Successful Onboarding (PB)

By Mark Stein and Lilith Christiansen

MASTER THE “4 PILLARS” OF SUCCESSFUL ONBOARDING AND CAPTURE THE ONBOARDING MARGIN
Fact: One-third of all external hires are no longer with the organization after two years. Most of them begin job-searching after six months.What can you do about it? In a word: onboarding, the fastest-growing human resources tool in the world today, although poorly understood, subject to narrow definitions, and with limited codified best practice understanding and management rigor. Global consultants Mark Stein and Lilith Christiansen have studied and worked with leading companies on the topic, and they've synthesized their work into one complete, ready-to-use system, incorporating case learnings from Fortune 500 companies and other forward-thinkers.

With Successful Onboarding, you can:

• Realize the best from your talent from the get-go-without wasting time.
• Rewrite the employee-employer compact-to everyone's advantage.
• Acclimate new hires to your culture-without scaring them off.
• Assimilate new employees of all backgrounds-yet benefit from their unique skills.
• Reduce time-to-productivity-while increasing the level of productivity.
• Address the specific needs of individual hiring groups-cost-effectively.
• Make improvements at the systemic level-with gains realized with regularity.

While many companies have become very good at recruiting, today's orientation programs fall woefully short and impact your bottom-line potential. Successful Onboarding provides you with not only the business case but also a systemic approach to the entire process, from beginning to end. You'll be amazed how significantly you can increase new hires' productivity and increase the strategic impact and appreciation of your HR function. You'll discover the most effective ways to share your vision, offer early career support, and strengthen your strategic position, intent, and direction. Along the way, you'll hear fascinating inside stories-the good and the bad-from Apple, Starbucks, Netflix, Microsoft, Baird, Bank of America, John Deere, and dozens of other industry leaders.

In the end, it's all about people. When your employees are effectively on board and your system is supporting their success, your company is on track to even greater performance.

visit author's website for more information http://onboardingmargin.com

• Language: English
• Publisher: McGraw-Hill Education
• Release date: Jul 9, 2010
• ISBN: 9780071746151

Mark Stein

Mark Stein is a playwright and screenwriter. His plays have been performed off-Broadway and at theaters throughout the country. His films include Housesitter, with Steve Martin and Goldie Hawn. He has taught writing and drama at American University and Catholic University and lives in Washington, D.C.

Book preview

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Part One

RETHINKING

ONBOARDING

1

THE BUSINESS CASE

FOR ONBOARDING

An R&D manager at a large consumer electronics firm wanted to improve the time it took to get new hires working at their best. This manager felt that a more comprehensive onboarding program would help new hires gain better and quicker access to the specialized knowledge they needed to excel in their jobs. Yet when our client tried to get his chief technology officer to invest in new hire onboarding, he received an unenthusiastic response. More effective onboarding seemed like an intriguing idea, but it wasn’t worth funding over other priorities and wasn’t clear what the payoff could be.

Few operating leaders today appreciate the full value that effective onboarding can deliver. This is understandable given onboarding’s position as an emerging discipline with only a short history. This is a shame because on an intuitive level, onboarding makes a good deal of sense. The dollars we spend to recruit Grade A talent have mounted over the past 20 years because of a number of factors, including tightening of the labor force and the increasing value of knowledge workers in a service-based economy. Other factors, as some have argued, are the wider emergence of external recruiters who have an economic interest in fostering higher salaries; talent shortages; the never-ending cycle of hire, attrit, and rehire; and the associated stream of finders’ fees. In fact, the cost of attracting talent approaches 30% of a new hire’s annual salary. Imagine the added value if firms possessed a centralized, focused, properly resourced function to incorporate talent into the firm, so there was less of a need to rehire.

It’s one thing to talk about adding value, and quite another to provide hard numbers and explain exactly where those numbers originate. This chapter builds a quantitative business case for dramatically enhancing and broadening the way firms bring new hires into the fold. It begins by examining the economics of onboarding, quantifying typical returns that can be expected. It then describes in more detail the specific business objectives and results firms can achieve with a strategic program in place. But this is only part of the story. The second half of the chapter attacks the problem from the employee’s viewpoint by examining the new hire’s personal needs. Employees who are enthusiastic about their work and their careers are usually strong and productive, and a well-designed onboarding experience satisfies them far better than an inconsistent, haphazard one. The chapter closes with a detailed and thorough economic analysis across industries. Using benchmark data from 25 leading companies across six industries, the prospective impact for your company and your shareholders is measured and illustrated.

It is hoped that this chapter will provide change agents inside organizations with the business case they need to spark serious discussions about onboarding with senior decision makers. If most leaders today believe their firms can’t afford an effective onboarding program, this chapter’s material is designed to convince them of the very opposite: Their firm cannot afford not to invest in one.

The Economics of Onboarding

The first step in building the case for onboarding is to estimate the hidden value that typical firms can hope to recover via a strategic program. To arrive at some hard numbers, we took a sample of Fortune 500 companies across six major industry sectors.

We assessed the impact of attrition of new hires on the overall cost structure and its impact on profit. Based on our research, on average across industries we believe that companies experience approximately 13% attrition of new hires in the first year, and some of that constitutes regrettable attrition (productive recruits with great prospects who choose to leave) as opposed to non-regrettable attrition (unproductive and low prospect workers leaving the firm). We asked ourselves, what if a strategic onboarding program could invert the common ratio of regrettable attrition? That is, instead of having 65% of our attrition made up of regrettable losses, what if we had 65% of our attrition made up of non-regrettable losses?

We determined that an approximate 25% reduction in total attrition levels was a reasonable goal and would represent a clear savings to a firm in terms of the replacement cost the enterprise would have to pay to recruit new employees. Yet this was only the beginning of the value effective onboarding could bring in this model. To get a more complete measure of this value, we also factored in the opportunity costs of regrettable attrition. When you put a new hire in, say, a quality improvement job and she or he doesn’t make it in the role because of poor onboarding, the loss includes all of the improvements to your quality program that are not happening during the failed ramp-up period, the departure period, and the new search—value that is lost forever. This loss may show up as rework cost, warranty cost, and a reduction in brand equity as customers grow frustrated with your company’s products or services. Although difficult to quantify in a simple analysis, these losses are significant, and they need to be reduced through more effective onboarding.

As the preceding discussion suggests, onboarding does not just offer an opportunity to reduce the overall attrition level. Rather, it also aims to improve the overall attrition mix (regrettable versus non-regrettable loss, as represented by Figure 1.1), which can have an even greater impact.

The objective of onboarding now includes retaining more of the people you want to keep, and reducing the proportion of your head count loss that is made up of regrettable attrition (i.e., retain more people you want and lose more people you are happy to see separate). The most exciting part of this attrition gain is that although it will affect the short-term, day-to-day productivity of the organization, its larger impact will be in the form of what the retained employees—who otherwise would have been regrettably lost—will do for your business in years to come. This is potentially a non-linear relationship, as some of these new hires may provide a truly big impact down the road. This is the game you need to be changing.

Another gain from onboarding relates to the productivity of all new hires. Effective onboarding can shorten the time it takes for the average employee to achieve expected productivity levels. The time (and level) will vary depending on the role, function, and company in question.¹ To quantify the potential gain from strategic onboarding, we calculated what it would be worth if we could reduce the time to productivity. We then asked what it would be worth if we could improve the average level of productivity—in effect, redefine what we expect out of a prospective new hire with regard to overall productivity, or contribution. Consider the situation in which, before an effective improvement, a firm deemed a new customer service representative productive when he could handle eight calls an hour. What if we were able to produce an entirely new form of value for the enterprise, maybe in the form of the representative’s ability to connect the dots between calls, actually detect patterns in customer issues, and possess the motivation and know-how to properly inform product development (or pricing, or channel strategy, mergers and acquisitions (M&A), or any other critical business activity)?

Figure 1.1 The Gain from Both Level and Mix of Attrition to the Onboarding Margin

Figure 1.2 summarizes the potential productivity gains attributable to strategic onboarding for those new hires who stay with the organization. The top curve represents the level of competency a typical firm could expect to see in new hires over time thanks to a more effective program. The bottom curve represents the existing progress of productivity performance over time. As the graph shows, new hires operating under a more effective program would get a jump start on their jobs, reaching maximum productivity—what the organization would define as 100%—some time between day ninety and the one-year mark, well before employees at the firm might currently reach maximum productivity (see Figure 1.2).

Figure 1.2 The Onboarding Margin

The area of the graph represented by the darker gray area is the entirely new value firms may hope to create by readying and equipping new hires to operate on a new level of redefined expectations. As the graph shows, this new value can be realized in the course of Year One and will continue to develop well into the future as employees come to excel in their jobs. Overall, new hires become more productive more quickly, and they operate at that higher level as part of the new steady state. This, combined with the gains attributable to lower attrition and better attrition mix, yields what we term the Onboarding Margin.™

Onboarding Objectives and Business Results

This exercise has hopefully provided you a rough sense of how much value more effective onboarding can unlock. To explore further how onboarding can add value for particular enterprises, let’s consider the many specific performance improvements and business results individual managers can hope to accomplish with a strategic program in place.

To the extent that most leaders today think about enhancing new hire onboarding, they usually have at least the following business result in mind: Decreasing the time and money devoted to serving new hires. Companies do spend a fair amount of direct spend on onboarding (in addition to indirect spend, which includes all the costs associated with unproductive new hires), much of it wasted because of their insufficiently organized and poorly designed efforts. An effective onboarding program can address this basic requirement and help cut waste in a number of ways. For instance, many companies have employees fill out paper-based forms, which in turn means the company needs extensive administrative departments to collect, organize, and collate the data. By standardizing and having employees read and complete forms online before their start dates, you can drive cost savings and compliance while also creating a potentially more interesting first day (as time is freed up to tackle far more engaging experiences). New hire training programs offer another example. Currently, many programs are unable to address new hires’ needs in a number of areas. Lacking standardized information, hiring managers are left to improvise their own solutions to integrate the new hire. A more effective onboarding program avoids the duplication of efforts, saving time and money and avoiding needless frustration for the new hire and his or her