During an economic downturn, employer branding is not for the anxious manager

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Although Europe’s Top Employers are not immune to the effects of the economic crisis, in 2010 they are continuing to make a significant investment in their employer brand, as shown in the CRF Institute’s recently published report European HR Benchmark Top Employers Europe 2010. But will the CEOs and HR leaders of Top Employers be able to put to rest the anxieties of managers who focus solely on short-term productivity gains?

Employer branding is not for anxious managers during an economic downturn. If they choose to focus purely on cost reduction, they will inevitably end up in the HR department talking about staff cuts. Top Employers certified by the CRF Institute know, however, that good employment practice is the ‘strategic key’ to long-term success. They are fully aware that when it comes to staff, it is not about cost but rather investment. Companies that also invest in their employer brand during an economic crisis – or anti-cyclical investing – and consistently communicate this to their staff have the most solid footing for when the economy begins to pick up again.

CEOs who are willing to continue investing in their employer brand will, however, have to stand their ground to ensure that the focus on short-term productivity advantages does not get out of hand. After all, fewer staff members working harder on an hourly basis increases productivity in the short term. This can easily be seen in a comparison recently made between US and European businesses by The Conference Board research agency. Whereas the US economy contracted by 2.5%, the number of hours worked declined twice as fast. In other words, productivity rose by 2.5%.

In the EU, productivity fell by only 1.1%. The fact is that there was a much smaller fall in employment when compared with the average economic decline of 4.2% in Europe. Job losses in the United States totalled 3.6% in 2009, while in the EU the average was 1.9% over the same period.

The differences in productivity between the United States and Europe are primarily the result of differences in social legislation. In most European countries dismissal is a costly affair, for both employers and the government. Redundancy payments ensure that companies hold onto their personnel longer. Government subsidies also allow organisations to hold on to personnel, because otherwise the relatively generous unemployment benefits will soar.

As soon as the economy picks up, however, the focus shifts from 'working with as few people as possible' to recruiting and holding onto as many people who are well qualified and optimally motivated. In that case, economies with a more fluid labour market can encounter problems due to the law of the handicap of a head start. The unemployed have been excluded from the labour market for too long, have fallen behind in terms of knowledge and skills, and, not insignificantly, are often demoralised. In contrast, whereas employees who keep their jobs during the crisis might have been able to develop themselves (at a quicker pace than at ‘normal’ times), they can be demoralised by a serious disruption in work-life balance.

In almost every country studied by the CRF Institute, Top Employers in Europe continue to make major investment in good employer branding despite the financial crisis. Some shifts are, of course, visible within HR priorities, but in general organisations continue to view good HR policy as a crucial condition for achieving their overall strategic goals. What is more, where 67% of the Top Employers appreciated this importance in 2009, that figure has risen to 75% in 2010. The position of HR management within organisations also has more significance in 2010 relative to 2009. (Refer to Chart 1.) More than 65% of HR heads report directly to the CEO. (Refer to Chart 2.)

Chart 1 - The role of HR in the organisation – Europe

Chart 2 - Reporting lines of HR management (To whom does your Head of HR report? - European average)

HR management is the driving force behind a strong employer brand. Communication naturally plays an important role and it is not just about being good, but above all about telling it. But at the heart of the issue is the matter of trust. The trust that the picture that you are painting as an employer also corresponds with what you are in fact delivering. Whoever loses that trust in times of crisis will be unable to re-establish it overnight once the economy picks up. A good HR strategy behind a strong employer brand is therefore focused on the long term, on delivering promises vis-à-vis every stakeholder.

Needless to say, a basic principle for HR strategy is formed in the first instance by the expectations regarding personnel development over the next few years. In that regard, the economy plays a role where it concerns expansion demand. The replacement demand is determined by the number of employees who are either retiring or finding a job elsewhere. The former can very easily be predicted based on the data from the personnel database; the latter is somewhat more complex. This is complicated even further because the replacement demand is also subject to developments regarding competency development, caused in part by globalisation and outsourcing. It does not only relate to quantity, but also to quality. Employees are required to have an increasingly wide range of skills. Whereas this development can be predicted, in terms of quality it is a whole lot more difficult to meet this demand.

The number of European Top Employers that anticipated an increase in personnel has dropped drastically in 2010. (Refer to Chart 3.) An actual decline in turnover can also be seen relative to 2008. Reason enough, superficially speaking, to put investment in the employer brand on the back burner for the time being. You do not need to recruit as many new people and you do not need to do your utmost to retain current staff. Up to now, however, Top Employers have not been swayed by this type of short-term thinking.

But 2010 will prove to be the year of reckoning. Will CEOs and HR leaders of Top Employer organisations be able to put to rest the anxieties of managers who focus solely on short-term productivity gains? And will they be able to give employer branding the attention and budget that it deserves?

Chart 3    - Expected change in the total number of employees in the next three years (Europe)

Chart 4 - Staff turnover - annual percentage