Why are employees loyal? Organizational commitment—or a tendency to stay rather than leave—can be demonstrated by retention commitment, value commitment, and effort commitment. These variants on reasons for commitment—to stay with the organization, to provide value for customers, and to make the effort needed—are affected by intrinsic job satisfaction more than extrinsic elements, so leaders should pay more attention to their staff members’ intrinsic needs and try to meet them. To be able to effectively manage the high rate of turnover, leaders and organizations must concentrate on enhancing their staff members’ intrinsic job satisfaction. This means a focus on job interest, opportunities to learn, chances to mentor others, and making achievements—not just pay and benefits.

Due to the worldwide economic crisis and recession, many organizations have tried to cut costs. The largest ‘expense’ is people—but they are also the greatest asset. When people are being downsized, other people leave too. They become disloyal—but then they would argue that the organization has been disloyal too. And then one of the main challenges that organizations face is staff turnover, due to its crucial impact on the business—especially when the crisis and recession end and things start looking up again. Ironically, this attempt to save ‘expense’ can backfire and end up costing more.

Employee turnover has significant costs and consequences, so organizations need to investigate and analyze the direct and indirect costs resulting from staff turnover and put in place proactive strategies to minimize the expected loss as much as possible. There are direct costs linked to turnover, including recruiting replacement staff, as well as indirect costs represented in training new employees. There is also the cost of being understaffed: this can eventually lead to the loss of customers due to the lack of availability of staff and the resulting lower quality of products or services. The pressure of being short-staffed on management time means that strategic work will be put on the back burner whilst tasks of urgent importance are dealt with. So, if the cost of staff loyalty is high, and disloyalty even higher, what can be done to manage this challenge of motivation, retention and minimizing turnover? A lot of this thinking is common sense, and the actions required often cost nothing, but it can be surprising how few managers are effective here.

Effective Executive Magazine, The Cost of Employee Loyalty and Disloyalty.