Promoting worker loyalty: an empirical analysis

The purpose of this paper is to empirically assess the link between worker loyalty and expected rewards, with special attention to reward desirability.

Using employee-employer matched data collected from over 10,880 employees in nearly 670 workplaces in six culturally and economically diverse former socialist countries, the authors investigate the link between worker loyalty and expected rewards, taking into account reward desirability. Worker loyalty is measured using a composite of four variables related to participant’s commitment to staying at his/her organization. The authors employ both OLS and fractional logit regression analysis, clustering at the firm level, and restricting the pooled sample to include only those participants who responded to all questions used in this analysis. In the basic model, the authors include expected rewards, with an extensive set of worker and workplace controls; in the extended model, the authors add reward desirability and the corresponding interaction variables.

Using pooled data, the authors find that loyalty is positively correlated with expected rewards, and most strongly linked to the intrinsic reward chance to accomplish something worthwhile. When reward desirability is taken into account, consequences of unmet expectations emerge, and the relative importance of respectful and friendly co-workers diminishes. Neither generational nor life-cycle differences in loyalty are evident.

Due to financial constraints, country samples included in the pooled data are not nationally representative; nor are workplace samples representative. Personal contacts of local project coordinators and the snowballing technique used to expand the number of participating workplaces, as well as the requirement that participants be able to read the survey instrument, may contribute to selection bias. As such, the findings should be viewed as taking a preliminary or exploratory step toward developing a more global perspective of factors influencing worker loyalty and performance until longitudinal and nationally representative data become available.

The findings indicate a positive link between loyalty and expected rewards, and when reward desirability is included, the loyalty consequences associated with unmet expectations. While rewards identified as highly desired (bonus, job security, friendly co-workers) are positively linked to loyalty, the strongest link is associated with chance to accomplish something worthwhile. Promoting worker loyalty is linked to offering programs to develop more skills and more job autonomy among those employees who desire it, as well as meeting expectations related to promotion.

Unlike existing studies, the authors pool data from multiple countries and control for a wide variety of worker and workplace characteristics in the analysis of the loyalty-reward structure link.