Employee Retention and Loyalty:

Employee First, Customer Second

By Majeed Shukur

English Composition II

Dr. Cassel
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The Customer is always right! This sentence has been a motto, a part of mission

statements and advertising campaigns for as long as products have been sold to people. In an era

of expanding technologies and shrinking global community, more people are in contact with each

other every day. Employees are not just the cogs in the machine but often the lifeline of the

company to the public. It stands to reason that every company wants their employees to be loyal,

to be enthusiastic about the product, to be productive. However the business world is changing.

Those who saw a job as a lifelong career are retiring and the people in the workforce now see a

myriad of choices. This begs the questions of why do people not want to stay with a company for

their lifetimes anymore and how do we recommit that loyalty? We are also seeing more

companies spending money and time training an employee only to see them leave after they have

become a valued asset. It seems too easy, the idea that treating someone with value would then

make them want to work harder. However, it is not cut and dry. To relinquish power to

employees is not only a difficult environment to thoroughly commit to, it is also a dangerous

one. At what point can we trust Joe Human to put the best of himself into his work if the power is

taken from those overseeing the work? In the end, though, to continue with the high turnover the

world is seeing in the technology and intellectual property industries will leave it open to poor

productivity, less creativity and eventually a stagnation that will be difficult if not impossible to

overcome. In today's world the argument can be made that employee loyalty, retention and

productivity are directly linked to how a company treats the employee, especially so for

millenials.
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Unless the company becomes obsessed with constant change for the better, gradual change for

the worse usually goes unnoticed.(Nayar)

In 2010 Vineet Nayar became the CEO of HCL Technologies. This company was

responsible for IT and software services including new technologies. The company, when Nayar

took over, was not as profitable as it had been. Morale was low and the employee turnover was

high. Recruiting the best minds was not an option because of the business environment, the

rumors of pay cuts and low profit margins. The management system in place was one that we see

in most companies, a confusing hierarchy of executives in a flow chart down to the employee. So

similar to a genealogical chart it literally looks like the family history of a king and his

decedents. Nayar, when confronted with the problems at the company seemingly went crazy. He

turned that chart on it's head, literally. Now, the power, the kingship, was split between all the

employees, then their direct managers were in charge of the problems brought to them, and if

they could not fix it they kept going down the line till it ended up on Nayar's desk. Nayar wanted

to work for him employees. He chose quick and drastic change within his company. Not only

was the management paradigm flipped, he chose to become completely transparent. This meant

that there were no more rumors of cut backs. Every employee from the CEO to the janitor had

complete access to the company's financial snapshot. The role of the CEO is to enable people to

excel, help them discover their own wisdom, engage themselves entirely in their work, and accept

responsibility for making change. (Nayar, Pg.164). In his theory, Nayar thought that if each

employee knows where we are financially and they felt supported in their work then they would
work harder to make the business successful since they had the power to do so. This was true as

the growth and share prices for HCL Technology increased 370% from 2006-2014.

Pg. 3 Shukur

Ramnath, NS. "These Revealing Charts Tell The Real Story At India's Big Five IT

Companies." Quartz India 2014. Web. 20 Nov. 2017.

However, dramatic, drastic change is hard to implement and it is not always about

management style. Money is also an important factor. While research has said money is not

everything when it comes to employee retention, it does have an impact, especially in technical

fields. Dan Price, CEO of Gravity, Inc. found out first hand how hard it was to change the way

business works. Famous for increasing the minimum wage at his company to $70,000 per year

and hailed as a new leader in employee retention and relations, this was not a change that could

occur overnight. In entrepreneurial businesses it is of utmost importance for money to guarded,

invested safely. However Mr. Price, a genial man, was confronted with the idea from employees

that they were not being paid what they were worth. In this instance, a change in management

style would not be enough to keep top quality employees. This was directly linked to money.
Unlike Mr. Nayar, Mr. Price spent years thinking over a possible solution. He tried a one-time,

20% raise. That raise was then followed by the most productive year the company ever had. The

Pg. 4 Shukur

profits and productivity rose by 30%-40% that year. Unsure of the correlation, Price tried again a

year later with another 20% one-time raise. The same numbers jumped again. More than that,

he was beginning to hear from employees about the benefits of this raise. It increased the time

they spent at work, but not the time they were supposed to spend at work. More employees were

voluntarily working more. They also reported better home-life balance. More vacation time was

taken but it did not negatively effect profits or productivity. It was also noted that employee sick

time was used less. When, in 2014, Price chose to try this raise a 3rd year in a row it was only due

to the need to for more employees that the rates couldn't rise as much. In 2015 Price announced

his $70,000 minimum wage promise. Gravity, Inc. was flooded with resumes. These resumes

were not just from people wanting more money either. There were industry executives who were

willing to take a pay cut to work for Price. The impact of the changes at Gravity, Inc. created a

new environment in which to work. By 2016 employee retention at Gravity, Inc. was holding

steady at 95%. This is not just because of the money though, as we see from those who were

willing to take a pay cut to work at Gravity, Inc. The change in management attitude into one

where care was shown for the employee was really the catalyst for the increased productivity and

increase retention.

This is not to say that money can solve all problems. Money can make a person apply for

a job and stay for a while. Research shows that money and perks alone do not retain

employees. Most employees leave a company because of management. This is to say, it is nice to

be given a raise, but if your manager is micromanaging, there won't be enough money in the
world to keep an employee. As an example, for many years Google has been touted as a leader

in the technology industry not just because of their excellence in their business but for the

perks the

Pg. 5 Shukur

employees who work there receive. Gym Memberships, on site hair care and doctors, gourmet

cafeteria, nap pods, all of these and more are offered to Google employees. However, the average

time an employee stays at Google is 1.9 years. Which is actually the second highest among the

top 10 biggest tech companies, as reported by Business Insider in 2017. This number includes

executives, management, and Joe Human. So is it that people are jaded? Do they think they will

do better elsewhere? Is socialism in business the way to go? Or is it that gym memberships do

not translate to care for employees so much as rapport and management style do?

What are the arguments against this new type of business model? Many who opposed

Price's changes called him a socialist. Business savvy writers predicted that companies like

Gravity, Inc and those following suit would see an increase in cost to the customer and would

eventually send customers running. Meanwhile, companies who change their management style

like Nayar were written about as being a flash in the pan. They would not be able to keep this

kind of transparency up and before long those who worked in management would not be

satisfied being at the service of employees who had less experience. There are those who still

believe the way to a successful business is customers first. Ranjay Gulati, who wrote the article

Reorganize for resilience: putting customers at the center of your business (HBP 2010) that it

is the focus on the customers that gives the company the resilience to last and succeed in today's

crazy market. In the case of a firm called Goldman Sachs, former executive director Greg Smith

believes that letting the employees have too much power is a recipe for disaster. The
environment in which the employees work must change before they are given any power or else

they will continue the way they have been taught. He believes people will ultimately look out for

themselves. This translates to making the most money regardless of the ethic of it. If employees

Pg. 6 Shukur

are left to their own work they will eventually work on things that are important to them which

may not align with the company. Therefore, the companies are basically funding ideas that may

never be seen as intellectual property and will therefore cause the company to lose money in both

time and resources but will leave the employee with a new product or plan to take outside of the

company.

So, what fine line must be followed to keep retention and productivity up for the long

run? In this socioeconomic climate how do companies change without losing employees or

trustees? According to Forbes Magazine, the list of the top companies to work for has

outperformed the S&P 500 index at a rate of 2-1 over the last 25 years. Upon closer inspection,

Forbes found that the companies employees rated best to work for were not those paying the

highest or giving out the best gifts. The companies rated the highest to work for were the ones

who took care of the people, not the positions. The companies on the list have on average a 1%

turnover rate because they attend to the person they hire, as a whole, not as a cog. Acuity, an

insurance firm in Wisconsin and number 3 on the Forbes list has a matching percentage of 8%

for the employee 401K program. The average matching nationwide is between 3-6%. This 2%-

5% increase in matching translates to the employee that the company knows he/she is working

hard for them and they want to make sure they are taken care of when it comes time to retire. It is

a very smart idea because that means the employee will be more likely to stay with this company

through retirement age and have significant longevity with the company.

Higher investment in people in terms of pay and benefits enable companies to do really
 well, MIT Sloan School of Management professor Zeynep Ton

Other noted incentives for employee retention among the best places to work are full-family

health care, good life insurance, death benefits and a work-life balance. These well-rounded

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benefits show that the company sees its people as people. They understand that the time spent out

of work is important and loved ones are important too. In layman's terms, it is the difference

between a college teaching you in a lecture style versus in a discussion style. One gives you the

information you need to do you job, the other makes sure that when you leave you have

understood it so you do not have to take time away from the family to work on it.

As discussed, there are pros and cons for changing management styles and business

models. However, is this new? Is it the work of the millennial workforce that we are seeing the

need for these changes? The idea of a work-life balance was not a business term for most

previous generations. Work so often was between 9am-5pm, weekends off. If you worked in

retail, there were Sunday's off. Today, with the shrinking of the global economy there are three

full shifts to many jobs. Stores that in the 1970's saw 100 people a day will now see 500. There is

an entire world online which requires constant upkeep. Where work-life balance was a foregone

conclusion for older generations for the most part, it is something that has been in constant

danger of getting lost to the newer generation. With the advent of the 1980's the sixty hour work

week became the norm. This, however, also meant high stakes, high risk and high rewards. With

the coming of the computer, when business was supposed to be easier and give more time for the

employee, instead it meant being connected wherever you went. While a person may not spend

12 hours at the office anymore, they spend more time working at home, which is fracturing their

lives in a detrimental way. While we now have telecommuting and split-shifts, we are not seeing
many businesses take advantage of that. However, the businesses that are offering to work with

their employees to change their work-life balance are finding increased loyalty among their

workers. According to CNBC, millenials want more flexibility when it comes to when and how

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they work. Business recruiter Indeed Inc. recently went through 10 million company reviews to

determine which ones had the best work-life balance and why.

"Companies who are empathetic and proactively work to provide the appropriate personal

time for employees tend to stand out," he says. "Comments we have seen from employee

reviews for these companies indicate 'fair' and 'flexible' work environments." - Paul

Wolfe, Senior HR VP , Indeed.

For Wolfe, the key ingredient is empathy; empathy in helping the employees find time to have a

life outside work as well as a fulfilling life at work. Millenials are among those who want this

most.

http://www.compensationforce.com/2017/04/2016-turnover-rates-by-industry.html

Dr. Ertas ,a doctor in public policy and administration, states millenials need motivation
to stay in job. This can come in the form of flexibilty, benefits, support or any combination of

those. Dr. Ertas also states that millenials are more likely to make it known that they are not

happy and volunteer their intention to leave, meaning businesses have the opportunity to retain

Pg. 9 Shukur

them with change. With this information, should we not be able to create a work environment

that can defy current retention rates?

While the companies who are increasing their retention rates through major change are

still in the minority, there has been enough research to show this is a growing, successful trend.

Now that the flash of gym memberships and work trips has led to more substantial life benefits

we should be seeing a gradual turn to the business model created by the likes of Nayar and Price.

It is sometimes enough to verbally show appreciation. When a manager doesn't have enough

power to change company protocol they can make appreciation more personal. Millennials have

been called the generation of the participation prizes. While that seems like a generalization,

perhaps millenials just understand the need for appreciation in work more than others. This

research is not being used to say that everyone deserves money and benefits regardless of how

they work. Instead, companies are seeing this as a way to retain talent, to increase productivity

and most of all to lower employee turnover. While it seems easy, change is difficult in a

successful business and even more so in an unsuccessful one. However, the numbers are in and

those leaders who are making connections with their employees are reaping the benefits. We will

see the leaders of industry for tomorrow be the ones who began change today.
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