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Employee Loyalty: Not Just a Retention Strategy


In the last five years, organizations in the United States have endured events spurring the most recent labor movement including the COVID 19 pandemic, the great resignation, and quiet quitting. The great resignation certainly reflects the reduction in people participating in the workforce, but the term is used to describe the great number of working people looking for a new job (Ford et al., 2023). Quiet quitting refers to those in the workforce who do the minimum required to keep their job. The labor movement demonstrates that employees require more than pay, benefits, and proper working conditions to fulfill their job responsibilities (Bucaţa et al., 2022; Ford et al., 2023). Employees started to expect more from their employers and were unafraid to look for a job elsewhere to find a reciprocal relationship. Ford et al. (2023) tells us that employee loyalty is developed through a mutual relationship between organization and employee where both benefit equally. Organizations must transcend beyond the traditional and understand how to operationalize employee loyalty.

The mere presence of employees in an organization means there is a risk for employee relations issues. Employee relations issues can be costly to an organization. According to the United States Bureau of Labor Statistics (2021), the average annual turnover rate is 48 percent across all industries. Losing an hourly worker costs an average of $1500, while losing a salaried worker can cost 1.5-2 times the worker’s salary (Agovino, 2021). The cost of a single third-party intervention can range from $400,000 to $2,000,000 (Orechwa, 2015). A long-term contract with a third party can result in a 25 percent increase in operating costs (Orechwa, 2015). Employee loyalty positively affects business performance outcomes, such as increasing profits, improving employer reputation, and stabilizing operations (Bucaţa et al., 2022; Stojanovic et al., 2020; Zhang et al., 2022). Since people are an organization’s greatest resource (Fulmer & Ployhart, 2013; Yadav et al., 2021), organizations must establish best practices for employee relations to build, maintain, and increase employee loyalty.


General Systems Theory

Through the rapid evidence assessment process three findings were identified to answer the question "what employee relations best practices positively affect employee loyalty in small and midsize enterprises (SMEs)?" The assessment revealed three findings: increasing employee loyalty through leadership; social connection builds employee loyalty; and strengthening employee loyalty through policy and performance.

General systems theory provides a foundational explanation of building, increasing, and maintaining employee loyalty. Figure 3 depicts the final conceptual model. The input is employee, who is inevitably impacted by the environment. The throughputs are the identified best practices regarding performance management, social connection, and leadership behaviors. Finally, the output is employee loyalty. The environment has a consistent influence on the entire system. As evidenced by the great resignation and quiet quitting following the pandemic, we know the environment can impact organizations and the workforce. Therefore, the feedback loop from employee loyalty to employee relations best practices is vital. As organizations and employees change and develop, the feedback mechanism allows employee relations best practices to remain innovative. Feedback mechanisms include employee surveys, focus groups, interviews, performance reviews, and the like. 


Figure 1

General Systems Theory Final Conceptual Framework


Note: Adapted from Operational Factors Affecting Service Delivery in Margaret Ekpo

International Airport, Australian Academy of Business and Economics Review by Inyang & Esu, 2017.


Recommendations

The assessment examined employee loyalty in the last three years and identified employee relations best practices that can be applied to build, maintain, and increase employee loyalty. These best practices are interventions founded through research and explained by the GST framework, providing reliable and theoretically supported recommendations. The recommended employee relations best practices are:


Performance Management

  • Designate part of the performance appraisal process to connect the employees’ work with organizational goals and social values.

  • Include career development and coaching in the performance process to provide direction to employees.


Leadership

  • Emphasize certain leader behaviors such as authenticity, caring, and discretionary effort.

  • Educate leaders on the performance management life cycle, leader expectations, and how effective performance management impacts employee loyalty.


Awareness

  • Establish a constant feedback mechanism between employees, leaders, and the organization.

  • Establish a process for continuous analysis of environmental factors such as economical, technological, social, and legal.


References

Agovino, T. (2021). To have and to hold. SHRM. https://www.shrm.org/hr-

today/news/all-things-work/pages/to-have-and-to-hold.aspx


Bucăţa, G., Virca, I., & Popescu, F. (2022). Organisational commitment, motivation and job

satisfaction. Land Forces Academy Review, 27(2), 124-133. https://doi.org/10.2478/raft-2022-0017


Ford, R., Newman, S., & Ford, L. (2023). Giving to get loyalty: How organizations signal their

loyalty to employees. Organizational Dynamics, 52(1). https://doi.org/10.1016/j.orgdyn. 2022.100956


Fulmer, I. S., & Ployhart, R. E. (2013). Our Most Important Asset: A

Multidisciplinary/Multilevel Review of Human Capital Valuation for Research and

Practice. Journal of Management40(1), 161-192. https://doi.org/10.1177/01492063 13511271


Inyang, J. & Esu, B. (2017). Operational Factors Affecting Service Delivery in Margaret Ekpo

International Airport. Australian Academy of Business and Economics Review 3(3), 156-165. https://www.researchgate.net/publication/326518093


Orechwa, W. (2015). The cost of unionization. Union Proof. https://blog.unionproof.com/the-

cost-of-unionization-2/


Stojanovic, A., Milosevic, I., Arsic, S., Urosevic, S., & Mihajlovic, I. (2020). Corporate social responsibility as a determinant of employee loyalty and business performance. Journal of Competitiveness, 12(2), 149-166. https://doi.org/10.7441/joc.2020.02.09


U.S. Bureau of Labor Statistics (2021). Annual total separations rates by industry and region,


Yadav, R., Panday, P., & Sharma, N. (2021). Critical issues on changing dynamics in employee

relations and workforce diversity. Business Science Reference.


Zhang, H., Du, L., & Jiang, Z. (2022). “Loyalty to organizations” or “loyalty to supervisors”?

Research on differential leadership and employee loyalty behavior: A perspective of

insiders and outsiders. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg. 2022.971624

 

 

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Great post, Maria. Please continue to share this with a summary article on LinkedIn, and maybe at other open source sites. Good luck, Dr. Bob

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