Great leaders inspire employee loyalty.  They share their vision, create a positive culture, provide opportunities for growth, and generally treat people well.  However, that's only part of the picture. 

Employee loyalty is a lot like customer loyalty.  While you naturally want customers to be loyal because they love your products, you can create customer loyalty through a de-facto monopoly, like when only one airline flies into the nearest city.

Another analogy is marital loyalty. Ideally, a marriage remains stable and intact because both spouses are happy.  In the real world, though, the threat of a nasty divorce keeps many a family together.

While I believe that employee loyalty is best created through positive methods, in the real world many companies use negative incentives to keep employees in place.  Here are five example:

1. Non-Compete Clauses

Originally, non-compete clauses were limited to employment contracts where the employee is privy to corporate secrets so important that the mere knowledge of them would constitute an unfair advantage to a competitor.

In recent years, however, non-compete clauses have been used in businesses, like fast food, where the primary purpose is to reduce the ability of the employee to find another job, thereby creating de-facto loyalty.

2. Social Pressure

As a general rule, employees are happier and more likely to remain loyal when they're part of a team and feel a social connection with their coworkers. Such relationships can be very positive, but there's a flip side.

A savvy manager can use social pressure to keep an employee in place by implying that he or she will be "letting the team down" if they depart to work elsewhere.  Some managers even hint that they'll pressure those who remain to shun those who've left.

3. Bad References

There's some truth to that scene that turns up in innumerable movies where Hollywood bigwig says: "You'll never work in this town again!"  Some manager make it clear that employees who leave unexpectedly will get lousy references.

That's probably no big deal if the employee hasn't been in that job for very long.  However, if the employee is long term, a bad reference can make it difficult for that employee to find work elsewhere.

4. Snatch-Back Compensation

Paying employees with stock options that get vested over time is a very common way to keep an executive or top performer in place.  Similarly, to keep salespeople in place, some companies dole out commissions many months after the deal closes.

Another some companies enforce employee loyalty is offering compensation in the form of a company car or company housing that must be returned or vacated when the employee leaves.

5. Locations with Limited Opportunities

Ever wonder why some companies stick large facilities in the boonies?  A lower cost for floor space is part of the motivation, but being located in areas where opportunities are limited also makes employees less likely to leave.

While I believe that these "evil" ways of enforcing employee loyalty are destructive in the long run, companies wouldn't use them if they didn't work.  As much as we all might prefer the carrots, sometimes the sticks work just as well or better.

Published on: Apr 6, 2016
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