Research Shows Exactly How Much Having a Bad Employer Brand Will Cost You

March 30, 2016

It’s easy to assume that cultivating a good employer brand – creating positive impressions among your current and potential employees – has substantial benefits. Or, on the flipside, that being perceived as an unpleasant place to work isn’t conducive to attracting top talent. But now we have the data to show that the cost of a bad employer brand could be in the millions.

Understanding the impact of your employer brand has never been easy to quantify. Yet it’s exactly this kind of data the modern day recruiter or hiring manager needs to make informed decisions. Which is exactly why here at LinkedIn, we set out to understand what happens when you don’t invest in your brand, and tried to tie it back to the hard dollars it costs.

We conducted extensive research focusing on full-time professionals, starting in the U.S. Our goal was to get clarity around how consumers evaluate a company’s brand so that we can shed light on the subject for the thousands of recruiters who invest so much of their time and energy on our platform every day.  

The cost of a bad employer brand 

A question you’re probably facing: is this extra investment worth it? Now we can categorically say, yes it is.

Using a combination of our research results, some publicly available data about salaries, and anecdotal evidence from friendly HR professionals about turnover rates, we crunched the numbers, and the results were pretty staggering:

  • The cost of a bad reputation for a company with 10,000 employees could be as much as $7.6 million in additional wages. Based on the average US salary being $47,230 (according to BLS), assumed annual turnover of 16.4%, and a minimum 10% per cent pay rise.
  • Employers who fail to invest in their reputation could be paying up to an additional $4,723 per employee hired.
  • Nearly half of US professionals would entirely rule out taking a job with a company that exhibited the top three negative employer brand factors, no matter what pay raise they were offered.
  • Even a pay raise of 10% would only tempt 28% of us to sign on the dotted line.

Bear in mind that this is just the impact on the wage bill – it doesn’t account for costs in other areas, such as employee attrition, morale, or having a smaller talent pool to choose from.

See how this US cost compares to the rest of the world in the infographic below.

  • cost of employer brand

Attracting talent at no extra cost

The research also has some illuminating results around how a strong employer brand can be influential in attracting talent, in particular younger talent:

  • Companies with most (3 in 5) of the qualities encompassing a positive employer brand can attract 41% of full-time US workers without any pay increase. This rises to 46% if they have all 5 - job security, more professional development opportunities, the opportunity to work on a better team, an organization with the same values as you and an organization that is talked about positively by present or past employees.
  • This data point also holds true for passive talent - 40% of these workers would be willing to move without a pay increase if an organization had most of the qualities of a positive employer brand.
  • Age also plays a role. Younger professionals (18 to 34 years old) are significantly more likely to accept a reduction in pay: 23% would be willing to accept a small (2%) pay cut, and 15% would go as far as a 5% reduction in pay in order to get a foot in the door of a company with a positive employer brand.
  • Companies with all 5 qualities can win over nearly half (49%) of those aged 18-34 and 46% of those aged 35-54 with no pay increase.

Avoid the cost on the bottom line

Here are my three top tips for boosting your company's reputation online:

1. Involve everyone

Your current employees are your best ambassadors and advocates. They are in the best position to give those on the outside an authentic idea of what it’s like to work for your company. Involve them in developing your ‘story’ and encourage them to share it – and their activity and achievements – through their personal and professional social channels. This is why LinkedIn launched a product called Elevate last year to help companies empower their employees to share relevant content from within the business.

The storytelling also needs to come from the top. A major lever in employer branding that sets aside the great from the mediocre is executive involvement. While often the most reticent, if you can engage the C-suite to blog and share on social, you will set the tone for the rest of the organization.

2. Seize the social opportunity

Don’t be a passive observer on social media. By playing an active part in discussion groups and threads about issues relevant to your business, you can build brand awareness and have the kind of two-way conversations with potential employees that create goodwill and trust.

3. Show, don’t tell

It’s one thing to say you have an excellent company culture, or that you’re concerned with reducing your environmental impact, but in a competitive talent market you need to back it up.

Blogs, photos, graphics, and videos can provide valuable insight into your company, and spark conversations. They don’t necessarily have to be slick, but they do have to be real – authenticity is key and can be a big differentiator when many prospective employers claim to have a great culture.

How does your company approach its talent brand? Have you seen any particularly great examples in your industry? We would love to hear about them on Twitter -- at @HireOnLinkedIn.

*Image by Kristina Alexanderson

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