How to Measure the ROI on Employee Experience Initiatives

Despite the fact that more and more companies are beginning to see the value in employee experience initiatives, many are still unsure of how to measure the return on investment (ROI) of these programs. This guide will help you do just that.

Ever seen the subreddit about employees who deserved a raise or, at the very least an experience to make them feel valued but got some kitsch gift instead? Here’s a prime example:

Or how about the one where the company gave its employees a small sheet of bubble wrap instead of holiday pay with a note that said, ‘Simply pop stress-relieving capsules every 4-6 hours or as needed!’

The common thread that runs through all these posts is these employees' bad experiences; most had already quit or were planning to do so. There’s no end to companies who think they’re appreciating their employees with a token of appreciation but end up providing an underwhelming experience instead.

Employers who fail to read the pulse of their workforce lose their best talent and suffer a loss in business. Hence, it is important to:

  • Understand the worth of your employee experience initiatives
  • Calculate dividends of the program
  • Quantify the return on your investments
According to Gallup, with the right employee experience strategy, you can boost your ability to attract, engage and develop high-performing employees.

Quantifying your Employee Experience ROI

How important is employee experience in the grand scheme of things?

elaborates on this by calculating exactly how ‘companies that focus on employee experience tend to see greater improvement in business performance.’

Since calculations require data, a good starting point would be to invest in a digital tool or platform that captures detailed information about your employee productivity, individual and collective, and the overall business performance.

To calculate the ROI on Employee Experience, or more specifically ROX (Return on Experience), the simplest formula would be:

% of ROX = (Benefits from all experience initiatives ÷ Amount of investment in the initiatives) x 100

Let’s show that with some numbers. A company invests $45,000 in increasing employee satisfaction; it saves $50,000 due to a drop in employee attrition and receives a $65000 boost in revenue due to improved performance and engagement.

If we calculate using the formula above, we the result will be:

% of ROX = {($50k +$65K) ÷ $45K} x 100 = 255.5 %

So, the return on employee experience initiatives is 255.5x but the actual measurement has to come from both tangible and intangible sources.

How to measure employee experience from tangible to intangible sources

Here is a step by step approach to measuring employee experience from tangible to intangible sources:

1. Tangible

Where the ROI calculation comes from tangible financial data that can be validated, such as increased annual revenue and stock price rise. The platform/tool should be able to crunch the numbers and perform detailed analysis and data-based forecasting to calculate your ROX accurately.

  • Revenue Increase

  • Shareholder Returns (rise in stock prices)
According to Forbes, the stock prices of Fortune’s 100 Best Companies to Work For list rose 14% per year from 1998 to 2005, while companies not on the list increased their stock price by an average of just 6%.

2. Intangible

Engagement scores determine the intangible ROI of the company’s employee experience initiatives, increase in customer base, turnover rates, CEO approval ratings and position on Forbes, Fortune, and Glassdoor's best workplace lists.

  • Employee Engagement Scores (based on the employees’ experience from onboarding to exit)

  • Annual Turnover and Retention Rates

  • CEO Approval Ratings

Improving your Employee Experiences

The examples listed above prove the importance of employee experience and its ROI in the form of financial and non-financial benefits. Ensuring your employees remain satisfied, motivated, and productive will automatically accelerate your customer success and business growth.

Companies where leaders work harmoniously with the HR to value and nurture the workforce, strengthen relationships across the board, and engender a sense of belonging and positivity in their employees, are sure to maximize their ROI because the better the employees’ experience, the higher the ROI.

According to McKinsey, to retain employees, organizations need to evolve their approach to building community, cohesion, and a sense of belonging at work.

Let's begin this new year with an engaged workforce!
Empuls is the employee engagement platform for small and mid-sized businesses to help engage employees and improve company culture.

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