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The idea that loyalty pays is being severely tested by the economic downturn
OVER the past few years, much has been made of the value to companies of loyalty--the loyalty of customers, suppliers and employees. The high priest of the loyalty cult is Frederick Reichheld, a director at Bain & Company, a consultancy firm, and author of "The Loyalty Effect", a 1996 bestseller which argued that engendering loyalty makes sound economic sense. "Business loyalty," said Mr Reichheld, "was considered an oxymoron not so long ago." Crude downsizing in the early 1990s crushed the loyalty of millions. "You want loyalty?" asks the ruthless bond trader in Michael Lewis's "Liar's Poker". "Then get a cocker spaniel."
The economic benefits of employee loyalty are real enough. They include lower recruitment and training costs, the higher productivity of experienced workers, and the positive effect that such workers have on customers and future employees. In the present economic downturn, some companies are trying to hang on to these benefits at the same time as they trim their labour costs.
For example, Accenture, a large consultancy, has introduced a scheme for its staff called FlexLeave. This enables them to receive 20% of their salary, plus their employer-provided benefits, while they take a 6-12 month sabbatical. In effect, the company has bought a call option on their services. Come the upturn, they will be available to return to the fold. Accenture says the scheme, introduced in America in June,...