Companies Lose 25% of New Hires a Year: How Onboarding Can Save Your Business
The process of onboarding is one of the most critical stages of the hiring process and costs an estimated $400 per person. It is the time that goals and expectations are set and new hires gain the knowledge necessary to be successful in their new roles. Management, seasoned employees, and new hires should come together and focus on fostering new relationships with the anticipation of building a cohesive and productive team.
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Bringing Team Members On Board
Once all the paperwork is signed and a new employee is made aware of their responsibilities, then comes time for the real work. Odds are that the new employee isn’t immediately ready to “kick it into high gear.” However, the right leadership could be just the thing to get them acclimated to the new job and well on the way to productivity.
To begin, it is important that management sets ground rules and expectations. The manager should then provide a clear sense of development opportunities and any available training. This will assist the new employee in developing the necessary skills required reaching their career goals. This also shows the new employee that their manager has a vested interest in their success.
Helping New Hires Adjust
The peer partner, or onboarding buddy, is extremely beneficial for the new hire. Not only will this individual keep management from having to hover over the new employee for the first few days or even weeks, but they can also assist new employees in getting familiar with the culture of the organization.
They can also help with answering questions, teaching some “tricks of the trade,” and a host of other positive benefits, like tying the person into the culture of the firm. A good candidate for a peer partner has to be good at their job, respected by other peers, a great communicator, and willing and able to assist others. Obviously, this takes a unique person to be able to take on the responsibility of assisting others and management should be careful in assigning peer partners because the wrong peer partner could unintentionally increase turnover.
What Happens When You Don’t Onboard Properly?
Research shows that the more time and effort an organization puts into onboarding, the higher the probability that they will have a low turnover rate. According to statistics from UrbanBound, a relocation management software developer, companies lose an average of 25% of all new hires in the first year. This number is significant because 90% of businesses believe that employees decide whether to stay within the first year of employment. That means that companies can potentially expect to maintain 65% to 75% of the staff they hire within a year.
What some organizations fail to realize is that there is a dollar amount associated with employee turnover. For an average small to midsize company who may onboard up to 100 employees per year, this can cost upwards of $40,000 per year or $400 per person. This value includes onboarding cost such as creating the offer, sending out paperwork, processing paperwork, materials for welcoming packs and contracts, as well as general administrative time. However, that value doesn’t include training, IT, or recruitment costs so that number per person will be much, much higher.
Research from SHRM shows that nearly 80% of companies polled have a formal or informal orientation program in place. Despite this, some of them lack good communication and execution. New employees shouldn’t walk into work on the first day and see that the company is not prepared for their arrival. Employers shouldn’t be scrambling to find a phone, desk, computer, and other essentials for them at the last minute.
Not only does a lack of organization such as this have a negative effect on the employee’s morale, but it can be costly to the company. The average employee takes about four days to really get going in their new role. In the meantime, they are typically filling out paperwork or reading over departmental procedures to pass the time while their workstation is being setup. If the employee makes $75,000 per year, the company just wasted approximately $1,150 paying the employee to do no work. Using the previous example of hiring 100 employees a year, that is a loss of $115,000.
What Does It All Mean?
It is important to welcome new employees and begin training and development upon arrival. The ultimate goal is to get workers productive as fast as reasonably possible.
Every organization should make it their mission to ensure that their employees feel welcomed and appreciated. New employees can benefit from the support and guidance of an experienced peer partner. The investment the company makes in quality onboarding can come back and benefit them exponentially. Additionally, when onboarding is done correctly and new employees are given the tools to succeed from the beginning, odds are they will stay longer, be happier, and be more productive.
Ben Eubanks is the Chief Research Officer at Lighthouse Research & Advisory. He is an author, speaker, and researcher with a passion for telling stories and making complex topics easy to understand.