Onboarding lays the foundation for retention and productivity. However, its price tag demands optimization. The average cost of onboarding a new employee is around $4,125, according to SHRM. However, this guide will uncover onboarding’s hidden expenses and offer cost-saving strategies.
Onboarding refers to integrating new hires through tailored orientation, relationship-building and training. Done right, it boosts retention, according to the SHRM. Yet onboarding incurs escalating costs, given rising wages, tech investments and the need for rapid skill-building. This overview quantifies true onboarding budgets and empowers managers to explore cost-efficiencies without compromising quality.
Related: How to Automate The Onboarding Process: 5 Tips For Efficiency
What is the True Cost of Onboarding?
Onboarding expenses extend beyond salaries into direct, indirect and emotional categories. Their magnitude depends on company attributes.
Direct Costs
- Salaries, benefits and paid training hours during ramp-up: This includes new employees’ wages and benefits like health insurance, paid time off, etc., for the period they are undergoing training and orientation before becoming fully productive. It can range from a few weeks to months, depending on the complexity of the job.
- Printing/purchasing onboarding materials, manuals, and workstation setup: There are direct expenses involved in procuring onboarding kits, employee handbooks, and IT setup, including laptop/desktop, software licenses, office furniture, etc. Additional costs may include printing and binding of various training manuals and reference guides.
- Software/systems access, online and in-person training courses: Onboarding often requires providing new hires access to important software and business systems for learning and work purposes. It also includes the cost of technical skills training programs, which can be online self-paced modules or in-person instructor-led classes.
Indirect Costs
- Lost productivity until newbies contribute independently: During the learning and ramp-up period, new employees are not fully productive, and their output is less than regular employees. This impacts the overall team and organizational productivity.
- Manager/trainer hours spent planning, delivering and evaluating onboarding: Significant time is spent by HR and employee supervisors in planning the onboarding curriculum, preparing training content and materials, delivering training sessions, and assessing the effectiveness of the onboarding program. This pulls them away from their main job responsibilities.
- Administering paperwork, scheduling and other onboarding logistics: Onboarding requires back-end work like generating offers, collecting employee forms, scheduling orientations and training, tracking completion of the onboarding plan, coordinating onboarding buddies/mentors, and ensuring all legal and compliance requirements are fulfilled.
Emotional and Mental Costs
- Decreased well-being, focus and productivity during transition periods: The stress of a new role, environment and responsibilities can lower the health, energy levels and engagement of new employees during their initial weeks.
- Burnout risks for overburdened trainers juggling onboarding duties: Handling frequent onboarding cohorts alongside normal work can drain employee coaches and managers, leading to diminished motivation and performance over time.
- Stress and decreased work satisfaction if onboarding lacks investment: A poorly planned onboarding experience leaves new hires feeling lost, anxious and undervalued, hurting retention and commitment to the organization long-term.
Related: What are the 4 Phases of Onboarding? A 2024 Guide to the Employee Journey
Addressing Specific Onboarding Cost Drivers
Costs vary significantly based on attributes impacting complexity and support needs. Here are expanded paragraphs addressing factors that influence onboarding costs:
Company Size and Structure
Onboarding at larger enterprises with multiple business units requires considerable collaboration between departments to ensure consistency. Coordinating activities across a vast geography adds expenses. Smaller organizations benefit from simplified planning without extensive overhead.
Role and Seniority Level
Specialized roles like engineers or medical professionals demand technical and compliance training spanning weeks or months. General administrative positions may onboarded quicker. Experienced directors onboard through abbreviated programs versus extensive entry-level training.
In-Person vs Remote/Hybrid Models
Virtual onboarding necessitates upfront investments in learning technology, collaborative tools, and digital infrastructure. Hybrid models demand both virtual and physical assets. Fully on-site carries real estate and facilities expenses.
New Hire Experience Level
Seasoned professionals transfer existing skills, minimizing basic training costs. Novices need intensive orientations across soft/hard competencies and lengthening durations. Gap analyses identify targeted skill-building to minimize superfluous content.
Onboarding Resources
Insufficient training hours and materials jeopardize assimilation quality and retention, offsetting initial savings. Committing proper funding streamlines processes for enhanced experiences, strengthening engagement in the long term. When you under-resource, you risk greater replacement and productivity expenses.
Thoroughly examining these attributes allows personalized cost estimations and targeted investment into high-impact initiatives addressing each organization’s unique dynamics.
Related: Gamify Your Onboarding: 12 Ways to Make it Fun and Creative
The Hidden Costs of Onboarding
Non-salary costs inflate total budgets further. Strategies addressing these optimize value.
Loss of Productivity from Training
During intensive education, new employees focus on learning versus completing regular assignments independently. Their outputs may reduce temporary productivity until ramped up to full capacity. Complex roles incur lengthier learning curves, compounding initial impacts on metrics.
Increased Turnover
Poor onboarding experiences like unclear expectations and lack of support and engagement leave newcomers feeling overwhelmed and undervalued. This risks higher voluntary turnover, necessitating repetitive recruiting, hiring and re-onboarding replacements to replace knowledgeable leavers.
Additional HR/Training Staff
Especially for high-growth companies, elaborate, prolonged onboarding programs stretching internal resources may necessitate dedicated onboarding coordinators or training personnel. These roles incur fixed salary and benefit expenses.
Wasted Technology and Materials
Outdated, redundant or ineffective onboarding assets waste previous investments without periodic content refreshes and optimization. Manuals become obsolete as processes evolve. Learning platforms lose relevance, requiring replacement instead of proactive improvement and customization.
Carefully quantifying hidden costs provides a complete financial picture, informing strategic prioritization of initiatives addressing the most impactful yet overlooked budget strains.
Related: How to Onboard an Executive: The Essential Guide
Reducing Onboarding Costs
Optimizing value involves balancing quality, budgets and timelines through purposeful adjustments.
Streamline Onboarding Processes
Automating paperwork using online onboarding portals and document management systems saves significant time by reducing manual data entry and processing. Standardizing processes across locations and roles through templated onboarding plans and checklists eliminates redundant work. Digital workflows streamline approvals and ensure consistency.
Focus Training on Core Responsibilities
Conducting training needs assessments identifies the basic must-know duties essential for day-to-day work versus excessive details. Trimming unnecessary content from programs by prioritizing operational fundamentals helps reduce training hours without compromising effectiveness.
Leverage Technology
Implementing learning management platforms gives leadership visibility into consumption while offering learners 24/7 access on any device. Content is conveniently updated centrally. Virtual and augmented reality tools simulate real workplace scenarios immersively at lower costs than physical classrooms.
Invest in Engaging Onboarding Materials
Professionally designed visual onboarding guides, presentations, videos and eBooks optimize engagement over wordy documents. Customizable templates localize content efficiently. Translating high-quality assets for international talent further improves the experience multilingually.
Empower Managers for Consistency
Comprehensive manager training standardizes successful onboarding delivery independently. Refresher courses address evolving needs. One-on-one mentorship from experienced managers enhances consistency through knowledge-sharing.
Measure Continuous Improvement
Pulsing post-onboarding surveys track effectiveness and satisfaction longitudinally. Analytics identify bottlenecks from platforms. Benchmarking discloses best practices facilitating data-driven continuous enhancement aligned with business strategies.
Related: The Digital Onboarding Revolution: Transforming the Employee Experience
Conclusion
Quantifying true onboarding expenditures illuminates paths for optimized value through continuous efficiency. Strategic adjustments balancing quality, engagement and affordability strengthen talent pipelines, sustaining competitive advantages. Overall, cost-conscious companies thrive by nurturing talent journeys from pre-boarding through assimilation.
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