Loyalty Lost

Walt, an old college friend, had worked for the same Oregon-based company since our graduation. The 85-year-old family-owned manufacturer had always treated its employees well. Walt worked his way up through the ranks on merit, dedication, and hard work.

Four years ago, he was promoted to be among the company's top four executives, reporting to the CEO, who admired his loyalty and knack for keeping key customers happy. But soon, everything would change.

A year later, a German-based company, a competitor in the European market, made an offer to the family owners that proved irresistible. The grandchildren of the late founder would become fabulously wealthy overnight. The third generation had never been directly involved in the business, so their decision to sell was easy.

When I talked to Walt after he'd visited the German headquarters of the new owners, he was encouraged. He thought there might be opportunities for further promotion within the parent organization. There had been a lot of talk about reinvesting in the business, taking it to a new level of excellence, he said.

That was then. Now, three years later, Walt is leaving for a comparable job with a competitor – something he had never before contemplated. In fact, he thought he would retire from his former employer. What changed?

Six months after the acquisition, the CEO who had overseen phenomenal growth the past 20 years was let go. The new owners sent in their own man – a German national – to run the North American operation. That's when everything started changing – for the worst, according to Walt.

The firm’s largest customer was headquartered in the Southeast. Walt had developed strong relationships with the key people there over the years, traveling cross-country frequently to meet them, as well as visiting their several manufacturing plants around the country. Like most of the firm's customers, Walt serviced this client well, solving its problems quickly through his close attention to details and first-hand awareness of how they used his company’s products. He knew how critical quality and on-time delivery were to this customer.

The changes at Walt’s company came slowly at first. Walt had previously been given a lot of leeway in how he operated, how he took care of the company's most important customers. Now, all his big and little decisions were being second-guessed by the new CEO. What had once been fun was now tedious and unnecessarily complicated.

His expense reports were being questioned as never before. His frequent travels to meet with clients were cut back in the interests of saving money. Cost cutting also negatively affected product quality and order fulfillment. Walt started getting a lot more complaints from his key customers. Parts did not meet spec. On-time delivery requirements were not being met. Soon, his best customers were bringing in second supply sources. Since his travel allowance had been cut, he was unable to visit to address customer concerns.

So when his firm’s top competitor came knocking, Walt was receptive. They made him a generous offer and he accepted. He will join them next month with comparable responsibilities, along with better remuneration, perks and incentives.

When people like Walt leave their long-time employers, the moves are indicative of significant internal change that their key people cannot tolerate. Talented contributors stay committed to their companies when they are given reason to be loyal, not only in how they are rewarded but also in the support they get in their respective jobs and the pride their companies instill in them.

Take that away and you take away the reason for their loyalty and commitment. It becomes just another job, interchangeable with any other job with a comparable paycheck.

Organizations must establish and then keep their eye on their own North Star to carry them and their people through times of challenge and difficult change, whether it’s an acquisition, management shake-up, or brutal market forces.

In the case of Walt’s company, its North Star was its unrelenting dedication to meeting customers’ needs by delivering top-notch quality and responsive service. When the new owners took over, though they likely never would have said so openly, their North Star was profitability through cost cutting. It was their actions – not their words – that demonstrated their true North Star.

We’ve seen it elsewhere, where an acquired company known for its entrepreneurial spirit became consumed and overwhelmed by its new parent’s obsession with process and procedure. The entrepreneurs in the acquired company were out the door within a year.

Acquiring companies may and often do speak to the concerns of their new employees coming to them through the acquisition. “Oh yes,” they may say, “we believe in an entrepreneurial approach to business, just like you.” But when actions contradict the words, the truth is out.

Walt was similarly excited about the words he heard from his company’s new owner, words about re-investing in the business to make it better at what it already did so well. But the ultimate actions of cost cutting bore out the truth. And the true nature of its future direction is not something he chose to be associated with.