Onboarding is imperative to a business, here's why
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Let’s not fool ourselves, onboarding – getting a new employee familiar with the company, how things are done and what they need to do – matters. No matter how strong a brand, nor how revolutionary its product, its success invariably rests on the employees driving it. There are many examples of really powerful products failing because there wasn’t the right team behind it. Apple, for example, launched a Personal Digital Assistant (PDA) in 1993, coining the term in the process. It failed dramatically and it was Nokia who took that market with their PDA in 1996 – in 1997 Jobs returned to Apple. There is more to success than just a good product.

On the opposite end of the spectrum, getting the right people behind something – anything – can result in surprising successes. Gary Dahl became a millionaire almost overnight by selling rocks for $3.95 a pop. Yes. Rocks. In 1975 “The Pet Rock” was launched and sold 1.5 million units in a matter of months. Often, people are a business’ biggest asset. However, they come and go, leaving businesses to adjust accordingly. This founds the importance of onboarding.

Onboarding isn’t free though. There is a significant investment on the part of the business doing the hiring, and probably more than you might think. Besides the obvious things like; recruitment companies, advertising, training and management time (interviewing, etc.), there are other costs that are far less obvious, and many of which can be mitigated by an effective onboarding programme:

Productivity loss

A new employee can take a couple of months to become au fait with a new company. Learning new processes, who to speak to or even how things are done is one thing, but actually producing (a profitable outcome) is another.

Cost to value of an employee

In fact, according to Bersin by Deloitte, some employees can take up to 2 years to reach the same levels of productivity as their predecessor.
Setting up an onboarding programme that introduces a new employee to helpful information can reduce that time cost significantly. Here are a couple to think about:

  • People of interest: the names and contact of all generally relevant people, as well as those specific to that role. Human Resources (HR), direct manager, project stake holders and IT managers are usually good starts.
  • Places of interest: bathrooms, lunch options, parking, etc. – could save valuable time that other employees would have to spend. This can also make a new comer feel at home.
  • Tools: where the printers are, how the key cards work as well as anything else they may need to get the job done. Don’t forget documents – new employees should be given access to all the relevant forms and policies.
  • Digital Locations: most companies use shared servers or have their own Virtual Private Networks (VPN). Let them know where things go and how to access them.
  • History and vision: where the company came from and where it’s going. A critical insight into the culture of a company and what’s expected in terms of working culture.

Engagement loss

some employees can take up to 2 years to reach the same levels of productivity as their predecessor.

Old employees leaving and new ones joining has an impact on existing staff. Besides asking questions, existing employees will likely have to pick up the slack while the new person gets up to speed. This can lead to stress and a negative perception of the company – not everyone understands the bigger picture.

A strong onboarding programme is a great way to integrate new staff into old teams and it really cuts down on the potential strain of loss.

Customer service and errors

We live in a world that is becoming more and more complex. And the stakes aren’t getting lower. New employees are bound to make mistakes and those mistakes are bound to cost the company. New employees need to learn how to deal with customers in a way that they’re used to, and there has never been so much at stake. One badly worded social media post can completely obliterate a brand’s reputation.

Onboarding programmes are where these can be minimised. Besides an opportunity to go through internet usage and polices, it can serve as a platform to discuss how the company handles customers which are sensitive, and how to deal with potentially difficult situations.

Training costs

We have already accounted for the new employees training costs, but what about the 10 -20% invested in the old employee?

Well, an effective onboarding programme can improve retention rates by up to 100% and productivity by up to 60%.

Seniority

Employee’s seniority levels also play a part. The graph below shows how, on average, the cost of replacing an employee is usually around 20% of their annual salary. Although, this percentage tends to climb with the size of the annual salary. Bear in mind, these figures are from a study in the 90’s, things are changing even faster now and is likely to push these numbers up even more.

Cost of turnover

It’s pretty clear that employee retention should be a high priority objective. While an effective recruitment process can improve retention rates, onboarding plays an important – if not paramount – role.

As success is so dependent on the team driving the business, surely that should be an area of investment? Yet, up to 35% of companies invest zero into onboarding. Cisco’s CEO, John Chambers, says “More than one-third of businesses today will not survive the next 10 years.” I am not suggesting that onboarding is the only cause, but it is definitely something to think about.

 

Resources:
https://www.americanprogress.org/issues/economy/reports/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/
https://www.linkedin.com/pulse/20130816200159-131079-employee-retention-now-a-big-issue-why-the-tide-has-turned
https://en.wikipedia.org/wiki/Personal_digital_assistant
https://www.entrepreneur.com/article/244602
https://www.icims.com/sites/www.icims.com/files/public/OnboardingWhitePaper_RC.pdf
http://www.urbanbound.com/blog/onboarding-infographic-statistics

 

Author: Kyle Hauptfleisch


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