In Marketing, the only metrics that matters to the organization is #customer lifetime value (#CLTV) – 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 #Employee Lifetime Value (#ELTV) 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, #Talent Analytics).
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.
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.
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