Here is how you can calculate the value of onboarding in your organisation. It does not have to be that difficult to make a business case for your onboarding.
No, it really does not have to be a challenge. We will give you 3 simple steps to help you calculate the value of making the life of your employees easier while also giving them a great experience. Let us calculate the cost, so everyone will understand what we are talking about.
"Welcome... please figure everything out for yourself!" That is the tough reality for many new hires in organisations today. But it is also the recipe for disaster as the new hire can end up spending too much time before he/she becomes efficient and on par with other experienced co-workers.
An organisation is able to save and win a lot of resources if it systematically takes good care of new hires with an onboarding plan. You can calculate the equation yourself by replacing the numbers with estimated values from your own organisation.
Step 1: How many productive working hours are your your most experienced employee spending per week?
Example: It is not unrealistic to envision a consultancy company experience an employee that is fully ramped to be able to sell around 27 of their work hours to their customers, while the last 10 hours are allocated to internal meetings and activities that the organisation itself pays for.
A step by step guide: Take a pen and a piece of paper and write down what you believe the number for a specific role is. The next question is then: How many productive hours does an experienced employee have per week?
Step 2: How many productive hours does your inexperienced employees have per week?
Example: Let us assume that the new hire sells on average 17 working hours per week until they are fully ramped and productive (obviously even fewer hours in the beginning and more hours as the time passes. But let us say 17 hours on average the first few months)
A step by step guide: Try to note down how many productive working hours the new hire has per week. And calculate the difference between a new hire and the experienced employee.
Step 3: How much does your organisation save if they have a structured onboarding program?
Example: Now we assume that it takes around 10 months before a new hire is fully ramped and at the same level af an experienced employee. After a solid and structured onboarding program, a new hire can get up to speed within 7 months instead of 10. That way we have achieved on average 10 hours more productivity per week for 3 months. Multiply that with an hourly wage of $240, you end up with an increase in revenue at around $28500 on average per new hire, who has gone through an onboarding program. Lastly, you need to look at how many employees that are being onboarded every year to get a rough idea of how much the organisation can spend and invest in onboarding.
A step by step guide: Note down how many months you believe it vil take the new hire to ramp up and get fully up to speed, when you organisation has a structured onboarding program (a rule of thumb: you can shave off approximately 25 % to 35 % of the time it normally takes)
Then note the value of a productive working hour. In the previous example the wage was $240 per hour as this is the price for an invoiced hour. You multiply this number with 4 and then then the number of months you have shaved off the onboarding. And here you have the estimated value of a new hire that is fully onboarded.
Essentially onboarding is about being classy and showing the employee respect. By showing the new hire friendliness and the ability to be helpful by giving a structured introduction to the role, the organisation gets so much in return in the form of an engaged, effective and efficient employee. But why not also look at how much the organisation saves and wins monetarily?
/A big thank you to Core Workers for the inspiration to the cost model