Your Employer Brand Is A Commercial Asset
// September 18th, 2009 // No Comments » // Employment Branding
Since the early days of employer brand development, there’s been a hurdle that every HR department has come up against. While the employer brand’s effectiveness as a tool can be measured in lots of intangible ways, there’s very little hard science in determining just how it contributes to the bottom line.
Over the past year as an internal employer brand manager, I’ve worked on a model to define and attach a dollar value to the employer brand. While the numbers in this example are fictitious, they show just how valuable a strong employer brand can be to an organisation.
This model looks at the three key benefits of an employer brand – attraction, retention and engagement.
Attraction
Assume that industry recruitment placement fee is 16% of salary, and the average salary of a 4000 person business is $100k. Company A hires 1000 staff a year, at 60% hires through recruitment agencies. So they’re paying $9,600,000 a year.
Company B hires 1000 staff, but only 22% through recruiters. At the same rate, their recruitment cost is only $3,520,000.
Engagement
Company A conducts a survey which demonstrates that its employees are 110% engaged. This means that employees are returning the investment that the company puts into their salary and training, in terms of discretionary effort. At 100% a company breaks even – the staff are producing work exactly in line with their combined salary. So Company A is recouping 10% more in discretionary effort than the company is paying them. This means their engagement ‘bonus’ is $40,000,000 – the commercial bonus of higher employee engagement.
Company B has workers engaged at 140% – they love the brand and they work harder. On the same salary model, this increased discretionary effort constitutes a commercial bonus of $120,000,000. Company B’s brand delivers substantially higher discretionary effort, leading to more profits.
Retention
Company A has a standard attrition of 20% annually. As a result, it experiences a dip in productivity with new hires, which amounts to 50% of the first year salary (due to training costs, time to fill and lost productivity). So the cost of 20% attrition works out as 800 staff x $50,000 (Based on average salary of $100K, this is lost commercial benefit) = $40,000,000.
Company B has an attrition of only 14% annually. The same lost commercial benefit cost is $28,000,000.
In comparison with Company A (the industry standard), Company B’s employer brand delivers;
Recruitment savings of $6,080,000.
Commercial benefit of higher engagement of $80,000,000.
Key staff retetnion benefit of $14,000,000.
A total commercial benefit of $100,080,000.
Naturally, some of these areas are difficult to define. How do you measure engagement vs productivity? In professional services, charge-out rates make this easier than in owner-operator businesses. Using your own benchmarks, you can determine the commercial result of your employee engagement, and translate this into the engagemnt part of this equation.
This is only an example, and gathering the data to create your own employer brand equity is a difficult and onerous task. However, once you can, the employer brand doesn’t become a nice-to-have. It becomes an intangible asset, part of your overall business strategy.
Of course, there’s the other side of the equation. By comparison with the industry standard, it’s entirely likely your employer brand is a commercial liability, based on the three markers above. What better argument for fixing it than the fact that it’s literally putting you at a disadvantage?
