The end of workplace loyalty

Kiersten Essenpreis for BI

In the two years I’ve been writing about Americans’ changing relationship to work, there’s one theme that’s come up over and over again: loyalty. Whether my stories are about quiet quitting, or job-hopping, or leveraging a job offer from a competitor to force your boss to give you a raise, readers seem to divide into two groups. On one side are the bosses and tenured employees, the boomers and Gen Xers. Kids these days, they gripe. Do they have no loyalty? On the other side are the younger rank-and-file employees, the millennials and Gen Zers, who feel equally aggrieved. Why should I be loyal to my company when my company isn’t loyal to me?

I knew it would happen again the other month, when I was reporting on white-collar workers who secretly juggle multiple full-time jobs. Overemployment, as the phenomenon is known, violates society’s implicit norms of loyalty to one’s employer more flagrantly than anything else I’ve encountered. But when I asked these overemployed professionals whether they felt bad that they were essentially cheating on their bosses, they were unapologetic. “My parents told me, ‘Don’t switch companies, grow in one company, be loyal to one company, and they’ll be loyal to you,'” one guy told me. “That may have been true in their days, but it definitely isn’t today anymore.”

After the story’s publication, I decided to dig deeper into the concept of loyalty. Where did this norm come from? Is it true that loyalty no longer pays? Was there a time when it did? And why does everybody get so fired up about it? At the moment, there’s an overwhelming sense that work — and the underlying relationship between employers and employees — is fundamentally broken. Some people chalk it up to the discontents of the return-to-office wars. But I think the anger runs much deeper. Neither employers nor employees feel they’re getting what they expect from the other.

It turns out there’s a whole body of research around these questions. It focuses on what organizational psychologists call the psychological contract — the set of things that employees and employers believe they owe each other and are owed in return. Many of these beliefs are societal in scope. Others emerge from personal experiences on the job. But for the psychological contract to hold up, you need both mutuality (both parties have a shared understanding of expectations) and reciprocity (both parties believe they’re getting a fair deal). Do that, and you generate the kind of trust and loyalty that leads to high productivity and low turnover. Fail to do that and — well, that’s where we find ourselves right now. A world in which the psychological contract is profoundly broken.

There was a time when the psychological contract between employers and employees seemed unbreakable. In the three decades following World War II, as Rick Wartzman documents in his book “The End of Loyalty,” a booming economy made American companies rich. Companies, in turn, shared that wealth with employees, both through hefty raises and through an extraordinary expansion of benefits. Companies began providing health insurance, which used to be a rare perk. They introduced profit-sharing programs and pension plans. They offered managers extensive training, along with opportunities to climb the corporate ladder. Kodak, which had an 18-hole golf course and a 300,000-square-foot recreation center for employees, sponsored everything from picnics and baseball games to bridge and badminton. “Kodak justified its considerable spending on these pursuits,” Wartzman writes, “as good for employer and employee alike.”

But the biggest perk of all was a sense of security. Blue-collar workers faced seasonal layoffs, but it was customary for companies to recall those workers when business picked up. Companies like Kodak went even further, delaying the implementation of new technology until it could figure out how to retrain and transfer any workers who would be displaced. And for white-collar professionals, layoffs and firings were rare. “You might not advance as far as you hoped,” Wartzman writes of managers at GE during the 1950s. “You might be shoved to another part of the company where, it was perceived, you could do less harm. But you had to mess up pretty badly to get tossed out completely.” Surveys, Wartzman found, showed that “nearly 100 percent” of managers thought their employers offered good job security — and that three-quarters felt “good” or “very good” about their organizations.

Researchers at GE in 1969. Back then, professionals enjoyed the kind of job security that would be unthinkable today. Fox Photos/Getty Images

That feeling persisted for several decades. “When I was teaching in the 1970s and in the early 1980s, that notion of job security as a fundamental feature of employment was taken for granted,” says Denise Rousseau, the academic who coined the concept of the psychological contract. Today, disillusioned workers might assume that the norm of workplace loyalty was nothing but a capitalistic ruse, a way for companies to exploit their employees. But it’s not hard to see why so many workers and managers felt a genuine commitment to their companies during the decades of American prosperity. Their employers were good to them, so it made sense for them to be good to their employers.

What changed was globalization. Threatened by overseas competition, American businesses began exporting jobs and “downsizing” their domestic workforces. A new management philosophy was born — one that was neither mutual nor reciprocal. “They don’t treat people relationally,” says Rousseau, who’s a professor of organizational behavior and public policy at Carnegie Mellon University. “They treat people transactionally and as fungible, as easily substituted one to the next.” One by one, long-established incentives for employee loyalty fell by the wayside. Companies replaced pensions with 401(k)s, forced employees to shoulder a greater share of healthcare premiums, scrapped supplemental health insurance for retirees, and started relying on external hires rather than training and promoting from within. Even worse, during the Great Resignation, employers effectively penalized employees for their loyalty, offering sky-high salaries to attract job candidates while neglecting their existing staff. As I reported in 2022, veteran employees received salaries that were 7% lower, on average, than new hires.

Still, employees were slow to shed the expectation of loyalty. The unspoken reality is that many of us still feel we should be loyal to our bosses. Why else does the prospect of, say, shopping around for job offers feel a little icky? Even if we know that layoffs happen to other people, we don’t really think they’ll happen to us. Instead, we cling to the belief that there’s reciprocity in the workplace — that we’ll be taken care of as long as we do what our employer asks of us.

One person who believed this was a guy I’ll call Mark. He always met his deadlines and his performance goals, and his clients loved his work. But in 2016, his company laid him off after it decided to pursue a new business model. What added insult to injury was that the company kept the one employee Mark managed — someone he had suggested hiring — because her salary was cheaper. His boss apologized, telling him that the layoffs had nothing to do with him. It was just business.

“I felt betrayed,” Mark told me. “I thought it was unfair. I did everything I was expected to do.” But then he had an epiphany — that employers no longer shared his expectation of loyalty. “I kind of grew up and realized it’s just how things are,” he said. “You can do everything and people could still fire you for no reason at all.” Now, he understands the new norm: “I’m always expecting that every job I have, I could be fired tomorrow.”

This disillusionment is what academics call a psychological-contract violation. When the contract holds, good things happen. But when it breaks, people find a way to even the scales. They make sure they’re not putting in more than they’re going to get. They resolve to never get burned again. For Mark, this meant accepting freelance gigs on top of his full-time job, and then taking on multiple full-time jobs at once. Today, he juggles three full-time roles and a few freelance clients. When it comes to loyalty, he’s an employer’s worst nightmare — because he has none.

Others have adapted in different ways. Maybe they refuse to sacrifice their nights and weekends to meet a deadline. Or they switch jobs every few months, in search of a higher paycheck. Or they use employee training programs at work to load up on professional certifications, as a way to increase their appeal to other employers.

“By not being loyal to employees,” Rousseau says, “organizations have failed to realize that they’re not going to get loyalty in return.”

Many employers have responded to the loss of loyalty not by trying to repair the psychological contract, but by cracking down on anyone they view as a traitor. Some have enacted unofficial policies to never hire back a former employee. Others are using surveillance software to track employee keystrokes in an effort to catch workers who are coasting on company time. Most egregiously, a few are even suing quitters using contract clauses known, ironically, as TRAPs — training repayment agreement provisions that require workers who leave a job before a specified date to reimburse their employer for training costs.

Last year, I reported that the unprecedented rise in remote work was prompting employers to further shred the psychological contract, opting to hire contractors, temps, and part-timers over full-time employees. Work from home, in fact, has played a major role in disrupting the traditional bond between employers and employees. Being away from the office prompts employees to emotionally distance themselves from their jobs — and makes it easier for employers to ignore their needs. “I do hear this from companies,” says Nick Bloom, a professor at Stanford University who’s an expert on remote work. “The more remote someone is, the more transactional it feels.”

What we have now is a vicious cycle of broken promises. The result is a workplace that none of us wants: one where no one feels they owe anyone anything.

What we have now is a vicious cycle of broken promises — companies cutting back on benefits and job security, workers cutting back on hours and effort. The result is a workplace that none of us wants: one where no one feels they owe anyone anything.

But there is another way. “There’s a pretty large set of progressive companies that have realized the old times aren’t coming back,” says Anthony Klotz, a professor of management at University College London. “They say: ‘Whoever caused it doesn’t really matter as a business. We just need to operate effectively.’ And that doesn’t mean taking the non-trusting path.” As in any relationship, the key to rebuilding trust is to stop fighting over who started the problem and start focusing on fixing it.

One example: Klotz studies “alumni programs” that employers have set up to stay in touch with and offer networking opportunities to former staff. The programs aren’t selfless — they arise out of a recognition that former employees sometimes turn into clients and customers, a situation that’s common in management consulting. Former employees also represent a ready talent pool in the event they decide to come back. Some organizations are so friendly to their quitters, Klotz says, that a quarter of their workforce consists of boomerangs. Alumni programs represent a small but meaningful way of restoring the psychological contract with employees. Employers recognize that they can’t guarantee to keep employees around forever — but they can tell those who leave that they’re always welcome back. It’s not lifetime employment, but it encourages a lifelong relationship.

I’ve been thinking about other ways employers and employees could renegotiate the terms of their frayed relationship. It’s hard to imagine any company promising total job security these days. But they could be more up front when the business sours and offer voluntary buyouts before they resort to layoffs. They could offer meaningful opportunities for learning and development, not the canned training videos that no one watches. They could consider internal candidates for new openings before they look elsewhere, and conduct regular salary reviews to make sure they’re not penalizing their veterans for sticking around.

In return, employees could give their bosses a new kind of loyalty. I’m not talking about returning to the old hustle-culture model that required workers to sacrifice everything for the company. But the new loyalty would recognize that employees have to uphold their end of the bargain. That includes things like stepping up when the business needs it, being a creative and productive member of the team, and riding out temporary waves of discontent instead of jumping ship at the first hint of trouble.

Ultimately, though, the psychological contract can’t be reduced to a simple ledger — a cool, calculated weighing of what we as employees give on one side, and what we get on the other. “It’s not tit for tat,” Rousseau says. “It’s more, ‘the way you’ve treated me and the things you’ve asked of me’ creates beliefs about how we should relate to each other in the future, because of the obligations we feel party to.” In other words, mutuality and reciprocity create trust — and trust generates loyalty.

Consider Mark, the guy who started juggling three full-time jobs after he was laid off. Given his disillusionment, I assumed he’d give each of his employers the bare minimum — aiming for a threshold of “meets expectations,” but rejecting any pressure to go above and beyond. Not necessarily so, he tells me. It depends, he says, on how his bosses at each of his companies treat him.

“If somebody respects me as a person, if they show me that they value the work that I do, if they show me that the work that I do has impact, then I’m going to go the extra mile for them,” he says. “I’m not going to give it the 80% I would usually give for a company I’m working for. I’m going to give them 90 or 100%.”

It surprised me that someone who’s so flagrantly breaking the traditional rules of loyalty — secretly working three full-time jobs! — could still be motivated to give it his all. It surprised me even more that the salary he earns from each of his jobs has very little to do with that calculus. Ultimately, we’re social creatures, and as in any relationship — even in one like work, which at its most basic terms is an exchange of labor for money — the most disillusioned of us still seek something more than a financial transaction. We want to be seen as people, not as line items — and employers can take the first step to repairing the psychological contract by recognizing that simple truth. And if they do it fully and faithfully enough, maybe we can begin to forge a healthier workplace dynamic — one in which loyalty, and the benefits that accompany it, flows both ways.

Aki Ito is a chief correspondent at Business Insider.