Big Ideas: “Why employee loyalty, in the traditional sense, is dying out.” With Dr. Ali Fenwick

Dr Ali Fenwick is a behavioural scientist at Nyenrode Business Universiteit in Breukelen, the Netherlands. He has an MBA from Rotterdam School of Management, Erasmus University (RSM) and a Ph.D. in Organisational Psychology from Nyenrode Business Universiteit. As a behavioural scientist, he specialises in work attitudes and behaviours investigating the psychological mechanisms underlying high performance. Topics he frequently investigates, lectures and speaks about are employee engagement, organisational commitment, leadership, consumer psychology, behavioural economics, and innovation.

Thanks for doing this with us! Could you share what inspired you to research in this area?

I have always been interested in human performance. I have dedicated much of my academic/work career to finding and developing behavioural interventions and strategies that help healthy people improve their overall performance as well as their well-being. I believe that there is a lot of potential and space to apply psychology in a non-clinical setting which can benefit people, businesses, and even society at large. I am particularly interested in how behaviour and performance can be influenced positively at work, as we spend so much time of our lives in the workplace. Creating great working environments is not just important for employees to feel good and be productive at work, but is also important for organisations to help attract, engage, and retain talent. Especially in today’s world, effective talent management has become contingent with organisational success and can provide for a firm-level competitive advantage. What has inspired my research is my desire to help both employees and employers find effective ways to build positive and sustainable relationships in a modern workplace. The nature of work is changing, and so are people’s expectations, needs, and beliefs about work as well. These times ask for new approaches, especially for those which can tap into the mindset changes currently taking place across different generations in the workplace.

Why do you think millennials and younger generations don’t feel loyal to one company?

There are multiple reasons why organisational loyalty is decreasing amongst different generations in the workplace. First and foremost, is the changing nature of work. After the last global recession in 2007, organisations needed to rethink how to optimise their usage of organisational resources to overcome the financial crisis. Many human resources were made redundant at the time and new work arrangements like project-based work and part-time labor contracts were being created to make the workforce more lean and agile. This sparked a change in mindset that there is an end to loyalty in organisations. Moreover, with the rise of the gig economy, remote and virtual work set-ups, people had more options to work from home or abroad, for multiple employers, and maintain a healthy work-life balance.

Younger generations, such as Gen Y and Gen Z, have entered the workforce with different values, beliefs, and expectations about work than the older generations Gen X and the Baby Boomers. First of all, younger generations were brought up believing that ‘lifetime employment’ doesn’t exist anymore. Rather, they believe in ‘lifetime employability’. Lifetime employability means you need to continuously learn new skills to remain relevant and employable in today’s business environment. This leads to younger generations moving from one company to another as many existing HRM policies don’t facilitate lateral or diagonal movements within the organisation (only traditional vertical movements — up the ladder). A millennial might want to work in sales for two years and then move into a digital marketing or business analytics position, to improve his/her chances of employment in today’s digitised workplace. If organisations don’t have internal mobility policies in place that satisfy these needs, these people will leave to go somewhere else. Second, a job in the traditional sense is steadily dying out. Just fulfilling the job description is not enough for younger generations. They are looking for more meaning in the work they do e.g. “how does my work connect to the bigger picture?” and “what impact is my work having on society and the world?”. They are also looking for workplaces which are inclusive and provide a sense of belonging which allows them to bring their whole self to work. If an organisation or a job is not able to fulfil these expectations on a continuous basis, there is high likelihood that another company with a stronger cause or inclusive organisational culture could compel younger employees to work for them.

In conclusion, the concept of loyalty in the traditional sense, in which effort and commitment is traded for job security, is steadily dying out. A new social contract is required to keep (younger) people attached to organisations, one which looks beyond pay to provide meaning, purpose, pride, and impact.

Why do you think people look for more meaning in their work?

As mentioned previously, people nowadays are looking for more in a job than just fulfilling their functional role and job description. They want to see how their work connects to the bigger picture and the positive impact their job, and organisation for that matter, make on different stakeholders. There is an explanation for this.

Over the years, we as a civilisation have moved up Maslow’s pyramid of needs focusing less on trying to fulfil basic human needs to survive. Rather, our focus has shifted more toward looking for a sense of belonging and self-actualisation. This has impacted the workplace in such a way that only fulfilling transactional needs, such as pay and recognition, are not enough. People are also looking for purpose and meaning in their work and to feel challenged and a sense of belonging in the workplace. As so much of our work today is knowledge-based and digital, people are looking for more cognitive motivators to help them feel safe in an uncertain business environment and are looking for connection and inspiration in workplaces which transcend the physical premises of the organisation.

How do you think remote working and the development of technology affects employee loyalty?

That’s a great question. First of all, I think technology has made it easier for employees to collaborate, communicate and work across different locations and time zones. This has both positive and negative effects on employee loyalty. On the positive side, technology promotes workplace mobility, work efficiency, and facilitates a better work-life balance. These outcomes can improve one’s sense of autonomy and self-efficacy, which in turn has a positive effect on employee commitment and thus on one’s willingness to remain with the organisation. On the other side, technology allows for people to work more independently requiring less dependency on labor contracts and fixed locations for work (e.g. digital nomads). Due to digitisation in the workplace and an increasing global mobility, many employees are choosing to work for themselves or for multiple organisations on a project-basis. Technology has given them an increased sense of freedom and self-control over their future.

In conclusion, when technology heightens one’s perceived locus of control, efficacy or autonomy, it will positively effect employee loyalty as long as the employee wishes to stay with the organisation. Technology is a means to an end, when it comes to deciding who to be loyal to.

Can you explain the term ‘social identity’?

Social identity refers to the process by which individuals categorise themselves through group identifying characteristics. This process of self-categorisation, such as by gender, religious association, or organisational membership helps the individual understand who he or she is, feels positive about one’s group affiliation, and helps to internalise group norms and behaviours which then influence individual behaviour. Organisational identification is the application of social identity in the workplace which helps individual employees shape their identity and feel connected through organisational membership. The application of social identity in organisations has been pivotal in explaining how organisational attachment occurs and how it impacts work attitudes and behaviours. For example, being called a ‘Barista’ instead of a ‘Coffee Maker’ can significantly affect how you behave at work and interact with customers, and even who you associate with. It also helps you to understand who is and is not a ‘Barista’ which creates group promoting and protective behaviours (in versus out group). Triggering individual and group identities at work can help enhance a ‘WE’ perspective on the job, which enhances the social and psychological environment of the organisation and improves task performance and employee well-being. My research shows that strong social identities at work motivate individual employees to favour group goals over personal goals, feel a sense of safety, and want to remain in the organisation, benefiting the welfare of the organisation.

Why do you think managers mainly rely on transactional approaches to employee retention such as competitive salaries and benefits?

Transactional exchange commodities like competitive salaries and benefits are still key motivators to attract and retain talent. However, their ability to really motivate people to give their best or remain loyal to an organisation in today’s workplace is limited. Pay and benefits are considered hygiene factors, which means if the topic of money is still on the table other factors to inspire high performance and commitment won’t work. You need to satisfy the financial expectations first, as a bare minimum, before attempting to further motivate using other approaches.

Many HR and front-line managers think that transactional commodities are still the main driver for performance and retention, and for some generations it is still a key motivator to remain with an organisation. However, younger generations don’t only look at work as a way to fulfil financial needs, they are also looking at work as a source of inspiration, pride, mastery, and impact. With millennials comprising more than 50% of the workforce today and Gen Z starting to enter the workplace as well, new HRM strategies need to be developed and tested to keep these generations engaged and committed. It is also very difficult for managers to really understand the levers of motivation for younger generations bringing along different values, beliefs, and expectations about work. Managing multiple generations in the workplace requires a tailored approach to motivation. it’s clear that one size doesn’t fit all in today’s workplace and managers don’t always have the time or knowledge to develop individual or team-based interventions that address these needs. Money and benefits are therefore a quick win, but at the same time, a lost opportunity. Overcoming manager myopia and mental heuristics are a critical starting point to help overcome the reliance on transactional approaches to increase employee loyalty.

How has the labour market changed in the last few years?

In the past few years, the labor market has changed immensely. We see more disruption happening in the market place than ever before, we see increased globalisation, geo-political tension, and we are seeing an increase in automation, robotisation, and digitisation. This has had a huge effect on how the labor market is evolving and the mobility of talent. The value of human resources in organisations is only increasing, especially for people who have the skills and mindset to navigate today’s dynamic business environment. There is a war for talent. Attracting and retaining talent has become a key objective for every business CEO or leader. Furthermore, the labor market has become very agile facilitating different labor arrangements with shorter-term work horizons, remote work set-ups, and project-based work. Finally, with millennials and Gen Z making up the majority of the workforce, new work values, beliefs, and expectations have entered the workforce as well. Leaders and managers need to manage 4 different generations effectively in today’s workplace. These have become challenging times for organisational leaders and managers to attract, engage, and retain talent.

What advice would you give to managers to help keep their employees committed?

First and foremost, focus on updating your knowledge of what really motives people in a modern-day workplace. Rethink and retest existing HRM policies and strategies to see what still works and what doesn’t, and ‘collaboratively’ create new people management policies and approaches that are more effective at increasing organisational commitment and employee loyalty.

Second, with meaning, purpose, challenge, mastery, and a sense of belonging becoming core psychological drivers of work motivation and performance, focus more on social identity at work e.g. driving organisational decisions along core values, be clear and open about what the company stands for, and follow through on your promises that the organisation makes to all its stakeholders. Start to use identity as a leadership tool, connecting employees to the bigger picture, emulating a desired future, creating inclusive and safe work environments where individual employees can bring their whole self to the workplace, and inspire from within. In a world where the physical boundaries of an organisation are steadily disappearing, you need to find ways to connect people from within.

Finally, maintain a balanced and respectful relationship with your employees. It is often said, that employees get attracted to a company because of the brand or the company’s reputation, but often leave because of their manager. As many people-related HR activities are now directly being managed by the supervisor or line-manager, it is important for managers to build strong and transparent relationships with their employees. Leaders and managers are the representatives of the values, goals, and expectations of the organisation which if communicated effectively will help align and motivate employees to give their best for the company.

Is enough research being done into the impact of this?

Employee commitment is one of the oldest and most investigated topics in the field of Organisational Behavioural and HRM research. A lot of research in the past 60 years has contributed to understanding what organisational commitment is and how it affects behaviour and performance. However, in the past 25 years little has changed in regard to its conceptualisation and application. This also affects how HRM practitioners view and inspire loyalty in the workplace. I think we are just starting to realise that traditional approaches need to be challenged. I personally don’t think there is enough scientific research (which challenges the status quo) being done yet in closing this gap. There are two reasons for this.

First, the nature of work is rapidly changing. These changes bring along new opportunities and challenges in terms of rethinking existing work practices. As a researcher, what do you focus on? For example, with the advent of robotisation in the workplace, does it make sense to start investigating the human — robot relationship and its impact on attitudes and behaviours, while we are still trying to understand the human — digital relationship? The changing nature of work makes it hard to decide what to focus on.

The second reason has to do with the way science evolves. As a researcher you aim to create new knowledge, theory, and strategies which others can benefit from. Novel research needs to be based on what we already know, building upon past results, and producing small amounts of new research findings which help fill a gap in theory or practice. If certain concepts are scientifically very established, such as the concept of employee commitment and retention, it makes it hard sometimes to break away from the existing approaches and thinking. As a researcher, I think it’s very important to balance the needs of practice and science together and to be experimental at the same time. This way new thinking can enter the discussion and spark further investigation and application.

Do you have any future research projects on the horizon?

I am currently working on some new research in the field of employee engagement and fulfilment. Employee engagement is very important for both the employee and the organisation. When employees are happy and engaged at work, they feel better and are more productive. According to various studies, the average employee engagement in organisations is shockingly low. I am trying to look for new ways on how to make employees feel more engaged and more fulfilled at work. My identity research is a good starting point for this new research, and I am eager to see which scientific and practical contributions I can make in this area. With the rise of AI and Machine Learning, I am also aiming to apply people analytics into the organisational development and talent management field. Using real-time data together with behavioural science can provide for powerful people management solutions and boost the application of nudges in the workplace. This is something I believe is very much needed in a business environment which is rapidly changing.

Thanks very much!