Employee Loyalty Around the Globe

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The benevolent cycle in which loyal employees beget loyal customers beget greater profits has been laid out convincingly by such luminaries as Frederick Reichheld (“The Loyalty Effect”) and James Heskett, W. Earl Sasser and Leonard Schlesinger (“The Service Profit Chain”). But can managers engaged in global businesses assume that the phenomenon seen in the United States applies in the rest of the world? And if so, what creates individual employee loyalty across the great diversity encountered in varied national labor markets? After all, we have all heard that siestas are a must in Spain and that no self-respecting French person works in August. Can we ever hope to make all our employees —whatever their nationalities — feel well-treated and therefore loyal?

The question has been answered in a landmark global study conducted by Walker Information Global Network, an Indianapolis-based international partnership that addresses stakeholder issues, and the Hudson Institute, a public-policy organization specializing in work-force research. More than 9,700 full- and part-time employees representing business, nonprofit and government organizations in 32 countries and regions as varied as the United States, Bolivia, Finland and Hong Kong participated in the survey. The conclusion: The cultural differences that we observe in cuisine, clothing and sport as we travel around the globe should not be confused with differences in work-force issues.

The study confirms the useful cliché that people are people wherever they live, and that most people care deeply about the same few things. In the workplace, people everywhere ask, Am I fairly compensated for my work? Am I well suited for my work? Does my employer trust me to do that work?

The researchers segmented the world's employee population as follows: 34% of worldwide employees are Truly Loyal, 8% are Accessible, 31% are Trapped and 27% are High Risk. The Truly Loyal exhibit the kinds of behaviors that make businesses successful — they work hard, stay late, go the extra mile to delight the customer, and recommend the company to their friends as a good place to work. The Accessible feel and act as committed as the Truly Loyal, but for reasons unrelated to loyalty, may leave within two years (perhaps a spouse is transferring, or childcare needs intervene). Trapped employees want to leave their jobs but for one reason or another feel that they cannot. High Risk employees are spending their working hours clicking through Monster.com — or whatever the local alternative may be. Six out of ten High Risk employees would not recommend their organization as a good place to work.

The study emphasized ethics because of its high impact on employee loyalty. Employees who perceive their employers as ethical are more likely to be proud to be associated with the company. Of the employees who felt they were working for an ethical company, 55% were Truly Loyal. Only 9% of those who questioned their employer's ethics were Truly Loyal. It is worrying that one-third of worldwide employees do not believe that their organization is highly ethical, and only six in 10 believe that their senior managers are people of high personal integrity.

View this as an opportunity, says Walker Information vice president Marc Drizin: “Being an ethical company doesn't really cost money over the long term. What it does cost is cheap compared to the cost of replacing workers revolving through your door. Some U.S. statistics may help us to understand this: On average, it costs $8,000 to $10,000 to replace a manufacturing employee. It costs $15,000 to replace that kid on the front line who sells you hats and jackets. It costs $3,000 just to interview someone before actually hiring or training him or her. And the cost for an IT worker, on average, is astronomical: over 125% of that employee's annual compensation.”

Offering career-development programs is one relatively cheap way to show commitment to the work force. As Drizin says, “Some organizations are reluctant to train because they are afraid that they are simply training that person for the next job —elsewhere. But being an exporter of talent is not a bad thing . . . . The person who leaves will tell everyone else,‘Man, that was a good place to work. Go apply for my job!’ ”

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