Original Article

Employee Loyalty: Measurement Global Business Review

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DOI: 10.1177/0972150921990809
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Tanusree Dutta1
Swati Dhir2

Abstract
Employee loyalty is a significant attribute to gain competitive advantage in any organization. Research
suggests that retaining and nurturing a loyal workforce has many benefits and protects the organization
from several disadvantages. Therefore, understanding and measuring employee loyalty is very important
for organizational effectiveness. The available literature on employee loyalty is scattered, and there is a
shortage of available tools to measure the affective, cognitive and behavioural aspects of the construct.
In this study, we developed a scale to measure employee loyalty in terms of the cognitive, affective
and behavioural components. We used the mixed methodology and grounded theory approach for
this purpose. Test items to measure employee loyalty were developed and data were collected to
validate them. Furthermore, the data were subjected to rigorous statistical analysis. Results suggested
robust psychometric properties in terms of validity and reliability. Such a scale is beneficial to HR
practitioners and professionals, policymakers and other like-minded vocations desirous of measuring
employee loyalty.

Keywords
Employee loyalty, validity, reliability, scale development

Introduction
Employees are the backbone of any organization. Employees and organizations share a reciprocal
relationship and a mutual commitment, enhancing overall organization performance (Chaurasia &
Shukla, 2013). Employees reciprocate favourably to positive organizational initiatives (Rubel et al.,
2017). To run a sustainable business with competent employees, organizations invest a lot in training
programmes, formulating policies, making beneficial packages for their employees and to gain employees
loyalty. Therefore, it becomes desirable that employees remain loyal to their organization and do not
search for alternate job opportunities (Murali et al., 2017). Research suggests an overlap of factors
influencing employee loyalty and job satisfaction (Dhir et al., 2020) The economic performance of an

1 Indian Institute of Management, Ranchi, Jharkhand, India.

2 International Management Institute, New Delhi, Delhi, India.

Corresponding author:
Swati Dhir, International Management Institute, B-10 Qutab Institutional Area, Tara Crscent, New Delhi, Delhi 110016, India.
E-mail: swati.dhir@imi.edu
2 Global Business Review

organization is also affected by employee loyalty (Rodríguez et al., 1999). Therefore, retention of employees
is a prime concern for HR managers worldwide (Hassan et al., 2020; Kashyap & Rangnekar, 2016)
According to Ineson et al. (2013), employee loyalty is a dyadic bond between the employer and the
employee. It is fundamental to sustainable management and competitive advantage. However, with time,
there has been a paradigm shift in the relation between an employer and an employee. The dilution of
this relation has resulted in a significant dip in employee loyalty. The situation becomes grave when an
employee, after continuous years of exemplary service, quits the organization. Such an action is a loss to
the organization. In fact, in this competitive business world, ‘employee loyalty’ is a dynamic characteristic
that an organization depends on. Lack of employee loyalty in the organization has been attributed to a
lack of job satisfaction (Frempong & Agbenyo, 2018), unacceptable working conditions and inadequate
monetary reward, to list a few (Carraher, 2011; Milman, 2003).
Notably, it is also evident that people are now more loyal to their careers than their organizations
(Kristof-Brown et al., 2005). This change necessitates the need to revisit the construct of employee
loyalty in the workplace. Moreover, extant literature lacks consensus on the dimensions of ‘employee
loyalty’, to measure the construct. Thus, this research article aims to address this gap and develop an
employee loyalty scale.
The manuscript begins with reviewing available literature defining employee loyalty, followed by the
conceptual gap and the proposed model. After the proposed model, a literature review of the variables
identified in the model is presented. The research methodology follows next, including information
about item generation, content validation and how the study was conducted. Discussion of findings and
the conclusion follow the analysis and result section.

Review of Literature

Defining Employee Loyalty

Hirschman (1970) coined the term ‘employee loyalty’. He defined a loyal employee as one who suffers
without complaining as he/she is confident that things will improve in the future. It includes employees’
bonding to the organization and faith in the organizational values and goals (Mathieu & Zajac, 1990).
Employee loyalty can be defined as the preparedness to make a personal sacrifice to nourish a relationship
(Mehta et al., 2010). Some researchers (Elegido, 2013; Ewin, 1993; Oldenquist, 1982; Provis, 2005)
perceive employee loyalty as a continuum, not a binary function. Rusbult et al. (1988) conceptualize
employee loyalty as an employee’s hope for improvement in conditions, willingness to support the
organization and display of desired citizenship behaviour. Iqbal et al. (2015) define employee loyalty as
a stable attachment with a particular person, group (organization), or object that is reflected in thought
and action. Avoiding gossip, working overtime and mentoring younger employees also define employee
loyalty (Hart & Thompson, 2007). Some researchers have construed employee loyalty as an emotional
component (Ewin, 1993; Hajdin, 2005; Randels, 2001), deliberate commitment (Gonza & Guillen, 2008;
Kleinig, 2008; Mele, 2001; Royce, 1908; Vandekerckhove & Commers, 2004), a feeling of attachment
(Burris et al., 2008; Organ & Ryan, 1995) and a desire to relinquish self-interest (Elegido, 2013; Ewin,
1993; Michalos, 1981; Oldenquist, 1982; Pfeiffer, 1992; Schrag, 2001).
In terms of effect, loyalty reflects the feelings towards the organization (Buchanan, 1974). An
emotional response is having a strong belief in the goals and values of the organization, along with a
desire to retain organization membership (Mathieu & Zajac, 1990). For the betterment of the organization,
a loyal employee is willing to make any personal sacrifice unconditionally. Such employees neither harm
Dutta and Dhir 3

the organization nor indulge in opportunism (Dooley & Fryxell, 1999). Loyalty is a psychological state
of the relation between the organization and its employee (Allen & Grisaffe, 2001) which strengthens the
employee’s decision to continue with the organization. Coughlan (2005) suggests that because of this
implicit promise, the employee abides by global moral principles while striving to achieve individual
and collective goals (Becker et al., 1996; Powers, 2000; Wu & Norman, 2006). Concerning different
stakeholders, an exhibition of employee loyalty includes loyalty to the company, job, supervisors and
co-workers (Powers, 2000). Loyalty is a characteristic visualized in terms of person–workplace
interaction. The workplace includes supervisors, peers, subordinates, organizational job roles and
responsibilities. Hence, it becomes pertinent to understand employee loyalty in the workplace (Wan,
2012). Thus, employee loyalty can be defined staying with the company rather than searching for jobs,
working late to complete an assignment, not divulging confidential information of the company,
advocating, abiding by rules in the absence of strict monitoring, prioritizing company goals over
individual achievements, abstaining from spreading incorrect information or refraining from making
profit from company’s resources, buying company’s products and advocating them to the community,
contributing in charities sponsored by the organization, suggesting improvement, participating beyond
expected role behaviour, assisting co-workers in achieving their goals, following orders and not taking
undue advantage of any policy (Powers, 2000).

Sense of Ownership
In developing countries, until the 1980s–1990s, organizations were taking initiatives to ensure that their
employees perceive themselves as integral to the organization and comprehend that they would own the
organization in the coming years. The organization belonged to them as they belonged to the organization,
that is, loyalty was on both sides. A sense of ownership is nurtured when an employee experiences
control and association and is able to invest oneself in different facets of the organization (Pierce et al.,
2001). It is the affective commitment of an employee that generates a ‘sense of ownership’ (Allen &
Mayer, 1990). The theory of psychological ownership also suggests the same (Pierce et al., 2003). The
theory suggests that individuals develop a sense of ownership in the relationships they build which leads
to a long continuous relationship (Asatryan & Oh, 2008). Some researchers (Pickford et al., 2016; Yee et
al., 2000) opine that a loyal employee would exhibit ownership towards the organization and make
efforts to remain with the organization because of the pleasure of the relationship (Allen &Mayer, 1990).
When employees feel that the job they are performing is valued and respected in the organization, it
fosters a sense of belongingness and encourages them to make a difference. They become a powerful
motivator in the workplace (Maslow, 1943).
The expression of employee loyalty includes identifying with the interest of others as well as the
organization (Schrag, 2001). A sense of ownership encourages an employee to develop an emotional
connection and a belief in the organization. It also helps to foster employee engagement (Dhir & Shukla,
2019; Buriro et al., 2018). It is reflected in advocating the organization’s product, services, and culture with
related others. Thus, a sense of ownership—an affective component—helps in fostering employee loyalty.

Trust
Employee loyalty and trust are two desirable yet difficult to obtain objectives (Mehta et al., 2010).
Concerning socio-economic situations, trust helps to reduce the uncertainty of a situation (Singh, 2008).
4 Global Business Review

Trust is an essential component of employee loyalty (Gucer & Demirdag, 2014; Costigan et al., 1998).
Presence of organization trust encourages employees to indulge in extra role behaviour (Singh &
Srivastava, 2016). Successful interaction among employees is dependent on trust (Fard & Kamiri, 2015;
Widjajani et al., 2017), which affects performance significantly (Altschuller & Benbunan-Fich, 2010,
c.f. Widjajani et al., 2017). Elaborating on the implications of social cognitive theory perspective,
Ozyilmaz et al. (2017) suggest that an employee’s trust in his/her own self would interact with the
person’s trust in the organization, to predict job behaviour. It is a cognitive dimension of ‘employee
loyalty’ (Ladebo, 2005). Interpersonal trust includes vulnerability to the actions of others, with the
understanding that the other would also indulge in the act of fostering trust (Mayer et al., 1995). There
are three dimensions of trust: firstly, an expectation that the exchange partner will be benevolent;
secondly, vulnerability to the risk that the other may not live up to the expectation; and thirdly, dependency
(Whitener et al., 1998). Employees feel safe among their peers and managers if they are trustworthy.
They are optimistic about improvements (Hirschman,1970) and remain faithful by displaying allegiance
(Ferri-Reed, 2011; Lee & Jablin, 1992).
It also helps generate cooperative behaviour, promote effective response to crises, reduce conflicts,
facilitate the quick formation of ad hoc workgroups and decrease transaction costs (Rousseau et al., 1998).
Lower trust level leads to psychologically distressing situations while increase trust fosters employee
satisfaction, thereby promoting loyalty (Dirks & Ferrin, 2002; Matzler & Renzl, 2006). Thus, organizations
should engage in generating trust among employees. Singh and Srivastava (2016) suggest that organizations
should promote an environment of trust so that employees engage in extra role behaviour. This would help
enhance both individual and organizational effectiveness Research suggests that recognition, compensation,
career development, supervision and promotion, are strong predictors of trust which make an employee
feel that the organization cares for and supports them (Narang & Singh, 2012).

Willingness to Stay
A study by Prabhakar (2016) suggests that employee loyalty (willingness to stay) has declined in the last
5 years. The behavioural dimension of loyalty is reflected in an individual’s desire to continue with the
organization (Khuong & Tien, 2013). Social exchange theory proposes that when an individual receives
benefit from others, they feel obliged and therefore compensate it by their effort and loyalty (Mossholder
et al., 2005). Effort and loyalty are expressed through commitment to the task assigned and a strong
intention to continue in the present organization. According to Prabhakar (2016), the tendency to remain
with an organization for the long term makes one loyal to an organization. A loyal employee does not
think of leaving or changing the organization and then indulges in a deliberate conscious effort to be
associated with the organization (Tett & Meyer, 1993).
As turnover proves costly to the organization, organizations benefit from identifying factors that
encourage an employee’s willingness to continue with the organization (Halid et al., 2020). Organizations
usually focus on the factors that reduce the likelihood of changing the organization instead of focusing
on the factors that enhance the employee’s intention to continue in the organization (Cho et al., 2009).
Most researchers have used ‘intentions to leave’ and ‘intentions to stay’ interchangeably (Black &
Stevens, 1989), but they are not the same. During tough times or any restructuring phase in the
organization, loyalty can be attributed to the behavioural efforts of the employees to resolve the problem
rather than quitting. The approach of loyal employees is more solution-based rather than a problem-
based approach. A loyal employee expresses a strong willingness to remain with the organization in both
good and bad times, highlighting the importance of loyal employees.
Dutta and Dhir 5

Objectives
The objective of this study is to develop a scale to measure employee loyalty. The construct of employee
loyalty is operationalized as sense of ownership, trust and willingness to stay. Sense of ownership reflects
the affective component of employee loyalty: trust as the cognitive component and sense of ownership
as a behavioural component of employee loyalty.

Rationale of the Study/Theoretical Framework

The review of extant literature indicates a lack of consensus in defining ‘employee loyalty’. It is
challenging to have a consensual definition of a behavioural construct like employee loyalty. We propose
that any behavioural construct is an interplay rather than an exclusive function of an affective, cognitive
and motor function; in this case, the cognitive component of employee loyalty includes the thought
process towards the exhibition of loyal behaviour. Cognition constitutes information, experience,
knowledge, faith, opinion and an array of other variables that influence an individual’s thought process
in exhibiting ‘employee loyalty’. The affective component includes feelings, sentiments, moods and
emotions about the organization that generating loyalty. The behavioural feature is the intent to remain
with the organization. Thus, we operationalize employee loyalty as constituting cognitive, affective and
behavioural functions. We propose that loyalty arises when ‘an employee feels a strong sense of
ownership, trusts the organization, and exhibits a strong desire to continue in the organization to serve
the common goals’. In the above definition, the affective dimension of employee loyalty is sense of
ownership, the cognitive component is trust and the behavioural intention is willingness to be with the
organization (Figure 1).

Research Methodology
We have tried to overcome the limitations of quantitative methods and qualitative methods by following
mixed methodology. Thus, this methodology helped in overcoming the limitations of both ways

Sense of ownership
(SO)

Employee loyalty Trust (TR)

Willingness to stay
(WS)

Figure 1. Employee Loyalty as a Function of Sense of Ownership, Trust and Willingness to be with the
Organization.
Source: The authors.
6 Global Business Review

individually. In the first phase, a qualitative research method was used to develop the scale on employee
loyalty. Adopting the grounded theory approach of qualitative research, we interviewed 25 Indian
executives from different organizations belonging to various industries such as electronics and
communication, Information Technology (IT) and Information Technology Enabled Services (ITES),
financial services, power sector, textile sector, banking institutions, and so on. To understand the
construct, we started by conducting interviews with 23 employees at different levels in various
organizations. It helped us to understand and comprehend the construct ‘employee loyalty’. We obtained
rich insights to frame additional items for scale development and conduct a more systematic quantitative
study. Executives defined ‘employee loyalty’ as ‘one who is genuine, honest, sincere, hardworking,
dedicated and committed to job and organization’. It was also conceptualized as

“an employee being loving, owning and owing to the organization, taking decisions in the larger interest of
the organization, mutual relationship- benefiting employee and employer, trusting the organizational
philosophy, its policies and systems, advocating about the organizations to friends and relatives, remaining
with the organization, being true to the purpose for which the employee has been hired and feeling for the
organization as a part of their family”.

Summarizing the findings of the interview, we developed additional items for the scale measuring
employee loyalty. The grounded theory approach helped us to develop the necessary dimensions from
a theoretical point of view. The existing literature on employee loyalty was also explored to make the
scale comprehensive.
Furthermore, scale development included item development, scale development and scale evaluation
(Schwab, 1980). While item development helped generate items for the construct under study, scale
development assisted in combining items to form a scale. Scale evaluation was done for the psychometric
examination of the new measure.

Item Generation
Available theoretical literature and industry inputs have been used for item generation. In this step, we
tried to map the items to measure the expected dimensions of employee loyalty. Analysing the previous
studies, the different parameters of the construct were identified (DeVellis, 2003); however, extant
literature lacks a higher-order construct definition and its dimensions. This gap in literature prompted us
to use the deductive approach method to integrate the insights collected from the expert’s interviews, and
whatever dispersed information was available in the extant literature. Using this method, we generated
26 items on the intent to measure employee loyalty.

Content Validation
In the context of scale, validation can be defined as a continuous process where various pieces of evidence
are collected, synthesized and summarized to reach a consensus from theoretical underpinnings and
empirical evidence (Cizek et al., 2008; Messick, 1989). Content validity helps identify the extent to
which a measure can explain and map the defined latent construct. To test for the content validity of the
scale, it was evaluated by four academicians and two industry experts. The respondents were chosen
based on their research interest in the area of social sciences. The definition of loyalty was provided to
Dutta and Dhir 7

the respondents, and they were asked to respond on an ipsative scale. The respondents also provided
essential improvements and clarification in terms of appropriateness and language of the items. Some
items of the scale were restated based on the feedback to increase the understanding of the second-order
construct, that is, employee loyalty. We tried to understand the consensus among the raters by using
Kappa values as a measure of content validity. Getting an acceptable range of Kappa values more than
0.7 was considered for the given items (Kongerud et al., 1989). A kappa value of 0.85 (p < 0.05) has been
obtained for our scale items. The results (p < 0.05) were also significant. This meant that experts were
unanimous, and the items represented the defined construct. Also, we have calculated the content validity
ratio, which was positive for all the constructs. CVR (Content Validity Ratio) = (N−Ne/2)/Ne/2, where
N = total number of panelists, while Ne = no of panelists said that items were essential for the construct.
Items with positive values were accepted (Zamanzadeh et al., 2015). At this stage, no item had been
dropped. All 26 items in our developed scale measuring employee loyalty had content validity.

Study
In phase 2, a 5-point Likert scale was developed, where a rating of 5 = strongly disagree, 4 = disagree, 3 =
neutral, 2 = agree and 1 = strongly disagree. Besides these 26 items, we also added 5 items from Homburg
and Stock (2000) scale of employee loyalty and 4 items for perceived contribution to the company’s value
to check the construct and criterion-related validity. The sample of the study comprised 219 working
executives from different organizations having at least 3 years of experience to ensure that they are pretty
much aware of the organizational culture and practices to think about their career planning in the given set
up. The average experience of managers was 4.5 years, and they belonged to junior level (31%), middle
level (56%) and senior level (13%). The sample had male (62%) and female (38%) manager representation.
The executives belonged to various manufacturing and service industries such as textile, telecommunication,
electronics and communication, agro-based products, pharmaceutical, banking and financial services and
academic institutions. We could get a good representation of service and manufacturing organizations by
including 65% of participants from the service sector and 35% from manufacturing sector, respectively, in
the overall sample. The data were collected using both online and offline modes. The questionnaire was
converted into an online form and the link was provided to the executives. The questionnaire form link has
been shared with the respondents over mails. The respondents were also sent reminders after 2 weeks, and
the response rate has been 40% from online mode. We had also distributed the questionnaire to the
executives in different organizations and collected data from them. In the offline mode, the response rate
was relatively better, that is, 90%, as compared to online mode.

Analysis

Item–Total Correlation
We have tried to explore the item–total correlations to check the correlations among 26 items. The
item–total correlation helps in two ways—one, it gives a fair idea about the items highly related to each
other, representing one dimension of the given construct and two, it also helps us to understand the low
correlations among the items, which belongs to another dimension of the given construct (Nunnally,
1967). However, it is expected that in the item–total correlations table, all the items are related to each
8 Global Business Review

other because all the items are representing the same second-order construct. The results showed that
items were significantly related to each other except items 6 and 17; these two items had an exceptionally
low correlation with all other items. That means these items were not able to represent the membership
that defines our second-order construct as employee loyalty. Therefore, these two items were excluded
at this stage, and a 24-item scale of employee loyalty was retained.
Table 1 lists the descriptive statistics, including kurtosis, skewness, mean and standard deviation
(SD). While mean values reflected the average of all the item scores, SD measured the variation of the
data. Skewness is an indicator of the lack of symmetry. Kurtosis measures the degree of tailedness. The
acceptable values for skewness and kurtosis were less than 2 and 5, respectively. Loether and McTavish
(1974) have mentioned in their research to accept skewness and kurtosis values as less than 2 and 5,
respectively. Since our sample has been accepted on these values, we can conclude that the given sample
data is not skewed (Table 2).

Table 1. Sample Adequacy Measures.

KMO and Bartlett’s Test
Kaiser–Meyer–Olkin measure of sampling adequacy 0.8
Bartlett’s test of sphericity Approx. chi-square 1896.87
df 91
Sig. 0
Source: The authors.

Table 2. Descriptive Analysis and Inter-item Correlations.

Sense of Willingness
Items Mean SD Skewness Kurtosis Ownership to Stay Trust
SO 1 3.89 0.780 −0.737 1.782 0.773** 0.118 0.226**
SO 2 3.98 0.844 −0.702 1.004 0.747** 0.324** 0.215**
SO 3 4.11 0.826 −1.187 2.412 0.757** 0.271** 0.232**
SO 4 3.93 0.914 −0.870 0.785 0.768** 0.214** 0.136*
SO 5 3.24 1.081 −0.395 −0.577 0.676** −0.234** −0.246**
SO 6 3.96 0.787 −1.069 2.513 0.637** 0.341** 0.336**
WS 1 3.60 1.172 −0.497 −0.388 0.155* 0.902** 0.119
WS 2 3.44 1.077 −0.690 −0.315 0.135* 0.883** 0.078
WS 3 3.42 1.006 −0.480 −0.371 0.383** 0.703** 0.300**
TR 1 2.65 1.033 0.432 −0.701 0.031 0.106 0.845**
TR 2 2.56 1.077 0.497 −0.388 0.160* 0.063 0.793**
TR 3 3.73 0.885 −1.349 1.975 0.263** 0.259** 0.717**
TR 4 3.58 1.024 −0.842 0.362 0.154* 0.336** 0.705**
Source: The authors.
Note: **Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Dutta and Dhir 9

Exploratory Factor Analysis

Exploratory factor analysis (EFA) is the most commonly used methodology for developing a scale (Ford
et al., 1986). Generally, EFA is used to indicate a variable (Chang et al., 2020). Without affecting too
much variance explained, it reduces a broad set of variables to an appropriate number of factors (Conway
& Huffcut, 2003). EFA was conducted using the principal component method with varimax (orthogonal)
rotation on 24 items for 219 data points (Chang et al., 2020). The items were arranged based on loadings
and size. Items were suppressed in case of low factor loading (<0.4). The items that loaded below 0.5
were omitted. Also, items with cross-loading were dropped to ensure accuracy. Thus, the factor analysis
was performed on the remaining items. The iterations were performed until no more items could be
dropped. Finally, after the iterative rounds, 10 items were dropped, and 15 items remained, producing a
three-factorial structure.
We collected a new sample of 219 executives to analyse the data and run the confirmatory factor
analysis (CFA) with these 15 questions. Thus, in CFA, the number of factors was set as three. There was
only one item with a very low loading (less than 0.5), hence removed from the list (Hinkin, 1995). The
resulting solution consisted of 13 items, and the R-square value is 67.85% indicating that the existing
dimensions were able to explain 67% of the total variance. For the rotated factor solution of the 13 items,
refer to Table 3. Table 3 shows some negative values for a few items. Negative values of loadings might
occur if a few items have negative correlations; however, the final items were positively associated with
each other (Abdi & Williams, 2010).

Table 3. Exploratory Factor Analysis. Exploratory factor analysis results of employee loyalty scale items
  Sense of Willingness Trust
Ownership to Say
Whenever I get a chance to speak in social gatherings, I try to speak posi- 0.773 0.118 0.226
tive about my organization.
I always look forward to another day at work. 0.747 0.324 0.215
I always promote the brand of my organization. 0.757 0.271 0.232
I prescribe the products and services of my organization to others. 0.768 0.214 0.136
A sense of owing this organization. 0.676 −0.234 −0.246
This organization has given me lots of things in my life. 0.637 0.341 0.336
If I could choose again, I would choose to work for the current organization. 0.155 0.902 0.119
It is very rare that I will look for a new job 0.135 0.883 0.078
I often think of leaving the organization. 0.383 0.703 0.3
I am not sure that my teammates will provide necessary support if I −0.031 −0.106 −0.845
needed at work place.
Management at my firm takes interest to resolve employee grievances up −0.16 −0.063 −0.793
to the possible extent.
I rely in what my colleagues say. 0.263 0.259 0.717
I am sure about the fact that my subordinates get the work done as per 0.154 0.336 0.705
the requirements.
Source: The authors.
Note: Extraction method: Principal component analysis.
Rotation method: Varimax with Kaiser normalization.
10 Global Business Review

Sample Adequacy
A sample of 219 managerial level executives has been collected for data analysis. The sampling adequacy
(KMO = 0.80) was verified using Kaiser–Meyer–Olkin (KMO) test . The KMO value above 0.6 is
considered acceptable (Field, 2009). Bartlett’s test of sphericity was also significant, showing sufficient
correlation among the items and evidence about the fact that the correlation matrix is not an identity matrix.

Descriptive Analysis and Inter-item Analysis

Table 2 gives a summary of mean, SD, kurtosis, skewness and inter-item correlations. The items have a
good range of responses translating the SD measures around 1 or close to 1 to remain useful as an
independent item (Liden & Masyln, 1998). Also, the inter-item correlation matrix analyses the correlation
between the item and sub-dimension of employee loyalty construct. Most of the items were significantly
correlated to the sub-dimensions of employee loyalty. The inter-item correlation in the last three columns
of Table 2 shows the correlations of independent items with the respective factors identified through
EFA. It clearly shows that the items belonging to the respective dimension are high compared to the
correlations with other dimensions or factors.

Reliability
An instrument’s reliability ensures that the measurement process of the given construct is well constructed
by calculating the inter-item correlations (Selltiz et al., 1959). SPSS can be used to estimate the reliability
of an instrument. The generally used measure to evaluate reliability coefficients is Cronbach’s alpha. It
also indicates how closely the items are related to each other, especially when labelled as a single factor.
The Table 4 shows the acceptable Cronbach alpha values for 3 factors of employee loyalty as Sense of
ownership (SO), Willingness to stay (WS) and Trust (TR). Moreover, for a new scale, we prefer to have a
coefficient of above 0.7 (Loewenthal, 2001; Yi & Gong, 2013). All three factors had a reliability score above
0.7 (Table 4).

Construct Validity
Construct validity is an essential validity of any scale development process because it tests the
proposed construct (Kaplan & Saccuzzo, 2012; Lewis & Loewenthal, 2015). Construct validity is
calculated by measuring the relationship between the test being established and other related tests and
measures. Convergent and discriminant validity are two types of validity that are essential for a
meaningful test.

Table 4. Reliability Scores.

Sense of Ownership Willingness to Stay Trust Overall Scale
0.843 0.872 0.883 0.754
Source: The authors.
Dutta and Dhir 11

Convergent Validity
It determines the degree to which two items of the same construct are correlated. Convergent validity can
be calculated in two ways: one is to check the average loadings of the factors whose average loading of
factors should be more than 0.7. The other way is to check the correlation with existing scales or some
construct driven by theory (Yi & Gong, 2013). The employee scale of McCarthy (1997) had been used
for this purpose. Table 5 shows that the three factors of our employee loyalty scale satisfied both the
conditions successfully. It is expected that the average loading of each dimension should be more than
0.7 to have convergent validity for the given scale (Yi & Gong, 2013).

Discriminant Validity
Discriminant validity signifies the distinctiveness of a construct from another. It can be validated by
ensuring that the same set of items are not loaded in multiple factors (Dhir, 2020). The correlation
between the factors should be greater than the variance extracted between the factors and low correlation
among the factors (Dhir et al., 2018). Table 6 also shows that there was no cross-loading among the three
factors, and hence, the scale has discriminant validity

Criterion Validity
Criterion validity contrasts scores on the test to other measures that are believed to be related to the test.
For establishing the criterion-related validity of the construct employee loyalty, the data for perceived
contribution to company value (PC) were collected. Previous research had suggested that loyal employees

Table 5. Convergent Validity.

Correlation with the
Factors Convergent Validity Acceptable Limit Existing Scale Significance Level
SO 0.726 >0.7 0.528* 0.000
WS 0.829 >0.7 0.702* 0.000
TR 0.765 >0.7 0.258* 0.000
Source: The authors.
Note: * Significant at p < 0.01.

Table 6. Discriminant Validity.

AVE Between the Acceptable
Factors Variance Components Conditions Correlation Between the Factors
SO 0.527 SO and WS 0.607 > 0.451**
WS 0.687 WS and TR 0.636 > 0.236**
TR 0.585 TR and SO 0.556 > 0.106*
Source: The authors.
Note: *Significant at p < 0.05, **significant at p < 0.01, AVE: average variance extracted.
12 Global Business Review

always perceive their contribution to the company to be valued positively (Dhir & Dutta, 2020).
Therefore, the loyalty scores were supposed to predict the extent of PC in individuals. The study has used
an existing scale for ‘perceived contribution to company value’ of four items, which includes sample
items like ‘Do you believe that the organization’s employees have generally become more efficient
within the last year?’ in a 5-point Likert scale from ‘never’ to ‘always’ (Martense & Grønholdt, 2006)
As evident from Table 7, our scale on employee loyalty (EL) (See Appendix A) and the dimensions
of loyalty explained the criterion variable as PC, thus getting the necessary evidence about predictive
validity for the proposed scale of employee loyalty. The impact of EL scale was determined using
multiple regression analyses. Martensen and Grønholdt (2006) suggest that loyal employees are equally
interested in contributing to the company value. Results of this analysis show that EL and its dimensions
(SO, WS and TR) were able to explain a substantial variance and get the value of R square as 0.603.

Discussion
Social exchange theory suggests that the transactions between the individual and organization are
interdependent. An offer of a benefit results in an obligation to reciprocate the same. With time, these
interdependent transactions generate mutual commitments, loyalty and trust (Blau, 1964), which retain
employees. On the other hand, attrition has an adverse effect on the profit of the organization (Lalitha &
Singh, 2014). Apart from monetary loss, there is also a loss in knowledge capital (Hana & Lucie, 2011).
Thus, creating and retaining loyal employees is what every organization dreams of achieving.
The article aimed to develop a scale to measure employee loyalty. The measure of employee loyalty
included three factors, namely a sense of ownership (SO)—affective dimension; trust (TR)—cognitive
dimension; and willingness to stay (WS)—behavioural dimension. The findings of the study help
conclude that the scale is a robust one with acceptable psychometric properties. Such a scale has
implications both for academicians and practitioners. The paper has followed a systematic approach of
developing the scale on employee loyalty with valid psychometric properties. The use of mixed
methodology provided an edge over the limitations of both quantitative and qualitative methods. The
statistical analysis helped determine the significance of the three dimensions of employee loyalty, namely
‘sense of ownership (SO)’, ‘trust (TR)’ and ‘willingness to stay (WS)’. Standardizing the scale on a
sample representing different sectors has mainly contributed to the generalizability of the scale. The

Table 7. Regression Results.

Unstandardized Coef- Standardized Coef-
ficients ficients
Model B Std. Error Beta t Sig.
(Constant) 0.464 0.269 1.727 0.086
EL 0.758 0.100 0.587 7.591 0.000
1 SO 0.509 0.048 0.508 10.589 0.000
WS 0.253 0.033 0.373 7.591 0.000
TR 0.156 0.074 0.093 2.102 0.037
Source: The authors.
Note: aDependent variable: PC.
Dutta and Dhir 13

grounded theory approach has also helped to understand the concept in a more detailed way and helped
us to fill the gap between theory and real understanding of the constrict among the industry leaders.
Extant literature had a limited perspective on the construct of employee loyalty and its dimensions.
The enriching discussion undertaken in this study with experienced working executives during the
process of scale development has helped to measure employee loyalty more realistically.
The driving force of any organization is its customers. They are the ones who ensure the existence of
an organization in the competitive market. Naturally, the organization also remains focused on creating
loyal customers. To create loyal customers, we need loyal employees. Therefore, employee loyalty is a
predecessor of customer loyalty. Loyal employees contribute extensively to the growth of the organization.
They are willing to work the extra pound without looking for personal benefits. They keep the organization
alive and growing. The scale developed in this article will prove to be a helpful and valuable tool for
human resource managers.

Conclusion
Measuring employee loyalty in the organization cannot be overlooked. Quantification of employee
loyalty though difficult is most desirable in an organization. The development of this employee loyalty
scale with robust psychometric properties will assist in measuring employee loyalty accurately. The
study has developed a scale to measure employee loyalty in terms of sense of ownership, trust and
willingness to stay.

Managerial Implications
Today measuring employee retention is not enough. It is also important to measure employee loyalty.
Employee loyalty helps an organization to grow exponentially. Loyalty encourages employees to perform
to their highest standards helping the organization achieve its goals and reach new heights. The findings
of the study would benefit policymakers. It will help them to craft improved and better HR policies and
promote a culture of mutual growth and development in the organization. However, there are certain
limitations to the present study.

Limitations and Future Research

The study was conducted using cross-sectional data. Cross-sectional data are susceptible to various
factors such as age, low response and misclassification (Liu et al., 2017). Establishing a strong causal
relationship with longitudinal data is a better solution to the problem. Also, future studies can further
examine the antecedents and consequences of employee loyalty construct. Further, experimental research
through longitudinal data can be established to study organizational practices on employee loyalty.
Future studies can also compare demographic variables such as age and gender, to compare the loyalty
of employees.
14 Global Business Review

Appendix A. Employee Loyalty Scale.

Sense of ownership (SO)
1. Whenever I get a chance to speak in social gatherings, I try to speak positively about my
organization.
2. I always look forward to another day at work.
3. I always promote the brand of my organization.
4. I would prefer to recommend the products and services of my organization to my friends.
5. I feel that I own this organization.
6. This organization has given me a lot of things in my life.

Willingness to stay (WS)

7. I often think of leaving the organization. (R)
8. If I could choose again, I would choose to work for the current organization.
9. It is very rare that I will look for a new job next year

Trust (TR)
10. I am not sure whether my teammates will provide the necessary support if I needed it at my
workplace. (R)
11. Management at my firm takes interest to resolve employee grievances up to the extent possible.
12. Most of my colleagues can be relied upon to do what they say.
13. I am sure about the fact that my subordinates get the work done as per the requirements.

Acknowledgement
The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve
the quality of the article. Usual disclaimers apply.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of
this article.

Funding
The authors received no financial support for the research, authorship and/or publication of this article.

ORCID iD
Swati Dhir https://orcid.org/0000-0001-5381-1040

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