A recent article published at the Harvard Business Review, “Why Do Employees Stay?” examines key reasons why employers suffer high turnover, pointing out that replacing an employee costs about 21 percent of their annual pay.
That’s not so surprising. We all know (or should know) that there’s a high cost to organizations with reputations as poor employers, especially as reflected in online reviews.
But what I found very interesting is not just costs to replace an employee, but the premium employees demand from companies that don’t demonstrate that they value their teams.
The HBR article written by Dr. Andrew Chamberlain, director of research at Glassdoor Economic Research, acknowledges that many employees leave a company to move into a new role along a logical career path. Yet his research shows that online reviews are a major factor in the decision to seek a role in a new company or where they are already employed.
As he explains, “We found that raising a company’s overall rating on Glassdoor by one star (on a one-to-five scale) was associated with a four-percentage-point higher chance that employees would stay for their next role.”
Employer brand value measured in dollars
Given that employees naturally want to move into more responsible positions as their careers progress, it makes sense to maintain a valuable employer brand to boost the chances that team members won’t be as susceptible to recruitment from outside the organization.
As Dr. Chamberlain notes, even a one percent improvement in the odds that employees will stay “can translate into hundreds of retained employees at a 10,000-person employer.”
The article includes a link to a Glassdoor research report (PDF), “Why Online Reviews Matter for Employer Brand.” In it, there’s data from a study including how much of a raise it would take for an employee to accept an offer from another company for a similar job.
- For a company with a negative employer review, it would take an average raise of about 55 to 60 percent to create that incentive.
- For a company with a positive employer review, that average raise would only need to be about 35 to 40 percent.
Consider the difference between being required to pay 55 percent more vs. 40 percent more to acquire new talent already earning $100,000 per year. That’s $15,000 just for one employee!
Multiply that by hundreds of hires and you can see how essential it is to protect your valuable employer brand and that online reviews really do make a difference.
