Employer Brand and Profits: Correlation or Causation?

WRITTEN BY: Jörgen Sundberg

If you take employer branding seriously then you are bound to ask: is there a correlation or a causal link between employee satisfaction and financial performance? You would hope to see a positive and significant relationship between employer brand and engagement and retention.

In 2015 the University of Kansas conducted a study for Glassdoor which showed that companies which improve their employee satisfaction scores on the site by one star see a 7.9% improvement in their market value. The study examined whether company ratings predict two commonly used measures of financial performance: Tobin’s q (which is a measure of a company’s current market value) and return on assets.

The authors of the study concluded that “Consistent with previous studies, our results suggest that corporate culture, as assessed by employees, helps predict subsequent firm performance… our finding provides empirical support for recent theories of the firm that model employees as key corporate assets.”

Definitive outcomes

A branding initiative will start with the identification of those dimensions of employer brand that help an employer to gain competitive advantage through retaining the talented employees. Careful selection of relevant metrics allow the team to explore the relationship between employer brand and productivity, job satisfaction, commitment and employee loyalty.

We know that a robust employer brand can significantly affect the engagement levels of employees who then deliver a positive customer brand experience. Research has linked happy employees to happy customers, so it is not surprising that enterprises want to align employer and corporate brand strategies in a competitive environment. It is clear that employee satisfaction and commitment may be considered as definitive outcomes of effective employer branding.

It is a complex task to link branding programs and organisational performance. It is possible to make a number of links between employee characteristics and organisational outcomes, for instance:

  • it has been shown that alignment of employee identity with organisational identity increases positive work-related attitudes and behaviours
  • higher levels of employee satisfaction can lead to greater performance levels and higher customer satisfaction
  • employee attitudes are positively related to customer satisfaction
  • a study of retailers was able to link employee attitudes and customer satisfaction to financial growth
  • a 2010 study showed that where employees have a more positive view of a corporate identity than customers, sales will grow commensurately.

The link between employer branding and productivity is a function of the psychological contract – the closer the alignment of employee behaviour with the values of the employer brand, the stronger the psychological contract and, hopefully, the greater the employee productivity. Engagement is key in that it results from having a line of sight between individual and business performance so employees understand their contribution, also important is a culture that values, encourages and listens to staff.

Live the brand

Identifying the element of employer brand which is instrumental in improving engagement and performance affords significant information for senior management in developing and driving the branding strategy. ‘Living the brand’ will show in improved customer satisfaction, loyalty and profit, all of which can be measured to monitor financial impacts and cost savings and, in truth, everything done as part of the employer branding initiative will impact on the overall brand. In evaluating ROI it is important to monitor on an ongoing basis the metrics used in tracking the building of brand and outcomes in order to ensure that employer brand matches the vision conceived of it in the design phases.

Engagement, the emotional commitment one has to the organisation and its goals, drives higher levels of discretionary effort. In conclusion, we believe that organisations with a strong employer branding strategy achieve greater productivity than those which lack such a strategy.

Ready to correlate your employer brand strength with company performance? Check out The Employer Brand Index today.


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