My thoughts on loyalty (as stated in my last post, Whose Bread I Eat, His Song I Sing) run counter to conventional wisdom which currently holds that loyalty between supplier and customer and between employer and employee are tentative at best, subject to change without notice and likely with little regard. Loyalty, it seems to most, is a quaint notion that has neither place nor purpose in a globalized, commoditized world. Perhaps Thomas Jefferson was right: The merchant has no country. Even I do admit that there are circumstances where my confidence in loyalty is put to the test.

Acquired Rights – and Wrongs

Being acquired or merged usually has its down-side or, more precisely, down-size for the acquired or merged company and the people therein. The rationale given invariably revolves around synergy. In the new math, one head is better than two. Redundancy is good only in IT and nuclear deterrence. For example, there is no need for two finance departments, especially since there can be only one treasury into which all cash flows and one set of books into which all the numbers flow. The problem with most rationalizing is that expediency and incumbency trump quality. You go with what and who you know; both are highly prejudiced by proximity, that is, you go with those close to home. The take-away of an acquisition is that something has to give.

It is the same at the commercial level. Looking for synergies will almost always mean the rationalization of suppliers, large and small. This reflects not on the greed of the purchaser but on that of his suppliers, for acquisitions often provide the once-in-a-lifetime opportunity to have it all.

A Changing of the Guard

A change in leadership will likely create a measure of vulnerability for direct reports. As in the case of the acquired company, loyalty can work in reverse, accruing to the original stakeholders or based on prior knowledge. The new CEO will assess the staff he inherits using both objective and subjective measures. At the end of the day – usually by the end of the first 100 days – he will go (or stay) with whom he is comfortable, from whom he knows he can command loyalty through thick and thin, and to whom he can confidently delegate difficult but necessary tasks. Not surprisingly, this may mean bringing along old staffers with whom a rapport has already been built and a necessary level of confidence already established. To the discomfort (though not the discredit) of incumbents, ‘may mean’ very often does mean.

Once again, a new buying team at a key customer could well entail the end of an enduring relationship, contractual obligations notwithstanding. A change may reflect not just pre-existing loyalties, personal and organizational, but also policy shifts. The new buyer may, for example, decide to move from split accounts to sole vendorships or vice-versa. Uncertainty is to be expected and you’d better have a good story to tell.

When the Going Gets Tough

When the numbers don’t add up to where they ought, odds are good that budgets will be cut. Management will, at one point, begin to talk about productivity, i.e., output divided by headcount. To enhance productivity, you can either increase the numerator (always desirable) or decrease the denominator (almost always the default) or, of course, do both. Any of these options becomes a driver for reengineering which, for most, does not mean refocusing the organization but shrinking it. There is a widespread belief that, in any restructuring, less is more. True or not, for those who are victimized, it is certainly less.

So, yes, there are circumstances that will shift loyalty into reverse (as in our first two situations) or move it to a back seat position (our third). Those circumstances invariably arise from a significant change – of leadership or of fortune. Even in explaining loyalty, more of the one would likely mean less impact from the other.

A recurring theme from the corner office will be an argument that the foundation for all successful enterprises over the long haul is integrity. Integrity is a concept impossible to understand if you don’t have it and unnecessary to understand if you do. The cornerstones of integrity are respect, commitment, consistency and loyalty. Each will be dealt with in time; this post is about loyalty.

It is too easily taken as a given that loyalty can no longer be found in business, that it goes as far as the nearest turn of corner and downturn of market. There is no real loyalty between companies and their employees, nor between suppliers and customers. When the slightest push comes to the merest shove, goes conventional - or, more precisely, convenient - wisdom, people will switch on a dime for a dime.

Three decades of experience tells me that this is simply not true. Of course, nothing is so simple, but I would most strenuously make the case that loyalty is alive and doing rather well under difficult circumstances. It takes a great deal of push to topple the walls that most employees build around themselves to maintain the security of their jobs. It takes a most egregious shove to overcome a buyer’s resistance to change.

The case could well be made that employees care more about their jobs than they do about the companies that provide them, that their loyalty travels only so far as their pay cheques will carry it. I would posit that people will almost always try to do their best for their employers and that given the opportunity and appropriate tools, most would succeed. They, equally, want their companies to do well, understanding full well who butters their bread. Despite all the griping around the water cooler and over Kokanee beer, most would be more than happy to wear the company colors and wave the corporate flag. Because now, as always, job security trumps job satisfaction.

Does this loyalty go both ways? Most companies – at least the good ones – know that you can never get enough good people. Most managers – at least the good ones – know that their success depends as much on the support of those below them as on that of those above. It is the sheep, after all, that make the shepherd.

Corporate buyers look for value as much as price. Even those charged with the purchase of commodities know that a secure and consistent supply chain is invaluable. Price will get an order, but relationships will get – and barring catastrophic screw-ups – keep the business. Incumbents will get the first call and the last look. They will be given the benefit of the doubt because buyers have no doubt about the short- and long-term benefits of doing so.

Suppliers will seldom chase business – even potentially more lucrative business – that would jeopardize their relationships with existing customers. Those that do will find out soon enough that what goes around comes around, that loyalty - or lack thereof - cuts both ways. They will come to realize that there is a lifetime value to customers that, while not easy to calculate, is impossible to ignore. Mostly, they will learn that shareholders are not interested so much in profit as in sustainable growth. Sustainable growth comes with protecting the base and growing with key customers.

Everyone will have a tale to the contrary - and nothing upsets the equilibrium of loyalty faster and with more finality than a changing of the guard - but it is precisely these exceptions that define the rule. And so, in general and on principle, I am in agreement with American writer, publisher and philosopher Elbert Hubbard who said, “An ounce of loyalty is worth a pound of cleverness”. At a minimum.