Study after study has shown the direct links between employee loyalty and profits. It’s a straight line: Loyal employees lead to loyal customers and loyal customers create profits. According to analyst Frederick Reichheld, author of Loyalty Rules! and The Loyalty Effect (both published by the Harvard Business School Press), a 5-percent increase in customer retention can yield profit increases ranging between 25 percent and 100 percent.

Notice that we’re talking about loyal employees — not satisfied employees. Satisfied employees are reasonably content with their jobs, but would consider changing for a small pay increase. Loyal employees regard pay as important, but the crucial elements in their feelings about the job are the nature of the job itself and their relationships with others at work.

Team Feedback
Small teams are crucial to the operations of companies with high loyalty among employees, in Reichheld’s view. Working in groups of 10 or fewer provides the direct performance feedback from fellow team members that builds work relationships and a sense of accomplishment.

Fairness Is Key
It’s easy to see why small teams build loyalty when you look at top concerns revealed in the 2001 Employee Benchmark Study conducted by the Walker Information research group. The study, probing attitudes of 2,795 U.S. workers, rated fairness in policy and pay decisions as the top issue, followed by care and concern for employees — both matters that are more likely to be addressed in small teams that recognize individual performance. The Walker study showed that the other important concerns are satisfaction with day-to-day activities, overall reputation of the organization, trust in employees, resources available to accomplish the job, clear job definition, and feelings of accomplishment.