Developing ‘Employer of Choice’ Status:
Exploring an Employment Marketing Mix
Dr Mark Wickham
University of Tasmania
Dr Wayne O’Donohue
University of Tasmania
Locked Bag 16
School of Management
Australia 7001
Phone: +61 3 6226 2159
Fax: +61 3 6226 2808
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Profiles: Mark Wickham is a Lecturer in Marketing at the School of Management, Faculty of Business, University of Tasmania. His primary teaching interests are in the field of strategic marketing and business ethics. Mark’s PhD examined the role of a regional government in the development of an internationally competitive industry cluster. Aside from marketing and business ethics, Mark’s other research interests include business-to-business/network marketing communications, computer-aided qualitative data analysis and the work-life balance.
Wayne O'Donohue is a Lecturer in Management at the School of Management, Faculty of Business, University of Tasmania. His primary teaching interests are in the fields of Organizational Behavior and Human Resource Management. His PhD examined the psychological contract of nursing, scientific and teaching professionals employed in public sector organizations. Aside from human resource management issues, his other research interests include the history and philosophy of science, and the management of research in universities and research and development organizations.
Developing ‘Employer of Choice’ Status:
Exploring an Employment Marketing Mix
Abstract
In recent times, the important role that marketing theory can play in the conceptualisation and development of an organization’s Employer of Choice status has been recognized and debated by both academics and practitioners alike. In order to contribute to that ongoing debate, this paper explores the application of a key element in marketing theory – the ‘extended marketing-mix’ concept – to the strategic management of human resources.
Introduction
Factors such as the globalisation of competition, the ‘tightening’ of skilled labor markets, advancements in technology, the growth of the knowledge economy, and the need for flexibility and expertise in the workplace have each presented strategic challenges to which organizations have had to respond (Barnett & McKendrick, 2004; Catteeuw, Flynn & Vonderhorst, 2007; Greenwood, Prakash, & Deephouse, 2005). The subsequent recognition of the key role of human capital in the pursuit of increased responsiveness, productivity, flexibility, and innovative capacity has been a defining characteristic of the ‘strategic human resource management’ (SHRM) movement that has emerged over the past 20 years (Forman & Cohen, 1999; Paauwe & Boselie, 2003; Whitaker & Wilson, 2007). Management academics and practitioners alike have acknowledged that an integrated set of effective SHRM policies and practices has a significant positive impact on organizational development and firms’ ability to generate a sustainable competitive advantage (see Afiouni, 2007; Becker & Huselid, 2006; Dunn, 2006; Endres & Mancheno-Smoak, 2008). A consequence of attempts by many organizations to develop their human capital in line with SHRM principles has been an intensification of competition for high-quality human resources – especially for those organizations that compete in competitive labor markets where skill shortages are prevalent (Bennett & Brush, 2007; Knox & Freeman, 2006; Shah & Burke, 2005).
One strategy employed by organizations facing direct competition for high-quality employees has been to develop themselves as an ‘Employer of Choice’ (EOC) in their respective industry (Herman & Gioia, 2001; Lenaghan & Eisner, 2006; Mackes, 2005). Organizational efforts to achieve EOC status have entailed the use of ‘employer branding strategies’ that draw on marketing concepts and principles for the express purpose of effectively marketing themselves to their target labor market(s) (Backhaus & Tikoo, 2004; Berthon, Ewing & Hah, 2005; Knox & Freeman, 2006). Simply put, EOC strategies represent attempts to construct a unique ‘employer brand identity’ based on an ‘employment value proposition’ (EVP) that is deliberately constructed to set an organization apart from competitors in some meaningful way (Hegar, 2007; Herman & Gioia, 2001; Vogel, 2006).
The adoption of ‘employer branding strategies’ has specific implications not only for the marketing and human resource (HR) management functions, but also more broadly for all managers and supervisors in an organization. The system-wide approach inherent to the effective implementation of an employer branding strategy requires a shared understanding of an organization’s EVP across functional boundaries and levels within the firm (Hegar, 2007; Johnson & Roberts, 2006; Lawler, 2005). Despite the level of consensus about the role marketing concepts play in the development of an organization’s EVP, implementation issues surrounding the adoption of employer branding strategies have not as yet been the focus of major attention within the EOC debate (Berthon, Ewing & Hah, 2005). At the same time, the HR literature has attempted to address the growing ‘war for talent’ issue through the use of a quite different set of psychological theories – for example using the tenets of ‘Equity’, ‘Expectancy’, ‘Motivation’ and ‘Institutional’ theories to gauge levels of employee job satisfaction and commitment to their employer (see Curran, 2003; Kelliher & Anderson, 2008; Lenaghan & Eisner, 2006). Here too, however, the debate about how best to implement and manage effective employment relationships remains ongoing. While the notion of an effective employment relationship has been predicated upon the organization’s use of a balanced package of SHRM policy offerings that provide value to both the firm and its current and potential employees (Backhaus & Tikoo, 2004), consensus is lacking on how its strategic benefits might be realized.
Indeed, within the SHRM literature, many issues pertaining to the conceptualisation of the employment relationship remain unresolved (Conway & Briner, 2005; Friedman, 2006; Sheehan, 2005; Tekleab & Taylor, 2003), with consequent calls for an expansion of the theoretical perspectives that inform our understanding of the employment relationship and how organizations might better manage it to increase employee engagement and business outcomes (Cullinane & Dundon, 2006; Hegar, 2007). This paper aims to address the literary gaps identified above by proposing the Extended Marketing Mix (see Booms & Bitner, 1981) as a way to strategically frame the employment relationship as an EVP. We believe adapting this marketing framework to the human resource management context offers the potential for extending our understanding of the employment relationship as an EVP and the strategic role it can play as the basis of an organization’s development of an EOC position.
A Brief Account of the Extended Marketing Mix Concept
The concept of the Extended Marketing Mix (Extended MM) is one of the foundations underpinning marketing theory and strategy development (Bennett, 1997; Constantinides, 2006; Rafiq & Ahmed, 1995). McCarthy (1964) formally defined the concept of a marketing mix as the strategic ‘combination of all of the factors at a marketing manager’s command to satisfy the [needs of the] target market’ (1964: 35). In his original formulation, McCarthy’s conceptual framework comprised four ‘Ps’ – Product, Price, Place and Promotion – that provided a basis upon which an organization could follow an internally consistent and integrated strategy for the provision of goods that would be perceived by the market as valuable. After much debate about the fit of McCarthy’s four ‘Ps’ to the delivery of services (see for example Lovelock, 1979; Mindack & Fine, 1981; Nickels & Jolson, 1976; Shostack, 1977), an additional three ‘Ps’ – Process, People and Physical Evidence – were added by Booms and Bitner (1981). Table 1 below provides a brief summary of the seven ‘Ps’ of the Extended MM.
Table 1: A Summary of the Extended Marketing Mix
Extended Marketing Mix Element / Marketing Function(for Goods and Services)
Product / Goods/services offerings that seek to satisfy the ‘core need’ or ‘want’ of target customers in a manner that enables them to purchase the goods/services offered by an organization.
Price / Mechanism for recovery of the total cost of production plus some predetermined level of profit. Price may also may be used to strategically position a Product within a given market space.
Place / Placement of an organization’s Product in the relevant retail/wholesale outlets as expected by an organization’s target customers. Also, ensuring that an organization’s distribution channels and intermediaries are capable of representing and selling the organization’s Product effectively and efficiently.
Promotion / Effective communication of the differentiated features and core benefits of an organization’s Product so that target customers are aware of its existence, features, and location(s) etc.
Process / Provision of a structured system and set of processes through which an organization and its target customers are able to interact and perform their roles effectively in a market transaction.
People / Provision of a human interface, where necessary, between the target customers and the Product offered by an organization.
Physical Evidence / In the case of goods, it is the Product itself. On the other hand, strictly speaking there are no physical attributes to services. Organizations tend to rely, therefore, on providing material cues such as packaging, websites, paperwork, brochures, furnishings, signage, uniforms, business cards, warranties, etc., to indicate the nature of the Product.
Source: Adapted from Booms & Bitner, 1981; McCarthy, 1964; Rafiq & Ahmed, 1995.
By using the Extended MM framework, an organization is better able to conceptualize and develop a ‘value proposition’ for its target customers and, when managed effectively, develop and allocate resources to position itself as a ‘vendor of choice’ in the marketplace (Bennett, 1997; Hakansson & Waluszewski, 2005).
From Extended Marketing Mix to ‘Employment Marketing Mix’
The process of becoming an EOC requires an organization to develop and present an EVP with features designed to attract, retain and motivate its target employees (Elias & Scarbrough, 2004; Lenaghan & Eisner, 2006; Mackes, 2005). As in the case of a customer-oriented value proposition, the EVP too must represent a coherent effort to manage the set of interrelated and controllable variables that an organization is able to utilise to satisfy the needs and/or wants of its target employees. Analogous with the Extended MM concept, there must be a cohesive alignment of what we will call the ‘Employment MM’. The following discussion describes the Employment MM and its constituent elements.
Product
As noted in Table 1, the Product element of the Extended MM focuses on the presentation of a good/service that satisfies a target customer’s ‘core need’ or ‘want’ in a manner that enables them to purchase it (Crane, 2001). Whilst this may seem straightforward, identifying the ‘core need’ to be addressed, and the extent to which a single Product is capable of fully satisfying it, presents a challenge to an organization. The strategic marketing literature recognises this challenge, and holds that there are three basic levels of Product that must be understood by an organization: the ‘core product’, the ‘actual product’, and the ‘augmented product’ (Kotler et al. 2006).
At the most basic level of the ‘core product’, an organization must have a clear understanding of the basic need target customers want to satisfy? The answer to this question is often not as straightforward as it first might appear, and a misdiagnosis can render a Product offering irrelevant to the customer. Whatever the mix of needs might be, an organization must ensure that its identification of target customers’ core need is accurate, as without such knowledge the task of constructing a ‘core product’ that is perceived in the market as valuable becomes very difficult. Once the target customers’ core need and the core product needed to address that need are understood, an organization is then able to develop its ‘actual product’ offering, which manifests in the quality level, features, styling, brand name and packaging. Further to this, in order to enhance customer perceptions of the value proposition on offer and differentiate itself from its competitors, an organization may also augment its core/actual product by offering features either in excess of those required to address the core need or unrelated to the core need. For example, while the ‘augmented product’ for a motor vehicle may include ‘back seat passenger safety features’ and/or options such as a ‘high quality surround sound system’, and ‘24-hour driver assistance service’.
Similarly, in the Employment MM what constitutes the Product, that is to say the range of inducements comprising the EVP, must be constructed as multi-layered in terms of core/actual/augmented features. There is a substantial body of research literature that shows the employment relationship comprises both explicit elements in the form of the employment contract, and implicit elements in the form of a psychological contract (Guest & Conway, 2002; Millward & Brewerton, 2000; Rousseau, 1995). At the most basic level of the core product, the development of an EVP is dependent on an organization having a detailed and accurate understanding of what core needs its target employees have. Over-simplification or an inaccurate understanding of the core need can lead, as in the case of a customer-oriented Product, to a core product that is inadequate. For example, in competitive labor markets if an organization was to assume that the core need for its target employees is simply ‘an above-average income’, other important needs identified in the HR literature, such as job satisfaction, work/life balance, and career development opportunities, may be overlooked (Cartwright & Holmes, 2006; Lester & Kickul, 2001). If for illustrative purposes, we understand the core need to be ‘an above-average income with career development opportunities’ then a competitive salary and the provision of regular training and development/promotion opportunities might represent the inducements that comprise the ‘core product’ offered by an organization.
Understanding and matching the target employees’ core needs with a core set of inducements means an organization is better able to develop its ‘actual product’ offering. For example, the inclusion of particular non-core inducements that relate to salary and promotion, such as salary sacrifice arrangements and training and professional development support, may be part of the ‘actual product’ that more fully addresses the core needs. Further to this, in order to differentiate itself from competitors, an organization may also augment its core/actual product by offering features related to core needs, but in excess of those required to address those needs. For example, the ‘augmented product’ may include a generalized commitment to care about the welfare of employees and their families and specific support for an acceptable work/life balance. Thus, similar to the motor car example above, the precision of an organization’s determination of the combination of inducements across the three levels of Product will reflect the degree to which it has a full and accurate understanding of the core needs of its target employees. This highlights the importance of effective labor market research to guide an organization’s understanding of its target employees’ core needs and decisions about the range of inducements an organization’s EVP should have if EOC status is to be realized.
Price
The Price element of the Extended MM requires an organization to focus its attention on the amount it charges its customers for the good/services that constitute the Product offering (Nagel & Cressman, 2002; Potter, 2000). At its most basic level, the practice of Price setting must enable an organization to recover its costs of production as well as generate some predetermined level of profit. At a more advanced level, the strategic setting of Price requires an organization to consider related issues such as product positioning, volume discounting, product bundling, and payment options, to name but a few. The major challenge in managing the Price element centres on the potentially disconnected relationship between an organization’s profit motive and its customers’ desire to maximize value for money (Gourville & Somon, 2002; Nagel & Cressman, 2002). In managing Price, therefore, an organization must do more than just set a fee which covers production costs and is comparable to their direct competition - it must include important strategic considerations such as the need to build strong and ongoing customer relationships and the need to assist customers in constructing their perceptions of value (Nagel & Cressman, 2002).
In the HR management context, an organization’s need to maximize employee productivity and the employee’s desire to maximize remuneration and benefits has long been recognized as an important issue in the employee relations literature (see Edwards, Bélanger & Wright, 2006; Nurse & Devonish, 2006). Similar to the commercial market, under the Employment MM the Price an organization ‘charges’ its employees for its EVP must be such that it facilitates a mutually beneficial labor market transaction. The contributions exchanged by both the organization and employee are often represented as either ‘economic’ or ‘socio-emotional’ in form, and represent inputs by each party to the employment relationship that provide direct benefit to the other party (Baker, 2009; Rousseau, 2004). An important point to consider here is the role that opportunity costs borne directly by employees, but which do not represent contribution of a direct benefit to the organization, might play in the employee’s assessment of the value relationship between Product and Price (O’Donohue & Wickham, 2008). For example, an employee’s perception of value will likely be influenced by the opportunity costs entailed in the EVP, such as ‘lost family time due to weekend work commitments’ and/or the resulting ‘stress of having an unhappy partner at home’, and which thus from their perspective form part of the Price. From an organization’s perspective, there are opportunity costs too, such as foregoing lower cost labor arrangements and/or the increased operational flexibility that might flow from such arrangements. The important point to make here is that while an organization has direct control over its own opportunity costs, it has no such control over the employee’s opportunity costs.
The organization’s consideration of the Price element in the Employment MM is made more complex by the dynamic nature of the employment relationship. Firstly, research has shown the nature of the employment relationship over time moves most often from primarily transactional and economic in nature to one which is more complex, relational and socio-emotional in nature (Rousseau, 1995; Shore et al., 2004). Hence, the uptake of the EVP is not a ‘once-off’ transaction and the Price the employee is willing to pay, both in terms of direct contributions and indirect opportunity costs, is the subject of ongoing review and negotiation. Such review may be prompted by strategic or environmentally-driven changes in an organization’s ability and willingness to continue offering EVP features, as much as by changes in an employee’s personal circumstances. Secondly, where an organization is faced with strong competition in the market for scarce resources, the ‘seller’ of the resource has much greater bargaining power. In a competitive labor market where conditions are not favorable to an organization, target employees are both a ‘seller’ of the scarce resource (that is, their skills and abilities) and a ‘buyer’ of one of many EVPs offered by competing organizations. From an organization’s perspective, it is only one of many ‘sellers’ of an EVP and one of many ‘buyers’ of scarce skills and abilities. This means that the less favorable the labor market conditions, the more value-adding features an organization must include in its EVP in order to attract and retain its target employees. In such circumstances, an organization’s management of the Price and other elements in the Employment MM should aim at offering greater benefits and/or perhaps a lower Price to target employees.