Sliding loyalty causes retention headaches

Sep 25 2007 by Brian Amble Print This Article

Look around the average workplace and it's a sobering thought that the proportion of employees who are not committed to the organization and are likely to leave within two years outnumbers those who are truly loyal.

That's according to study of employee loyalty in American organisations published earlier this month by Walker information which revealed that just a third of employees can be considered to be loyal

Although the proportion of truly loyal employees – 34 per cent – is unchanged from two years ago, the percentage of employees categorized as "high risk" now exceeds those who are loyal, creating a widening gap for employers struggling to improve retention.

The Walker Loyalty Report for Loyalty in the Workplace, examining trends in both employee loyalty and business ethics, suggests that more than a third - some 36 per cent - of employees are at high risk of leaving within two years – an increase of five percentage points from 2005.

"Employers are faced with a situation where the number of employees causing a negative drain on the organization outweighs those who are working to positively support it," said Chris Woolard, senior consultant for Walker Information.

"With more than a third of employees classified as high risk, the results of our study signal concern as to how the negative attitudes often characteristic of this group will affect organizations – and their ability to compete successfully – down the road."

To make matters worse, the number of graduates who expect to stay with their first employers for more than three years is also on the slide.

As the latest College Student Career Confidence Survey by Right Management has highlighted, 61 per cent of college students expect to remain with their first employers for less than three years, unwelcome news for organizations that have just spent a fortune in time and money recruiting this year's crop of graduate hires.

The Walker Loyalty Report sheds further light on this, finding that workers in their 20s – "Generation Y" – are both the most loyal but also the most dichotomous, with 78 per cent classified as either truly loyal or at high risk of quitting.

Baby Boomers, meanwhile, ranked lower in loyalty – with just 32 per cent truly loyal – and followed Gen Y in the number of high-risk employees with 37 per cent.

"With the lowest number of trapped employees and the highest percentage of those deemed high risk, the implication is Generation Y workers are confident better opportunities exist," Chris Woolard said.

The Walker research also found that employee loyalty during the first 10 years on the job generally increases as employee tenure rises, but a large number are high risk.

Employees with a company for less than one year were the least loyal at just 26 per cent, while loyalty was highest (45 per cent) for those with six to nine years on the job. After a decade on the job, however, loyalty starts to diminish.

But the news isn't all bad for employers, with some improvements emerging in the experience areas most predominantly tied to loyalty. Fifty-eight per cent of those surveyed said their employers show care and concern for them – one of the leading drivers of loyalty – compared to just 54 per cent in 2005.

Within this category, 55 per cent agreed their employers were working to develop employees for the long term, up from 50 per cent two years ago.

Douglas J. Matthews, CEO of Right Management, said that it is vital to understand what motivates recent graduates if you want to keep them in an organization for more than three years.

"Career development opportunities are one of the top motivators. Giving them a chance to develop professionally and advance in their careers will foster higher levels of engagement, productivity, and retention."

It is a similar story later on in the career cycle. According to the Walker report, the top experience-based drivers of loyalty are fairness at work, care and concern, trust in employees, feelings of accomplishment, and satisfaction day-to-day.

And with Right Management estimating that it costs an average of 2.5 times an individual's salary to replace an employee in terms of recruitment, training, lost productivity and severance costs, the message is that it pays to help get new hires committed to their organizations - and keep them engaged in their jobs - as early in their careers as possible.