Statistics suggest that poor hiring and onboarding leads to failure rates of over 50% of new starters.
While there is growing consensus about the importance of onboarding, I can’t help but notice a lack of understanding about what an onboarding process is supposed to achieve. Not only that, but it seems there’s plenty of uncertainty about how long and how involved it should be. We’ve previously discussed onboarding as an aspect of managing under-performing staff. But its true purpose – and value – goes much deeper.
Research shows that it is the onboarding process, rather than any level of talent or experience, which determines whether a new employee becomes a productive, long term member of the organisation – or not. And with an average $11k per employee recruitment cost, getting on board with onboarding has never been more important.
I want to discuss how a strategic six month (or more) onboarding program can deliver a range of quantifiable employer and employee benefits including:
- improved productivity,
- faster acculturation, and
- greater employee retention.
What’s going wrong with onboarding?
There’s a universal problem with employee retention, and in many cases it can be traced back (at least in part) to inadequate (or non-existent) onboarding programs. Recent statistics show that half of all senior external hires fail within 18 months, half of all hourly workers leave new jobs within their first 120 days and that companies are losing up to 25% of all new hires in the first year.
Well-planned onboarding is critically important, and despite growing awareness of this issue, the process remains sadly under-developed. In fact, around 35% of companies spend a grand total of $0 on onboarding (that $0 figure is not a mistake). Even among organisations that do have onboarding programs, 40% rated their programs as ‘less than moderately effective.’
What should onboarding achieve?
The most important factors in successful onboarding are socialisation and cultural acclimation within your organisation. Everything else being equal, an employee’s effectiveness is strongly related to how well they can:
- figure out the real issues that need to be addressed, and
- identify who the important people are for a particular issue.
It takes a relational approach to the task of onboarding. Put your focus on establishing your new starter within the broad network of social relationships within the organisation. This will give them the capacity to work successfully within the company’s policies, routines, and technology and, as a result, with their subordinates, peers and superiors.
A six month timeframe for onboarding
Addressing the socialisation needs of new employees takes time. Relationships form slowly when left to grow at their own pace, so a robust onboarding program should ideally include short and long-term goals and measures as well as regular, ongoing review.
Opinions differ on the ideal length of an onboarding program, but they usually range from 90 days to nine months. A case study of First Horizon National’s HR policy, released by Forrester Research Inc, showed quantifiable benefits in employee retention from a 90 day schedule:
‘the overall voluntary turnover rate shows a decline from 19.5% in 2008 to 10.96% at the end of 2009.’
But if you consider that 70% of new hires make the decision to stay or leave an organisation within their first six months, it makes sense that your onboarding process covers that timeframe.
Research from The Aberdeen Group comparing companies with above-average employee retention rates (Best in Class) to those with below average retention (Laggards) also suggests that six months might be ideal.
- 30% of Best in Class companies extend onboarding to the first six months compared with just 10% of Laggards
- 90% of Best in Class incorporate socialisation compared to 75% of Laggards.
The quantifiable benefits of onboarding
It’s important to remember that the onboarding process isn’t simply to improve employee comfort. It’s also about maximising the benefit of the first few months on the job and increasing the speed to full productivity.
In fact, according to the Brandon Hall Group, ‘organisations that have invested time and resources to improve the quality and scope of their onboarding process—the 27% that rated their onboarding process as more than moderately effective—are consistently outperforming the rest:
- 78% saw increases in revenue in the last fiscal year (1 in 3 saw increases of more than 10%).
- 64% saw positive gains in the majority of their organisational KPIs.
- 54% saw significant gains in employee engagement metrics, including employee turnover, absenteeism, productivity, and employee satisfaction.’
Consider the true cost of current hiring practices – high cost of recruiting, lower than ideal employee retention, and lost productivity due to slow employee acclimation. If you had to put a dollar value on the cost of hiring every new employee, my guess is it wouldn’t be a pretty figure. With the facts to support it, there’s no longer any doubt that a comprehensive, well-defined, six-month onboarding process presents a smart and valuable investment choice for progressive companies today.
Jon Windust is the CEO at Cognology – Talent management software for the future of work. Over 250 Australian businesses use Cognology to power cutting-edge talent strategy. You can follow Jon on Twitter or LinkedIn.