The Forum for People Performance Management and Measurement published a white paper earlier this year on the long term financial contribution of employees. Employee Lifetime Value is a relatively new concept that measures how employees create value for their employers when retained in the long term. Incentive Programs can actually work to improve the value employees add to employer’s bottom line in many ways. The white paper lists out examples that show why evaluating employee lifetime value requires serious consideration and I wanted to shed light on how an incentive programs can impact each point.
(The italicized text is from the People Performance article with my comments below)
A Brookings Institute study found that nearly 85% of a company’s assets are related to intangible capital tied up in knowledge and human talent.
Many of my clients have realized that much of their assets, as the white paper discussed, are tied up in human talent. By motivating and engaging their workforce with an incentive program, clients of mine are better able to attract and retain talented employees over the long term. This allows them to better preserve the intangible capital tied up in employee knowledge and human talent.
Employees are the major source for a company to increase competence and profits.
When an organization implements a training and mentoring award program, it is investing in its most valuable resource- employees. Clients of mine who participate in this kind of incentive program are able to transfer knowledge from mature employees who are near retirement and pass it along to other workers before it is lost. This knowledge transfer or transition allows companies to increase its long term competence and profits.
Employee turnover costs companies in the United States more than $140 billion annually in recruiting, training, replacement, administrative and other costs.
Recognizing and rewarding employees for reaching job specific goals, anniversary milestones and even birthdays are all ways to help combat the high costs associated with replacing an employee. Online incentive programs are a great way to communicate with employees on what goals the company is looking to achieve, how the award program is personally relevant to their job and how they are performing. A majority of the online incentive programs I administer incorporate emails, statements and other media to communicate with employees and keep employees engaged. Engaged employees are much less likely to search for greener pastures and possibly take their knowledge and expertise to competitors.
Corporate interest in retention management and succession planning is growing, with 57% of companies worried about long-term workforce requirements and 61% worrying about the cost and disruption to the organization because of frequent turnover.
Combating poor employee retention rates is major battle for many organizations, especially those in the healthcare industry. Because of the hardship being experienced during the recession, many healthcare clients of mine are expanding their employee retention efforts in order to reduce the high cost of employee turnover. High turnover rates can be effectively reduced over time with incentive programs designed to recognize and engage the workers who reach award program goals.
Over their lifetime, your employees will contribute countless hours and effort to the company’s bottom line results. By recognizing and rewarding employees with an incentive program, the employee lifetime value rate of your organization will be greatly impacted. A Watson Wyatt Worldwide study of 3 million workers in 551 large companies found that companies with an effective way to recognize employees realized a median total return to shareholders of 109% over a two year period, compared to a 52% return for employers that did not effectively recognize employees. Increase your company’s employee lifetime value by implementing an incentive program and your shareholders will thank you.