Is employee loyalty outdated?

The IT labour market in Australia has been through some turbulent times in the past decade. The market started out strong in the 1990s, with the dot-com era, millennium bug worries and Sydney 2000 Olympic Games contributing to a massive demand for IT skills. Good times were short-lived, however, as a market crash at the turn of the century left IT professionals disillusioned and unemployed.

Now, as the market is picking up again, the industry is having a tough time wooing back skilled staff. Competitive salaries and flexible working conditions have become the flowers and chocolates of a desperate bid for talent, and still employers are scratching their heads over how to get their employees to commit to the company.

And with the new, notoriously fickle wave of Generation Y's entering the workforce, one thing is for certain: the times, they are a-changing.

"Don't ask employees to be passionate about the company," IT textbook author Kathy Sierra writes in a recent blog entry. "People ask me, 'how can I get our employees to be passionate about the company?' Wrong question. Passion for our employer, manager, current job? Irrelevant."

According to Sierra, employees should be less concerned about contributing to their company and focus instead on their craft, be it programming, designing, or engineering. She likened the ideal company to a good user interface that would allow employees to be so engaged in their work that the company just fades into the background.

Sierra's school of thought may resound with projects dedicated to developing the perfect code, but for employers, a workforce of independent, mobile personnel could be bad news.

Already, the twenty-something-year-olds making their way into the industry have demonstrated a loyalty shift from the traditional focus on their employers to a more selfish interest in their own careers. Described by analysts as 'Generation X on steroids', the new generation is highly skilled, highly ambitious, in high demand - and they know it.

"Whilst Generation X are predominantly loyal employees who believe in building their careers through effective and long periods of service in each role, Generation Y are loyal primarily to their careers," observed John McVicker, Managing Director of Sydney-based IT recruitment firm, Best International.

"The length of time most Generation Y people think is appropriate to stay in one organization is based on the length of time it takes to get a promotion or a better job," he said.

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A 2004 survey of about 1,200 Australian employees also indicated a decrease in employee loyalty over the years, with Generation Y staff responding with lower levels of commitment to staying with their organisation than both Generation X and the Baby Boomer generation.

The study was conducted by international human resources consultancy, Mercer. According to Rob Knox, the consultancy's Head of Human Capital Product Services, there is a wide variance in the current five-to-six-year average employee turnover rate.

Some turnover is healthy, Knox said, as it provides the opportunity for the organisation to take on new ideas while allowing other, perhaps unmotivated or low-performing employees to move on. On the other hand, he said, having employees leave after too short a time is likely to have negative consequences on a company.

"In general, I believe employers would prefer an increase, rather than a decrease in loyalty," he said. "Among other things, the cost of recruitment and training associated with a decrease in loyalty has a negative impact on business results."

McVicker agrees that employees who can demonstrate workplace loyalty and passion are highly valued attributes in recruitment, as these are people who are expected to be able to enhance the work environment for existing employees, and ultimately contribute to the organisational culture.

"Passion and loyalty are very high on the list of competencies that employers seek in potential staff," he said. "Whilst individual competency and ability is vital to actually doing the job, to survive the talent drought, employers will be looking for prospective candidates who can do the job but want to grow with the company."

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So why are employees moving on? One explanation is that companies are attempting to minimise their recruitment risks by only taking on candidates who already possess the exact skills for a job. It is not uncommon for employers with such a strategy to recruit externally instead of promoting existing staff, thus creating a workforce that rewards job mobility.

"An external hire that has exactly the right skills for a job might be considered a stronger candidate than an internal recruit who needs to be coached and managed into a new and more senior role," McVicker said.

"However, from experience, this is a short-sighted and somewhat risky tactic for employers," he said. "Employers will get more from an employee who is a good cultural fit with their organisation but requires more training, than hiring an external 'superstar' who has the potential to do real damage and disrupt office relations if things don't work out."

But like it or not, the workforce is changing; and the job market is fast adapting to current trends. Mercer's Knox observed an increase in the number of knowledge workers, who are able to easily transfer their knowledge skills from one organisation to the next due to the nature of their work, and are thus best equipped for job mobility.

Best International's latest monthly report also revealed that the increase in demand for IT contractors is now exceeding the demand for permanent positions. While the overall IT job market increased by 10 per cent in February, increase in demand for contract positions was up 10 per cent compared with a rise of 9.3 per cent in permanent roles.

All is not lost, however, as McVicker points out that some employers are now implementing retention strategies to keep their employee base strong. He gave the example of employers with a large contractor or Generation Y employee base, who could look to either locking in their key contractors through contract extensions, or considering longer 12 to 18 month contract periods for new hires.

According to Sierra, while it is 'absurd' to think of employees truly having a passion for the company itself, a workplace that provides enough intellectual stimulation can encourage employees to stay there.

"When employees are supported in their passion for their work, they tend to let some of that passion spill over to their employer," she observed.

"It's like someone who has a passion for digital photography, and feels passionate about Photoshop," she said. "They aren't really passionate for Photoshop -- the passion is for photography -- but Photoshop gets to ride along."

"That's how it is with employers who give the passions for their employees a chance to thrive; the employees' passion for their work casts a glow back on the company that makes that happen," she said.

Copyright © 2007 IDG Communications, Inc.

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