A fresh study from Duke University’s Fuqua School of Business sheds light on intriguing dynamics within the labor market strategies of businesses. The study reveals a curious trend: certain high-prestige brands opt to provide lower salaries to their staff, resulting in detrimental effects on productivity, employee retention, and overall profits.
In contrast, brands that distinguish themselves through their distinctiveness seem inclined to offer higher pay, particularly to employees who embody this uniqueness. This strategic approach could potentially lead to more favorable business outcomes, as the research suggests.
Brand power
“We used to think that brands only contribute value to firms through the brand’s effects on customers’ willingness to pay for the firms’ products,” the researchers explain. “But we show that brands also affect the behavior and attitudes of their employees, another potent determinant of firms’ performance and value.”
Brands set themselves apart by being either really good (vertical) or really unique (horizontal). Brands with high vertical differences are the ones people think are super high-quality. Those with horizontal differences attract customers who see them as special and different.
The researchers looked at information from the ‘100 Best Companies to Work For’ list and data about brand popularity. They used this data to learn about how much companies pay their employees and how long the employees stay. They also did some experiments with managers and customers to test their ideas about different brands and how much they pay their workers.
Influencing pay
Their findings showed that companies known for being high-quality (vertical) tend to pay their workers less money. On the other hand, companies that stand out for being unique (horizontal) want to hire people who match their unique style, and they are willing to pay them more.
“It’s as if high-quality firms bargain on their prestige, and on the value that working for them adds to their employees’ resume power,” the researchers explain.
The research shows something important: brands that are different from the rest (these are the ones that stand out) pay their employees more money to attract people who think similarly. This also helps the brands make more profit.
A good match
The researchers think that these employees not only feel good about working for a brand that matches their personality, but they also get paid more. The research highlights that these higher salaries are important because employees who work for unique brands can’t use this experience to find better, higher-paying jobs later on.
The authors suggest that managers in charge of well-known brands should think about the bad results of paying less money. Instead, they should find different ways to make use of the brand’s good reputation.
“They should consider the returns of attracting a larger pool of applicants, drawn by the brand’s reputation and, rather than using resume power to determine pay, they could highlight it to convert more job offers,” the authors conclude.
It’s a finding they hope will prompt HR and marketing departments to work more effectively together so that the branding work the marketers do makes recruiting talent that bit easier.
