Company loyalty

The decline of corporate loyalty exemplifies the problem of trust in a fast-moving world. The great companies of the past have struggled to sustain a sense of trust from their employees, while new ones have often built trust and enthusiasm on a new basis.

Most of the great companies of the 20th century built trust through a culture of familial loyalty: employees expected to spend their whole careers with the company, and in return they were expected to identify deeply with it and to be willing to sacrifice for it. But in the competitive pressure-cooker of the 1980s and 90s, most of those companies – notably icons of the old order like IBM, Hewlett-Packard, Procter and Gamble – abandoned that deal. They embraced layoffs, first in crisis, but increasingly as a regular way of doing business, a constant rebalancing.

Now many companies have gone towards the opposite extreme: using material rewards to motivate, giving up on loyalty and trust and a sense of community. That is effectively breaks an old culture, and may make change easier. But it does not make a culture in which people are willing to work together.

Large companies like Google or the “new” IBM, as well as myriad smaller organizations in fields from technology to social enterprise, do something different. They don’t promise stability and security; they promise challenge and growth. Employees are drawn to them for the opportunities to build their skills and their reputations, and perhaps to advance exciting projects and purposes. They don’t particularly expect to keep working there for their entire careers.

That is all very well – in some respects it’s terrific – but it also creates a lot of problems. It’s terrific from the companies’ side because it maximizes their flexibility; it’s also good for employees in that it opens up a world of new choices. While lifetime security at one company has some attractions, it’s incredibly soul-deadening as well. Companies of the past, in exchange for security, demanded conformity, obedience, deference. The new deal allows much more personal agency and encourages more diversity.

But if the new deal at work is good for some people, it is very bad for others – for those who don’t have the skills to make it in the new world; for those who are unfortunate, choose the wrong company at the wrong time, and wind up unemployed; for those with children who need to save reliably for college; for those who don’t like the intense stress of continual uncertainty and challenge.

If business and society want the advantages of flexibility, innovation, responsiveness, they need to pay the costs. They need to help people to replace job security with career security. This certainly involves extensive support for education and training. It almost certainly requires some basic minimum income, or a lifetime Social Security, to carry people through the vicissitudes of uncertain careers. It requires better information to help match people to opportunities, and better regulation of employers who take advantage of the flexibility.

For the moment, most of the costs are borne by the employees, They are the ones who have to figure out how to get through transitions, save in a completely unpredictable environment, build networks of support, find information about possible paths forward. Companies and society, especially in the U.S., bear very little cost for layoffs. There’s growing anger about that unfairness. If trust is to be maintained, and the potential of an advanced economy is to be realized, those burdens will need to be rebalanced.