History Of The Loyalty Concept

Published Date: 02 Nov 2017

2.1 Introduction

There are a great number of theories which have been proposed to explain what keeps employees loyal to their company, especially within a hospitality establishment.

Although there are a wide variety of such theories, this survey will focus on the evolution of employees’ loyalty, since the most ancient to the most actual times.

The survey will be divided into 3 sections. The first will refer to the concepts of ‘loyalty’ and ‘employee loyalty’, the second to clarify the role, the importance and the trends of employee loyalty in general and especially within hospitality establishments and the third will focus on identifying the loyalty programs and the ways to improve employees’ loyalty and employee loyalty programs within hospitality establishments.

2.2 The Loyalty concept

Loyalty, according to "The free Dictionary", by Farlex, is defined as, "the state or quality of being loyal, a feeling or attitude of devoted attachment and affection".

Also, Fred Reichheld in his book, "The Loyalty Effect", defines loyalty as the willingness to make an investment or personal sacrifice to strengthen a relationship.

Loyalty is usually seen as a virtue, even though, a problematic one. It is constituted centrally by perseverance in an association to which a person has become intrinsically committed.

Its empiric expression is found in friendship, to which loyalty is integral, but many other relationships and associations seek to encourage it as an aspect of affiliation or membership; families expect it, organizations often demand it, and countries do what they can to foster it.

Until recently, loyalty did not attract much philosophical attention. Most of the detailed engagement with loyalty came from creative writers, business and marketing scholars, psychologists, religious scholars, political economists, and pre-eminently-political theorists, who took a particular interest in patriotism and loyalty oaths.

The grand philosophical exception was Josiah Royce, who created an ethical theory round "loyalty to loyalty".

Since the 1980’s, though, some independent philosophical discussion has begun to emerge, not only in the context of political theory, but also in those of professional ethics, whistleblowing, friendship, and virtue theory.

The Old Testament writers were continually occupied with the fickleness of human commitments, whether to God or to each other.

In Medieval to Early Modern, uses of the term loyalty came to be affirmed primarily in the oath or pledge of loyalty or allegiance sworn by a vassal to his Lord.

Although it is often spoken of loyalty as though it were a relatively free-floating practical disposition, which it can be, it is very common to associate loyalty with certain natural or conventional groupings. "Our loyalty tends to be expressed in loyalties."

"Our" loyalties are not expressed to any groups that may exist, or even to any group with which we have some association, but only to those to which we are sufficiently closely bound to call "ours". Our loyalties are to "our" friends, "our" family, "our" profession", or "our" country, not "your", unless "your" is also "our".

Josiah Royce, professor of the History and Philosophy at Harvard University, also discovered in the book, The philosophy of loyalty, by the Macmillan Company, 1908, page 16, a paragraph which defines the "loyalty" concept as "The willing and practical and thoroughgoing devotion of a person to a cause." He mentions that a man becomes loyal firstly, when he discovers a cause to which to be loyal to, secondly, devotes himself entirely to that cause, and thirdly, he practically serves his cause with consistent devotion.

He then explains "the cause" as being "something which seems to the loyal person to be larger than his private self, external to his purely individual will, something that appears to him to be at once personal and impersonal, since it concerns both himself and other people."

In addition, the cause of being loyal, it is never entirely impersonal. Loyalty involves communication, it is something social, and thus it involves other persons.

2.3 The Employee loyalty concept

"But what exactly does loyalty mean in a business setting?" This is a question asked by Dr. David G. Javitch, in his work, Creating Loyal Employees, December 2006.

According to him, loyalty in business, in its most basic sense, is the relationship between an employer and an employee; an abstract, often unwritten contract in which the employer agrees to provide the materials and resources the employee needs to get the job done, matched by the employee's agreement to work at an optimal level to fulfill the goals of the company.

He also supports the idea that "loyalty is really the glue that ties an employee to their job, and that tie is a function of the respect and allegiance the entrepreneur attempts to develop in their employees. In other words, he agrees that loyalty is a key reason many employees remain on their job."

In general, employee loyalty can be best described in terms of a process, where certain attitudes give rise to certain behaviors, intended or actual. There have been major changes in the business world and the workforce in the last couple of decades. In the past, once hired an employee believed it was a life time job and managers expected their unstinted loyalty to the enterprise. Similarly, workers used to be devoted to their employer.

This image of employment loyalty has gradually changed with the advent of "globalization" when employees began to face restructuring, company relocations, and downsizing. Employers ‘broke the rules’, mutual obligations are reconsidered, life time employment and devotion is no longer expected, job-hopping is considered to be a normal phenomenon, and people are constantly striving for higher salaries or better working conditions.

Loyalty and trust have become more difficult to obtain and give in the work place. Loyalty seems like a quality that's becoming increasingly harder to find, whether it's employee loyalty to a company or consumer loyalty to a product. In the past, employees believed when they were hired by a company that they would be with that company until they retired.

Starting in the 1980s as companies sought to increase profits; workers' perceptions of lifetime employment were shattered by corporate downsizing, company relocations to other states or countries and static wages.

Loyalty has two dimensions: internal and external. Loyalty is, fundamentally, an emotional attachment. The internal dimension is the emotional component. It includes feelings of caring, of affiliation and of commitment.

This is the dimension that must be nurtured and appealed to. The external dimension has to do with the way loyalty manifests itself. This dimension is comprised of the behaviors that display the emotional component and is the part of loyalty that changes the most. The first step is to redefine loyalty as internal feelings that can be manifested in a variety of new ways. Instead, what happens most often is that the leaders of an organization feel that they are very loyal to their employees and that the organization has policies in place to reflect that-but that workers don't understand what management is trying to do. On the other hand, employees who feel they are very loyal to their companies aren't demonstrating it in ways management understands.

The terms of the loyalty are far different from what they were in the past. Rather than a blind corporate allegiance, employees show their commitment through their efforts for the organization.

Powers, Edward L. in his analysis, "Employee Loyalty in the New Millenium", 2000, developed a conceptual framework in which to analyze employee loyalty in the 21st century, and had made a clarification on loyalty and employee loyalty concept as follows:

"Typical loyalty contexts:

Typical indications of Employee Loyalty:

Loyalty to Country

Loyalty to Family

Loyalty to Self

Loyalty to Profession

Customer Loyalty

Loyalty to Sports Teams

Loyalty to Religious Beliefs

Loyalty to Community

Animal’s Loyalty to Master

Loyalty to National Origin

Work – Related

Loyalty to Supervisor

Loyalty to Coworkers

Loyalty to Job

Loyalty to Company

Remaining with the company; not leaving; not job hunting

Staying late to complete a project

Keeping the company’s business confidential; No "whistleblowing"

Promoting the companu to customers and community

Adhering to rules without close supervision

Sacrificing personal goals to achieve company’s goals

Not gossiping, lying, cheating or stealing

Buying company products

Contributing to company-sponsored charities

Offering improvement suggestions

Participating in company’s extracurricular activities

Following orders

Taking care of company property and not being wasteful

Working safely

Not abusing leave policies, including sick leave

Helping coworkers; cooperating"

2.4 The Role, importance and trends of employee loyalty

The role and importance of employee loyalty has been and it still is the object of study, analysis and evaluation made at the beginning of the 5th decade, after the year 1946.

Employee loyalty and customer loyalty bring profitability to an organization and helps it develop. If the level of employee and customer loyalty is low, it can cause the company many losses and even bankruptcy.

The idea that Profit and Growth are stimulated by customer and employee loyalty is also mentioned and strongly sustained in the Heskett et al (1997) as cited in Abdullah (2011): "The model chain of relationships between profits and growth are linked to customer loyalty, while customer loyalty is linked to customer satisfaction; in turn, customer satisfaction is linked to service value, while service value is linked to employee productivity, whereas employee productivity is linked to employee loyalty, employee loyalty is in turn linked to employee satisfaction, and employee satisfaction is linked to internal quality of work life."

There is a strong connection between productivity, loyalty, employee satisfaction, customer loyalty and profitability. In conclusion, the secret to fostering employee loyalty is Leadership.

Leaders who genuinely care about their people, who are "plugged in" to their organizations, and listen to their employees for suggestions to improve, will develop corporate cultures that naturally support the concept of the Service-Profit Chain. By no surprise, employees who trust and respect the leadership of an organization often feel more empowered and motivated to do their best.

Companies with loyal employees have a significant competitive advantage and a higher rate of survival compared to companies with less loyal employees: "The long term success of any company depends heavily upon the quality and loyalty of its people" Keiningham T, Aksoy L, 2009. Why managers shold care about employee loyalty, [http://workbloom.com/blog/management/why-managers-should-care-about-employee-loyalty/]

Employee’s loyalty is critical for organizations as constant turnover or churn can be very expensive.

"Replacing a lost employee costs 150% of that person’s annual salary" – The costs and impact of employee turnover can be grouped into four major categories:

Cost due to a person leaving;

Hiring costs;

Training costs;

Lost productivity costs;

Loyal employees are assets to a company, and their retention is the key to its success; for one, they bring in loyal customers. Given their importance, employers need to be able to identify and retain loyal employees. The fact that an employee has been working for a company 20 years doesn’t automatically guarantee his or her loyalty. For example, an employee might have difficulty finding a better job opportunity due to lack of marketable skills. Green A, 2007, What is loyalty and how do you develop it? [http://www.boston.com/jobs/on_staffing/022007.shtml]

Loyal, satisfied employees generate customer satisfaction by excellence in performance that leads to organizational success thus resulting in improved financial success. In this case, there is a direct connection between employee satisfaction and customer satisfaction.

Yee with colleagues (Yee RWY, Yeung ACL, Edwin Cheng TC, 2010, An empirical study of employee loyalty, service quality and firm performance in the service industry. International Journal of Production Economics, 124 (1): 109-120) developed a research model to analyze the influence of employee loyalty on company performance. Their result, based on service shops in Hong Kong, indicate that employee loyalty robustly affects company "profitability through service quality, customer satisfaction and customer loyalty."

Foster with colleagues Foster C, Whysall P, Harris L, 2008, Employee loyalty: an exploration of staff commitment levels towards retailing, the retailer and the store. International Review of Retail, Distribution & Consumer Researcg, 18 (4): 423-435. and Reichheld Reichheld FF, 2001, Lead for loyalty, Harvard Business Review, 79 (7): 76-84 indicated that companies with greater loyalty among employees, customers and shareholders generate greater profits.

In his research on employee loyalty, Michlitsch concluded that companies could best implement their strategies if they developed and retained their high-performing employees, including the following key factors: "clear mission and strategy, selection and training, corporate culture, communications and information, and rewards" Mischlitsch JF, 2000, High-performing, loyal employees: the real way to implement strategy. Strategy & Leadership, 28 (6): 28-33. Cascio conducted a relative study of Sam’s Club and Costco and found out that Costco’s employee-related costs were higher than Sam’s Club, but that Sam’s Club annual employee costs were three times higher than Costco’s dues to high turnover Cascio WF, 2006, The high cost of low wages. Harvard Business Review, 84 (12): 23-23. Loyalty was higher at Costco due to higher pay and benefits.

In the past, most employees would work for one company their entire life. Altman noticed that, in the past, having a job meant a commitment for life. People would get hired by one company and retire from the same company. Altman W, 2008, Whatever happened to employee loyalty? Engineering & Technology, 3 (6): 76-79.

The employers were also more loyal to their employees. There was a strong sense of trust between these two parties that would bond them for a long time.

Levin concluded that in the past employees looked for job security in exchange for their loyalty and hard work; the same situation does not remain in the present context. Levin PM,

Studies revealed changes in weight and strength motivational factors as a result of major changes in economic conditions, political and social climate nationally and internationally.

Studies have revealed changes in the share and the strength of the motivational factors as a result of the major changes intervened in the economic conditions and the political and social climate at a national and international level.

The dynamics of implementation of new technologies, transport, communication and computerization, globalization, elimination and others, require the reevaluation of the influential factors of approach by categories; job categories including executives, senior managers, managers, regular non-management employees, part time employees and consultants, and levels of employees ( age, activity background, etc) ["The loyalty treatment", Nursing Management, 2001]

Now, employees look for a more independent, mobile workforce. Loyal employees help in the growth and sustainability of a company. Employee loyalty reduces a company’s financial strain, saving on investment in the recruiting process of new staff.

The article, "The Death of Corporate Loyalty", Anonymus, 1993, Economist, 327 (7805): 63-64, posed a question whether companies that are cutting thousands of jobs will be able to generate loyalty and commitment among their remaining employees. In the past, long-term job tenure was much higher; however, such expectations are fading quickly with voluminous job cuts. Managers empowered in this way are likely to flex their muscles at every opportunity. Told to act like risk-taking entrepreneurs, they will expect entrepreneurial rewards as well.

In the research report "Redefining Employee Satisfaction Business Performance, Employee Fulfillment, and Leadership Practices" published in 2006 by Wilson Learning Worldwide Inc. are revealed job satisfaction factors ,as follows:

"We began our research by identifying the principal elements of fulfillment, empowerment, and engagement. We identified five:

• Satisfaction with the job: To be fulfilled, people need to value their day-to-day work activities.

People need to have a sense of accomplishment or pleasure from the work itself.

• Satisfaction with relationships: People also need to value the relationships they have on the job to be fulfilled. People want to like working with their coworkers. While people know that conflicts will arise, they want to be assured that the focus is not on the interpersonal differences, but the task differences.

• Satisfaction with leadership: If people do not think that they are being managed or led effectively, it is hard to have fulfillment in the work.

• Knowing that others are satisfied in their work: One of the key findings from our research is the importance of the open expression of fulfillment in the workplace. Knowing that others gain fulfillment in their work is a powerful motivator.

• Knowing that others are satisfied with the organization’s leadership: It is difficult to be fulfilled if there is not open trust and support for leadership. Equally, when that open trust and support is present, it helps create an environment where people feel empowered and willing to give their full engagement. This combination of both personal satisfaction and communication of group satisfaction is a critical distinction between Fulfillment Satisfaction and traditional definitions of satisfaction."

2.5 Employees Loyalty programs

Recognition and reward programs:

The aim and objectives of a company’s recognition and reward program is to motivate and engage employees, but it also must uphold employee retention, reduce accidents and healthcare costs, and encourage performance improvement and many more.

By rewarding and recognizing loyalty of performance, a company gets the most of the people that work for it.

Employee Performance Improvement Programs:

Attendance;

Training/ Certification;

Suggestions/ Ideas;

Participation;

Compliance;

Product or Service Quality;

Productivity;

Safety;

Wellness;

Teamwork;

Referrals;

Customer Service;

New Sales, Up-Sell, Cross-Sell;

Components of a loyalty program may include:

Service Awards;

Birthday Acknowledgement;

Spot Recognition;

Peer-to-Peer Recognition;

Nomination Process;

Suggestion Awards;

Associate Referral Program;

Sales Referral Program;

Training

Survey and quizzes;

Performance Management;

Incentives drive interest and behavior when people value the rewards offered and they believe they can attain them.

It is not possible to offer the "perfect" reward selection that has the power to motivate all employees participating in one program. That is the reason why it is better to have a large and diverse collection of rewards in the industry that can get the attention even of the most discriminating of the staff members.

Rewards can vary, from electronics, to world class packages and cruises, luxury house-wares, airline tickets, tickets to sold-out events, music, movies, books, tools, sporting good and many more.

A basic definition of the term "incentive" is something, such as a fear of punishment or the expression of reward that induces action or motivates effort.

In the business industry, the word "incentive" is defined as an additional payment made to employees as a means of increasing production. The additional payment is not always expressed in money. There are a lot of incentives that worth more than money themselves, and usually, those are the ones that make employees the most satisfied, devoted, and loyal to a company.

One of the biggest challenges faced by employees is keeping staff motivated.

Offering incentive opportunities is a great way to keep things fresh and ensure employees are continually striving to hit their specific targets. Examples of incentives in the hospitality industry can vary between Sports Hospitality (sports events), Hospitality at music events (music festivals), Culture events (trip wine tasting in France), Participative outdoor events (fun activities: paintballing, 4x4 off road rides), and other.

Incentive programs and promotions have helped companies:

Meet and exceed sales goals;

Engage and motivate employees and customers;

Drive incremental revenue and profit;

Launch new products;

Promote stronger customer relationships.

2.6 Summary

The concept of loyalty has been known since the beginning of mankind and has developed with time and it is still developing nowadays.

The loyalty concept is basically seen by many, as a feeling expressed by a person, to another person.

It is also believed that loyalty is something that can be at once personal and impersonal, as it concerns both the loyal person and other people.

Within a hospitality establishment, and among the employees of a company, the loyalty concept slightly changes.

Employees are the most important asset to an organization, and for this reason, employers need to do their best possible to keep their staff loyal.

In order to ease the most difficult task of an employer, (to keep employees loyal), certain loyalty programs have been implemented. There is a great variety of such programs, rewards, incentives that hospitality heads chase, in order to keep employees within a company for many years.

These programs, offer employees something in turn of their devotion (vouchers, trips, electronics, etc.)

The proposed study will seek to reveal the motivational factors and their influences on job satisfaction and employee loyalty in Hospitality establishments mostly located in Romania.