how to understand the roi of investing in people

How to understand the ROI of invest ing 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_

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©2015 QUALTRICS LLC.

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Housekeeping

Maia JosebachviliVP OF STRATEGY & PEOPLE

Maia Josebachvili is the VP of Strategy & People at Greenhouse, where she’s part of the executive team that’s led the company through 8x growth in just two years. Previously Maiahas been a Founder & CEO, a derivatives trader on Wall Street, an engineer, and a pro-skydiver.

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

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Copy others Underinvest

YEAR 2

100KYEAR 1

50K

Marketing leads per year

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1 Year

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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

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Employee Lifetime ValueHow?ELTV

Too many variables

Toosubjective

Difficult to assignvalue 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

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N ETR EV EN U E( 1, 000s )

A S S U M P T I O N

CASE 16 months to ramp and cons istent ly h i t quota

A better onboarding program can decrease ramp t ime by 30%1

CASE 24 months to ramp andconst 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

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A S S U M P T I O N

CASE 16 months to ramp and cons istent ly h i t quota

CASE 24 months to ramp andconst i tuent ly h i t quota

A better onboarding program can decrease ramp t ime by 30%1

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

Case2 : Fu l ly ramped in 4 months

Case1 : S t i l l ramp ing 4 months in

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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 2Consis tent ly surpasses month ly sa les quota bybr inging on $60k per month

Consis tent ly h i ts $50k per month sales quota

CASE 1

H I R I N G

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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 2Consis tent ly surpasses month ly sa les quota bybr inging on $60k per month

Consis tent ly h i ts $50k per month sales quota

CASE 1

H I R I N G

Case 2 : 20% more sa les

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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 can improve an employee’s performance by 20% in a year1

CASE 2Goes f rom $60k in month lysales 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

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A S S U M P T I O N

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

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

CASE 1

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

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

Case 2 : 20% inc rease in sa les in year 2

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

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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 year 1

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

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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 year 1

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

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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 haveenough people

We’reswamped

Need tohire more

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ELTV

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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

Hiring a better person

Hir ing a personmore sui ted for

the job

ROI

E X A M P L E

ProposalTemplate

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

ProposalTemplate

110 5th Ave 3rd FloorNew York, NY 10011

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 .

W 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 .


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

ProposalTemplate


Situation AnalysisOur recruiting process is not currently set up to make data-driven decisions. Because of this, hir ing managers often have to rely on gut-feel when making hiring decisions.

• At [OUR.CO], the Recruit ing Team has no easy way to track basic recruiting metrics like Days to Offer or Candidate Satisfaction

• At [OUR.CO], 15% of new hires are classified as ‘not the right f it for the job’ at their 6-month check-in

• A study by the BCG group showed that excellent recruit ing practices contribute to more than 2x profit margins

• Industry studies show that hiring decisions based on gut-feel are more l ikely to be inf luenced by unconscious bias, which adversely impacts a company’s Diversity & Inclusion init iat ives

E X A M P L E

ProposalTemplate


Proposed SolutionTransform the recruiting process to facil itate evidence-based and data-driven decisions.

• Develop a set of Recruit ing KPIs to send to all stakeholders at a regular cadence. Set goals and targets around the KPIs and communicate progress.

• Hire a Data Analyst to develop recruit ing reports, analyze metrics, and recommend continuous optimizations on the recruiting process.

• Create ‘offer packets’ to share with Department Heads before approving offers. Offer packets should include all feedback and scorecards submitted about the candidate.

E X A M P L E

ProposalTemplate


Return on Investment

Investment required

• Data Analyst to manage init iat ive ($60k/year)

Business impact

By using data to inform process improvement and hiring decisions, we can make a significant impact on the employee lifetime value (ELTV). Specifically:

• Increase quality of hire• Increase percentage of employees who stay

past 6 months

E X A M P L E

ProposalTemplate


Obstacles, Challenges, & Open questions

Like with any data project, the first step will be ensuring data integrity. It is l ikely that our data is not complete enough to report on as-is and will need an extensive “data clean-up” before we’re ready to start reporting regularly.

The program will need hiring manager buy-in. In order to create offer packets and track all of the data, interviewers will have to input their feedback in a timely manner. Hiring manager support in this init iative will be very helpful.


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 .


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

ProposalTemplate

Employee Lifetime Value

Inputs: Onboarding, hiring, management, development, & 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 ELTV

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Articulate the return; don’t ask for investment

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THANK YOU!