It's invariably dull to read articles about the business benefits of employee loyalty. That these benefits are still not obvious to many employers really raises questions about how they're managing to survive in business at all. But a hugely underexplored area is the reverse: what are the benefits that employees themselves derive from being loyal? Or are there indeed any consequences?
A study just published in the Journal of Economic Psychology focuses very much on the latter and has found that if you're a loyal worker it's possible your employer may be taking you for a ride.
![Have you been at your workplace long enough to receive a gold watch?](/web/20170107025225im_/http://www.canberratimes.com.au/content/dam/images/g/h/7/m/f/s/image.related.articleLeadwide.620x349.gs17ga.png/1476316678376.jpg)
The economics professor who authored the study was compelled to do so after analysing research that found many organisations don't actually recognise or reward their most loyal workers. For evidence, you only have to look at the accelerating pace with which long-standing employees are becoming casualties in this modern era of downsizing, much of which is occurring even when financial pressures aren't present.
In this particular study, the researcher examined the data of more than 10,000 British employees to see if those who were loyal earned less than those who were disloyal. The unambiguous answer was yes. And not by a little. On average, loyal employees earned between 19 and 30 per cent less than their peers.
So why is that? He explains: "Employers have greater bargaining power over employees who are loyal, and such workers are more averse to severing the ties with the organisation, and are thus willing to work for a lower wage."
Another interpretation of that conclusion is that many employers are aware their most loyal workers aren't going anywhere so they assume, perhaps subconsciously, that it'd be futile to keep throwing money at them. Disloyal workers conversely make their tenuous employment well known and so, in a bid to hang on to them, their bosses desperately increase their salary.
It explains why the one demographic affected by the biggest wage difference was those who are religious. Religious employees, believe it or not, are among the most loyal of workers. According to prior research, that's because they're more inclined to work for the purpose of serving others. They're also more inclined to be committed to an organisation's goals, ipso facto they have fewer dollars in their bank account. Loyalty clearly comes at a price … for the employee.
Among other demographics, men were found to be less loyal than women, as were unionised employees. And, perhaps less surprisingly, those who trust their managers and are involved in decision-making are also more likely to stay put.
The impact on wages isn't only in the short term. It's also a long-term consequence. This was demonstrated in research conducted by Harvard Business School several years ago. The finance professor who led the study investigated the effect on pension schemes when employees were loyal.
His extensive analysis found those who were loyal had a greater tendency to invest more of their retirement portfolio in their organisation's stock. Their blind loyalty, however, resulted in returns that were lower by about 1.75 per cent each year. Cumulatively, the consequence of that bias was that they had 20 per cent less in their account by the time they retired.
So, is this an argument against loyalty? Definitely not. Being loyal means you get to build stronger workplace relationships, become a trusted internal expert, and more easily navigate what can often be complex political terrain.
It's just that it pays to be careful your loyalty isn't leaving you short-changed. Literally.
Are you loyal to your employer? Have there been any consequences?
James Adonis is the author of Employee Enragement.
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