Investing in a mentoring program.

"It would be great to hear your thoughts on the value for businesses. Why should they invest in mentoring and/or coaching? What is the ROI?"

I was asked this great question.

To work this out we need to break down the answer into 2 parts; talent and Return on Investment (ROI).

Talent – attract, retain and develop through mentoring

Cost to replace a talented employee

Let’s look at the threat of an employee leaving to find a better place to work.

There are a range of studies that show it costs a company 125 to 400% of an employee’s annual salary to replace them if they leave.

Of course, this percentage will vary depending on so many factors, but let’s make the math easy. Say that it costs a company 150% of an employee’s annual salary to replace them. This amount includes

• outgoing payments to the person leaving,

• recruitment costs,

• people’s time to interview,

• onboarding the new hire

• building up the skills and productivity of the new employee.

• the risk that this new employee may not be a correct fit and you need to start again.

• the ripple effect of a someone leaving that makes others think about leaving (or being poached by the person leaving)

Cost of a mentoring program

Let’s say your mentoring program is covering 50 of your talented people and assume that the average salary is $150K AUD per person per annum. Again, average salaries are dependent on the industry, and we are talking about your top talent who may be on a higher salary than average.

Lets take a conservative churn rate of 10%. Churn is the percentage of the workforce that leave in a year, and its not uncommon for numbers to be higher than 20%. A lrge proportion of these people leave due to lack of opportunities and growth.

If your mentoring program manages to stop 3 of that 50 (6%) from looking for other jobs or being poached in a year, then you would see the following annual savings.

No. of people x average salary x percentage cost to replace = total savings

         3            x $150K              x             150%                      = $675,000 AUD.

Now for the investment of setting up and running a mentoring program. This considers the following items.

• The external costs of running your mentoring program plus

• The internal costs of running the program

Total costs would be around $100,000.

The ROI of a mentoring program

The ROI would then be:

ROI = ( $675,000 - $100,000  ) / $100,000 = 575%

Note: this calculation is simple and there may be items I have omitted from both sides. Please feel free to amend as needed for your own company’s situation.

But the benefits don’t stop there.

Increase in productivity from mentoring.

It has been proven that people who are mentored are 4 x more productive than people who receive training alone[1]. That boost in productivity can only improve company performance metrics which will only lead to a boost in ROI. This was not factored in the 275%.

Mentoring increases the diversity and performance of the team

Having a mentoring program will have the longer-term effect of increasing diversity in your leadership group, especially if you run specific diversity programs. There is a plethora of studies out there that show the more diverse the leadership team of a company, the greater the rewards to the company. One study even went as far as to say they expected a 19% increase in revenue for companies that have a diverse management team. Even if a fraction of that percentage could be achieved, that alone would make any mentoring program a no-brainer.

Conclusion

I hope this answer has given the reader confidence to start to develop their company’s mentoring program.

Next Level Mentoring is here to help our clients make the right decisions on their mentoring program to ensure they are Simple, Effective, Sustainable and Engaging. Get those right and it won’t be long before mentoring is engrained in your company’s culture, and everyone wins.

References

[1] – Business Ethics : A stakeholder and issues management approach.