What’s Your Return on Employee (ROE)?

Talent. Employers  can’t survive without it. Yet, as if the war for top talent weren’t bad enough on its own, many sectors and cities are now struggling with rock-bottom retention rates as well. Lifetime employment has gone the way of the fax machine: Fewer than five years at a job is the new normal overall, with millennials lasting just under three years.

“With attractive and flexible career alternatives popping up every day, the best talent is being lured away left and right, putting pressure on hiring managers to not only find but also hold onto their most impactful employees,” writes Jillian Kurvers for Mashable.

Improving the workplace seems like a good way to both recruit and retain: Good culture attracts top talent and keeps them happy. Catered meals, flex time, remote work, company outings, more parental leave, half-day Fridays, hip office spaces, onsite daycare, top-notch benefits, free beer, unlimited vacation, equity in the company – the list goes on. But at what cost?

“Many studies show that the total cost of losing an employee can range from tens of thousands of dollars to 1.5-2x [the employee’s] annual salary,” writes Josh Bersin, principal and founder of Bersin by Deloitte.

This number reflects the cost of recruiting, onboarding, business disruption, and cultural impact. But tack on the loss of everything you’ve invested in the departing employee (including all those free lunches and gym memberships) and that number grows much larger.

Despite unparalleled perks and professional development, companies like Google, Amazon, and Facebook struggle with average tenures around one year. One year. In what other resource would we pour so much time and energy, knowing that a year later it would be gone? Considering the cost of recruiting, training, and keeping employees happy, it’s hard to believe that our investments disappear the minute an employee hands in their company iPhone.

Am I the only one who finds this a bit unfair? I’m your manager. Our company’s name on your resume, the experience you gained here, the skills you learned, and the development you received – all of these things made you more marketable. And yet here I stand, caught off guard, staring wistfully at your old stapler and the pile of work you left unfinished.

Don’t get me wrong: I am an advocate of an employee-centric workplace. Employees have every right to pursue other opportunities, and they should be applauded for their service and ambition. But companies need to adapt to this new paradigm so they’re not left in the lurch.

“As we approach full employment, employees have more options and employers have [fewer],” writes Forbes contributor George Bradt. “Organizations must now deal with the society of ‘free-agent’ employees they’ve created.”

Free dry cleaning, more autonomy, and mentoring programs can increase tenure, but they don’t change the fact that most of our top talent will be gone in under three years. What can we do to recoup our losses, insure our investments, and perhaps even gain something in the long run?

Return on Employee, or ROE

It’s called “return on employee” (ROE), and the concept is gaining steam as workers become less tethered and more in control. It stems from the idea that the employer-employee relationship has mutual value that lasts well beyond the office goodbye party. From rehiring and referrals to business development and brand ambassadorship, companies have every reason to stay in touch with their exes. And with priority access to new job opportunities, meaningful colleague connections, product discounts, and exclusive event invites, employees best not be burning any bridges either.

Says Anne Robie, global head of HR at StubHub : “The future of talent is that people are not actually wanting to be employees. They want to have a wide variety of experiences. They’d like to be a contract hire and live in San Francisco for six months, then Singapore, and maybe London after that.”

It’s time to build lifelong talent networks to prepare our organizations for this new reality.

Fast-scaling companies around the globe are quickly recognizing the potential of their former employee networks. As “HR managers” become “chief people officers,” so too must evolve the way we view and value our past talent.

So, what’s your company’s ROE?

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 A version of this article originally appeared on the KonnectAgain blog.

Liza Bennigson is business development director at KonnectAgain.