Two common questions in the business world are “What is loyalty?” and “How do you create loyalty both internally with your employees and externally with your customers?”
Loyalty is a commitment that is based on trust and positive rewards. People can be loyal to anything: friends, family, brands, companies, flavors of ice cream, etc. In business, loyalty is when customers consistently praise the products or services they receive. It also exists when employees feel committed to their employers and their companies. Loyalty is the result of repeated positive experiences.
Generally speaking, employees are loyal to a company when they connect to the purpose of their work and the vision of the company, and when they think their contributions are making a difference. Their loyalty leads to pride in their work, which means they are apt to produce a better product or provide a better service.
Customers show company loyalty through praise and repeat purchases, both of which are invaluable to a company’s success. Here’s why:
• It costs 10 to 20 times more to acquire a client than it does to keep a client.
• A Forum Corp. study shows more than 60 percent of customers who changed brands did so because of poor services or lack of personal attention.
• Tom Peters states that on average, a customer with a poor experience will tell nine to 10 people about it, and 13 percent will tell 20 or more of their closest friends and associates.
If customers tell others not to work with a particular company or talk about a bad experience they had, their friends definitely will shy away from doing business with that organization. Many people will “spread the word,” but this is not the word that you want on the street.
Yet, few people will complain to the organization itself. In fact, 25 of every 27 customers who have had a bad experience fail to report it because they don’t think anything will change.
Ninety-one percent of those who complain won’t come back, and it doesn’t matter if the purchase was worth $2 or $2,000 — they simply do not want to have another bad experience.
In Fortune magazine’s annual ratings of the “Most Admired,” “Best to Work For” and “Best Run” companies, loyalty is a fundamental judging criterion.
Management in these companies is dedicated to understanding employee, customer and shareholder needs. These companies clearly understand that loyal employees will make them solid and profitable and that unhappy, disgruntled (thus, disloyal) employees have the opposite effect.
The good news is that companies lacking employee loyalty can change their culture and build loyalty from the inside out. They can do this by instituting an employee engagement process. Here are the 10 most important elements to building a culture of employee loyalty and customer loyalty.
Put Your Purpose Out There
The first thing all companies should do is establish their purpose and values, then clearly share them with all employees. Purpose refers to why the company exists, the reason the organization was created. Ideally, this should go beyond just making a profit — in today’s world, people want to feel they are making a difference, that they are adding value to others’ lives.
Clearly Articulate Your Company’s Values
Once the purpose is established, a company must clearly articulate (internally and externally) the standards and values by which it will operate. Companies want to be known as highly ethical and professional in the way they do business. Further, if a company is to be successful, employees must feel connected and committed to the company’s values and purpose. Every company needs to say what it does and why, and then the employees will know what they are working toward each day.
Establish a Culture of Trust
Leaders within an organization are responsible for building a culture based on trust and respect. This means straightforwardness, openness, acceptance and reliability.
• Straightforwardness: Expectations are clear, disagreements are discussed and resolved and individual performance is discussed and agreed on.
• Openness: Employees feel they can exchange information and discuss their feelings and opinions, and they do not keep secrets.
• Acceptance: Employees are respected for the contribution they make, differences are valued and leadership is shared.
• Reliability: Employees can count on one another for support, keep commitments and strive for excellence in everything they do.
When these elements of trust exist in an organization, you will see increased engagement, empowerment and loyalty.
Align and Communicate
Without consistent communication, people become concerned about the future. This is when they update their resumes and leave.
Good communication starts with making sure everyone in the organization is aligned with the strategic direction, especially senior leaders. They have to be totally aligned, trusting and supportive of one another and communicate their alignment in everything they do and say.
Managers interact with employees either by keeping them informed or by not communicating, and both ways send a message. When managers keep communication open, employees are aligned and all work is transparent, the message to employees is that they matter. When managers do not share information with employees and do not include them in decision making, the message they are sending is employees are unimportant. Employees who feel they do not matter to a company are quick to leave.
Listen to Employees
A person on the manufacturing floor, an analyst in marketing or a customer service representative might see and hear things that could improve productivity. Companies need to provide a forum, as well as an open environment that allows people to speak out without repercussions and make suggestions that can be acted on.
There are thousands of great ideas sitting in employees’ heads, but many companies suppress them, which brings down employee morale. Once morale is down, employees find another company receptive to their innovative and creative ideas.
Engage People in Solutions
Once suggestions and ideas are heard, engage employees in determining the feasibility of implementation. This expands their thinking and provides them the opportunity to think outside their present responsibilities. By doing this, companies are breeding their future leaders.
People want to grow — give them the opportunity or watch them leave.
Learning is the New 401(k)
Most companies train their people on the elements of doing their job. This is important, but people also need to be trained on how to better interact across the company, what other departments do and how to quickly understand the company’s financials. Employees want to be in continuous growth and learning mode, and learning is a benefit to them, as well as the company. Give them the opportunity to continuously learn, and they will be forever loyal.
The No. 1 company on Fortune’s list of “Best Companies to Work For” clearly articulates its shared vision to the organization — Wegmans’ philosophy is, “The more we invest in training, the more it comes back to the bottom line. … Everything is a learning event for our employees — it’s just part of doing business.”
Rewarding and recognizing employees is critical. People need frequent reminders they are doing a good job. Small and frequent awards are the best such as coffee shop gift cards and catered lunches. Most important, managers must say the two most underused words in the English language: “Thank you.” When said with sincerity, there are fewer words that mean more.
An example of a company that has done an exceptional job with recognition of its employees is Southwest Airlines — according to its Web site, “We are committed to provide our employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, employees will be provided the same concern, respect and caring attitude within the organization that they are expected to share externally with every Southwest customer.”
This philosophy has built an extremely profitable organization with the highest employee satisfaction in the industry.
Leadership and Management Training
An employee’s manager, supervisor or leader is the most important person to him or her. This person is an employee’s lifeline to information, recognition, challenges and future vision.
Being a manager is one of the best and most difficult positions — managers and supervisors need to be coaches, friends, disciplinarians and sounding boards, and they need to improve procedures and set new directions. Additionally, they have to know the best way to work with people in their 20s and 50s, and they need direction and guidance on how to do that.
Managers need training and inspiration, and they need it consistently. To maintain productivity and loyalty, invest in your managers and supervisors — people leave managers more readily than they leave jobs.
JetBlue Airways created five principles of leadership in which all companies need to engage:
1. Inspire greatness in everyone.
2. Treat people right.
3. Do the right thing.
4. Communicate with your team consistently.
5. Encourage initiative and innovation.
Create a Caring Corporate Culture
This sort of culture also ought to be an open one, providing for great communication. Ensure it respects and values everyone’s contributions.
Hire for Culture and Attitude
Loyalty is all-encompassing, and all the above need to be present to ensure employees are loyal. These 10 steps shape where people work, how long they will work there and how wholeheartedly they will apply their mental energies. Employee and customer loyalty make up the fuel that drives today’s global economy.
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