The Change in Employee Loyalty

BY BARBARA M McGUINNESS

Abstract: Employee loyalty affects company performance, competitiveness and

ultimately the bottom line. Today, the old employment contract is null and void. Employee
loyalty cannot be taken for granted; it must be fostered and cultivoted. The new employment
contract encourages participative decision making, career pay for productivity and flexible
benefits.

Traditionally, employee loyalty was taken for granted. It was assumed that when
employees joined an organization, they intend to stay, grow and mature in that organization.
Loyalty meant the company would always provide regular pay raises, recognition and other
tangible and intangible benefits. Loyalty was earned and was a two-way street; the company
rewarded employees with security and, in turn, employees did the best job they could for their
employer. Today, employee loyalty cannot be taken for granted.
The old employment contract
As we moved into the second half of the 20th century, businesses were stable and the
economy was growing. Corporations began taking on human characteristics; "family" was used
to describe the company's relationship to its employees. Employees were given a variety of
benefits. The organization considered its workforce permanent and personnel programs and
practices were geared to ward full-time employees.
Because of the shift toward outpatient care, decreasing inpatient census and managed
care, hospitals are cutting and streamlining services to remain competitive. For staff nurses as
well as nurse managers, this means no one is safe. The old employment contract is now null
and void.

The new employment contract

Rather than loyalty and security, the new employee contract focuses on mutual
commitment. Most organizations are moving toward an employee population that is flexible,
part-time or temporary to respond to the changing marketplace demands. In the new
employment contract, employees manage their own careers and update their qualifications.
What does all this mean for nursing? Basically, it indicates that individual nurses are
responsible for advancing their education and training, in addition to keeping an eye on
outside job opportunities. Also, nurses, both staff and managers, must perform realistic selfevaluations while acquiring skills to make themselves more marketable. The new corporate life
means employees will be less concerned about company loyalty and more concerned about
shaping their own goals and future.

Are today's employees loyal?

Today's employees have different values than those of the past. Today's younger
generation of employees places higher value on personal achievement over corporate goals.
Many of these employees are unwilling to pledge loyalty to an employer; they direct their
loyalties inward.
Because of downsizing and the increasingly competitive nature of business,
organizations depend on their employees to perform well. In hospitals, as in other
organizations, there are fewer financial resources available to attract and retain highly
productive employees. Therefore, organizations must find other means to increase employee
productivity. Cultivating employees who are loyal to the organization is critical because when
loyalty drops, productivity drops as well. When employees stay with an organization,
productivity and overall job satisfaction rise and training costs fall.
When loyalty drops, productivity drops as well.
The old employee contract is now null and void.
Is there a negative side to cultivating a workforce that is loyal and committed to its
employer? An excessively loyal workforce could result in a lack of creativity resistance to
change, a tendency to engage in group think, insufficient turnover and the pursuit of improper
goals. Yet, without corporate loyalty, the company suffers; productivity decreases and
organizational turnover increases.

How to foster loyalty

Participative decision making elicits employee input and creates an atmosphere of

involvement. Employees are encouraged to make their own decisions, thus combating any
sense of apathy.5 Participative decision making not only instills a sense of commitment to the
organization, but also taps a valuable resource, the organization's own employees.

Effective/open communication is a key component of the managerial process.

Employees must be told why decisions are made in order to understand management's
actions. If management communicates the organization's mission, vision and goals clearly and
frequently, employees will understand where the company is going, how they plan to get there
and what they can do to ensure success.

Developing trust must be accomplished before loyalty can even be addressed. In

today's environment, it is not easy to get employees to trust management. Employees have
seen promises made and broken. They have seen their friends and coworkers dismissed or
demoted. If management wants loyalty to develop, grow and mature, they need to take the
first steps.

Career development is second only to job security in helping foster commitment. Since
job security cannot be guaranteed, employers must offer career development to their
employees. While it is true that employees are personally responsible for their own career
development, forward-thinking companies offer career enrichment programs that help
employees, including senior management, identify and develop their marketable skills. Crosstraining in different clinical and nonclinical areas (e.g., managed care, staff development) and
clinical ladders all provide an opportunity for professional growth.


Pay for productivity and flexible benefits include merit-based wage increases,
promotion based on performance and clinical ladders. According to Rhodes, "When pay is not
linked to performance, it can become a source of dissatisfaction and can damage employee
commitment to the organization. Although it is too early to tell if use of alternative rewards
(e.g., broad-based or productivity-based incentives) will have a long-lasting impact on
employee loyalty and com-mitment, companies are likely to make a more thoughtful linkage
between employee pay and performance in order to foster greater commitment." For
example, some hospitals offer job-sharing options, flex time for working mothers and on-site
day care for children and elders with costs adjusted to an employee's salary. By offering these
benefits, nurse managers, together with human resources professionals, can make a positive
change in their employees as well as their organizations.
Together, organizations and nurse managers can increase employee loyalty while
remaining competitive and profitable. People want to be loyal, but they need a reason.

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McKendall, M. and S. Margulis, "People and Their Organizations: Rethinking the
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Brewer, G., "Alternatives to Downsizing," Incentive. 1992, 166:2:22-28.

6.
Rhodes, D.W., "Employee Loyalty is an Attainable Goal," The Journal of Business
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8.

Rhodes, op. cit., p.53

9.

Brewer, loc.cit.