When implemented correctly, a mentoring program can yield clear benefits for mentees, mentors and the organisation. Before you can start implementing a mentoring program, you need to seek executive approval. Often this involves creating a business case and determining the return on investment (ROI) your organisation will receive from mentoring.
In this article, we help you to calculate the ROI of your mentoring program, depending on whether you are (1) implementing a new mentoring program or (2) switching from manual to software.
If you are implementing a new mentoring program, you will need to demonstrate the key benefits - both intangible and tangible.
Tangible benefits can be touched, seen, or quantified. They are concrete and measurable.
In contrast, intangible benefits do not have a physical presence and cannot be touched or seen directly. They are abstract and often harder to measure.
As mentioned above, there are many tangible and intangible benefits of mentoring, however, the most compelling benefit for executives is often helping organisations to reduce their employee turnover costs.
The actual cost of employee turnover varies per position and salary bracket. Gallup reports that the cost of replacing an employee can be between 0.5x to 2x the annual salary of the employee.
It also takes up to two years for a new hire to match the productivity of an existing employee.
To calculate the impact of mentoring on reducing employee turnover and increasing retention in your organisation, use Brancher’s ROI calculator. You will need four numbers:
The sources for the above averages and statistics can be found on Brancher’s ROI calculator page.
So why do employees quit?
A study reveals that 46% of HR Managers believe employee burnout is a significant factor that affects the workplace. The best way to combat employee burnout is to increase support within the organisation.
Research shows that employees are 70% less likely to experience burnout if they have adequate support. This is where mentoring programs play a crucial role. Mentors can provide additional support to mentees.
An employee’s engagement level is a key metric of their emotional commitment to the organisation. A study by Gallup revealed that over 70% of employees are actively disengaged or not engaged in their workplace. The average cost of disengaged employees is 34% of their salary.
To calculate the benefit of mentoring on employee engagement, use Brancher’s ROI calculator. You need to enter two data points for this metric:
Brancher’s ROI calculator will then provide you with the employee engagement cost benefit, with links to relevant sources.
For a program of 120 people (60 pairs) and an annual employee salary cost of $90,000 per annum, the engagement savings are estimated to be $315,792 (a 10X benefit).
Improving employee engagement can help to:
Suppose you are switching from running a mentoring program manually to bringing in mentoring software. In that case, the business case will be around (1) administration savings and (2) your ability to scale existing benefits to more employees.
First, use Brancher’s time and dollar-saving calculator to calculate the administration savings.
To calculate the impact of administration time and dollar savings in your organisation, use Brancher’s Time and Dollar Saving Calculator. You will need these three figures:
Secondly, to calculate the benefits of scaling the program to more employees, you have two options:
The impact of scaling the program can be explained by analysing the data on the previous program’s success and projecting future benefits based on the number of increased participants. You may have data on the impact of mentoring on participants’ engagement, skills, knowledge, promotion, and retention.
For example: If 50% of previous mentees received a promotion while participating in the mentoring program compared to 10% of staff not participating in mentoring, you can expect the benefit to be around 40%.
In this example, participating in the mentoring program is associated with a 40% increase in promotions.
Use Brancher’s ROI calculator explained above to determine the new employee engagement and retention savings of running a bigger mentoring program for a larger population.
For example, a mentoring program with 120 people is expected to result in an annual saving of over $477,792 due to employee retention and engagement.
Finally, once you have determined the benefits, the final step to calculate ROI is to divide the benefits by the cost.
To determine your mentoring program’s ROI, you can use this formula:
Mentoring benefits (employee retention, engagement, admin savings and scale impact, if relevant) divided by Mentoring Investment (cost of mentoring software) = Mentoring Program ROI
To build a strong business case for mentoring software, you’ll need two key resources: Brancher’s ROI calculator and Brancher’s time and dollar-saving calculator. These tools measure different aspects:
Use these tools to support your business mentoring case. For further questions, feel free to contact us, and we’ll be happy to help explain the process.
Sources:
McFeely, Shane and Wigert, Ben. (2019, March 13). Gallup. This Fixable Problem Costs U.S. Businesses $1 Trillion. https://www.gallup.com/workplace/247391/fixable-problem-costs-businesses-trillion.aspx