Measuring ROI of Employee Experience

Delivering an outstanding employee experience (EX) is no longer a nice-to-have for employers—it’s an absolute must. A positive EX drives engagement, productivity and retention. And a positive EX is contagious—we found that 90% of employees say the experience they receive impacts the experience they provide for customers.

But how should employers measure the return on investment (ROI) of EX initiatives? To find out, isolved’s Masterclass featuring Nucleus Research's Trevor White and Evelyn McMullen helped identify key steps and best practices when measuring the ROI of EX.

Defining EX ROI

Put simply, EX ROI is the financial value generated by investments in employee initiatives. It quantifies the benefits and outcomes from resulting efforts to improve EX—like employee retention, productivity and customer satisfaction. Measuring and demonstrating the ROI of EX is crucial for HR leaders to justify EX investments.

Key Steps in Measuring ROI

Companies looking to measure ROI should follow these steps:

1. Identify areas of benefit/costs: Companies should start by identifying specific areas where investments in EX programs can yield tangible, measurable benefits. These areas can include increased productivity, reduced turnover, enhanced recruiting, improved customer satisfaction and a magnified employee brand. In terms of costs, companies should consider things like software, benefits, salary increases, bonuses and training.

2. Estimate costs and benefits/costs: Once the areas of benefits and costs have been identified, it’s time to grab a calculator and add everything up.

3. Calculate ROI: To calculate the ROI of EX, divide the net benefits (benefits minus costs) by the overall investment and multiply it by 100 for a percentage. For example, if a company has a net benefit of $100,000 based on a $50,00 investment, it will enjoy a 200% ROI on EX.

Measuring ROI Best Practices

Calculating EX ROI isn’t strict science—here are a few best practices companies should consider when making their calculations.

• Utilize key performance indicators (KPIs) to track and measure the impact of EX initiatives.

• Use direct observation and analysis of your company’s history to measure benefits. Also, use caution when using benchmark data, as the variables involved may skew your own calculations.

• Adjust estimated time saved using correction factors to reflect the unique characteristics of your organization.

• Discount indirect benefits to avoid overstating the overall ROI. In other words, changing to name-brand coffee in the break room likely isn’t a driver of improved EX. Make sure the results are fact-based and relevant to the equation.

Measuring the ROI of EX is imperative for HR leaders looking to justify investments in powerful initiatives. Delivering an exceptional EX isn’t only a great way to find and keep talented employees—it’s delivers tremendous business value and boosts bottom lines.

Click here to watch the webinar and learn more!