Investing in a mentoring program.

articles for businesses building a mentoring program

I was recently asked the following question

"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?"

Great question.

We calculate a ROI of at least 275% if you just look purely at your mentoring program's ability to retain talent.

In getting to this number we will break down the answer into 2 parts; talent and ROI.


Talent – attract, retain and develop through mentoring


For a company to continue to be successful, one key ingredient is to ensure that it attract, develops and retains its identified talented employees.

Mentoring is great addition to a company’s talent management program. With mentoring you get the double benefit that it involves both your future leaders (mentees) and current leaders (mentors) at the same time so both groups of talent are being developed. This is proven to increase retention of staff by 40% over 5 years. Remember; the mentors get as much benefit to their careers from mentoring as does a mentee.

Employees are also demanding more than “just a job” and having a mentoring program is a simple and great way to show the company cares about developing its employees.

If you look at Herzberg’s motivation-hygiene theory, a mentoring program can be classed as a Motivator that helps increase the satisfaction in the workplace through showing of knowledge (and other areas).

In Daniel Pink’s book “Drive” which focuses on motivation, a mentoring program helps both in Mastery (the ability to get better at something) as well as Purpose (having a feeling of belonging in the company).

75% of millennials deem mentoring to be important to their success and if your company can show it has an outstanding mentoring program then you will increase your attractiveness as an employer to this pool of future talent.


Return on Investment from a mentoring program

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 50 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 100% 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

  • 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 great talent leaving that affects others.


Cost of a mentoring program

Let’s say your mentoring program is covering 100 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.

If we assume your mentoring program manages to stop 10% from looking for other jobs or being poached in a year, then you would see the following annual savings.

10% x 100 x $150K = $1.5 million AUD. You can move the numbers around to fit your company data.

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

  • Investment to design a program. This is a one-off cost when you decide to have your mentoring program.

  • Investment to run a program. Through efficiency, you will see these costs reduced.

  • Investment from “lost production” from your mentors and mentees during the time they are mentoring. We will use 100 people for this example with a rough internal hourly cost of $110 AUD based on the $150K AUD annual salary. I would allow an average of 3 hours per month per participant in the mentoring program for 10 months.

Investment in the company will be around $350K AUD to $450 KAUD on average each year. Let’s say $400 KAUD.


The ROI of a mentoring program

The ROI would then be:

ROI = ( $1,500,000 - $400,000  ) / $400,000 = 275%

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.



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.



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

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