The Hidden Costs of Poor Onboarding

Your company’s onboarding process has more of a financial impact than you may realize. In fact, your turnover rates, workplace culture, and compliance with federal and state regulations are all affected by how your onboarding process is conducted. 

Onboarding is the first real experience new hires have on the job and has a direct influence on staff loyalty. In our 2023 State of Hiring Report, we found that 80% of survey takers who reported a positive onboarding experience say they are somewhat or very loyal to their current employer. 

Now imagine if you could ensure that every new employee felt ready for their new role in their new workplace, all thanks to onboarding. What would that look like?

You’d have fewer mistakes due to missing information. Your customers would have a better experience. New hires would be more engaged from Day One so your team could focus on their goals instead of figuring out the workplace. 

Best of all? You’d retain more employees. When you provide new employees with a great onboarding experience, they trust in your ability to lead them and the company — and that’s what gains their loyalty.

Four onboarding statistics about finances

As you can see, there are several hidden costs of poor onboarding. A great onboarding process is a must-have, not a negotiable in the hiring process. Consider the following statistics when weighing the pros and cons of enhancing your onboarding process.

Onboarding a single new hire costs a little more than $1,500

On average, onboarding for a single new hire costs companies a little over $1,500. That’s more than two weeks of pay for most entry-level positions accounted for before any training occurs. When you take into account the hours spent by your human resources department to coordinate the onboarding process, gather necessary documentation from new personnel, and input all of that data into the various platforms in their technology stack, you see where the costs start to add up.

Almost a fifth of new employees leave between first 7 and 90 days

Technically, the full statistic is that 17% of new hires will leave a new job sometime between their first seven and 90 days of employment. If you were to hire 100 employees then, that’s a total of $25,500 wasted on 17 employees who left your company within the first 90 days. Onboarding can make or break your bottom line here — which makes doing everything you can during this process to improve overall retention even more important.

Replacing an employee can cost up to 200% of their salary

Depending on the position, replacing a staff member can cost anywhere from 90% to 200% of their role’s salary. Let’s say that after a recent round of hiring 10 employees, you can expect 2 employees to quit within 90 days. To make the mathematics here simpler, we simply rounded up 17% of 10 (1.7) to a full two since there’s no such thing as a half an employee. Let’s also assume that replacing these rather entry-level positions will cost you 90% of their salary. If we’re calculating for an inexperienced automotive technician that works full time for $23 per hour, for example, we can assume that it will take roughly $43,056 to source and hire talent to replace them if they leave. Again, the costs add up: what your dealership pays for different and necessary pieces of HR technology, the difference in service bay flow that interrupts revenue generation, how much it costs to sponsor a job post until you get a lead… the cents and pennies add up rather quickly! The more the senior the position, the higher the cost to replace them will be, which is why it can take up to 200% of a salary to do so.

You can drive a 60% increase in revenue year-over-year with onboarding

Now knowing the hidden costs of poor onboarding, it’s time for some good news: if you create and implement a structured onboarding process, you can drive a 60% increase in revenue year-over-year. That’s money saved just by optimizing an already existing process! Chances are, you already have a solid foundation to build upon, so it won’t be starting from scratch.

What can you do to improve your onboarding process?

Numbers don’t lie — and these clearly show the direct impact that onboarding has on your businesses bottom line. With this in mind, we have three tips to improve your existing onboarding process.

Onboard digitally

Take all of your paperwork online, if you can. You already know all of the materials you need to collect from your new employees; simply scan the documents as a pdf and share with candidates. You can use checklists within an applicant tracking system to keep track of which staff members have completed what tasks and reach out to them accordingly to remind them to submit. This way, you’ll also reduce the risk of sensitive data being inaccurately entered. By digitally onboarding, you’ll take care of most of the tedious tasks before a new hire’s first day — all they’ll have to do is bring their I-9 documents for your team to verify and they can be on the floor that much sooner.

Why do you want them with their coworkers as quickly as possible? When you get new team members in their roles faster, you increase the likelihood that they’ll bond with their coworkers. You want employees to be friendly with their teammates, as this means they’ll be more likely to stay and can help keep your retention rates high.

Keep new hires engaged before first day of work

Another aspect that you want to build on in your onboarding process is pre-boarding, or the intentional action of keeping new hires engaged with your company before they officially start. This tactic helps reduce anxiety in candidates about their first day on a new job while also reducing the risk of them no calling, no showing to their first shift. By regularly and consistently communicating with candidates through email or text before they show up to start working, you can start establishing a repertoire that will endear new employees to your organization and increase the likelihood of them staying. You could also send new hires a welcome package that includes any uniforms, branded swag, or other useful items that your employees could realistically use in their day-to-days.

Enroll employees in employee referral program

Like we said earlier, people want to work with people they like — and what better way to make that happen than with an employee referral program? With automated campaigns, all you have to do is set up a program to absorb your new hire’s contact information from your ATS and schedule customized messages to encourage them to refer former colleagues and friends to your business. Typically, the best results come from this method after about two weeks of employment; by then, they’ll have received a good feel for your company and it won’t feel like too much of an ask to get them to suggest some names. Make sure that submitting referrals is easy for your employees and watch as they trickle in!

If you’re not sure where to start optimizing your current onboarding process, Hireology can help! Connect with our team to discuss your team’s unique needs and discover how our platform can help.



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