The Cost of (Not) Onboarding Your New Hire

A few weeks ago, I wrote in another piece, Onboarding is Unboxing, that I calculated for a client once that it cost them about $350,000 to replace a junior engineer if she left at 12 months. I want to revisit this concept and break it down a bit, and see how it’s related to retention — because it always surprises people when I mention it. Beware, we’re going to go into some math-y stuff in this read.

So how did I get to that number — and why is it important?

It’s important primarily because the turnover rate in the tech industry hovers around 15%, depending on who you ask, and Tech Republic found that average tenure at tech companies, including Google and Amazon, was about 1.2 years. So, if we’re paying an average salary of $98,260 for a junior software engineer and they only stay for 14 months, we’ve put down at least $108,000 just in salary. Add in the cost of aggregated time spent by HR, recruiting, the manager, and the employee’s team, and you can see how the cost balloons. I got to the number I quoted above using this formula:

There’s always a backstage. What is the backstage in your employment process?

Retention is involves more than just having benefits, or bean bag chairs, or hack days, or even an onboarding program. It involves leveraging those elements successfully to support an employee as a complete person.

Retention isn’t about having all the ingredients present — it’s about knowing how to mix those ingredients well.
This is my estimate of the upfront and indirect costs — but I guarantee you it’s not exhaustive.
Quick estimate for a mid-level engineer.

If you take only one thing away from this long-winded proof of onboarding costs, take the fact that you choose how you want to invest in your company. You can choose how to invest the cost of hiring and onboarding — hopefully with an eye toward retention. Investing in a system that automates as much of the process, or at minimum provides a template to use, will help you stretch your budget.

I’d love to hear from you — have you ever calculated these costs for your own team? What are they? I’d be interested to see if your estimates are drastically different, or if you’ve come up with new ways to spread cost out. Reach me at @kristenmaeve or kristen@edifyedu.com!

Founder, Edify. Learning strategist. Tea not coffee.