How Employee Loyalty Impacts Your Business

Employee loyalty

This post was contributed by our friends at When I Work who provide employee scheduling, time clock and communication to thousands of people across the world.

The most important thing you, a business owner, should be concerned with is customer loyalty, right? After all, what could possibly be more important than doing whatever you can to keep customers coming back?

You know the costs associated with acquiring new customers versus the costs of keeping the customers you have; some studies place it at five times more to get new customers than keep what you have. We’re definitely not going to argue that customer loyalty is important. We’re a pretty big proponent of that, which is what we’ve built our business on.

But there’s a little tricky underside to that whole equation of customer loyalty, a concept so closely woven in that you might miss it: employee loyalty. Your employees and how loyal they are to your business are crucial to making customer loyalty happen.

What is employee loyalty, anyway?

We understand customer loyalty, because we get the need for customers.

Employee loyalty sounds a bit trickier. They aren’t buying products or services, but are at their job. It doesn’t seem so connected to a successful business like a customer would be.

Employee loyalty isn’t simply a matter of someone being afraid to lose paycheck. True loyalty is never based in fear, temporary gimmicks, or anything that can be removed or replaced. Instead, a loyal employee is someone who completely buys into where he or she works.

Loyal employees want your business to succeed. They believe that working there is in their interest, and is good for them. They believe in and adhere to your business’s culture. They don’t have one foot out the door, always on the prowl for a better gig. They aren’t fickle or one office pizza party away from quitting.

A loyal employee is all in.

Why employee loyalty matters.

A loyal employee sounds awesome and wonderful to be around, but beyond the warm fuzzy feelings of having people who are loyal to your business surrounding you, what other benefits are there? Surely less loyal employees can still do the job, right?

As it turns out, there’s money to be made in loyalty. Crass, but true.

There is true profitability involved when you cultivate employee loyalty. At the University of Pennsylvania, researchers discovered that businesses that spent 10% of their revenue on capital improvements saw a 3.9% productivity increase. That sounds pretty good. But get this—when that same 10% was invested in employees, productivity went up 8.5%.

Double. Productivity doubled.

Investing in your employees has real returns. But if those numbers aren’t persuasive enough, let’s consider what happens if you don’t have employee loyalty.

Your employee's attitudes become your customer's attitudes.

When you start to see your employees as a mirror for your customers, you’ll appreciate employee loyalty a lot more.

Employees that are disrespectful or flippant towards your business? They’ll treat your customers likewise.

A lack of loyalty isn’t just employees who are leaving. In many cases, they stay on and show disloyalty through attitudes. In a way, that’s worse than if they left.

Revolving doors are frustrating.

Customers notice when employees aren’t sticking around. They notice when their favorite clerk is missing, or when the helpful salesperson from their last visit is nowhere to be found. When they call to talk to get tech help or ask a question related to their last call and a new employee answers, they have to start all over again.

Revolving doors mean no continuity. It’s hard to be a loyal customer when your experience changes every time you visit a business. Employees are part of the experience.

You don't want a bad reputation.

There’s the matter of your reputation, which a lack of employee loyalty has a direct impact on.

Inconsistency suggests unreliability. Employees coming and going aren’t just a customer experience problem. It’s a situation that lends to the appearance that your business has management problems. What customer is going to be loyal to a business that may or may not be stable?

Enjoy bad reviews. Check out most bad reviews that customers leave. How many are complaints against rude or inept employees? Not all of that is based in loyalty issues (some of that has to do with training and proper staffing levels), but some of it does. If employees are loyal, they care about your customers because you care about those customers. They’re loyal to what matters to the business and they respond to customers accordingly.

Employee word-of-mouth has power, too. The last thing you want is for customers to hear that your business is a bad place to work.

The talent drain is real.

Employers are well aware of the cost of hiring and training in new employees. But when employees leave, it’s much more than just a matter of training gone to waste. Those employees take the skills and tricks of the trade that they learned on the job that you didn’t necessarily train them.

Your employees learn how to handle the personalities of your difficult regulars. They remember what your regular customers like. They get a sense of what will and won’t work. These are the kinds of skills you can’t train, and you can’t exactly replace.

Ultimately, your bottom line is affected.

How would 41% less absenteeism, a 17% increase in productivity, and 21% more profit sound to you?

They way to achieve those numbers? Happy, loyal, and engaged employees.

Everything listed above this point has an effect on your bottom line, but if you wanted the numbers, there you go. Studies abound that show when your employees are connected and engaged (i.e. loyal), business booms.

How to improve employee loyalty.

So how do you go about improving employee loyalty? Loyalty isn’t something you can simply demand employees feel. You have to create a desire in them to be loyal to your business.

Be loyal to your employees.

Seems obvious, but it sometimes escapes business owners that loyalty is a two-way street.

Hire and expand wisely. If you let your hiring get out of hand, it won’t be long before you have to let employees go. Nothing stirs up feelings of unease, distrust, and lack of loyalty like a known history of employees being fired.

Treat employees fairly. Be fair in how you treat employees in wages, benefits, discipline, rewards—all of it. A key aspect to treating your employees fairly is to be consistent in how you apply each of those listed items.

Don't ignore loyal employees that already exist.

50% of employees rank employee recognition as “very important.”

Do you have a plan to reward employees? Do you recognize them?

We’re not talking about gimmicks, but truly reward those employees who work the extra hours you ask, continue their education, exhibit excellence and drive—all of the things a loyal employee will do. Increases in wages, promotions, or other tangible rewards help that loyal employee feel like it was worth the effort.

Mere lip service or—even worse—not acknowledging excellent work and attitude can turn a loyal employee into a passive aggressive or disinterested employee. When loyalty is ignored, it can turn into apathy and worse.

Find the balance between customers and employees.

It might seem like you’re caught in an awkward place between customer loyalty and employee loyalty. Which one is your top concern?


It’s a balance. A draw.

Don’t lose customers because you want to hang onto a bad employee, but on the flip side, don’t sacrifice a good employee for a customer that’s a jerk. There’s a kind of dread that employees feel when they know that the innocuous phrase “the customer is always right” is turned into a weapon in the hand of a clumsy manager who will berate, belittle, humiliate, or not stand behind the employee in order to placate every customer demand.

People are loyal to leaders who don’t sell them out. You can be fair to customers and employees without using the latter as sales floor cannon fodder.

Ask your employyes how things are.

Whether you use surveys or speak to employees in person, find out how things are going in the workplace. How is management doing? Does management style fit the personality of the workforce and the culture of the business? Are employees being treated fairly? What frustrations are brewing? Do employees feel like they are rewarded for excellence and loyalty?

Once you get all of that information, don’t forget the most important thing: do something with it.

There is nothing more frustrating than taking the time to fill out a survey or mustering up the courage to have a heart-to-heart with the boss only to see absolutely nothing happen with the information gathered.

Talk is cheap, but loyalty isn’t. It’s priceless.

Help employees take pride in their work.

Whatever your business is, whether you sell a product or a service, it is possible for employees to take pride in their work. We can’t all work in glamorous non-profit charity, but as an employer, you can help employees see the value and importance in what they do.

Help employees see beyond the obvious. You’re not just selling coffee, you’re selling an atmosphere that allows people to socialize and build relationships. You’re not just selling burgers, but you’re selling a fun night out. You’re not just selling car parts, you’re selling safety. When you communicate in these terms, and base your policies and practices around these ideas, your employees can see what they do in a better light.

Expect greatness from employees. There’s no need to be a tyrant, but it’s OK to expect great work from your employees and let it be known. Reward that excellence in real ways. Don’t compare employees or publicly humiliate them if they don’t hit the same level as others. Focus on getting the best you can out of each employee while understanding that each person has a different best.

Take pride in your own work. Nothing creates more disillusionment than a boss who doesn’t meet standards of excellence and ethics while expecting employees to. It’s easier for an employee to take pride in their work when they know that others, including management, aren’t going to muddy their efforts because they’re not pulling their own weight and end up lessening the impact of what the employee has done.

Employee loyalty takes work to earn, but pays off in all possible ways. Just remember that, as you work to make your business one where employees are loyal, this whole concept is about the business and not individual people. In other words, you want employees who are loyal to the business, not individual managers and not individual ideology. Employees can be loyal and disagree with a manager. Employees can be loyal even if policies change. Employees can be loyal so that when a manager leaves, the employee still stays.

With that in mind, build a business—in culture, in ethics, and in honoring excellence in work—that inspires loyalty in those who work there no matter who is in charge. Every customer that walks through your door should immediately see—whether in faces or attitudes or prompt service or dust-free shelves—evidence of loyal people who take pride in their work.

You want skilled, trained, competent employees, but more than that, you want employee loyalty. It’s only on that foundation that you can grow your business instead of treading water.

Author Bio

author bio

Chad Halvorson is the Founder & CEO of When I Work. When I Work makes work less work for the hourly workforce. Over 70,000 workplaces rely on When I Work to schedule, communicate, and track time with their employees. Since 2010, over one million employees have worked 55 million shifts in 50+ countries around the world.