Back in 2019, we ran a survey around onboarding. Having an accurate definition of what we meant by onboarding was the first important step in the process. Working in partnership with experts in the field, we gathered insights from them, as well as data from our respondents. To help us better clarify the definition of onboarding, we looked to one of those experts.
Assistant Professor of Management and Human Resources at the California Polytechnic State University, Dr. Allison M. Ellis’s definition of onboarding was as follows:
“The process of assisting new hires in gaining a functional understanding of the skills and tasks required in their new role, helping them to develop new relationships with others in the workplace, and facilitating an understanding of the company culture and goals.”
So far so good. With a clear, comprehensive, and common definition of onboarding to ground our research, we could move on to the next step: The rationale behind the study. Which was: Why does onboarding even matter? Before we embark on a study of onboarding, we needed to make sure it was of value. Industry stats helped concentrate our minds. Then, pulling on external research, four key areas emerged when looking at an ROI.
Why does onboarding matter?
Costs
Why spend money on onboarding? Surely you could do the bare minimum (at low or no cost), focus instead on on-the-job training, and allocate your budget elsewhere.
You could. But you shouldn’t.
Why? Because it’s a short-term solution. It may seem like you’re making savings. But in the long run, you’re actually losing money. Let’s look at the stats:
Recruitment’s an expensive business. It’s also an investment. And when you lose an employee due to poor or nonexistent onboarding, you’re in negative equity. In fact, the figures show it’s often worse than that. According to SHRM, companies spend an average of $4,700 on each new hire. And that’s just the recruitment costs. You also need to factor in lost productivity and all the money you’ve spent training and onboarding them. No surprise then that Josh Bersin of Deloitte puts the cost of losing an employee at around two times their annual salary. Let’s not forget that an employee’s value grows over time, too. So in terms of your investment, you only really get your money’s worth if they stay around for a while.
Retention
As we’ve seen, keeping hold of employees maximizes your investment. So how does onboarding help? Well, there’s a strong and direct link between good onboarding and higher retention. The first few months of employment are crucial because that’s when new hires are most likely to leave a company. Almost 33% of new hires start looking for a new job within their first six months, and that percentage is even higher among millennials. SHRM found that up to 20% of employee turnover happens in the first 45 days. Provide a strong and structured onboarding experience, however, and it’s a different story. The figures show that investing in onboarding raises new hire retention by 82%, so new employees are more likely to be with the organization in the long run.
Productivity
You’ve hired a candidate because you needed a competent person to do a certain job successfully. And the sooner your employee starts being productive, the better. Here’s where good onboarding helps. With the right training, they can start applying their skills on the job sooner. In fact, Google managed to boost productivity among new hires by 25% with just one onboarding email. Imagine what a whole onboarding strategy can do for you.
Branding
One of the biggest challenges organizations are facing today is competition for talent. With so many opportunities and an employment market full of choices, companies have to work harder to source and secure qualified new hires. So, why should a candidate choose you over someone else?
Look to your employer branding. Grow your reputation, and you stand a better chance of being their preferred pick. But how do you do that? Providing a rich and rewarding onboarding experience is a good place to start. Because the more satisfied your new hires are, the more likely it is they’ll share their positive experience with you and your company. (To be honest, they’ll discuss their experience whatever you do. But you want positive feedback, not negative. And how you approach your onboarding will determine what kind of feedback they have).
Let’s recap!
Onboarding helps new hires learn about their new role, their new colleagues, and their new company (its culture and its goals). Its benefits include increased employee retention, financial savings, faster productivity, and better branding.