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Huron Professor’s research proves customers’ perceptions of employee treatment have significant implications for a business’s bottom line

Jon Munn, Director, Marketing & Communications
Mar 4 2020

Do consumers care about how a company treats its employees? The answer is yes, and this information can have a big impact on customers’ feelings toward the brand, according to new research by Huron’s own Dr. Maxwell-Smith.

In 2020, the popular mantra for companies is that corporate social responsibility is good for the bottom line. As part of this, companies are often advised to treat their employees well, so that they will, in turn, treat customers well.

However, many consumers have little or no interaction with most of the employees of the company from which they purchase a product or service. So, what happens when consumers learn about how a company treats employees who they have never met, or likely will never meet? Does this information affect consumers’ feelings towards the company’s brand?

When Huron professor Matthew Maxwell-Smith began researching these questions, he found conflicting results. “Some survey polls and academic research suggested consumers care more about product quality than anything, whereas other studies suggested employee treatment is considered. There was no causal evidence about how consumers’ brand attitudes are affected.”

“This was surprising when you consider how important brand image is to companies, and how easy and common it is nowadays for consumers to go online and learn about how employees they’ve never met (i.e., ‘unfamiliar’ employees) are treated by well-recognized firms.”

Led by Dr. Maxwell-Smith, he and his collaborators at the University of Illinois conducted experiments investigating consumers’ feelings and intentions towards the brand of a company after they learned about its positive or negative treatment of unfamiliar employees. Participants in these experiments were presented with, for example, testimonials from current or former employees, news media stories, or the types of corporate social responsibility index reports and rankings that are accessible through the web or phone apps.

“We weren’t sure what to expect. Our original prediction was that ideological beliefs regarding the value of equality between social groups would be the sole factor that identifies which consumers would be influenced the most by employee treatment,” said Professor Maxwell-Smith.

The results of these experiments were clear: “The treatment of employees has a huge impact on consumers’ brand attitudes and purchasing intentions.”

Three experiments revealed a clear causal connection: favourable employee treatment led to more positive brand attitudes, while unfavorable treatment led to negative brand attitudes. One study further showed the same results regarding purchase intentions toward the brand.

“What’s interesting is that participants’ initial brand attitudes had no impact. So it’s not like participants were defending or vilifying their favourite or least-preferred brands,” Dr. Maxwell-Smith said.

The strongest reactions to this information were from consumers who were ideologically inclined toward seeking equal versus hierarchical, top-down relationships between societal groups. The impact of employee treatment on brand attitudes was MUCH larger than expected.

“The effects of perceived employee treatment on brand attitudes were some of the largest effect sizes I’ve come across,” Dr. Maxwell-Smith said. “That means, information about employee treatment has a lot of potential for impacting brand attitudes in a positive or negative way.”

Where do we go from here?

“More research in this area needs to be done,” Dr. Maxwell-Smith said. “For example, it’s unclear how long changes in brand attitudes last after learning about employee treatment. There may also be other factors, such as how far people are along in the purchase decision process, or how financially dependent they are on certain brands or stores.”

Professor Maxwell-Smith plans to recruit Huron students to help him with future research in this area.

“In 2020, I anticipate starting a research lab dedicated to social issues related to marketing and consumer behaviour,” Dr. Maxwell-Smith said. “I’m looking forward to getting undergraduate students involved in this work.”

More about Dr. Maxwell-Smith

Huron BMOS Professor Matthew Maxwell-Smith conducts research on ethical consumption, particularly, how ideology and competition affect support for environmentally- or socially sustainable choices. He teaches courses on Marketing, Consumer Behaviour, and Psychology at Huron.

The research described in this story is to appear in the March 2020 Volume 109 issue of the peer-reviewed Journal of Business Research.