Wednesday, 21 September 2022 06:28

Corporate loyalty looked like this when it was a real thing

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In 1911, George Eastman, founder of Eastman Kodak, instituted the Kodak Welfare Fund. The Fund assisted employees who were no longer able to work because of accident, illness or retirement.

A year later Eastman instituted a program known as the "wage dividend", which was one of the most progressive and widespread profit-sharing programs in the history of corporate America. 

Seven years later, in 1919, Eastman offered employees nearly one-third of his personal stock at a price below the market rate. Eastman used the proceeds to strengthen the Welfare Fund.

Eastman also implemented paid sick leave, life insurance, disability coverage, a retirement annuity, paid college tuition, access to company-funded healthcare centers and company housing.

George Eastman was loyal to his employees, and in turn, they were loyal to him. Kodak never unionized and its employees were known for lifetime tenures – and for their tendency to remain involved in the Kodak community long after they stopped punching their timecards.

Kodak is one of four companies featured in Rick Watzman's book, The End of Loyalty: The Rise and Fall of Good Jobs in America. The other three are Coca-Cola, General Electric (GE) and General Motors (GM). 

Each of these companies – including Kodak – saw the relationship with its employees change over time, particularly as shareholder value became the only measure of company success after the 1970s.

Loyalty receives too little attention.

Need proof?

How many unemployed middle managers do you know who've inexplicably decided to rebrand themselves as "loyalty coaches"? None, right?

There is no secret to fostering loyalty. George Eastman created one of the world's most loyal workforces because he was loyal. You don't have to create a sophisticated internal branding campaign to convince employees to be loyal when you define leadership the way George Eastman did.

George Eastman's workers knew he had their back.

He believed a hard day's work should be rewarded with a good life and he put his money where his mouth was. He knew that there was only one way to create loyalty and that was to be loyal.

What happened, then?

If it worked well, why is it so hard to find – particularly in a large corporation – leaders like George Eastman today?

Part of the explanation can be found in the education many corporate leaders receive in business school. If you've ever opened an Economics 101 textbook, you know that there is literally no difference between a human being and a wrench. Both are forms of capital.

But human beings and wrenches are very different.

There is no way to make a loyal wrench.

And there is no way to make a loyal employee if you think of him or her the same way you would a wrench.

When it comes to loyalty, there is no secret sauce.

Loyalty is gained when it is given.

Loyalty is also highly influenced by power. In the United States, companies often have the power to terminate employees for any reason. They also restrict them from earning outside income. Most companies make that clear with a stack of documents employees sign on day 1.

The balance of power in favor of the company means that the type of loyalty George Eastman demonstrated has been replaced by corporate feudalism rebranded as "loyalty". Kodak itself ultimately went bankrupt and not just becauseof changes in technology.

The gradual loss of such a unique corporate culture played a role.

How do we create companies that last and make loyalty a real thing again?

We can change the way we educate our leaders. We can recognize that a human being is different from a wrench. We can stop diluting words like loyalty and leadership and redefine them by following an example of what leadership and loyalty really look like.

George Eastman would be a good place to start.



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