Date posted: 2/23/2016
Note: We are currently conducting research with our customers on the ROI of Real-time Performance Feedback (“RPF”) products. We will share results next year when our research is finalized and compiled. However, in the meantime, here is a back-of-the-envelope estimate:
In this example, we’ll assume that WidgetCo has 100 employees. Thus, the annual cost – er, investment – for their Real-time Performance Feedback solution might be around $5,000 or so ($2,400 for a solution like BlinkEval; $7,200 for a solution from one of our competitors; others higher, lower, or in between).
Let’s suppose conservatively, WidgetCo is able to reduce unwanted turnover by 1%, or 1 employee per year (studies suggest that engaged employees are 15% less likely to leave, so if your typical unwanted turnover is 6% or 7%, a 1% reduction is not an unreasonable assumption). While the RPF solution is valuable for all employees, it may be the most valuable to your newer and younger employees who often desire more frequent feedback, so we’ll conservatively estimate that this one employee makes $45,000 (for reference, the median starting salary for 2014 college graduates was $45,478). The typical “rule of thumb” is that the cost of undesired turnover is approximately 6 months of salary (once you figure in position vacancy, recruiting costs, lost productivity, etc.). For more experienced employees, the cost of turnover could easily be double or triple this amount, or more.
So, our conservative estimate puts the ROI of RPF at $22,500 / $5,000 or 450%! Compare a 450% return on invested capital (or more, depending on your workforce and results) relative to the typical range of capital investment alternatives often considered by your CFO, few of which ever exceed 25% or 30%. Or compare your 450% ROI to your company’s 8% or 12% cost of capital.
Remember also, that not all turnover is bad. Your RPF solution may accelerate desired turnover, and encourage newer employees who may not be an ideal fit with their job expectations to find a different role in the Company with a better fit, or to look for opportunities outside your Company. In either event, your Company benefits, both financially (no severance benefits required) and culturally.
In addition to the retention and voluntary benefits, RPF solutions have other tangible and intangible benefits, including:
Note that our back-of-the-envelope estimate above includes no estimate of value for these other benefits.
BlinkEval is continually trying to improve the value of our Real-time Individual Performance Feedback solution for our customers so they can maximize their return on their investment – not just their investment in BlinkEval, but their overall investment in human capital. We believe the value proposition for our current customers is extremely high, and we are working hard to ensure that it will continue to improve with future product enhancements. Please learn more about our solution to these challenges at www.BlinkEval.com and take us for a free trial to see how much value we can add to your organization!
In our next post, we will be exploring the 4 Most Important Characteristics of an Effective RPF Solution.