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Damage Control: New Research Reveals the Impact of Having a Bad Reputation

Adam Shay

To review the original article click here 21st Nov 2014

New research reveals the impact of having a bad reputation.

Corporate reputation continues to have a significant impact on the attractiveness and expense of talent acquisition and retention finds a new research study from Corporate Responsibility Magazine and Alexander Mann Solutions. The main findings from The Cost of a Bad Reputation were presented at the 2014 COMMIT!Forum as part of the conference’s focus on building a sustainable workforce.

The Cost of a Bad Reputation finds that candidates are reticent to join organizations that have a bad reputation, and those who are willing to join require a significant pay increase. Such top talent can be tempted by a significantly lower lift in pay offered by a company with a good reputation than a bad reputation.

Organizations with bad reputations face increased recruiting costs due to the greater difficulty to source, offer, and on-board new hires. This has a particular impact when recruiting females and more experienced workers.

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“Companies with a bad reputation are likely to take a significant hit to their bottom line in terms of talent,” says Adam Shay, global head of employer brand management services for Alexander Mann Solutions.

Reputable organizations enjoy greater consideration among potential candidates, far lower costs to onboard those candidates, and potentially greater retention among employees. A CEO perceived to be active in CR and environmental issues also has impact on recruiting. The study found that nearly three-quarters (72 percent) of respondents felt it important to work for a company led by a CEO whose priorities include CR and/or environmental issues. Organizations should incorporate such actions and beliefs when building their employer brand. It’s critical to leverage a reputable employer brand to gain an edge against competitors who have faced scandal.

“Many employees today don’t just want to have a job that pays the bills; they want a job and an employer that they can personally identify with or reflects their own values,” says Shay. “We believe that employees will be more engaged working for an employer they believe in, one that they are proud to tell their friends and family about.”

While recruiting expense increases are in the millions of dollars, this business cost is literally dwarfed by the billions of salary cost differential. The study found that males would require an average of a 53 percent pay increase and females a 60 percent pay increase in order to leave their current employer and take a job with a company with a bad reputation. In total, nearly one- half (48 percent) would require more than a 50 percent increase in pay.

The additional recruiting and salaries costs—plus other expenses required to overcome a reputation damaged by an environmental scandal—can be disastrous to a company’s bottom line.

Findings: Companies with a Bad Reputation
This year’s study found that 70 percent of those currently employed would leave their job to work with a company with a bad reputation, up from 63 percent in 2012. Males are more likely than females to take the job, 76 percent versus 70 percent, respectively.

Age and position in career also play a role in the decision to take a job. The older the worker, the less likely they are to accept the job for all three years of the study. In 2014, only 56 percent of those between 55 and 64 would take the job while 79 percent of Millennials—those under 35—would take the job. The youngest, and most junior workers are the least concerned about corporate reputation, while the more experienced workers have concerns about the risks involved with a damaged brand.

Gender has a financial impact on the decision to take a job with a company with a damaged reputation. In 2014, only 63 percent of females would leave their current employer, significantly lower than the 76 percent of males. Further, females would require a 60 percent increase in pay, while males would require a 53 percent increase.

Findings: Companies with a Good Reputation
In 2014, nearly all (93 percent) of those currently employed would leave their current employer to work with a company with a good reputation. Males are slightly more likely than females to take the job, 95 percent versus 92 percent, respectively.

To leave their current employer and take a job to work with a company with a good reputation, both males and females would require an average of about a 33 percent pay increase. Only 18 percent would require an increase of 50 percent or more.

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