Employer Branding and Psychological Contract: What’s the Big Deal?

By Published June 21, 2017
Employer Branding

Globalization has not only increased competition among organizations but has also created a new window of opportunity for the workforce. Workplaces have transformed drastically, and the idea of employer branding has become more important than ever, at a time when the war for talent intensifies with each passing day – making hiring, recruiting and retaining existing employees ever challenging.

The new age workplace consists of workers representing three generations namely—Baby boomers, Generation X and Generation Y (the Millennials) and now Generation Z. Retaining and engaging such a multicultural workforce is a challenge in itself. This is precisely the reason why organizations need to focus on employer branding and even take deep delve into the present concept of a psychological contract.

Employer Branding

Employer Branding Revisited

The term employer brand/ing began to be consolidated since the 1990’s where Ambler and Barrow (1996) chose to relate the techniques and language of brand management to HR management. The duo defined an employer brand as: “the package of functional, economic and psychological benefits provided by employment and identified with the employing company.”

The gilded standard of employer branding includes companies such as Google and Facebook. In 2010 while Google was recruiting for 6,000 jobs they reportedly received 75,000 applications, which can be mainly attributed to their unique employer branding.

So Does This Fancy Phrase Help Organizations?

Why the overall concept of employer branding is so significant and how do organizations benefit from it?

Employer branding has been taking from the marketing domain and is a child of its time.

A buoyant labor market distinguished the 90s era. Employees and job seekers were rebelling for the best places to work, and employers were frantically trying to differentiate themselves from one another to attract the best talent.

During these times, employer branding was used to communicate a company’s story, ethos and culture to tap the best talent.

With a strong employee branding proposition in place, organizations can curtail recruitment expenses, upsurge productivity, motivate and thereby retain top talent. If an employee perceives they are receiving what was promised to them in the form of employee brand communication, the psychological contract will be fulfilled, and equity maintained as well.

With a powerful employer brand, an organization’s repute amongst existing and potential future employees can be increased, leading several to perceive the organization as a great place to work. Investors and staff alike will form a queue to work with the organization (in theory).

Psychological Contract and Employer Branding

The concept of psychological contract and employer branding goes hand in hand.

The psychological contract is defined as the “mutual expectations between the employer and the employee” and is primarily linked to employer branding. The term psychological contract is used to describe loyalty to the firm in exchange for job security. Employees will not only give their best and try to fulfill their employer’s demands but also vice versa.

While the psychological contract happens to be an unwritten promise between the employee and employer, employer branding refers to the communication of organizational culture to current as well as potential employees.

In other words, it is about the circles of expectations held by employer and employee about each party’s mutual responsibilities toward each other, and it is about the demeanor of the relationship that gradually develops between them.

It is ‘psychological’ in aspect that it consists of everything that is not part of the legal contract, but which nonetheless may be part of an implied contract between the two parties. For employees, it ensures their expectations on just treatment, on training, learning and development, on career growth alongside the organization’s ethical standards, the workplace culture and so on. For the employer, it encompasses expectations on effort and commitment.

Both the concepts—employer branding and psychological contract need to be adhered to when developing and maintaining an employer branding idea to keep motivation high and, also attract and retain talent.

Employer Branding – Unwritten promise between employer and employee

Psychological Contract – Official communication of workplace culture to employees – existing and potential

Despite the subtle differences, employer branding and psychological contract are two sides of the same coin. Unless and until employers have succeeded in properly exploiting the consumer behavior and understand their psychology, employer branding strategies might not be successful.

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