Business owners and employers are up against new and unprecedented challenges going into 2021. All the social and economic changes that started in 2020 left multiple companies out of business or slowed down their growth rate. The situation puts more pressure on the employer’s ability to engage employees and keep the churn rate down. Even in years with a boom in the economy, high employee turnover was a significant drain of financial resources, and the turnover numbers only increasing.
To combat high turnover rates, employers need to find a way to engage their employees on a deeper level to establish loyalty. One method, which employers can often overlook, is a well-planned onboarding process. Several studies show that a good onboarding experience can increase employee retention and minimize your turnover costs.
Calculate your turnover costs
Companies are using various methods to calculate employee turnover costs. Some companies allocate 15% of employees’ annual salary as a turnover cost when they voluntarily leave the company.
Let’s imagine that you hired a sales rep for a senior-level position. Copenhagen’s average salary level for a senior sales rep is around 596,142 DKK per year. This company would lose 89,421 DKK when the sales rep leaves.
When an employee has been with the company for less than one year, the percentage can increase to 33% as you can’t account for the first-year ROI. You might end up spending another part of your budget on an entirely new recruitment process instead of using it in different areas of your business.
What can you do to earn loyalty with your new hires?
A study done by Work Institute interviewed 240,000 former employees and found correlations among the participants where the number one reason for turnover was within career development. They also suggest that most of the turnover is preventable, and the first-year employees are ranking the highest in turnover rates with 34%. So what can you do to prevent wasting your resources and increase employee retention?
According to Glassdoor, a well-planned onboarding process can increase employee retention by 82%. With a highly competitive and saturated recruitment market, it’s more challenging to attract the right talent. Once you get through a successful hiring process, it’s vital to engage and retain employees from the first day. The well-developed onboarding process can be your best shot to maintain your new hire for more than three years.
What should you know about the onboarding process?
Employee onboarding is a process of integrating your new hire with your company and organizational culture. During this process, you should introduce your latest members to the rest of the team and equip them with the tools necessary to be productive.
The concept of onboarding is as old as the hiring process itself, and yet 88% of organizations are not onboarding well, which leaves a large space for improvement. Furthermore, it’s twice more likely that poor onboarding experience will get your new hire to look for other opportunities.
O.C. Tanner research suggests that 69% of employees are more likely to stay with the organization for a minimum of three years after experiencing a great onboarding process. If a company has an onboarding strategy, it’s usually only for the first week, leaving the new hire confused and lacking resources. The best practice is to create an onboarding strategy with a minimum of 90 days. Since most of the turnover happens within one year, you might even consider extending the onboarding until the end of the first year.
Remote onboarding process
It comes as no surprise that remote onboarding became a big trend since March 2020. Remote work and social distancing are almost a new norm, enhancing online onboarding even more. Already 77% of employees mentioned that they are willing to take a job offer without physically coming to the office. What makes this trend even more relevant is that by 2030 generation Z will fully enter the workforce, which most definitely will increase the demand for a remote work environment.
According to a Workable’s New World of Work survey, remote onboarding and training became a significant challenge for 37.4% of companies, and 49.7% of them showed concerns about onboarding and recruiting in the post-COVID world.
Some companies decided to battle the challenges of remote onboarding with automated solutions, as it solves the problem of inconsistent application, manager accountability, and ineffective measuring for onboarding ROI. It might sound counterintuitive, but with automated tasks that you would typically have to do manually, you’ll get more time to interact with your new hire and strengthen the relationship.
Employee turnover is a significant problem that many companies are trying to solve. There can be multiple reasons why employees are disengaged and decide to leave their jobs. According to studies mentioned in this article, most of the turnover happens during the first year of employment. With this knowledge and several other studies, it’s safe to say that the onboarding process plays a significant role in employee retention.
During this process, a great experience can gain an 82% increase in employee retention, where the best practice is to create at least a 90-day onboarding strategy. Part of the process should be designing a remote onboarding strategy because the demand for this trend will only increase in the future.
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