How inclusive hiring translates to cost savings
- Reduce job turnover rates
- Make the recruitment process more efficient
- Reduce time spent filling positions
- Save internal training and orientation costs
Developed using a Return on Investment Tool created by New Growth Group1Chris Spence and Brian Schmotzer, “ROI Worksheet,” New Growth Group, 2014.
Reduce job turnover rates
Local hiring and incumbent worker programs have been shown to reduce turnover rates and improve retention, which is a significant cost savings.2“Business Guide to Investing in the Frontline Health Care Workforce,” CareerSTAT (June 2016): 5, www.nfwsolutions.org/sites/nfwsolutions.org/files/publications/CareerSTATGuide_Summary-060316_V5.pdf To demonstrate savings and better understand return on investment, it is important to calculate the cost of turnover. It must be noted that the cost of turnover calculation often encompasses some of the other savings listed below, and care should be made not to double count savings.
Cost of turnover
The cost of turnover encompasses separation costs (cost of administering exit interview, severance pay), recruitment costs (advertising, recruiter staff time), selection costs (interview time, background and reference checks, administrative time), hiring costs (human resource administrative costs and staff time, relocation costs, orientation, and job training), and lost-productivity costs (vacancy cost, cost of hiring temporary staff or filling position with overtime, peer disruption).3Timothy Hinkin and J. Bruce Tracey, “The Cost of Turnover: Putting a Price on the Learning Curve,” The Cornell Hotel and Restaurant Administration Quarterly 41, 3: 14-21, scholarship.sha.cornell.edu/articles/445/ Healthcare human resources literature identifies turnover cost rates per position category, which can be used as a multiplier when calculating return-on-investment.
Turnover rate of program participants
Measure employee retention amongst participants of specific training or local hire programs.
Turnover rate of job category generally
Measure the turnover rate for the position people are being trained into before the training intervention (or for employees who did not receive the training or local hire programming).
Make the recruitment process more efficient
Many of the best practices to train local residents for jobs (e.g. working with an intermediary for outreach, utilizing a cohort model) also save institutional time and resources spent on recruitment. Workforce intermediaries and community organizations can produce a qualified pool of applicants that are sent directly to hiring managers. The workforce intermediary conducts outreach and initial screenings, and develops and runs trainings. Institutions can also save on recruitment costs by hiring internally.
- Cost to recruit a standard candidate
- Number of candidates provided by intermediary
- Number of candidates recruited internally
Reduce time spent filling positions
Similar to recruitment costs, working with an intermediary also yields savings in time spent filling positions. Intermediaries will plan ahead to put together a training cohort for high-need jobs. For positions with skills gaps, this can yield a qualified pool of applicants much faster than the normal application process. The time spent to fill positions is important to consider because the cost of vacancy can be significant. Filling the position through overtime or through a staffing agency often yields rates that are much higher than standard wages.
- Average time spent to fill a particular position category, from vacancy to hire
- Average time spent to fill a targeted cohort position, from vacancy to hire
- Cost of overtime or staffing agency replacement
Save on internal training and orientation costs
Both pipeline and incumbent worker training programs often involve a customized curriculum adjusted to employer needs. Pre-employment training programs can incorporate specific skill trainings on the institution’s software programs and organizational practices and on position-specific tasks. Candidates often tour the institution prior to hire, and even complete job shadowing or internship programs. Since the cost of training is often externalized to the workforce intermediary or training partner, these are time and resource savings for orientation. It is important to note that these savings might already be captured in the cost-of-turnover multiplier, so these should only be measured if not utilizing that multiplier.
- Cost and length of standard new employee orientation and training
- Resources spent on standard new employee orientation and training by health system
- Cost and length of pipeline candidate new employee orientation and training, after hire
- Resources spent on standard pipeline candidate orientation and training
Leverage public and philanthropic resources by linking existing workforce development dollars to employer demand
In order to address skills gaps, hospitals must invest resources in training programs. However, in developing a local hire program, health systems are often able to leverage public funds for training efforts. Workforce investment boards, city offices of economic development, local chambers of commerce, and federal workforce grants can often be used to develop employer-specific training. Similarly, local intermediaries often receive philanthropic grants to develop this type of training. By partnering with these organizations and local intermediaries, the cost that the individual institution would have had to outlay to invest in building employee capacity becomes a savings. In essence, the health system is receiving a business service that would otherwise have to be internalized to fill high-need positions where there are skills gaps.
- Cost of training applicants for high-need positions
- Cost of recruiting external candidates for training
- Cost of partnering with workforce development organizations
Other cost variables to include in ROI calculations
- Staff time for administering program
- Tuition assistance provided for internal candidates
- Training costs for internal candidates or pipeline candidates
- Costs of space and training equipment
Based in Cleveland, Ohio, New Growth Group is a firm that specializes in workforce development and talent management. New Growth Group has been contracted to develop return on investment tools for hospitals implementing workforce development programs, and can develop specific tools tailored around particular programs, inputs, and interests. For more information: www.newgrowthgroup.com/
CareerSTAT, an employer-based effort to develop frontline hospital workers, has many resources related to incumbent worker training programs within healthcare settings. One such guide, entitled “CareerSTAT: A Guide to Making the Case for Investing in the Frontline Hospital Workforce,” pulls together resources and evidence that demonstrates the impact of such programs. For the full guide see: www.jff.org/node/466
A more expansive notion of ROI
- Address issues of health equity and identified community health needs
- Create a more diverse workforce
- Improve employee morale
- Improve the institution’s reputation in the community
- Reduce carbon footprint with more employees living closer to work
- Increase the number of residents with access to health insurance
|↑1||Chris Spence and Brian Schmotzer, “ROI Worksheet,” New Growth Group, 2014.|
|↑2||“Business Guide to Investing in the Frontline Health Care Workforce,” CareerSTAT (June 2016): 5, www.nfwsolutions.org/sites/nfwsolutions.org/files/publications/CareerSTATGuide_Summary-060316_V5.pdf|
|↑3||Timothy Hinkin and J. Bruce Tracey, “The Cost of Turnover: Putting a Price on the Learning Curve,” The Cornell Hotel and Restaurant Administration Quarterly 41, 3: 14-21, scholarship.sha.cornell.edu/articles/445/|