The changing face of loyalty: From traditional to transactional

There is a growing trend towards transactional employee loyalty in many workplaces. Instead of traditional notions of loyalty, based on long-term relationships and a sense of commitment to a company, employees are increasingly regarding loyalty as a two-way exchange of value. In other words, they want their loyalty to be rewarded with concrete benefits — competitive pay, opportunities for career growth, and a positive work environment. However, this may be seen as a further indication that while loyalty is becoming less important in modern workplaces, it is not extinct. Rather, it is evolving.

The pandemic has caused significant disruptions across multiple industries, leading to a record high quit rate of more than 40 million in the previous year. This has also resulted in a tight labour market with employees having the upper hand and being able to demand better working conditions, higher salaries, and more flexible arrangements, such as remote or hybrid work.

As a result, employers are being forced to adapt and become more accommodating to retain their employees. However, it is also being seen as a more pragmatic and result-oriented approach to employment relationships. As Sujiv Nair, global CHRO, Re-sustainability, puts it, “Yes, the world is moving towards transactional loyalty. However, it’s in the hands of a manager to balance or reverse it.”

Also, loyalty is not one-sided. “Employees will only feel a sense of belonging and loyalty when they believe that the organisation is taking care of them,” points out Anil Mohanty, senior HR leader. Loyalty implies that the relationship between the employee and employer is reciprocal. Even if employees feel productive and well treated at their current company, they may choose to leave for another employer that offers a 20 per cent higher salary. However, if employees feel highly engaged and well treated by their current employer, they will not only feel productive but also have a desire to remain with the company.

So, how does loyalty develop? Surely not when the employer fails to show empathy or support during difficult times. It develops when employers take care of their workforce during tough times.

For instance, during the COVID-19 pandemic, many organisations and employees supported each other, which strengthened their loyalty.

“The very first thing is to build trust among the employees,” points out Nair. For instance, the typical career path for young people today involves a series of short-term and transactional employment relationships. They evaluate these relationships based on what the employer wants from them and what they have to offer in return, both currently and in the future. As long as the relationship is mutually beneficial, they will stay.

“If employers and employees collaborate during difficult situations instead of immediately resorting to layoffs, both parties can take ownership of the problem,” says Mohanty. For instance, a 50 per cent pay cut across the board can be implemented temporarily until the situation returns to normal, ensuring that both the organisation and employees are taken care of, creating a win-win scenario.

“Employees will only feel a sense of belonging and loyalty when they believe that the organisation is taking care of them.”

Anil Mohanty, senior HR leader

Nowadays, loyalty seems to be fleeting and easily influenced by transactions. If an organisation fails to meet employee expectations, their loyalty towards the company tends to diminish or disappear. Therefore, during times of financial difficulty or challenging business conditions, when companies expect their employees to remain loyal, their employees may disappoint them by not express the required level of loyalty.

Today’s workforce has multiple generations working together.   “The different generations — Millennials, Gen X and Gen Y — need to be managed and dealt with differently, to retain them and build a strong workforce,” points out Nair. For instance, Gen Z will not be satisfied with working silently and obediently in a high-pressure workplace, where success is determined purely by one’s ability to survive. They need short-term rewards, flexibility, even the fancy perks, and the right opportunities to grow in future.

“The different generations — Millennials, Gen X and Gen Y — need to be managed and dealt with differently, to retain them and build a strong workforce.”

Sujiv Nair, global CHRO, Re-sustainability

The typical career path for young people today involves a series of short-term and transactional employment relationships. They evaluate these relationships based on what the employer wants from them and what they have to offer in return, both currently and in the future. As long as the relationship is mutually beneficial, they will stay.

Additionally, employers must show support and consideration towards employees in all un-favourable situations. For instance, if an employee suffers from a prolonged illness or accident, the employer may decide to put them on unpaid leave, despite their contributions to the organisation. In such cases, it’s challenging for employees to maintain loyalty towards the organisation. “The lack of support and consideration from the employer makes it difficult for employees to remain committed to the organisation,” points out Mohanty.

“Establishing a feedback loop between employee and manager is key, and coaching is an effective tool managers can leverage,” says Nair.

The willingness to do grunt work should not be confused with loyalty. Young people who are eager to prove themselves may do anything and everything, but they will not do grunt work if they feel that no one is keeping track of their work or giving them credit. “Many a time, the loyalty of employees to an organisation goes beyond their work hours and duties. Some employees stay late or go the extra mile because they have a sense of responsibility and loyalty to the organisation. However, this loyalty must be reciprocated by the organisation. Loyalty happens when employees feel that they are valued and taken care of by the organisation, and when they believe that their contributions are recognised and appreciated. It is a reciprocal relationship that requires effort from both sides,” suggests Mohanty.

Last but certainly not the least, “Managers need to spend 30 per cent of their time to nurture and maintain relationships,” asserts Nair.

With some employees, loyalty goes beyond just being paid for work. When employees go above and beyond their job duties, it shows loyalty to the organisation. However, if the organisation only focuses on one aspect and ignores other contributions, there will be no loyalty. Mohanty suggests, “Employees who do more than their job duties should be acknowledged for their contribution and rewarded for the same. This will increase their sense of belongingness and loyalty to the organisation. This type of treatment will be remembered even if the employee leaves the organisation.” Anil