International Employee Loyalty Survey. Executive Summary

Transcription

1 International Employee Loyalty Survey Executive Summary Released: May 27, 2002

2 MANPOWER INC. INTERNATIONAL EMPLOYEE LOYALTY SURVEY EXECUTIVE SUMMARY Contents About the Survey...2 Is loyalty really dead?...3 What does the future hold?...4 Do companies deserve loyalty?...5 How is loyalty changing?...6 Is loyalty important for business performance?...7 Are Human Resource strategies effective?...9 Are all employees mercenaries?...10 How can loyalty be increased?...12 Summary...13 About the Survey With over 400,000 customers and 2 million employees worldwide, Manpower Inc. sees the challenges that Human Resource Managers and Senior Management face on a daily basis. Employee retention strategy is one of the biggest challenges for many companies. To help determine what is really happening with the concept of employee loyalty, and the factors that affect retention, Manpower commissioned an International Employee Loyalty Survey. The results found that employee loyalty is growing, but there are many variations in loyalty levels across world geographies as well as demographic groups that comprise organizations workforces. The survey supports the need for a targeted retention strategy in order to succeed in reducing turnover rates among key employee groups. Methodology The Manpower Inc. International Employee Loyalty Survey was conducted by The Empower Group. Telephone interviews were completed between March 8 and April 3, 2002, including: 2,627 Human Resource Managers from a cross section of companies across France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom and the United States; and 1,454 permanent employees across the United States and the United Kingdom. Page , Manpower Inc.

3 Is loyalty really dead? Human Resource Managers believe employee loyalty has been increasing over recent years. Employees agree. Human Resource Managers were asked their perceptions regarding the loyalty of their organization s employees. A greater proportion reported that employee loyalty had increased (26%) over the last three years, than reported it had decreased (22%). The Net Loyalty Factor amongst Human Resource Managers is therefore +4 percentage points. Loyalty Among Employees: Past Three Years Human Resource Manager View Has Increased Has remained the same Has decreased NET LOYALTY FACTOR Thinking back over the last three years, do you think loyalty towards your company amongst employees has increased, decreased or remained the same? 22% 26% PLUS 4 PERCENTAGE POINTS 48% Base: 2,627 Human Resource Managers, international Key: Human Resource Managers 4 Thirty percent of employees report their loyalty has increased over the last three years. With 21% reporting decreasing loyalty, the Net Loyalty Factor for employees is +9 percentage points. Loyalty Among Employees: Next Three Years Human Resource Manager View Thinking ahead over the next three years, would you expect loyalty towards your company amongst employees to increase, decrease or remain the same? These findings refute much anecdotal evidence within the Human Resource community and media, which have emphasized decreasing loyalty levels. While a notable proportion of both employees and Human Resource Managers report decreasing loyalty, these responses are outweighed by reports of organizations with increasing loyalty. Will Increase Will remain the same Will decrease NET FUTURE LOYALTY FACTOR 42% 42% 10% PLUS 32 PERCENTAGE POINTS Base: 2,627 Human Resource Managers, international Key: Human Resource Managers 5 Page , Manpower Inc.

4 What does the future hold? Human Resource Managers expect their organization s employee loyalty levels will increase over the next three years. Employees also expect to become more loyal to their organizations. More than four in ten Human Resource Managers reported that they expect loyalty to increase in their organizations. The same proportion foresees no change. With only one in ten expecting employee loyalty to decrease, the Net Loyalty Factor of +32 percentage points illustrates a high degree of optimism for the future. Loyalty Among Employees: Past Three Years Has Increased Has remained the same Has decreased NET LOYALTY FACTOR 6 Base: 1,445 US and UK Employees Thinking back over the last three years, do you think loyalty towards your company amongst employees has increased, decreased or remained the same? 21% 30% EMPLOYEES: PLUS 9 PERCENTAGE POINTS Key: Employees 45% Employees have a positive view of the future Loyalty Among Employees: Next Three Years One in four employees anticipate their loyalty will increase. Only around one-in-ten expect their loyalty to decrease. Will Increase Thinking ahead over the next three years, would you expect loyalty towards your company amongst employees to increase, decrease or remain the same? 25% Loyalty is not dead. It s alive and growing, and the Human Resources profession knows this. Will remain the same Will decrease 11% 57% NET FUTURE LOYALTY FACTOR EMPLOYEES: PLUS 14 PERCENTAGE POINTS Base: 1,445 US and UK Employees Key: Employees 7 Page , Manpower Inc.

5 Do companies deserve loyalty? Only moderate proportions of Human Resource Managers report high levels of employee loyalty in their organizations. Key Loyalty Measures Employee loyalty is perceived to have increased over the past three years, and is expected to increase further over the next three years, but what is the current position? Only around six out of ten Human Resource Managers perceive their employees to have high levels of loyalty to their employer organization. A similar proportion feels that their organization actually deserves the loyalty of employees. With around four in Employees feel loyal towards the company Company deserves employees loyalty 10 Base: 2,627 Human Resource Managers, international 1,445 US and UK Employees ten Human Resource Managers believing that loyalty is neither strongly felt by employees nor particularly deserved by employers, there appears to be considerable room for enhancement of Human Resource strategies to engender greater levels of loyalty. Interestingly, a comparison of the employee data with the Human Resource Managers data reveals that while managers underestimate employee loyalty (-10), they overestimate the extent to which loyalty is deserved by the company (+5). The levels of loyalty perceived by Human Resource Managers and the expectation of future improvements leads to a question regarding the dynamic between current loyalty levels and future expected change. For example, if as we have found around four in ten Human Resource Managers expect loyalty to increase, and a similar proportion report low current levels of loyalty, is this the same forty percent of Human Resource Managers? In other words, are poor performing companies being left further behind or are high performing organizations forging ahead? The dynamics of changing loyalty are examined in the following section. 62% 64% 59% 72% Key: Human Resource Managers Employees Page , Manpower Inc.

6 How is loyalty changing? Human Resource Managers are seriously underestimating the extent to which loyalty is polarizing. A key to foreseeing future trends in employee loyalty is to understand how expectations for the future are influenced by current loyalty levels and by changes in loyalty that have occurred over preceding years. Here, the views of Human Resource Managers are contrasted with those of employees. Both sets of data have been classified according to current levels of loyalty to the organization. Current level of loyalty % expecting increase % expecting decrease Human Employees Resource Managers Human Resource Managers Employees High Moderate Low A number of observations are remarkable: The proportion of Human Resource Managers with a positive outlook does not vary across the three groups. Around four in ten expect employee loyalty to increase, regardless of how loyal employees are currently perceived to be. The picture from employees is very different. While 28% of those with currently high levels of loyalty are expecting their loyalty to increase over the next three years, only 14% of those with low levels of loyalty share this view. When future decreases in loyalty are considered, 23% of Human Resource Managers in organizations with low loyalty take the view that loyalty will decrease in the future. Conversely, the proportion of employees with low loyalty who expect their loyalty to decrease in the future is significantly higher (33%). These data suggest a negative loyalty cycle is developing among some employees, which is seriously underestimated by Human Resource Managers. The intensity of this negative loyalty cycle can be appreciated by looking at the impact of past changes in loyalty levels on expectations for the future. A number of notable observations were revealed: 44% of Human Resource Managers reporting decreased employee loyalty over the last three years expected loyalty would increase over the next three years. Only 13% of employees shared this view. While 15% of the same Human Resource Managers expected that loyalty would further decrease, twice as many employees 30% have this negative outlook. By way of comparison, positive cycles of loyalty were evidenced, with 49% of employees reporting past increases in loyalty anticipating further increases over the next three years. The message from employees is clear. Future changes in loyalty are heavily influenced by current levels of loyalty, and by the inertia of past changes. Human Resource Managers are failing to appreciate the extent to which loyalty levels are polarizing. Page , Manpower Inc.

7 Is loyalty important for business performance? Human Resource Managers believe employee loyalty impacts the bottom line. An adaptation of the Service-Profit Chain model 1 assumes that employee loyalty can, both directly and indirectly, lead to improved business performance and profitability. Directly, the service-profit model suggests highly motivated employees will remain loyal and perform at, or close to, optimal levels as a result. Indirectly, it suggests employee loyalty is likely to create customer loyalty by providing reliable, high quality customer service. In turn, by generating customer loyalty, greater profitability is achieved. Is Loyalty Important?: Human Resource Managers Perspective Employee Loyalty 22 Employee loyalty leads directly to business profits Employee loyalty leads to customer loyalty 80% Customer Loyalty Customer loyalty leads to business profits 76% 81% Business Performance Generally, Human Resource Managers show high levels of support for the principles of the Service- Profit Chain model. Loyalty is seen as important for business performance. However, a significant proportion of Human Resource Managers do not actively believe in a key element of the model - that employee loyalty generates customer loyalty: in fact almost one quarter (24%) are either neutral about this statement or disagree with it. 1 As originally suggested by Frank Reichheld in The Loyalty Effect (Harvard Business School Press), 1996 Page , Manpower Inc.

8 The importance of loyalty can be seen in the relationship between retention rates and employee loyalty. Retention rates are significantly poorer if it is felt that little or no employee loyalty exists. At these lowest levels of loyalty, average retention rates fall by about 5 percentage points. Interestingly, smaller organizations appear to perform least well in the retention battle. When the mean turnover figures are segmented by size of organization, we find annual turnover rates of 16.1% for companies with less than 150 employees, compared to 13.7% for those with employees and 12.8% for those with more than 500 employees. Impact of Loyalty on Retention % Annual Labor Retention Rate within each group A lot Strong degree Some Little None Level of employee loyalty as perceived by Human Resource Manager Base: 2,627 Human Resource Managers, international 13 The potential cost to businesses of loyalty disengagement are evidently huge. The impact of loyalty on retention suggests that the benefits of engendering loyalty are likely to outweigh the potential costs associated with higher turnover. Page , Manpower Inc.

9 Are Human Resource strategies effective? Companies need to do more to drive loyalty. The data below suggests that a significant proportion of Human Resource Managers feel their companies are not yet doing enough to engender the commitment required among employees. While over three quarters (77%) of Human Resource Managers believe, in principle, that employee loyalty is increasingly important in recruiting talent, fewer than seven in ten (69%) feel their retention strategies are creating loyalty among their workforces and even fewer (only 62%) believe their recruitment strategies are having this effect. So while generally, Human Resource Managers feel companies are striving to retain their best talent, there is some disparity regarding how well this is being achieved. Recruiting and Retaining Talent: Human Resource Managers Perspective Company strives to retain most talented employees Employee loyalty is increasingly important in recruiting talent Our talent retention strategy creates loyalty Our talent recruitment strategy creates loyalty Base: 2,627 Human Resource Managers, international For example, more companies 17 seem to be working harder at engendering loyalty once employees have been with the company for some time than at the point of entry. Four in ten Human Resource Managers do not feel that their actions are actively encouraging loyalty through positive practices at the point of entry into the organization. 62% 69% 79% 77% Key: Human Resource Managers Page , Manpower Inc.

10 Are all employees mercenaries? Analysis of employee data reveals distinct loyalty segments. These employee segments exhibit highly different business behaviors. To investigate the differences between actual feelings of loyalty towards a company and the feeling that a company deserves an employee s loyalty, the employee data gathered across the US and UK was segmented. This loyalty balance analysis has identified four main types of employees: Mutual Loyalists feel loyal towards their company and feel that the company deserves that loyalty. There is likely to be a feeling of mutuality here between the company and the employee. These employees are likely to see their psychological contract as a two-way street where their own efforts and performance are rewarded with investment from the company. To some degree this is the ideal scenario: true, mutual loyalty. In our analysis, just over one in two US/UK employees are Mutual Loyalists. Loyalty Balance Analysis: Employee View 29 +ve Employees feel loyal to company -ve Blind Loyalists 19% Saboteurs 21% Mutual Loyalists 53% Mercenaries 6% Company deserves employees loyalty +ve Blind Loyalists: A significant proportion of our sample, almost one in five, express loyalty towards their company despite not feeling that the company deserves it. To some extent, this segment is expressing blind or misplaced loyalty towards the company. Despite their rejection of the notion that their own particular company has done enough to generate loyalty proactively, they still feel relatively strong degrees of loyalty towards it. Mercenaries: Only a small segment of our sample, just over one in twenty, is Mercenaries. That is, despite feeling that their company actually deserves their loyalty, they feel no loyalty towards it. They are not playing their part in a mutual, two-way, loyalty-based relationship. Saboteurs: This group, accounting for over one in five employees interviewed, is negative on both counts of loyalty. They neither feel the company deserves their loyalty, nor feel any loyalty towards it. Page , Manpower Inc.

11 Overall, Human Resource Managers expectations regarding the profile of the loyalty balance are closely aligned with the actual views of employees. Human Resource Managers estimates of the size of the Mutual Loyalist segment are accurate (48% Human Resource Managers; 53% employees), as are their estimates for the Saboteurs (21% among both groups) and the Blind Loyalists (14% and 19% respectively). However, Human Resource Managers tend to overestimate the size of the Mercenaries segment. While those in the Human Resource profession believe around 17% of employees fall into this category, in reality, only around 6% of permanent employees place themselves in this segment. This is mainly a reflection of Human Resource Managers tendency to overestimate the level of deserved loyalty felt among employees. Loyalty Balance Analysis: Human Resource Manager View of Employees +ve Employees feel loyal to company Blind Loyalists 14% Saboteurs 21% Mutual Loyalists 48% Mercenaries 17% So how does loyalty affect the key behaviors impacting business performance? -ve Company deserves employees loyalty +ve 36 Key Loyalty Measures Mutual Loyalist Blind Loyalist Mercenary Saboteur % Motivated % Advocate company as an employer % Advocate company s products and services % Committed to business strategy On all of the key measures, performance decreases through the categories of the loyalty balance, with Mutual Loyalists at the highest levels and Saboteurs at the lowest. The impact of loyalty on organizational performance can be considered when it is understood that only half of Saboteurs are motivated (56%), and four in ten report that they are not committed to the success of their employer s business strategy. This compares to near maximum rates of motivation and commitment among Mutual Loyalists (96% and 93% respectively). Page , Manpower Inc.

12 How can loyalty be increased? Human Resource Managers have a good understanding of what needs to be done to engender greater employee loyalty, but they are not optimizing this among their workforces. Human Resource Managers and employees were asked to identify which issues impacted most heavily on loyalty. The good news is that Human Resource Managers responses closely matched those of employees. Open & honest communications Giving recognition Strong teamwork Key Loyalty Measures 90% 84% 89% 83% 88% 87% The same top three loyalty drivers emerged from responses of both Human Resource Managers and employees. Those were, open Base: 2,627 Human Resource Managers, international 1,445 US and UK Employees SLIDE 11 Key: Human Resource Managers Employees and honest communication (90% Human Resource Managers, 84% employees), giving employees the recognition they deserve (89% and 83% respectively) and strong teamwork (88% and 87%). On the declared drivers of loyalty, Human Resource Managers appear to know which areas need to be addressed. Given the absolute loyalty levels identified earlier, this suggests that Human Resource Managers need to do more to increase loyalty within their own organizations. The challenge for the Human Resource community is to overcome current barriers (on issues such as communication, recognition and teamwork) to address loyalty improvements. Statistical analysis reveals that three additional issues are closely related to employee loyalty: The extent to which loyalty is perceived by employees to be valued and rewarded by the organization; Employees seeing senior managers living in accordance with the organization s values; Employees understanding how to apply their company values in their daily work. Interestingly, with regard to each of these three loyalty drivers, significant variation was found among employees at different levels of the organization. There is a clear disconnect between the views of senior managers and non managerial employees: While 82% of senior managers agree that they see our company values lived by senior managers, this figure decreases to 63% amongst non-managers. There is also a mis-match in the extent to which employee loyalty is perceived to be valued and recognized by companies. Over two thirds of senior managers feel that their company recognizes and values employee loyalty. However, only 53% of non-managers believe this to be the case. Furthermore, while 86% of senior managers claim to understand how to live in accordance with my company s values in my day-to-day work, this decreases to 78% among non-managers. Human Resource and general senior managers both play key roles in driving loyalty, but they are clearly not delivering on all the behaviors and processes necessary to optimize it. Page , Manpower Inc.

13 Summary Manpower Inc. International Survey Confirms Employee Loyalty is Alive and Growing Contrary to popular belief, employee loyalty is not dead. Across the eight countries included in the survey, Human Resource Managers reported that loyalty has increased in the past three years, and they are very optimistic about loyalty increasing over the next three years. The many demographic differences in the survey results are a clear indication that a one-size-fits-all employee retention strategy will be relatively ineffective. A targeted retention strategy is necessary in order to succeed in reducing turnover rates among key employee groups. The survey indicated a polarization trend among the most loyal and disloyal of employee groups, with each group expecting to become more hardened in their views over the next three years, further emphasizing the need for a targeted approach to retention strategy. The data from each of the eight countries included in the survey revealed distinct differences in loyalty levels and the factors that drive loyalty. These international differences increase the complexity of retention strategy for multinational corporations. For employers that are striving to create a high performance workforce, these results offer solid evidence of the need to make retention strategy a higher business priority, and customize their approach to fit their specific work environment. There is still much to be learned about the best way to engender employee loyalty, but this survey provides new information that any employer can use to energize its workforce. Page , Manpower Inc.

14 About Manpower Inc. Manpower Inc. is a world leader in the staffing industry, providing workforce management services and solutions to customers through 3,900 offices in 61 countries. The firm annually provides employment to 2 million people worldwide and is an industry leader in employee assessment and training. Manpower also provides a range of staffing solutions, engagement and consulting services worldwide under the subsidiary brands of Brook Street, Elan, The Empower Group and Jefferson Wells. More information on Manpower Inc. can be found at About The Empower Group The Empower Group is a global consultancy helping build great organizations by maximizing the strategic impact of their people. Empower operates in four service areas: research & diagnostics, organization performance, talent architecture, and branding & communication. Currently Empower is present in over 14 countries, employs over 500 people and is an independent operating division of Manpower Inc. More information on The Empower Group can be found at Full survey results available at: English: French: Spanish: For more information regarding the study, contact: Manpower Inc. International Headquarters 5301 N. Ironwood Rd. Milwaukee, WI USA Telephone: info@manpower.com Web site: The Empower Group International Headquarters 23 Buckingham Gate London SW1E 6LB United Kingdom Telephone: +44 (0) ; info@empowergrp.com Web site: Page , Manpower Inc.