Written by Michael Windham and Jeffrey Haynes, Baker Tilly Human Capital Services
Much has been written about the benefits of onboarding—the reduction in manual effort, the reduced time to productivity, and increases in employee retention, etc. Published data builds the case for a strong ROI as well: UrbanBound estimates that UK and US companies spend $37 billion dollars annually to retain unproductive employees who don’t understand their jobs, while, amazingly, 35% of those companies spend $0 on onboarding. That’s called the cost of doing nothing.
These statistics show how much is wasted by poor or nonexistent onboarding, but what are some reasons our clients have for investing in more sophisticated onboarding processes? And how do these processes contribute to positive business outcomes?
Many companies still spend a great deal of time manually performing onboarding tasks (gathering, sending, and tracking down completed paperwork, creating employee files, etc.). Automating and streamlining the onboarding process reduces this manual effort and cuts costs. For example, one of our clients, a 60,000-employee health system, measured the time saved by its onboarding team on what were once manual tasks, after it implemented Oracle Human Capital Management’s onboarding component. Onboarding with Oracle HCM, it reduced the onboarding time of each hire by more than 45 minutes. After breaking down this estimated time saved per “onboarder” into dollars using an average salary of $60,000 per year, along with the company’s average of 7,000 hires per year, the savings amounted to more than $150,000 per year. This not only contributes to the company’s ROI, but the reduction in time spent onboarding allows for 4,000 hours to be used for more strategic HR activities.
While there are many variables contributing to this metric, we will focus on two of them. One is what our healthcare client referred to as “time to get here.” In other words, how quickly can an organization get from “offer accepted” to “day 1” in order to begin training and get a new employee on the path to productivity? By streamlining and automating the activities between acceptance of the offer and the first day of work, it was able to get new hires behind their desks a full week earlier than without Oracle HCM Cloud. What would an additional week of productivity look like in your organization, and how would that contribute to your bottom line? The other variable in time to productivity is the shift to “pre-day 1 activities”—in other words, taking those non-work-related activities (such as form completion) away from new hires on their first day on the job and handling them electronically before that day. By doing so, the new employee can focus on job training and other more important activities on the first day rather than filling out forms. If we estimate just an hour of savings per hire and more than 7,000 new employees per year, we have now converted more than 7,000 hours of less-important activities to work that contributes to the bottom line.
Turnover is an obvious cost that adversely affects the bottom line. There have been many studies about turnover rates and the impact of onboarding on those rates, but real-life examples are always best. So, going back to our healthcare client, retention data for both the first 90 days and the first year were available for the periods before and after implementing Oracle HCM Cloud. Turnover for new hires within the first 90 days decreased from 10.3% to 8.2%, and first-year turnover decreased from 26.1% to 22.5%. If we quantify the first-year improvements using a conservative estimate of $5,000 as the cost to replace an employee (many studies have this number as high as 1.5 to 2x annual salary per employee) and we hire 7,000 people per year, that translates to savings of more than $1,260,000.
Finally, when onboarding is done correctly, it can be dynamic and engaging and provide a positive experience for new hires. Some of the more compelling reasons to commit to Oracle HCM Cloud Onboarding include the ability to complete time-consuming forms electronically before the first day of work; a more seamless transition to onboarding activities; the elimination of redundancies in data entry; and the presentation of content that promotes the culture of your organization. As shown by the numbers above, these benefits affect ROI in the long term.
It’s easy to see why our clients find that it makes sense to invest in onboarding. Reduction of manual tasks, simple time-to-productivity measures, reduced turnover rates, and improved new hire experiences have given our clients tremendous savings. The results speak for themselves.