How To Cut The Average Cost To Train A New Employee
What does it really mean when a new hire joins your company? Usually, it indicates that you want a fresh perspective, need some new blood, are in a position to backfill some churned headcount, or are ready to add some true specialists to your organization. We know what onboarding means for the new hire: excitement, swag, and a fair amount of confusion. We know what it means for their manager and the rest of the team: disrupted workflows, increased interruptions. But beyond the immediate work impacts, what does it cost your business to bring on someone new, and is it possible to reduce that cost?
The true cost of training new employees
The real cost of onboarding and training a new employee is about $2,000 for smaller businesses to more than $3,000 for larger ones. That’s just once they’ve joined the company, and is on top of internal/external recruiting costs, which can include visible line items like recruiter salaries or agency fees, as well as hidden items like job board or background check fees. That $2000 is also on top of the employee’s annual salary and benefits.
Between equipment, software licenses, business interruption for the immediate team and the time per new hire for HR to process documentation, those costs can reverberate down through the rest of the business. Plus, even the most successful companies can spend months fully onboarding new employees, meaning that most new hires don’t achieve full productivity for many, many weeks.
Taken all together, these costs have a quantifiable impact on the bottom line: new hires (and transfers!) can reduce total revenues by between 1 and 2.5%. Regardless of the size of your company, that is a significant percentage of revenue lost in the process of improving your business.
Using knowledge management to reduce overall onboarding costs
While it’s not possible to totally eliminate these outlays and business interruptions, there are some ways to significantly reduce its impact while simultaneously improving new hire retention rates, employee engagement, and time to productivity. The truth is that the best way to reduce costs is to systematize the onboarding experience by giving everyone access to the information that they need. Here’s how:
Reducing costs by increasing new hire retention rates and employee engagement
If you’re doing it right, new hire onboarding takes anywhere from 8 weeks for clerical roles to more than 20 weeks for professional ones. And even then, those new employees don’t start working at maximum capacity until about 8 months in. So when a third of new hires look for a job in their first 5 months, and a quarter leave before the end of the year, you’re looking at a potential 2-year cycle of lost productivity when you have to replace a new hire with another new hire. (Source)
New hires leave for many of the same reasons any employee does: overall dissatisfaction with their current position and the potential for salary or benefits increases elsewhere, with location also potentially playing a factor. So by looking at overall employee turnover, we can address some of the main issues with new hire retention.
The first factor, dissatisfaction with current position, can be tied directly to that employee’s level of engagement. Unengaged employees — those who are not interested in overall or personal performance, changes to existing structures or workflows, or the larger decision-making process — don’t have a particular investment in contributing their skills or know-how to the organization. They may not be rewarded for doing so, their contributions may be dismissed, and they may be reprimanded for interrupting colleagues when looking for information or clarification.
Knowledge-driven cultures, on the other hand, actively combat these kinds of negative consequences, directly driving up engagement rates. In fact, companies with knowledge-driven cultures were more than twice as likely to report being satisfied or very satisfied with their levels of employee engagement than the rest.
The state of knowledge management, collaboration, what matters, and what to do about it
Reducing training costs by decreasing time to productivity
Even if full onboarding takes the better part of a year, you can still reduce time to productivity. After all, “fully onboarded” doesn’t just mean 100% productive — it means being fully bought into the overall company culture. Three factors roll up into what we think of as “being productive”:
Being able to creatively problem-solve
Using time efficiently
Knowing when to ask for help — and when to offer it
Employee training programs often focus on different things entirely, like outlining large org charts that have little impact on a person’s day-to-day work or where to find IT or the help desk. In reality, 70% of job training happens… when someone is actually doing the job!
By shifting what we understand as “job training programs” to giving someone all of the pieces they need to learn through a robust knowledge base, you’re able to scale onboarding programs and allow people to get up to speed in the way that’s best for them — instead of siloing them in a room for a week as a corporate trainer explains how to log into Salesforce in case one person out of the ten in the room hasn’t worked in it before.
Putting all job-related knowledge in one place allows you to get employees into their roles in the first few days with the tools they’ll need both in the immediate moment and for the longer term, allowing them to trust the experts in the company without interrupting them. This allows not just the new employee, but everyone with whom that new employee interacts to be more productive.
Knowledge-driven cultures are the way forward
Engaged, informed employees are what truly create a positive company culture, and these types of cultures outperform the field. If you give a new employee — or even an existing employee in a new role — the tools they truly need to excel in their jobs, instead of what training consultants want to sell, you can not only save budget, you decrease time the time it takes for them to become engaged and productive, with an interest in how their team, org, and company performs. Line items like recruiter fees, new computers, and new software licenses won’t go away, but you’ll be able to make sure that they are being put to good use, faster, and seriously reduce the impact on your bottom line.