Any sales manager or executive worth his salt can figure out the lifetime value of a customer, down to the decimal point. Ironically, few can quantify the value of their employees, an endeavor that is just as—if not more—critical to the success of the business.
Pasha Roberts, chief scientist at Talent Analytics, uses a simple cost-benefit plot (below) to attach value to an employee. The uncomfortable truth evident in the graph? Employees don’t begin adding value to the business until months—or even years—after they are hired.
Roberts’s hypothetical calculation takes into account the heavy costs associated with hiring, which comprehend recruitment, onboarding, supplies, training, and administrative overhead (as well as salary). After about a year, costs level out. And if all goes well, by this time the employee is fully productive in his or her role. However, by Roberts’s calculation, the employee only begins providing a return on the company’s investment after about two and a half years.
The plot makes a convincing (some might say desperate) case to reduce attrition, especially during the critical onboarding period when an employee is costing the business dearly, yet is most likely to leave.
Unfortunately, decreasing turnover is a tough nut to crack. You’ll need a predictive model that allows you to identify signs that an employee is a flight risk—especially during that first phase of employment. Roberts breaks down the steps for building a predictive model in a series of articles on employee churn. Hint: You’ll want to apply this model before you extend a job offer.
