The Loyalty Trap

In most societies, loyalty has always been morally esteemed and deemed worthy of reward.  Disloyalty has resulted in social banishment.  But far from being a good, loyalty is most often a tool used by the cunning to entice the unwitting into surrendering power.

Within firms, is loyalty a good or a bad?  In the modern business environment, loyalty has been a dominant operational imperative thought necessary for success.  Yet a second, competing model is emerging in which relationships are built on professionalism rather than loyalty.  The new professional relationship paradigm threatens to outperform loyalty, though not necessarily to destroy it.  Loyalty is so psychologically ingrained that it is considered to be the glue that holds a firm together.

The idea of loyalty has its roots in the blood, mud, death and comradeship of the battlefields of every war since the birth of modern civilisation in ancient Greece.  Wherever a nation has existed, loyalty has been demanded.  It has been accepted that without loyalty a nation could not survive external assault.  It is not surprising then that loyalty should be a modern business catch-cry, because for the first 70 years of the 20th century the business of conducting business was dominated by men whose approaches had been molded by the experiences and demands of war.

Business in market economies has largely been seen as a war involving winners and losers.  Loyalty has offered a prime conceptual framework for managing the firm for competitive war.  The principle structure adopted has been that of class.  Firms would invite people in and people would apply to become part of the firm.  Individuals would be assessed for skills and abilities and slotted into formal, rigid class structures inside the firm.  Incomes, status and decision-making prerogatives were all determined by the class structure.

This idea of micro class structures in firms, based on qualifications and acquired formal skills, replaced ideas of macro class structures built on inherited position.  The 20th century firm has been a scientifically created, sophisticated version of the traditional class system through which the lord of the manor managed his estate in medieval England.  But in business your position in life is not determined by birth but by which part of the firm's hierarchy you are assigned to.  The better-known class structures of old became hidden within the class structures of the firm.

Within this class structure a simple set of rules applied that were meant to operate for the mutual benefit of the firm's members.  The demands on the individual were simple:  do the tasks allotted to you and above all conform to the hierarchical structures of the firm.  In short, be loyal to the firm above all other considerations.

An individual's willing conformity or loyalty has often been more highly prized than success at allotted tasks.  After all, mistakes at work can usually be corrected by other employees.  And the firm's selection processes were surely so good that hiring inappropriate individuals could hardly ever happen!  If an individual failed consistently over time, the individual could be reallocated to more suitable tasks.  The system would protect the individual from occasional lapses but was not itself threatened by individual task failure.

However, lack of loyalty was cancerous and threatened to bring down the edifice.  Exposing weaknesses inside the firm or questioning its hierarchical structures threatened the entire system.  So, in return for loyalty, the firm would provide the employee with protection from the harsh realities of the war that was conducted daily between firms.  The loyalty payoff included financial security, longevity of engagement, security in retirement and a sense of place and purpose in the firm's class structure.

This dominant management model has been highly successful.  Great industrial monoliths, larger than many nations, have been created.  The principles of command and control, dependent as they are on loyalty driven mindsets, have enabled spectacular and complex organisations to form contributing to a 20th century explosion of material well being.

But loyalty has never been solid.  The trashing of corporations that began in the 1980s, with mergers, acquisitions, and downsizing, has sent the clear and unforgiving message that firms can and will be loyal to individuals only while its suits their purposes.  In reality this has always been the case.  Firms can be loyal to employees only while economic circumstances enable them to afford it, a lesson learnt by the Great Depression generation.  When a business goes broke, that's the end of the loyalty pact!

Loyalty has always been sold to employees as a positive.  But it has always had sizable, never-to-be-mentioned personal downsides.  Loyalty has always required the willing sacrifice of the employee's sense of and desire for freedom to the higher demands of the organisation.  Nothing is more completely lost than what is willing discarded.  Liberty thrown away creates a gaping, unresolved emptiness in the individual's heart.  In this environment, loyalty generates a culture of silence, fear, transference of blame and gouging of personal integrity.  For example, most people feel uneasy when the system requires them to ignore corruption.  Most people chafe at the limitations on their ambitions that the corporate hierarchy imposes on them.  Ultimately, the loyalty system creates a culture of subservience to the whims and personal ambitions of the corporate elite.  Such a culture makes it impossible for an organisation's performance to realise the greatest combined potential of its personnel.

Above all, the loyalty thought necessary to a firm's performance has acted to dull performance by suppressing accountability.  When loyalty is demanded, accountability becomes diffused and lost.  All the signals in the loyalty-driven organisation say "the buck stops somewhere else".  Accountability that has been diminished by loyalty causes errors, corruption, and general underperformance that has to be absorbed and accepted.  Loyalty causes the firm's systems to be corrupted and incapable of solving internal problems.

Systems cannot fix problems.  Only the people in systems can do that.  Demands for loyalty suppress people who would otherwise keep the organisation operationally active, intact, alert and reactive to problems.  A huge amount of informal conversation revolves around problems at work caused by people higher up on the firm's status ladder but which can't be brought to the attention of anyone even higher up or are already being connived at by them.

In the latter part of the 20th century, substantial changes in people's thinking began to emerge.  Not change by way of cataclysmic earthquake, but by the steady gouging of new landscapes by altered river patterns.  The working generations of the late 20th century were dominated by people who had had no involvement in war or the armed forces.  The organisational demands of war were not among the life experience of these generations.

Peace is a marvellous, civilising gift.  It allows for the flowering of the human spirit.  The resultant flowers may not always be of universal liking but at least the human spirit has a chance.  And in a sustained environment of peace and expanding, shared wealth, people's desires change.

The negatives of loyalty produce a major psychological dysfunction.  As loyalty limits ambition and demands conformity to class structures inside firms, frustration emerges as a dominant but suppressed human emotion.  As long as people are prepared to accommodate frustration, loyalty can survive.  But generations molded by peace have low tolerance levels of frustration.  People want more.  They want to explore the inner self, to find the thing that drives them, to risk and to create.  They are less accepting of failure and negative behaviors in those around them.  In short, the peace generations have become entrepreneurial and, as entrepreneurs, people find pathways to greater financial success and personal satisfaction.

Individual entrepreneurship is the primary threat to loyalty, a threat that firms must understand, study and accommodate if they are to survive.

How then do firms address an environment without loyalty?  Simple!  They embrace it.

Don't ask for loyalty.  Ask for a business relationship.

The firm without loyalty expectations is one in which promises that cannot be kept are not made.  Typically, these firms do not seek or offer longevity in engagement.  They do not offer a class or career structure.  They offer people the chance to make their own career.  They do not seek to tie people to the firm.

The firm not requiring loyalty wants professionalism instead, from the office cleaners as much as from the CEO.  Professionalism is not a status reserved for an educated, highly paid elite.  Professionalism is a state of mind.  It transcends the tasks to be done and the formal skills required.  Professionalism is confidence in one's ability to perform, to demand clarity in the performance expectations and to accept only those performance expectations that can reasonably be met.

But how does a firm function if loyalty is not demanded to a structure that binds the body together?  Simple!  Living without loyalty does not mean living without structure.  It does mean accepting that the structure is not all-powerful;  that the firm is not bigger than the individuals who work for it.  It means having a structure that is itself open to question and sanction on a daily basis.  It means the elimination of arrogance.  So the firm without loyalty does not seek to create and enforce culture.  It accepts that culture is a product of the people in the firm and as the people change and come and go, the culture changes.  Community and culture is not something that is made, it simply emerges and evolves.

Above all, the firm without loyalty has one focus and one only:  the delivery of results to match the needs of its markets.  This focus is not limited to the outer edges of the organisation, where direct interface with markets is thought to occur.  It does mean the deep penetration of market focus into every recess of the organisation.

Do such firms exist?  Probably not, but many firms are well down this path.

Are loyalty driven firms dead?  Not at all!  The success that loyalty firms have achieved cannot be ignored.  But the loyalty mindset is under pressure.  Loyalty-structured firms now face competition from firms that look to different people paradigms.

In management thinking, loyalty has achieved a quasi-divine status.  To challenge loyalty is to risk bringing down the wrath of the high priests of social and business engineering.  Yet loyalty has an undeserved reputation.  Its negatives have become apparent and are being rejected.  The outcome can be maturity in the personal relationships operating inside firms, a maturity that promises greater dignity for people and improved performance for organisations.

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