How to create a business case for the purchase of onboarding software

May 14, 2020
Onboarding, ROI

Employees who have just started a new job, are looking for confirmation that they made the right choice. Every new employee feels a certain level of uncertainty that they want to get rid of as soon as possible. A good digital pre- and onboarding programme is hugely important in this process. It ensures that they feel ‘part of the family’ more quickly, know what is expected of them and pick up their duties more quickly. 

But what does an organisation have to gain from a good pre- and onboarding strategy? How do I calculate the return on investment of onboarding software?

In other words, how do you make a business case? The result of a good onboarding process is also reflected in higher involvement and lower absenteeism. How do you express that in terms of money? The article below provides you with four tools to help you create a business case for the purchase of onboarding software.

 

1. Costs onboarding process

Each organisation frees up capacity, both planned and unplanned, to onboard a new employee. Planned: making sure that your new employee is welcomed and gets a tour of the facility, gets to meet his/her new colleagues for a cup of coffee and maybe even has a colleague assigned to them to act as their buddy and introduce them to your 'way of working'. Think of systems, communication channels and most importantly: the coffee machine and lunch breaks.

Unplanned: answering all those questions that come up prior to the first working day, but certainly also during the onboarding period. These activities all cost capacity, both of (mostly) HR and/or a direct colleague, and of the new employee himself/herself. By calculating that time, you can estimate the average cost of the current onboarding process.

An example - Make an estimate of the hours invested by the new employee, direct colleagues and HR in the onboarding process. See the example below: 

Number of new employees per year

70
Average hourly wage €17
Average time onboarding HR/colleague (number of hours) 10
Average time onboarding new employee 16
Total costs onboarding process 30.940
   
Savings when using Appical 35%
Savings with Appical €10.829

 

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2. Smiling faces

A happy (new) employee is a motivated colleague. You want the question marks that arise in the run-up to and after the first working day to change into positive exclamation marks. This happens as soon as your new employee finds the confirmation he or she is so desperately looking for.

Despite the fact that it is difficult to attach value to motivation, we can say something about it. For example, unmotivated employees show higher rates of absenteeism. Research by Gallup shows that the absenteeism rate for the employees involved is 37% lower. Think of the labour costs you save, including sick pay but also replacement costs, production loss and absenteeism support.

 

An example - Calculate the total cost of absenteeism and what a reduction would mean in euros. 

Total number of new employees 70
Absenteeism 4%

Costs of absenteeism per employee

€800
Total costs absenteeism €56.000
   
Impact Appical 5%
Savings with Appical €2.800

 

 

3. Up and running!

The third component of your business case consists of providing insight into the time it currently takes to get your new employee up and running. And them aim to reduce that time by a month(!).

Research by Google shows that the onboarding of new employee at Google can be sped up by a month when the following 5 tips are applied:

  1.     Make sure the new employee knows what his/her role and responsibilities are
  2.     Sit down every month to discuss the onboarding process (first 6 months)
  3.     Help him/her to quickly build an internal network
  4.     Use a buddy system
  5.     Make sure you keep the lines of communication open!

Our colleagues Eric-Jan and Elaine wrote a blog about this subject before!

 

An example - Multiply the average monthly labour costs per new employee by the number of new employees per year.

Total number of new employees 70
Average gross monthly wage €2.800
Labour costs employer 31%
Total monthly labour costs €60.760
   
Impact use of Appical 10%
Savings with Appical  €6.076

 

 

4. Make fans!

Retention is the new recruitment! It's time to calculate what the organisation has to gain from not welcoming a new employee, but a fan. Research by SHRM shows that 20% of new employees leave within 45 days. However, 69% of the employees who have had a positive onboarding experience still work for the same organisation 3 years later, AND organisations with a good onboarding strategy are more successful in filling vacancies (up to 50%!). 

 

An example - The turnover costs do not only consist of the recruitment costs of his/her (temporary) replacement and the training costs. They also include costs such as reduced productivity or lost sales. In this example, we only assume the reduction of the number of recruitments and the reduction of recruitment costs.

Total number of employees 700
Turnover per year (number) 35
Costs per new hire €5.500
Annual hiring costs €192.500
   
Impact Appical   5%
Savings Appical €9.625

 

 

Savings when using an onboarding tool

If we add up all the savings from this example, we arrive at a total savings on onboarding of €29.330 for a company that hires 70 people per year. This means that a good onboarding tool not only enhances the employee experience, but it also saves the organisation money.

It is important to remember that these calculations are based on averages and estimates.   Each company has its own specific situation and influences, which means a business case can at most be a good indication of the savings.

An online tool is, as the name already says, a tool to support real practice. A tool like Appical cannot replace the important offline ‘contact'. It does, however, offer organisations the opportunity to set a quality standard and provides structure in your entire pre- and onboarding programme, both online and offline. 

Do you need help making a business case? You can make a simple calculation here. Would you like a complete ROI calculation for free? Let us know! Contact us by clicking on the button below.

 

I want a complete ROI-calculation