An Exploration of the Competitive Advantage of Employer of Choice Programs on International Human Resource Management

By Lenaghan, Janet A.; Eisner, Alan B. | Journal of International Business Research, July 2005 | Go to article overview

An Exploration of the Competitive Advantage of Employer of Choice Programs on International Human Resource Management


Lenaghan, Janet A., Eisner, Alan B., Journal of International Business Research


ABSTRACT

The competition for knowledge workers has intensified as traditional recruitment markets expand beyond national borders. The infusion of technology in the recruitment process has broadened the reach of employers to locate talent. Multinational corporations find that competition for labor crosses industries and oceans. An MNC needs to market their employer brand in order to remain competitive in the war for talent. The organization that can attract and retain top talent will achieve and sustain competitive advantage. Many human resource professionals believe that the organizations that achieve Employer of Choice status will win the war for top talent. The costs associated with such a strategy are significant yet the outcome of such a position has not been studied. This article suggests, based on existing theory, empirically testable propositions to analyze the effectiveness of Employer of Choice strategy in the global market.

INTRODUCTION

Employer of Choice (EOC) programs are designed to aid an organization in outperforming its' competition in the recruitment and retention of top talent in order to secure an exceptional workforce. It is important to note that "top" in this definition does not refer to the place in the organization chart or structure, rather it is indicative of the best employee, the top performer for each position in the organization.

An Employer-of-Choice is basically a self-proclaimed achievement. Although in order to have credibility in the proclamation, it helps to be named to one of the popular press list of best companies to work for. According to Fortune Magazine's annual list of the best companies to work, companies on the list yield higher returns for shareholders (Shellenbarger, 1998). Sullivan (1998) states that the advantages of EOC status include: "ease in attracting quality talent; good public relations for the organization; improved workforce retention rates; favorable customer image; and ease in maintaining corporate culture and employee motivation because of the shared pride." Konrad and Deckop suggest that "HR can create value by developing systems to make the firm an employer of choice" (2001). In fact, Becker and Huselid posit that the combination of an Employer of choice strategy with high performing work systems, will, in most cases, result in increased financial performance (1999).

According to a report distributed by Watson Wyatt called measuring the competitive fitness of Global firms, world class global companies are lacking in human resource management competency. This study published annually since 1998 analyzed data from 326 leading global companies. It measures twelve management capabilities one of which was human resources. Human Resource Scores have consistently shown that HR functions were one of the weaker capabilities of global firms (Watson, 2002). Yet, clearly, the literature depicts the importance human resource management plays in maintaining an exceptional workforce. Porter (1985) asserts that effective human resource management policies and practices can supply a significant contribution to the firm's competitive advantage because they provide the mechanisms to recruit and retain top talent. The latter is significant as it is the reduction of turnover that has been posited as an important benefit enjoyed by EOCs.

BACKGROUND

The demand for "top" labor is outpacing the available supply, thus creating what Clarke refers to as a "critical labor and skill shortages in virtually all industries requiring specialized core competencies within the workforce" (Clarke, 2001). In fact, organizations have begun to recognize the importance of expanding recruitment areas to extend beyond domestic borders to meet its labor demand. This deficit seems to be contrary to the reported higher levels of unemployment being experienced in many countries, yet it is not the numbers of workers that is in deficit, rather, it is a lack of skills. …

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