Loyalty in the Age of Downsizing

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“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.7 Some researchers suggest that managers’ commitment to an organization is related to whether the organization reaches its strategic goals.8

Third, loyalty to an organization results in lower turnover. Loyal employees are not likely to look for jobs elsewhere.9 For those employers who cannot readily hire employees with appropriate skills and knowledge, and for those employers in highly competitive labor markets, developing loyal employees can be a competitive advantage.

Employees as Free Agents?

As companies have been downsizing, restructuring, and reengineering, the psychological contract between manager and organization has been broken.10 No longer can organizations guarantee lifetime employment to committed managers.11

In response, managers have become more loyal to their own careers. Many have adopted what Hirsch calls a free agent strategy; free agents are employees who take personal responsibility for managing the terms of their future employment.12 The result has been what Hall calls the emergence of the “protean” manager — one who is self-directed and willing to change organizations and jobs to fulfill his or her career desires and needs and to create personal satisfaction.13

Research suggests that managers who proactively manage their careers may advance more quickly and more adequately fulfill their career aspirations than managers who passively let their organizations manage their careers. Further, these individuals may feel more loyal to their new organizations than they do to those they leave.14 Loyalty thus may not be “dead” but transferred from one organization to another. Therefore, we set out to study a critical issue — whether managers who function like free agents are more loyal to their new organizations than to their former employers.15

Comparing Male and Female Managers

Given the increasing number of women in managerial ranks, any investigation of recent changes in managers’ career patterns and loyalty to their organizations must investigate the potential differences between male and female managers. One question we addressed in our study was whether women who followed a free-agent career pattern and changed companies for personal satisfaction benefited as much as the men who did so.

Previous research has suggested that women managers do not benefit to the same extent as men. Organizational politics and practices may exclude women and limit their advancement in the hierarchy.16 In addition, women often leave companies because of systemic discrimination embedded in organizational policies, practices, and culture.17 Some researchers have encouraged women to use the external labor market — that is, to leave their companies — to create a greater sense of equity between themselves and their male counterparts.18 These findings should not be surprising, given that companies are merely microcosms of a patriarchal U.S. society in which men have historically dominated and had more power and better access to resources.19

Furthermore, recent analyses of women managers’ career patterns suggest that those who leave their organizations may not merely be attempting to replicate their previous salaries but are looking at the total employment package, including whether the new work environment is more “female friendly” and less political.20 For many women managers, the issue is “ultimately not about retreat but about redefinition.”21 Many women executives have “simply wearied of the male-dominated game and seek to do business more on their own terms. They change not only their jobs, but their ideas of success as well.”22

Loyalty to Corporations

We began studying employee loyalty in 1989, as part of a larger research project examining changes in employee attitudes and career patterns associated with an increasingly turbulent corporate environment (see the appendix for our study design and methodology). We surveyed 686 middle managers from twenty Fortune 500 companies in 1989 and again in 1991, asking them questions about their loyalty to their companies and the career opportunities and organizational politics they perceived in their companies. In addition, we interviewed thirty-two managers, asking them more detailed questions about their attitudes toward their jobs and employers.

Some findings corroborated the popular press; some did not. Loyalty does seem to be diminishing. We found, in general, that managers were less loyal to their organizations in 1991 than they were in 1989. Managers who functioned as free agents, however, did not fit this pattern; they were more loyal to their new employers than they were to their former ones. They also perceived their new companies as having greater job opportunities than their former companies and believed their careers were less determined by organizational politics than they did when they worked for their former employers. By contrast, those managers who stayed with their employers not only were less loyal in 1991 than in 1989, but also thought they had fewer job opportunities.

The data also indicate that many managers who left their employers in 1989 recognized that better career opportunities were available outside their industries. Thus 70 percent of those who left their firms were in different industries in 1991 than in 1989. This finding suggests that these managers not only were acting as free agents but also were pursuing the more self-serving protean career model that Hall identifies.23 They recognized opportunities in different industries and were not reluctant to make significant shifts in the nature of their jobs.

Male-Female Differences

There were few significant differences in male and female managers’ responses overall in either 1989 or 1991. In both years, there were no major differences in loyalty to company, loyalty to career, or perceptions of opportunity. In both years, however, the female managers were more likely than the male managers to feel affected by organizational politics. Further, both the male and female managers who left their employers fared better than their counterparts who stayed at their previous organizations.

Some differences between the males who stayed at their organizations and those who left and between the females who stayed and those who left are worth noting.

The male managers who left:

  • Perceived that their new organizations offered greater career opportunities than their former employers.
  • Perceived their new organizations as less political than those in which they worked in 1989.
  • Perceived that their loyalty to their careers was significantly stronger in 1991 compared to 1989.

The men who stayed with their 1989 organizations:

  • Were significantly less loyal to their organizations in 1991 than they were in 1989.
  • Perceived that their organizations offered fewer career opportunities in 1991 than in 1989.

The female managers who left:

  • Were significantly more loyal to their new employers than they were to their former employers.
  • Showed no differences in loyalty to their careers in 1991 compared to 1989.
  • Perceived their new environments to be less political than those in which they worked in 1989.
  • Perceived that their new organizations offered greater career opportunities.

The women who stayed with their 1989 organizations:

  • Were significantly more loyal to their careers.
  • Were significantly less loyal to their companies.
  • Thought that their employers offered them fewer opportunities than they did in 1989.

In short, our data show that the attitudes of both the male and female managers who stayed with their organizations became less favorable over time relative to the men and women who found new jobs elsewhere. In particular, during the time period of our study, those who stayed with their employers became less loyal to their organizations and more loyal to their careers.

Predictors of Loyalty

Managers who were loyal to their organizations in 1989 were likely to be loyal in 1991. Further, controlling for loyalty in 1989, more years with the current company, more years in the workforce, industry worked in, less loyalty to one’s career, and whether managers stayed or left their 1989 employer predicted greater loyalty to their organization in 1991. Those who left their 1989 employers were more loyal to their new organizations than those who remained with their 1989 employers. Gender was not a predictor of loyalty.

Implications for Companies

One supervisor interviewed during our study commented, “A major question asked by employees now is ‘What’s in it for me?’ Employees are less loyal than they were and are acting more as independent individuals negotiating their own situations.” As most companies now recognize, they can no longer count on unthinking loyalty from their managers.

Our research findings have some important implications for organizations coping with the challenge of maintaining employee loyalty in a turbulent environment:

Managers who are free agents in proactively pursuing their own career development fare better than those who do not.

Our data show that those managers who left their organizations in 1989 benefited by increasing their career opportunities and by moving into companies where their careers were less influenced by organizational politics. Managers who are most prepared to recognize the career limitations within an organization and take a more proactive attitude toward their careers fare better than those who do not. The message here is that to obtain greater career opportunities, managers must develop flexible approaches toward their careers. Ideally, companies should help managers to further their careers without seeking employment elsewhere. To both attract and retain talented managers, companies must foster less political work cultures and place a high priority on meeting employees’ long-term career development and growth needs. Specifically, companies must create new, more challenging jobs for their managers.24

Women managers seem particularly sensitive to a perceived supportive corporate climate.

Both males and females appear to benefit from increased career mobility. But a move to a new company may pay off for women managers more in terms of the increased sense of loyalty that it fosters and the feeling that their careers are less influenced by politics. Consequently, companies seeking to attract and retain female managers must attend to such issues as the degree of organizational politics and the career opportunities for women.

In the current corporate environment, maintaining a strong employer-manager relationship is essential.

Treating people with respect and dignity is important. Brockner has shown that how companies treat laid-off employees significantly affects the attitudes of the surviving employees.25 As a senior engineer we interviewed stated, “The biggest question for me is ‘How does the company treat you?’” Our earlier research on the impact of turbulence on employee loyalty suggests that companies that communicate regularly and honestly with their employees may retain higher levels of loyalty.26 These issues are especially important for managers, who are themselves expected to foster loyalty in the workforce.

Conclusion

Our research findings reflect the complexity of employee loyalty and how it may differ among male and female employees and among those leaving and staying with their employers. The results highlight the shift of loyalty during the past decade: no longer are loyalty to an organization and loyalty to a career mutually exclusive. Instead, our study illustrates that today’s manager — a free agent in managing his or her own career in an insecure corporate environment — can nonetheless be loyal to the company where he or she is developing that career. Thus U.S. managers may not be the self-serving opportunists often portrayed in the business press, but rather committed employees who are motivated by what they perceive to be a more receptive corporate setting.

In fact, an intriguing dimension of our study is that, for many managers, the move to another organization increases their loyalty. Perhaps burned-out managers are refreshed and renewed by changing companies. This is an important issue, given the relationship between loyalty and productivity that many business scholars propose.27 A key question, which merits future research, is the link between loyalty and performance over time for the managers who have left their organizations. That is, do these managers maintain their increased loyalty and corresponding higher job performance, or is there a “honeymoon” effect in which loyalty and performance erode over time?

Our results also alter the traditional negative stereotype of a company-hopping manager who seeks only to make more money. Instead, a protean manager28 who is willing to risk changing employers in order to further career development may contribute as much or more to a new employer as a long-term manager.

Appendix

Sample

The sample for our study consisted of 542 male and 144 female managers (n = 686) who participated in two surveys of career experiences and attitudes that we conducted in 1989 and 1991.

In 1989, the sample consisted of 1,029 randomly selected managers from twenty Fortune 500 corporations that represented eight industries: pharmaceutical and hospital supplies, communications, consumer products (food), professional and financial services, retailing, hotel management, chemicals, and manufacturing. We selected the managers from company lists of the names and addresses of all managers who relocated for career advancement opportunities in 1987 and 1988. The sample therefore consisted of managers whose organizations considered them to be upwardly mobile.

We sent surveys to fifty randomly selected managers from each firm, with a 67 percent return (n = 670). In addition, we randomly selected 150 additional managers from each company list who were members of dual-income families (spouses worked outside the home) or single males or single females. We added a total of 359 managers to the sample from this list. Most managers in the study had master’s degrees and averaged age thirty-seven.

In 1991, we sent all the survey respondents a follow-up survey. We could not reach seventy of these managers because they had relocated and not provided a new address. The response rate among the managers we were able to reach was 78 percent. Completed data on all variables for this study were available for 686 managers. We also interviewed thirty-two additional managers in order to obtain more detailed responses about the attitudes we were studying.

Measures

Loyalty to a company.

We measured loyalty to a company using four items from the Patchen* scale, which focuses on the tendency to continue to engage in current employment. The four items were (1) “If I had to choose all over again, I would take a job with this company,” (2) “I would recommend this company to a friend as a good place to work,” (3) “I would be willing to spend the rest of my career working for this company,” (4) “I feel a sense of pride working for this company.” We used a five-choice response scale, ranging from “strongly agree” to “strongly disagree.”

*M. Patchen, “Some Questionnaire Measures of Employee Morale: A Report on Their Reliability and Validity” (Ann Arbor, Michigan: Institute for Social Research, Monograph No. 41, 1965).

Stayers/leavers.

This variable was a dummy variable intended to distinguish between employees who were with their organizations between 1989 and 1991 and those who left within that time period. The variable was coded 1 = stay and 2 = leave.

Loyalty to one’s own career.

We measured this variable using a scale that is a good measure of loyalty to one’s career. The scale consists of two items: (1) “I would willingly change companies for a career advancement” and (2) “My loyalty is to my own career, not to any particular company.” We provided a five-point response scale, ranging from “strongly agree” to “strongly disagree.” This measure was designed to identify those employees who were most closely following a free-agent career model. Those scoring high on this scale were presumed to be more like free agents than those who scored low.

Career opportunity.

We measured this using a single item: “My future with this company looks bright.” We gave a five-point response scale, ranging from “strongly agree” to “strongly disagree.” This measure was designed to assess respondents’ perceptions that career opportunities existed within their organizations.

Influence of organizational politics on career.

We measured this using the question: “How much do organizational politics influence your career opportunities?” The five-point response scale ranged from “not at all” to “a great deal.”

Sex.

This variable was coded 0 = men, 1 = women.

Years with current company.

We used an open-ended question to determine how long respondents had been with their current companies. The resulting continuous variable was used in the regression equation as a control variable.

Years in workforce.

We measured this variable by asking, “What year did you enter the workforce?” and subtracting 1991 from that year.

Industry.

The industry variable was dummy coded; 0 = manufacturing and 1 = all other industries.

†L.K. Stroh, J.M. Brett, and A.H. Reilly, “Family Structure, Glass Ceiling, and Traditional Explanations for the Differential Rate of Turnover of Female and Male Managers,” Journal of Vocational Behavior, volume 49, 1996, pp. 99–118.

Topics

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.

Reprint #:

3847

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