Building the Business Case for On-boarding Software
With the war for talent in full swing, and turnover for some industries at an all-time high, organizations are increasingly turning to on-boarding software to tighten up their procedures for new hires—and for good reason. Wynhurst Group research suggests that more than a fifth of employee turnover occurs within 45 days of taking up a new position. The same report shows that a properly structured on-boarding program can make a clear difference in that turnover rate for organizations; boosting retention for those companies leveraging on-boarding technology close to 60% higher than their less-focused competitors. While few companies would argue that these turnover statistics are alarming, of concern is the fact that few organizations seem to understand the metrics, measurement, and ROI considerations of how on-boarding software can affect that turnover—a critical problem for any company looking to build the business case for automating the on-boarding process.
As Dr. John Sullivan points out, "On-boarding is no different from any other business process: if it is to meet its goals and continually improve, it must use metrics and measures". Indeed, on-boarding measures are critical, and the implementation of an on-boarding software solution offers the opportunity to ease that ROI measurement burden; not only by automating much of the transactional (and even acculturation) processes for new hires, but also by gathering data and contributing to metrics and reporting. Here we explore the issue of building an on-boarding software business case further, and tackle questions such as why on-boarding should be measured, how on-boarding success is assessed, and which specific metrics should be used to achieve these performance goals.
There are two clear incentives to invest time and effort in assessing on-boarding impact. First are the wider strategic issues of establishing the impact of new hires on the business, identifying factors that are contributing to turnover, assessing the effectiveness of the recruitment process, and early spotting of new star performers for the talent pool. A 2011 Software Advice article, On-boarding ROI: Metrics for Measuring the True Value notes, "When determining ROI of the on-boarding process, you need metrics that will help you determine how efficiently new hires can come in and make an impact on their team and your organization." The second, narrower but no less useful focus is on the impact of the on-boarding software itself (i.e. what time is it saving the organization, how is it improving the new starter experience, what is the impact on core issues such as reduction of ramping-up time, improved retention, etc.).
On-Boarding Software Issue # 2: What Signals On-boarding Success?
Key Performance Indicators (KPIs) for on-boarding software success (as cited by the Aberdeen Group) revolve around 3 main areas: improving time to productivity; improving overall customer satisfaction; and genuine desire to improve retention rates. By using these three drivers as the basis for measurable business goals, a separate metric for each can be established and tracked, providing objective evidence to senior management of the value of well-planned on-boarding; which also gives HR the opportunity to further refine the on-boarding process. To complete the loop (with continuous improvement of the process in mind) Dr. John Sullivan suggests that new-hire satisfaction rates with the on-boarding process (as well as the operationally opposite process of off-boarding—a hallmark of HR software solutions such as Enwisen AnswerSource) also be measured, thus bringing employee satisfaction and engagement into the picture.
On-Boarding Software Issue # 3: Which Metrics Should be Used?
Obviously the choice of performance metrics needs to take into account various factors; including HR processes, management needs, and C-suite priorities. The following list offers a number of potentially suitable measures. For organizations taking the first steps on the on-boarding metric path, the recommendation is to choose no more than one metric per business goal and prove and embed their use and value before widening the scope of the ROI initiative.
Impact on the Business:
Number of days to achieve the minimum productivity expectations for new hires.
Voluntary turnover rates of new hires in the first six months.
Involuntary termination rate of new hires in the first six months.
The percentage availability of prescribed development and training classes to new hire within two weeks of start date (time period may vary according to role specifics).
The percentage retention of designated 'essential information' that can be demonstrated by a random sample of new hires after one month or other period.
The percentage of hires who left within six months, who cited on-boarding challenges (in an exit survey), as a contributor to their departure.
New hire satisfaction rates with both corporate and 'local' on-boarding processes after one month and six months.
Percentage of hiring managers who are satisfied with on-boarding.
The On-boarding Process:
The percentage of new hires who had no trouble receiving their first paycheck, IDs, receiving benefits, or receiving telephone, computer equipment and other assets.
The percentage of designated 'essential on-boarding program elements' that were not delivered to new hires within the first month.
The average number of days, after an acceptance offer, before on-boarding begins.
The percentage of new hires who receive "customized information" that fit their particular needs, business unit, and/or job family.
The On-boarding Software ROI Bottom Line
As Dave Wilkins at Taleo has stated, "The hiring and on-boarding process is really the start of the talent management conversation. Engagement starts in the recruiting process, manifests itself in the on-boarding process, and then continues on in how you motivate employees day to day." By leveraging the software to contribute to ROI measurement – partly via standard reporting from the talent management (or wider HRMS) database and partly through the management of customized surveys that test the chosen metrics – an on-boarding system can ease the measurement process while proving its own worth at the same time.
Talent management thought leader, Dr. John Sullivan is clear: "On-boarding is no different from any other business process: if it is to meet its goals and continually improve, it must use metrics and measures."