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How to Build and Implement an Employee Loyalty Program

Human Resources

By Sharlyn Lauby

As consumers, we're familiar with loyalty programs. They are created to strengthen the connection between the customer and the company brand. With U.S. unemployment at 4.6 percent and voluntary quits on the rise, it could make good business sense for organizations to consider strengthening employee loyalty.

The concept of employee loyalty isn't exactly the same as motivation or engagement, but may be equally important. It could be argued that employee motivation or engagement can't exist without employee loyalty. Employee loyalty is defined as "employees being committed to the success of the organization and believing that working for this organization is their best option."

Current Employee Loyalty Trends

While the concept of employee loyalty is focused on retention, organizations should be realistic. Turnover will never be zero, and we probably don't want it to be. But turnover is expensive and the more turnover an organization has, the more costly it will be. Employee loyalty can help reduce turnover expenses and allow organizations to spend their resources wisely.

That's what most organizations are looking for—controlled expenses. If an organization has out-of-control turnover, they aren't in the position to enhance the employee experience (and employee loyalty.) For example, a Gallup study reported that 37 percent of engaged employees would consider leaving for a 20 percent raise or less, compared to 54 percent of actively disengaged employees. What does this mean for employee loyalty? Organizations looking to improve employee compensation as a way to increase loyalty can't afford runaway turnover expenses.

And if you're wondering if focusing on things like employee compensation and becoming a "best place to work" have a positive impact on loyalty, the answer is "yes." Employees who work for "dream companies" are 11 times more likely to stay at their company than those in dream jobs at regular companies. And they have 41 percent more satisfaction.

5 Steps to Creating an Employee Loyalty Program

Implementing an employee loyalty program doesn't have to be difficult. Organizations can use the proven instructional design model – ADDIE – as their guide. The ADDIE model focuses on five key steps – analysis, design, development, implementation, and evaluation – in program creation:

  1. Analysis – In this step, assess where the organization is today and establish where they want to be in the future. We're not designing the program - yet. It's about understanding the issues. To understand what's currently happening in the organization regarding employee loyalty, look at employee survey results, stay interviews, and exit interviews. Senior management should reach consensus on the goals for the program.
  2. Design – Even though this step is called "design," we're not creating yet. During this step, benchmark what others are doing successfully, brainstorm program options, and research feasibility. Keep in mind some of the options to increase employee loyalty could include changing existing practices in recruiting or compensation and benefits. Any proposed changes should align with program goals. Before moving forward, get buy-in from senior management and secure budget resources.
  3. Development – Now it's time to create the program! Finalize the individual components of the program, including the decision of what elements will be created internally and which will be purchased from external sources. For example, stay interview questions can be developed using online resources such as the Society for Human Resource Management (SHRM) website. On the other hand, it could make sense to use an external resource to conduct exit interviews.
  4. Implementation – This is the most visible step in the process. Don't forget to have a communication plan for sharing the program with managers and supervisors. Make sure all program materials reflect the company branding. Before the formal launch, consider implementing the program in phases. Everything doesn't have to be done at once. Organizations can also roll out parts of a program to a single department before going company-wide. Think of it as a pilot program.
  5. Evaluation – Once the program is implemented, the work isn't over. Regularly look at program results and make adjustments as necessary. Any metrics being calculated and reported should align with program goals. Only measure what is valuable and can be controlled. Also, find opportunities to solicit feedback directly from employees about the program. They might have ideas that would increase program value.

Develop an Employee Loyalty Program to Fit Your Business Needs

Employee loyalty is an important issue. It can impact recruitment, engagement, and retention. Developing a program to address employee loyalty makes good business sense.

However, employee loyalty is also a unique business matter. Organizations should research best practices as a source of creative inspiration, not to create a one-off program. By using the ADDIE model, organizations can systemically develop an employee loyalty program that suits their unique needs.




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Sharlyn Lauby is an author, writer, speaker, and consultant. She has been named a Top HR Digital Influencer and is best-known for her work on HR Bartender, a friendly place to talk about workplace issues. HR Bartender has been recognized as one of the Top 5 Blogs read by HR professionals by the Society for Human Resource Management (SHRM) and best business blog by the Stevie Awards.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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