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Loyal employees often make more money

MICHIGAN STATE (US) — A loyal workforce can boost a firm’s bottom line. Now a new study finds employees who are loyal also stand to benefit—by making more money.

Michigan State University researchers surveyed 10,800 employees in former socialist countries that introduced capitalist economies in the 1990s.

While previous research has found that worker loyalty bolsters companies’ bottom lines by lowering labor turnover costs and enhanced customer service, this study shows that employees also benefit, says Susan Linz, lead author and professor of economics.


Workers were more likely to be loyal if they expected to earn a bonus or learn new skills. In addition, loyalty was higher among employees who expected that doing their job well would result in job security and the feeling that they were accomplishing something worthwhile. (Credit: Eugene Peretz/Flickr)

“We know that firms realize financial gain from loyal workers, but we wanted to know if they share those benefits with the workers,” Linz adds. “And among the more than 650 workplaces included in our study the answer is yes, they are sharing the wealth.”

The researchers surveyed employees from 2005 to 2011 in six culturally and economically diverse countries: Armenia, Azerbaijan, Kazahkstan, Kyrgyzstan, Russia, and Serbia. The employees came from a wide range of sectors including manufacturing, retail and financial services, health care, education, public sector, construction, and transportation.

Loyalty was measured in three ways: by workplace seniority; whether the employee would turn down an offer of slightly more money to change jobs; and whether the employee was committed to and engaged with the company (i.e., did they buy into the company’s mission even when it was outside their job responsibilities).

Linz says she was surprised to find such a strong link between worker loyalty and higher earnings. In three countries, the contribution of loyalty to earnings was equivalent to the contribution to earnings of an additional year of experience.

How to cultivate loyalty

Workers were more likely to be loyal if they expected to earn a bonus or learn new skills. In addition, loyalty was higher among employees who expected that doing their job well would result in job security and the feeling that they were accomplishing something worthwhile.

Contrary to previous studies, however, praise from supervisors was not always positively linked to worker loyalty.

The findings have implications in the global economy.

Western-based companies looking to set up shop in countries such as Azerbaijan or Russia, for example, need to know how to train their managers to motivate workers. Knowing which strategies promote loyalty is crucial.

“If Western managers come in and start offering them praise, telling them they’re doing a great job and so on, it might not have that big of an effect,” Linz says. “Managers might have more success by offering the workers a chance to learn new skills, which can contribute to their sense of better job security or desire for more job autonomy, all of which were positively linked to loyalty in our study.”

In the United States, where it’s common for workers to switch jobs and where companies and entire sectors are downsizing, popular perception is that it doesn’t make sense for employees to be loyal. But what if firms do reward loyalty? Linz says it would be interesting to conduct the employee survey here to see if the findings are similar.

The findings were published in the journal Evidence-based HRM.

Source: Michigan State University

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