Onboarding and retention

9/6/2023

According to the Society for Human Resource Management, direct replacement costs of an employee are as high as 50-60% of that employee’s annual salary. Those are the costs associated with recruiting, hiring and training a new employee. However, the total cost of turnover can equal 90-200% of that annual salary when accounting for measurable costs like accrued paid time off and overtime coverage for other employees, as well as costs that are harder to pin down, like loss in productivity and delays in production or customer service. 

Meanwhile, a successful onboarding process increases the likelihood that a new employee stays with a company for at least three years by 69%, according to O.C. Tanner, an employee recognition software company. Properly incorporating new hires into their roles — and into company culture — pays dividends when it comes to reducing turnover. With retention of the utmost importance in the age of “The Great Resignation,” it might be time employers take a look at their onboarding strategies. 

Investing on the front end

“If you are able to try and take that time and invest on the front end, it does end up paying on the back end,” said Dr. Claire Muselman of Drake University in Des Moines. 

Muselman is an assistant professor of Practice in Leadership, Human Resources and Organizational Behavior at the Zimpleman College of Business. Muselman’s doctoral research was in employee engagement, or, as she likes to call it, human capital development. She described it as making people thrive in their seat. Coming from the insurance industry, she most recently served as the chief risk officer at an industrial services company in Texas. Her company had to rethink their onboarding practices to accommodate the diverse backgrounds of its new hires. 

“A successful onboarding program has to be consumable at a plethora of levels that make people feel valued,” she said. “Do your people feel seen, heard, acknowledge and valued?”

Muselman says the mediums that have been used over the years for onboarding have been “terrible.” Companies tend to sit a new hire in front of a computer and have them watch a pre-recorded PowerPoint for hours. This method of communicating is not best for retaining information. Instead, Muselman believes companies should make onboarding memorable, fun, engaging and exciting. One method could be hosting live, in-person and dynamic conversations with a cohort of employees. Incorporating games and technology is another method of increasing engagement. 

“One of the other things I think we’re seeing an uptick on is when people are going through this onboarding process, if they don’t have a good experience, they’ll walk way sooner than they have in the past,” said Muselman. “We have to remember that this is a mutually beneficial relationship. As an organization, we need to be able to provide a meaningful experience as well as having those individuals feel like they can make a contribution throughout this process.”

With onboarding, Muselman suggests beginning at the macro level and funneling down to the micro. The process should start with reviewing a company’s mission, vision and values as a whole. From there, you can review how an individual’s role fits into the company and how they will help accomplish its goals. 

According to Musleman, one person who can create a better onboarding experience for a new hire is his or her direct leader. Many times, onboarding responsibilities are handled by an HR or administrative staff member, but a direct leader can help to ensure a new hire has what he or she needs to be successful. 

“The investment of the direct leader, that is the most pivotable human that is involved throughout this onboarding process,” said Muselman. “Because that person’s going to be a constant throughout.”

A process, not an event

Dr. Ken Brown is the Tippie Children Professor of Management at the University of Iowa’s Tippie College of Business. His focus is on organizational psychology. In other words, the people side of a business. 

Brown explained two mindsets that should be had when it comes to onboarding. First, onboarding is not an event but a process, and, secondly, it is a shared responsibility of everyone who interacts with the new employee. 

One resource Brown suggests for improving onboarding practices is the Society of Human Resources Management’s four C’s: compliance, clarification, culture and connection. 

Compliance focuses on following all relevant federal, state and local laws. This step helps to reduce liability and cover an organization in case there is ever a lawsuit. For example, employers should make sure that employees in management positions know the laws regarding sexual harassment.

“If you’re hiring someone to be a manager, you know you need to talk to them about several compliances around sexual harassment,” Brown said. “Prior court cases are very clear. If you do not train managers on this, the firm is responsible… Now, if (the company has) done a lot of training and there are clear expectations about how we treat people, then the firm can say, ‘We did everything we (should). This is a rogue agent. This is an employee that circumvented our systems and processes. We should not be held liable.”

Clarification is all about setting clear expectations and getting every question answered. 

A new hire has so much to learn, Brown said. 

“It’s not clear what’s important to learn, what’s not important to learn. It’s not clear which employee they should listen to… Creating some clarification about what’s your job, who should you be listening to, what are the clear policies that will help you do your job effectively, that’s just so powerful.”

The third element is culture. Many businesses talk about their culture, but Brown suggests that companies incorporate culture in the early selection and hiring processes. Hiring managers should talk about how they model company culture. Anything sent to an employee before their first day should emphasize company culture as well. 

The last “C” is connection, and it can become particularly difficult during online or remote onboarding. Brown said that research shows people tend to stay within an organization where they have friendships. Onboarding should not be set up to force friendships but to create a space for meaningful conversations and opportunities to develop relationships. 

Experience not necessary

VizyPay, a financial technology company located in Waukee, boasts about its culture on its website, including its “Work hard, play hard lifestyle.” 

Ninety-five percent of VizyPay’s employees come from outside of the payment processing industry. That’s because the company focuses on soft skills and training employees as opposed to focusing on candidates’ resumes and past experience.

“Because we don’t focus on the resume, we’re willing to give anybody a chance,” said Chief Strategy Officer Outhay Lovan. “That’s what makes us so diverse. That’s how we create innovation.”

The majority of VizyPay employees are boots-on-the-ground salespeople across the country. After new employees are hired, the company will bring them from wherever they are to Waukee to complete a five-day onboarding process. The first day focuses on paperwork, familiarizing employees with their benefits, and presentations on company culture. The second day focuses on the scope of services offered by the company. This day is primarily to ensure new hires understand what the company is doing and what they offer. The rest of the week is spent with their department, doing hands-on learning. 

Since the company does not focus on resumes and hard skills, VizyPay developed a learning and development strategy to accommodate need for training. The company is willing to work with an employee one-on-one to teach them skills like using Outlook or blocking out their calendar.

“It’s not the resume, it’s the person. And if they’re willing to do what it takes, they’re going to be here long term,” said Lovan. “So, let’s work with our people. Let’s give them the tools and resources so they can be successful, and they can start to build their resume and start to build their brand.”

When it comes to onboarding, VizyPay’s focus is hiring to fill sales roles. Since the beginning of the year, they have hired 66 employees. Thus far, 41 are no longer with the company. Current company-wide retention rate sits at 64%, and the average tenure is 1.8 years. 

“Not everyone fits our culture or the role, and we are OK with this,” said Lovan.

Focus on retention

On the other hand, Zirous, an IT company based in West Des Moines, has a 100% retention rate of employees hired within the last year. Company-wide, their retention rate is 92% annually, and, over the last three years, has been between 92-95%. 

Found throughout the building are signs for each employee with their years of service. Another display celebrates employees who marked five, 10, 20 and 30 years with the company. Some of the earliest employees have been with Zirous since its inception in 1986. Of their close to 80 full-time employees, 54% of them started their career at Zirous. 

“Our CTO has been here 37 years. That’s longer than some of the people have been alive here,” said Jenni Hipwell, vice president of people and culture at Zirous. “It’s very much a learning environment. Everyone wants to learn and grow.” At its core, Zirous is a tech firm that provides consulting services. “So you’re always working with different technologies and different people and different industries outside of Zirous. I think that also helps bring the culture and the retainment.”

Onboarding begins before the first day at Zirous. Hipwell is sure to ask about any food allergies and clothing sizes for breakfast on the first day and their custom Zirous-branded Hawaiian shirts. On the first day, Hipwell meets with the new hires and works them through all the paperwork. She is also sure to have an organizational chart with headshots and a seating map ready.

Zirous’ HR intern for the summer of 2023, Addy Petig, said she experienced more opportunities to ask questions or seek clarification than she did from her previous employers.

To foster strong culture and connections, Zirous places a strong emphasis on team activities, including participating in the Des Moines Corporate Games. 

The company also makes a point of seeking feedback from employees and implementing their suggestions.

“I do satisfaction surveys as well, usually about every 18 months,” Hipwell said. “Surveys talking about environment, schedule, flexibility, benefits — literally everything that you can kind of think of.”

From there, Hipwell holds a lunch and learn to share the results of the survey. She also addresses feedback and asks employees to describe company culture.

“If there’s something that we’re missing the mark on right now, let’s fix it. It’s very open door,” she says.

According to the U.S. Chamber of Commerce, many workers are seeking better opportunities and quitting their jobs, only to be rehired somewhere else. According to an article written by the Chamber Director of Global Employment Policy & Special Initiatives Stephanie Ferguson, the “Great Resignation” might be better described as “The Great Reshuffle.” With the high costs created by turnover, many companies are now looking at onboarding with an eye toward retention. ♦