The Cost-Cutting Benefits of Employer Branding - dummies

The Cost-Cutting Benefits of Employer Branding

By Richard Mosley

Companies often focus on the investment needed to develop an employer branding strategy. However, they often neglect to see the cost-cutting benefits when it is successful.

A LinkedIn survey of 2,250 corporate recruiters in the U.S. revealed that the average cost-per-hire in organizations with a strong employer brand was two times lower than those with employer brands ranked moderate to poor. In addition, LinkedIn discovered that the employee turnover rate among companies with a strong employer brand was 28 percent lower than among companies with weaker employer brands.

Given that the average cost of employee turnover, including training and lost productivity, can range from 90 percent to 200 percent of an employee’s annual salary, the cost savings involved in this lower rate of attrition are clearly significant.

Cost savings derive from a number of factors, including the following:

  • Direct sourcing: Taking a more proactive approach to employer branding helps you to bring your recruitment marketing in-house, and reducing your dependency on search firms significantly reduces your cost-per-hire.
  • Better targeting: Employer branding focuses on targeting the right talent with the right messages through the right channels. This cuts costs in three ways:
    • Focuses your recruitment marketing investment where you know you’ll get the best return
    • Reduces the number of applicants who fail to meet your general requirements, saving time and reducing processing costs
    • Ensures you attract and hire the right candidates with a clear (and realistic) understanding of what they can expect
  • Rationalizing your creative spend: By focusing investment on a single creative framework with a shared selection of high-quality creative assets, rather than taking a more localized and ad hoc approach, you can save a significant amount of money. This logic extends beyond global advertising campaigns to career sites and other online domains where coordinated investment in website development and recruitment marketing content generally benefits from similar cost advantages.
  • Building brand awareness and equity: Decades of brand research have demonstrated that consistent brand messaging builds greater awareness and a stronger, more impactful brand image over time than is accomplished by more fragmented approaches. After you’ve established a positive brand reputation, subsequent marketing activities benefit significantly from the brand halo effect. In simple terms, you get more bang for your marketing buck when people feel generally familiar and favorable toward your brand than when they don’t know you.
  • Enhancing your pull power: In addition to more cost-efficient and effective push marketing, a clear employer brand image attracts (pulls) a much higher proportion of unsolicited applications from target candidates. Likewise, a positive employer brand experience encourages a higher level of advocacy and referral activity (a source of hire known for its low cost and high quality). It also provides access to a much wider pool of potential talent.
  • Hiring good people for less: Convincing midcareer candidates to leave one organization and join another typically requires a salary increase or conversion premium. Conference Executive Board (CEB) research indicates that the average conversion premium required to attract a midcareer candidate to an organization with a strong employer brand reputation was close to half that demanded from an organization considered to have a weak employer brand reputation.
  • Reducing unwanted attrition and rehire: If you’re clear about the kind of people who will fit in and thrive within your organization, you’re clear about the kind of employment deal you’re offering them, and you deliver on your employer brand promises, you’re likely to enjoy a significantly lower level of unwanted employee turnover. The cost savings can be significant, particularly with regard to misfit attrition within the first few months — before an employee has been able to make a meaningful contribution to performance.