Purpose of Onboarding

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The purpose of onboarding is to help new hires transition into the roles at the company. When implemented correctly, onboarding will alleviate stress as it improves the culture of an organization. Employees who start well are more likely to stay at the company long-term. This will reduce turnover and save money in hiring and training costs.

Start-up Cost

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Hiring new employees is expensive. Besides the recruiting costs and salary, there is a number of start-up costs associated with new hires.

Costs:

  • Salary: This is the agreed upon pay rate.
  • Benefits: This includes insurance, vacation pay, legal benefits, supplemental pay, and retirement. This is roughly .02 to .04 percent of the salary.
  • Miscellaneous: These are the costs of training, rent, equipment, etc. This is .05 to 1.3 percent of the salary.

Onboarding can reduce the miscellaneous costs by quickly familiarizing employees with their position.

Anxiety

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People naturally experience anxiety when they are placed in new situations. Taking a new job will automatically create stress. There is the stress of learning a new job and fitting in with the company’s culture. Employees who are not properly oriented, both in their job and their surroundings, will remain stressed and anxious. Excessive stress will impede performance and increase company turnover. 

Employee Turnover

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Turnover is inconvenient and expensive. Replacing qualified employees requires more than onboarding costs. There are a number of factors to consider when calculating the cost of employee turnover.

Factors:

  • Exit costs: This includes paperwork, exit interviews, knowledge, contacts, benefits etc.
  • Absence costs: Company loses money in productivity, disruption, and possible overtime.
  • Recruitment: The cost of advertising, recruiting, and screening candidates can be high.
  • Onboarding costs: The cost associated with the hiring process.

There are very specific ways to calculate turnover. A basic method, however, is to estimate 50 percent to 200 percent of an individual salary. 

Realistic Expectations

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It is important to inform employees of the expectations placed on them from the beginning of their association with the organization. These expectations must be realistic. Not informing employees of all expectations, or making the expectation unrealistic, will hinder performance. 

Expectations:

  • Company expectations: The vision and mission of the company
  • Policies and procedures: The company policies and procedures that everyone must follow
  • Housekeeping: Informal rules and guidelines
  • Job description: Expectations, training, and evaluation procedures of the individual’s job

Case Study

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A small publishing firm had high turnover of 75 percent. Most employees left within a year, and very few people lasted five years. The company paid well, but people would not stay long. Eventually, the cost of turnover began to significantly cut into the profits of the organization. A consultant was hired to examine the problem.

The company lacked basic procedures. There was no orientation or onboarding process. New employees were hired and put to work without basic training. The CEO assumed existing employees would show new ones what to do, but they were too busy with their own work. New employees were scolded for their poor productivity, and most left for less stressful positions. Implementing a simple onboarding strategy reduced turnover by 55 percent within a year.