Despite the fact that more and more companies are beginning to see the value in employee experience initiatives, many are still unsure of how to measure the return on investment (ROI) of these programs. This guide will help you do just that.
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Ever seen the subreddit about employees who deserved a raise or, at the very least an experience to make them feel valued but got some kitsch gift instead? Here’s a prime example:
Or how about the one where the company gave its employees a small sheet of bubble wrap instead of holiday pay with a note that said, ‘Simply pop stress-relieving capsules every 4-6 hours or as needed!’
The common thread that runs through all these posts is these employees' bad experiences; most had already quit or were planning to do so. There’s no end to companies who think they’re appreciating their employees with a token of appreciation but end up providing an underwhelming experience instead.
Employers who fail to read the pulse of their workforce lose their best talent and suffer a loss in business. Hence, it is important to:
Understand the worth of your employee experience initiatives
Calculate dividends of the program
Quantify the return on your investments
According to Gallup, with the right employee experience strategy, you can boost your ability to attract, engage and develop high-performing employees.
Quantifying your Employee Experience ROI
How important is employee experience in the grand scheme of things?
Forbes elaborates on this by calculating exactly how ‘companies that focus on employee experience tend to see greater improvement in business performance.’
Since calculations require data, a good starting point would be to invest in a digital tool or platform that captures detailed information about your employee productivity, individual and collective, and the overall business performance.
To calculate the ROI on Employee Experience, or more specifically ROX (Return on Experience), the simplest formula would be:% of ROX = (Benefits from all experience initiatives ÷ Amount of investment in the initiatives) x 100Let’s show that with some numbers. A company invests $45,000 in increasing employee satisfaction; it saves $50,000 due to a drop in employee attrition and receives a $65000 boost in revenue due to improved performance and engagement.If we calculate using the formula above, we the result will be:% of ROX = {($50k +$65K) ÷ $45K} x 100 = 255.5 %So, the return on employee experience initiatives is 255.5x but the actual measurement has to come from both tangible and intangible sources.
How to measure employee experience from tangible to intangible sources
Here is a step by step approach to measuring employee experience from tangible to intangible sources:
1. Tangible
Where the ROI calculation comes from tangible financial data that can be validated, such as increased annual revenue and stock price rise. The platform/tool should be able to crunch the numbers and perform detailed analysis and data-based forecasting to calculate your ROX accurately.
Revenue Increase
Company
Revenue Increase
Alcoa
When aluminium producer Alcoa got a new CEO, Paul O’Neil, who decided to prioritize worker safety, employee productivity improved dramatically with decreased safety incidents. As a result, in a decade, Alcoa’s annual income had increased to 500%.
Bain and Company
This company has seen its UK branch record a 7% business growth which translates to approximately a £10m increase in revenue.
Gravity Payments
Thanks to Dan’s genius move to increase the minimum wage, he was able to secure the employees’ loyalty and revenues increased by 300%
Shareholder Returns (rise in stock prices)
Company
Rise in Stock Price
Campbell’s Soup
After the company prioritized employee experiences under its new CEO, the company’s stock price increased by 30% compared to the 10% loss suffered by similar S&P 500 stocks.
Workday
The company’s unique employee experience initiatives boosted shareholder returns increasing its stock price to $161 a share!
NVIDIA
This tech company boasts a high stock price of $211 per share as opposed to $33 per share in 2015!
Arby’s
After the company’s new Brand Champ program focusing on improving their front-line employee experiences, the company’s stock rose from $4.50 a share (2012) to around $21.
Cheesecake Factory
Before the Cheesecake Factory focused on employee experience; its stock price hovered around $31. Since championing employees, the company’s stock price has grown steadily, peaking at $64 in 2017 before settling to its current level of $42.
SAP
Since the 2017 revamp of its employee experience strategy, SAP has seen steady market growth and stocks rising from $80 in 2013 to the current $133 per share!
According to Forbes, the stock prices of Fortune’s 100 Best Companies to Work For list rose 14% per year from 1998 to 2005, while companies not on the list increased their stock price by an average of just 6%.
2. Intangible
Engagement scores determine the intangible ROI of the company’s employee experience initiatives, increase in customer base, turnover rates, CEO approval ratings and position on Forbes, Fortune, and Glassdoor's best workplace lists.
Employee Engagement Scores (based on the employees’ experience from onboarding to exit)
Company
Employee Engagement Rates
Bain & Company
Bain is known for its 96% employee satisfaction scores,
Also featured in the Management Top 250 list, Nvidia has a 75% engagement score, while on Glassdoor, it has one of the highest overall ratings at 4.6, with 94% of employees happy to recommend it to their friends.
Annual Turnover and Retention Rates
Company
Turnover and Retention rates
Gravity Payments
When Dan Price provided his employees a great experience by increasing their minimum wage to $70000, employee turnover was reduced by 50% as the retention rate rose from 91% to 95% (industry average is 68%), and customer inquiries went up from 30 a month to 2000.
Arby’s
Arby’s was initially known for its struggling employee morale and low retention rates. Post their new program, the company’s retention rates shot up and is currently above the 90% mark.
CEO Approval Ratings
Company
CEO approval ratings
South Carolina Federal Credit Union
CEO Scott Woods has one of the highest approval ratings on Glassdoor at 98%
Adobe
Adobe’s Shantanu Narayen enjoys a 97% approval rating
SAP
With a 94% approval rating, CEO Christian Klein seems to be hugely popular with the employees on Glassdoor
Workday
Their CEOs Aneel Bhusri, Chano Fernandez seem to be genuinely loved by employees and have a 93% approval rating.
Its positive workplace put it on Glassdoor’s Best Places to Work list back in 2013.
Nvidia
Today it is recognized as one of the best workplaces for three years running.
Cheesecake Factory
The company has been recognized as a great place to work in the Forbes and Fortune 100 Best Places to Work lists.
SAP
After the company did not make it to the Best Places to Work list post-2013, it decided to introspect and revamp its employee experience initiatives. The company has returned to its place on the list since 2017.
According to a survey by Gartner, 64% of organizations maximize their ROI by shaping how the employee experience feels and report 47% high performing employees.
Companies where leaders work harmoniously with the HR to value and nurture the workforce, strengthen relationships across the board, and engender a sense of belonging and positivity in their employees, are sure to maximize their ROI because the better the employees’ experience, the higher the ROI.
According to McKinsey, to retain employees, organizations need to evolve their approach to building community, cohesion, and a sense of belonging at work.
