Be Aware - Increasing Employee Loyalty (5/5)

This article continues a 5-part series on increasing employee loyalty. The fifth recommendation is to increase loyalty by being aware.

In The Business Ethics Field Guide, the authors outline the following story. “Nathan left Frank’s office unsure of what to do. Frank, the managing partner of the firm, had just asked him to file a return for a major client improperly showing zero fines or underpayment penalties. This client was important to the firm, and especially to Frank, who had a longstanding relationship with him.

Nathan had started working in this tax practice only a few months before. The practice belonged to a prominent CPA firm, but the tax office Nathan was working in was fairly small. In the job interview, Frank had told Nathan he planned to prepare him to take over a retiring partner’s client load in a few years.

This morning, Frank had asked Nathan to drop by his office. When Nathan arrived, Frank looked up from a stack of returns and said, “I’m reviewing the Bigglesworth return and have a few changes I’d like to run by you before talking it over with the client. I see you have Mr. Bigglesworth paying an underpayment penalty to the state of $50,000. Could you explain this to me?

“Sure,” Nathan said. “Our state doesn’t have a safe harbor rule for estimated tax payments like the federal government does. Since Mr. Bigglesworth’s company did so well this year, last year’s estimated tax payment didn’t cover the total taxes he owed, so he is now subject to state underpayment penalties.

Frank furrowed his brow. “Nathan, I understand where you are coming from, but I’m good friends with Mr. Bigglesworth. I advised him what payments to make during the year. He shouldn’t have an underpayment penalty.”

When Nathan hesitated, Frank continued, “I’m sure the state has a safe harbor rule similar to the federal one. What is he going to think when I hand him a return requiring him to pay an unexpected fine of $50,000, in addition to all the extra tax he’ll owe? Fix the return to show zero underpayment penalties.”

Consider how loyal Nathan is as Nathan’s boss asks for a tax return to be changed, do you think Nathan is feeling an increased sense of loyalty towards his employer?

Others have shared ethical dilemmas with me that they have experienced that have made them question the integrity of their employer.

The first story involved an employee was injured on the job. When filing the workers' compensation paperwork, the employer asked the employee to alter some of the facts about the incident. The employer viewed altering reality as only a “little” lie. There is no such thing as a little lie. Either you’re honest or you’re not.

Another story included an employer asking an employee to prepare a set of financial statements to distribute to a potential investor. The employee pushed back saying that he didn’t feel comfortable preparing unaudited financial statements. He didn’t want anyone to make financial decisions based on unaudited documents that could potentially contain material misstatements. The employer told the employee that the financial statements were not going to be relied upon to make any investment decisions. However, the employee knew he was being pressured to prepare the requested documents because the company needed additional funding.

While these experiences didn’t destroy these employees’ loyalty it did reduce their trust in their respective managers and companies. Asking your employees to do something unethical will inevitably push away good employees. Only shady people want to work for a shady boss. In order to create employee loyalty, an employee needs to know that his or her employer makes ethical decisions. Inversely, once an employee sees an employer make an unethical decision their loyalty will start to diminish as they naturally start to question the kind of loyalty they should have towards their unethical employer.

Additionally, seek feedback from your employees. An annual performance review is not enough. According to Forbes, only eight percent of people actually keep their New Year’s resolutions. If you want your employees to improve and grow, implement regular feedback and follow-up sessions throughout the year. A manager’s perspective on necessary goals and growth may be quite different from the reality that your employees face.

In conclusion, the most important assets in your organization are your employees. Today’s workforce has vastly different expectations from prior generations. As a result, high turnover is the new norm. Turnover is expensive as the Center of American Progress found that the average cost to an employer of losing a highly-skilled employee is 213% of his or her annual salary. High-performing loyal employees are becoming increasingly rare and are consequently becoming more valuable. Companies can’t afford to neglect the satisfaction of their employees and need to make an asserted effort to foster loyalty.

Below is a summarized list of how to increase your employees’ loyalty. These are simple management philosophies and styles that, when executed properly, will have a dramatic impact on any organization.

1. Compensate competitively
2. Instill a sense of purpose
3. Empower through trust
4. Provide opportunities for growth
5. Be aware