The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value

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Harvard Business Press, 2001 - Business & Economics - 323 pages
5 Reviews
Loyalty is by no means dead. In fact the principles of loyalty . . . are alive and well at the heart of every company with an enduring record of high productivity, solid profits, and steady expansion.
From The Loyalty Effect

The business world seems to have given up on loyalty: many major corporations now lose-and have to replace-half their customers in five years, half their employees in four, and half their investors in less than one. Fred Reichheld's national bestseller The Loyalty Effect shows why companies that ignore these skyrocketing defections face a dismal future of low growth, weak profits, and shortened life expectancy. Reichheld demonstrates the power of loyalty-based management as a highly profitable alternative to the economics of perpetual churn. He makes a powerful economic case for loyalty-and takes you through the numbers to prove it. His startling conclusion: Even a small improvement in customer retention can double profits in your company. The Loyalty Effect will change the way you think about loyalty, profits, and the nature of business.

Fred Reichheld is a Director Emeritus of Bain & Company and a Bain Fellow. He is also the author of Loyalty Rules!.

 

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read the book. the loyalty effect is a two way street...let me explain...Business and the public sector are into a phase of creative disassembly where reinvention and adjustments are constant. Hundreds of thousands of jobs are being shed by United Technologies, GE, Chevron, Sam’s Club, Wells Fargo Bank, HP, Starbucks etc. and the state, counties and cities. Even solid world class institutions like the University of California Berkeley under the leadership of Chancellor Birgeneau & Provost Breslauer are firing staff, faculty and part-time lecturers. Yet many employees, professionals and faculty cling to old assumptions about one of the most critical relationship of all: the implied, unwritten contract between employer and employee.
Until recently, loyalty was the cornerstone of that relationship. Employers promised job security and a steady progress up the hierarchy in return for employees fitting in, performing in prescribed ways and sticking around. Longevity was a sign of employeer-employee relations; turnover was a sign of dysfunction. None of these assumptions apply today. Organizations can no longer guarantee employment and lifetime careers, even if they want to.
Organizations that paralyzed themselves with an attachment to “success brings success’ rather than “success brings failure’ are now forced to break the implied contract with employees – a contract nurtured by management that the future can be controlled.
Jettisoned employees are finding that the hard won knowledge, skills and capabilities earned while being loyal are no longer valuable in the employment market place.
What kind of a contract can employers and employees make with each other? The central idea is both simple and powerful: the job or position is a shared situation. Employers and employees face market and financial conditions together, and the longevity of the partnership depends on how well the for-profit or not-for-profit continues to meet the needs of customers and constituencies. Neither employer nor employee has a future obligation to the other. Organizations train people. Employees develop the kind of security they really need – skills, knowledge and capabilities that enhance future employability.
The partnership can be dissolved without either party considering the other a traitor. hope this helps!
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Contents

I
1
II
33
III
63
IV
91
V
117
VI
153
VII
185
VIII
217
IX
255
X
279
XI
301
XII
311
XIII
315
XIV
323
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