Companies like Apple, Google, Tesla, and Nike have no problem finding talented people to interview. Their in-demand products make jobs with their companies in demand, too. What employees don’t often demand, however, is a premium salary. In fact, most are willing to work for less in exchange for putting a top brand on their resume, according to the study “Employee-Based Brand Equity: Why Firms with Strong Brands Pay Their Executives Less” by Nader Tavassoli and Rajesh Chandy of the London Business School and Alina Sorescu of Texas A&M University.
“We found that executives are willing to take an average 12% pay cut to work at a top firm,” says Tavassoli, a professor of marketing. “Just as a strong brand can attract customers who are willing to pay higher prices, they also attract employees who will agree to lower levels of pay.”
And they know it. “Most [top brands] intuitively get it and have no incentive to correct it,” he says. But the pay discrepancy is overlooked because Tavassoli says there are five other benefits employees receive by working at a top company.
As a consumer, you probably use and identify with several brands, but as an employee you probably have only one job.
“When it comes to your identity, where you work is very visible and it’s connected to your identity,” Tavassoli says. “There is a much more intimate relationship on the employee side than the customer side, and it can affect how you see yourself.”
Working at a top brand has rewards beyond the paycheck, including status, says Tavassoli. “Show up at a party and say you work for Ferrari, and you’ll get more attention,” he says. “That is one substitute for pay.”
Having a top brand on your resume underscores your quality as an employee, says Tavassoli. “Not only did you select the place; they selected you,” he says.
In addition to paying less, the study found that top brands also attracted CEOs of higher quality, based on their experience, board appointments, and other factors. And for less experienced, younger executives, the brand-equity transfer is significant in terms of reducing uncertainty about their abilities.
Tavassoli’s study found that younger CEOs are more willing to go to top brands at a bigger pay cut.
“In general, you make less when you’re younger, but when you’re younger, you also have less experience,” he says. “If you work at a top brand, you get an additional signal value because the job can have a bigger impact on a resume than a longer sum of achievements.”
Having a top brand on your resume also helps your compensation in the long term.
“We found that when CEOs take discounts on their pay to work for a strong brand, it does help them in their next CEO position,” says Tavassoli. “They may make less now, but they got a boost in pay at their next job.”
Taking a pay cut doesn’t mean you’ll be financially challenged, says Tavassoli. In large organizations, bonuses might be higher, and the fact that a top brand wants you should be a signal that you can go elsewhere and make more if you wish.
Tavassoli says he sees PhD students at his school get offers, and it’s not the top schools that offer top pay. Second-rank schools have to offer more to attract top talent, he says, but most of the students still choose the top schools.
In 1995, Tavassoli interviewed at MIT for a job and was offered a position by the dean of faculty for a 30% pay cut versus his other options. “I tried to negotiate with the dean by explaining to him the cost of living index, and he said, ‘Is there a question in there?’” recalls Tavassoli. “I said, ‘Yes, do you have a pen?’ And I accepted their offer.
“MIT paid well, but I didn’t go there for money. Top firms know they don’t need to give more money if most people are going to accept their offer anyway.”