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Brilliant CEOs build employer brands

THE concept of an ‘employer brand’ made its debut in management literature in 1996 in a seminal paper penned by Ambler and Barrow, published in the Journal of Brand Management. The proponents of this concept defined an employer brand as the “package of functional, economic and psychological benefits provided by employment and identified with the company.” An employer brand is thus the total employment experience. In business terms, an employer brand is the reputation an employer commands among current and prospective employees. Ideally, this should be as a great place to work and with whom customers would like to do business. The process of employer branding entails how an employer uniquely combines and communicates strategy-supporting financial and non-financial rewards to differentiate it from other employers. There is a business case for CEOs to be directly involved in sponsoring the crafting of employer brands.

Brett Chulu

Employer brands business case
One of the lesser known abilities of the late co-founder of Apple, Steve Jobs, is that he was as much a brilliant HR strategy genius as he was technologically savvy and was a mastermind in innovation.This trait is not unique to Jobs—CEOs from top tech firms exhibit the same unusual intense interest in HR strategy. This pattern is to be anticipated due to the heavy dependence of high tech on knowledge management. In high tech, the greatest assets are neither physical assets nor financial capital, but brain capital. Thus, attracting, retaining and engaging top minds are key strategic and operational imperatives. This largely explains why the CEOs of top tech firms place a huge premium on building and sustaining powerful employer brands. The Boston Consulting Group conducted research into how business performance differs between firms with strong and weak HR practices and found that employer branding was one of the focal areas. The research, published in August last year, found that firms with strong employer branding practices had profit growths 2,4 times greater and profit margins 1,8 times bigger than firms with weaker employer branding practices. This is due to the fact that powerful employer brands are more likely to attract and retain high-performing candidates who can grow the top-line. Interestingly, it has now been established that candidates are willing to take 10% reduction in salary in order to work for a powerful employer brand.

Lessons from tech firms
The most important takeaway from top tech firms is that an employer brand is a driver of business strategy. Apple’s trademark strategy is growth through disruptive innovation and its employer brand is built to deliver on this strategy. Disruptive innovations are game-changing innovations that create new markets by simplifying products and services, making them more affordable to previously excluded consumers. Apple reflects this thinking in how it positions itself as an employer brand. Its pay-off line; “think different” sums up the reputation it wants to be known for by its current and prospective employees. The jobs website further reads: “Simplicity isn’t simple. Ask anyone here. It’s hard work. It means forever asking, “Why is it this way?” and “How can it be better?” It means rethinking every customer experience until the clutter has fallen away — until all that remains is what’s essential, useful, and beautiful.” In short, Apple promises an employer brand that is similar to the one it promises its customers. So what’s unique about the Apple employer brand? Two practices set Apple apart.

First, Apple does not offer high basic salaries as might be expected at the world’s most valuable firm.Cash bonuses are reported to be in the order of 30% of basic salary. That’s really low when compared to other top firms that are known to offer short-term incentives equal to or exceeding basic salary. Low fixed pay and low short-term incentives are a deliberate strategy Jobs crafted for a reason. This is related to Apple’s unconventional innovation processes. Apple is well-known for employing several teams to work on highly secretive assignments in which each team is kept in the dark about what the other is working on. This work practice is deliberately designed to maximise competition and rivalry among the teams so as to bring out the best among them. Jobs knew very well that a highly competitive environment could result in counterproductive behaviour such as sabotage. A smart way to counteract this is to give employees low fixed pay and low incentives and throw in long-term incentives such as share options. That’s what Jobs did. It is not in the interest of an employee to sabotage others as that could ultimately curb share price growth. Second, Apple has the unique capability of consistently churning out game-changing innovations. Besides almost guaranteeing spectacular share price growth, promising fabulous wealth for employees, game-changing innovations have a psychological benefit. Employees are given the opportunity to become part of the ‘next big thing’ that influences fundamental global lifestyle trends. Thus Apple provides meaning to employees in that they see how their efforts directly impact the entire world. That’s an experience unique to Apple. That’s why the company’s jobs website partly reads: “A job at Apple is unlike any other you’ve had. You’ll be challenged. You’ll be inspired. And you’ll be proud. Because whatever your job is here, you’ll be part of something big.”
The second most important takeaway from high tech firms is that though two firms can have similar business strategies, their employer brands are unique. Apple, Google, Netflix and Facebook thrive on innovation but they are markedly different employer brands. Netflix, the firm that disrupted the movie rental business thinks very much differently from Apple when it comes to a crucial aspect of employer branding. Netflix is well-known for its radical work-life balance practices, its bold leave practices being a case in point. Netflix, unlike most firms, gives unlimited leave days and neither records nor tracks them. Netflix has reasoned that the nature of its business blurs the distinction between work and non-work life. At Netflix it’s no big deal if you do not show up at the office: Results matter more than physical presence at the work station. Contrast that with Apple, where work matters more than work-life balance. Google is well-known for its “20% time-off” practice. This practice is an employer brand policy in which a Google employee sets aside 20% of their paid time to pursue his/her own innovation projects. Facebook is well-known for recruiting top minds and giving them a very sketchy job description; as a top mind the new employee is told to study Facebook’s processes and discover how he/she can better them. That’s not possible at Apple as innovation process practices are highly structured. Reflect on it.

Powerful employer brands increase profitability and thus contribute to a firm’s market value. Can your company afford to leave the employer brand to chance?
Chulu is a strategic HR consultant who has worked with both listed and unlisted companies. — brettchulu@consultant.com.

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