clc attracting and retaining critical talent segments identifying drivers of attraction and...

Attracting and RetainingCritical Talent SegmentsIdentifying Drivers of Attraction and Commitment in the Global Labor Market

CEB Corporate Leadership Council

Please note that the CEB program names referenced in this document have changed since the time of publication.

2006 Corporate Executive Board. All Rights Reserved.

Note to Members

This project was researched and written to fulfi ll the research requests of several members of the Corporate Executive Board and as a result may not satisfy the information needs of all member companies. The Corporate Executive Board encourages members who have additional questions about this topic to contact the Board staff for further discussion. Descriptions or viewpoints contained herein regarding organizations profi led in this report do not necessarily refl ect the policies or viewpoints of those organizations.

Confi dentiality of Findings

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The Corporate Leadership Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and the Corporate Leadership Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Corporate Leadership Council is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the Corporate Leadership Council or its sources, or b) reliance upon any recommendation made by the Corporate Leadership Council.


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Table of Contents

Letter from the Corporate Leadership Council v

Overview of the Competitive Employment Value Proposition Initiative vi

Summary of Conclusions ix

List of Participating Organizations x

Interpreting Study Findings xii

Note on Research Methodology xiii

Council Essay: From Talent Scarcity to Competitive Advantage 1

Chapter I: Defi ning the Differentiated Value Proposition 25

Chapter II: Managing EVP Variation Across Key Segments 61

Chapter III: Ensuring EVP Credibility in the Labor Market 111

Appendix 143

Methodology 144

Demographics 145

The Role of the Organizations Mission in the EVP 146

Additional Segment Level Results from the Councils Employment Value Proposition Survey 147176

Order Form 177


v 2006 Corporate Executive Board. All Rights Reserved.

Letter from the Corporate Leadership Council

Council members have observed a unique convergence of key labor market and business dynamicsan aging workforce, specialized talent needs, globalization, and growth imperatives, to name only a fewforcing a fundamental rethink of workforce staffi ng strategies in support of business need. In response, leading HR organizations are moving beyond vacancy-driven staffi ng to explore proactive management of labor markets with the goal of ensuring advantaged access to scarce talent pools.

To ensure this advantaged access to talent, organizations have grappled with three fundamental questions:

How can the organization position itself to compete effectively for scarce talent?

How can the organization compete across multiple talent segments?

How can the organization position itself to ensure the commitment and retention of its new hires, as well as tenured employees?

In response, the Council is pleased to announce the launch of the 2006 Competitive Employment Value Proposition Research Initiative, a three-part examination of how organizations can best attract and retain critical talent. The fi rst volumeAttracting and Retaining Critical Talent Segmentsoffers a new-to-world framework for understanding how the employment value proposition (EVP) attracts candidates and builds employment commitment, and examines how to effectively design and segment the EVP.

Two additional volumes will be published shortly under separate cover. The second volume profi les leading organizations strategies for defi ning and managing the EVP, as well as how to ensure its credibility in the labor market. The third volume examines how organizations should design and communicate effective EVPs for key talent segments.

It is our hope that this initiative will support member organizations in attracting and retaining critical talent to meet current and future business needs. Since the fi ndings presented herein do not address every challenge faced in attracting and retaining talent, members are encouraged to contact the Councils research team for further assistance. As always, we encourage and look forward to your feedback.

With our continued appreciation,

Corporate Leadership CouncilWashington, D.C. and LondonFall 2006


vi 2006 Corporate Executive Board. All Rights Reserved.

The Councils Competitive Employment Value Proposition Initiative addresses the diffi cult challenge of how to design an employment value proposition (EVP) to attract and retain critical talent segments.

In this study, Volume I of the initiative, the Council presents empirical analysis of more than 58,000 respondents at 90 member organizations and within the labor market to understand which aspects of the EVP attract candidates to organizations, as well as which aspects of the EVP drive employee commitment (and therefore retention). This study also analyzes how organizations should segment the EVP, and provides strategies for effectively communicating the EVP to the labor market.

In Volume II, a companion best practice study, the Council provides examples of tactics and strategies from leading organizations on how to:

Defi ne a Differentiated EVP,

Manage EVP Variation Across Segments and,

Ensure EVP Credibility in the Labor Market.

Volume III further explores EVP segmentation, examining how organizations should design and communicate effective EVPs for key talent segments.

The Corporate Leadership Councils 2006 Research Series

Overview of the Competitive Employment Value Proposition Initiative


vii 2006 Corporate Executive Board. All Rights Reserved.

Council Series on the Competitive Employment Value Proposition

Overview of the Competitive Employment Value Proposition Research Initiative

Attracting and Retaining Critical Talent Segments (Volume I)Identifying Drivers of Attraction and

Commitment in the Global Labor Market

Attracting and Retaining Critical Talent Segments

Best Practices for Building a Competitive Value Proposition

Critical Questions Addressed in This Volume

The fi rst volume in the series defi nes the Employment Value Proposition (EVP) and provides detailed analysis on the following:

Which EVP attributes have the greatest impact on attracting and committing talent?

How can organizations vary the EVP for different talent segments?

What strategies should the organization employ to effectively communicate the EVP?

Attracting and Retaining Critical Talent Segments

Identifying Drivers of Attraction and Commitment in Emerging Markets

Corporate Leadership Council

Attracting and Retaining Critical Talent SegmentsIdentifying Drivers of Attraction

and Commitment in the Global Labor Market


Attracting and Retaining Critical Talent SegmentsBest Practices for Building a Competitive

Value Proposition


Attracting and Retaining Critical Talent SegmentsIdentifying Drivers of Attractionand Commitment in Emerging Markets


Attracting and Retaining Critical Talent SegmentsIdentifying Drivers of Attraction and Commitment in the Global Labor Market


ix 2006 Corporate Executive Board. All Rights Reserved.

Summary of Conclusions

Question: How Can Organizations Build Competitive Advantage in the Labor Market?

The Employment Value Proposition (EVP) Is Critical to Talent Attraction and Commitment. Constructing and delivering an effective employment value proposition allows an organization to source more deeply within the labor marketincreasing its access to more passive candidates. It also improves the commitment of new hires by up to 29%.

Improving EVP Attractiveness Reduces New Hire Compensation Premiums by Up to 50%. When candidates in the labor market view an organizations EVP as attractive, they demand less of a compensation premium when deciding to join. Specifi cally, EVPs that are viewed as unattractive require a 21% premium to hire employees, while attractive EVPs require only an 11% premium.

Question: What Defi nes the Competitive Employment Value Proposition?

A Core Set of 7 of 38 Potential Attributes Are Universally Important at Driving Both Attraction and Commitment. The starting point for any organizations EVP should be the seven core elements that provide, on average, 60% of the attraction and commitment benefi t across all major talent segments.

The Competitive EVP Must Be Differentiated from Competitors and Strategically Relevant. A competitive EVP builds upon market realities and leverages the organizations strengths relative to competitors in the areas most important to employees. The EVP must also align with the organizations current capabilities and longer-term strategic objectives to succeed.

Question: How Can Organizations Increase the Competitiveness of Their Employment Value Proposition Across Critical Talent Segments?

The Winning EVP Addresses Geographic Variation in the EVP Preferences of Critical Talent Segments. Geographic differences account for 72% of the variation in EVP preferences. Segmentation based on function, gender, or ethnicity is unlikely to generate signifi cant returns.

Talent Segments in Emerging Markets Have Unique EVP Preferences That Must Be Prioritized for Success in Those Markets. Contrary to the developed economies, there is no universal EVP for emerging economies. Country-specifi c analysis shows that compensation is relatively less important to attract talent in India while company growth and innovation are more important. In China, a disproportionately high importance is placed on development opportunities.

Question: How Can Organizations Build a Credible Employment Value Proposition in the Labor Market?

A Successful Labor Market Communication Strategy Emphasizes Organizational Reality, Message Consistency, and Self-Assessment. Organizations can increase new hire commitment up to 27% by ensuring that the recruiting processes accurately refl ect the realities of the work environment and that all communication of the EVP is consistent. This allows candidates to accurately assess their fi t with the organization.

Three Keys to Increase the Number of Employees Advocating for the Organization Are Trust, Flexibility, and Organizational Values. Employees are the most trusted communication channel of potential new hires, but only 24% of employees would recommend their organizations to friends. Addressing three key issues can increase employees likelihood of advocating the organization in the labor market by up to 47%.

Source: Corporate Leadership Council research.in this document have changed since the time of publication.Please note that the CEB program names referenced

x 2006 Corporate Executive Board. All Rights Reserved.

With Special ThanksThe Council surveyed more than 58,000 employees from 90 different organizations across 20 industries

Partial List of Participating Organizations

List of Participating Organizations

Source: Corporate Leadership Council research.


xi 2006 Corporate Executive Board. All Rights Reserved.

With Special Thanks (Continued)

Partial List of Participating Organizations

List of Participating Organizations (Continued)



xii 2006 Corporate Executive Board. All Rights Reserved.

Interpreting Study Findings

The results and recommendations in this study are derived from data collected from a large sample of employees from a diverse group of member organizations. Members interpreting and acting on these fi ndings may wish to keep the following considerations in mind:

Generalizing to Employees in Other Organizations, Industries, and CountriesThe observations and conclusions presented herein are based on a non-probability sample of organizations and, as with any such sample, should be interpreted with caution. The Council believes, however, that the conclusions of this study are likely to be generalizable to many, if not most, organizations for the following reasons.

1. Employees and managers were sampled from a diverse set of organizations (90), industries (20), and countries (34).

2. The size of the sample, more than 58,000 employees, is very large by traditional standards. All other things being equal, large samples increase the accuracy with which inferences can be drawn about the target population.

3. The Council carefully tested the data to ensure that the fi ndings were consistent across industry, geography, and organization size. Instances where fi ndings differ according to segment are detailed in Chapter II of this study.

Supplementing the Data in Attracting and Retaining Critical Talent Segment with Other SourcesAlthough the analysis presented here is based on a large sample of employees and managers, the Council advises members to supplement the information presented in this study with other sources where appropriate. Research is always most powerful when it draws from multiple data sources and methods.

A Note on TerminologyThroughout this study, the term EVP is used to refer to the Employment Value Proposition, which is the set of attributes that the labor market and employees perceive as the value they gain through employment in an organization.


xiii 2006 Corporate Executive Board. All Rights Reserved.

Note on Research Methodology

Research Methodology

Attracting and Retaining Critical Talent Segments is supported by two main components.

The Corporate Leadership Councils Employment Value Proposition Survey: The data presented in this study were collected using a new survey instrument, the Corporate Leadership Councils Employment Value Proposition Survey. This Web-based survey was conducted during the spring of 2006, with more than 58,000 respondents from 90 member organizations completing the survey.

Analytical Tools: Attracting and Retaining Critical Talent Segments makes use of a number of analytical techniques, chiefl y Q-Sort methodology and linear regression.

The Q-Sort technique is a tool for measuring attitudes and preferences. It uses a forced-choice method, where one must rank a series of items in a pool. Typically a person is presented with a set of statements or options, and is asked to rank-order them, either in groups or on an individual-item basis, an operation referred to as Q sorting. These rankings are subject to analysis.

Linear regression is used to calculate the strength of the relationship between an independent and dependent variable while controlling other factors, such as employee age, organizational tenure, industry, function, and education. As an example, linear regression would allow the analysis of how delivery of the employment value proposition attribute Manager Quality (the independent variable) impacts an employees commitment (the dependent variable).


1 2006 Corporate Executive Board. All Rights Reserved.

Council Essay: From Talent Scarcity to Competitive Advantage


Attracting and Retaining Critical Talent 2 2006 Corporate Executive Board. All Rights Reserved.

Talent in Short Supply

Across 2006, organizations of all sizes and from a range of industries and geographies have reported talent shortages and workforce management problems. These problems have resulted from increased demand in supply-constrained labor markets, and in turn manifest through a diverse and wide-ranging set of challenges: shortages of highly-qualifi ed graduates, pending retirements, an aging workforce, and lack of experienced talent.

These supply problems, coupled with rising demand for labor, also create two additional problems with which organizations must contend: high turnover and wage infl ation. As competition for talent increases, organizations not only have trouble attracting employees, but also with keeping them as competitors raise compensation packages in bids to poach talent. The resulting wage infl ation places additional strain on organizations.

In combination, all these problems threaten to disrupt operations across the globe, requiring organizations to seek new and more refi ned methods to attract and retain the talent they need for success.


Council Essay: From Talent Scarcity to Competitive Advantage 3 2006 Corporate Executive Board. All Rights Reserved.

Heard Around the WorldAcross the globe, labor market and demographic shifts are giving rise to talent shortages

Expressions of Concern Re: Labor Shortages

2006

Unwanted TurnoverManufacturing company experiences 25% turnover in managerial ranks.

Source: The Washington Post, 15 June 2006; Eurostat; McKinsey Quarterly, April 2005; Workforce Recruiting Management, June 2006; CLC Agenda Settomg Survey; Corporate Leadership Council research.

Shortage of Qualifi ed GraduatesHigh-Tech company sponsors technology contests to get students excited about computer science because of shortage of engineering graduates.

Pending RetirementsGovernment agency reports that by 2011, 45% of its scientists will be eligible to retire.

Wage Infl ationNear full employment of high-skill Indian talent results in rapid wage infl ation.

Shortage of ExperienceChinese companies require 75,000 internationally experienced leaderscurrently there are about 3,000 to 5,000 such leaders in China.

Aging WorkforceHalf of the European men aged 55 to 64 elect early retirement.



The talent scarcity problem originates from the intersection of two trends: intensifying competition for talent and increasing workforce complexity.

Trend #1: Intensifying Competition for Talent

A strong global economy has placed enormous strain on talent pools. Fueled by a record-setting global GDP growth of 4.75% from 2003 to 2007 (estimated), an increasing number of organizations, both local and international, now compete for talent.

Skill shortages, both globally and in specifi c talent markets, often limits the size of the labor pool from which the organization can recruit. As an example, the growth of industries such as health care has outpaced the speed at which schools can produce medical professionals such as nurses. Insuffi cient experience further exacerbates this problem. Critical on-the-job experience, such as leadership at senior levels, has grown even more scarce as the global demand for executives has accelerated. Even where necessary technical skills are available, insuffi cient experience often limits the size of the real labor pool from which an organization can draw talent. Engineers are a frequently cited example; though technical institutes worldwide produce increasing numbers of engineering graduates, the pool of engineers with the experience to manage large scale projects is thin.

Unemployment has declined as a result of increased demand and competition, from 7.2% to 6.6% across developed economies, further increasing competition within labor markets. Combined with accelerating retirement rates as the baby boom generation ages, the global labor market is set to experience a continued war for talent.

Trend #2: Increasing Workforce Complexity

Responding to these labor shortages is not simply a matter of dealing with increased competition, however. The complexity of the workforce further complicates the organizations response to these labor shortage problems, increasing the potential costs of failing to attract and retain the critical talent needed by the organization.

The span and operation of organizations increasingly crosses borders, creating the needs for HR to attract, retain, and manage global workforces. Cross-border trade refl ects this trend, increasing from 18% of world GDP in 1990 to an expected 30% by 2015. The steady pace of offshoring by organizations in developed economies also refl ects this trend, placing greater strain on workforce management as organizations compete to attract and retain talent in new talent markets.

Separately, any one of these challenges would occupy a considerable portion of HRs attention and resources. Combined, they create conditions where a heightened and new war for talent require more targeted and direct strategies to attract and retain the organizations critical talent.

Increased Labor Market Competition and Complexity



A Different Kind of War for Talent?Intensifying labor market competition and increasing workforce complexity complicate the talent scarcity problem

Factors Infl uencing the Need to Focus on Attracting and Retaining Critical Talent

Competition for Scarce Talent

Strong Global Economy Global GDP growth at near-record pace of 4.75% from 2003 to 2007

(second only to 4.9% growth during 19701974).

Declining Unemployment Average unemployment in a sampling of developed economies declined from

7.2% in 2003 to 6.6% in Q1, 2006.

Skill Shortages in Low-Wage Countries Despite large labor pools, an average of only 13% of university graduates in

low-wage countries are viewed as employable by global companies.

Accelerating Retirement In developed nations, the over-65 population is anticipated to rise from 14%

in 2000 to 23% by 2030.

Complexity of Workforce

Crossing Borders Cross-border trade increasing from 18% of world GDP in 1990 to 30%

by 2015.

Aging Workforce Rising median age in sample of developed nations (up 12.4% from 40.4 in

2005 to 45.4 in 2025).

Moving Offshore More than three million U.S. service jobs expected to move offshore by

2015.

Virtual Talent Pools Expanding Of U.S. companies, 44% offered telecommuting options in 2005, signifi cantly

up from 33% in 2001.

Source: US Bureau of Labor Statistics and National Statistical Sources (United States, Canada, Japan, France, Germany, Italy, United Kingdom; McKinsey Quarterly (United States, United Kingdom, Germany, Italy, Japan); UN, 2005; IMF and Deutsche Bank, 2006; CNN (2006); Corporate Leadership Council research.



A Solution to the Talent Shortage

To address these talent shortages, organizations have increasingly recognized the power of the employment value proposition (EVP) to better attract and ensure the long-term commitment of talent.

Nature of the EVP

Specifi cally, the EVP is the set of attributes that the labor market and employees perceive as the value they gain through employment in an organization. The EVP consists of fi ve dimensions:

The tangible rewards an employee receives for his or her work, such as compensation and benefi ts

The opportunity a job or organization affords an employee, such as development experiences

The nature of the work itself, such as the extent to which it matches an employees interests

The characteristics of the organization, such as its size or market position

The characteristics of the organizations people, such as manager quality

Outcomes of the EVP

Combined, these fi ve dimensions of the EVP inform whether candidates are attracted to an organization and, once employed, the extent to which they will commit to the organization.

Increasing the organizations attractiveness to the labor market increases the size of the available talent pool from which it can source. In addition to increasing the fi t between the organization and job candidates, effective EVP management is also likely to result in increased commitment levels of employers. With increased levels of commitment, employees will work harder, perform better, and stay with the organization longer.

Utilizing data collected from the Employment Value Proposition Survey, the Council examined how to most effectively leverage the EVP to drive attraction and commitment.



The Employment Value PropositionA Key to Attraction and Commitment

The Employment Value Proposition (EVP) drives attraction and commitment in the labor market


Attraction EVP Attributes Commitment

Increases the size of the available talent pool

Increases fi t between organization and the candidate

Improves employee effort level and performance

Improves retention

EVP Attractiveness

IndexCommitment

Employment Value PropositionThe set of attributes that the labor market and employees perceive as the value they gain through employment in the organization.

Opportunity

Work

People

Organization

Rewards

The EVP



Benefi ts of Managing the EVP: Attraction

Organizations that manage the EVP effectively will increase their attractiveness, and therefore the depth of the candidate pool from which they can source talent.

Three Factors Determine Organizational Attractiveness

When managing the EVP to increase attractiveness, HR must consider three things. First, HR must consider the importance of the attribute to the candidate; do candidates care enough about a particular attribute for it to inform their decision making? Second, HR must consider the extent to which candidates are aware of the attribute; how readily can the organization relay information about the attribute to the labor market? Finally, HR must then consider how candidates in the labor market perceive the organizations delivery of that attribute; do they have positive or negative impressions?

Increased Attractiveness Also Enables Deeper Labor Market Sourcing

Attractive EVPs allow the organization to recruit from the active labor market, but also the passive labor market. Organizations with unmanaged EVPs will only have access to the portion of the labor market which is either directly applying for new jobs or considering applying to new jobs. These active candidates comprise approximately 40% of the workforce. A managed EVP will bolster the organizations success in recruiting these candidates, but will also enable access to deeper portions of the remaining 60% of the labor market which is passive. Passive candidates are higher performers, and more likely to stay at their new organizations.



Opening Up the Labor Market

making it possible for the organization to source from a deeper segment of the labor market

Degree of Activity in the Labor Market

Effective EVP management increases the attractiveness of the organization in the labor market

12%

6%

0%

Very Passive Very Active

Distribution of Labor Market by

Degree of Job-Seeking Activity1

1 Respondents are measured on a scale of 1 to 100 based on how active they were in the labor market before they were hired by their current organization. A score of 100 indicates that the respondent was very active, and a score of 1 indicates that the respondent was very passive in their job search behavior.

2 For more detail on passive candidates, see the Recruiting Roundtable Study Building Talent Pipelines.

0 25 50 75 100

Function of: Importance of the attribute Awareness of the attribute Perception of the attribute

EVP Attractiveness

Index

Labor Market Penetration

Managed EVP Unmanaged EVP

Source: Corporate Leadership Council, Employment Value Proposition Survey: Corporate Leadership Council research.

The Value of Passive CandidatesPassive candidates are higher performers and more likely to stay at their new organizations.2

Benefi t #1: Improving Attraction

How deep into the labor market can an organization source talent?

Organizations with managed EVPs are able to effectively source from more than 60% of the labor market

while organizations with unmanaged EVPs are able to source from only 40% of the labor market.



Benefi ts of Managing the EVP: Commitment

A stronger EVP not only increases the depth of the labor market from which the organization can source, but also ensures that new hires have much greater commitment to the organization. These higher levels of commitment in turn lead to increased effort, performance, and retention.*

Strong EVP Delivery Impacts New Hire Commitment

In fact, excellent delivery on the EVP can yield a workforce where 38% of new hires display the highest levels of commitment. Organizations with poor delivery of the EVP typically have less than one in ten employees who are highly committed to the organization after one month of employment.

EVP Delivery Will Ensure Commitment Over Time

EVP delivery has lasting impact on new hires. After 12 months of employment, 31% of new hires will have the highest levels of commitment at organizations with strong EVP delivery. That number is remarkably lower at organizations with poor EVP delivery, 3%. Given the substantial investments made in recruiting employees in to the organization it becomes all the more imperative to ensure their commitmentand therefore performance and retentionthrough strong delivery of the EVP.

* For more information on the impact of commitment on performance and retention, please see page 33.



Getting More Commitment at Day One

Poor Excellent0%

20%

40%

9%

38%

Benefi t #2: Improving Employee Commitment

Percentage of Employees

Displaying High Levels of Commitment1

EVP Delivery2

1 High levels of commitment are defi ned as employees whose commitment scores are greater than 90 on a 100-point scale.

2 Poor EVP delivery is defi ned by employees that have an EVP delivery of 4 or less on a 7-point scale. Excellent delivery is defi ned as an average score across all attributes of 6 or more.

Source: Corporate Leadership Council, Employment Value Proposition Survey; Corporate Leadership Council research.

Commitment is higher when employees enter

Commitment Levels, Less Than One Month of Tenure

Poor Versus Excellent EVP Delivery

and at their one year anniversary

Commitment Levels, 12 Months of Tenure

Poor Versus Excellent EVP Delivery

Poor Excellent0%

20%

40%

3%

31%


Displaying High Levels of Commitment

EVP Delivery2

When organizations effectively deliver on the EVP, new employees arrive with higher levels of commitment

= 29%

= 28%

and maintain that commitment across the fi rst year.



Benefi ts of Managing the EVP: Compensation Savings

Finally, increasing the attractiveness of the EVP has one further advantage with direct cost implications: it reduces the compensation premium organizations must pay to hire talent. In other words, an attractive EVP reduces the amount of compensation increase (the premium) the organization must offer, compared to the candidates current salary, to convince them to accept the offer.

Measuring Compensation Premium

To test the impact which an attractive EVP has on compensation premiums, the Council asked respondents with less than 18 months of tenure to provide compensation data on both their current job and the job they held at their previous employer. This data was then analyzed according to the extent which they felt their current organizations EVP to be attractive. Further analysis was conducted to ensure that these fi ndings held for both vertical and horizontal job changes across organizations.

EVP Attractiveness Reduces the Compensation Premium

As shown below, respondents to the Employment Value Proposition Survey said that, on average, they received a compensation increase of 16% when moving from one organization to another. The bars to the left and right show the average increase in compensation according to the degree of attractiveness of the organizations EVP.

The chart demonstrates a clear trend: less attractive EVPs lead to higher compensation premiums, while more attractive EVPs result in lower compensation premiums. While not necessarily high on a per-employee basis, the monetary benefi ts quickly add up across large numbers of hires. Assuming that the organization hires 500 new employees a year at an average salary of $50,000, the premium they would have to pay with an unattractive EVP would be $2.6 million a year.

In summary, as attractiveness of the EVP increases, organizations become less reliant on higher compensation levels to attract talent.



11%

16%

21%

Decreasing Compensation CostsAn attractive employment value proposition decreases the compensation premium required to attract candidates

The Monetary Benefi ts of Increasing Attractiveness

Source: Corporate Leadership Council, Employment Value Proposition Survey: Corporate Leadership Council

Average Compensation Increase When

Changing Organizations

Average Increase in Compensation

Increase in Compensation for Candidates Who Think

the EVP Is Attractive

Increase in Compensation for Candidates Who Think

the EVP Is Unattractive

Note: Respondents were asked about their compensation level in their previous job and that is compared against their compensation in their current job. Analysis was conducted to ensure that these fi ndings hold for both vertical and horizontal movements.

while a 21% premium is needed to lure candidates who feel the EVP is unattractive.Only a 11% increase in compensation is needed

to attract candidates who feel the EVP is attractive

Doing the MathAssuming an organization hires 500 people per year at an average salary of $50,000, the additional compensation premium that they pay by being relatively unattractive in the labor market is $2.6 million per year in base compensation.

Benefi t #3: Compensation Savings



The Problem: Poor EVP Management

Few Organizations Successfully Deliver the EVP

Across 90 surveyed organizations, the percentage of employees rating their employer as delivering a strong EVP ranged from less than 30% to more than 55%. In the average organization, 41% of employees agreed that the organization delivered a strong EVP.

Building and delivering an effective EVP presents a signifi cant challenge to nearly all organizations. But why is this the case? Three problems, explored on the following pages, explain poor EVP design and delivery: misalignment with preferences, poor differentiation, and failure to deliver on attributes of the EVP.



0%

50%

100%

Signifi cant Room to ImproveFew organizations deliver the EVP well, but those that do realize disproportionate returns

Variation in Delivery of the EVP

By Organization

Source: Corporate Leadership Council, Employment Value Proposition Survey; Corporate Leadership Council


Reporting Strong

Delivery of the EVP

Organizations

Overall Problem

Note: Each bar represents the percentage of employees indicating effective EVP delivery averaged across the 38 attributes by organization. Delivery effectiveness was calculated as the percentage of employees who somewhat agreed or strongly agreed (5, 6, or 7 on a 7-point scale).

Average Delivery Score = 41%

Organizations that effectively deliver the EVP have twice as many highly committed new hires as the average organization.

At the vast majority of organizations, only 4 out of 10 employees perceive a good EVP.



Problems with Managing the EVP: Lack of Preference Alignment

To successfully deliver an EVP, organizations must fi rst base that EVP on attributes which the labor market prioritizes. In general, however, misalignment exists between labor market preferences and organizational EVPs.

HR Misprioritizes Labor Market Preferences

One cause of this misalignment is a general disconnect between what the labor market prefers and what HR believes the labor market prefers. Organizations can construct the EVP from a wide array of attributes, requiring it to prioritize some over others. Unfortunately, when identifying what attracts candidates to the organization, HR overestimates the importance of people while underestimating the importance of rewards, opportunities, and the nature of the employees work. This misalignment then results in misprioritization of attributes when designing the EVP.

This does not mean that people attributes do not matter when designing the EVP, nor that HR should solely base the EVP on rewards. This data suggests, however, that on the absence of hard data HR risks building and marketing an EVP that does not deliver what the labor market wants. Such fundamental misalignments are a key cause of low employee satisfaction with EVP delivery.

Variation in Labor Market Preferences Compounds Alignment Problems

Variation in labor market preferences across segments exacerbates the problem of aligning the EVP with labor market preferences. For instance, only 13% of respondents in China highly value work-life balance when evaluating an employer, compared to 44% in the United Kingdom. Clearly, basing an EVP on worklife balance will generate different results between the two countries.

This raises the question of designing and implementing multiple EVPs. Coordinating an EVP across a variety of employee segmentsby gender, geography, function, or ethnicity, for instancepresents a daunting puzzle. How far should organizations pursue such segmentation? Chapter Two will explore this problem in greater detail.



Most EVPs Are Not Aligned with Employee Preferences

Problem #1: EVP Is Not Aligned to Preferences

Disconnect between what the labor market prioritizes and what HR thinks is most important

Relative Importance to Candidate Attraction

HR Executives Versus Labor Market

Source: Corporate Leadership Council, Employment Value Proposition Survey; Corporate Leadership Council, 2006 Chief Human Resources Offi cer Survey; Corporate Leadership Council research.

is further compounded by variation in what is most important across segments

Importance of WorkLife Balance

Aggre

gate

Resp

onde

nts

China Ind

ia

Unite

d Kin

gdom

Unite

d Stat

es10%

30%

50%

33%

13%

22%

44%

39%

0%

20%

40%

0% 20% 40%

Perception of Importance to

Attraction (HR Executives)

Actual Importance to Attraction (Labor Market)

Opportunity

People

OrganizationOrganization

Work

Percentage of Respondents Ranking in

Top Five Most Important Attributes

Rewards

Labor Market Segments

HR executives overestimate the importance of people

and underestimate other EVP categories.



Problems with Managing the EVP: Lack of Variation

Once HR understands which attributes form a compelling EVP for its employees and relevant labor markets, it must overcome the problem of poor differentiation.

The Labor Market Cannot Differentiate Between EVPs

Relatively little variation exists in perception of the fi ve EVP categories, as shown by the chart on the lower page. The key to the right of the chart explains in detail how to read the box and whisker plots for each category. The boxes show the typical range of perception, while the whiskers show the high and low extremes of perception.

With little perceived difference of EVP attributes from one organization to the next, the labor market cannot clearly evaluate one potential employer to the next.

As an example, perceived differences in an organizations work characteristics are particularly narrow. Most organizations generally position their jobs as having impact, of recognizing and respecting employees, and providing worklife balance. But without more detail to clarify these assertions, the EVP will lack the differentiation it needs to appear attractive to prospective employees.

The organizations rewardssuch as the competitiveness of the compensation or benefi ts packagesprovides a similar example. Little variation in perception of this attribute category exists in the labor market, minimizing the extent to which candidates can incorporate it into their perception of EVP attractiveness.

Those organizations which can position themselves as different along these dimensions will potentially increase their attractivenessand therefore competitivenessof their EVPs.



Problem #2: EVP Is Not Differentiated

Perception of EVP Category

Across Organizations

Source: Corporate Leadership Council research; Annual Executive Retreat survey.

Rewards Opportunity Work People Organization

Attribute Category

1

4

7Very Strong

Very Weak

Highest Scoring Organization

Top Quartile

Mean

Bottom Quartile

Lowest Scoring Organization

4.4

4.74.95.1

5.4

6.0

4.9

5.3

5.6

5.9 5.8

4.8

5.55.65.7

4.5

5.1

5.45.7

5.9 6.0

4.8

5.3

5.65.9

Key

Looking across organizations, the labor market has very similar perceptions of the EVP attributes.

All EVPs Look AlikeThe labor market perceives little variation in EVPs across organizations

Labor Market Perceptions of Organization

By Category



Problems with Managing the EVP: EVP Delivery Failure

It is not enough to simply select the right EVP and differentiate it effectively in the labor market; organizations must actually deliver on the EVP, providing the rewards, opportunities, work, people, and organizational experience promised to the labor market.

Few Employees Feel the Organization Successfully Delivers the EVP

Alarmingly, less than 25% of employees feel that the organization effectively delivers the value proposition promised to them as candidates. In other words, less than one in four employees agrees that their organizations compensation is as competitive as promised, that its managers are as high-quality as previously asserted in the recruiting process, or that the opportunities within the organization are as strong as they were led to believe.

Poor EVP Delivery Diminishes New Hire Commitment

This failure to deliver on the EVP has a direct impact on employee commitment. Poor EVP delivery leads to a precipitous decline in the commitment levels of new hires across their fi rst 12 months of employment, with more than a 25% reduction in average commitment. This in turn impacts the performance of these new hires, as well as their intent to stay with the organization.



One

Mon

th or

Less

6 Mon

ths

12 M

onths

30

40

50

Poor EVP Delivery Reduces Employee Commitment Only 24% of new hires agreed

that what was promised was delivered

The Value Proposition Promised to Candidates Is Delivered1

Percentage of Employees Agreeing with Statement

causing signifi cant declines in new hire commitment

Employee Commitment by Tenure with Poor2 EVP Delivery

Problem #3: EVP Is Not Delivered

24%

76%

Agree

Neutral or Disagree

Tenure

New Hire Commitment

1 The pie chart represents the percentage of respondents who indicate agree or strongly agree (6 or 7 on a 7-point scale) with the question, At our organization, the employment experience promised to prospective employees before they join is always delivered once theyre onboard. New hire is defi ned as tenure with the organization of 12 months or less.

2 Poor EVP delivery is measured as an average score of less than four across all EVP attributes.

Source: Corporate Leadership Council, Employment Value Proposition Survey: Corporate Leadership Council research.

n = 58,024.

Failing to deliver on the EVP causes more than a 25% decline in new hire commitment levels across the fi rst 12 months.



Key Findings


1. An organizations employment value proposition (EVP) is the set of attributes that the labor market and employees perceive as the value they gain through employment in the organization.

2. An effective EVP provides organizations with three quantifi able benefi ts:

Improved attractiveness: Organizations with effective EVPs are able to source from a much deeper pool of talent in the labor market. Top-performing organizations draw candidates from about 60% of the labor market, including passive candidates who would otherwise be content to stay with their current job. Lesser-performing organizations are able to source only from the most active 40% of the workforce.

Greater employee commitment: Organizations with effective EVPs enjoy signifi cantly higher levels of commitment from their employees. Top-performing organizations have 3040% of their workforce displaying high levels of commitment, compared to less than 10% in under-performing organizations.

Compensation savings: Organizations with effective EVPs are able to reduce the compensation premium required to attract new candidates. Top-performing organizations are able to spend 10% less on base pay compared to under-performing organizations.

3. Organizations fail to build a strong EVP because of three common pitfalls:

Comprised of the wrong attributes: In the absence of data, organizations risk over-investing in employment attributes that are less important to the workforce, while under-investing in the most critical elements necessary for attracting and retaining talent.

Not differentiating from competitors: The labor market perceives minimal variation in the EVPs offered by different companies, suggesting that organizations are not suffi ciently differentiating (and communicating) their EVPs.

Failing to deliver on the EVP: Organizations that fail to deliver on the most signifi cant elements of the EVP see signifi cant declines in the commitment of their workforce. This decline can begin almost immediately for new hires who feel that their expectations are not met.



Chapter IDefi ning the Differentiated Employment Value Proposition



Order from Chaos

Breaking Down the Employment Value Proposition

Conceptual and operational defi nitions of what attracts key talent, along with corresponding advice on how to retain it, vary signifi cantly in academia, consultant literature, and the business press. Many questions exist as to what constitutes the value proposition. As a result, senior HR leaders and their executive colleagues have grown increasingly frustrated with the failure of EVP strategies yield the right talent for the business.

For the purposes of this studyand ultimately to make the fi ndings actionablethe Council has defi ned an Employment Value Proposition (EVP) as a set of attributes that the labor market and employees perceive as the value they gain through employment in the organization.

Developing the List of 38 EVP Attributes

To develop an actionable list of EVP attributes, Council staff reviewed a variety of sources to identify potential EVP attributes. These sources included job postings, company Web sites, business press articles, consultant literature, academic and business research, and interviews with Council members.

A master list of over 200 characteristics was compiled and evaluated for similarity, distinctiveness, universality, and overall ratability, leading to the consolidated list of 38 attributes seen below.

This fi nal list of 38 organizational attributes can be categorized into fi ve categories: The Rewards, The Opportunity, The Organization, The Work, and The People.


Chapter I: Defi ning the Differentiated Value Proposition 27 2006 Corporate Executive Board. All Rights Reserved.

The Work Business Travel Innovation Job Impact JobInterests Alignment Location Recognition WorkLife Balance

Testing an EVP Along 38 AttributesOf all of the potential attributes, which are most important for attraction and retention?

The Opportunity Development

Opportunities Future Career

Opportunities Organization Growth

Rate Meritocracy Organizational Stability

The Rewards Compensation Health Benefi ts Retirement Benefi ts Vacation

The People Camaraderie Collegial Work

Environment Coworker Quality Manager Quality People Management Senior Leadership

Reputation

The Organization Customer Reputation Diversity Empowerment Environmental

Responsibility Ethics Great Employer

Recognition Industry Informal Environment Market Position Product Brand Awareness Product Quality Respect Risk Taking Organization Size Social Responsibility Technology Level Source: Corporate Leadership Council, Employment Value

Proposition Survey; Corporate Leadership Council research.Note: Building on existing academic and business research, business news, organization and employment Web

sites, and more than 100 member interviews, the Council distilled the EVP into 38 representative attributes. These 38 attributes comprise fi ve EVP attribute groupings that together defi ne an organizations EVP.

Opportunity Work

People

Organization

Rewards



Defi nitions of EVP AttributesThe table below presents defi nitions for the 38 attributes which constitute the Employment Value Proposition

Attribute Name Defi nition

Business Travel The amount of out-of-town business travel required by the job

Camaraderie Whether working for the organization provides opportunities to socialize with other employees

Collegial Work Environment Whether the work environment is team-oriented and collaborative

Compensation The competitiveness of the jobs fi nancial compensation package

Coworker Quality The quality of the coworkers in the organization

Customer Reputation The reputation of the clients and customers served in performing the job

Development Opportunities The developmental/educational opportunities provided by the job and organization

Diversity The organizations level of commitment to having a diverse workforce

Empowerment The level of involvement employees have in decisions that affect their job and career

Environmental Responsibility The organizations level of commitment to environmental health and sustainability

Ethics The organizations commitment to ethics and integrity

Formal/Informal Work Environment Whether the work environment is formal or informal

Future Career Opportunities The future career opportunities provided by organization

Great Employer Recognition Whether or not the organizations reputation as an employer has been recognized by a third-party organization

Growth Rate The growth rate of the organizations business

Health Benefi ts The comprehensiveness of the organizations health benefi ts

Industry The desirability of the organizations industry to the respondent

Innovation The opportunity provided by the job to work on innovative, leading edge projects

JobInterests Alignment Whether the job responsibilities match your interests




Defi nitions of EVP Attributes (Continued)

Attribute Name Defi nition

Job Impact The level of impact the job has on outcomes

Location The location of the jobs the organization offers

Manager Quality The quality of the organizations managers

Market Position The competitive position the organization holds in its market(s)

Meritocracy Whether or not employees are rewarded and promoted based on their achievements

Organization Size The size of the organizations workforce

Organizational Stability The level of stability of the organization and the job

People Management The organizations reputation for managing people

Product Brand Awareness The level of awareness in the market place for the products brand

Product Quality The organizations product or service quality reputation

Recognition The amount of recognition provided to employees by the organization

Respect The degree of respect that the organization shows employees

Retirement Benefi ts The comprehensiveness of the organizations retirement benefi ts

Risk Taking The amount of risk that the organization encourages employees to take

Senior Leadership Reputation The quality of the organizations senior leadership

Social Responsibility The organizations level of commitment to social responsibility (e.g., community service, philanthropy)

Technology Level The extent to which the organization invests in modern technology and equipment

Vacation The amount of holiday/vacation time that employees earn annually

WorkLife Balance The extent to which the job allows you to balance your work and your other interests




Focus on Whats Important to Candidates to Drive Attraction

Meeting Candidate Preferences Is the Primary Driver of EVP Attractiveness

Developing an EVP capable of attracting talent in the labor market involves three steps: selecting the attributes for inclusion with the EVP, building candidate awareness of the EVP, and shaping candidate perception. The fi rst step, however, is the most vital. Selecting the right EVP attributes explains 77% of the variation in EVPs attractiveness in the labor market.

Selecting EVP Attributes

Organizations must base the EVP on attributes which the labor market considers when evaluating potential employers. Failure to correctly build the EVP will undermine efforts in the fi rst and second stages, since promoting EVP attributes which the labor market does not incorporate in to its decision making will clearly fail to attract potential candidates.

Building Candidate Awareness

Once the EVP has been aligned with attributes the labor market considers important, the organization must work to build awareness of these attributes. Building candidate awareness of attributes accounts for 10% of the variation in attractiveness of the EVP. Doing so requires that organizations effectively reach out to the labor market to communicate their EVP.

Shaping Candidate Perception

Finally, organizations must ensure that the labor market has a favorable impression of how the organization can deliver on the attributes within its EVP. Shaping candidate perception of attributes accounts for 13% of the variation attractiveness of the EVP. This stage goes beyond simple awareness to credibly convince employees of EVP attributes. Additional detail on the channels candidates trust the most when evaluating potential employers can be found on page 51.

Keeping these three steps and their relative importance in mind, HR can work to craft a compelling EVP capable of attracting key talent. The following pages will provide further guidance on the critical fi rst step, aligning the EVP with attributes the labor market fi nds most important.



0%

50%

100%

0%

50%

100%

77%

13%

10%

An Attractive EVP Builds on Whats ImportantAttractiveness is a function of the EVPs alignment with candidate priorities

EVP Aligned with Important

Attributes


EVP Perceptions

Relative Weight of Different Components of Attractiveness

The biggest factor in determining how attractive an organization is to the labor market is a function of whether or not it is based on the attributes that candidates care about. Awareness and perceptions are relatively less important.

EVP Awareness

Defi ning AttractivenessThree factors determine whether or not an organizations EVP is attractive to the labor market:

1. Is the EVP based on the attributes that the labor market cares about?

2. Does the labor market have a favorable impression of the organization on those attributes?

3. Is the labor market aware of how the organization scores on those attributes?



Why Measure Commitment?

In addition to organizational attractiveness, this report also studies the impact of EVP attributes on employee commitment (also known as employee engagement). Commitment has both an emotional component, the extent to which employees value, enjoy, and believe in their organizations, as well as a rational component, the extent to which they believe it is in their best interests to stay with the organization.

The Corporate Leadership Councils Research on Employee Commitment

To arrive at this defi nition, the Council has surveyed more than 75,000 employees since 2004 to understand the nature of employee commitment (engagement), what drives it, and what outcomes organizations will receive from building it. The full results of this study can be found in Driving Performance and Retention Through Employee Engagement, available at www.clc.executiveboard.com

Commitment Drives Performance and Retention

The results are two-fold: increased performance and higher levels of retention.

Specifi cally, improving employee commitment leads to greater discretionary effort. Every 10% improvement in commitment can increase an employees effort levels by 6%, which in turn can improve performance by 2 percentile points.

Similarly, improving employee commitment will also support retention, reducing probability of departure by as much as 87%, from 9.2% to 1.2%. Every 10% improvement in commitment can decrease an employees probability of departure by 9%.



The Impact of CommitmentCommitment drives performance

Maximum Impact of Commitment on Performance Percentage*

Numberof Employees

50th Percentile

70th Percentile

The 10:6:2 Rule Every 10% improvement in commitment can increase

an employees effort level by 6%.

Every 6% improvement in effort can improve an employees performance by 2 percentage points.

* The analysis above presents a statistical estimate of the maximum total impact on discretionary effort and performance emotional commitment will produce. The maximum total impact is calculated by comparing two statistical estimates: the predicted discretionary effort or performance rank for an employee who scores high in emotional commitment, and the predicted discretionary effort or performance rank for an employee who scores low in emotional commitment.

as well as retention

Maximum Impact of Commitment on the Probability of Departure

0%

5%

10%

0%

5%

10%9.2%

1.2%

Strongly Noncommitted Strongly Committed

Probabilityof Departurein the Next 12

Months

The 10:9 RuleEvery 10% improvement in commitment can decrease an employees probability of departure by 9%.

Moving from low- to high-effort levels can result in an improvement in employee performance that moves an employees performance rating up to 20 percentage points.

Moving from strong non-commitment to strong commitment decreases the probability of departure by 87%.

Source: Corporate Leadership Council 2004 Employee Engagement Survey; Corporate Leadership Council research.


The Reasons People Join and Stay with Organizations

While there is some truth to the old adage that people join organizations and leave managers, the reality of todays market is that employees join for the rewards and opportunities and stay for the people and the organization.

Rewards and Opportunities Have the Greatest Impact on Candidate Attraction

The opportunities and rewards an organization offers are the primary drivers of attraction, carrying the most weight in infl uencing someones decision to join an organization. These are not only the most externally visible and assessable categories of attributes, but directly meet the rational needs of candidates on the labor market.

The People and Organization Drive Employee Commitment

These categories are not the most important drivers of attraction, however. Once candidates have accepted the job offer and started employment, the organization and its people play a much more prominent role in driving employee commitment. Once employees are in the organization, the day-to-day impact of the people and culture carry a lot more weight as they make decisions about how hard to work and how long they intend to stay with the organization.

Do You Maximize Attraction or Commitment?

This raises a critical question: will EVP strategies designed to maximize organizational attractiveness lead to workforces with lower commitment, and therefore lower performance and higher turnover?

While each set of attributes has a dominant role for driving either attraction or commitment, that does not mean that organizations can rely solely on one set or the other to drive a particular outcome. Opportunities, for instance, remain important for driving commitment as well for attraction, and failing to deliver on opportunities would have notable negative impacts on employee commitment.

Organizations must ultimately balance the EVP across these attributes. Before addressing this question in greater detail, the following pages will fi rst look at the top drivers of attraction and commitment separately.



Putting Science Behind an Old AdageEmployees join for the opportunity and the rewards and stay for the people and the organization

Importance of Attribute Categories

By Outcome

0%

50%

100%

0%

50%

100%

29%

29%

19%

11%

12%

16%

22%

19%

20%

23%

Attribute CategoriesThe People

The Organization

The Work

The Opportunity

The Rewards

Attraction Commitment

Relative Importance

of Categories, Indexed to 100

The Key for AttractionEmphasizing the opportunity and the rewards are critical for attraction.

Note: Attraction bars represent the percentage of respondents reporting attributes as top fi ve in importance when evaluating an organization as a potential employer, averaged within attribute grouping and indexed to one-hundred. Commitment bars represent the maximum impact each attribute had on commitment, averaged within attribute grouping and indexed to one hundred.

The Key for CommitmentHowever, focusing on the people and the organization become increasingly important for driving commitment.



Compensation and Career Opportunities Attract

Looking at the individual attributes which compose the EVP, which does the labor market hold most important?

The graph below presents the aggregate EVP preferences of the workforce, and shows the percentage of respondents who listed each attribute within their top fi ve most important attributes when assessing a potential employer. Bars with darker gray shading indicate that there is little variation in preferences for that attribute across demographic segments. Lighter gray shading of a bar indicates that there is variation in preference for that attribute across demographic segments.

The Top Drivers of AttractionCompensation and Future Career Opportunity

Looking across the attribute categories, opportunities and rewards drive candidate attraction more than any other category, followed by work characteristics, organizational characteristics, and then people.

When considering an organization as a potential employer, compensation is by far the most important driver of attraction. That said, several other drivers fi gure prominently in the labor markets evaluations of potential employers: future career opportunities, organizational stability, worklife balance, development opportunities, and respect. Given that, of these, only work-life balance shows strong variation by region, organizations must carefully consider the extent to which they can compete on these attributes when evaluating their EVP strategies.

Attributes That Do Not Drive Attraction

Surprisingly, a few attributes that have been heavily relied upon in the pastsuch as product brand recognition, great place to work recognition, or market positionactually have very little impact on attracting employees to the organization. Organizations that rely on these attributes to attract the talent they need risk lower EVP attractiveness in the labor market.

It is important to note why some attributes drive attraction more than others. Some are genuinely less important to candidates. Others, such as manager quality, are important (in this case manager quality is a powerful driver of commitment), but much harder for candidates to assess with confi dence from an external perspective. Job seekers will put more weight on dimensions they believe they can assess accurately, such as compensation.

Using This Data to Develop an EVP Strategy

Many attributes that have featured prominently in organizational branding campaigns do not weigh heavily in the decision-making factors of the labor market. As an example, 6% and 4% of respondents prioritize an organizations social and environmental responsibility, respectively. An EVP based on these attributes would appeal to this small segment of the labor market, but would fail to strike a larger segment of the labor market as a compelling employment value proposition.



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25%

50%

35%33%

28%

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11%11%11%

33%

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7% 6% 5% 5% 5% 4% 4% 4% 4% 3%

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Opportunity and Rewards Are Most ImportantCompensation and career opportunities show disproportionate returns at improving attraction

Percentage of Respondents Rating EVP Attribute in Top Five Most Important for Assessing Potential Employers

The RewardsThe Opportunity The Work The Organization The People

Percentage of Respondents

Rating in Top Five

Attributes

Compensation is the most important driver of attraction.

Product brand awareness is relatively unimportant at driving attraction as is manager quality.

Note: Each bar represents the percentage of respondents reporting attributes as top fi ve in importance when evaluating an organization as a potential employer. The data above represent the aggregate level of attribute importance at the country-level averaged across countries.

The relative variation of attributes is calculated by the ratio of the standard deviation of the importance of the attribute to the average importance of the attribute. Attributes with a ratio above 0.3 are considered to display signifi cant variation across segments.


Attributes That Display Consistency Across Segments

Attributes That Display Variation Across Segments


Its Not All About Compensation and Product Brand

Many organizations have long held that successful EVP strategies could rely almost exclusively on the product brand. Data on the previous page casts doubt on this, showing that product brand awareness was highly important for only 7% of respondents. But what about compensation? Can organizations buy their way out of labor market trouble?

Strong EVPs Do Not Require High Compensation and Strong Product Brands

Compensation is in fact a powerful tool for attracting talent to the organization. But it is not the only tool available to successfully attract candidates in the labor market.

The graphic below shows three sample EVPs selected from the organizations that participated in the 2006 Employment Value Proposition Survey: one with average awareness and perception of all attributes, one which prominently features compensation and product brand, and one which prominently features future career opportunities and respect for employees. Each organization has an indexed attractiveness score, based on the importance the labor market places on a particular set of attributes and the extent to which the labor market is aware of and perceives those attributes.

Not surprisingly, the EVP with high compensation and product brand is more attractive to the labor market than the average EVP, with an attraction score of 73 versus 66.

The high-compensation and strong product brand EVP does not always outperform, however. The second EVP, featuring career opportunities and respect, is even more attractive to the labor market, with an attraction score of 74 versus 73.



60

70

80

60

70

80

66

7374

Overcoming Low Compensation and a Weak Product BrandOrganizations can compete on more than just brand and compensation

Attractiveness of Multiple EVPs

Attractiveness Score1

Average EVP EVP #2EVP #1

Focused EVP Corp.2

Well-known and positive perception of future career opportunities

Well-known and positive perception of respect for employees

Average awareness and perception of all other EVP attributes

Mega Corp.2

Well-known and positive perception of compensation

Well-known and positive perception of product brand

Average awareness and perception of all other EVP attributes

Average Corp.2

Average awareness and perceptions of all EVP attributes

1 Attractiveness is a measure of how important the labor market views a particular set of attributes, multiplied by awareness and perception levels.

2 Pseudonym.

Organizations that compete on attributes outside of compensation and product brand can be just as attractive to the labor market.



The People and the Organization Drive Employee Commitment

When designing the EVP, organizations must not only consider the impact that attributes have on attracting candidates, but also on their commitment levels.

Understanding the Top Drivers of Commitment

The graph below presents the maximum potential impact that delivering each EVP attribute can have on an employees level of commitment. Bars shaded in dark gray indicate that the attribute consistently drives commitment across talent segments; bars shaded in light gray indicate that variation exists in how the attributes drives commitment across segments.

EVP attributes concerning the organization and its people have the greatest overall impacts on driving commitment, though attributes concerning opportunities and work play an important role as well. Development opportunities, job-interests alignment, and respect for employees are the most important, potentially impacting commitment by 45%.

Beyond these top three attributes, however, organizations have a wide array of attributes to rely on when designing EVPs to build commitment. Seven other attributes have impacts of 40% or greater: future career opportunities, recognition, innovation, empowerment, ethics, manager quality, and senior leadership reputation. Importantly, nearly all of these attributes (except people management and ethics) have consistently high impacts on commitment across talent segments. As with attraction, there is a surprising degree of consistency in what drives commitment among employees.

Attraction and Commitment Drivers Dont Always Overlap

While many of the strongest drivers of attraction also have a strong impact on commitment, there is not a perfect overlap between the two. In general, compensation and career opportunities are important for attracting talent, but working with quality people in an environment that respects and empowers employees is the key to driving employee commitment. Compensation is one of the starkest differences. It is the most notable driver of attraction, but more than 25 other EVP attributes play a greater role in driving employee commitment.

The reverse is true as well; what drives commitment doesnt necessarily drive attraction. As an example, manager quality does not fi gure prominently in most candidates evaluations of a potential employer, but it does have a substantial43%potential impact on an employees commitment. As noted previously, these differences often result from the candidates inability to assess such dimensions accurately.

Developing an EVP Which Maximizes Both Attraction and Commitment

These past pages have introduced two key concepts. First, that EVP attributes drive attraction and commitment to varying degrees. Second, that these impacts on attraction and commitment can vary according to talent segments. To bring these concepts together, the following pages will discuss the core EVP for the labor market: an EVP with high impact on both attraction and commitment, and which is consistent for all major talent segments.



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clc attracting and retaining critical talent segments identifying drivers of attraction and...

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