does worker loyalty pay

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Does worker loyaltypay? Evidence from

transition economiesSusan Linz, Linda Good and Michael Busch

Michigan State University, East Lansing, Michigan, USA

Abstract

Purpose Does worker loyalty benefit workers? This paper aims to address this question.Design/methodology/approach Using data collected from over 10,880 employees in morethan 655 workplaces in six transition economies, the authors first document the nature of workerloyalty using three alternative measures. They use ordered probit regression analysis to investigatelinks between loyalty, expected rewards, and performance. Second, they use OLS regression analysis

to identify the association between earnings and loyalty.Findings Among participants in this study, loyalty is positively associated with expected rewardsand performance. Loyalty also is positively associated with earnings. In three cases, loyalty has largerinfluence on earnings than an additional year of experience.Research limitations/implications Country samples are not nationally representative; dataare cross-sectional rather than longitudinal.Practical implications What strategies might firms adopt to install or enhance worker loyalty?Originality/value This paper uses multiple loyalty measures and comparable data collectedfrom culturally and economically diverse countries. It undertakes explicit consideration of benefitsto workers associated with loyal behavior.

Keywords Personnel economics, Well-being at work, Labour economics, Employee motivation,Economics, Organizational economics, Employees behaviour

Paper type Research paper

1. IntroductionIt is widely accepted that worker loyalty is good for a firms bottom line[1]. Loyalworkers those actively engaged in their organization and its objectives, who arecommitted to their organizations success, and who neither seek alternative employmentnor respond to other offers even when offered slightly higher pay (Insightlink, 2004; Niehoffet al., 2001) tend to exhibit higher productivity (Drizin and Schneider, 2004; Silvestro,2002; Yeeet al., 2010; Yousef, 2000). Loyal workers lower labor turnover costs, which firmsconsider a significant benefit because replacement costs are estimated to range from one tofive times the workers salary, and may reflect as much as 25 percent of a firms annualprofit (Branham, 2000; Hirschman, 1970; Hoffman, 2006; Mayfield and Mayfield, 2002; Tonand Huckman, 2008). Loyal workers can increase revenue and long-term profit becausethey provide enhanced customer service, leading to customer base expansion andincreased sales (Duboff and Heaton, 1999; Insightlink, 2004; Olympic Performance Inc,2009). While a large literature documents the benefits to firms of worker loyalty, missingare studies which investigate whether and to what degree loyalty benefits the worker.

Does worker loyalty pay? We analyze the link between loyalty and earnings usingdata collected from over 10,800 employees in over 665 workplaces in six formerlysocialist economies: Armenia, Azerbaijan, Kazahkstan, Kyrgyzstan, Russia (part of theformer Soviet Union) and Serbia (part of the former Yugoslavia); countries that, asdomestic and international conditions stabilize, are likely to become important markets

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/2049-3983.htm

Evidence-based HRM: A GlobalForum for Empirical ScholarshipVol. 1 No. 1, 2013pp. 16-40r Emerald Group Publishing Limited2049-3983DOI 10.1108/20493981311318593

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and production centers in the global economy. Our objective is threefold. First, usingthree alternative loyalty measures, we document the nature and scope of workerloyalty among participants in our survey. Second, we investigate whether the positivelinks between loyalty, expected rewards and performance commonly found in studies

conducted in developed market economies emerge among our survey participants.Third, we use regression analysis to determine whether there is a positive associationbetween earnings and loyalty among participating workers in the six countriesincluded in our analysis. Given the cross-section nature of our data, we are not ableto establish causality in these relationships, but we can (and do) illuminate similaritiesthat emerge among participating workers in these economically and culturally diversecountries. Thus we take a step toward establishing the foundation for developinga more global perspective of factors associated with worker loyalty, and, moregenerally, worker performance.

Our study makes several contributions to the loyalty literature. For example, usingmultiple loyalty measures allows us to unite two strands in the literature. Inmanagement and psychology, loyalty typically is measured rather broadly using

variables related to organizational commitment or engagement, and studies tend tofocus on the links between loyalty, performance and expected rewards. In economics,loyalty is measured more narrowly by using workplace tenure (seniority), and studiesfocus on the link between loyalty and earnings. We explicitly address this disciplinarydivide by using both types of measures to assess the links between loyalty andexpected rewards, and loyalty and earnings. As such, we provide information on theextent to which alternative measures generate similar results among the participantsin our study. In addition, we address the disciplinary divide by utilizing both types ofperformance measures: earnings and self-reported performance, acknowledging thatour results may be subject to biases due to measurement error. Finally, we extend theanalysis of worker loyalty by utilizing data collected from employees in countriesbeyond the cultural zone of the European Union. More importantly, because our

sample includes a wide variety of workplace types (manufacturing, health, education,retail and other services, construction and transportation, for example), our analysisis not limited to a single firm or occupation. Consequently, our data are well suitedto systematically explore whether positive links between loyalty, expected rewardsand performance found in studies conducted in developed market economies alsoare evident among participating workers in these formerly socialist economies. Wedo so with an eye toward highlighting commonalities, so that we might contribute todeveloping a global perspective of factors influencing worker performance.

Does worker loyalty pay? Our investigation proceeds as follows: Section 2 presentsour loyalty measures. Section 3 describes our country samples and summarizes theworker loyalty results by country, as well as provides a brief descriptive analysis ofthe expected rewards and performance measures used in this analysis.

In Section 4, to document the nature and scope of loyalty among our surveyparticipants, we analyze the links between loyalty and expected rewards, andloyalty and self-reported performance. Given the nature of our loyalty, expected rewardand self-reported performance variables categorical variables ranked from low tohigh we employ ordered probit regression analysis to examine whether positivelinks reported in existing studies also emerge among the employees participating inour study. Clustering by firm and controlling for select worker and workplacecharacteristics, we find that, generally, loyalty is positively associated with expectedrewards, which is consistent with existing studies. Moreover, comparable to studies

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conducted in developed market economies, a positive and statistically significantrelationship emerges between loyalty and performance for all six countries included inour analysis. We find little evidence that workplace tenure (seniority) is a good proxyfor worker loyalty among the participants of our study.

In Section 5, we focus on the link between loyalty and earnings. Using OLS regressionanalysis, clustering by firm, we find that loyalty is positively associated with earningsamong participating workers in these six countries. In the basic specification, loyaltyis statistically significant among Armenian, Azeri, Kyrgyz and Russian participants.Indeed, among Armenian, Azeri and Kyrgyz employees, the magnitude of the loyaltyeffect is equal to or greater than that associated with an additional year of experience.In an extended specification which captures features of labor market conditions intransition economies, loyalty continues to exhibit a positive and significant associationwith earnings (Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan). Thus our results suggestthat for the majority of participating employees, loyalty pays.

Discussion and concluding remarks are offered in Section 6.

2. Measuring worker loyaltyLoyalty, as an organizational term relating to employees rather than customers, emergedfrom managers efforts in the 1970s and 1980s to build consumer loyalty to stores andbrands (Bellenger et al., 1976; Parasuraman, 1983). Firms noted that, just as retainingexisting customers is financially beneficial, retaining existing employees who do their

job well is significantly less costly than attracting new ones. Labor retention improvesproductivity as firm-specific human capital is developed and exploited. Furthermore,studies indicate that encouraging organizational commitment and engagement whatcame to be called worker loyalty has the added benefit of positively influencingconsumer loyalty (Allen and Grisaffe, 2001; Boyle, 1990; Heskett et al., 1997; Sirdeshmukhet al., 2002; Webster, 1994).

The worker loyalty literature reveals three basic constructs: loyalty as measured

by the degree of organizational commitment and engagement (Berntson et al., 2010;Carsonet al., 2006; Hoffman, 2006; Mellahiet al., 2010; Meyer and Allen, 1991; Yeeet al.,2010, for example); loyalty as measured by workplace tenure or seniority (Altonji andWilliams, 2005; Bingley and Westergaard-Nielsen, 2003; Borzaga and Tortia, 2006;Foster et al., 2008; Hirschman, 1970; Hoffman, 2006; Pfann and Hamermesh, 2008;Silvestro, 2002); and loyalty as an emotional attitude or a reflection of a workers values(Coughlan, 2005; Hajdin, 2005). Given the empirical nature of our research objective, weconcentrate on the first two loyalty constructs.

Because worker loyalty tends to include more than job performance loyal workersare willing to make decisions and act in accordance with the long-term well-beingof the company (Abdullah et al., 2011; Hajdin, 2005; Mathieu and Zajac, 1990) our preferred measure of worker loyalty focusses on organizational commitment and

engagement, and consists of six items adapted from Cook and Wall (1980). FollowingAllen and Meyer (1990), Berntson et al.(2010), among others, we include three itemsthat reflect a passive (and unobservable by managers) attachment to the organization:I feel myself to be part of the organization; even if the company were not doingwell financially, I would be reluctant to change to another company; and I sometimesfeel like leaving this company for good. Following Drizin and Schneider (2004),Sweetman (2001), Yee et al.(2010) and others, we also include three items that reflectan active (and observable by managers) attachment to the organization: I am proudto be able to tell people the company where I work; the offer of a little more money with

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another company would not make me seriously think of changing jobs; and I wouldrecommend a close friend to join this company. In all six cases, the response optionsincluded a five-point scale where 1 strongly disagree and 5 strongly agree. Tomaintain consistency higher numbers reflect greater loyalty the third item was

reverse coded. The composite measure (loyalty) has a minimum value of six andmaximum value of 30.

Two single-item measures are also possible options for investigating worker loyalty.One stems from studies which use workplace tenure or seniority in their analyses: Howmany years have you worked at this organization (tenure)? Longer workplace tenure isassociated with higher worker loyalty[2]. We include a second single-item measurebecause our main objective is to analyze the link between loyalty and earnings, and wewould like to have a loyalty measure which we can separate, albeit roughly, fromearnings. Consequently, we utilize one of the items from our composite measure: Theoffer of a little more money at another company would not seriously make me think ofchanging jobs (notchgjob) with respondents given a scale of 1-5, where 1 stronglydisagree and 5 strongly agree. Loyal workers would score high on this statement.

Since both of these single-item measures, tenure and notchgjob, may reflectoutcomes unrelated to loyalty (restricted employment opportunities, or strong location/geographic preferences, for example), both are viewed as less desirable than thecomposite measure. Our study is unique, however, in providing alternative loyaltymeasures, as well as multiple performance measures (earnings, comparativeperformance). As such, using data collected from over 10,880 employees in sixformerly socialist economies, we take a preliminary step in addressing the disciplinarydivide in the loyalty literature.

3. Data descriptionUnder the auspices of a project designed to investigate factors influencing workerperformance in formerly socialist economies, an employee survey was conducted in

Russia, Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan and Serbia[3]. Local projectcoordinators contacted over 700 workplaces to request permission to conduct thesurvey. In organizations where permission was granted, the questionnaire wasadministered in common areas or at specific job sites in the workplace. If workersagreed to participate, they had the option of returning a complete or incompletequestionnaire. More than 10,880 employees in over 665 workplaces participated.A detailed description of the sample selection process is available upon request.

While cost constraints precluded generating a representative sample in any ofthe countries, our convenience samples represent a wide variety of workers andworkplaces, and involve multiple geographic locations in each country. For thepurposes of this paper, we restrict the country samples to include only thoseparticipants who answered all questions relevant to this analysis of worker loyalty,

giving us a total of 8,308 observations. For simplicity, we utilize the country nameto refer to participating workers from that country. Sample characteristics aresummarized by country and gender in Table I.

As seen in Table I, the average participant was in their mid- to late-30s with over14 years of schooling[4] at the time of the survey. About half of the participatingworkers are female in Armenia, Kazakhstan and Serbia (40 percent in Azerbaijan); overtwo-thirds in Kyrgyzstan and Russia are female. While participating employees in allcountries report, on average, at least five years at their current workplace, amongparticipants in Azerbaijan, Kyrgyzstan and Russia, workplace tenure is somewhat

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Armenia

K

azakhstan

Kyrgyzstan

Russia

Serbia

Azerbaijan

Men

Women

Men

Women

Men

Women

M

en

Women

Men

WomenM

en

Women

Workercharacteristics

Age(attimeofinterview,years)

38.8

37.6

33

.0

33.2

38.2

39.7

37.9

38.4

38.1

37.0

33.0

32.3

(11.7)

(12.1)

(9

.3)

(8.5

)

(12.2)

(12.3)

(12.4)

(11.3)

(8.2

)

(8.3

)(9.1)

(9.8

)

Yearsofschooling

15.2

15.1

14

.5

14.9

15.0

14.5

14.4

14.3

14.1

14.4

13.6

13.9

(2.2

)

(2.0

)

(2

.4)

(2.1

)

(3.5

)

(3.6

)

(3.0)

(2.6

)

(2.0

)

(2.0

)(2.8)

(2.6

)

Jobtenure(yearsatcurrent

workplace)

6.9

7.0

4

.6

5.1

6.4

9.9

8.3

10.1

7.8

7.1

4.7

6.3

(6.8

)

(7.8

)

(3

.7)

(4.5

)

(7.5

)

(9.9

)

(7.8)

(9.3

)

(5.5

)

(5.5

)(6.0)

(7.9

)

Averageearnings(localcur

rency)

93,0

61

82,1

19

30,872

24,3

60

4,040

3,147

6,795

4,351

54,1

31

52,5

474

47

266

(77,323)

(70,588)

(44,989)

(14,151)(3,2

26)

(1,7

52)

(6,506)

(3,1

42)

(21,430)

(19,890)(3

53)

(166)

Married(%)

54.2

43.8

59

.0

58.3

65.5

52.1

62.8

55.3

63.3

51.3

57.8

50.1

Supervisor(%)

42.2

30.7

39

.7

48.3

39.5

30.9

45.5

31.4

25.0

22.3

37.0

19.4

Receivedpromotion(%)

45.9

43.1

40

.3

39.2

47.8

45.1

56.6

50.2

36.1

39.4

50.2

37.0

Holdsmultiplejobs(%)

16.3

12.8

10

.0

8.6

18.3

11.7

19.1

11.8

4.4

2.5

21.0

10.9

Experiencew/unemployment(%)

28.1

28.6

41

.7

39.0

46.5

56.0

20.0

20.2

27.4

33.6

45.7

37.1

Workplacecharacteristics

Stateowned(%)

36.2

37.3

20

.4

30.8

84.9

84.7

26.0

42.9

47.7

44.9

21.0

35.1

Manufacturing(%)

26.2

20.7

31

.6

17.8

0.6

0.5

47.4

39.4

25.7

23.2

41.6

32.5

Education/healthcare(%)

22.3

15.1

12

.2

17.5

5.2

17.6

17.0

33.9

7.9

11.9

13.3

39.0

Retailandotherservices(%

)

29.7

30.7

34

.6

36.0

7.0

6.4

19.8

16.9

20.2

24.1

18.8

15.0

Finance(%)

2.3

3.5

3

.6

6.1

2.0

1.4

2.4

0.3

15.2

16.7

11.1

5.6

Publicsector(local,region,

federal)

16.4

25.8

14

.2

21.5

84.1

73.9

4.8

6.5

20.3

20.4

6.9

7.5

Construction/transportation

(%)

2.4

3.5

3

.9

1.1

1.2

0.2

8.6

2.9

10.7

3.8

8.4

0.3

Notes:Russia:employeesu

rveyconductedinRostovregion(2002),Sverdlovskregion(2003),Bashkortostanautonomousrepublic(2005);Serbia:employee

surveyconductedinBelgrade(2008),

NoviSad(2009);Armenia

:employeesurveyconductedinYerevan(2005)andShirakregion(2008);Kyrgyzstan:

employeesurveyconducted

inBishkek(2007)andKaraBalta(200

8);Kazakhstan:employeesurveyconductedinAlmaty,Taldyquorghan,and

surrounding

locales(2005);Azerbaijan:e

mployeesurveyconductedinBaku,S

umgait,Shabran,

Sabirabad(2011)

Table I.Sample characteristics(by country and gender)

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rewards[8] and asked, for each one, what would be the likelihood of receiving thatreward in response for doing their job particularly well.

Table II reports the results by country; the odd columns provide mean scores andthe even columns summarize the percentage of respondents who selected very likely

for each expected reward. The rewards are divided into extrinsic and intrinsiccategories in order to assess whether significant differences in expectations emerge.For example, workers may successfully sort into jobs that have characteristicsthey desire, such as chance to learn new things, friendly co-workers or chanceto accomplish something worthwhile. Thus, their expectation of receiving suchintrinsic rewards would be relatively high. Workers may have little control overcompany policy related to bonus payment and promotion, thus their expectation ofreceiving such extrinsic rewards may be relatively low. Consequently, if there is a highincidence of successful sorting/job match, as would occur in a competitive and flexiblelabor market, we would expect to find higher expectations for intrinsic rewards incomparison to extrinsic rewards. While it is unlikely that competitive and flexiblelocal labor market conditions are in place in these six countries (Rutkowski, 2006), itremains worthwhile to examine potential differences between extrinsic and intrinsicrewards in order to help establish a foundation for analyzing worker loyalty and, moregenerally, worker performance.

As seen in Table II, expectations, generally, are relatively low regarding thelikelihood that any of these 11 rewards will actually be received. Among Serbianparticipants, in particular, the percentage reporting very likely reaches double digitsin only four of the 11 cases. Only among participants from Kazakhstan does thepercentage selecting very likely consistently exceed one-third. In terms of differencesin expectations between intrinsic and extrinsic rewards, our data indicate statistically

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Armenia(21.1

)

Kazakhstan(21.9

)

Kyrgyzstan(20.0

)

Russia(20.6

)

Serbia(18.8

)

Azerbaijan(18.3

)

Weak

Moderately weak

Moderately strong

Strong

Figure 1.Loyalty distribution,by country

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Armenia

Kazakhstan

Kyrgyzstan

Russia

Serbia

Az

erbaijan

Meana

Very

likely

(%)

Meana

Very

likely

(%)

Meana

Very

likely

(%)

Meana

Very

likely

(%)

Meana

Very

likely

(%)

Meana

Very

likely

(%)

Extrinsicrewards

Receivebonus/payincrease

3.1(1.4

)

19.9

3.7(1.2)

28.7

2.6(1.5

)

16.8

2.9(1.4

)

16.2

3.0(1.2

)

10.4

3.2(1.3)

19.6

Havebetterjobsecurity

3.6(1.2

)

25.2

4.0(1.0)

37.6

3.6(1.3

)

28.2

3.7(1.2

)

32.1

3.6(0.9

)

13.9

3.3(1.3)

22.3

Bepromoted/getbetterjob

3.2(1.3

)

19.3

3.7(1.2)

31.3

2.9(1.4

)

15.8

2.6(1.4

)

11.0

2.8(1.0

)

5.1

3.3(1.2)

19.1

Supervisorwillpraise

3.5(1.2

)

24.7

3.9(1.1)

31.9

3.3(1.3

)

20.2

3.3(1.3

)

18.3

3.3(0.8

)

5.2

3.6(1.3)

33.0

Respectedbyco-workers

3.7(1.2

)

28.5

4.1(0.9)

36.9

3.9(1.1

)

37.1

3.8(1.1

)

31.5

3.4(0.8

)

8.9

3.9(1.1)

36.2

Intrinsicrewards

Chancetolearnnewthings

3.6(1.2

)

26.7

3.9(1.0)

35.4

3.6(1.3

)

29.1

3.4(1.3

)

25.0

3.1(1.1

)

9.1

3.4(1.3)

27.7

Accomplishsomethingworthwhile

3.6(1.2

)

24.8

3.9(1.0)

32.0

4.0(1.1

)

39.0

3.6(1.3

)

29.7

3.2(0.9

)

7.8

3.3(1.4)

24.0

Freedomatwork,onthejob

3.4(1.2

)

19.5

3.8(1.1)

29.9

3.2(1.4

)

21.0

2.9(1.3

)

13.1

3.4(0.7

)

3.6

3.3(1.4)

25.8

Friendlyco-workers

3.6(1.2

)

27.9

4.1(0.9)

42.5

4.0(1.1

)

39.6

3.9(1.1

)

32.9

3.6(0.8

)

10.6

3.8(1.1)

36.1

Jobmakesmefeelgoodaboutmyself3.7(1.1

)

30.3

4.1(0.9)

35.6

4.0(1.1

)

39.2

3.9(1.1

)

37.5

3.3(0.9

)

8.9

4.1(1.0)

43.9

Chancetodevelopskills

3.7(1.2

)

30.8

4.1(0.9)

38.0

4.1(1.1

)

43.4

3.8(1.2

)

34.9

3.3(1.0

)

10.8

3.6(1.2)

31.5

Note:aMeanderivedusingfive-pointscale,where1

notverylikelyand5

verylikely(standarddeviationsinparentheses)

Table Expected rewar

by count

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As seen in Figure 2, while Armenian participants are rather evenly split betweenreporting better or same, both Serbia and Azerbaijan have a significantly highernumber of participating employees who self-report performing better than othersdoing similar work, especially when compared to participants from Kazakhstan,

Kyrgyzstan and Russia. Those who report themselves performing worse tend toaccount for o5 percent of the participants.

4. Expected rewards, performance and worker loyaltyGiven the categorical nature of our variables, ranked low to high, we use orderedprobit regression analysis to assess whether the positive relationship betweenloyalty and expected rewards (Berntson et al., 2010; Foster et al., 2008; Hart andThompson, 2007) and between loyalty and performance (Drizin and Schneider, 2004;Silvestro, 2002; Yeeet al., 2010; Yousef, 2000) found in studies conducted in developedmarket economies also hold among the participating workers in these six formerlysocialist economies.

4.1 Worker loyalty and expected rewardsTo analyze the link between loyalty and expected rewards, we use the following model:

Loyalty a bX gExpectedRewards e

where X is a set of explanatory variables that include: age, age-squared, education,average earnings at the firm, dummy variables for female workers, marital status,supervisory responsibilities, state ownership and sector (education, services, finance,construction and so forth; with manufacturing as the omitted sector);ExpectedRewardsincludes ten of the 11 rewards listed in Table II[12], each standardized by country tohave a zero mean and unit standard deviation.

We first use the loyalty composite measure described in Section 2, loyalty,

standardized by country to have zero mean and unit standard deviation. We repeat theanalysis using the two single-item measures: tenure and notchgjob. Our objective issimply to document whether the results obtained are roughly similar for each loyaltymeasure. In each specification we cluster by firm in order to take into account possiblecollinearity among workers in a particular organization; that is, the unobservedcharacteristics may be correlated among workers within a firm (Wooldridge, 2002).Regression results for the composite loyalty measure are reported in Table III.

As seen in the top panel of Table III, more often than not, we find positiveassociations between loyalty and expected rewards among the participating workersin our study. In particular, our results suggest that worker loyalty is positively linkedto several expected extrinsic rewards: (expected) bonus is statistically significantin all but Serbia; respect of co-workers is significant among participating Armenian,

Kazakh and Russian workers. While two expected rewards often cited in studiesconducted in developed market economies, job security and praise from supervisor,are positively linked to loyalty, they are only statistically significant in two countries:Russia/Azerbaijan, and Krygyzstan/Russia, respectively.

Significant positive relationships emerge for expected intrinsic rewards, as well. Forchance to accomplish something worthwhile, more freedom on the job and chanceto acquire new skills, the positive relationship is statistically significant in at leastthree of the six countries. Quite surprising are the negative coefficients on morefreedom on the job and expect that job will make me feel better about myself among

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Armenia Kazakhstan Kyrgyzstan Russia Serbia Azerbaijan

Expected rewardsAdditional pay, bonus 0.0922* 0.106*** 0.163*** 0.0907*** 0.0203 0.182***

(0.0473) (0.0727) (0.0420) (0.0351) (0.0528) (0.0454)Job security 0.0399 0.0358 0.0276 0.0960** 0.0336 0.122**

(0.0421) (0.0371) (0.0432) (0.0389) (0.0427) (0.0533)Promotion 0.0477 0.0471 0.00522 0.0415 0.0795 0.0807*

(0.0464) (0.0470) (0.0470) (0.0410) (0.0776) (0.0469)Praise from supervisor 0.0535 0.0346 0.0931** 0.0958** 0.0412 0.0428

(0.0495) (0.0472) (0.0396) (0.0436) (0.0339) (0.0521)Respect of co-workers 0.0908* 0.195** 0.0333 0.108*** 0.0309 0.0349

(0.0536) (0.0873) (0.0415) (0.0456) (0.0426) (0.0487)Accomplish somethingworthwhile 0.0949* 0.0511 0.0671* 0.159*** 0.0092 0.360***

(0.0509) (0.0390) (0.0373) (0.0421) (0.0556) (0.0541)Freedom on the job 0.139** 0.0511 0.115*** 0.0051 0.0982*** 0.0972**

(0.0560) (0.0412) (0.0437) (0.0385) (0.0428) (0.0406)Friendly co-workers 0.0457 0.150*** 0.0516 0.0103 0.0126 0.0722(0.0640) (0.0363) (0.0554) (0.0444) (0.0336) (0.0531)

Feel better about myself 0.0261 0.0550 0.0276 0.0531 0.106** 0.0867*(0.0441) (0.0361) (0.0571) (0.0341) (0.0417) (0.0518)

Acquire new skills 0.0701 0.0870** 0.0012 0.0813***0.0139 0.295***(0.0430) (0.0424) (0.0386) (0.0327) (0.0591) (0.0590)

Worker and workplace characteristicsAge 0.0235 0.0362 0.0356** 0.0154 0.0723 0.0236

(0.0192) (0.0239) (0.0179) (0.0173) (0.0627) (0.0347)Age squared/100 0.0272 0.0699** 0.0487** 0.0334 0.0948 0.0623

(0.0228) (0.0314) (0.0210) (0.0216) (0.0780) (0.0458)Years of education 0.0233* 0.0026 0.0014 0.0131 0.0321* 0.0137

(0.0122) (0.0150) (0.0094) (0.0108) (0.0175) (0.0166)

Respondents sex 0.0778 0.0422 0.221** 0.0692 0.0979 0.0197(0.0722) (0.1000) (0.0972) (0.0925) (0.104) (0.0966)

Supervisory responsibilities 0.135** 0.0721 0.111 0.190*** 0.0068 0.0470(0.0663) (0.0661) (0.0779) (0.0606) (0.112) (0.0806)

Married 0.133 0.112 0.271** 0.0849 0.223** 0.0070(0.0781) (0.0851) (0.1130) (0.0994) (0.0740) (0.0946)

Married woman 0.0046 0.0780 0.396*** 0.0705 0.118 0.0497(0.104) (0.1190) (0.129) (0.106) (0.155) (0.1216)

State-owned organization 0.0187 0.2170 0.305** 0.373*** 0.344*** 0.0058(0.105) (0.1380) (0.125) (0.122) (0.132) (0.1785)

Health/education organization 0.146 0.104 0.224 0.349*** 0.236 0.480**(0.131) (0.141) (0.158) (0.123) (0.331) (0.2419)

Service organization 0.0559 0.1610 0.629*** 0.0072 0.299 0.220(0.0956) (0.1000) (0.121) (0.123) (0.339) (0.2719)

Financial servicesorganization 0.144 0.220 0.346** 0.0650 0.174 0.553***

(0.2460) (0.1860) (0.164) (0.259) (0.281) (0.2083)Public organizations(national, regional, local) 0.113 0.357*** 0.216* 0.247 0.0973 0.353

(0.1440) (0.1620) (0.130) (0.215) (0.311) (0.2269)

(continued)

Table III.Ordered probit regressionresults loyalty, expectedrewards

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where Perform is the composite performance measure described in Section 2,standardized by country to have zero mean and unit standard deviation, and thecontrols for worker and workplace characteristics (X) are as described above. Ourregression results using the loyalty composite measure are reported in Table IV.

A positive link between loyalty and perform is evident in Table IV; the coefficient isstatistically significant in all six countries. We note that the pattern of statisticalsignificance and coefficient signs for the worker and workplace controls in the loyalty/


Perform 0.0983*** 0.0613** 0.0484* 0.0918*** 0.0619** 0.231***(0.0267) (0.0351) (0.0290) (0.0290) (0.0306) (0.0511)

Worker and workplace characteristicsAge 0.0486** 0.0354 0.0492*** 0.0237 0.0658 0.0195

(0.0190) (0.0248) (0.0172) (0.0178) (0.0574) (0.0334)

Age squared/100 0.0503** 0.0570* 0.0618*** 0 .0385* 0.0879 0.0457(0.0222) (0.0320) (0.0200) (0.0227) (0.0714) (0.0432)Years of education 0.0254** 0.0268 0.0051 0.0092 0.0163 0.0175

(0.0127) (0.0176) (0.0091) (0.0108) (0.0184) (0.0201)Respondents sex 0.0828 0.0236 0.257** 0.0287 0.0831 0.0154

(0.0744) (0.106) (0.103) (0.0998) (0.103) (0.09630Supervisoryresponsibilities 0.170*** 0.0317 0.113* 0.192*** 0.0100 0.0161

(0.0648) (0.0638) (0.0734) (0.0645) (0.118) (0.0876)Married 0.181** 0.173** 0.268** 0.107 0.212*** 0.0563

(0.0791) (0.0858) (0.117) (0.108) (0.0790) (0.0889)Married woman 0.0797 0.0052 0.422*** 0.0762 0.117 0.0559

(0.106) (0.128) (0.133) (0.112) (0.154) (0.1224)State-owned

organization 0.0641 0.204 0.312*** 0.403*** 0.321** 0.0291(0.115) (0.143) (0.120) (0.138) (0.136) (0.2376)Health/educationorganization 0.255** 0.137 0.287 0.335** 0.182 0.871***

(0.125) (0.136) (0.141) (0.139) (0.314) (0.3275)Service organization 0.0425 0.353*** 0.744*** 0.0055 0.326 0.361

(0.0958) (0.105) (0.100) (0.139) (0.322) (0.3525)Financial servicesorganization 0.0155 0.277 0.480 0.0967 0.115 0.799***

(0.122) (0.194) (0.133) (0.242) (0.268) (0.2511)Public organizations(national, regional, local) 0.204 0.436*** 0.232* 0.274 0.0849 0.744***

(0.150) (0.162) (0.120) (0.210) (0.305) (0.2994)Construction/

transportation 0.0302 0.307 0.624*** 0.334* 0.226 1.142***(0.203) (0.273) (0.120) (0.201) (0.275) (0.2264)

Average earningsat firm 0.208*** 0.109 0.0630 0.0942 0.564*** 0.0088

(0.0640) (0.105) (0.0457) (0.0836) (0.207) (0.2195)Constant 3.728*** 1.195 0.748 2.733*** 8.513*** 4.532***

(0.809) (1.109) (0.602) (0.895) (2.725) 1.5612Observations 1,459 1,392 1,189 1,756 1,420 1,092

Notes:Standard errors in parentheses. ***po0.01; **po0.05; *po0.1

Table IV.Ordered probitregression results loyalty, performance

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performance regression (Table IV) is largely similar to the expected reward/loyaltyresults (Table III). That the controls have same effect in both specifications suggestsrobustness in the characteristics of loyal workers.

For illustrative purposes, we repeat our regression using the two single-item

loyalty measures: tenure and notchgjob. When tenure is the loyalty measure, performis positive in all six countries, but not statistically significant. In the notchgjobspecification, perform is positive in four of the six countries, and statisticallysignificant in Russia and Azerbaijan.

Our analysis suggests that the positive associations between worker loyalty,expected rewards and performance, described in studies conducted in developedmarket economies, also hold for the participating employees our project. Thus, our firstobjective of documenting the nature of worker loyalty in these culturally differentcountries using the expected reward and performance constructs is accomplished.Moreover, we provide preliminary evidence in support of accepting notchgjob as asingle-item measure to proxy for worker loyalty, and rejecting workplace seniority(tenure) as an effective proxy for worker loyalty in former socialist economies.

We now turn to our primary objective does worker loyalty pay?

5. Loyalty and earningsWe model the link between loyalty and earnings by specifying a log earnings equation:

ln w a bX d loyalty e

where lnwis the natural log of self-reported average monthly earnings at the workplacewhere the employee interview took place; loyalty(composite measure) is standardized bycountry to have zero mean and unit standard deviation; d represents the effect on (log)wage of one standard deviation increase in loyalty; Xis a row vector of explanatoryvariables (age, age squared and years of schooling to approximate general experience;

workplace tenure to approximate firm-specific experience; dummy variables equal toone for women, supervisory responsibilities, and married; dummy variables equal to onefor state ownership and for different sectors education or health services, retail andother services, finance and so forth, with manufacturing as the omitted sector); bis a column vector of parameters and e is an error term. We use OLS regressionanalysis, clustering by firm to take into account possible collinearity among workers ina particular organization.

In a second specification, we add characteristics to X that capture labor marketconditions in transition economies that would likely influence earnings dummyvariable equal one if worker holds multiple jobs at time of interview; dummy variableequal one if worker experienced unemployment in preceding five years[15].

5.1 Empirical results: basic specificationResults reported in Table V suggest that, among the participants in our survey, loyaltypays. The loyalty coefficient is positive in all countries, and statistically significant infour: Armenia, Azerbaijan, Kyrgyzstan and Serbia. Indeed, among Armenian, Kyrgyzand Azeri participants, the magnitude of the loyalty coefficient is greater than thatassociated with experience; among Serbian participants, experience has a relativelygreater impact on earnings.

We note that the earnings results are similar to those reported for developed marketeconomies. Earnings increase with age, but by a decreasing amount, and are positively

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correlated with education. Women tend to earn less than men; supervisors tend to earnmore. Marital status is largely insignificant[16]. Participating employees in state-ownedfirms earn less than their counterparts in privately owned firms. The negativecoefficients on education/health care, and public organizations (local, regional and federalgovernment organizations, plus NGOs) reflect the low wages paid in these sectors incomparison to manufacturing. This stems largely from the fact that, in these six


Loyalty 0.145*** 0.00832 0.0326** 0.0271 0.0270* 0.0587***(0.0262) (0.0177) (0.0158) (0.0238) (0.0140) (0.0174)

Job tenure 0.00901* 0.0131** 0.00218 0.00512 0.00207 0.00430.0047 (0.00559) (0.00209) (0.00312) (0.00467) 0.0043

Age 0.0139 0.0430*** 0.0371*** 0.0320*** 0.00876 0.0471***(0.0143) (0.0126) (0.00931) (0.0108) (0.0156) (0.0125)

Age squared/100 0.0133 0.0561*** 0.0404*** 0.0337** 0.0112 0.0544***(0.0158) (0.0163) (0.0105) (0.0129) (0.0207) (0.0165)

Years of schooling 0.0682*** 0.0810*** 0.0147** 0.0397*** 0.0623*** 0.0321***(0.0111) (0.0131) (0.00584) (0.00864) (0.00981) (0.0064)

Respondents sex 0.0776 0.184*** 0.168*** 0.220*** 0.0202 0.235***(0.0524) (0.0610) (0.0584) (0.0694) (0.0300) (0.0479)

Supervisoryresponsibilities 0.160*** 0.164*** 0.256*** 0.322*** 0.299*** 0.3215***

(0.0478) (0.0498) (0.0436) (0.0380) (0.0447) (0.0454)

Married 0.142**

0.0117

0.0169 0.0660 0.0509 0.0367(0.0625) (0.0503) (0.0575) (0.0682) (0.0400) (0.0385)Married woman 0.130 0.0259 0.00340 0.0504 0.0501 0.0679

(0.0797) (0.0684) (0.0649) (0.0747) (0.0344) (0.0569)State-ownedorganization 0.00572 0.276*** 0.287** 0.0844 0.0674 0.235**

(0.142) (0.0952) (0.126) (0.135) (0.0978) (0.1037)Health, educationorganization 0.658*** 0.00111 0.0394 0.223 0.310** 0.2623***

(0.185) (0.126) (0.138) (0.146) (0.125) (0.1009)Serviceorganization 0.0841 0.224** 0.0922 0.0996 0.0970 0.0584

(0.153) (0.0922) (0.0910) (0.115) (0.102) (0.0551)Financial services

organization 0.395** 0.295 0.578*** 0.540*** 0.0522 0.5771***(0.181) (0.183) (0.157) (0.0874) (0.101) (0.1663)

Publicorganizations(federal, regional,local) 0.208 0.217* 0.0376 0.142 0.109 0.481***

(0.222) (0.124) (0.117) (0.185) (0.151) (0.1591)Construction,transportation 0.0683 0.211* 0.278** 0.366** 0.272** 0.0477

(0.230) (0.113) (0.121) (0.148) (0.110) (0.0931)Constant 9.929*** 7.965*** 7.203*** 7.189*** 9.796*** 4.313***

(0.320) (0.258) (0.192) (0.236) (0.313) (0.2355)Observations 1,459 1,392 1,189 1,756 1,420 1,092

R2 0.237 0.238 0.208 0.283 0.342 0.529


Table V.

OLS regression results earnings, basic model

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countries, these two sectors typically involve state-owned organizations and pink-collar(dominated by women) occupations. In contrast, wages in the financial services sectorare significantly higher than in manufacturing in five of the six countries; these jobstypically are found in the private sector and held by men.

Recognizing the possible endogeneity between loyalty and earnings, we repeat theregression analysis using notchgjob, standardized to have a zero mean and unitstandard deviation, as our loyalty measure. While we lose the richness of the compositemeasure, this single-item measure provides a reasonable alternative assessment of thelink between loyalty and earnings. Controlling for the same worker and workplacecharacteristics, we find that the coefficient on notchgjob is positive in four of the sixcountries, and statistically significant in Armenia and Azerbaijan.

5.2 Empirical results: extended specificationThe extended specification reported in Table VI includes holds multiple jobs andexperience with unemployment. These factors tend to reduce wages in all butKyrgyzstan, with the results statistically significant in Russia and Serbia (multiple

jobs) and Armenia, Kazakhstan and Russia (experience with unemployment). Loyaltycontinues to exhibit a positive and significant association with earnings in Armenia,Kyrgyzstan and Azerbaijan, and in this specification, in Kazakhstan, as well. AmongRussian participants, loyalty has a marginally negative association with earnings.We note that the same basic pattern of coefficient sign and significance seen in Table Vholds for the worker and workplace controls in the extended specification.

When notchgjob is used as the loyalty measure, as in the basic specification, thecoefficient is once again positive in four countries, and statistically significant amongparticipants in Armenia and Azerbaijan.

6. Discussion and conclusionsIs loyalty a financially rewarding investment of a workers time and effort? We use data

collected from a large number of employees across a wide variety of workplaces in sixformerly socialist economies to address this question. Our findings indicate a positivelink between worker loyalty and earnings, in some cases equivalent to the returnassociated with an additional year of education. In essence, the firms participatingin this study appear to be sharing the wealth associated with worker loyalty.By documenting the earnings benefits to workers, our study extends the existingliterature, which focusses primarily on loyalty benefits to firms, and providespreliminary evidence that worker loyalty is not misguided, as some studies suggest.

6.1 Incidence of worker loyaltyUsing a composite measure that captures multiple loyalty dimensions, our data indicatethat over 75 percent of the workers exhibited moderately strong or strong loyalty;

although among Azeri workers the figure is somewhato60 percent. These results largelycoincide with reports provided by consulting firms in developed market economiessuggesting that 10-30 percent of workers are not engaged. More importantly, however,among the participants in this study, workers who self-report performing better than theirpeers are more loyal than workers who self-report performing worse. Thus our resultstend to underscore the importance of firms promoting worker loyalty and undertakingstrategies for removing workers who exhibit low loyalty.

How can firms increase the likelihood that their workers will become or stay loyal?Our results highlight a plethora of strategies firms might employ.

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6.2 Loyalty and expected rewardsLike studies conducted in developed market economies, we find a positive linkbetween loyalty and expected rewards, with participating workers more likely toexpect intrinsic rewards than extrinsic rewards. Our findings are consistent acrosssix culturally and economically diverse countries. While our country samples are not


Loyalty 0.142*** 0.00388 0.0329** 0.0289 0.00336 0.0583***(0.0271) (0.0191) (0.0158) (0.0232) (0.0166) (0.0182)

Job tenure 0.0527 0.00811 0.0588 0.0916* 0.394 0.0041(0.0610) (0.0723) (0.0598) (0.0531) (0.546) (0.0044)

Multiple jobs 0.124** 0.232*** 0.0340 0.0657 0.0174 0.0537(0.0494) (0.0383) (0.0422) (0.0517) (0.0328) (0.0463)

Experience w/unemployment 0.0116** 0.00256 0.00185 0.00572* 0.00117 0.0153

(0.00468) (0.00519) (0.00209) (0.00300) (0.00579) (0.0317)Age 0.00891 0.0271* 0.0367*** 0.0329*** 0.00446 0.0478***

(0.0146) (0.0158) (0.00920) (0.0105) (0.0217) (0.0129)Age-squared/100 0.00709 0.0286 0.0396*** 0.0350*** 0.0108 0.0561***

(0.0163) (0.0195) (0.0104) (0.0125) (0.0284) (0.0172)Years of schooling 0.0665*** 0.0598*** 0.0145** 0.0412*** 0.0646*** 0.0342***

(0.0115) (0.0106) (0.00593) (0.00841) (0.0117) (0.0064)Respondents sex 0.0890* 0.171** 0.170*** 0.241*** 0.0107 0.252***

(0.0516) (0.0732) (0.0576) (0.0690) (0.0403) (0.0489)Supervisoryresponsibilities 0.157*** 0.159*** 0.254*** 0.319*** 0.355*** 0.316***

(0.0473) (0.0497) (0.0434) (0.0381) (0.0425) (0.0457)Married 0.129** 0.0201 0.0144 0.0421 0.0227 0.0373

(0.0599) (0.0696) (0.0551) (0.0673) (0.0323) (0.0407)Married woman 0.113 0.0425 0.00632 0.0353 0.0337 0.0687

(0.0789) (0.0896) (0.0633) (0.0751) (0.0438) (0.0591)State-ownedorganization 0.00885 0.348** 0.287** 0.0880 0.176** 0.2258**

(0.136) (0.135) (0.128) (0.132) (0.0844) (0.1084)Health, educationorganization 0.638*** 0.171 0.0242 0.224 0.475*** 0.264**

(0.180) (0.170) (0.144) (0.143) (0.0893) (0.1035)Service organization 0.0693 0.323*** 0.0777 0.0949 0.223* 0.0490

(0.150) (0.0830) (0.0968) (0.111) (0.110) (0.0506)Financial servicesorganization 0.425** 0.269* 0.570*** 0.517*** 0.0564 0.567***

(0.173) (0.156) (0.158) (0.0851) (0.0818) (0.1643)Public organizations(federal, regional,local) 0.191 0.375** 0.0276 0.153 0.0896 0.484***

(0.216) (0.150) (0.120) (0.182) (0.0983) (0.1663)Construction,transportation 0.119 0.244*** 0.254** 0.338** 0.241** 0.0505

(0.235) (0.0686) (0.126) (0.144) (0.0882) (0.0937)Constant 10.11*** 8.508*** 7.197*** 7.222*** 10.04*** 4.304***

(0.326) (0.328) (0.186) (0.235) (0.431) (0.2406)Observations 1,444 760 1,186 1,715 923 1,056

R2

0.237 0.282 0.210 0.294 0.567 0.532


Table VI.OLS regression results earnings, extended model

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nationally representative, this commonality across workers in these six countriessuggests a rather broad foundation for developing a global perspective of strategiesthat influence worker performance.

Our findings provide important implications for managers and human resource

development personnel. First, participating workers generally had very low expectationsof receiving desired rewards. A large literature suggests that expectations of receivingdesired rewards play an important role in worker motivation, job satisfaction andperformance. Combined with our results that indicate a similar link between expectedrewards and worker loyalty, it is clear that a strategic opportunity to enhance workerloyalty, and thus performance, hinges on providing rewards that workers desire. Wenote that desired rewards in transition economies may not always coincide withrewards desired in western countries. Second, the positive and significant link betweenexpected bonus and worker loyalty was the most consistent finding in our study,indicating that among many of the participating workplaces, policies are already inplace to reward performance. Publicly recognizing loyal workers (those who do their

job well and consistently adhere to or promote the companys objectives), perhaps by

using workplace bulletin boards or newsletters, or at monthly or annual workplacegatherings, for example, might also help to establish a workplace culture that engagesmore workers. Our findings suggest it would likely be worthwhile for firms to educatetheir workers about the benefits of loyalty.

In lieu of paying bonuses, organizational strategies to build worker loyalty mightfocus on options suggested by our intrinsic reward findings. For example, morefreedom on the job and chance to accomplish something worthwhile were bothpositively and significantly related to loyalty, yet both were viewed as highly unlikelyrewards to receive. Training managers to allow worker autonomy, helping managers totrain workers for a wider variety of tasks, engaging workers in joint decision makingand better educating them about their firms mission and goals might be used to targetthis apparently untapped opportunity to enhance worker loyalty. Moreover, given the

positive link between loyalty and chance to develop new skills, providing opportunitiesfor job enrichment that is, redesigning job dimensions to provide training in a new areaor assigning more challenging work (Herzberg, 1968; Insightlink, 2004) representsanother area to explore. Niehoffet al.(2001) found that job enrichment resulted in higherlevels of worker loyalty. These strategies, however, are contingent upon creatinga workplace culture where workers feel rewarded when they gain more autonomy orcontrol, or when their job has been enriched; a workplace culture quite different from thepaternalistic and directive management system of the Soviet-type firm.

While job security, praise from supervisor, friendly co-workers and jobmakes me feel good about myself are important correlates of worker loyalty indeveloped market economies, they were not statistically significant among the workersparticipating in our study. This underscores the difference in workplace cultures

between the organizations participating in our study and organizations includedin studies conducted in developed market economies. For example, benefits to thefirm associated with praise from supervisor, in the form of verbal recognition,a hand-written note, or a day off, are substantial in developed market economies(Insightlink, 2004; DAusilio, 2008; Duboff and Heaton, 1999; Farinelli, 1992). Yet numerousstudies conducted in transition economies find supervisor praise to be less desired andleast expected (Huddlestonet al., 2002; Linz, 2003; Linz and Semykina, 2011). Moreover,while friendliness of co-workers sounds rather pedestrian, when viewed in the contextof the workplace, being a good team member and helping others demonstrates

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positive organizational citizenship behaviors and helps to create an environment whereindividuals feel valued (Bolino and Turnley, 2003; Podsakoff et al., 2000). To takeadvantage of these relatively low cost options for enhancing worker loyalty, our resultssuggest that replacing the Soviet-type workplace environment (they pretend to pay us

and we pretend to work) with a new workplace culture may be required; one whereworkers feel engaged and loyalty is publicly recognized.

6.3 Limitations and future researchWhile our findings indicate that worker loyalty is positively linked to earnings, ouranalysis is limited by our cross-sectional data, which preclude efforts to establishcausality. Future research on worker loyalty will be greatly enhanced if longitudinal dataare collected. Second, because our country samples are not nationally representative, weare limited in our ability to generalize our results. Collecting the appropriate nationallyrepresentative data is essential for facilitating future research. Moreover, because we useself-reported data on education, workplace tenure, earnings and performance, our resultslikely are subject to biases due to measurement error. Future studies which collect data

from supervisors would reduce same-source bias. Future studies might also extend ouranalysis by considering links between loyalty and personality, for example, or bycollecting similar data from employees in developed market economies in order to makemore explicit comparisons.

Notes

1. The popular press, numerous organizations involved in measuring worker loyalty (e.g.Walker Information Loyalty Reports, The Loyalty Research Center, surveys conductedby MASMI and Global Poll), recent blogs (e.g. www.linkedin.com/answers/management/labor-relations/MGM_LBR/790674-43107269) and trade publications routinely carry storiesreporting that loyalty is rising (falling) and what companies are doing (have done) to improveworker loyalty, as well as stories which estimate the replacement cost of labor in terms ofprofit share or share of workers annual salary.

2. Walker Information Inc (2007) loyalty report indicates that least loyal are employees withworkplace tenure of less than one year; loyalty increases with workplace tenure for the firstten years at the organization; and loyalty diminishes with workplace tenure during thesecond decade at the organization.

3. Country selection was driven by the presence of established contacts who agreed to act aslocal project coordinators. According to US State Department reports, these countries reflectdifferent levels of economic development, as measured by per capita GDP and share ofagriculture in GDP. In 2007 (before the recent financial crisis) per capita GDP was $620 inKyrgyzstan, $2,570 in Armenia, $2,710 in Azerbaijan, $4,450 in Serbia, $4,970 in Kazakhstanand $7,590 in Russia. In terms of share of agriculture in GDP, in Kyrgyzstan, in 2007,agriculture accounted for 31 percent of GDP, in Armenia 20 percent, in Serbia 13 percent, inAzerbaijan 7 percent, in Kazakhstan 6 percent and in Russia 4 percent. In terms of cultural

diversity, as measured by ethnic composition of population and religions, Armenia andAzerbaijan are the most homogenous (98 percent population report themselves as ethnicArmenians; 93 percent belong to Armenian Apostolic Church; in Azerbaijan, 91 percentpopulation are Azeri, with 93 percent reporting themselves as Muslims). In Kazakhstan,56 percent report themselves as ethnic Kazakh (Sunni Muslims account for nearly half of thepopulation; 44 percent practice Eastern Orthodoxy), compared to just under 70 percent ofpopulation in Kyrgyzstan reporting themselves as ethnic Kyrgyz (with 75 percent reportingthemselves as Muslims and 20 percent practicing Eastern Orthodoxy). In Serbia, 83 percentof the population are ethnic Serbs (84 percent practice Eastern Orthodoxy, 6 percentreport themselves as Roman Catholic, 3 percent as Muslim). Similarly, in Russia, just over

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80 percent of population are ethnic Russian (about 60 percent practice Eastern Orthodoxy;16 percent report themselves as non-believers) (see www.state.gov/p/eur/ci/index.htm).

4. While ten to 11 years of schooling in these countries is the equivalent of high school, aftereight or nine years students may elect to pursue vocational training rather than general

education. Only 6 percent of the participants completed less than high school. Over90 percent had training beyond high school.

5. The relative gender imbalance stems in part from local culture (willingness of malesto respond to query of female survey administrator, and vice versa) and in partfrom connections of local project coordinators (connections dominated by workplacesthat tend to employ a relatively large fraction of females education/health care,government offices, retail).

6. This includes open and closed joint stock companies, limited liability corporations, partnershipsand sole proprietorships.

7. The Cronbach a scores for this measure range from 0.55 (Kazakhstan, Kyrgyzstan) to0.85 (Azerbaijan), with Russia, Armenia and Serbia at approximately 0.75.

8. Our reward list was originally used by Huddleston and Good (1999) in a study of Russianand Polish retail workers. These 11 rewards emerged from a larger set of rewards throughfocus groups and empirical study. Following their lead, participants in our study were givena five-point Likert scale, where 1not very likely and 5 very likely.

9. We note that the majority of Kyrgyz participants are employed in state-ownedorganizations, particularly in the public sector. Studies suggest that individuals sortinto state-sector jobs to enjoy particular (non-competitive) work environments (Halepotaand Irani, 2010; Kim, 2005, 2009; Turkyilmaz et al., 2011). We control for state sectoremployment in our regression analysis.

10. Serbia may be viewed as exception to this participating workers put additional pay as oneof the more likely rewards they expect. However, among participating Serbs, expectation ofreceiving this or any reward is significantly lower than among participants in other countries.

11. Participants were given the following wording: for the following items, compare yourself toother employees at your organization who do work similar to yours. How do you rate yourselfin terms of quantity and quality of performance? Check the appropriate response (where1much worse than others, 5much better than others). The specific statements are asfollows: compared to other employees doing similar work, the overall quality and quantity ofmy work isy. Compared to other employees doing similar work, how productive are you?Compared to other employees doing similar work, how well do you anticipate problems thatmay arise and try to prevent them or minimize their effect? The Cronbach a scores for theperformance composite measure range from approximately 0.45 (Serbia) to 0.85 (Armenia)with Russia, Kazakhstan and Kyrgyzstan at 0.80 and Azerbaijan at 0.70.

12. Due to high collinearity between the expected rewards chance to develop skills andchance to learn new things among the participants in this project, we dropped chance to

learn from our regression analysis.

13. The relationships between expected rewards and tenure have little in common with thosereported in Table III. For example, expected rewards have little explanatory value in terms ofworker seniority in Kyrgyzstan and Russia. While expected rewards tend to exhibit anegative association with workplace tenure, exceptions (positive associations) occur mostoften among participating Armenian and Kazakh workers.

14. When statistically significant, tenure is negatively related to years of education. In all sixcountries, participating workers in state-owned organizations report longer workplacetenure/higher loyalty. Workplace tenure tends to be longest in manufacturing; negative

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coefficients appear for nearly all non-manufacturing sectors, the exception being servicesector workers in Kazakhstan. Not surprisingly, however, older workers tend to reportlonger workplace tenure, as do workers with supervisory responsibilities.

15. Because the sample size changes in each country as a result of missing values associated

with the two new variables, for this extended specification, we standardized the loyaltymeasure for each country based on the actual sample size.

16. As seen in Table V, among Kyrgyz participants, overall, single men are most loyal andmarried men least loyal, with married women more loyal than single women. However, themagnitude of the difference among these gender/marital status categories is quite small.

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Journal of Occupational and Organizational Psychology, Vol. 79 No. 3, pp. 395-409.Denisova, I., Eller, M. and Zhuravskaya, E. (2007), Labor market flows in transition, CEFIR

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Corresponding authorSusan Linz can be contacted at: [email protected]

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