Columnists - Jack & Suzy Welch;The Loyalty Fallacy

How should leaders manage loyalty? Some bosses hang their hats on it; to them, loyalty differentiates good employees from bad. But I've seen weak employees who are retained because they're loyal drag a company down. When and where is loyalty important? -- George DeTellis Jr., Orlando

For starters, we can certainly tell you when loyalty feels like the most important thing in the world: during layoffs. Under such fraught circumstances, longtime employees very naturally tend to think of all the years they've served, all the hours they've toiled, all the times they've "been there" for the team or company. And they wonder: "Didn't my loyalty mean anything?"

Meanwhile, their managers are also feeling shaken, although not from shock and anger but from embarrassment and guilt. Because most managers know full well that employees shouldn't discover which corporate values matter most on their last day of work. Values should be a first-day, every-day topic, especially in recessionary times when people deserve to understand which behaviors constitute job-protecting performance.

And that's rarely loyalty alone.

Now, we're not revving up here to announce, "Loyalty is dead," a line that's been bandied about since the early 1980s, when foreign rivals forced many American corporations to lay off armies of people who presumed they had guaranteed lifetime work. As you note in your question, plenty of managers still "hang their hats" on loyalty in its many forms. There's personal loyalty, in which a loyal employee puts the boss at the center of his world in a fawning, obsequious way that everyone sees -- except the boss. And there's full-attendance loyalty, based on relentless showing up. And there's good, old-fashioned loyalty to the company, as if it were a nation-state. Such behaviors do warm the cockles of some managers' hearts and can result in job security.

But not often. These days, it's far more common for managers to protect and reward employees who consistently deliver results. We're not saying that loyal employees aren't given any due. When the economy is strong, a record of loyalty can be enough to "give cover" to an employee with mediocre performance. But when the going gets tough and staff reductions become necessary, the vast majority of managers act in the best interests of the company. Their top performers will stay, loyal or not. And marginal employees -- again, loyal or not -- will be asked to move on.

Is that wrong? Not in our view. Companies can win only if they field the best players, and should that sound mercenary, it's important to remember that, ultimately, everyone in a society benefits when companies thrive and pay taxes. Indeed, if our economy is to get back on its feet, we need companies that are meritocracies now more than ever.

So loyalty isn't dead, but rewarding loyalty without performance should be. It's shortsighted and wrongheaded.

But more wrong still is how few managers communicate the truth about loyalty before they're forced to. Instead, it's usually only as they're handing poor, unsuspecting Joe or Mary their pink slip that they finally admit: "Look, all these years, you came in every day, and you did your job, but you weren't actually very good. And now that someone has to go, it needs to be you."

What a shame. And how unnecessary, too. Any company -- no matter what its size or business -- can have a candid, rigorous performance appraisal system that clarifies which values and behaviors matter and in what measure and, just as importantly, lets employees know where they stand relative to their peers. Granted, even the best, most consistently conducted appraisal systems won't make layoffs easy. But they can go a long way toward taking out the surprise, and at the very least, they bring the usually hushed-up matter of loyalty-vs.-results to the surface for all to see and understand.

Over the next year, the recession is sure to teach every manager at least a few important lessons the hard way. If you haven't been clear up until this point about your organization's real values, you'll likely never again allow a vague or phony performance appraisal to slip by you. When it comes to loyalty, guilt is a great teacher.