Even the most talented HR professionals struggle to gauge the value of an organization’s employees. It’s very difficult to quantify the contributions of a specific employee, especially if their role doesn’t directly generate revenue. Yet making the case for increased investments in employees, like stronger new hire onboarding or training programs, without data supporting how these programs will affect employee impact is difficult, too.
One metric that may provide some much-needed insight is employee lifetime value (ELTV). HR professionals can use it to understand how much an individual contributes to the organization, whether in dollars, in productivity, or even in morale. With ELTV data, HR teams are able to pinpoint weaknesses in their current hiring, onboarding, or training initiatives, which allows them to make a stronger case for new programs or tools that will help employees succeed across the organization.
Let’s explore what ELTV is, how it’s measured, and how your organization can use the insights it reveals to increase your investment in employees, which will ultimately lead to a stronger, more productive business.
What is employee lifetime value?
Employee lifetime value is an estimation of an employee’s potential or actual contribution to an organization. ELTV can also be used to measure the contributions made by specific roles, teams, or even locations.
Whether forecasted — when a new hire’s role is first created but before it is filled — or based on data from existing employees, ELTV is typically displayed on a graph with a role's “value” on one axis and their time at the organization on the other. This value measurement is expected to increase over time, decreasing only when the employee leaves the organization.