EMPLOYEE LIFETIME VALUE

The predicted future worth of an employee's tenure in an organization is referred to as employee lifetime value (ELTV).

Employee — anyone who receives formal salary and works for the business on a full-time or part-time basis. The overall period of an employee's working connection with the company is referred to as their lifetime. Because people actually add value to the firm, having a high employee lifetime value has a favorable impact on business outcomes.

                                 Figure 1(aihr.com, 2021)

The graph’s ‘start' label indicates that an employee is theoretically making a 'negative contribution' to the company. This is to show how much it cost to hire the staff. From there, the line rises to the point where an employee contributes after being on boarded. An employee's line and value grow over time until the employee decides to depart.

IMPORTANT OF ELTV

Ø  Estimating human capital ROI-The data from ELTV provides you with the required knowledge as well as a new perspective on the value of learning and growth.

Ø  Making a business case for investment in people-The data from ELTV provides you with the required knowledge as well as a new perspective on the value of learning and growth.

Ø  Understanding the employee lifecycle-ELTV teaches employees when and how to contribute to various elements of their careers at the company. It delves into the hiring, onboarding, development, and off boarding processes.

 

WHAT IMPACTS ELTV

1.      Onboarding: - Employees may contribute considerably more quickly to a business with a well-established onboarding program, which also raises the likelihood of long-term retention.

2.      Training: - Employee development that is well-designed leads to long-term organizational growth and raises the value of individuals' efforts.

3.      Recruitment: - From the outset of an employee's journey, a good talent acquisition and recruitment strategy should result in higher performance. A new worker also brings with them new ideas and energy, which can boost team members' contributions.

4.      Management Practices :- Strong management practices are significantly linked to employee contributions and retention rates, and thus to a beneficial impact on ELTV

5.      Employee experience: - Every component of the ELTV cycle/chart is experienced by employees. Organizations can manage employee contributions through hiring and developing personnel.

 

HOW TO MEASURE ELTV

Ø  Hiring and onboarding

Ø  Employee experience

Ø  Training and development

 

HOW TO BOOST ELTV

Ø  Create a solid recruitment and selection procedure.

Ø  Onboarding should be a priority.

Ø  Invest in training

Ø  Develop your managers

Ø  Work on your employee experience

Ø  Build an inclusive company culture

Ø  Have solid compensation and benefits strategy

 

CONCLUSION

Employee development, retention, and a positive employee experience are all important factors in enhancing employee lifetime value, which has a favorable influence on the bottom line. ELTV also enables you to assess the impact of minor adjustments in HR procedures and the incremental value they can provide. In many cases, simple improvements in an onboarding process can result in a 6x increase in an employee's ELTV.

 

 

REFERENCES

Berger, P.D. and Nasr, N.I., 1998. Customer lifetime value: Marketing models and applications. Journal of interactive marketing, 12(1), pp.17-30.

Venkatesan, R. and Kumar, V., 2004. A customer lifetime value framework for customer selection and resource allocation strategy. Journal of marketing, 68(4), pp.106-125.

Zeithaml, V.A., Lemon, K.N. and Rust, R.T., 2001. Driving customer equity: How customer lifetime value is reshaping corporate strategy. Simon and Schuster.

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