The ROI of Employees

roi of employees

Over at his blog yesterday, Chris Brogan wrote about his admiration for Gary Vaynerchuk. The post sparked quite the discussion in the comments, a lot of it about ROI (return on investment).

This stemmed from a quip Gary had made to an event attendee who was asking a few times about the ROI of social media, to which Gary replied, “What’s the ROI of your mother?”

A throwaway quip, but one I thought was indicative of why so many people are confused (or afraid) when it comes to using social media for business. I said as much in the comments, and Chris Theisen raised an interesting point with his question: “Do companies actually measure whether each employee has a positive ROI on the company?”.

If they don’t, then they should.

What’s the point in running a business and employing the folks you need if you’re not measuring their impact? Questions you should be asking (and measuring) include:

  • Does John the sales guy bring in enough sales to cover his costs? Great, he may be bringing in $100,000 worth of sales, but if they’re to 100 different customers and I need to hire more customer service advisors to handle their queries, John’s value immediately diminishes.
  • Does Karen the customer service advisor upset my customers? She may be awesome in the office, but if she’s caused 10 customers to leave in the space of twelve months, and they each spend $5,000 per year, her salary of $30,000 per year is now actually $80,000 per year.
  • Does Peter the marketing guy piss off fellow team members and lower their morale because he thinks he’s “all that”? If so, does that stop them doing their job properly and cost me sales, or quality service for my customers? Does it make my employees want to leave, costing me more money to train new hires (not to mention losing the team spirit that had been fostered before Peter’s arrival)?

These are just three examples of where you could start looking, and measuring the impact each employee has on your business. There are many more, and some that are unique to individual businesses and industries – but they’re good starter points, and a pointer for a full organizational development analysis. This can then tell you how to make sure your employees feel as valued by you as they are valuable to you.

If you’re not already measuring the ROI of your employees, then are you really measuring the success of your business?


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  1. says

    Metrics are all over the map, IMHO. ROI, ROMI, Social ROI, etc.

    Your point about measuring the real costs, though, is vital. I have a colleague who has this down to a science on the sales front in insurance and financial services. A sales person in that niche should be at a certain productivity metric where they’re bringing in a multiple of their salary by the end of year one, or they need to be coached into another line of work.

    Sales may be an easier place to do this, but the other costs – like being the office a**hole and having no one want to work on projects with you, for instance…all companies should quantify those, too.


    • says

      Hey there Dave,

      I’ve worked for companies that use similar measures to the one your friend has, and it’s a great way to both measure/work toward the employee’s success, as well as gauge the vale to the business and whether they’re better suited in another department.

      Makes the business and employee a hell of a lot more effective, and something more businesses should do. Perhaps they should hire your friend on a consultancy basis. 😉

  2. says

    Say, that’s an interesting perspective I’ve not seen before. Taking things a step further, someone who might be passionate about using social communication to improve the human condition where they work might think about how to use such tools to improve the ROI in themselves and their peers.

    (Then again, I think this is probably the first step toward a legitimate SM ROI calculation.)

    • says

      Hey there Brian,

      I like that idea, and can think of a couple of companies (local) that I know are doing something similar (but not to a huge extent).

      It’d definitely be a great stepping point toward full-on quantitative ROI across the board.

      Cheers, sir!

    • says

      I completely agree with you which is what I am gong to propose to the company I work for. I think there is a lot of internal communication which could make the organization stronger if they thought of people who had a voice instead of a divided work force. There is so much more you can do and they don’t realize it is the people who are always answering the questions not the marketing folks.

      People ask friends who work there questions and sometimes we are NOT equipped for the answers. Which is it marketing? Yes, but at the same time you are eating and sleeping the brand. So why not give your ambassadors something to work with? I just have to figure out how to package it nicely to talk to the Senior Vice President of the organization.

      • says

        Good on you, Jamie. Go for it.

        Just be sure to spend a little time with your Senior VP hat on thinking about what’s important to “you.” The higher up the ladder you go, the thinner the air gets. Those cats don’t see the world the same way we do down here on the ground. If your clearly beneficial idea is to get any traction, you need to speak a little VP.

        Blogging 101: Know Your Audience, right? :)

        Good luck.

  3. says

    Many organizations also overlook the ROI of employees when layoffs are looming. I’m a fairly recent victim of a large departmental layoff from a Fortune 200 company. I wish my former company would have calculated my ROI before letting me go…I’m doing freelance projects for them now, so I know exactly how profitable I was as an employee.

    • says

      Very true, Marianne. Back in the U.K. when I first started on the job front (many years ago!), it was always a case of last in, first out.

      Which, okay, I get you want to reward loyal employees and say thank you for years of support. But what if the newest start was more valuable than the 30-year veteran?

      It’s not always the extent of employment that dictates the best employee.

      Thanks for dropping by, miss!

  4. says

    In an interview with Kevin Rose, Philip Rosedale of Second Life fame said he used to send a survey to his employees every week asking them if they wanted to keep him as CEO. Measuring employee ROI is vital, but seems only fair that bosses should also undertake self or peer evaluations every so often. It’s a two way street. What is the return on investment of employees, and what investment are you as the manager or CEO returning?

    • says

      Great point, David.

      I’m a big supporter of CEO’s having no more than five years at a company (if they’re not part of the founding team).

      A CEO’s main crux is to take the company forward and always be looking at how that means the company needs to be shaped.

      Many CEO’s do a great job of this in the early years, but then start to get comfortable with success.

      If they knew they had a set tenancy in which to shine, it sure as heck would make them more responsive to the needs of everyone and how to use that to move the business forward.

      Cheers for the thoughts, mate.

  5. Nancy Davis says

    This is really something good to think about. The ROI of someone who has been networking and getting great contacts far outweighs the ROI of the person who cannot be bothered to talk up the business to everyone they meet.

    The ROI of someone out networking every chance they get may not be obvious right away, but if they persist, they cam be their company’s best asset.

    • says

      Another great point, Nancy. Like you say, if companies can make sure their employees are happy, that can help turn them into brand advocates. And I’m more likely to do business with a company that I know looks after its employees, than one that has a high churn rate and low loyalty factor.


  6. says

    Hey Danny,

    These are some solid, practical questions and examples you offer. I agree, that some things (if not all) can be measured.

    We’re in the process of outlining a conference calendar for the summer. Where do we want to invest money (on booths, sponsorship, etc.). Based on our average sales from previous conferences, I’ve arrived at a few conclusions:

    – Stage presence matters. If we can speak at an event we’re sponsoring, it significantly increases our ability to connect with attendees.
    – I have a break-even number – how much we’re willing to invest to host a booth, cost of travel, time away, etc.

    The hard(ish) number to calculate is how many sales have resulted a month or two (or several) after the conference. We have lots of inbound calls but sometimes, it’s difficult to directly point out a sale that resulted from the conference. Yes, we’re getting name recognition, and that’s great. But how much does that translate in terms of dollars. These are the parts I’m still working on tightening up.

    Anyway, good discussion… :-)

    • says

      Hey there Ricardo,

      Yep, that’s the funny thing about conferences – like you say, usually a hard cost that can be difficult to quantify the return on.

      Is there a way you can incorporate a QR code at your booth, that directs traffic to a specific call-to-action (either on phone or website)?

      If you can compare foot traffic to your booth to snaps of the QR code to follow-through after, and then see how the sales came from that against the cost of making all that happen…

      Not sure on feasibility depending on your audience or schedule, but one option perhaps?

      • says

        Uh oh, don’t get me started on QR codes! Heh.

        So, about a month ago, this Real Estate Tech conference decided to “go green” with their schedule. So they didn’t print the agenda and instead said: “Download the Agenda by scanning the QR code at registration”. After all, it is a tech conference and all…

        Do you know how many Agents came up to me and said:
        – “What’s a QR code?”
        – “How do I scan it?”
        – “What’s an app? What do you mean I need an application to scan it?”

        It was too complicated for the attendees to even grasp so most of them just loaded up the agenda from the conference website on their computers. This was about half or more of the Agents in the room.

        That said, having a QR code at the booth probably isn’t the most feasible thing to do. We are dabbling in custom landing pages for each event however and using that in our marketing…

        • says

          Ha, I hear you, mate. We’ve been working with real estate agents and while some are web and tech-savvy, most aren’t.

          So yeah, probably not the right audience. Now if it was a mobile conference or tech conference, on the other hand… 😉

  7. says

    I think Gary is right. Fundamentally, he is correct. Would you do it if you didnt know/have the ROI numbers? Because the reality is, we dont have the numbers. We never did and we never will.

    All the variables are never accounted for and all discussions of ROI involve guestimates and wild speculations. And THAT you can take to the bank.

    So..would you do it if you didnt know the numbers? Cuz you dont.

    • says

      Gary’s right with the throwaway quip? Or that you can’t measure fully?

      I’m not sure you can never account for all variables. Let’s say you have 100 flyers with a great call-to-action that has multiple ways to respond (phone, SMS, website, email).

      You hand deliver all 100 to your chosen addresses. You can then tell by response how successful that was by the return versus cost.

      Can you tell if the flyer was read or binned? No. But that’s not really a variable, is it – I’d say a variable would be was the flyer delivered. But since you delivered it yourself, you know it was.

      So now you repeat the experiment but with a different design or call-to-action language, and gauge if that elicits a better response.

      I just think there’s a lot of laziness and glib out there, which very often covers for a lack of acumen versus a lack of numbers.

      • says

        On both accounts actually. Dig this.

        Information Resources ( studied the effect of advertising and concluded that “the relationship between high copy scores and increase sales is tenuous at best”.

        They were being generous.

        The myth of advertising as an effective means of gaining new business is based on the fact that some people, in some way, at least to some extent can visibly measure the positive effect advertising has on their product. However…

        If advertising is not showing any effect on sales, then the explanation is that you need different advertising.

        How convenient.

        • says

          I am going to be blogging about this myth Dino. The fact is the Ad Industry can not be truthful or honest to Brands or they will have their billings cut significantly. So they (my industry) is going to lie, cheat, deceive etc to prove the spend is worth it. Even worse. What happens to the Media that follows Advertising like Ad Week or Mashable etc. What if the Industry billings were cut in half tomorrow. Massive layoffs. Less readers. So they are also in on this conspiracy. And the worst part. Marketers themselves tend to be the most gullible folks I have ever engaged with. Which is why my Reality Posse which you are part of (and Danny, Gini etc) keeps me sane LOL

  8. says

    Danny, yes and lets not forget the most important, the ROI of clients. Not every clients are created equal and some cost more than they bring. Some business should be turned down while others over-serviced.

    What is your take on ROI in social media Danny?

    • says

      Oh, completely agree there, mate! :)

      I think social media offers a great way of tracking and measuring actions and reactions. But it’s only a small part of the bigger picture, mate.

      Mix it up with mobile, digital banners, traditional marketing, print and display ads, etc. And that’s just from the sales side.

      Count the savings by switching simple customer service and tech support to Twitter versus manning phones. Or finding your next employee through LinkedIn versus a recruitment agency’s cost.

      There are a ton of different ways to look at ROI (and not just financial) that it’s scary to see how many people are saying you can’t really track…

      • says

        I forgot who said something along the lines of what is the ROI of a phone, in many ways social media is a tool like a phone (ok a smart phone).

        Do you agree? Are trying to measure the ROI of a tool, instead of how we use that tool?

        • says

          John you are really smart. My comment below was before reading your comment here. I even blogged last fall about Social Media being an O/S vs Media. Think Windows instead of Huff Post. It should be bought and sold as technology vs ad supported. Do I get a free IPhone with Free Service in exchange for viewing Ads? Yet the VCs conned Twitter and Facebook into thinking they should.

          Last spring I estimated if Facebook could get just 200mil people to pay just $3/month for their communication tool it would vault them to 314 on the Fortune 500 and increase revenues 600%. Then they could say screw Brands. Screw Ads. 100% closed and private. And reinvest in the network making it so indispensable we all pay for it. Just like we pay for Cable TV or our Phone service. And those folks charge us $50-100 a month!

            • says

              Not in its current form. maybe a year ago enough would. But what if I gave you a service that allowed you to easily communicate with friends and family share photos etc across all platforms? That is clean, ad free, etc. I pay $95 for 450 phone minutes unlimited text and data per month as it is. They could be reinvesting in the user experience vs figuring more ways to exploit us.

            • says

              I guess I mean get rid of places, deals, brand pages, open graph everything except sharing in your network personal photos, videos, text/chat/email/event invites, maybe even a personal blog in a way that is easy to use and allows us to include more than one person at a time.

        • says

          It’s a good question, John. I’m a big fan of the tool and the use being completely integrated – you can’t have one without the other, so the measurement would be from either.

          Does the tool save me time, and that time saved saves me money? Can I reinvest that money into making the tool smarter for my own specific use, saving more time, more money, more ways to invest?

          That’s the kind of measuring and investment I’d be running with.

    • says

      LOVE that question, John! Clients definitely have an ROI that can completely suck you dry if you’re not aware of it. I also agree that employees have a ROI and while it may not translate into obvious numbers, morale impact alone eventually does. Productivity goes down, sales go down, and the cycle continues.

  9. says

    You hit something HUGE Danny. And Gary he can go flip himself.

    The CEO, CFO, COO all have measures they are judged on when it comes to bonus pay and keeping their job. Everyone in manufacturing and sales and warehousing all have measures and are measured when it comes to how well they are doing.

    Then comes CMO which says ‘Trust me we are spending and marketing the right way’. CFO well prove it! CMO sorry I can’t. CFO but we spent $50mil on Advertising what if this year we spend $35mil instead? CMO that scares me. CFO Why? CMO I think we will lose sales. Hold on. Let me get our AOR on the phone. AOR – if you decrease our billings by $15mil your sales will crash. CFO – Prove it? AOR/CMO we can’t.

    NOW even worse. Social Media is even more murky and even less measurable than Advertising and the overall Marketing. I have zero pity on the fools who say You can’t measure this. Or You shouldn’t think about ROI. Because that is arrogant and in my opinion the person should be fired.

    NOW I am not saying it can be measured properly. But the attitude must be there because the CFO who’s shirt is on the line if your budget item doesn’t look like a payoff can’t support the investment. If the CFO knows spending $100k on a direct sales person brings in $1mil and spending $100k on Social gives them a non-concrete return. Sorry Social go away and come back when you can prove yourself.

    I have a Finance Degree and my view is always the CFO. I don’t believe in branding unless it leads to sales. I don’t believe Social moves needles for big companies or possibly ever will. And that is my position. Anyone who says I am wrong…Prove it!

    Wow danny you have me riled before 9:30am. And BTW I believe in Social Media as a Revolution in Interpersonal Communication Technology…not as a revolution in Marketing. Was the Phone a revolution in Marketing? No. It really just created a telemarketing industry which was just a small part of B2C marketing. Social is like a Phone. It is a technology platform. Marketing forced its way just like telemarketers forced and annoyed us into that sphere. Just like spam mail invaded email. They were not asked to come by the people using the technology.

    • says

      OH! But yes everything employee should be measured for ROI and even for Social Media Tasks some sort of agreement of goals can be set and then reached. Even if this isn’t something with Sales directly related to it. So great post even if I went off LOL

    • says

      Man, I do love it when you go off on one, mate, because you bring such passion behind some solid points. :)

      I definitely think social is far harder to scale at corporations than a small business. Is social media really going to make a huge difference at a Fortune 50 company in the same way it could at a mom and pop business?

      I’m not convinced. I think social can be a great service platform, or extra promotional aspect, at organizations. But when you’re already making $100 million a year in sales and social media brings in an extra $500k, while it’s great it’s not as influential as a small business making a million a year and they bring in an extra $100k.

      And yes – we can talk all about relationships, having bigger ears and more, and there’s absolutely nothing wrong with these approaches. But if there are no sales at the end of all that, then there won’t be any relationships, or ears, or whatever.

      Cheers as always, mate. :)

      • says

        I have to believe a big chunk of the $50bil Facebook valuation is the feeling it will be a big massive sales driver for Fortune 50 companies. Because if not. Then aren’t they more like a Social Version of EBay/Etsy?

        I just think Brands, VC’s, the platforms like Facebook forget the basis of their existence is communication like a phone or email. Not Marketing. Which was my point with John above.

        BTW good job on getting me riled LOL

    • says

      To build a brand takes time and money. Coke and Budweiser are not stupid. I had to use this in a rebuttle to a client. The right amount of investment is based on the goals. Budgets are muscles to get things done, not reward for a job done. That is commission. Sales people would love if everyone was held to roi because they are the only ones who can proudly at the end of the year put a concrete number beside thier name, but in the words of Obama and Romney, we didn’t build that (on our own).

  10. says

    Amen, Danny. I think not nearly enough measuring and tracking gets done in business, especially in small business. It is absolutely vital that everybody contribute more value than they’re costing, and while there are lots of different ways to measure that, the key for businesses is to find one that matters, and make sure it works!

    • says

      Hey there Danny,

      For sure, mate, and like you say, it doesn’t matter what size the business is – if you’re continuously putting more money out than you’re bringing in, eventually you’ll go out of business.

      And who wants that? 😉

  11. says

    Does John the sales guy bring in enough sales to cover his costs? Great, he may be bringing in $100,000 worth of sales, but if they’re to 100 different customers and I need to hire more customer service advisors to handle their queries, John’s value immediately diminishes.

    I think that this is too simplistic a view. I understand that you prepared a quick example but I think that we need to expand it.

    It is a mistake to measure salespeople strictly by the sales that they produce. It may seem counterintuitive to say that because in some ways it is the easiest thing to measure.

    However your sales force is out pounding the pavement as brand evangelists and more importantly building relationships that are often invaluable.

    Let’s use automobiles for a moments as an example. What is the real difference between a Toyota Camry and a Honda Accord.

    For the sake of the example we’ll say that the models we are comparing are configured similarly.

    The answer is that there are relatively few differences and often they are not substantive so prospective customers can either way.

    This is where relationships come into play. People prefer to do business with people they like/trust/respect. We can apply that same example to a million different products/services.

    And to Howie I would say that I disagree with viewing the world solely through a CFO perspective. Effective branding campaigns have consumers asking for particular products over another.

    There is a reason why Hyundai has had to sell their cars for less and provide a more impressive warranty package than other auto manufacturers.

    Not to mention the value of top of mind. People prefer to purchase items whose names they are familiar with. There may be no difference in quality/performance between JimBob Televisions and Sony but JimBob will get killed because no one knows them.

    • says

      Hi Jack,

      That’s true – there is more than “just sales”, but it all adds up to the sale. The storytelling; the relationships; the brand advocacy, etc.

      The same can be said for customer service; or tech support; of the trainers that go out to retailers and make the sales guys in-store the brand advocates.

      The end goal is still the same – you need to be bringing in money. And you could be the most awesome relationship builder and brand advocate in the world; but if you’re costing me more than you bring in, then I have a simple decision to make: let you go or let my business go.

      I know which decision I’m going to make… 😉

  12. says

    Hey Danny,
    My perspective on most things is philosophical as it is with the concept of ROI. My metric is selfishness (Is something in my perceived best interest).And often my criteria for self interest is how does it make me feel. There are times when my blogging objective is purely business (because I want to be successful at blogging) and other times it’s for social reasons because that makes me feel good. Now this has really been a stream-of-consciousness type of comment that isn’t as coherent as I would like, but it does make me feel good. And I’m not sure I fully understand what I just said, but if you do please get back to me (lol).

    • says

      Haha, will do Riley! :)

      I think selfishness can be good (as long as it doesn’t turn into closing your ears completely). Like you say, you want what’s best for you – and the best for you usually means you knowing what’s not working, so jettisoning it.

      Same with measurement and ROI – measure, analyze, act. Often selfishness and good business are both the same thing… 😉

    • says

      Cheers John,

      Agree, mate – you can either have a great crop of fresh and tasty apples, or let the rot in one spread throughout the rest.

      I like my apples fresh and tasty. 😉

      Have a great weekend yourself, sir!

  13. says

    G’Day Danny,
    I’ve been preaching the virtue of measurable, identifiable and definitive performance standards for employees for years. Call it ROI if you like. People are the most expensive resource in any business. If you don’t measure their contribution, how will you know that the resource investment is worthwhile?

    Funnily enough, when staff know that their contribution is being measured definitively, they are far more likely to contribute willingly.

    Best Wishes


    • says

      Hey there Leon,

      So true about people being the most expensive resource – I’ve seen so many companies struggle because they’ve been loyal to the wrong people for too long.

      Like you say, often we can allow ourselves to become lax because we feel comfortable. While it doesn’t mean we need to suddenly become all draconian, knowing that we’re accountable would definitely stop us from being lazy.

      Cheers as always, mate.

  14. says

    Some really helpful guidelines Danny. But we are not sure about one thing. If we talk about Social Media Marketing, its really hard to measure the ROI of each employee because most of the time they work in teams. Its also really difficult to assign each one of them a particular Social Media task. If our Social Media marketing efforts are not effective at a particular point of time, whom to blame? The entire team?

    • says

      Good question.

      I’d look at it in two ways. While it’s a team approach, each member usually has an allocated task (based on the strengths they bring to that project). So you might have a Facebook whiz, a Twitter whiz, a corporate blogging whiz, etc.

      If you’ve given them project management control duties on their tasks, then it’s easier to see how successful (or not) they’ve been and then it down at the end of the project and go over results.

      Or, you simply allocate responsibility for the complete project to the manager or project manager that’s in charge of the team. After all, at the end of the day, a team is only as good as its leader. You can then see why certain parts worked and others didn’t, and make future plans to combat this.

  15. says

    I am so sick of these ridiculous statements from people who have never worked in a corporation and had the pressure to produce anything, justify a budget or be responsible for P&L in a bureacratic organization.

    It’s easy for an small company owner or entrepreneur (like me, or Gary) to throw out a statement like this because the value of social media is intuitive and self-regulating. We can “sense” that the efforts are paying off and put more or less into it based on what we sense we are getting out of it. For this reason, small businesses may actually have a leg up on the big companies!

    But there is an implied ROI to everything a company does and just “sensing it” does not cut it in front of a board of directors. Comments like this from Gary are non-productive and dangerous for those who have to face political organizational realities every day.

    • says

      Hey there mate,

      Exactly my point – thank you! :)

      That’s the thing that we’re seeing a lot of recently – there are some vague ideas and coulds, ifs and potentials, without there being any actual knowledge of what’s involved in the bigger picture.

      And that (to me) is a very dangerous thing indeed.

      Cheers, sir, always a pleasure.

  16. says

    Danny somehow I just now saw this in a Google Alert, alebit months later. Glad my question inspired the post. I think most companies are horrible at actually measuring what makes them money and whats a positive return. Our company has a suite at the local minor league baseball stadium. We take clients there sometimes and employees use it sometimes. Its a nice perk and a nice thing to do for clients but whats the return on it? Id say negative at best.