How to Create Shareholder Value with Employer Branding2 min read.
When making a case for Employer Branding investment, among the many ROIs (Return on Investment) you can point to, do not ignore the potential positive impact of EB on share value…
Employer Branding is no longer an optional add-on but is now established best practice for any organisation, as vital as marketing, product development, PR, and other recognised business essentials.
It is now a critical aspect of a company's overall brand reputation, promoting the image of an employer that can attract and retain top talent. According to Glassdoor, 69% of job seekers are likely to apply for a position if a firm actively manages its Employer Brand, while on LinkedIn 45% say that a company’s Employer Brand is more important than the role itself.
When it comes to Employer Branding, the genie is out of the bottle and serious organisations can no longer hope to successfully compete for talent without it.
And because of the cost efficiencies associated with talent retention in terms of lower recruitment overheads (a 43% lower cost-per-hire, says Glassdoor) and improved performance outputs, a strong employer brand can significantly impact a company's financial performance and even its share price.
It does not guarantee share performance, of course, because there are simply too many variables influencing the markets, but by exerting a positive influence on costs and productivity it can have both direct and indirect impacts on a company's value. A strong employer brand can lead to positive financial results, such as increased revenue, profitability, and market share, which will send the price in the right direction.
Of the top ten companies in talent consultancy WilsonHCG’s 2023 Fortune 500 Employer Branding report, only two have seen a decline in share price over the last five years and both are in the troubled tech sector. Of the other eight, seven of them experienced a double-digit increase over that 60-month period.
Here is how employer branding can impact a company's share price:
Attracting and retaining top talent
A highly skilled and motivated workforce drives innovation, increases productivity, and positively impact the company's financial performance and share value.
Reputation and customer loyalty
An enhanced reputation leads to increased customer loyalty and higher sales. Again, this is unlikely to do any harm to the share price.
Investors may view a company with a positive Employer Brand as a financially stable and attractive investment opportunity, leading to, yep, you guessed it, an increase in the company's share price.
Weak employer branding
Conversely, a weak Employer Brand will have a negative impact on performance, leading to higher employee turnover and the ‘regrettable loss’ of valuable talent, decreased productivity, and a negative effect on share price.
According to a survey conducted by LinkedIn, 72% of recruiting leaders globally agreed that Employer Branding had a significant impact on hiring top talent. Furthermore, a study by Glassdoor found that companies with strong Employer Brands enjoy a 43% higher retention rate than companies with weaker ones.
A report by Universum found that companies with strong Employer Brands enjoyed a 43% increase in share value over five years, while companies with weaker employer brands saw only a 16% increase.
In another study, companies with strong Employer Brands were found to have a 20% higher stock price performance compared to those with weaker Employer Brands. Additionally, organisations with strong employer brands commanded a premium of up to 9% in their stock price.
You get the picture. There are countless studies, surveys and reports all pointing to the positive impact of Employer Branding on the bottom line.
The unanimous verdict is in - investment in developing and maintaining a strong Employer Brand makes sound business sense, both in the boardroom and on the markets.
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