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Want a Loyal Workforce? Build an Ethical Corporation

Want a Loyal Workforce? Build an Ethical Corporation
By Rushworth M. Kidder
What’s the price of loyalty? It’s an old and cynical question. Roughly translated, it means, “What will it take to buy you off?”

For global corporations, there’s a far more important question: “What’s the value of loyalty?” How important is it to have a work force that likes coming to work each day? How valuable is an environment where most employees aren’t constantly on the lookout for a better employer?

One thing is clear: When employees do leave, the costs to recruit, relocate, orient, train, and acculturate their replacements is staggering. Which is why so many corporations recognize the crucial importance of loyalty.

Now a new global study, released in September by two Indianapolis-based firms, Walker Information and the Hudson Institute, explores what stimulates and promotes loyalty. Based on nearly 10,000 survey responses in 32 nations, the “2000 Global Employee Relationship Report” has sobering news:

Only 34% of employees are truly loyal to their organization.
Only 1/3 believe their organization is highly ethical.
Only 60% believe their senior leaders are people of high personal integrity.
25% knows of or suspects an ethical violation at work in the last 2 years.
Yet fewer than half of those employees have reported the violation.
Why is a study on loyalty so concerned with ethics? Because, as the study observes, “when workers have higher opinions of their employer’s ethics, they are more committed employees.” If loyalty is to improve, in fact, there are three major areas employees feel need to be addressed by their employers: fairness at work, care and concern for employees, and trust in the employees. Each falls squarely into the ethical realm.

The study also reveals divergences among the 32 nations. Using a rank order based on the highest levels of “truly loyal employees,” the study finds Colombia and the Republic of Korea at the top, with Singapore, Hong Kong, and Chile at the bottom. The United States ranks 7th, Canada 16th, and the United Kingdom a poor 27th.

Since no comparable data exists for prior years, trends aren’t discernible. But the study doesn’t float in a vacuum. Two years ago, a study by McKinsey & Co. found that young executives considering job offers ranked ethics well above pay. Only 23 percent said “high compensation” was important. Top ranking, at 58 percent, went to “values and culture.”

If the Walker/Hudson study is correct — if there’s a strong nexus between loyalty/job satisfaction/retention and ethics/values/integrity — that finding gives new significance to earlier research.

Last winter, for instance, Hudson found that employees at small organizations (50 – 99 employees) were significantly more apt to agree that their company was “highly ethical” and was led by a person of “high personal integrity” than their peers in medium- or large-sized firms. Employees in smaller firms also felt more comfortable reporting misconduct, and felt more strongly that management helped interpret and apply values.

And last June, a survey by the Ethics Resource Center in Washington, D.C., made two key points: Nearly one-third of employees observe unethical conduct at work, and “employees say that their organization’s concern for ethics is an important reason that they continue to work there.”

Rolling all this logic together, the conclusion looks like this:

Promoting the core values of fairness, caring, and trust builds an ethical climate.
An ethical climate breeds workforce loyalty.
Workforce loyalty translates into retention.
Retention means significant bottom-line savings.
For benchmarks, look at small firms in places like the United States, Mexico, and France. For caveats, look at large firms in the United Kingdom, Japan, and Singapore. And for encouragement, remember that, according to the Walker-Hudson study, “two-thirds of employees are proud to work for their organization and feel like ‘part of the family,'” and that “six in ten would recommend their organization as a good place to work.”

More information can be found at www.globalethics.org

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