Employee Lifetime Value (ELTV) – The Only Metric That Matters

 

In Marketing, the only metrics that matters to the organization is () – an economic value that customer brings over their association with the business. Companies have been drawing multiple benefits from this measurement ranging from defining objectives, building marketing strategies, getting early warning, designing loyalty programs, budget allocation, and so on – a compilation by Peter Clark (author, the loyalty guide).

In Talent economy, employees are our new customers (read as an internal), a company is a product, and HR is a business. However, the biggest challenge HR has been facing, is to quantify the economic value of an employee delivers in the form of future cash-in-flows to the business during their association with the company. We call it ()  and it answers questions such as:

– who are the most valuable employees?
– Why does one sales rep outperform all of her peers?
– what is the cost of losing a top performer?
– Who are the employees who will create more value in the next 2, 5, and 7 years? And so on.

 

Commonality between CLTV & ELTV

Graham Hill, Partner at Optima Partners, draws a parallel between Customer lifetime value and Employee lifetime value to provide strawmen for calculating ELTV.

 

Why does it matter?

Millennials will make up 75% of the workforce by 2025, and that 66% of them expect to leave organization by 2020, per Deloitte Millennials Survey, 2016. The focus needs to shift from retention to optimization i.e. realize maximum value from employee lifetime.

 

A Foundational Research

A whitepaper by Forum for People Performance Management and Measurement and the Performance Management
Council details concepts, metrics, and applications of employee lifetime value in the area of recruiting, developing and retention.

 

How to optimize the ELTV?

Decreasing any or the combination of the following – hiring cost, time to productivity, salary/productivity ratio etc., can deliver optimum economic value, per Pasha Roberts (Chief Scientist, ).

 

Tabs

Maia Josebachvili, VP of People & Strategy at Greenhouse, learn how to articulate the “Lifetime Value” of hires and reveal the impact of new people initiatives to senior leaders.

 

Tabs-2-e1471810426797

Mckinsey team consisting of Michael Chui, James Manyika, and Mehdi Miremadi researched the potential of artificial intelligence and robotics to perform the task once reserved for humans. However, they find that as the automation of physical and knowledge work advances, many jobs will be redefined rather than eliminated—at least in the short term.

 

Tabs

The researchers analyzed 360-degree assessments of thousands of leaders in six C-suite functions—CEO, CFO, COO, CIO, CHRO, and CMO—in which each executive was ranked on 14 aspects of leadership on a scale from one to seven. The surprising result: The traits of CHROs matched up closely with those of CEOs.

Source: http://www.hbr.org

 

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About Manoj Kumar 79 Articles
A senior management consulting professional and an entrepreneur by heart, Manoj has led global change programs for fortune 500 companies like HSBC, Fidelity Investments, and GE. His expertise lies in functional strategy development, operating model building, process analysis, operational improvement, and simplification including global implementation of BI technologies. In 2014, he was recognized as one of the Top 72 HR Analytics Influencers worldwide. He is currently working as the Vice President, HR Analytics, HSBC. He is also very active in the Entrepreneurial community in India. His entrepreneurial stints include – India’s first online Toy Rental Company “Rentoys” (http://www.rentoys.in), featured in Outlook Money, ET, DARE, UTV Pitch, ET Now, BangaloreMirror, Indian Express, DNA) and an online marketplace for Indian voiceover artists – VoiceHired.com (1000+ artist community)