employee engagement

The ROI of a strong employer brand

By October 6, 2016 No Comments

There is widespread recognition that brands create measurable value among consumers. Put simply, research consistently shows that people are willing to pay a higher price for branded products or services than they would for a comparable unbranded version. Known as brand equity, this price premium is the result of a combination of factors including the level of awareness and the perceptions people have of that brand.

This enhanced consumer response is the reason why organisations around the world spend thousands, if not millions, on creating and maintaining their brand. And it works. Even the most cynical consumer will be influenced to some degree by their thoughts and feelings about certain brands; attitudes that develop insidiously over time in response to everything the brand says and does (or doesn’t do).

Organisations around the world spend thousands, if not millions, on creating and maintaining their brand

Recognising the value

Given the acknowledgement that brands influence consumer behaviour, it is interesting that the concept of employer branding only emerged in the 1990s. The idea that every organisation offers an explicit and implicit value proposition to its workforce has gained traction over the intervening years, and many companies now recognise that existing and potential employees are affected both positively and negatively by the image they have of that company as a place to work.

Despite this, it can be argued that many organisations don’t always give due care and attention to their reputation as an employer. Companies that understand the financial implications of a strong consumer brand may not appreciate the full extent to which employer brand directly affects the bottom line. That can lead to a situation where employer branding and employee engagement are undervalued and seen as a “nice to have” rather than an essential element of successful business performance.

Establishing a causal link

We chatted to a couple of people who are well versed in the ROI potential of employer branding – Kirsten Davidson, head of employer branding at Glassdoor, and Stephen Cheliotis, CEO of The Centre for Brand Analysis – who shared their thoughts on how this relatively intangible activity adds up to distinctly tangible results.

“There are a lot of studies showing that companies listed as best places to work, or which are known as good places to work, financially outperform other organisations”, says Kirsten. “For example, when we looked at the Glassdoor Best Places to Work list over the last eight years we found that, on average, those businesses outperformed the S&P 500 by 122%.

Companies listed as best places to work financially outperform other organisations

“That’s great, but the question is whether this is a simple correlation or if there is a causal link between employee satisfaction and financial performance. Last summer the University of Kansas conducted a study using our data that provided valuable insights in this area. For those who are unfamiliar with the way Glassdoor works, employees and candidates have the opportunity to rate companies using a star ranking from one to an exceptional five out of five. This particular study showed that companies which improve their employee satisfaction scores on the site by one star see a 7.9% improvement in their market value. This tells us that companies with dissatisfied employees are not achieving their full potential.”

The power of a strong employer brand

Stephen believes this uplift is the result of various factors: “When we ask people whether they deem their employer’s problems to be their own, and how committed they are to fixing those issues, we see that leading brands markedly outperform weaker brands. Employees who are truly connected to the organisation in this way have a demonstrable impact on the way the business operates, which in turn translates into a positive effect on the bottom line.

“Having a strong employer brand is also about attracting and retaining the best talent. That can be challenging, particularly if your business isn’t well known, you are working in a less than glamorous sector or are recruiting for broad roles that are not sector specific, such as a new finance director. Building your brand will make it easier to recruit top candidates and may also mean that those high quality recruits are prepared to look beyond financial incentives, such as the salary or benefits package. That can be particularly helpful if you are unable to compete on those metrics but can offer an attractive alternative in terms of working environment and culture.”

Having a strong employer brand is also about attracting and retaining the best talent

Glassdoor research supports the idea that people look for more than money when making career decisions. When the company asked over 220,000 employees about the drivers of satisfaction at work the findings revealed that salary and financial compensation aren’t even in the top three. In fact, they come in fifth behind factors such the opportunity for development and how closely the organisation’s values match their own.

Kirsten makes the additional point that employer branding isn’t simply a case of telling a cool, slick story, “it’s about telling an authentic, differentiated story so people know what they’re getting into and what’s expected from them. Those are the people who are going to stay and see things through if there’s a bump in the road.” That alone can be the difference between stability that underpins growth and a high staff turnover that makes it hard to gain traction and move forward.

It’s about telling an authentic, differentiated story so people know what they’re getting into

A cross-business approach

Both Kirsten and Stephen highlight the fact that businesses will only discover the full extent to which employer branding and employee engagement deliver positive financial results when these elements sit firmly at the heart of the business. The most enlightened companies embed a focus on culture, values and staff satisfaction across the organisation, from the senior leadership team down, rather than delegating these considerations to one person or department. Taking this approach ensures that the employer brand becomes as much a driving force in operational success as the consumer brand, and one which deserves and receives just as much attention.

Kirsten Davidson, Head of Employer Brand, Glassdoor

Kirsten is responsible for sustaining and growing Glassdoor’s vibrant Employer Brand while navigating the challenges that come with hyper growth. Her work includes leveraging Glassdoor’s powerful data to provide insight and learnings that help global employers navigate a new world where the lines between recruiting, marketing, brand, and culture are increasingly blurred.

Stephen Cheliotis, CEO of The Centre for Brand Analysis (TCBA) and Chair of the UK Consumer Superbrands®, Business Superbrands® and CoolBrands® Councils

Stephen is a leading brand consultant and strategy advisor to both established and challenger brands in a wide range of b2c and b2b markets. He undertakes a range of brand evaluation and consultancy projects that inform and shape brand, marketing and business strategies to enhance brand reputation and business growth.  Stephen also works with marketing agencies to develop their intellectual property and tools to help drive their planning processes, new business outreach and fame.

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