3 New (And More Accurate) Ways to Calculate the ROI of Employer Branding
How do you know your employer brand program is working? How can you actually calculate the ROI of employer branding and share the results with your team and business leaders?
The value of branding will always be hard to track, but in the long run, creating a brand that candidates remember and identify with will be hugely valuable to your company (not just in the hiring process, but at every stage of the talent lifecycle).
The issue is, to justify investing resources into employer branding, you need to show that it's working and worthwhile…
Traditional techniques to measure the ROI of Employer Branding
Number of applications is the standard metric by which many employer branding programs are judged.
The logic is simple. A better employer brand attracts more applicants. This is generally true – Google gets around 2 million applicants every year. The problem though, is that there are a whole host of other reasons why application numbers can fluctuate.
This means that ‘number of applications’ is an unfair way to measure the ROI of employer branding. Instead, try these three newer (and more accurate) ways to measure your branding programs and track their value:
1. Building your Candidate Net Promoter Score
Candidate NPS (or Net Promoter Score) is a measure of how likely a candidate is to refer friends or colleagues to your organization (e.g. a measure of employer brand advocacy).
Turning candidates into brand advocates is possibly the best indicator of branding success. It shows that their interactions with your company have been so positive that they’re actively spreading the word and promoting your brand.
To measure your candidate NPS, send candidates a simple survey asking them how likely they are to recommend your company to their friends. Candidates can select a score between 0 and 10 that shows their willingness to promote your brand to their friends.
Before we go any further, here are some definitions of words that you may find helpful during your employer branding journey.
Detractors: Candidates that select scores between 0-4 are seen as brand detractors (e.g. they would actively criticize and detract from your employer brand).
Passives: Candidates that select scores between 5-8 are seen as passives (e.g. they do not feel strongly enough about your brand to impact it positively or negatively).
Promoters: Candidates that select scores between 9-10 are seen as promoters (e.g. they would actively promote your employer brand to friends and family).
The ROI of employer branding initiatives can be seen clearly by an increase in the number of brand promoters over time. Candidate NPS can be determined with simple tools like Surveymonkey or sent through more sophisticated employer branding software like Beamery.
Pro tip: Getting referrals from brand promoters
Referrals don’t just come from your existing employees. Companies can maximize the value of a great candidate NPS to increase the number of referrals from unsuccessful applicants.
Here’s a simple formula to help you put this into action:
- Send a short NPS survey to unsuccessful applicants to get valuable feedback on your application process
- Track the scores and feedback that you receive to see which candidates are brand promoters
- Ask anyone who has given you a 9-10 rating to refer any friends or colleagues that they think could be a good fit
- Rinse and repeat!
Not every candidate that you ask for will refer friends, but you’ll most likely receive sufficient referrals to make this initiative a great source of new applications.
2. Tracking your Employee Lifetime Value (ELTV)
A strong employer brand doesn’t just apply to your candidates, it has an incredibly positive effect on employee engagement and retention, two of the prime metrics that many companies use to measure the ROI of their brand.
ELTV represents the total net value over time that an employee brings to your organization. Every individual’s ELTV spans across the entire employee lifecycle – starting on their first day of employment and ending when they leave the company.
The employee lifecycle (at most companies) is getting shorter every year. We live in a society of job hoppers, and ‘lifers’ (people who spend their whole career at one company) are a dying breed.
This has sparked a growing concern around employee engagement and has led many companies to turn some of their employer branding efforts inward to improve retention.
This can be a highly effective strategy. Good employees want to feel valued, they want to work for great companies, and they want to do something meaningful with their careers (this is especially true of millennials and Generation Z). A compelling employer brand checks all of these boxes.
Companies with great culture and a powerful employer brand can get big returns on employee engagement, productivity and ultimately, ELTV.
- Here are a few ways to spot employer branding ROI by measuring ELTV:
- Reduced ramp time (e.g. time before a new employee is adding value)
- Increased level of value that employees provide
- Prolonged increased level of value over time
- Increased retention rates and average employee tenure
The higher your ELTV and retention rates are, the easier it is to demonstrate the ROI of your employer branding programs, and the more likely you will able to continue (and possibly expand) those efforts.
3. Measuring quality of hire
Bad hires can be hugely destructive to your organization. According to statistics from the U.S. Department of Labor, a bad hire can cost the company up to one third of that individual’s salary. So if the bad hire is making $90,000 per year, your organization could lose $30,000 – just from one single bad hiring decision.
Employer branding can’t solve poor hiring decisions – that’s down to your process. What it can do though is help your company start to build relationships with the kinds of candidates that you really want to get in your organization.
We’re talking about your ideal candidate persona, (the skills and abilities that make up your ideal new hire). If you have a good idea of your target candidate, then you can begin to craft specific employer branding campaigns that will help your company stand out to individuals with those skills, abilities, and interests.
For example, both LinkedIn and Walmart have done a fantastic job at building an employer brand that appeals to top engineers and developers. This might seem pretty surprising – on the surface, neither company seems like the kind of place where the best technical talent would want to work...
But both companies have made a huge effort to contribute to the Open Source Software community, a huge draw for the top engineers, most of whom will have made large numbers of Open Source contributions themselves.
LinkedIn and Walmart promote their Open Source efforts effectively, and use them to attract the best talent in those areas of expertise.
Case Study: Zappos – the unconventional test for quality of hire
Some companies go to extremes to ensure that new hires meet their bar for quality.
Employer branding leader Zappos offers new hires cash incentives to leave – an initiative started by former Zappos CEO, Tony Hsieh. This program was started to weed out bad hires. Hsieh believed that bad hires have cost the company over $100 million cumulatively and he made it a huge priority to prevent it from becoming a continuing problem in the future.
These incentives aren’t insignificant either, when Hsieh was CEO, he was offering all new employees $2,000 to leave! By doing this though, Zappos ensured that they only had people who were committed to the mission onboard, it’s one of the key reasons they’ve been able to build such an unbelievable culture.
Now, other CEOs are taking notes from Hsieh’s time at Zappos. The CEO of Trainual is began offering new hires $5,000 to quit in 2022.
Without the right metrics, recruiting is rudderless. How can you know what to prioritize if you don’t have data on what actually works?
The key to a successful employer brand and a scalable talent marketing strategy is to have accurate, up-to-date talent data to work with.
Not only does high-quality data help you prove the ROI of your efforts to your organization’s leadership, but it also helps you ensure that you are making the right hire the first time.
AI-driven tools like Beamery can take the manual guesswork of evaluating candidates off recruiters’ plates – allowing them to focus on more important things, like building relationships with candidates and providing excellent talent experiences for both candidates and current employees.