What’s Your Return on Employee (ROE)?

by Jayne Ronayne, CEO KonnectAgain

Talent. Companies can’t survive without it. Yet, as if the war for top talent wasn’t bad enough, many sectors and cities are now struggling with rock-bottom retention rates to boot. Lifetime employment has gone the way of the fax machine: less than five years is the new normal overall (with millennials lasting just under three years). “With attractive and flexible career alternatives popping up every day, the best talent is being lured away left and right, putting pressure on hiring managers to not only find but also hold onto their most impactful employees,” says Jillian Kurvers, a company culture writer.

Improving the workplace seems like a good way to both recruit and retain: good culture attracts top talent and keeps them happy. Catered meals, flex time, remote work, company outings, increased parental leave, half-day Fridays, hip office space, on-site daycare, top-notch benefits, free beer, unlimited vacation, equity in the company…the list goes on. But at what cost?

“Many studies show that the total cost of losing an employee can range from tens of thousands of euro to 1.5-2X annual salary,” says Josh Bersin, Principal and Founder of Bersin by Deloitte. This number reflects the cost of recruiting, onboarding, business disruption and cultural impact. But tack on the loss of everything you’ve invested in the departing employee (including all those free lunches and gym memberships) and that number gets much higher.

Despite unparalleled perks and professional development, companies like Google, Amazon and Facebook struggle with average tenures lingering around one year. ONE YEAR?! In what other entity would we pour so much time and energy, knowing that a year later it would be gone? Considering the cost of recruiting, training, and keeping employees happy, it’s hard to believe that that these investments disappear the minute they hand in their company iPhones. 

Am I the only one who finds this a bit unfair? That, if I’m your manager, our company’s name on your resume, the experience you gained here, the skills you honed and the learning and development you received—all of these things made you more marketable. And yet here I stand, caught off-guard, staring wistfully at your old stapler and the pile of work you left unfinished.

Don’t get me wrong: I am an advocate of an employee-centric workplace. Employees have every right to pursue other opportunities, and should be applauded for their service and ambition. But companies need to adapt to this new paradigm so they’re not left in the lurch. “As we approach full employment, employees have more options and employers have less,” says Forbes “New Leader’s Playbook” columnist, George Bradt. “Organizations must now deal with the society of ‘free-agent’ employees they’ve created.”

Free dry cleaning, more autonomy and mentoring programs can increase tenure, yes, but don’t change the fact that most of our top talent will be gone in under three years. What can we do to recoup our losses, insure our investments, and perhaps even gain something in the long run?

It’s called Return on Employee (ROE), and the concept is gaining steam as workers become less tethered and more in control. It stems from the idea that the employer-employee relationship has mutual value that lasts well beyond the office goodbye party. From rehiring and referrals to business development and brand ambassadorship, companies have every reason to stay in touch with their exes. And with priority access to new job opportunities, meaningful colleague connections, product discounts and exclusive event invites, employees best not be burning any bridges either.

Says Anne Robie, Global Head of HR at StubHub, “The future of talent is that people are not actually wanting to be employees. They want to have a wide variety of experiences. They’d like to be a contract hire and live in San Francisco for six months, then Singapore, and maybe Dublin after that.” It’s time to build lifelong talent networks to prepare for this new reality.

Fast-scaling companies around the globe are quickly recognizing the potential of their former employee networks. As HR Managers become Chief People Officers, so too must evolve the way we view and value our past talent. What’s your company’s ROE?

About the author
Jayne is the CEO & Co-Founder of KonnectAgain a cloud-based solution that enables companies to forge strong relationships with their former employees. KonnectAgain builds communities for companies, enabling them to manage their alumni communications, networking, events, groups & job openings on one seamless easy-to-use platform.