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Building Loyalty

September 1, 2000
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Related Topics: Retention, Featured Article
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Novelfringe benefits may bring you more job applicants but they aren’t likely to inspireworker loyalty unless your employees feel a sense of pride in their work.

That’sthe key finding in the latest installment of United States @Work, a comprehensive surveyof worker attitudes conducted annually by Aon Consulting Worldwide’s LoyaltyInstitute.

Insteadof adding pet-walking services or on-site dry-cleaning services, companies struggling withhigh turnover in this era of tight labor markets may want to reconsider their compensationpackages and their workplace environment, said David L. Stum, Ph.D., president of theLoyalty Institute. The Ann Arbor-based research company is an arm of Chicago-based AonConsulting. “Organizations need to take a good, hard look at the basics beforelaunching new and trendy benefits and other human resources practices,” he said.“Start by ensuring that you offer a safe, secure work environment and equitablecompensation and benefit packages. These are your foundation, and there’s no sensebuilding upon a foundation if it’s faulty.”

Theissue of worker commitment has become all the more important because the stakes of keepingworkers continue to rise.

Beyondthat, Stum encourages managers to build a sense of spirit and pride in the organizationbecause workers who feel that their companies are succeeding in this area feel morecommitted to their jobs. Additionally, when a worker’s sense of being valued andbelonging exceeds expectations, that employee is nearly seven times as likely to stronglyrecommend the organization as one of the best places to work, Stum said.

Thisback-to-the-basics advice for corporate America is based pioneering research Stum took ona decade ago in the area of worker loyalty. A business management psychologist bytraining, Stum began asking employees to describe their idea of job commitment so that hecould better understand what keeps workers from jumping ship.

“Weknew the old social contract of work for life was dead and that the landscape of corporateAmerica born in the 1950s had changed dramatically,” he said. “I wanted to dosomething that went beyond employee happiness and employee satisfaction because to me,those concerns are superficial measures that are the outgrowth of a paternalistic,adult-to-child employer-employee relationship. The American worker has grown up and isdemanding an adult-to-adult relationship.”

Inthe last several years, the issue of worker commitment has become all the more importantbecause the stakes of keeping workers continue to rise.

“Thecost of replacing an employee in today’s market is roughly one half of that person’sannual salary -- a figure that doesn’t include the loss of intellectual capital thatresults from each departure,” Stum noted.

SinceAon’s United States @Work survey was first conducted in 1997, analysis of thefindings has uncovered some surprisingly fundamental practices that can help managementnavigate the current retention crisis, which has been brought on by the tightest labormarket in 30 years, he said.

“Employers are going to continue to experience tight labor markets and risingemployee expectations in what they want in their employer-employee relationship.”

Thegood news for employers is that even if employees now expect to change workplaces severaltimes during their working careers, they still are prepared to “give their all”to companies they consider deserving. And management can do something about that, Stumsaid.

“Americancompanies have fueled the ‘Me, Inc.,’ attitude of the last decade because theyhave not given employees a reason to be committed to the organization,” he said.“We have a new work order in this century. But unless employers build pride in theirorganizations, employees will continue to be lured away by small pay increases and glitzybenefits. Employers are going to continue to experience tight labor markets and risingemployee expectations in what they want in their employer-employee relationship.”

Stumbegan working with the employees of more than 200 of his corporate clients in late 1980sto develop his measure of employee commitment, known as the Aon Loyalty InstituteWorkforce Commitment Index. Participating firms included Borders Group, Inc., ChryslerCorp., Ford Motor Co., IBM, Kimball Office Furniture, Little Caesars, McDonald’s,Medisys Health Group, and Northwestern Mutual Life.

“Wecame to understand that by looking at how workers themselves defined job commitment andloyalty, we could better define what qualities make some companies more attractive thanothers,” he said.

Stuminterviewed workers in a series of focus groups to figure out what characterized acommitted employee. “What we came up with were six characteristics -- six behaviors,if you will -- that workers said indicate to them a loyal worker,” Stum said. “Acommitted worker is one who is a team player, who is willing to make personal sacrificesfor the good of the company, who believes in the company’s product, who willrecommend the company as among the best places to work, and who is prepared to stay at thecompany for at least the next several years, even if offered a modest pay increaseelsewhere.”

Fromthis information, he created a series of survey questions that make up his WorkforceCommitment Index or WCI, a sort of Consumer Price Index on human resource issues, he said.Then he and his staff combed their data bases of employees to come up with a statisticallyvalid sampling of workers across America, what Stum calls “the voice of the AmericanWorker.”

The1,800 workers in his United States @Work survey are all over 18 years old and work morethan 20 hours in non-military and non-government companies with more than 20 employees,Stum said. For this year’s installment, workers were surveyed by telephone in thefirst quarter of 2000. In 1997, the first year in which the survey was administered, theresponses were benchmarked at a WCI score of 100. That number represents a starting point,and every year since then has been measured against the 1997 loyalty response. Because 100doesn’t represent a percentage or “perfect score,” responses can go higherthan 100.

In1998, the survey recorded an overall index of 97.8. In 1999, it rose to 100.3. This yearthe overall survey number dropped back to 98.8, giving Stum pause. “The fact that thenumber trended downwards this year is disturbing because of what is going on in theeconomy now,” he said. “We expected that the index would be going up slightlyeach year, given that American organizations are growing globally and profits have beenaveraging a growth rate of 9 percent. If we had experienced a period of downsizing, thenwe would have expected the index to drop.”

Thissee-sawing of his WCI index has left Stum to conclude that corporate America has more workto do in addressing the worker loyalty issue if it wants to stem the retention tide.

Immediatesupervisors have a very strong influence on helping build an employee’s sense ofpride and spirit in the organization.

Gettingbeyond the overall numbers gives HR managers and their executive committees plenty of foodfor thought, said Lindsay Borden, vice president of administration, human resources forthe Bob Evans restaurant and food-products businesses.

“Weas HR directors know the drivers that produce worker satisfaction, but the usefulness ofthis kind of survey is providing backup for our own observations,” Borden said.

Amongother findings: Nearly 20 percent of American workers said they feel their pay andbenefits are below their expectations. As you might expect, workers who earn the least,less than $20,000, also are the least committed to their jobs, scoring a WCI of 92.2.Surprisingly though, those who made more than $100,000 were not the most committed. Theyregistered a WCI score of 101.4, compared to the 104.4 turned in by workers making between$65,000 and $74,999.

“Thismight suggest that defection at certain levels of management could be on the rise in theUnited States,” Stum said.

Themost committed group by age are workers 50 to 59, who scored 103.2. Those 18 to 29 wereleast committed, with a score of 93.1.

Amongthe 317 workers in the survey who had experienced company downsizing, the WCI registered a93.4 score. Those in expanding companies scored a WCI of 101.

Onthe issue of employer trust, Stum noted that 13 percent of workers surveyed said they didnot feel safe and secure at work. And that group scored 55 on the WCI. By contrast, thosewho do feel safe and secure recorded a 109 WCI score.

Inthe gender breakdown, men scored 97.5, lagging behind women slightly in overallcommitment. Their score: 99.7.

Thestudy showed that immediate supervisors have a very strong influence on helping build anemployee’s sense of pride and spirit in the organization. One in four workers didn’tthink their companies were doing a good enough job of developing managers and supervisors.

Stum’sgroup has now gone beyond the WCI to develop a program to help HR managers and theircompanies take steps to create a committed workforce. Aon has come up with the “performancepyramid” of workplace practices, a five-level sequence of steps for evaluating acompany’s efforts on the commitment and loyalty front.

Whileall five levels are important in building employee commitment and increasing retention,Stum said, the key is for HR managers and company executives to pinpoint the unmet needsin their organizations. “Improvement at that level will provide the greatest returnon human resource and workplace-practice investment by increasing workforce commitment.”

Workforce,August 2000, Vol. 79, No. 8, pp. 42-48 -- Subscribe now!

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