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10 reasons to consider employee lifetime value

Based on the model of measuring customer lifetime value (CLV), the idea of measuring employee lifetime value (ELV) is to give some hard data to the business on the effectiveness of its People strategy – to calculate in monetary terms some idea of a return on your people costs. By deploying the ELV approach, it is possible to appreciate and calculate a value that an employee brings to your business – and therefore surface the return on investment in recruiting, rewarding and retaining them.

  1. Because it matters “If you want to maximise customer lifetime value, you need to think about employee lifetime value. It’s the same principle. The employee journey means investing in recruitment, getting staff on board and up to peak performance and creating an environment where they stay longer and want to work, so you get more from them.” Duncan Cheatle, founder, The Supper Club, and founder and CEO, Learn Amp

  2. It can take staff on a journey The employee journey can be broken down into onboarding, engagement, performance and development. The efficiency of the onboarding process, the quicker employees can be helped to deliver full productivity, and how long they stay with the business are the three factors in increasing ELV.

  3. ELV gets results In a study by Boston Consulting Group, companies with HR practices targeting employee experience consistently saw better economic performance than less people-focused competitors. In fact they recorded more than twice the average profit margin and experienced revenue growth three and a half times better than those not so focused on ELV.

  4. Recognition pays LinkedIn talent solutions found that 12% of employees switched jobs because they did not receive enough recognition for their contributions. Data from Qualtrics shows that 55% of employees cite recognition for good work as key to their engagement with the role.

  5. ELV drives growth The Boston Consulting Group research found that delivering on recruiting, and onboarding of new hires and retention were the most influential activities in terms of employee experience. They had the greatest impact on revenue growth, with the most capable companies achieving growth 3.5x and 2.5x the least capable, respectively.

  6. Experience matters 50% of respondents to of respondents to the 2020 Future Workplace HR Sentiment Study cited greater focus on employee experience as the biggest change they expected to see.

  7. ELV drives profits Research conducted by Harvard Business Review found that, when it comes to profit per employee, companies that invest in employee experience outperform those that don’t by as much as 4.2 times.

  8. Onboarding is vital A report by BambooHR found that 31% of employees left a job within six months of starting, and of those 68% left in the first three months. The cost of replacing an employee is between 90% and 200% of their annual salary.

  9. First impressions last Glassdoor reports that a strong onboarding protocol can improve new hire productivity by over 70% and retention by 82%.

  10. Training leaders pays dividends Research by Gallup found that firms that systematically pick the right managers, achieve 27% higher than average revenue per employee. Plus, promoting people based on people skills, rather than longevity, boosts performance. According to LinkedIn, 41% of people leaving their job did so because they were unsatisfied with senior management. Yet, research by Unit 4 found that only 15% of organisations offer more than seven hours of leadership training to anyone.

We've created a detailed guide on ELV and how it can be implemented to drive profitability. Download it here.