Recession Lessons #2 – The End of Employee Loyalty?


Karl Marx’s clarion call, “Workers of the world unite, you have nothing to lose but your chains” may be resonating much more these days than in the past.  Large, well-paying sectors like financial services, automotive and construction, quickly and with little warning, have shed millions of white and blue collar jobs during the past 16 months. Layoffs have occurred in every recession and every industry.  Yet, this time things may turn out differently and the entire economy will pay a steep price in the long run.

According to a survey by the Centre for Work-Life Policy (as reported in the The Economist Magazine), the proportion of employees professing loyalty to their employers slumped from 95% to 39% over the June 2007 to December 2008 period.  The study also found that the number of employees trusting their employers fell from 79% to 22% over the same period.  Perhaps, shell shocked employees may be overreacting to the worst recession since the Great Depression.  However, other evidence supports the hypothesis that there is a permanent shift in employee attitudes and behaviors.  A survey by DDI, an American consultancy, found that more than half of all employees were “stagnators” (i.e. the employee has little interesting work to do and little hope for promotion) and that half of these people planned to look for a new job once the economy improves. 

The most obvious reason for this unhappiness was the massive and rapid job loss.  A who’s who of corporate America pruned hundreds of thousands of jobs including Merck, Schering-Plough, eBay, Chrysler, Yahoo, Whirlpool and General Motors.  Upwards of 200,000 Wall Street workers lost their jobs. 

One area where companies failed their employees was in the mixed messages they communicated.  Many firms sought to deepen their relationship with employees beyond merely a pay-for-work contract.  Employers would be friends and partners in addition to bosses.  Examples of this approach were company-supported socializing, on-the-job catered meals and flex time.  At the same time, these same firms were ratcheting up the expectations.  They consistently increased workloads, demanded higher productivity, and regularly trimmed staffs, both in bad and good times.   Not surprisingly, employees were bewildered by the inconsistencies.  The severe recession became a catalyst in exposing employer hypocrisy (or employee naiveté), triggering attitudinal change that ranged from cynicism to downright hostility.

Pervasive employee dissatisfaction and turnover will have serious financial repercussions including:  reduced productivity for the remaing employees; higher HR costs (e.g., recruiting fees) and; a greater risk of skills and manpower shortages.  Longer term, a shattered employer-employee covenant may increase unionization rates and lead to a permanent loss of competitiveness due to loss of key competencies and institutional memory.

What can employers due to repair this frayed relationship?  

  • Come clean with employees, even with bad news – Honesty and transparency builds trust and enhances the credibility of the message and messenger;
  • (Finally) make HR strategic to the organization – Senior management needs to pay more than lip service to safeguarding and enhancing human capital and corporate culture;
  • Don’t overreact when bad news hits – In many cases, senior management was (understandably) over-zealous in shedding workers.  A more prudent approach in the next downturn will help ensure the firm is better positioned for the inevitable upswing;
  • Rehire laid off workers first – Nothing may do more to rebuild loyalty and capabilities faster than to rehire laid off workers when conditions improve.

For more information on our services and work, please visit www.quantaconsulting.com

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3 comments so far

  1. Kyle McGuffin on

    Great job Mitch. I hope employers read your blog. Many great tips. Thanks

  2. […] and longer hours. Soon this will become problematic for both the workers and their employers.  I touched upon this topic in an earlier blog post but now a recent article in The Economist magazine sheds more light on this issue and discusses […]

  3. […] and longer hours. Soon this will become problematic for both the workers and their employers.  I touched upon this topic in an earlier blog post but now a recent article in The Economist magazine sheds more light on this issue and discusses […]


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