Page 54 - Successful Onboarding

The Business Case for Onboarding • 43

analysis, we assumed 0% net company growth in revenue and head count.
Consequently, we assumed that the number of employees entering a com-
pany in a given year was equal to the number of employees leaving.
Next we needed to determine the average cost for a new employee at each
company. To do so, we started with the median salary per company. We used
external research databases of salaries to find median salary for employees
at different levels. Once salaries for each level within a benchmarked com-
pany were determined, we removed positions and salaries that were outliers
so to avoid skewing results. The median salary by industry was as follows:

• Aerospace & Defense: $75,016
• Energy & Utilities: $81,047
• Financial Services: $75,744
• Healthcare: $69,644
• Technology & Telecom: $80,368
• Consumer Packaged Goods & Retail: $53,410

Although average salary rates can help determine the cost of a new
employee, it was necessary to include a factor for recruiting costs. This fac-
tor includes HR costs of looking for new employees, temporary replace-
ment fees, headhunters, paying a leaving employee for remaining vacation
days, etc. Although many sources cite 1.4 times salary cost as a figure for
employee replacement, we applied a more conservative factor of 0.75
times salary per employee.
With these inputs, the following calculation was performed to arrive at the
annual cost for the benchmark companies within an industry: (# of employ-
ees that attrit) (average salary) (recruiting costs factor of 0.75). These
numbers were then applied against a ratio for each industry to reflect the fact
that the benchmark companies only reflected a percentage of the actual sec-
tors being examined. Once applied to the larger and complete industry as
represented by all of the companies in the industries, the total annual cost of
attrition—purely for replacement cost purposes—was as follows:

• Aerospace & Defense: $5.8B
• Energy & Utilities: $3.1B
• Financial Services: $90.7B
• Healthcare: $11.3B