Can we revive employee loyalty? Should that be our focus? We talk through potential generational differences in what it takes to earn loyalty and commitment and suggest focusing instead on the cornerstones of a positive employee experience.
Understanding the Evolution of Employee Loyalty
At an individual and macro level, we've seen our relationship with work shift significantly over the past five years. Within this stream of research, advice, and news there's one theme that's come up over and over again: loyalty. Whether it's stories about the rise of anti-work, job-hopping, full-time employees secretly juggling multiple jobs, quiet quitting, or leveraging a job offer from a competitor to force a raise in compensation, we seem to divide into two groups. On one side are, usually, invested leaders and tenured employees asking, "Why do they have no loyalty?" On the other side are those who ask, "Why should I be loyal to my company when my company isn't loyal to me?" Often these groups fall into a generational split with older workers lamenting the lack of loyalty of their Gen Z and Millennial counterparts.
Each month my team and I come together to think about what we've reading and thinking about that month and share takeaways for supporting how we lead and build remarkable businesses. This month we're exploring loyalty. How and why is it linked to the generations? What drives it? Should it be our goal, or are we missing something?
It turns out there's a whole body of research around employee loyalty (or loyalty to almost anything else for that matter). When we're thinking through our relationship with work we're talking about a psychological contract — the set of things that employees and employers believe they owe each other and are owed in return. For the psychological contract to hold up, you need both mutuality (both parties have a shared understanding of expectations) and reciprocity (both parties believe they're getting a fair deal). Do that, and you generate the kind of trust and loyalty that leads to high productivity and low turnover. Fail to do that and — well, that's where we find ourselves right now. A world in which the psychological contract is profoundly broken. It's worth noting that the draft of the psychological contract is influenced by societal norms and also by the specifics of the industry and organization. For example, expectations for parental leave have evolved making what employees expect and consider attractive now different than the expectations of employees 10, 20, or even five years ago. On the flip side workers now expect much less assurances about job security than those in decades past.
Diminished loyalty means we have more shattered expectations. Workers see companies reducing benefits, changing workload expectations, and changing their inputs (time, effort, productivity) accordingly. Perhaps now more than ever before, with low trust, engagement, and retention, it's a workplace that nobody signed up for: where the feeling of mutual obligation is just not there. Early career employees, often those solidly in Gen Z, with fewer years of history to ground them, face an even more confusing go of establishing and evaluating their written and unwritten promises with employees. And there's more contributing to their actions than just what we see in the workplace.
Challenges Faced by Today's Workforce
Young adults in Generation Z — those born in 1997 or after — have emerged from the pandemic feeling more pessimistic and disillusioned than any living generation before them, according to long-running surveys by the Pew Research Center and interviews with dozens of young people around the country. They worry they’ll never make enough money to attain the security previous generations have achieved, citing their delayed launch into adulthood, an impenetrable housing market, and loads of student debt. With this in mind, we might be able to understand, in part, what's contributing to that loop of unmet expectations.
A recent poll by The Wall Street Journal in early 2024 revealed that over three-quarters of voters under 30 believe the country is heading in the wrong direction. Additionally, younger workers expressed lower levels of happiness and a decreased inclination to trust others compared to previous generations at the same age. This lack of trust poses significant implications and barriers for employers and leaders in supporting, coaching, and developing this vital generation.
Leaders are struggling to build loyalty with a generation that lacks hope in their potential to establish a meaningful career or sustain the same, let alone higher, quality of life as their parents. The pandemic has only intensified these existing trends among Gen Z, with isolation as school and work were abruptly transitioned to virtual, less social interactions, and a tendency to spend increased hours connecting with others digitally through any number of relatively new technologies.
Importance of Empathy and Compassion in Leadership
The abundance of pessimism shifting expectations for loyalty and our psychological contracts, I argue, make sustaining an employee experience grounded in respect, understanding, caring, and fairness more important than ever before. That's why we felt the New York Times article on Walmart's significant investment in compassion-focused leadership training worthy of note. Nearly every week for the past two years Walmart has equipped and educated leaders on the mechanics of empathy to nurture compassionate leadership.
Photo by Fabio Bracht on Unsplash
Empathy fuels compassion by connecting leaders with their employees on a deeper level, fostering an environment where open communication and genuine concern for well-being are the norm. As employee expectations usually fall short of being shared or seen as fair (that reciprocity and mutuality we shared earlier), the connection built by empathetic leadership can build the ties we need to build connection. By training leaders in empathy, we start to build a bridge across the trust gap, showing employees, particularly those early in their careers, our sincere drive to coach and support them in ways that are meaningful to them.
Empathetic leaders are skilled at recognizing, and acting when possible, on the unique challenges and aspirations of their team members. They create inclusive spaces where diversity, equity, and inclusion are not just said but lived. This inclusivity resonates with younger employees, who value a workplace that acknowledges and celebrates their individuality.
In addition to empathy, a systematic review found five other dimensions of compassionate leadership, all that can be taught, coached, and built into the processes and ways your business runs:
- Openness
- Clear direction and communication,
- Physical and mental well-being,
- Inclusiveness,
- Integrity, respect, and fairness
While compassion can build retention and lower turnover, leading to the cascade of savings and financial gains we know come from positive leadership and talent management, there's a top-line benefit. Research shows us that organizations led by empathetic leaders outperform their less empathetic counterparts. Empathy in leadership is not only linked to higher employee satisfaction, but also greater customer loyalty, and overall financial performance. It comes back to one of our core beliefs as a company: your customer experience will never be greater than your employee experience.
And that leads us to our point: what if instead of focusing on loyalty as our goal, we instead intensely focus on the consistency of the employee experience?
Strategies for Earning Employee Loyalty through the Employee Experience
As we shared, loyalty comes down to a contract. While it might not be signed, sealed, and delivered, it still exists as an unwritten (too often also unspoken) agreement. The day-to-day experience of our employees gives us the greatest opportunity to shape and meet the promises of our psychological contract. Here's how —
1. Establish Clear Direction: Knowing the company’s vision and its role in achieving might be the most meaningful first step to building shared expectations and a mutual psychological contract. Not surprisingly, clear direction emerges as the largest gap in performance expectations in our work supporting leadership development. Clear direction means we understand the what and why behind where we are headed, and how my contributions support us in getting there. Then, when challenged, my leader recognizes my setbacks and obstacles and shares a path that supports us in reaching our goals and my own needs in the best way possible.
2. Prioritize Well-Being: Of course, this starts with understanding, and seeking to understand, the well-being of those around us. With that in place, intentional plans to design work around the obstacles that thwart well-being are likely to alleviate turnover and burnout. Genuine concern (emphasis on genuine) for employees’ physical and mental health to improve their overall satisfaction.
3. Cultivate Openness and Authenticity: Encourage a culture where feedback is welcomed and diverse opinions are valued. Openness in the workplace has been linked to higher productivity and morale. Consider a mix of formal and informal methods for encouraging openness. Are one-on-one meetings happening regularly with leaders? Are you promoting, hiring, and then training leaders who lead with authenticity and openness top of mind?
4. Ensure Fairness: Fair treatment in day-to-day experiences is crucial. Perceptions of fairness can improve performance by up to 26% and retention by up to 27%.
By connecting these elements with your organization's values, vision, and culture, you can create a consistent environment. That consistency, both over time and between words and actions, builds those mutual promises and reciprocity that are central to having a shared psychological contract. Consistency also places your consistent compassion and positive employee experience front of mind.
Kudos to Igor Omilaev on Unsplash for the cover photo.
