How to Build Employee Loyalty (And Why It Matters)

For any business, big or small, employee loyalty is one of the key factors in determining its success or failure. 

And the bad news is that many companies are failing to inspire loyalty in their staff: 43% of workers would be willing to quit if offered 10% more pay elsewhere, according to a 2019 survey. That was up from 23% in 2015.

As those statistics suggest, building company loyalty isn't easy. But in this tutorial, you’ll learn some useful strategies for inspiring loyalty in the workplace—and increasing your employee retention rate at the same time.

We’ll start by looking at the importance of employee loyalty, and then we’ll examine some successful employee retention strategies. We’ll finish by looking at some case studies involving some of the companies with the most loyal employees.

So, if you’re ready, let’s get started!

1. Why Loyalty Matters

If you run a business, I’m sure you want loyal employees. But it’s worth spending some time looking at exactly why it’s important. What are the benefits of high company loyalty?

1. Productivity and Performance 

Who do you want producing your products, handling your money, and running your systems? Someone who is loyal to your company and plans to stay for the long haul, or someone who’s more interested in updating their CV and searching job boards?

Clearly, the loyal employee is the better option. To put it bluntly, they’re more likely to care about what they’re doing and to do it well. Their own interests are more likely to be aligned with the company’s, and you’ll see better end results.

2. Better Customer Service

Your employees are also the public face of your company. They’re the ones who interact with your customers and represent your business to the wider world. 

If they’re highly motivated and loyal, they’ll be more efficient in their job and create a better impression on customers. If they’re not, you’ll always be struggling to hire new people and train them to do the job you expect of them.

3. Lower Cost and Less Disruption

When employees don’t feel loyal to the company, they’ll leave at the first opportunity. For a business, that means that staff turnover will constantly be high, which causes two big problems.

1. It’s expensive to hire and train new staff. In fact, it can cost more than twice an employee’s salary to recruit and train a replacement.
2. When someone leaves, they take all their knowledge and training with them. Unless you've got very good systems for documenting job processes, there’s a good chance that the person’s knowledge and experience will be lost to the company. Even in a best-case scenario where there’s no lasting loss, the new employee will still take a while to get up to speed.

So it’s clear that holding onto your employees is a good idea. In the next section, we’ll talk about some ways you can do that.

2. Key Employee Retention Strategies

If you want to improve company loyalty, and hence your employee retention rate, here are some strategies you should follow.

1. Ask Your Employees

The first step is to find out what's driving loyalty (or lack of loyalty) among your employees. There are some general factors that are often at play, and we’ll look at some of those in a minute. But each workplace is different, and you need to understand what makes people stay or leave at your company.

For example, maybe people love working for you, but hate the long commute and lack of transport options. Maybe there are particular managers within your company who inspire either loyalty or loathing. You need to understand what employees care about, and the only way is to ask them.

Formal staff surveys are great tools for this, but make sure to ask the right questions and to encourage people to write in their own answers and comments. Also keep in mind that informal conversations can sometimes lead to a deeper connection and sense of trust, and hence more honest and forthcoming answers than a survey. So try both strategies to get a sense of what causes people to stay or leave.

Also make good use of exit interviews—particularly if you've got a high turnover rate. It’ll be too late to persuade that particular employee to stay, but the lessons you learn about why that person decided to quit can help you avoid losing others.

2. Give Them What They Want

Now that you know what's important to your employees, give it to them. Of course, this won’t always be possible. Things like your company’s location are hard to alter, and major changes to your facilities may be beyond the budget of a small business. If that’s the case, then communicate that to your employees, showing that you understand it’s important to them but explaining why it’s not feasible right now.

But as far as possible, deal with any specific issues that come up as a result of your formal and informal surveys. Then keep asking. The issues are likely to change over time, so make sure you keep on top of things and are always working to earn and keep your employees’ loyalty. It’s not a task you’ll ever be able to mark as “complete.”

As well as dealing with specific requests, it’s also good practice to examine the following common areas that tend to have an impact on company loyalty.

3. Review Pay and Benefits

Show me the money! Although most employees aren't primarily driven by money, it’s certainly important to make sure that you’re being competitive in the salaries and benefits you offer.

So make sure you regularly go through a process called compensation benchmarking, in which you review what other companies in your industry and area are paying for similar jobs and make sure your firm is offering a competitive rate.

The benefits package can also be a decisive factor for many people, particularly in important areas like health, parental leave, and retirement plans. So try to ensure you’re providing the benefits your employees want, and that you’re matching or exceeding those of your competitors.

Find out more in this tutorial:

• 
  Small Business
  How to Offer Competitive Small Business Pay & Benefits
  Andrew Blackman

4. Consider the Career Path

Put yourself in the shoes of your employees for a moment, and ask yourself a few questions:

• What are the career development opportunities like? 
• Do people have access to training to help them learn new skills? 
• Do they've got a fair chance of getting promoted and moving up within the company? 
• Is there much support from HR and/or managers in helping employees decide what they want to do and map out a fulfilling career path?

While some employees are happy staying at the same level, many people want to move on and do new things. Ask yourself if they’re able to do that within the company. A common reason employees give for quitting a job is the lure of a “new opportunity.” Try to provide those new opportunities within the company.

5. Work on the Culture

Remember that employee loyalty survey I mentioned earlier? It also found that less than one-third of people believe they've got a strong workplace culture. And a long-running Gallup poll shows that only 13% of employees worldwide are engaged in their jobs.

When you think about it, those figures are quite dismal. People spend large parts of their lives at work, and if they don’t feel part of a positive, supportive culture that engages them, it’s not surprising if they want to leave.

Also, too many workplace cultures don’t feel inclusive and welcoming to everyone. As we’ve discussed in our series on workplace diversity, a common problem for companies seeking to hire a more diverse workforce is that the new employees feel excluded by the dominant culture, and when that happens, they don’t stick around.

So work on creating a better corporate culture. It’s a large topic that’s too much to cover here, but you can find some specific tips and techniques to use in these articles:

• 
  Business
  How to Create a Positive Work Environment for Your Business
  Andrew Blackman
• 
  Diversity
  How to Build a Culture of Diversity and Inclusion in Your Workplace
  Andrew Blackman
• 
  Communication
  How to Develop & Show More Empathy in Your Workplace
  Andrew Blackman

Getting the culture right is one of the best employee retention strategies out there.

6. Review Your Hiring Practices

This one’s often overlooked, and understandably so—you’re focusing on retaining existing employees, after all, so what does hiring new employees have to do with it?

Effective recruitment, however, can actually have a strong impact on employee loyalty. If you hire someone who’s out of their depth or just completely wrong for the role, they’re going to want to leave. The same applies if you hire someone who’s overqualified and won’t feel challenged by the role, or someone whose personality is likely to clash with those around them.

If you hire the right people for the job, on the other hand, they’re likely to do a good job and feel comfortable and motivated. And that means they’re likely to want to stay.

So think about ways in which you can ensure you hire the right people. You can find some useful tips in this article:

• 
  Management
  How to Hire Your First Employees
  Andrew Blackman

7. Be Loyal

Finally, remember that loyalty is a two-way street. You can’t expect your employees to be loyal to you if you’re not loyal to them. Indeed, one of the main reasons for the decline in employee loyalty in recent decades is that many companies have been less loyal to their employees. Jobs for life and generous benefit packages have given way to endless rounds of downsizing and offshoring.

Of course, there will be times when you've got to make tough decisions, such as closing an unprofitable store or cutting costs during lean times. But you can still try as far as possible to show loyalty to your employees and to the town you operate in. Support your staff during tough times, and they’ll remember it.

3. What You Can Learn From Companies With High Employee Loyalty

Now let’s see what some of these employee retention strategies look like in practice. Here are a few brief examples of successful strategies by some of the companies with the most loyal employees:

1. Hyatt: Investing in Employees and Committing to Diversity

Hotel company Hyatt enjoys lower staff turnover than its competitors, with the average housekeeping employee staying for more than 12 years. 

One of the reasons for that is the company’s commitment to diversity, which has resulted in it winning awards such as the Human Rights Campaign Best Place to Work for LGBT Equality.

Hyatt also invests in popular employee benefits like travel discounts and free or subsidised on-site meals, and it offers tuition reimbursement to help employees improve their education and learn new skills.

The lesson: Many companies talk about diversity and training, but taking those things seriously and really investing in them can pay valuable dividends in the form of employee loyalty. 

2. Quicken Loans: Supporting the Local Community

Remember what we said before about being there in the tough times? Well, nowhere in the U.S. has been through tougher times lately than Detroit. While many firms abandoned the city, Quicken Loans kept its headquarters there and hires hundreds of new employees a month.

The firm has also shown its commitment to helping the local community recover from the disastrous economic problems besetting the city, as well as helping employees and their families navigate the tough times.

Add generous benefits and a clear communication of company values, and you’ve got a winning recipe for company loyalty.

The lesson: If you want your employees to be loyal to you, start by being loyal to them.

3. Southwest Airlines: Putting Employees First

Most companies talk about putting the customer first. Others are clear that shareholder interests take precedence. Southwest Airlines takes a different approach: employees first, then customers, then shareholders.

The logic makes sense: if employees feel valued, then they’ll treat the customers well, which will generate profits for shareholders.

What that looks like is a clear articulation of the company’s vision through effective storytelling, as well as highlighting and recognising valuable employees. CEO Gary Kelly gives a public shout-out to a different employee every week, and stories in the company’s magazine and corporate videos help to reinforce the message and cement employee loyalty.

The lesson: If you want happy customers and strong profits, inspiring loyalty among your employees is a great place to start.

Improve Your Employee Retention Rate!

In this tutorial, you’ve seen the importance of employee loyalty and learned about the ways in which companies can use effective employee retention strategies to improve loyalty in the workplace. We’ve also looked at a few examples of some of the companies with the most loyal employees and what they’re doing right.

The next step is for you to begin putting this into practice in your own workplace. Start building a clearer picture of what matters to your employees and why they’re leaving or staying. Then use some of the techniques we’ve covered here to begin improving your employee retention rate.

Editorial Note: This content was originally published in 2019. We're sharing it again because our editors have determined that this information is still accurate and relevant.