How to Measure the True Value of Onboarding

With physical distancing practices in full effect, strategic onboarding became more critical than ever. Talya Bauer, Ph.D. of Portland State University, defines onboarding as “the process of helping new hires adjust to social and performance aspects of their new jobs quickly and smoothly.” A successful onboarding program is the most helpful guide for helping new hires navigate the company. In many cases, it is a crucial step that determines a new hire’s future: will she/he be a productive part of the organization or a fugitive employee?

Finding and hiring new talents takes considerable time and money. Former Zappos CEO Tony Hsieh previously stated that bad hires had cost the company over $100m. The cost includes training, replacement, loss of productivity, and the negative impact on the team. According to the Allied Workforce Mobility Survey, companies with highly successful onboarding programs spend less than half than somewhat successful ones. To avoid unnecessary costs during the hiring process, HR should optimize the onboarding process.

To identify how well your onboarding program is working and measure its effectiveness, you’ll need metrics. Management guru Peter Drucker once said, “what gets measured, gets managed” (The Practice of Management, 1954).

Here are three metrics that you can utilize to measure the effectiveness of the onboarding process:

Time-to-productivity

Time-to-productivity, or “time to proficiency,” refers to the time it takes a new employee to meet the expected performance level ably. In other words, it’s a metric that measures how long it takes a newcomer to become fully proficient in his/her job. This metric is affected considerably by the success of the onboarding program. For a beginner with the right experience, background, and skills, the onboarding process is the most significant step in helping the new hire reach the expected productivity levels. For example, Journey App measures the metric by asking the new hire’s manager to assess “Job Readiness.” See below.

A recent study shows that organizations with a standard onboarding process experience 50% greater new-hire productivity. The better the onboarding process is, the faster new hires start generating revenue and become a part of the profit.

If an employee needs comparatively longer time-to-productivity, ceteris paribus, there must be a problem during the onboarding process.

Keep in mind: This number may differ significantly among the positions/teams within the company. However, it shouldn’t vary too much from person to person within the same team, considering the same onboarding program. Set your expectations accordingly.

Retention rate

If a company has a successful onboarding program, retaining employees and ensuring long-term commitment becomes less challenging. That means an intense onboarding process can result in higher retention. As Urbanbound states in the same survey, 69% of employees are more likely to stay with a company for three years if they experienced great onboarding. New employees, who went through a structured onboarding program, were 58% more likely to be with the organization +3 years. A study by Harvard Business Review found that 80% of companies believe that turnover results from a bad hire. Brandon Hall Group defines a bad hire as someone who negatively impacts organizational productivity, performance, retention, and culture: “A bad hire is often categorized as someone likely to leave an organization in the first year or cause other employees to leave the organization.” According to Glassdoor’s research, organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%.

A higher retention rate demonstrates that your onboarding program is successful in assimilating new employees into the company.

Keep in mind: Assign mentors/buddies to help new hires set clear goals and expectations. Also, carry out exit surveys to have a better understanding of the reason for leaving. Exit interviews help reduce the turnover rate. Consultants say that the first six months are critical when the new hires decide to stay or go. So, keep a close eye on them during this period. It’s a process, not a checklist! Use mentoring opportunities to boost engagement.

Employee happiness

One way of measuring onboarding effectiveness is to track employee satisfaction. Employee satisfaction can be considered one of the essential metrics that also impact other metrics because happy employees tend to be more productive and stay longer.

Higher job satisfaction >>> Higher performance (=Lower time-to-productivity)>>> higher retention rate (=reduced unwanted turnover)

There are many ways to gauge employee satisfaction, but the most commonly used is to collect information throughout surveys (which also include structured interviews). In the surveys, you can ask how they feel about their jobs and their expectations. Surveys show whether your onboarding is successful and what, if any, areas need to be improved. Tracking employee satisfaction also creates awareness about new beginners’ needs and motivations. A successful onboarding helps newcomers establish a good relationship with her/his colleagues during the social integration process, which also has a vital role in employee happiness. Below you can see the first week survey of the Journey app.

Keep in mind: A close link exists between goal commitment and new employee satisfaction level. If your newcomer thinks that the company is supporting her/his career goal, she/he feels engaged more. Moreover, role clarity is also crucial for job satisfaction. A study conducted in the United States and the UK found that organizations lose an estimated $37 billion each year because of role ambiguity. Not having a clear understanding of her/his role creates performance problems.

Gathering data continuously about time-to-productivity, retention, and employee feedback helps organizations evaluate onboarding practices’ effectiveness and allows interference when needed.

Successful onboarding can improve new hire retention rates, speed up time to competency and increase productivity. These three metrics can help you diagnose and measure your onboarding program’s effectiveness.

If you want to learn more about new hire onboarding, you can check out our blog posts here.