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Do loyalty programmes really create more employee retention?

Loyalty programmes for employee retention
rexx systems news
Do loyalty programmes really create more employee retention?

In view of the continuing shortage of skilled workers, many companies are trying to retain their employees in the long term by giving them loyalty or loyalty programmes over and above their salary. Which ones are worth considering and, above all, does it make any difference at all?

Although the Corona crisis has temporarily caused an increase in unemployment figures, the shortage of skilled workers has remained and will even intensify if the German economy, as expected, fully picks up again. And this will make it more difficult again to find good people and, above all, to keep them in the long term. The job plans of many companies are full again, and thus personnel and talent management are also gaining more importance again.

At the same time, the risk of a higher turnover rate is also growing. Employee retention, analogous to customer retention, is therefore the very big issue for many companies. A salary increase, good working conditions, interesting tasks (keyword job enrichment) and flexible options such as home office are partly suitable means of retention or motivators for employees. In addition, loyalty or retention programmes are now becoming more and more common in order to survive as an employer in the so-called “war for talents”.

Motivation à la Maslow and Herzberg

Individual needs such as trust, esteem, self-affirmation, success and independence, as described in Maslow’s pyramid of needs in 1943, are increasingly becoming the top priorities for many people in their jobs. Frederick Herzberg, American professor of industrial science and clinical psychology, developed his two-factor or motivator-hygiene theory in 1958.

Among other things, he describes recognition, responsibility and opportunities for advancement as motivators, while hygiene factors for Herzberg include remuneration and salary, personnel policy and management style, interpersonal relationships between superiors and employees, job security and influence on private life.

Is the company car still tempting?

When you think of loyalty programmes for customer retention, you probably first think of the good old discount stamps and Christmas presents for good customers. For employee retention, company cars and company mobile phones may no longer play the same role as they used to, but as privileges they are still important motivators, especially, of course, when they are linked to a promotion. Exclusivity often makes the difference here, because if everyone has a company mobile phone, the incentive loses its appeal. And even above-average salaries can hardly create the necessary employee loyalty in the long term if the chemistry is otherwise not right or recognition is lacking.

According to a survey of more than 5,000 employees cited by HR Puls, the latter is the most important factor for employee retention, closely followed by appropriate leadership, flexible working hours and interesting tasks. Flexible remuneration, on the other hand, which is preferred by many employers, is only secondary as a motivator.

Motivation grows with the tasks

According to HR Puls, studies show that most professionals have only a low level of loyalty to their employers. As a result, many companies today have to live with the constant spectre of fluctuation. Gone are the days when employees and the company had a long-term loyalty relationship.

If the signs point to fluctuation and it is difficult to compensate for this with new skilled workers, it is high time to think about loyalty programmes. However, HR managers should be aware that employee loyalty takes place on several levels: One is loyalty to the company, which should present itself in the best possible light, keyword employer branding. The other is the bond with direct superiors and the team, but more important for many specialists and managers is the bond with their own assigned tasks.

If the HR department or the boss notices that a good professional or talent is on the way out, it can be a good idea to entrust them with a new area of responsibility. However, in order to avoid inflation, one should show tact and, if necessary, plan for other candidates for promotion as well or offer them the prospect of the next suitable position that becomes available.

Management training will be more important than ever, because …

According to a study published by Deloitte in 2019, Austrian companies have to reckon with fluctuation costs of 13,705 to 17,159 euros per job. In Germany, the figures are likely to be comparable. Other sources even cite turnover costs three or four times as high in each case. At 25 per cent, turnover was particularly high among staff in key positions in 2016.

According to the Deloitte study, the most frequently cited reasons for leaving were leadership and leadership style, salary, lack of promotion opportunities and too few positive employee experiences. Measures implemented to prevent involuntary turnover were, in turn, training, increased employee orientation in processes, leadership development and increased team building. “Employee-centred HR services and optimised HR processes guarantee a positive employee experience. This makes them key factors for employee retention and motivation,” the study says. The results are certainly transferable to Germany, although the estimates for turnover costs per employee here are sometimes more than twice as high.

Most corporate loyalty programmes still focus on customer retention. At Deutsche Bahn, for example, you receive a bonus point for every euro you spend; if you earn enough, you can get bonuses or free rides. Loyalty programmes for employee motivation can be designed differently depending on the industry and company. German carmakers are very generous with bonuses and other incentives anyway, but they don’t “let their hair down” when it comes to company cars, loan cars and employee discounts, so that even factory workers can often drive home in the latest models. For a lifetime company car, however, you have to have reached a certain hierarchical level, as is the case at BMW.

Generally popular non-cash bonuses are allowances for fitness studios or incentive weekends for the top performers in sales. In addition, there are tax-free prepaid credit cards or vouchers for shopping, wellness, further training and other benefits. Some providers specialising in loyalty programmes also link employee motivation programmes with idea or innovation management, continuous improvement or CIP processes and sales competitions.

Once to Japan and back to Europe

English loyalty actually sounds a bit like the medieval feudal relationship between the prince and his subjects. Lifelong loyalty, in other words. But as a partner at Ernst & Young writes in an opinion piece for Nikkei Asia, companies in Japan can no longer count on the lifelong loyalty of their employees, especially not from Millennials. Shaking their heads, the veterans of large companies watch as Gen Z tends to gravitate towards start-ups. Routine tasks like copying documents, once almost a rite of passage to management, no longer interest them. Instead, young employees in particular are looking for openness to technology and new tasks. If young talents are on the way out, companies should look at how they can use this to their advantage, for example by forming talent pools of alumni, as the large conglomerate and trading group Sumitomo has done.

Speaking of alumni, many of Japan’s top managers are recruited from graduates of one year (dōki) who have pushed themselves up together. Where the dōki mechanism no longer applies in the event of a change, mentoring and integration programmes should resolve this handicap. And if midcareer hiring (recruiting from within a career) is based on a culture of performance instead of relationship networks, that would also be a good sign for the prospective junior staff.

Japan and Germany are not comparable and yet somehow they are. The old patriarchs of the economic miracle years in this country also liked to maintain a kind of patronising loyalty relationship to and with their workforce. Today, however, good skilled workers are often gone faster than companies can look around. Money and other incentives alone are not enough, especially not if they are poured out with a watering can. At least as important for employee retention are good framework conditions, recognition, opportunities for advancement and the feeling that one can really make a difference in the company. Kindergarten allowances and home office, advertised by many companies as a permanent option, benefit young parents in particular. The HR department should work on such programmes, but with fairness and transparency, as made possible by the HR software from rexx systems. There is the so-called Salary Transparency Act, but in many companies wages and salaries remain a closely guarded big secret. However, the rexx suite, one of the leading HR software products on the market, offers an HR salary comparison with a comprehensive database that makes it possible to get an idea of the appropriate remuneration for jobs in Germany, Austria and Switzerland at the touch of a button.

Conclusion and advice
Loyalty programmes still work in retail, even though customers today are increasingly “cheating” and no longer allow themselves to be lured by every discount offer or Christmas present. Whether such retention programmes can contribute significantly to strengthening employee loyalty and motivation depends on the individual measures and various factors. As explained and indicated here, even high salaries and attractive benefits cannot compensate if the chemistry is not right or toxic people, whether superiors or colleagues, disturb the working atmosphere. As the above surveys show, it is also important to have opportunities for promotion, interesting, fulfilling tasks and a positive employee experience. If there are signs that someone has already resigned, he or she can be let go according to the motto “travellers should not be stopped”, or the employee or feedback discussion can be sought – ideally together with HR or personnel management.


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