From recruiting to on-boarding to collaboration and knowledge management, there’s a cost associated with every step of an employee’s journey. When I speak with companies about how they are transforming their digital tools to better engage their employees, they often ask me, “What is my ROI for spending so much on something that has no revenues to recoup?”
Leaders must put numbers to everything. So how do you make the case for those large investments that don’t correlate direct revenue? Break it down at a per employee cost level and highlight the productivity gains in terms of dollars and cents.
So, what does it cost to employ an employee?
I whipped out some grade school math skills to figure out how much it costs. I took some liberties, and this is not an exact science, so just go with me here. For the sake of this article, we’re going to say that Charlotte is our average employee making $75,000 annually.
First you have hiring and on-boarding costs. Recruiting tends to average around $3,000-$4,000 per hire. Then, the typical on-boarding process takes about 4 days, according to HRonboard.com. That breaks down into costing about $1,000 to on-board a new employee, and that’s not including the new equipment, cost of desk space and benefits.
- Total so far – $5,000
Next up is working. How can Charlotte do her job? Most office employees typically use email, Microsoft Office, a phone line, and maybe some proprietary software and miscellaneous items. According to a McKinsey Global Institute (MGI) report, “The average interaction worker spends an estimated 28 percent of the workweek managing e-mail and nearly 20 percent looking for internal information or tracking down colleagues who can help with specific tasks.”
Breaking that down into hours, that’s 11.2 hours managing email and 8 hours searching for information per week. That means Charlotte’s employer is paying her $27,692.30 per year to organize her email, then hunt down information or co-workers who might have that information to do her job.
All Charlotte has done so far in her job is get on-boarded to the company, then spent almost a quarter of her week in email and looking for info. Not a very efficient use of Charlotte’s time or expertise for the company.
Here’s the cost for a single engaged employee:
- Recruiting – $4,000
- Onboarding – $1,000
- Day-to-day – $27,692.30
- Total cost annually – $32, 692.30
Where am I going with this?
The assumption can be made that Charlotte is considered an engaged employee and is maximizing her time as efficiently as possible. What if Charlotte was able to cut her time spent in email and searching for information by 25%? According to MGI, “Improved communication and collaboration through social technologies could raise the productivity of interaction workers by 20 to 25 percent.” Check out this graph to see how an average workweek can breakdown:
Transforming the employees digital experience (aka Digital Transformation for employees) has the potential to save a company $5,538.46 per employee annually. (Time spent in email and searching for answers X 25%)
What do I mean by a Digital Transformation for employees?
There are a dozen definitions for what “digital transformation” is. Essentially, it is the changing of digital technologies within a company and how that company goes about discovering and implementing those changes. A digital transformation for employees means communication and collaboration platforms, such as Microsoft Office 365, Google G Suite, Slack and a host of other tools out there.
Depending upon what tools are needed to enable your employees to be more collaborative with colleagues, the average cost for Enterprise solutions is around $28 per month per employee. (An Office 365 E5 license is $35 per month, per employee, and a G Suite E3 license is $20 per month, per employee. This article gives a great comparison between the two major players in this arena.)
At $28 per employee/month, a company can spend $336 annually per employee for full collaboration and communication tools. Subtract this cost from the aforementioned $5,538.46 in savings for companies who successfully implement these tools and companies are now at a savings of $5,202.46 per employee. For a company of 100 employees that’s a potential savings of up to $520,246.00! This is your ROI. This is how you can make the case to change how your organization engages internally.
Taking Engagement to Where Your Employees Are
It’s one thing to throw a bunch of numbers out there and figure out it’s a sound investment to capitalize on employee engagement tools. It’s a completely different ballgame to actually implement these new tools. In my subsequent blog posts on this topic, I’ll dive into the various areas for collaboration and communication for employees, such as social technologies, enterprise platforms, and freeware. One size does not fit all when it comes to employee engagement, culture, and technology.