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6 Strategies for Building Employee Loyalty

To develop loyalty among employees and encourage them to stay, company leaders need to meet workers' basic needs.


​The numbers are staggering. An average of 4 million U.S. workers quit their jobs each month last year. The peak occurred in November, when 4.5 million workers walked away, according to the Bureau of Labor Statistics. In total, 47.8 million workers resigned in 2021—the highest number of yearly resignations on record.

For employers, that's much more than an inconvenience. The cost of replacing a single employee can run up to two times that person's annual compensation.

Whatever we call this recent wave of departures—the Great Resignation, Great Attrition, Great Reshuffle, Great Reconsideration or Great Re-Evaluation—the urgent imperative for company leaders is clear: They need to stem the tide of workers who are quitting, and they can do that by bolstering employee loyalty.

Employers have their work cut out for them, however. Only 39 percent of employees globally and 43 percent of U.S. workers say their current company is meeting their needs, according to management consulting firm Mercer's Global Talent Trends 2022 report, which captured survey responses from workers in 13 industries and 16 countries.

"By and large, people's needs in the workplace are not being met today," says Kate Bravery, global practices leader for Mercer's careers business.

It's up to company leaders to understand what those needs are and how best to fulfill them. Here are six ways to do that.

 

1. Think of resignations as a symptom of a broader illness. The sickness? Work that lacks meaning.

When trying to improve employee loyalty, leaders often think first of creating an enjoyable workplace. "So many firms have defaulted to thinking that loyalty is about employee happiness," says Fred Reichheld, a fellow at management consultancy Bain & Co. and founder of Bain's loyalty practice.

The boss's job isn't to create a fun place to work, he maintains. It's to provide employees with a greater sense of purpose. Work that's worth the effort—and worthy of loyalty—is about "being part of a team where you provide meaningful service that enriches the lives of others," Reichheld explains. The pandemic didn't create the problem of work that lacks meaning, he adds, but it did expose the problem.

Work that makes clients' and customers' lives better is "the only sustainable purpose that inspires employees," Reichheld says. Yet only 10 percent of company leaders believe that's their organization's primary purpose, he found when he surveyed company leaders around the world for his book Winning on Purpose: The Unbeatable Strategy of Loving Customers (Harvard Business Review Press, 2021).

"The Great Resignation shows that if you put your employees in a position to do things to customers they're not proud of, they'll find something better to do with their lives," Reichheld says.

Increasingly during the pandemic, employees have been attracted to companies' values, especially commitments to sustainability, diversity, equity and inclusion, as well as to workers' physical, mental, social and financial well-being, Bravery says. A company's values should be its brand.

"Employers need to take the lessons of brand loyalty and transfer them to how they think about employee loyalty," Bravery advises.

Company leaders also should heed what management consultancy McKinsey & Co. calls "the purpose gap." More than 70 percent of employees say their sense of purpose is largely defined by work, according to a 2020 McKinsey survey of more than 1,000 U.S. workers. Yet when it comes to living that purpose, there's a chasm between executives and everyone else. While 85 percent of executives and senior managers say they're living their purpose at work, only 15 percent of front-line managers and employees agree—and almost half (49 percent) disagree.

2. Ask employees what's important to them.

"Ask people what they need—and what they need right now," advises Michael Monahan, national managing principal, people and community, with tax and advisory services company Grant Thornton.

It can be a struggle to keep up with people's needs, especially as those desires have fluctuated along with the ups and downs of the pandemic. But it's important for employers to have a regular process for identifying their people's needs and acting on them.

"Listen and respond," says Amy deCastro, vice president of HR at Schneider Electric, a multinational company specializing in energy and automation with more than 19,000 U.S. employees.

The top-down decision-making process of many executives before the pandemic doesn't lead to a loyal staff, according to deCastro, who oversees roughly 3,500 of the company's U.S. employees. "You have to have contributions from people who truly represent the broader organization," she says. "We have to listen to employees and make sure what we're providing is what they're asking for." Over the past two years, for instance, Schneider Electric has involved its employee resource groups and focus groups in decisions about benefits, deCastro says.

After asking its employees about their wants and needs, Schneider Electric introduced some benefits that didn't demand much of the organization but did make a notable difference to its people. For instance, the company now offers a pet care benefit that includes up to five days of pet sitting, for which a worker has a daily co-pay of $10.

Every year, IT consulting company CGI assesses its employees' satisfaction, in part with a 14-question survey, and identifies ways to improve it. "That allows us to take the temperature of our members on the things that are going well and the things that can be better," says Jennifer Hilliard, vice president of human resources. As a result of a recent assessment, CGI began offering a benefit that provides autism support services.

The tangible results of listening and responding can't be a one-size-fits-all benefit or program. After all, individuals have individual needs. Additionally, not every benefit has to be enjoyed by every employee in order to be considered successful, deCastro says.

Last year, Schneider Electric launched a sabbatical program that allows employees to put aside a percentage of their paycheck while the company matches a portion of that amount. After three years, employees can use the savings to take three months off and do whatever they want. However, despite plenty of interest before the program's launch, only a few hundred workers have taken advantage of it.

"Is that a failure? I don't think so, because we now have the loyalty of 200 people over the next three years," deCastro says. But the company does have to ensure it provides benefits that satisfy its U.S. workforce of roughly 20,000 employees, she adds.

 

 

‘We have to listen to employees and make sure what we're providing is what they're asking for.’

Amy deCastro 

3. Accept that flexible work isn't going away.

If there's one thing employees clearly want, it's flexibility in where and when they work. The pandemic-accelerated trend toward greater worker autonomy now looks like it's here to stay. "People have begun to realize that flexible work is not just a benefit," Bravery says. "It's a new operating model."

Almost one-third of employees (32 percent) say flexibility is the biggest reason they stay with their employers, Mercer's survey found. One in 3 respondents say they would forgo a pay raise if they could have more control over their work location and hours. And when employees are satisfied with their flexibility, they're 2.6 times more likely to report being happy, according to a 2022 LinkedIn report on global talent trends.

Employers are getting more creative with what flexibility can look like. Schneider Electric introduced a part-time-work option that allows its full-time employees to be on the clock for just 24 or 32 hours per week for three months a year, with their pay reduced accordingly. Last year, deCastro, the mother of a high school senior, happily took advantage of the program to visit college campuses.

"That flexibility created loyalty for me," deCastro says. "And other employees say a reason they don't want to leave the company is because they have such flexibility."

 

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4. Find ways to foster connection in a virtual work world.

With remote work, office employees never really look one another in the eye. Isolated within their own homes, they can only stare at their computer screens—and often at their own faces on those screens.

As a result, people lack connection, Monahan says, and many yearn for it: "The lack of human connectedness has been a major contributing factor to the Great Resignation and to the challenges with employee loyalty."

Grant Thornton has seen attrition rates rise even within employees' first or second year on the job; prior to the pandemic, the company had not seen high quits rates during that period of employment. When company leaders have been able to bring people together in person—such as for park picnics last summer—resignation numbers have gone down. But whenever pandemic conditions forced the organization's workforce to go entirely remote, resignations again began to climb.

The lesson for leaders: "Develop as much human connectedness and social interaction beyond the workplace as you can," Monahan advises. "Make sure personal outreach is part of the regular cadence."

Grant Thornton has done that by having partners and principals reach out to workers in the same geographic regions as them. Each leader was assigned 10 employees to call regularly just to check in and chat. Even in a virtual world, the company has found, people's ties to place still matter. "Don't talk about work," Monahan advises. "Just see how they're doing."

The C-suite also needs to help create connectedness, he adds. Rather than having a CEO deliver a companywide presentation online, have that leader also pop into small breakout groups during a virtual town hall. "That's more impactful than having the CEO sit in a massive conference room speaking to employees like shareholders," Monahan says.

Making connections isn't just about exchanging pleasantries. It's also about providing resources. In light of the challenges with the pandemic and social unrest in recent years, Grant Thornton encouraged each employee to take 40 hours of paid time off to volunteer in their community.

5. Treat people as individuals with career goals to achieve, not workers with functions to fulfill.

"We've seen an increase in people who say they're satisfied with their workplace and would recommend it to others but are still thinking of leaving," Bravery says of Mercer's surveys of employees across various organizations.

Employees might be happy enough with their jobs, she says, but they likely won't stay with the organization if they don't see a long-term future for themselves there. With more flattened and agile organizational structures, it's not always clear what career progression within a company might look like. Employers need to do a better job of explaining to employees how they can move from one role to another. People who say they're thriving at work are three times more likely to have a manager who pays attention to their career goals, according to Mercer's survey.

"Understand who your employees are, what they want out of the organization and how you can support them as a full person versus just people collecting paychecks," deCastro says.

Schneider Electric has tried to create attractive career paths for people who have left the company or the workforce. Its partner reacHIRE, an employment search service, identifies those candidates and trains them while Schneider Electric employs them for half a year. "The hope is that at the end of those six months, we have someone who is very interested in Schneider and feels we have invested in them," deCastro says.

6. Avoid quick money fixes that lack lasting impact.

Before the pandemic, bonuses could often deliver a lasting boost to loyalty and retention. Now, that impact fades after just minutes, according to Monahan. "One-time bonuses are not that effective," he says. "As we got deeper into the pandemic, 'What have you done for me lately' became a mantra." When employees get a once-a-year bonus check, it raises the question of why the company didn't pay them better sooner.

CGI likewise has found that short-term attempts to bolster retention, such as one-time bonuses, aren't effective loyalty-building strategies. What's more effective is a sustained commitment to paying people well. CGI has woven ongoing financial incentives into the way it operates. It gives all of its employees, not just select executives, the opportunity to purchase immediately vested shares of company stock, with a portion matched by the company. And it disperses a portion of profits to all employees based on company performance. "For us, 'ownership' is not just a word," Hilliard says.

Many employers used to safely assume that an annual pay bump or occasional promotion would be enough to ensure a loyal staff. Now, they need a much better understanding of who their people are and what they want.

Novid Parsi is a freelance writer based in St. Louis.

Explore Further

SHRM provides information and resources to help business leaders build employee loyalty and encourage workers to stay on.

SHRM Toolkit: Managing for Employee Retention
Managing for employee retention involves taking strategic actions to keep employees motivated and focused so they elect to remain employed and fully productive for the benefit of the organization.

SHRM Toolkit: Developing and Sustaining Employee Engagement
Employee engagement has emerged as a critical driver of business success in today's competitive marketplace. High levels of engagement promote retention of talent, foster customer loyalty, and improve organizational performance and stakeholder value.

SHRM Resource Hub Page: Employee ExperienceCompanies are struggling to improve productivity, employees are concerned about stress and well-being, and the world of work has become more complicated and confusing. Improving the employee experience is paramount.

SHRM Toolkit: Developing Employee Career Paths and Ladders
Employees are generally more engaged when they believe that their employer is concerned about their professional growth and provides avenues to reach individual career goals.

SHRM Resource Hub Page: Remote Work
The benefits of telework also bring challenges for employers. Find the latest news, updates and critical members-only resources on this issue.

HR Q&A: What benefits can employers offer to improve employee retention?
In times of record employee turnover, revisiting employee benefits offerings might help retain top talent.

SHRM Toolkit: Designing and Managing Incentive Compensation Programs
Incentive compensation programs are primarily used to promote efficiency and productivity of the workforce, but organizations can also use them to enhance employee recruitment, engagement and retention, as well as employer branding.

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