Loyalty to a company starts as a small seed, but if fed and watered in the right way it can pay back in spades. International management coach Bob Selden explains.

Tata Motors recently released the revolutionary Nano in India, the world's cheapest car at $2,500! What's that got to do with loyalty you may well ask? Well, 70-year-old Ratan Tata, the current CEO of Tata, who took over the ailing company business in 1991, has a personal mantra of 'loyalty'. He is unusual for a CEO. Tata is humble, openly admitting his mistakes and sends personal thank you notes to employees. In a recent deal with terminated workers from his steel company, he agreed to pay their wages for life!

When Ratan Tata took over as chairman of the group, he was forced to earn rather than command respect – he inherited Tata through his mother's marriage, not blood lines. At that time the company was a loose-knit group, dependent purely on the Indian economy and not performing well. Today it is a major international player. It now owns many diverse international businesses ranging from one of the biggest world steel makers, Corus Steel in the UK, to the prestigious Ritz Carlton in Boston. The Tata group now has market capitalisation of $70 billion and after tax profit of $2.8 billion last year.

Ratan Tata's gentle, kind manner engenders loyalty and yet he encourages his managers to make tough decisions. "Mr Tata encourages us to take big, calculated risks," says Ravi Kant, Tata Motors' managing director, at the unveiling of the Nano. His style appears to be the ultimate 'tough mind, gentle hand' approach.

Earning loyalty

Unfortunately, loyalty is a philosophy that seems to have been lost in many modern organisations. Powerful corporate decision makers seem to think that paying people more salary and perks will gain their loyalty. It does not. All it gains is their compliance. So when people are offered more money, because they have no loyalty to the organisation, they quickly and easily change companies.

Compare this with two other recent examples.

As a management coach, I am currently working with a mid-level executive who was told six months ago that her division was likely to be closed down. As the company wanted to keep her, this timing gave her the opportunity to seek a role elsewhere in the company. Unfortunately, there were no suitable roles. So, the company has now instigated termination.

Now here's the 'loyalty' kicker. As well as a very generous termination package, her salary will continue to be paid for the next nine months. During this time, she is encouraged to remain at work. Should she happen to find a role outside the company at any time within the next nine months, as an additional thank you, the company will continue to pay her 50% of her current salary for the remainder of the nine months. She has just found a new role and starts in two weeks time. Can you imagine how fondly she talks of her old employer and of the level of 'loyalty' credibility that has been built up by the company with their existing employees?

Closer to home, my wife works for a very successful European major multinational pharmaceutical company. They have tremendous loyalty amongst their workers with many of them being lifetime employees. What engenders such loyalty? Well, in addition to good leadership and management, loyalty starts with the employment contract. Both parties are required to give six months notice of leaving or termination.

Faced with an unexpected termination, would you rather be given the option of a six month window to find a new role, or the ignominy, embarrassment and belittlement of being marched off the premises by armed security guards on the day of termination? Just as importantly, what loyalty impact do each of these termination decisions have on those employees who stay?

Loyalty is a two-way street. It cannot be bought. It must be earned – by managers and employees. Loyalty may well cost – most often in the time invested in people by the organisation's leaders – but it also pays. In spades!

Bob Selden coaches at the International Institute for Management Development in Switzerland and the Australian Graduate School of Management in Australia and is the author of 'What To Do When You Become The Boss'. For free advice on your management challenge, contact Bob at http://www.whenyoubecometheboss.com/