Are Companies Loyal?

I came across a cartoon at Economic Times, which showed two executives speaking and one saying:

It’s no more about employee loyalty… try winning company’s loyalty…

It got me thinking. Should a company be loyal? Can a company be loyal? To whom? I quickly googled, and there was hardly anything on a company’s loyalty.

The first question is an easy one, a company can be loyal.

Should a company be loyal is more complex, till we answer the question to whom.

I guess we have to scroll through the stakeholders: Employees, customers, partners, shareholders and society. The easy answer is that a company should be loyal to all of these. If this is true, then we have to ask are most companies you know loyal, and to whom? Are companies you buy from loyal to you? I have found that whenever we as Customers have been good and fair to our suppliers, they tend to be more loyal to us than to other customers who are not as fair or good to them.

I would imagine most companies tend to be loyal to their major shareholders. They generally show their loyalty to the shareholder by offering him what he wants most: dividends, stock price, long term growth and market leadership. I suspect most shareholders want either dividends or stock price growth. Thus the loyal management works on these aspects.

Are companies loyal to employees? Is this loyalty secondary to the loyalty to shareholders? This makes us think of the Japanese lifetime employment system (only 8.8% of Japanese companies have this now). There were three models: Stationary (governed by a set of rigid rules, and the expectation that some non performing employees would voluntarily leave), Growth (depends on organisational growth, and all grow with the organisation), stagnant (where the company when in bad shape let’s employees go) …Assuming employees were given life time employment, what value was this loyalty? Apart from a somewhat guaranteed employment, this system did not allow employees to easily switch and they became captive employees. Was company loyalty good for employees?

Outside of Japan, I am sure there are examples of companies being loyal to employees. I cannot think of many. We also notice that companies work on making employees loyal. One way is to make the employee feel indispensable. Or by giving golden handcuffs…If you leave you will be worse off or lose bonuses, or stock options.

The less said about true loyalty to customers. As long as the customer can be milked (can buy), he is worthwhile. In this instant gratification society, even this is short lived. Also, as I mentioned earlier, there is some loyalty to customers who are good to them.

I had written about company loyalty to suppliers, and that too is minimal and based on the benefit to the company (sometimes called mutual benefit). This loyalty is generally purchasing department led, though it is true mutual bonds between the supplier and the end user in the company do form.

The company’s loyalty to society and to sustainability has yet to be proved. There are examples of Unilever and others who are trying to be loyal to the environment and sustainability

So, the company is loyal to the Owners…in reality!

How can they change or be otherwise. Others have written that the company has to think of itself first. I think this is true for survival (first put the oxygen mask on yourself, and then on the kids…but not put the oxygen mask on yourself and abandon the kids). So instead of abandoning the other stakeholders, companies try to sustain them to the extent their loyalty to the owner will let them.

Many Customer consultants would want the company to be customer-centric. Does that include company loyalty?

I think company loyalty and customer-centricity is a thought process and requires enlightened owners, and enlightened managers, who look beyond profit being the purpose of a company.

Would love your comments and help. We are happy to help others in education and executive education on courses in Value Creation

 

Gautam Mahajan                                                                                                              Founding Editor, Journal of Creating Value,

President-Customer Value Foundation
M: +91 9810060368
Tel: 11-26831226, Fax: 11-26929055
email: mahajan@Customervaluefoundation.com
website: http://www.Customervaluefoundation.com

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

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