Employee Value Proposition

Abstract

The employee value proposition includes all of the benefits, both tangible and intangible, that an organization’s employees receive in exchange for offering the employer their time, effort, and expertise. The employee value proposition includes traditional forms of compensation, such as employee salaries, but it also extends much further than this, to include any kind of program or policy in place at the organization which tends to improve the experience of those who work there.

Overview

In most sectors of the economy, the competition for jobs is fierce. Job seekers who are able to find employment are happy just to receive a salary, and most other benefits derived from the position are not major considerations. In some fields, however, profits are high and employers are anxious to attract the most talented individuals in order to benefit from their expertise and acquire an advantage over their competition; examples include the pharmaceutical industry, technology firms, doctors, and lawyers. In these settings, it takes more than just a high salary to entice the best and brightest. Employers find that instead they must consider the whole employee value proposition (EVP), a concept which encompasses everything that employees find valuable about working at an organization, from healthcare benefits and retirement plans to perquisites such as on site dry cleaning and open bars. EVP even includes the organizational and office cultures, with many employees preferring more open and less hierarchical structures (Verbeke, 2008).

Organizations that put effort into their EVP often attract attention because building an EVP is employee-centric, while most companies in the modern world are employer-centric. Employer-centric organizations are ones in which the leadership places the needs of the organization first, and the needs and wants of customers and employees are secondary. An example of this would be a company that lays off part of its workforce in order to reduce the liabilities on its balance sheet, making the company appear more profitable and thereby pleasing shareholders and potential investors, which in turn increases the company’s value (Storey, 2005). In contrast, an employee-centric company would put its efforts into creating the most attractive work experience possible, in order to lure top talent to the organization; these talented individuals would then give their utmost to the organization in the form of creativity, hard work, and dedication, ultimately improving the quality of the organization and its products and services, and thereby benefitting the entire organization and those whose lives it touches. Both approaches seek to accomplish the same overall goals of growth and improvement, but they differ in how they think this can best be accomplished (Ellwood, 2014).

Viewpoints

Employers wishing to take control of their EVP, as opposed to simply living with the "default" EVP that an organization develops unintentionally and which may not present the image of the organization that the employer desires, typically find that their first step is to conduct research. Just as a company would not begin producing a product before finding out if the market has any demand for that product, the smart company develops its EVP by first asking a few basic questions to find out what current employees like and dislike about the company, what the company’s competitors are doing to build their own EVP, and what types of elements are valued by the people in the company’s talent pool, that is, what is important to the people the company wants to hire (Sison, 2015).

This information is gathered in a variety of ways. Some of it can be collected by reviewing the literature on human resource development within the relevant field, but more detailed and more current data usually is obtained by distributing surveys to current and prospective employees, holding focus groups with internal and external constituents in order to ask open-ended questions about their likes, dislikes, and priorities, and then coding and organizing all of this data for later analysis. Once the information has been reviewed, the organization can then begin to construct a draft EVP based on the preferences revealed in the data collection phase of the project.

For example, if surveys had indicated that a high percentage of the talent pool targeted by the company are pet owners, then the company likely would have used this information in its focus groups to find out more about how the respondents feel about their pets; in the EVP drafting stage, this information could then be used to include services designed to appeal to pet owners, such as having a pet sitting service and pet grooming facility located in the workplace for the convenience of employees.

It is important to keep in mind that the ultimate reason that employers go through this process is to benefit the organization (Pellet, 2009). Benefitting the employees by offering them services they value is essentially a means to the larger end of recruiting and retaining top talent, who will then help the organization to perform at a higher level than its competitors, increasing profitability and market share.

As some observers have noted, the drive to expand services for employees can occasionally result in an "EVP arms race." This is a situation where a relatively small number of employers are intensely competing with one another for a few brilliant hires, as occurred in Silicon Valley during the so-called Dot Com Boom of the late 1990s. As each firm implemented a new service to build its EVP, its competitors immediately matched that service with their own, while adding still more services. If one company installed a coffee bar (free for employees) in its offices, then its competitors could be relied upon to do the same before too much time passed, and go them one better by adding a frozen yogurt station as well (Wilson, 2015).

One objection to the idea of EVP that is often raised is that the premise upon which it is established is faulty, namely, that employees care about anything other than how much they earn. These critics assert that salary is paramount, it always has been, and it always will be, for the simple reason that if an employee is paid enough, then that employee will simply be able to purchase whatever goods and services might be offered through an EVP program. In the example above, they suggest, it would be much more cost effective to simply pay the company’s top performers enough so that they could buy their own coffee and frozen yogurt, rather than the company having to supply it for everyone at the firm.

EVP critics suggest that rather than having a meaningful impact on employee recruitment and retention, EVP should be seen as part marketing gimmick (for prospective hires) and part brainwashing tool (for current employees). They also suggest that EVP perquisites have more to do with corporate showmanship than with employee satisfaction, because they sometimes appear to be little more than means by which large companies can show the rest of the world how successful they are. The reality of the modern economy, critics say, is such that the bottom line of salary is all that anyone really considers when deciding to accept a position or remain in one, because salary is what everything else in a person’s life depends on—home, family, car, recreation, travel, and so forth. (Trost, 2014).

EVP skeptics point to environments such as San Francisco, where housing is so expensive that thousands of employees are forced to commute for hours each day because they cannot afford to live closer to work; for people in this situation, EVP is little more than a theoretical concept, because if the salary is not adequate for them to afford a place to live within driving distance, then no amount of gourmet lunches will make it possible for them to work there.

EVP supporters respond to such critiques in a variety of ways. It is true that EVP has the greatest effect among employees for whom salary is not the prevailing concern. Typically these are highly skilled professionals who possess talents that are rare or even unique, and who are in such demand that they have multiple job offers to consider at any point in time, any one of which would provide a salary more than adequate for their needs. Naturally, for a person in this situation, factors other than salary would take on additional importance, and could conceivably become decisive in a person’s employment decisions. One would select a position with an employer providing the greatest number of value enhancing programs based on one’s own preferences, and salary would have less influence on the final determination. These can include flexible work schedules, on-site lifestyle services, and intangible benefits such as a relaxed and collaborative office culture. (Schwartz et al., 2011)

EVP proponents assert that these benefits are not solely of value to the elite—they also contribute to the quality of life of every other employee and, over the long term, tend to encourage people to join the company and stay there. Seen in this way, EVP is not always a feature-rich benefits package that is the make or break item in every employee’s compensation package (or "people deal"); instead, it is a subtle but substantial part of the organization’s atmosphere that makes employees feel that they are valued as members of a community of shared values, rather than just another number in the payroll system. The best way to do this, according to human resources experts, is to begin by asking questions that reveal the organization’s fundamental character and priorities. A key question of this sort is to hypothesize what qualities the organization has that would attract and retain talented people, if the organization was for some reason not able to pay salaries on par with the market. Asking this question forces members of the organization to think about the kind of workplace they have collectively brought into being, whether intentionally or unintentionally, and then to consider whether it is a place that people want to come to every day. Whatever the answer to this question, the organization can benefit from the inquiry. If the organization is a place that people are happy to be a part of, then the inquiry will produce a list of reasons why that is the case, and these can then be compiled into a formal EVP which may be used to recruit new employees. If the answers to the question reveal that people in the organization do not find a great deal to value apart from their paychecks, then ideally this would spur the organization’s leaders to reconsider the direction the firm is heading in (Heneman, Judge, & Kammeyer-Mueller, 2012).

Indeed, one of the less often discussed benefits of developing an intentional EVP has nothing to do with recruiting new employees. The organizational self-study that EVP development requires can also lead to a reinvigoration of the commitment of existing employees to the group. This happens because in order to develop an EVP, an organization must be able to succinctly state what its real purpose for existing is, and what kind of place the organization is to work at as its members strive to fulfill its purpose. Organizations need to go through this type of self-reflection periodically. This is partially due to the natural turnover that causes some people to depart the organization and others to join it. Those who leave take some of the organization’s collective knowledge with them, and those who arrive need to learn the history of the organization, even as they bring in fresh ideas and experience.

Organizations do not exist in a vacuum—their environment is continuously changing, and over time this requires the organization to realign itself with its surroundings. Going through the process of developing an EVP can be an excellent way of doing this. The most challenging aspect can be to find and retain leaders for the organization who have the proper understanding of the nature of the EVP and its importance to an employee-centric organization.

All too often, leaders either fail to appreciate the potential of an employee-centric attitude, or they reject this attitude in favor of a more pragmatic, and/or cynical, marketing orientation. When this occurs, EVP loses its real power and can become little more than an elaborate effort at corporate communications. This is a short-term rather than long-term view, inasmuch as it concentrates on improving the organization’s situation within a time frame of months or years, rather than the multi-year outlook that is the focus of an authentic EVP undertaking. Ironically, such is the volatility of the contemporary economy that those organizations that do not choose to aim for the long term will more than likely not be around long enough to eventually see the error of their ways (Benz, 2014).

Terms & Concepts

Brand Alignment: Brand alignment refers to a management strategy in which the organization seeks to marshal all of the resources its employees possess and use them to overcome organizational challenges; it requires full commitment from all members of the organization.

Employee-centric: An organization that is employee-centric places a priority on employee satisfaction. In contrast, an employer-centric organization tends to assume that its employees should be happy simply to have a job, and does not make it a priority to increase employee satisfaction.

Employer Branding: Employer branding is the effort made by an organization to present itself to prospective and current employees in a favorable light, so that current employees will be encouraged to stay with the organization, and prospective employees will want to become a part of it.

Internal vs. External Experience: This is a comparison between the image an organization presents to its customers, who are external to the organization, and the image it presents to its employees, who are internal to the organization. The goal is for people’s experience of the organization internally and externally to be in alignment.

Pay Philosophy: The pay philosophy of an organization is the overall attitude the organization and its leadership have toward the proper role of financial compensation in the people deal. While some might assume that a higher salary is always better, statistics have shown that in healthy, growth-oriented organizations, monetary rewards are only one part of the overall value employees are looking for.

People Deal: An organization’s people deal is the complete package of benefits and rewards available to members of the organization. Organizations seek to craft their people deal so that they can attract the most talented employees while still remaining profitable.

Bibliography

Benz, J. (2014). Will purpose rebalance the employee value proposition?. People & Strategy, 37(2), 10–11. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=97575596&site=ehost-live

Coleman, A. (2014). Anatomy of a present-day employee value proposition. Employee Benefits, 1. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=99257262&site=ehost-live

Ellwood, I. (2014). Marketing for growth: The role of marketers in driving revenues and profits. New York, NY: Public Affairs.

Heneman, H. G., Judge, T., & Kammeyer-Mueller, J. D. (2012). Staffing organizations. Middleton, WI: Mendota House.

Mandal, A., & Krishnan, S. K. (2013). Creating a compelling employee value proposition. Human Capital, 38–42. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=109266693&site=ehost-live

McLean-Conner, P. (2015). Employee value propositions: A foundation in building a competitive work force. Electric Light & Power, 93(1), 18–19. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=102276808&site=ehost-live

Pellet, L. (2009). The cultural fit factor: Creating an employment brand that attracts, retains, and repels the right employees. Alexandria, Va: Society for Human Resource Management.

Schwartz, T., Gomes, J., McCarthy, C., & Schwartz, T. (2011). Be excellent at anything: The four keys to transforming the way we work and live. New York, NY: Free Press.

Sison, A. G. (2015). Happiness and virtue ethics in business: The ultimate value proposition. Cambridge, UK: Cambridge University Press.

Storey, J. (2005). Adding value through information and consultation. Basingstoke, UK: Palgrave Macmillan.

Trost, A. (2014). Talent relationship management: Competitive recruiting strategies in times of talent shortage. New York, NY: Springer.

Verbeke, A. (2008). Growing the virtual workplace: The integrative value proposition for telework. Cheltenham, UK: Edward Elgar.

Wilson, C. (2015). Designing the purposeful organization: How to inspire business performance beyond boundaries. Philadelphia, PA: Kogan Page.

Suggested Reading

Barton, T. (2014). Creating an employee value proposition to win the war for talent. Employee Benefits, 10. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=95401124&site=ehost-live

Barton, T. (2014). Capital One builds enticing employee value proposition. Employee Benefits, 8. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=95666920&site=ehost-live Frauenheim, E. (2012). Deal or no deal? "Employee value proposition" evolves. Workforce Management, 91(11), 16.

We've condensed our values into something we can really use. (2015). People Management, 13. Retrieved January 3, 2016, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=111794896&site=ehost-live