The Employee Value Proposition

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The employee value

proposition

A lot of companies talk about being an employer of choice, but as competition for talent heats to a

boil, Stewart Black, INSEAD Affiliate Professor of Organisational Behaviour, says executives have to

do more than give the concept lip service.

According to Black, many good companies with

good strategies often fail to hit their targets because

they don’t have the people they need. Attracting

and keeping talented employees is vital for

companies to compete today.

“The reality for most managers and executives out

there is that there is a war for talent,” Black says.

In part, it’s a numbers game. North America and

Europe went from baby boom to baby bust and

there just aren’t enough qualified people to fill the

jobs. In Asia, the economies are young and there

isn’t a pool of experienced workers to meet

booming demand. This is creating a historic global

shift.

"When you have growing demand in general,

especially in certain markets, for people with

qualifications and increasing competition (for) those

people, there is a shift in the balance of power from

employers toward employees. This means

employers, if they want to attract and keep the best

and the brightest, have to have an attractive value

proposition for employees," says Black.

The employee as customer

Employees also have new access to information. Just

as the internet increased competition for customers

by allowing them to compare prices and products,

now employees can instantly search the web to

discover their value and other job opportunities.

One final factor is a big move in many countries

away from traditional pension plans that tended to

keep employees from leaving, especially

employees with tenure. As companies have shifted

from defined benefit to defined contribution plans,

they’ve lowered the switching costs for workers

changing employers.

“So, I know more of what my value is, my switching

costs have gone down, so therefore to keep me you

have to have an attractive value proposition,” says

Black of the change in employee attitudes.

All of this will require a big shift in thinking for

employers, who have long acted as though any

worker were replaceable. They are beginning to

find that they are no longer in the driver’s seat when

it comes to hiring talent.

Employees also pay a price

Black often surprises executives when he tells them

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that employees pay a price for working at their

company.

“They said no, you’ve got it wrong, they don’t pay

us, we pay them. But the issue is that employees

really do pay a price,” says Black. “You pay a price

in terms of the hours you give to the firm, and in

some companies that’s a 40-hour week and in some

companies it’s a 100-hour week. You pay a price in

terms of the stress and strain, literally the blood,

sweat and tears you give.”

Employees weigh the price they pay against what

they are being offered. “Is it fundamentally a good

deal? If it’s not a good deal, especially now that I

have more information, I start shopping around for a

better deal,” he said. “Unless you’re a slave or

somehow or otherwise indentured, people have a

choice.”

Black says there are measurable things corporate

executives can do to attract and keep the best

people. Borrowing a phrase from customer

satisfaction analysis, he calls these “value

propositions” and lists four main categories:

leadership, company, job and rewards.

1. Leadership

Studies show that strong leadership is the single

most powerful feature in motivating and keeping

employees. He says workers understand that poor

leadership will impact not only the success of the

company but the quality of the work environment

and their own ability to develop and build a career.

“People do care about the quality of leadership and

they also care about the company’s ability to

identify and develop leaders, including eventually

themselves,” Black says.

2. Company

This encompasses everything about the firm:

reputation, values, culture and its contributions to

the world and the community. Employees might be

willing to work longer hours or for less

compensation for a company with stronger

corporate values or a better reputation.

“A few years ago Exxon was not the greatest

company to work for, just after the Valdez (oil spill

in Alaska). Not very long ago, Enron was not a

company that you’d want to work for. So the

reputation, the culture, those sort of things matter,”

he says.

3. Job

This involves many of the day-to-day aspects of a

job. How interesting and compelling is the work?

Can employees grow and be fulfilled in their jobs?

Do they have the resources and training to achieve

their goals?

“In particular, how much freedom, autonomy,

growth and challenge do I have in the job that I am

asked to do? How interesting is the job?“

4. Rewards

This is what most people think of when they think

about employee compensation: wages and benefits.

But rewards also include intangibles such as career

prospects, development opportunities and social

contact with co-workers.

Black says it’s often difficult for executives to see

how this impacts the bottom line, but it is

measurable.

“Take almost any business, but certainly a firm that

has a high service component, if people are going

out the door too quickly, that means that they’re not

getting up the learning curve and as a consequence

aspects of your service suffers,” he says. “It

translates directly into key aspects like service

quality which have a direct affect on bottom line

results.”

For managers, measuring their company’s value

propositions for employees is a concrete way to

become an employer of choice and to succeed as a

business.

“Lots of companies believe their competitive

advantage is their unique culture; however, if you

can’t attract and retain the right people, your culture

will soon stop delivering any advantage,” he says.

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