Measuring the Effectiveness of Onboarding
In the United States, a typical job tenure is two to four years. Each year, about 25% of the workforce experiences career transition whether it be through layoff, termination or just a desire to progress one’s career.
The unfortunate truth is that nearly half of all executives who move into new jobs leave them within 18 months of being hired. This has been verified by several sources. The Corporate Leadership Council reported that nearly half of new executive hires quit or are fired within the first 18 months at a new employer. Harvard Business School reported a 40% to 60% failure rate of US executives in 2003. Right Management consultants indicated that about 30% of new managers and executives fail at their new jobs and leave within 18 months.
We estimate the cost of turnover is about 35% of an incumbent’s total compensation (which considers recruiting fees and lost productivity among other things). With that in mind, for every $100,000 in executive compensation, this kind of turnover is costing $35,000 per year.
Some of these failures could be attributed to a lack of fit with the organization that wasn’t apparent during the recruiting process. Perhaps skills fell short of expectations and were not up to the task. You may want to believe all your employees are happy about the new guy, but what about those who feel they were passed over in favour of an outsider? But a large part is a function of the employers not doing enough to help ensure these new employees get off to a good start with their organization.
A recent study of onboarding practices by the Olinger Group of Chicago, sponsored by benefits consultancy ALEX reveals some startling data on how effective – or not- employers’ onboarding practices are. The survey collected inputs from 400 employees, representing a cross-section of age and seniority.
Only slightly more than half of the employees surveyed (52.3%) indicated their employer had a formal onboarding process. Another 37.5% indicated there was NO formal onboarding program in place at their companies. That still leaves about 10% who did not know if there was an onboarding program, which probably means there was none.
Note the emphasis on “formal”. All companies have some form of onboarding process. Usually, it’s ad hoc or just informally structured. Companies that have the lowest turnover rates have clearly defined processes for onboarding new hires.
The first day on a new job is a defining moment in an employee’s experience.
In the ALEX/Olinger study, 72.3% of respondents indicated they received no welcome message from their new supervisor. One in five did not have a desk on their first day, another quarter had no computer and over a third had no phone or voice mail on their first day. Does this sound like their employers planned for their arrival?
Just under a third (27%) of new employees say they arrived to their first day of work without having received a first day agenda.
Feedback is lacking. Nearly 44% of respondents indicated they received no formal written review of their progress from their manager within their first 90 days on the job.
There’s clearly a difference in the effect of onboarding on employee satisfaction. For those companies with formal onboarding processes, 71% of new hires rated their job satisfactions as “Very satisfied” or “Somewhat satisfied”. Without formal onboarding, employee satisfaction dropped to 25%. “New hires are nearly three times more likely to be “somewhat satisfied” or “very satisfied” with the new job experience when their employers have an onboarding program in place.”
Aberdeen Group’s 2012 report, “Onboarding 2012: Accelerating Time to Performance” noted a couple of key items. First, among companies with best-in-class onboarding, 71% of new hires were rated as “Exceeds Expectations” vs. only 13% at companies with poor onboarding processes. Second, those companies with best-in-class onboarding observed an 11% improvement in employee retention while those companies with poor onboarding saw a 13% decrease in employee retention.
If you still think onboarding isn’t important, consider this. There’s significant payback in terms of customer satisfaction and customer retention that impact your bottom line. Companies with great onboarding processes realized 6 times the customer satisfaction and 5 times the customer retention rate compared with companies with poor onboarding practices,
Next week, we’ll walk you through what a good first day on the job should be.