How to Determine the ROI of a New Employee

When you hire a new employee, you make a significant investment of time, money and resources. How do you know if you’ll realize a worthwhile return on those expenses?

Hiring success is determined by the quality and performance of a new hire. Here are some barometers to gauge these factors:

  • Percentage of goals and qualifications met: At the time of hire, define specific production goals and qualifications you expect a new employee to achieve, along with time frames for completion.
  • On-the-job performance: Give a new hire time to acclimate to their role. Then review their output and performance, compared to others who have recently been brought on board, as well as to an overall average of your entire team. Review the numbers at the one-month mark and again after six months – or according to other parameters as determine by your organization.
  • Subjective assessments by managers: Use a standard set of measurements, so comparisons are fair and provide value. 360 team assessments can also be very beneficial.

Steps to Take

Try these tactics for determining whether a new hire will be justified:

  • Do a cost-benefit analysis. If you think you would miss out on profits by not hiring a candidate, then you have your answer. Remember to include all the costs associated with recruiting, onboarding and training. Some are more obvious than others. For instance, how much productivity is being lost or how deeply is morale being impacted due to a business-critical staff vacancy?
  • Do the right work upfront. Know exactly what your company wants and needs in an employee. Clearly define roles and responsibilities. Make sure your job descriptions are thorough and up to date, and they align with broader business goals.
  • Empower your recruitment team. Give interviewers and other members of your hiring team the tools and resources they need to be successful. Of paramount importance is having the right data on hand so decisions can be made efficiently and objectively.
  • Pay attention to roles not directly related to revenue. Some positions are easy to assess and track. Salespeople, for example, either make quotas or not. ROI may not be so clear cut for “back office” roles such as HR, IT or call center services. But it’s just as important to put a dollar value on them.
  • Hire only A players. It will be much harder to realize a positive ROI on hires who are less than stellar. You don’t want to make a costly hiring mistake, and then try to justify what happened.

To ensure a winning return on every hiring investment you make, consider a partnership with PrideStaff Fresno. We’ll help identify your unique talent needs and build a customized recruitment plan around them. Read our related posts or contact us today to learn more.