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Working Best

Countless business publications across the globe rank the “Best Places to Work” in a particular region or industry on an annual basis, but how does this proliferation of employment branding relate to key human capital outcomes like applicant quality and employee retention? That’s the question addressed in a recent study by Purdue University’s Brian Dineen, an associate professor of organizational behavior and human resources in the Krannert School of Management.

In “Third Party Employment Branding: Human Capital Inflows and Outflows Following ‘Best Places to Work’ Certifications,” published in 2016 in the Academy of Management Journal, Dineen and his coauthor, David Allen of Rutgers University, find that companies who receive such awards have an easier task of retaining staff.

“Employees may sometimes doubt the credibility of internal branding efforts, but third-party endorsements seem to be more credible in persuading them that the organization is a great place to work, relative to other non-endorsed organizations,” Dineen says. “In addition, employees who work for an award-winning company may identify more strongly with such a company and be reluctant to consider moving. We find these type of external accolades and certifications associated with lower turnover rates, even after controlling for prior turnover rates.”

The study reviewed more than 300 “Best Places to Work” participant surveys covering a three-year span, gathering a vast amount of data to test hypotheses on collective turnover rates and perceptions of applicant pool quality.

In the area of recruitment, the survey asked employers to rate the quality of employee applications. The study’s authors then compared answers to “Best Places to Work” certification success. The results showed certifications not only have an impact on attracting higher quality job candidates, particularly in smaller companies, but also in retaining current employees.

“We recognize that companies use employment branding to attract talent, but we also consider that companies have at least equal interest in using branding to retain talent,” Dineen says.

“We also considered whether there was a relatively greater decrease in turnover after an initial certification, which we call a ‘celebrity effect;’ or whether it took a few certifications for the effect to kick in, termed a ‘crystallization effect.’ The celebrity effect happens quickly, while the crystallization effect takes more time or multiple certifications.”

“Our study actually found more support for the celebrity hypothesis – that the effects are stronger following an initial certification and tended to waver off with subsequent certifications.”

Dineen says future research could offer insights into the monetary value that such awards have on human resources recruitment and retention, as well as their product marketing benefits.

“Our theoretical perspectives could be used to consider, for example, whether current customers might become loyal to certified companies more quickly or if consumers of competing products might require more stable certification patterns before switching product allegiances,” he says.

An abstract and downloadable PDF of “Third Party Employment Branding: Human Capital Inflows and Outflows Following ‘Best Places to Work’ Certifications” is available at http://amj.aom.org/content/59/1/90. Dineen also discusses his research with Krannert Dean David Hummels in a video at https://youtu.be/mWnNgNy45yU.