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How to Determine the ROI of a New Employee

Are you looking to hire a new employee, but need to justify the return on investment (ROI) first? If so, you’re not alone. Well-run businesses always make sure that the ROI justifies the expense.


So, the question really becomes: How do you best justify ROI? Here are three steps to accomplish this goal.


1. Choose a Measurement


The first step is to choose a method of measuring ROI. One frequently used method is a cost-benefit analysis. If you hire a new person, calculate the cost vis-à-vis the expected benefit.


It helps to quantify expected benefit with specificity. Will they increase sales by x amount, for example? Will they ensure more IT coverage in a way that will make online operations work more seamlessly to drive customer retention up? Will they enlarge the role of cloud computing to drive more customers?


2. Have a Clear Role in Mind


As you assess your business or department, define the role you want the new employee to play. Why? Because not defining roles and responsibilities is a peril. First, if you have an undefined sense of needing new people, you won’t be able to define the “benefit” part of any cost-benefit analysis.


Second, though, employees who don’t have clearly defined roles and responsibilities may be more prone to underperform or even to fail. A bad hire is definitely not going to have a good ROI – and may even impede your ability to get new hires in the future. If you need a software developer, for example, you need to define the roles and responsibilities they will have, not expect them to also do expanded social media analytics.


3. Tabulate All Costs


When counting up the costs, be sure to tabulate all of them. There are obvious costs and hidden costs with every hire. The obvious costs are salary and any benefits, for example. But hidden costs center around the hiring and training process.


The hiring process takes time and person-hours. Development of the job description, finding the appropriate channel for posting, and interviewing all take time. Onboarding will take time.

The training process will take time, and until it is done, the productivity of new hires is likely to not reach its peak. Factor this in as well.


Tabulating the costs effectively will help you in the long run as well as the short term. You will learn how to estimate the cost-benefit analysis more effectively.


An Experienced Staffing Agency for Your Needs

Recruiting and hiring can be a drain on your productivity and ROI until it is done. Working with an experienced staffing agency can increase the ROI by ensuring the recruiting and hiring process is optimized. Nesco Resource can help. We are experts in the engineering and IT fields. Contact us today to learn more.


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