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Loyalty is a critical theme in SME leadership

Employee loyalty is much coveted, especially in uncertain times. In SMEs, the owner or the founder is the anchor for loyalty but as the younger workforce comes in, the dynamic is changing

May 14, 2022 / 08:10 AM IST

Small and medium enterprises (SMEs) by their very nature are small and need to be agile. They often do not have a strategy playbook and in an uncertain business environment such as today dependence on one ancillary product is risky. Take, for instance, the automotive sector that suffered major setbacks in 2020 when the coronavirus broke out. Many SMEs supplying parts to major vehicle manufacturers had to shut off operations.

In such a scenario, it takes several weeks or months to get the business anchored. Hence, loyalty plays a significant role. Loyalty is a trait that most dictionaries describe as faithful adherence to commitment, a leader, or a cause. It implies that a loyal person stays constant through the rough and tumble. There is also an overarching purpose or entity which comes before self. One can show loyalty to one’s country, company, or friends.

Employee loyalty is much coveted and is manifested when staff feels attached to their organisation. Very often in an SME, the owner or founder is the anchor for loyalty.

The underlying assumption is that such employees are less likely to abandon the boat in troubled waters and have a strong attachment to the company.

Experience shows there are broadly two types of loyalty: 

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Transactional loyalty

This loyalty is rooted in non-emotional reasons. Many SME employees feel that the employer is a fair-weather friend. Such employees feel that speaking up for themselves in terms of boundaries of working hours or the way of working is seen as a sign that they lack loyalty.

We have seen a case where an employee communicated to her employer that she would like to stick to fixed working hours after months of working odd hours, and the next day, she found several additional responsibilities added to her roster, making it impossible for her to stick her working hours. She continued because she needed the money. This is true of large companies as well. The great resignation drama has shown us that.

Emotional loyalty

It is created and sustained with value exchange. This can happen with people who join the firm around its inception and do whatever is asked of them. In return, they expect major incentives, both tangible and intangible, for their loyalty—rewards and recognition.

During the next stage of growth, if there is a capability gap, the employee feels let down when professionals step in and are seen as being significant contributors.

As the ageing workforce in SMEs gives way to the millennials, there is another twist in this loyalty saga. SMEs will eventually recruit the next generation for the talent needs but the owners often will find an absence of loyalty in this new crop of employees. For these folks, loyalty dependens on the purpose.

Author Simon Sinek tweeted in the May of 2012, “When people are financially invested, they want a return. When people are emotionally invested, they want to contribute “. That still holds.

When employees show interest in more than their sphere of work, it is a good sign of employee engagement. This involves paying attention to their suggestions, and also in giving feedback. Implementing a simple suggestion scheme either virtually or in person will help. This can be in its basic form–a suggestion box in break rooms, canteens, etc. A few companies rope in the families of employees into this.

Responding to employees and showing that people at the top care is easier done in an SME than in a large corporation with complex hierarchies.

There is also the conflict between loyalty and competence. Younger talent with academic qualifications and innovative ideas are brought in to meet the need for both professionalism and business growth in the new age.

Professional hires often find the fluidity and the “control and command” style of leadership in SMEs frustrating. They often leave, and when they do, the old loyalists make the most of the opportunity to cement their position. Managing this conflict is a constant worry for SME leadership.

A conflict between loyalty and competence can be managed in the following ways:

Give rewards to the older loyalists by giving them visibility in terms of designation, due attention in meetings and so on but keep them insulated from crucial decisions needed for the business growth.

Set policies that show tenure in the company and are not necessarily correlated to loyalty.

Ensure that compensation and rewards are given for performance and results rather than tenure in the company.

Empower all employees equally to upskill or gain exposure to new advancements or technology in the industry.

Ensure that employees do not get the wrong perception of their importance in the organisation or assume or expect certain rewards just based on the time they have spent in the organisation.

SMEs may have an edge over their larger competitors in terms of fluidity of hierarchy or the ability to interact directly with employees but unless have a culture of transparent communication, this advantage may not last.



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M Muneer is the managing director of CustomerLab Solutions, a consulting firm.
Gayatri Krishnamurthy
first published: May 14, 2022 08:10 am
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