How To Maximize Employee Onboarding ROI
Research from Leena AI found that the average cost of onboarding ranges from $600-1,800 per employee from SMEs and over $3,000 for larger organizations.
These costs add up, and they’re not counting the opportunity cost of a new hire leaving or taking longer to get productive.
Onboarding is the crucial first step in the employee journey, making a good first impression and helping set a new hire up for continued success.
Use this article to help you get the maximum ROI from your onboarding activities.
How Does Onboarding Impact Your Bottom Line?
The aim of an effective onboarding process is to help new hires integrate and become productive in as an efficient manner as possible. On top of that, it can help reduce turnover and strengthen company culture.
For example, a survey from Talmundo found that more than 50% of survey respondents say that onboarding shortened the learning curve.
Another study by SHRM found that organizations perceive effective onboarding as improving retention rates (52 percent), time to productivity (60 percent) and overall customer satisfaction (53 percent).
As it costs an estimated 21% of the annual salary to replace an employee with a new one, there is potentially significant onboarding ROI to be gained from increasing retention rates alone.
How To Increase Onboarding ROI
So now we’ve covered what onboarding can cost, how to maximize your ROI?
Including pre-boarding activities
Starting the onboarding process before the first day, for example sharing welcome emails, handbooks, tutorials, and HR paperwork, can help make it more efficient.
Preboarding engages new hires early, boosts confidence, and accelerates the onboarding process. Indeed, research from Aberdeen Group found that 83% of best-in-class companies start onboarding before day one.
We don’t wait until the first day to kick things off. By the time someone walks in (or logs in if they’re remote), their equipment is ready, their accounts are set up, and they already know what their schedule looks like for the first week.
Make a great first impression
According to research, 20% of employee turnover occurs within the first 45 days, so a good first impression counts.
Preboarding is where it all begins, but then there’s the orientation period and first month or so. This is the time to share the organization’s mission, vision, and values, and opportunities using real stories or examples that reflect these principles in action to build an emotional connection.
Some top orientation activities include:
- Face-time with the leadership team
- Pair up with a buddy or mentor
- Get hands-on with the company’s products and/or services
- Set goals including quick wins to build momentum
- Coordinate training and development.
Also, small gestures like a welcome kit or personalized desk setup can leave a lasting positive impression.
Ensure a consistent process
Inconsistent onboarding leads to variable results and challenges in measuring effectiveness.
Like with most things, the most effective way to ensure consistency is to create an onboarding plan that can be adapted for each individual.
Some elements, such as welcome presentations from leadership, can be standardized across plans, allowing space to personalize the onboarding experience.
Orientation is where there’s the most crossover between roles, and it’s recommended to make a 90 day onboarding plan at least but, as I’ll go into, it shouldn’t end there.
Spend more time on onboarding
While 90 days is a good benchmark, as pointed out in this HBR article, new hires can take almost a year to reach full proficiency, especially for more senior positions.
So, after the first three months, ensure that the new hire is still receiving regular support in the form of regular feedback such as 1:1 check-ins with managers.
Include social integration
Research has found that positive social interactions at work directly affect the body’s physiological processes and positive social interactions serve to bolster physiological resourcefulness.
All this to say, fostering work relationships accelerates productivity and engagement. A good way to achieve this is through a buddy system.
Microsoft data analysts writing for Harvard Business Review found that the more an onboarding buddy met with a new hire, the greater the new hire’s perception of their own speed to productivity:
- 56% of new hires who met their onboarding buddy at least once in the first 90 days indicated that their buddy helped them to quickly become productive in their role.
- 73% for those who met two to three times
- 86% for those who met four to eight times
- 97% for those who met more than eight times.
Another fun idea taken from Mike Gibbon’s article on employee onboarding best practices is Rookie Cookies:
“At one company I worked for, they had a practice called “Rookie Cookies”. New employees were encouraged to make (or buy) cookies, and people would come by, introduce themselves, grab a cookie, and chat. It was a great (and tasty!) way of meeting new colleagues for the first time!”.
Also, spreading onboarding tasks across different team members or even departments helps to build connections and take some of the workload off managers.
If onboarding global employees, it might pay to invest in bringing them into the office for the first week at least.
Use automation
Automation improves onboarding ROI by reducing manual effort, minimizing errors, and streamlining repetitive tasks, leading to cost and time savings.
“We rely on tech to make onboarding less of a headache,” says Tetiana Burda, CAO at Syndicode. “For instance, we’ve got onboarding tools to automate repetitive tasks like sending out welcome emails, organizing training modules, or signing contracts digitally before the first day. People often underestimate how much friction you can remove with straightforward automation. It frees up HR to focus on what matters: the human connection.”
How To Measure Onboarding ROI
Measuring onboarding ROI requires using tools such onboarding software, HRMS etc to track the following metrics:
- Employee retention rates: Compare the retention rates of employees who underwent structured onboarding versus those who didn’t. A higher retention rate among onboarded employees indicates program success.
- Time to productivity: Measure how long it takes new hires to reach full productivity or competency in their roles. Faster ramp-up times can signify a successful onboarding process.
- Employee engagement scores: Use onboarding surveys to understand how new hires perceive the onboarding experience and gauge their engagement levels during and after onboarding. Higher engagement typically correlates with better ROI.
- Performance metrics: Track the performance of new employees within the first year. Improved performance over time can indicate the onboarding program's effectiveness in preparing them for their roles.
- Cost of onboarding vs. outcomes: Compare the cost of onboarding (including materials, training, onboarding software costs, and personnel time) to the value it generates, such as improved retention, faster productivity, or reduced recruitment costs.
- Internal mobility and promotion rates: Track how quickly new hires advance within the organization. Employees who are onboarded effectively are often better prepared for growth and advancement.
- Manager feedback: Gather insights from managers about the preparedness and performance of new hires post-onboarding. Positive feedback indicates the program is equipping employees well.
By combining these metrics, organizations can gain a comprehensive view of how their onboarding programs drive ROI and identify areas for improvement.
The Bottom Line On Onboarding ROI
Investing in a proper onboarding process is an easy win for all the reasons listed above. All that’s required is a little investment in creating a structured process and maybe some new tools e.g., onboarding software, HRMS, or learning management system.
Not only will this help new starters get productive quicker and increase the likelihood they’ll stay, it’ll also help make internal teams’ lives easier and nurture a more cohesive culture.
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