17 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization
The Influence of Employer Branding
on Productivity-Related Outcomes of an Organization Alan Robertson* and Ali Khatibi** The study aims to identify the significant outcomes of employer branding on organizational productivity and which organizational factors impact upon the relationship between the two. Data gathered from a survey of 369 Sri Lankan companies indicates that a well-developed employer branding strategy enables an organization to achieve significantly higher employee productivity-related outcomes than with a partially-developed or undeveloped strategy. Identifying the factors instrumental to the process affords an increased awareness of why this occurs, particularly in respect to the role of senior management in developing and driving the branding strategy, as well as understanding that its impact is largely ineffective until the brand image is fully developed and embedded in the internally and externally-focused identity of the organization. Although data was gathered from companies in one developing country it has practical implications for those managing employer branding programs through providing a greater understanding of the importance of organizational factors on brand strategy development in effecting the improved productivity. * PG Student, Faculty of Business Management and Professional Studies, Management and Science University, Malaysia. E-mail: nalalanka@yahoo.com ** Dean, Faculty of Business Management and Professional Studies, Management and Science University, Malaysia. E-mail: alik@msu.edu.my Introduction Ambler and Barrows (1996) seminal definition of the term employer brand described it as the package of functional, economic and psychological benefits provided by employment, and identified with the employing company, while the sum of a companys efforts to communicate to existing and prospective staff that it is a desirable place to work (Lloyd, 2002) outlines the employer branding process. In both instances, these definitions focus on the obligations of the employer to the benefit of the employees without spelling out any commensurate return in terms of positive outcomes for the organization. Although up to 20% of businesses in some countries actively practice employer branding strategies (Minchington, 2011), there appears to be little research data to document the outcomes that ensue in relation to factors that increase productivity. In exploring the relationship between the employer brand and the productivity-related outcomes of an organization, the following question is addressed: What are the significant outcomes of employer branding that influence employee productivity? 2013 IUP. All Rights Reserved. The IUP Journal of Brand Management, Vol. X, No. 3, 2013 18 Literature Review An examination of the literature related to employer branding indicates that it has essentially six major potential outcomes for an organization. Two outcomes are directly related to the external focus of the employer brand: facilitating the recruitment of (1) a sufficient number; and (2) quality of employees. The objectives of the internal employer brand are directed towards: (1) improving levels of employee job satisfaction; (2) increasing staff retention and reducing turnover; (3) enabling higher levels of productivity as a result of greater employee commitment; and (4) reinforcing the consumer brand image of the organization. Externally-Focused Outcomes Initially, and even in some current literature, employer branding is seen principally as a recruiting tool for organizations. Chambers et al. (1998) in The War for Talent explore the difficulty faced by large US companies in attracting the most suitable executive employees. Reasons for this include the aging population which is resulting in a reduction of the proportion of working age people, no increase in the percentage of female workers, a flattening of workforce productivity improvements, stable immigration levels and executives not prolonging their careers. Despite the global financial crisis, these findings remain relevant. In arguing that employer branding offers the best way to redefine and improve the way a company recruits, Johnson and Roberts (2006) cited a study that indicated 40% of job seekers ranked treatment of employees highest in their perceptions of organizations as a place to work (29% ranked quality of products or services as most important). Research by the Chartered Institute of Personnel and Development (CIPD) shows that approximately 75% of companies that use employer branding as a tool for recruitment find it effective (Dyer, 2007). The recruitment process entails development of the appropriate image for an organization, striking a balance between instrumental and symbolic traits (Greening and Turban, 2000; Lievens and Highhouse, 2003; and Hieronimus et al., 2005), segmenting the job seeker market (Moroko and Uncles, 2009), and presenting an accurate and realistic perception (Meglino and Ravlin, 1999; Cable et al., 2000; and Backhaus and Tikoo, 2004), closely aligned with other organizational images (Knox and Freeman, 2006; Wheeler et al., 2006; and Mark and Toelken, 2009) and the internal employer brand (Davies et al., 2004). Some research studies have identified a relationship between an organizations reputation and its success in attracting quality applicants (Fombrun, 1996; and Cable and Turban, 2001), with Highhouse et al. (1999) suggesting overall perceptions of reputation are in fact the most significant factor influencing the choice by recruits. Factors that contribute to an organizations reputation include financial performance, company size, media exposure, advertising expenditures and type of industry (Cable and Graham, 2000). 19 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization The concept of employer attractiveness provides another approach to branding an organization in relation to recruitment through the identification of attributes which positively influence its perception in the eyes of job applicants (Berthon et al., 2005; and Arachchige and Robertson, 2011). Employee Satisfaction and Commitment It could be argued that employee satisfaction and commitment are not ends in themselves but rather mediating variables between identification with the employer brand and outcomes such as retention and job performance. While it is acknowledged that there is a link with product brand identification and employee commitment to delivering the brand promise (Boone, 2000; and Aurand et al., 2005), the relationship between employer brand, employee satisfaction and commitment and job performance is yet to be supported empirically. In fact, Punjaisri et al. (2009) showed a distinct absence of a statistically significant relationship between employees brand commitment and brand performance. For this reason, employee satisfaction and commitment will be considered as definitive outcomes of employer branding. Satisfaction and commitment are derivatives of the ability of the organization to meet its employees expectations as perceived in the psychological contract (Rousseau, 1995). Establishing the employer brand is highly dependent on the organizations ability to communicate its values and expectations to employees. This can be done through formal processes associated with HRM activities (training and development, compensation and performance management), public relations, and informal sources (co-worker influence, organizational culture, leadership and management behavior) (Miles and Mangold, 2004). The employer brand has the ability to develop a brand image and brand personality (Davies, 2008) which contribute to the organizational identity (Albert and Whetten, 1985). This shapes the employees personally perceived image and in turn, influences their satisfaction and commitment (Mael and Ashforth, 1992; and Dutton et al., 1994) and is generally seen as a positive outcome for employer and employee alike. Retention of Employees Management theory normally emphasizes the importance of organizations attracting, developing and keeping talented employees. Retention of employees is seen as a positive and relevant objective of organizations, and practices, such as employer branding, which have the potential to enhance retention are considered to be valuable due to their role in contributing to this outcome. However, the value of retention as an outcome does need to be qualified in some respects. Somaya and Williamson (2008) pointed out that companies in general lose approximately 15% of their human capital every year, yet this should not always be seen in a negative light. They point out that while some employees are lost to competitors, others leave to join existing and potential firms with whom linkages can be forged. The IUP Journal of Brand Management, Vol. X, No. 3, 2013 20 It is also possible that very low employee turnover may be misleading as an indicator of employer branding success if staff are loyal to the employer simply to accrue tenure- based rewards and are not sufficiently engaged in the organizations goals (Moroko and Uncles, 2008). Drucker (2002) has drawn attention to the growing trend of employing temporary workers, particularly through temp agencies, often with a view to giving an organization greater flexibility in the management of its workforce, but also to help minimize the costly regulatory processes associated with hiring labor. In a situation where a reasonable proportion of employees are hired, fired and possibly, promoted from outside the organization, the traditional concept of employer branding is unlikely to hold. Nonetheless, retention is seen as an important objective in most companies, especially considering the cost of recruiting, inducting and developing replacement staff. Productivity In terms of quantifiable evidence, there is still a large question mark as to whether employer branding contributes towards helping a firm achieve better performance. Resolving the issue is a difficult task due to the complexity of linking branding programs and firm performance. Backhaus and Tikoo (2004) suggested that it would be necessary to identify the mediators that operate between the employer branding program and the firms profit margin or profit growth. These may take the form of incremental increases in individual level productivity, or overall productivity at the aggregate level (Backhaus and Tikoo, 2004, p. 512). Other strategies entail comparative studies of successful and unsuccessful employer branding in organizations (Moroko and Uncles, 2008), and identifying organizations regarded as having higher levels of employee relations and comparing their performance with other similar organizations in the broader market (Fulmer et al., 2003; and Read, 2007). A range of linkages between employee characteristics and organizational outcomes have been identified in research studies. The alignment of employee identity with organizational identity has been shown to increase positive work-related attitudes and behaviors (Olkkonen and Lipponen, 2006). It has been found that higher levels of employee satisfaction can lead to greater performance levels (Iaffaldano and Muchinsky, 1985) and higher customer satisfaction (Ryan et al., 1996). In addition, employee attitudes are positively related to customer satisfaction (Morrison, 1995), while Rucci et al. (1998) have gone one step further by linking employee attitudes and customer satisfaction to financial growth in their description of the five year process to revamp the ailing Sears Roebuck Company in the United States. In terms of assessing performance outcomes, Davies et al. (2010) have focused on the relationship between employee and customer perceptions of corporate identity, specifically the variation between the two. Their results showed that where employees have a more positive view of a companys identity than customers, sales will grow commensurately. On the other hand, a more negative view of corporate identity by employees than customers 21 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization will result in a decline in sales. The whole subject of the link between employer branding and productivity is closely aligned with the concept of psychological contractin an organizational context the shared understanding of employee obligations toward the employer and the obligations expected from the organization in return (Edwards, 2010). The closer the alignment of employee behavior with the values of the employer brand, the stronger the psychological contract between both parties and presumably, the greater the employee productivity. However, as Vallaster and de Chernatony (2005) pointed out, this alignment is very much dependent on the success of the employer branding process. While there is an inherent logic in all of this, little has been done to substantiate the relationships, although Punjaisri et al. (2009) have found a positive link between internal branding to employees within organizations and behavioral aspects of employees in their delivery of the brand promise. Enhancing Product Brand Equity In the effort to differentiate employer branding from its marketing counterpart, the product (or consumer), the importance of the link between the two has received little recognition in the available literature. Mosley (2007), however, has made an argument for the interaction of employer branding with customer brand experiences whose strength depend on an organizations brand ethos and culture. He stated that sustainable brand- led culture change will only be effective when the brand ethos is deeply embedded in the everyday leadership and people management processes of the organization. Employer brand management provides such a mechanism for translating the brand ethos into the everyday working experience of employees, and by doing so reinforces the organizations ability to deliver consistent and distinctive customer brand experience (Mosley, 2007, p. 132). Knox and Freeman (2006) further added to this idea with their claim that internal employer branding and external marketing communications, two-way branding, will both be strengthened if there is a strong congruence between the two. Henkel et al. (2007) emphasized the importance of the managerial role within organizations to implement and control employee delivery of the consumer brand. They found that success in the attainment of this objective is dependent on the brand promise being lived up to in the attitudes and behaviors of each employee, which enables them to adapt and respond quickly to customer needs with respect to brand values of their company. In order to do this, they should know the companys goals, values and expectations which are, in part, transmitted through the employer brand image (Foster et al., 2010). One of the major functions of the consumer brand is to differentiate a product from that of its competitors (Aaker, 2003). The differentiation of the organization as an employer can be attributed to the strength of the employer brands personality (Davies, 2008) and the uniqueness and attractiveness of the psychological contract between the employees and the organization (Edwards, 2010). As the employer brand should reflect the organizational values and goals, this differentiation as an employer should create a The IUP Journal of Brand Management, Vol. X, No. 3, 2013 22 differentiation in the values and goals espoused by its employees with a subsequent flow-on to differentiation in employee performance which will include consumer brand supporting behavior. Conceptual Framework Figure 1 presents a simplified conceptual model for the employer branding process. The study focuses on the latter stages of the branding process following the establishment of the brand itself and examines the relationship between the employer brand (internal and external) and the organizational outcomes. Figure 1: Conceptual Employer Branding Model Organizational Communication Organizational Outcomes Employer Brand Employer Value Proposition Employer Branding Management Organiza- tional Factors Hypotheses In order to provide answers to the question underpinning this study, the following hypotheses are addressed: Hypothesis 1: The strength of the employer brand is positively related to external and internal organizational productivity outcomes. Hypothesis 2: The greater the level of employer branding strategy implementation within an organization, the greater the level of external and internal organizational productivity outcomes. Methodology Information was gathered from a study of employer branding in Sri Lankan companies. A total of 608 employees of 369 companies of varying sizes, industries and locations within the Western Province were selected, including the capital city of Colombo and the Greater Colombo area. Two types of sample populations were used in the study. The first was made up of a random sample of 66 companies drawn from the list of the 100 most respected business 23 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization entities in Sri Lankan as identified in a survey conducted by The Neilson company for the Lanka Monthly Digest (LMD, 2010), a well-reputed business magazine. The second, and larger sample of 303 was made up of companies selected randomly from selected stratified locations within similarly derived geographical areas within the Western Province. The principal source of data was a self-completion questionnaire administered to one or more employees within the selected companies depending on the policy of the company. In addition, semi-structured interviews were conducted with one employee from 20 Sri Lankan companies of varying sizes, industrial classifications and geographical locations. Respondents were asked to indicate on a five-point Likert scale the rating of their organization in relation to questions on the external employer brand and the internal employer brand, the productivity-related outcomes and the mediating factors. The external employer brand is that perceived by potential job applicants while the internal brand relates to the perception by current employees of the organization as an employer. For the purpose of this study, companies were classified according to the level of employer branding strategy that they had implemented. These were grouped into three levels: A well-developed employer branding strategy. A partially-developed employer branding strategy. No employer branding strategy. The data was processed using SPSS. Each scale was tested for reliability with the alpha obtained in all being above 0.80, which is considered as good (Sekaran and Bougie, 2009). Results and Discussion Respondents were asked to rate the performance of their company in achieving each of the potential outcomes. In relation to the external branding outcomes, recruiting applicants of the required quality was rated more highly than recruiting sufficient quantity. Of the internally focused outcomes, enabling employees to provide quality of product and service was seen as the major outcome, followed by increasing worker satisfaction and commitment and increasing productivity. The companies surveyed were perceived as least effective in reducing voluntary employee resignations (Table 1). Hypothesis 1 Hypothesis 1 states that the strength of the employer brand is positively related to external and internal organizational productivity outcomes. Testing these variables for statistical correlation reveals a moderate level of positive correlation between the external and internal employer brands and their corresponding productivity variables (Table 2), thereby supporting the contention of Hypothesis 1. The IUP Journal of Brand Management, Vol. X, No. 3, 2013 24 N Mean SD Recruiting enough new job applicants to fill vacancies 363 3.34 0.707 Recruiting applicants with required skills and abilities 366 3.41 0.741 Creating work environment for satisfaction and commitment 366 3.41 0.758 Minimizing voluntary employee resignations 368 3.11 0.861 Increasing employee productivity 368 3.39 0.689 Enabling employees to provide quality of product and service 368 3.48 0.729 Overall mean 3.36 0.583 Table 1: Mean of Outcomes Hypothesis 2 Secondly, the level of employer branding strategy development and level of outcomes can be considered. Tables 3 and 4 indicate, companies with a well-developed employer branding strategy have a significantly higher level of related productivity outcomes than do those with a partially-developed or no strategy. External Internal Externally- Internally- Employer Employer Focused Focused Brand Brand Productivity Productivity External Pearson 1 0.456 ** 0.424 ** 0.421 ** Employer Correlation Brand Internal Pearson 0.456 ** 1 0.427 ** 0.563 ** Employer Correlation Brand Externally- Pearson 0.424 ** 0.427 ** 1 0.664 ** Focused Correlation Productivity Internally- Pearson 0.421 ** 0.563 ** 0.664 ** 1 Focused Correlation Productivity Table 2: Correlation Between Employer Brand Strength and Outcome Means Note: ** Correlation is significant at 0.01 level (2-tailed). 25 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization Mean SD Mean SD Mean SD Recruiting enough new job applicants to fill vacancies 3.78 0.76 3.29 0.70 3.30 0.679 Recruiting applicants with required skills and abilities 3.89 0.79 3.39 0.71 3.35 0.72 Creating work environment for satisfaction and commitment 3.96 0.67 3.44 0.69 3.31 0.77 Minimizing voluntary employee resignations 3.61 0.89 3.10 0.83 3.03 0.84 Increasing employee productivity 3.80 0.71 3.42 0.62 3.30 0.70 Enabling employees to provide quality of product and service 3.96 0.76 3.56 0.67 3.38 0.72 Table 3: Comparison of Means and Standard Deviations of Outcomes at Different Levels of Employer Branding Strategy Well-Developed Employer Branding Strategy Partially- Developed Employer Branding Strategy No Employer Branding Strategy Outcomes The ranking of outcome strengths is almost identical across the three strategy levels. In relation to the externally-focused outcomes, the ability to get the right people was to a small degree more successful than getting sufficient numbers of employees to fill the vacancies. Of the internal outcomes, worker satisfaction and commitment was most highly ranked in companies with a well-developed employer branding strategy, closely followed by the enabling of employees to provide quality of product and service. The order was reversed in the other two branding strategy levels. In all groups minimizing resignations was the least successful outcome. The one-way ANOVA analysis identifies a significant difference between companies with a well-developed employer brand strategy and those with a partial or no strategy (Table 4). In Tables 4 and 5, there is a significant relationship between a strong employer brand and a well-developed employer branding strategy bringing about higher levels of productivity-related outcomes. Hypothesis 2, therefore can be partially accepted, however, it must be remembered that the means in Table 4 support the hypothesis only in relation to companies with a well-developed strategy. The following two qualifications to the hypothesis must be noted. The IUP Journal of Brand Management, Vol. X, No. 3, 2013 26
Level of Employer Branding Strategy N Subset for alpha = 0.05 1 2 Tukey HSD a No strategy 226 3.2762 Partially-developed strategy 107 3.3657 Has a well-developed strategy 35 3.8341 Sig. 0.610 1.000 Table 4: Means of Productivity Outcomes Related to Level of Employer Brand Strategy Development The first relates to the fact that there is little difference between the outcomes of companies with a partially developed employer branding strategy and those with no strategy at all. The strength of the employer brand therefore does not appear to increase Tukey Has a well- Partially- 0.46847 * 0.10936 0.000 0.2111 0.7258 HSD developed developed strategy strategy No strategy 0.55797 * 0.10202 0.000 0.3179 0.7981 Partially- Has a well- 0.46847 * 0.10936 0.000 0.7258 0.2111 developed developed strategy strategy No strategy 0.08950 0.06591 0.364 0.0656 0.2446 No strategy Has a well- 0.55797 * 0.10202 0.000 0.7981 0.3179 developed strategy Partially- 0.08950 0.06591 0.364 0.2446 0.0656 developed strategy Table 5: Comparisons Between Productivity Outcomes at Different Levels of Employer Brand Strategy Note: * The mean difference is significant at the 0.05 level. Dependent Variable: Productivity Output Mean (I) Level of Employer Branding Strategy (J) Level of Employer Branding Strategy Mean Difference (IJ) Std. Error Sig. 95% Confidence Interval Lower Bound Upper Bound 27 The Influence of Employer Branding on Productivity-Related Outcomes of an Organization at the same rate as the branding strategy builds momentum. It is not until the employer branding strategy is established and fully functional that a significant growth in productivity outcomes takes place. Secondly, while the outcomes may be at a lower level, the employer brand strength can still have a strong effect in companies with no employer branding strategy (Table 6). Therefore, a company with a strong employer brand, whether it is achieved by a deliberate employer branding strategy or not, can receive a commensurate productivity-related improvement. Table 6: Linear Regression Effect of No Employer Branding Strategy on Relationship Between Employer Brand Strength and Productivity Outcomes Model Unstandardized Coefficients Standardized Coefficients B Std. Error Beta t Sig. 1 (Constant) 1.078 0.236 4.563 0.000 Employer Branding 0.652 0.070 0.534 9.359 0.000 Mean Note: a. Dependent Variable: Productivity Outcome Mean. b. Selecting only cases for which companies have no employer branding strategy. The main findings on the employer branding-related outcomes can be summarized as follows: There is a moderate level of correlation between the strength of the employer brand and organizational productivity outcomes, both externally- and internally- focused. Companies with a well-developed employer branding strategy exhibit higher levels of related organizational productivity outcomes than those with partial or no strategy. There is no significant difference between the employer branding-related productivity outcomes between companies with a partially-developed employer branding strategy and those with no strategy. Implications of the Findings The study has found a positive link between the strength of an employer brand with levels of recruitment and factors related to employee productivity. The association between the internal brand and its related outcomes is stronger than that between the external brand and related outcomes. The argument for developing employer branding in an organization is further strengthened by the significant difference in the levels of outcomes between those with The IUP Journal of Brand Management, Vol. X, No. 3, 2013 28 a well-developed strategy and those with a partially-developed or undeveloped strategy. In relation to all outcomes, those organizations in the former category have been shown to achieve at a considerably higher level than others, particularly in enabling better product and service quality and creating a work environment for employee satisfaction and commitment. From a recruitment perspective, these organizations are most significantly successful in attracting applicants with the required skills and abilities, while minimizing voluntary employee resignations is the least successful of the outcomes. Nonetheless, the level of employee retention in companies with a well-developed employer branding strategy is still much higher than those with a lesser strategy implementation. Conclusion The data gathered for this research indicates that a well-developed employer branding strategy enables an organization to achieve significantly higher employee productivity- related outcomes than with a partially-developed or undeveloped strategy. Identifying the factors instrumental to the process affords an increased awareness of why this occurs, particularly in respect the role of senior management in developing and driving the branding strategy, as well as understanding that its impact is largely ineffective until the brand image is fully developed and embedded in the internally and externally-focused identity of the organization. To be more precise in determining the nature and extent of the outcome improvement derived from employer branding, a set of quantitative measures are needed. Although the available literature provides an assortment of approaches, there is little in the way of a definitive framework. Further, research in this area would be very valuable. In addition, the process of embedding employer branding within an organization needs further exploration. Even though employer branding may be practiced, there appears to be a critical level of implementation at which it becomes effective. Both cross-sectional and longitudinal studies are needed as well as case studies from a range of industries, organizational types and sizes and countries. Limitations of the Study: All the data obtained by questionnaire and interview was drawn from one country, Sri Lanka, and therefore the findings may not be applicable in other national settings. In relation to the sampling of respondents two points need to be mentioned. Firstly, as employer branding is still largely in its early stages of development in Sri Lanka, the number of companies surveyed which had a well-developed employer branding strategy was considerably smaller than those with a partially-developed strategy and those with no perceived strategy at all. In addition, the sample was made up of companies not individuals. It was not possible to control who the participants from each company were. This depended on the policy of the company and the identity of the original contact person in each. 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