Loyalty in the Age of Downsizing

“Today, the employer’s attitude is that making money is number one; the employees are not number one any-more. Constant changes in company structures create less loyalty. In the past ten to twenty-five years, employees have acted more like free agents. . . . There is less trust, more anxiety, and less loyalty on the employee’s part. . . . Loyalty to the company has to be fostered by the company.” — Mid-level manager

“We were almost taken over, and a lot of people were let go; the loyalty that people had for this company has changed. But the company’s loyalty to the employee has changed also. This is bound to affect . . . what an employee is willing to do for a company. We’ve seen a lot of good employees and good performers lose their jobs, and we’re all less sure of ourselves. This is true not only in our company, but in our whole industry.” — Mid-level manager

These quotes point to a disturbing trend in many corporations: the decline of employee loyalty associated with the dramatic downsizing, restructuring, and re-engineering occurring throughout corporate America. The titles of some business and popular press articles reflect this decline (e.g., “Loyalty No Longer a Model for Corporate Life,” “Corporate Loyalty Not What It Was,” “The New Deal: What Companies and Employees Owe One Another,” “Whatever Happened to Corporate Loyalty?”1). Some management scholars claim that managers have never felt more alienated,2 and others argue that the view of organizational life, hard work, and loyalty will never be the same.3 Are employees no longer as loyal to their organizations as they once were? If so, can organizations do anything to counter this trend?

The issue of loyalty is important to companies for several reasons:

First, individuals with high levels of commitment to their organizations identify highly with the companies they work for.4 Not surprisingly, therefore, companies view loyal employees as very desirable.5

Second, there are systemic links between employee loyalty and organizational performance, manifested in employees’ willingness to assume responsibility for their work and to perform their tasks in a highly reliable way.6 Managers who are loyal to their organizations are motivated to work hard and to stay with the company.

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References

1. New York Times, 12 February 1995;

Chicago Tribune, 5 February 1995;

Fortune, 13 June 1994; and

Chief Executive, November–December 1990.

2. P. Hirsch, “Undoing the Managerial Revolution?,” in R. Swedberg, ed., Explorations in Economic Sociology (Beverly Hills, California: Russell Sage, 1993), pp. 135–157.

3. W.F. Cascio, “Downsizing: What Do We Know? What Have We Learned?,” Academy of Management Executive, volume 7, February 1993, pp. 5–104.

4. G.L. Blau, “Job Involvement and Organizational Commitment as Interactive Predictors of Tardiness and Absenteeism,” Journal of Management, volume 12, number 4, 1986, pp. 577–584;

D.F. Caldwell, J.A. Chatman, and C.A. O’Reilly, “Building Organizational Commitment: A Multifirm Study,” Journal of Occupational Psychology, volume 63, 1990, pp. 245–261;

R. Eisenberger, R. Huntington, S. Hutchison, and D. Sowa, “Perceived Organizational Support,” Journal of Applied Psychology, volume 71, number 3, 1986, pp. 500–507;

H. Nouri, “Using Organizational Commitment and Job Involvement to Predict Budgetary Slack: A Research Note,” Accounting, Organizations, and Society, volume 19, 1994, pp. 289–295;

D.M. Randall, “The Consequences of Organizational Commitment: Methodological Investigation,” Journal of Organizational Behavior, volume 11, 1990, pp. 361–378; and

B.S. Romzek, “Personal Consequences of Employee Commitment,” Academy of Management Journal, volume 32, September 1989, pp. 649–661.

5. Blau (1986);

S.L. Oswald, K.W. Mossholder, and S.G. Harris, “Vision Salience and Strategic Involvement: Implications for Psychological Attachment to Organization and Job,” Strategic Management Journal, volume 15, 1994, pp. 477–489;

A.E. Reichers, “A Review and Reconceptualization of Organizational Commitment,” Academy of Management Review, volume 10, July 1985, pp. 465–476; and

A.E. Reichers, “Conflict and Organizational Commitments,” Journal of Applied Psychology, volume 71, number 3, 1986, pp. 508–514.

6. L. Bailyn, Breaking the Mold: Women, Men, and Time in the New Corporate World (New York: Free Press, 1993).

7. D.M. Rousseau, “New Hire Perceptions of Their Own and Their Employer’s Obligations: A Study of Psychological Contracts,” Journal of Organizational Behavior, volume 11, 1990, pp. 389–400; and Cascio (1993).

8. Oswald et al. (1994); and

W.C. Kim and R.A. Mauborgne, “Procedural Justice, Attitudes, and Subsidiary Top Management Compliance with Multinationals’ Corporate Strategic Decisions,” Academy of Management Journal, volume 36, June 1993, pp. 502–526.

9. Cascio (1993); and

Rousseau (1990).

10. Rousseau (1990).

11. See also:

Cascio (1993).

12. P. Hirsch, Pack Your Own Parachute (Reading, Massachusetts: Addison-Wesley, 1987).

13. D.T. Hall, Career Development in Organizations (San Francisco: Jossey-Bass, 1986); and

D.T. Hall, “Promoting Work/Family Balance: An Organization Change Approach,” Organizational Dynamics, Winter 1990, pp. 5–18.

14. D.T. Hall and J. Richter, “Career Gridlock: Baby Boomers Hit the Wall,” Academy of Management Executive, volume 4, August 1990, pp. 7–22;

Hall (1986);

Hirsch (1987); and

L.K. Stroh, J.M. Brett, and A.H. Reilly, “A Decade of Change: Mobile Managers’ Attachment to Their Organizations and Their Jobs,” Human Resources Management Journal, volume 33, number 4, 1994, pp. 531–548.

15. For review of alternative forms of commitment, see:

J.E. Mathieu and D.M Zajac, “A Review and Meta-Analysis of the Antecedents, Correlates, and Consequences of Organizational Commitment,” Psychological Bulletin, volume 108, number 2, 1990, pp. 171–194.

16. R.J. Burke and C.A. McKeen, “Women in Management,” in C.L. Cooper and I.T. Robertson, eds., International Review of Industrial and Organizational Psychology (New York: Wiley, 1992), pp. 245–284.

17. B.A. Gutek, A.G. Cohen, and A.M. Konrad, “Predicting Social-Sexual Behavior at Work: A Contact Hypothesis,” Academy of Management Journal, volume 33, September 1990, pp. 560–577; and

H.M. Rosen and K. Korabik, “Workplace Variables, Affective Responses, and Intentions to Leave among Women Managers,” Journal of Occupational Psychology, volume 64, 1991, pp. 317–330.

18. L.K. Stroh, J.M. Brett, and A.H. Reilly, “All the Right Stuff: A Comparison of Female and Male Career Patterns,” Journal of Applied Psychology, volume 77, number 3, 1992, pp. 251–260.

19. M.J. Davidson and R.J. Burke, “Women in Management: Current Research Issues,” in M.J. Davidson and R.J. Burke, eds., Women in Management (London: Paul Chapman Publishing, 1994), pp. 1–8.

20. K.S. Kush and L.K. Stroh, “Flextime: Myth or Reality?,” Business Horizons, September–October 1994, pp. 51–55.

21. B. Morris, “Executive Women Confront Midlife Crisis,” Fortune, 18 September 1995, pp. 60–86.

22. Ibid., p. 62.

23. Hall (1986).

24. Cascio (1993);

P.H. Mirvis, “A Competitive Workforce: The Issues and the Study,” in P.H. Mirvis, ed., Building the Competitive Workforce (New York: Wiley, 1993), pp. 1–30; and

M. Useem, “Company Policies on Education and Training,” in Mirvis (1993), pp. 95–121.

25. J. Brockner, “The Effects of Work Layoffs on Survivors,” in L.L. Cummings and B.M. Staw, eds., Research in Organizational Behavior, volume 10 (Greenwich, Connecticut: JAI Press, 1988), pp. 213–255.

26. A.H. Reilly, J.M. Brett, and L.K. Stroh, “The Impact of Corporate Turbulence on Employee Attitudes,” Strategic Management Journal, volume 14, 1993, pp. 167–179.

27. See, for example:

Bailyn (1993).

28. D.T. Hall and J. Moss, “The New ‘Career Contract’: How It’s Different and Why Employees Don’t Get It” (Boston: Boston University School of Management, Executive Development Roundtable, paper, 1995).

Acknowledgments

The authors would like to thank Jeanne M. Brett, Northwestern University; Erica Fox; The Employee Relocation Council, Washington D.C.; and anonymous reviewers for their significant contributions to this manuscript.