how to understand the roi of investing in people - cmx summit west 2016

How to understand the ROI of investing in PeopleU s i n g E m p l o y e e L i f e t i m e Va l u e t o a r t i c u l a t e R O I

Maia JosebachviliVP of Strategy & People @MaiaJo_

R O I I S H A R D E R T O M E A S U R E W I T H P E O P L E

M O S T C O M PA N I E S D O T W O T H I N G S

Ctrl C Ctrl V+

Copy others Underinvest

YEAR 2

100KYEAR 1

50K

Marketing leads per year

Q1

1 Year

Q2

Q3

Q4

P R O D U C T R O A D M A P P L A N

6 MonthsP R O D U C T R O A D M A P P L A N

Q1

Q2

Q3

Q4

Employee Lifetime ValueHow?ELTV

Too many variables

Too subjective

Difficult to assign value to people

T H E C A L C U L AT I O N P R O B L E M

Don’t calculate.Compare.

ELTV model

Put it into action

Compare two scenarios

Framework

H o d i e O r d oF I G N º 0 1

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ELTV

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R A I S I N G T H E B A R

How quickly they ramp

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How high someone can go


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How high someone can go How much higher they go over t ime


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How long they stay


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How long they stay

How quickly they rampOnboarding

Hir ing Management & Development

Management & Culture

PER YEAR

600K

PER YEAR

60KQuotaSalary

A S S U M P T I O N

CASE 16 months to ramp and consis tent ly h i t quota

A better onboarding program can decrease ramp time by 30%1

CASE 24 months to ramp and const i tuent ly h i t quota

1. Organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%. (Brandon Hall, The True Cost of a Bad Hire, 2015)

O N B O A R D I N G

A S S U M P T I O N

CASE 16 months to ramp and consis tent ly h i t quota

CASE 24 months to ramp and const i tuent ly h i t quota

A better onboarding program can decrease ramp time by 30%1

O N B O A R D I N G

1. Organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%. (Brandon Hall, The True Cost of a Bad Hire, 2015)

A S S U M P T I O N

1. A study from the Boston Consulting Group shows that recruiting is the HR function with the highest impact on revenue. Excellent recruiting practices contribute to more than 3x revenue growth and 2x profit margins.

A better hire can outperform a peer by 20%1

CASE 2Consistent ly surpasses monthly sa les quota by br inging on $60k per month

Consistent ly h i ts $50k per month sales quota

CASE 1

H I R I N G

A S S U M P T I O N

A better hire can outperform a peer by 20%1

CASE 2Consistent ly surpasses monthly sa les quota by br inging on $60k per month

Consistent ly h i ts $50k per month sales quota

CASE 1

H I R I N G

1. A study from the Boston Consulting Group shows that recruiting is the HR function with the highest impact on revenue. Excellent recruiting practices contribute to more than 3x revenue growth and 2x profit margins.

A S S U M P T I O N

1. Companies that hire managers based on their management skills saw a 48% increase in profitability. (State of the American Manager, Gallup, April 2015)

Great management and development practices can improve an employee’s performance by 20% in a year1

CASE 2Goes f rom $60k in month ly sa les to $72k in month ly sa les in year 2

Cont inues to h i t $50k per month sales quota

CASE 1

M A N A G E M E N T & D E V E L O P M E N T

A S S U M P T I O N

CASE 2Goes f rom $60k in month ly sa les to $72k in month ly sa les in year 2

Cont inues to h i t $50k per month sales quota

CASE 1

M A N A G E M E N T & D E V E L O P M E N T

1. Companies that hire managers based on their management skills saw a 48% increase in profitability. (State of the American Manager, Gallup, April 2015)

Great management and development practices can improve an employee’s performance by 20% in a year1

A S S U M P T I O N

1. 36% of people switching jobs left because they were “unsatisfied with the work environment / culture” of their previous employer. (Why and How People Change Jobs, LinkedIn, 2015)

A great culture, coupled with good management, can increase employee tenure by one year1

CASE 2Cont inues to thr ive for another year

Star ts to look for a new job 20 months in ; leaves af ter 2 years

CASE 1

C U LT U R E & M A N A G E M E N T

P U T T I N G I T A L L T O G E T H E R : 3 - Y E A R O V E R V I E W

P U T T I N G I T A L L T O G E T H E R : 3 - Y E A R O V E R V I E W

$1,300,0002.5x

Making the caseZ

F r u c t u s L a b o r i sF I G N º 3

Typical(tactical) conversations

Don’t have enough people

We’re swamped

Need to hire more

T I M E

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ELTV

R E V I S I T I N G E M P L O Y E E L I F E T I M E VA L U E

R E V I S I T I N G E M P L O Y E E L I F E T I M E VA L U E

E X A M P L E

Proposal Template

G R E E N H O U S E P R O P O S A L

Situation AnalysisW h a t ’ s t h e c u r r e n t s t a t e o f t h i n g s ? U s e d a t a a n d i n f o r m a t i o n f r o m y o u r c o m p a n y a n d s u p p o r t i n g d a t a f r o m e x t e r n a l s t u d i e s .

Proposed SolutionH o w d o y o u ‘ c o m b a t ’ t h e p r o b l e m , o r l e v e r a g e t h e o p p o r t u n i t y ?

E X A M P L E

Proposal Template


Return on InvestmentI n v e s t m e n t r e q u i r e d a n d b u s i n e s s i m p a c t .

Obstacles, Challenges and Open QuestionsN o p l a n i s f r e e f r o m o b s t a c l e s . B e u p f r o n t a b o u t w h a t t h o s e a r e .

E X A M P L E

Proposal Template


Situation AnalysisAs we’ve grown as a company, our culture is not as strong as it was when we first started. As a result, engagement and attrition are becoming more of a concern for our organization.

• At [OUR.CO], our employee engagement survey scores have been decreasing for two quarters in a row and our attrition has gone from 10% to 15%.

• At [OUR.CO], our hiring plan predicts to be 50% bigger in one year, meaning a large portion of the company won’t have the institutional knowledge of our original, start-up culture.

• 36% of people switching jobs left because they were “unsatisfied with the work environment / culture” of their previous employer. (Why and How People Change Jobs, LinkedIn, 2015)

E X A M P L E

Proposal Template


Proposed Solution

Make ’Nurturing a Culture’ a company-wide initiative

• Hire an Employee Experience Specialist to coordinate efforts

• Allocate a culture budget of 3% of total salary load to be used for culture-related activities

• Have the CEO report on progress quarterly so that everyone understands this is an important priority

E X A M P L E

Proposal Template


Return on Investment

Business impact

By improving our culture, we believe we can increase average tenure by 3 months and drive up the employee lifetime value (ELTV). We estimate this to be a deferred cost savings of $500,000 over the course of two years.

Investment required

• Employee Experience Specialist to oversee the program ($50k/year)

• Culture budget ($100k/year based on 3% of total salary load)

E X A M P L E

Proposal Template


Obstacles, Challenges, & Open questions

Improving our culture will not be successful if it is only a “People” initiative.

This initiative will need significant manager involvement and buy-in in creation and execution of initiatives. Specifically, we’ll need:

• Managers to focus on the engagement survey results and address their issues with their teams.

•CEO to report on progress during all-hands meetings

• Attendance at culture events from senior leadership


Return on InvestmentI n v e s t m e n t r e q u i r e d a n d b u s i n e s s i m p a c t .

Situation AnalysisW h a t ’ s t h e c u r r e n t s t a t e o f t h i n g s ? U s e d a t a a n d i n f o r m a t i o n f r o m y o u r c o m p a n y a n d s u p p o r t i n g d a t a f r o m e x t e r n a l s t u d i e s .

Proposed SolutionH o w d o y o u ‘ c o m b a t ’ t h e p r o b l e m , o r l e v e r a g e t h e o p p o r t u n i t y ?

Obstacles, Challenges and Open QuestionsN o p l a n i s f r e e f r o m o b s t a c l e s . B e u p f r o n t a b o u t w h a t t h o s e a r e .

E X A M P L E

Proposal Template

Employee Lifetime Value

Inputs: onboarding, hiring, development, management & culture

Relative value vs absolute numbersTakeaways

H o d i e O r d oF I G N º 0 1

Small improvements can have a 6x return on ELTV4

Articulate the return; don’t ask for investment5

@MaiaJo_ [email protected]

G R E E NH O U S E . I O