Chuck Ros asked:




Either your VP of Human Resources has told you they need an onboarding system, or you’re looking for ways to cut costs in HR and you came across this strange term.  Why this system, and why now?  Your VP, consultants, and your own independent research tell you the system will save the company money, but doesn’t every new system purport to save the company money (and then only occasionally deliver)?  To dig deeper, you ask for an ROI analysis and the numbers are phenomenal, incredible, and too good to be true.  If this is such a good money saving idea, why haven’t you heard about it before?

 

Let’s start by looking at what an onboarding system is.  Unfortunately, there are as many definitions of onboarding as there are technology companies and consultants saying you need this solution.  To put it simply, an onboarding system is one that automates the process of a new employee taking on a new role.  Admittedly, I’m a technologist, so I’m offering you a definition that is technology centric; ask a consultant to define onboarding and you’ll really get the definition of the onboarding process.  I’ll discuss later in this article which—your onboarding process versus an onboarding system—you should invest in first.

 

Further complicating any discussion of onboarding systems is that they tend to come in two different flavors: transactional onboarding and acculturation onboarding.  Transactional Onboarding systems focus on automating the direct and obvious cost elements of onboarding an employee: replacing manual forms-filling tasks with automated tasks, eliminating consumption and handling (shipping and storage fees) of paper forms, and eliminating re-keying labor between systems.  Acculturation Onboarding systems focus on the indirect and not-so-obvious cost elements of mentoring and guiding new employees to effectiveness more rapidly.

 

If you’re looking for immediate and obvious savings in cost, a transactional onboarding system will be more interesting to you.  Immediately after the system is implemented you’ll be able to quantify savings: reduction of paper, reduction of shipping costs between units and locations, reduction of storage costs, reduction in document latency costs, and reduction of labor.  Transactional Onboarding systems can benefit all organizations, but are of particular benefit to companies that are highly distributed, with multiple units and locations, and that are in industries with compounding factors like high turnover.

 

Acculturation Onboarding systems, by comparison, deliver value that will be more subjective and less obvious.  How can you measure how quickly someone becomes effective in their new role?  For that matter, how can you measure that effectiveness?  Some roles may be directly measurable and testable, particularly when measured against an industry standard or government regulation (as in healthcare and education), but many roles may be hard to measure effectiveness.

 

It should be noted that the two types of onboarding aren’t mutually exclusive; you might elect to implement both, and the systems may even be provided by two different onboarding vendors.  The dynamics of your organization should be taken into consideration when setting the goals of an onboarding system: if you have a workforce that is costly to recruit, has professional roles that take a long time to achieve effectiveness, and relatively low turnover (think white collar), then an acculturation onboarding system will make more sense.  If you have a workforce that is less costly to recruit, works in roles that effectiveness is achieved quickly, and has relatively high turnover (think blue collar), then a transactional onboarding system will make more sense.  But even these rules of thumb can break down with complexity: the larger the firm and the more complex their onboarding process (think multinational), even with a shiny-white collar workforce, is likely to be better served with a transactional onboarding system or a best-of-breed approach to both transactional and acculturation onboarding.

 

No matter which system is more appropriate for your business, the principle question to ask is: will it save us money?  Both types of onboarding will save you money, but a transactional onboarding system’s money savings will be more obvious and measurable, and will be realized more quickly.

 

How much savings are we talking about?  One research firm’s cost estimation of a manual onboarding event is about $1,100.  If you’re hiring 1,000 employees a year you’re spending about a million dollars each year.  But don’t believe these numbers; do the math yourself.  How many hours do your new employees spend filling out newhire paperwork, and what’s their average labor cost?  How much money do you spend with Fedex and UPS shipping newhire paperwork from your field units to your main office?  How much time does your HR team spend entering newhire data, and what’s their average labor costs?  How many errors do they make when entering data, and what’s the cost of those errors?

 

Speaking of errors in entering data leads us to the other question to ask regarding an onboarding system: will it help us mitigate risk?  You know that all processes surrounding the employer-employee relationship are fraught with risk, and the majority of that relationship is obviously established during onboarding.  A manual onboarding process allows employees to either mistakenly or fraudulently enter incorrect data on forms.  Your HR department works diligently to review and catch the errors (costing you more in labor), but inevitably some errors will slip through, awaiting costly discovery during a future audit.  Good onboarding systems will practically eliminate these risks and their associated costs.

 

Which brings us back to onboarding systems versus onboarding process.  Because of the inherent risks associated with employee onboarding, I would venture to say you have a well established—albeit manual—process designed primarily to mitigate these risks.  By implementing an onboarding system that addresses these risks, you will change the whole focus of your onboarding process from mitigating risk to actually improving the process.  The system then seems to be the horse to the process’s cart, so investing in an onboarding system before investing in consultants to tell you how to improve your onboarding process will more quickly save you money, but you must be certain your new system is flexible enough to accommodate the fine improvements you’ll be making to the process down the road.

 

I can sum up the question of whether you need an onboarding system by pointing out that if you were still doing your accounting by hand, knowing about today’s business software technology, you’d automate your accounting process in a heartbeat.  Onboarding is a very costly and risky manual process in your HR department and you need to automate this manual process.  So, why, you ask, are you just now hearing about onboarding?  The genesis to this question really comes from the passage in 2000 of the Electronic Signature Act, which guarantees the legal validity of electronically signed documents; in other words, before 2000, the federal government insisted documents be signed in ink for them to be legally valid.  Once electronically signed documents were given the thumbs up in 2000, the way was paved for a number of forms-centric processes—such as onboarding—to be automated that couldn’t be automated before.

 

So my specific recommendations are that, yes, you need to implement an onboarding system.  Evaluate first whether a transactional or acculturation onboarding system makes more sense, or if having both is the best solution.  Select your potential onboarding vendor or vendors based on how well they meet your specific requirements on cost savings, how measurable the returns are, and how flexible their solution is to meet your future requirements.  But above all, don’t wait any longer; waiting is costing you money.