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Four Best Practices to Increase Your Return on Investing in Employees

Posted by Jessica Miller-Merrell

Employee Lifetime Value

You have a lot to consider when determining how much you should invest in employees. Will they stay with the company long enough to make their highest contributions? Will they continue to improve their skills once they are hired? While it is expensive to screen and hire people to find the right fit a position, one bad hire can cost you in terms of productivity and new hiring expenses if you have to let them go. In this article we are going to discuss:

  • the factors that influence employee attitude
  • the single factor that makes people want to stay with a company longer
  • “employee lifetime value” and how it influences your ROI
  • the four best practices for increasing your company’s ROI in employees

Factors that influence employee attitude

Employees will not stay long if they are unhappy with the company culture and their role within it. Here are the main factors that contribute to employee turnover:

  • the number of complaints and conflicts at work
  • the type of teamwork shown
  • employees’ overall commitment levels
  • employees’ level of stress
  • job satisfaction
  • ability to contribute to the company

Therefore, HR should focus on the single factor that can make employees stay longer.

What makes employees stay? Ongoing training

Hiring the right candidates will make a huge difference in their overall contributions and productivity to your company. According to data recorded and processed by the workforce insights arm of credit-reporting agency Equifax, 40 percent of employees who leave their jobs voluntarily do so within six months of starting a position, and another 16 percent of employees leave within 12 months, meaning more than half of voluntary turnover happens within a year of new hires’ start dates. According to SHRM, 60% of a company’s entire workforce will leave a company within four years if the company has no formal process for ongoing training and career development.

Such high turnover can be prevented.

SHRM also found that companies with an engaging onboarding program retain 91% of their first-year workers, so investing in a robust onboarding experience should be a no-brainer, yet, according to a recent survey conducted by Kronos Inc., a workforce management technology provider, and the Human Capital Institute (HCI), 24 percent of respondents said that their company offered no onboarding program at all. To smartly invest in training and career development that will prevent turnover, we need to understand an employee’s lifetime value.

Employee lifetime value and ROI

When determining investment in skills training, you need to consider employee lifetime value (ELTV), which is the total net value that an employee brings to your organization over time. ELTV is best understood in the context of your employees’ lifecycle:

  • Their first day in your company
  • The moment when they make their best contribution
  • The moment they decide to leave your company
  • Their last day in the company

To increase their total ELTV, you need procedures that will maximize:

  • A speedy ramp up to competency in their job responsibilities
  • Opportunities for growth and training
  • Their potential promotion within the company
  • How long they stay

How can HR increase ROI using ELTV? Here are four best practice tips.

4 best practices for increasing your company’s ROI in employees

  1. Hire experienced managers and train them well. Companies that hire managers based on their management skills saw a 48% increase in profitability. (“State of the American Manager,” Gallup)
  2. Improve your company culture. People leave jobs for a many reasons, but poor management and toxic work environments top the list. When you have solid management and a culture of positivity, you’ll see an increase in retention and ELTV.
  3. Avoid hiring the wrong people. Skills testing is one of the best methods to help you avoid hiring the wrong people who will not remain with the company for long. In addition to screening for competencies, you can screen for culture fit as well. This will ensure an improvement in ELTV.
  4. Make sure you have an effective onboarding strategy. A positive onboarding experience is one of the most fundamental factors that go into securing your company’s success, generating a significant ROI and ensuring your workforce will be knowledgeable and motivated.

Today’s talent economy requires forward-thinking companies that assess how they bring new employees into their company culture and get them up to speed so they can be productive as quickly as possible. What techniques do you use to increase the ROI of your people and make them want to stay with your company?

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About Jessica Miller-Merrell

Author

Jessica is listed as the 2nd most influential recruiter online and as the 8th most powerful woman on Twitter. She is the author of Tweet This! Twitter for Business, a how-to business guide for Twitter users. She also writes for a number of leading publications, including Fortune, HR Magazine, SmartBrief, and HR Executive Magazine.

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