Loyalty Report Loyalty in the Workplace
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1 Loyalty Report Loyalty in the Workplace Executive Summary September 2007 Employee Loyalty Business Ethics
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3 Publisher s Note If you re familiar with the Walker Loyalty Report series or the work we do on behalf of our clients, you know we invest a lot of time and attention on how customer loyalty impacts both a company s bottom line and its chances of continuing success. Every two years, however, our loyalty report series includes a comprehensive look inside American businesses examining the current state of employee loyalty and related implications. The 2007 installment of The Walker Loyalty Report for Loyalty in the Workplace points to some areas of concern for today s employers. Results of our national study indicate that while the percentage of truly loyal employees 34 percent hasn t changed from 2005, the percentage of employees in the high-risk category now outnumber the loyal. In fact, the number of high-risk employees has increased five percentage points in just two years, topping out at an all-time high of 36 percent this year. This widening gap means there are more employees today working against their companies than supporting them. For employers struggling to improve retention, the consequences of low employee loyalty can be quite significant. As our survey indicates, loyalty affects behavior. Review our findings, and you ll discover loyal employees are much more likely than their counterparts to execute company strategy, work to make the company successful, and lend a hand when needed. The relationship between employee loyalty and behavior is a powerful indicator of the overall importance of loyalty in the workplace. Our study also offers a snapshot of employees perceptions of business ethics that tells its own story. What we ve learned since our first employee loyalty study in 1999 is that, much like customer loyalty, loyalty on the inside of a company matters too. It s our hope this study will encourage you to take a closer look at employee loyalty within your own company, identify ways to link it to your customer loyalty results, and proactively work to improve it. Sincerely, Steve Walker Chairman of the Board, President, and CEO The Walker Loyalty Report for Loyalty in the Workplace 1
4 Walker Perspective All-time low employee loyalty means high risk outnumber truly loyal Chris Woolard As Walker Information's leading employee loyalty specialist, Chris Woolard is responsible for the design, implementation, account management, and analysis of his clients' employee and customer assessment programs. As the manager of programrelated activities, his involvement focuses on study design, exploratory research, questionnaire development, preparation of study materials, client reports and presentations, program scheduling, finalization of all program deliverables, and meeting other unique client needs and requirements. Woolard joined Walker Information in 1999 with survey research experience in employee and patient satisfaction. In their efforts to win customers and achieve success, the last thing American businesses need to worry about in today s competitive marketplace is whether their employees are playing for the home team. Based on the results of Walker Information s most recent study of employee loyalty, however, this concern appears to be valid. While The Walker Loyalty Report for Loyalty in the Workplace indicates the percentage of truly loyal employees 34 percent is unchanged from two years ago, the number of employees in the high-risk category has reached an all-time high of 36 percent five percentage points higher than in With more than a third of employees classified as high risk, employers are faced with a less than desirable scenario in which the number of employees causing a negative drain on the company outweighs those who are working to support it. In reviewing the study findings, we speculate the outlook could have been even more bleak for employers had they not made some promising strides in the experience areas most predominantly tied to loyalty. For example, 59 percent of those surveyed said their employers show care and concern for them, one of the leading drivers of loyalty. This represents a four percentage point increase from the 2005 findings. Attitude Accessible 7% 36% High Risk 2007 Behavior Truly Loyal 34% 23% Trapped Attitude Accessible 6% 31% High Risk 2005 Behavior Truly Loyal 34% 28% Trapped Walker Information, Confidential and Proprietary
5 Impact of loyalty on employee behavior To assess the true value of employee loyalty, it s important to look at how loyalty affects companies day-to-day. This year s study offers some interesting insights, especially when comparing the behavior of loyal employees to those who are not loyal. Eighty-one percent of loyal employees (those in the truly loyal and accessible categories) are likely to execute their company s declared business strategy in their daily work. Conversely, just 39 percent of those who are not loyal (high-risk and trapped categories) indicated they will do the same. Generation Y confident of better opportunities? Our study s results-by-generation support a dichotomous trend among workers in their 20s commonly referred to as Generation Y. As a group they are very dichotomous with 78 percent categorized as either truly loyal or high risk. These findings imply that Generation Y employees are fairly confident better opportunities exist in the workforce, making it unnecessary for them to settle for a job they don t like or one that doesn t provide what they need. However, these findings also indicate if a Generation Y employees finds a job they like, they will be truly loyal to a company. Employees play pivotal role in company strategy Forty-four percent of employees indicated they are involved in strategy development. Having employees involved in the development of the strategy is critical to them embracing, supporting, and executing the strategy. Also, perceptions of senior leaders impacted perceptions of the strategy. Unfortunately, only 50 percent of the employees felt senior leaders made good decisions and communicated the strategy. And, only 42 percent felt inspired by senior leaders. Upward trend in employees view of company ethics halted Walker s employee loyalty survey is coupled with a snapshot of business ethics specifically analyzing employees perceptions of company ethics and the ethics of senior leadership. While our past studies of ethics have noted an upward trend in this arena, this year s results remain virtually unchanged from Sixty-three percent of employees agree their company is highly ethical, and 57 percent believe their senior leaders are ethical. The study also shows a clear link between employees perceptions of company ethics and employee loyalty. 100% 80% 60% 40% 20% 0% 91% Believe the organization is highly ethical Truly loyal employees High-risk employees 89% 35% 31% Feel positively about senior leaders having personal integrity The Walker Loyalty Report for Loyalty in the Workplace 3
6 Improving loyalty what s next for employers? For employers, the task of improving employee loyalty and reducing the number of workers in the high-risk category begins with directing proactive attention to the issues of most concern to employees. Based on the results of our survey, there are a number of positive steps employers can take to better their chances of improving overall loyalty. Enhancing employee development Develop detailed job descriptions to determine skills and abilities necessary for each job Set realistic expectations in the hiring process Conduct regular meetings with manager to discuss development needs and opportunities Support employees by offering time and money for training Improving fairness at work Acknowledge most common policy issues hiring/promotion/salary, dress, and work hours/time off Ensure policies are clear Train managers/supervisors on how to apply policies Train employees on policies Recognize there are instances when employees may be treated differently; while this can create animosity, it could be a sound business decision Walker Information, Confidential and Proprietary
7 Executive Summary Employee loyalty at an all-time low Today s employers are faced with a situation in which the number of employees causing a negative drain on the organization outnumbers those who are working actively to support it. Although the number of truly loyal employees 34 percent is unchanged from two years ago, 36 percent of workers are now categorized as high risk, meaning they are not committed to the company and are likely to leave within two years. The percentage of high-risk employees climbed five percentage points since Walker s last employee loyalty study in 2005 to its highest mark since we began this research in % 50% 100% Truly Loyal Accessible Trapped High Risk Dichotomy apparent in Generation Y workers Employees in their 20s commonly referred to as Generation Y are more dichotomous than other generations with 78 percent classified as either truly loyal or high risk. The percentage of truly loyal workers within this group is 38 percent. There are any number of social and economic reasons for the dichotomy revealed through the study; however, the most likely may be a confidence among Gen Y employees that more and better opportunities exist especially with the imminent exit of Baby Boomers from the workforce. Generation Y Generation X Baby Boomers % 50% 100% Truly Loyal Accessible Trapped High Risk The Walker Loyalty Report for Loyalty in the Workplace 5
8 New employees are least loyal Employees with tenure of less than one year are the least loyal at just 26 percent. Loyalty is highest at 45 percent for those with six to nine years on the job. Generally, employee loyalty during the first 10 years increases as employee tenure rises. Less than 1 Year Years Years Years After a decade with the organization, however, loyalty diminishes sharply Years with just more than a third ( percent) of workers between years on the job categorized as truly loyal. The percentage drops to a More than 20 Years mere 30 percent for employees with more than 20 years of experience 0% 50% 100% with a company. Truly Loyal Accessible Trapped High Risk Relationship exists between loyalty and employee behavior Loyalty has substantial impact on how employees behave and perform daily on the job. Eighty-one percent of employees categorized as loyal (truly loyal and accessible employees) are likely to execute the company s strategy, while just 38 percent of those who are not loyal (high-risk and trapped employees) say they will do the same. Ninety-two percent of loyal employees indicate they work to make the company successful, compared to just 49 percent of disloyal employees. Finally, when it comes to lending a hand with heavy workloads, nearly 90 percent (89 percent) of loyal employees say they will help, while just 60 percent of those in the high-risk and trapped groups will pitch in when needed High-Risk Customer High-Risk Employee Walker Information, Confidential and Proprietary
9 Drivers of loyalty remain consistent The top drivers of loyalty at the attitudinal level have remained consistent over the past several studies.. The top drivers of loyalty at an experience level have also remained the same as 2005 with the exception of Trust in Employees, which was new this year. Top five drivers of loyalty - Attitudes 1. Development opportunity 2. Employee focus 3. Job quality 4. Brand 5. Reputation Top five drivers of loyalty - Experiences 1. Fairness at work 2. Care and concern 3. Trust in employees 4. Feelings of accomplishment 5. Satisfaction day-to-day Upward trend in perception of company ethics halted While past studies of business ethics registered an upward trend in employees perception of company ethics, this year s results remain virtually unchanged from two years ago. Sixty-three percent of employees agree their company is highly ethical, and 57 percent believe their senior leaders are ethical. Showing a link between ethical perceptions and employee loyalty, ninety-one percent of truly loyal employees believe their companies are highly ethical, compared to just 35 percent of high-risk employees. Nearly the same number (89 percent) of loyal employees feel their senior leaders have personal integrity, while just 31 percent of high-risk employees agree. Top ethics violations reported Lying to Supervisors Unfair Treatment of Employees Conflicts of Interest Lying on Reports Sexual Harassment 29% 34% 32% 37% 42% The Walker Loyalty Report for Loyalty in the Workplace 7
10 Employees play pivotal role in company strategy Sixty-two percent of those surveyed agree they are important to the company s strategy with 44 percent indicating they are involved in strategy development. Nearly three-quarters (71 percent) of respondents say they personally understand the company s strategic priorities, and 64 percent believe employees as a whole understand the firm s strategic plans. Methodology Data for this survey was collected online from 2,950 people, 18 years of age and older, working in companies with at least 50 employees. The respondents were full- and part-time employees representing business, non-profit, and government organizations. The results were weighted according to the June 2007 release from the U.S. Bureau of Labor Statistics. Understanding Loyalty Walker s unique loyalty matrix, based on a proprietary statistical algorithm, classifies employees into four specific categories: truly loyal, accessible, trapped, and high risk. This segmentation is derived from the combination of employee s expressed levels of behavioral intentions and attitudes. The Walker loyalty matrix provides a basic understanding of the current employee loyalty scenario in a given industry. It s a useful first step in helping companies categorize their employee base and create actionable data to maximize loyal employees. These employees want to keep doing business with your company but may not be able to continue doing so. + Accessible Truly Loyal These employees plan to keep doing business with you and want to do business with your company. These employees do not want to and do not plan to keep doing business with your company. Attitude High Risk Behavior Trapped + These employees plan to keep doing business but do not necessarily want to do business with your company Walker Information, Confidential and Proprietary
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12 About Walker Information To be a market leader in today s highly competitive environment, a company must be able to solve key business issues through customer-focused strategies. This involves leveraging the voice of the customer to fully understand the dynamics of your customer relationships. After all, focusing on customers drives business performance. Walker s diverse team of consultants provides tailored, comprehensive solutions to help companies achieve their business objectives and, ultimately, grow shareholder value. Walker specializes in customer loyalty and related customer strategies, including innovative approaches to segmenting, valuing, obtaining, serving, and retaining customers. Building relationships 301 Pennsylvania Parkway Indianapolis, Indiana Telephone: (International: ) info@walkerinfo.com
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