Page 58 - Successful Onboarding

The Business Case for Onboarding • 47

Onboarding Margin: Combined Effects of Attrition
and Productivity
To make this analysis even more fun, we looked to see what these com-
bined numbers (attrition impact and productivity impact) would yield to
investors in terms of market value (as measured by market capitalization).
We applied traditional industry-specific stock price to earnings ratios (P/E)
ratios as compiled by NYU’s Stern Business School as follows: Aerospace
and Defense 14.6; Energy and Utilities 24.51; Financial Services 13.08;
Healthcare 28.36; Technology and Telecom 33.32; and Consumer Pack-
aged Goods 23.50. Based on these historical P/E ratios, the impact to aver-
age stock price gain was as follows:

• Aerospace & Defense: 15% or $34B in additional market cap
for the sector
• Energy & Utilities: 3% or $65B in additional market cap for
the sector
• Financial Services: 44% or $514B in additional market cap for
the sector
• Healthcare: 22% or $278B in additional market cap for the sector
• Technology & Telecom: 23% or $280B in additional market cap
for the sector
• Consumer Packaged Goods & Retail: 4% or $34B in additional
market cap for the sector

Recognizing that we did not have a perfect sample by any means and that
the analysis was applied to a given year (and that profit changes year to year
for a whole host of reasons), we simplified further and determined an aver-
age prospective impact of 19% (the simple average of the prospective six
rates of stock price improvements noted). Just to be on the safe side, we cut
this answer in half, bringing us down to ~9%. Then we did the same again—
knocking this number in half, bringing it down to 4.5%. We asked respected
HR leaders from large corporations what would happen to their career if
they took an action that resulted in their company’s total value going up by
4.5%. (Don’t forget, these market caps are really large numbers.) Each and
every person offered the same response: A wonderfully big smile.