Employee Experience ROI: How to calculate and measure return on experience (ROX)

Great employee experiences have never been more important. Employers who fail to stay close to their workforce and adapt working practices accordingly now stand to lose their best talent. According to Gallup, the right employee experience strategy can make all the difference to your ability to attract, engage, develop, and retain high-performing employees.

In this blog, we'll uncover:

• How to calculate the value of your employee experience initiatives
• Gauging return on employee engagement (ROX) using data from different sources
• What organizations can do to improve ROX—and why that matters in concrete terms

Why delivering a great employee experience matters

Traditionally, companies have focused on improving employee satisfaction metrics through cultural changes—but culture is just one aspect of the employee experience. When extracting insights and calculating ROI from employee surveys, employers must look at a range of other factors. This includes the physical and technological environments in which employees work and how well employee experience initiatives are communicated.

Organizations are increasingly expanding their horizons regarding the scope of employee experience: emphasizing the role of employee development, autonomy, and relationships. The 'new' employee experience empowers employees to make decisions about how their work is completed as well as visualizing how their careers can progress within the company.

Most employers are failing to deliver on this new vision of the employee experience, however. Just 32% of US employees felt engaged (including feeling a sense of belonging and dedication to their work), according to a Gallup poll—a gap which adds up to around $500 billion in lost productivity. Worldwide, the picture is even bleaker. Just 15% of workers in Gallup's State of the Global Workforce report felt engaged at work.

Regarding measuring the impact of employee experience in terms of return on investment (ROI), companies should look at the employee journey as a whole. From the employee hiring process right through to retirement, focusing on the key processes and other subtle factors that contribute to how an employee feels about where they work. This huge scope means few companies are truly measuring employee experience ROI—otherwise known as ROX.

Once the desire to measure and improve employee experience has been established, the next step is to find the right method for measuring ROX. Forbes suggests homing in on calculating how "companies that focus on employee experience tend to see greater improvement in business performance". Calculations require data, so a preparatory step is investing in a platform or set of digital tools that capture detailed information about employee productivity and business performance.

Measuring employee experience ROI from tangible sources

There are two clear tangible sources that can contribute to ROI data for the employee experience: revenue (financial performance) and shareholder returns (stock prices).

To give you an example, aluminum manufacturer Alcoa's new CEO decided to prioritize employee safety. This in turn led to increased employee engagement and productivity, along with fewer safety incidents. As a result, within a decade, the company reported a 500% increase in annual revenues. Another example can be seen at Campbell's Soup. The incoming CEO decided to prioritize employee experience. Their stock price rose 30% in stark contrast to the 10% loss suffered by similar S&P 500 stocks in the same period.

Gauging employee satisfaction and ROI from intangible sources

Engagement scores largely dictate the intangible ROI of a company's employee experience efforts: customer loyalty, employee retention and attrition rates, CEO approval ratings, and where the company sits in best workplace rankings.

For example, Zoom has one of the highest reported employee engagement scores, at 81.5%, reflecting a series of recent employee experience improvements. Another prominent example is Arby's, previously plagued by reports of struggling employee morale and high attrition rates. Under their new employee experience program, employee retention shot up to over 90%. And, reflecting a focus on employee experience initiatives, Boston Consulting Group's CEO has a high approval rate of 89%

Lastly, let's look at an example of a company ranking highly on best company, employer or workplace lists in Forbes, Glassdoor or Fortune. From 2013, SAP didn't make the Best Places to Work list. After revamping its employee experience initiative, however, it returned to the list and has held a place since 2017.

Delivering better employee experiences

It's clear from the above examples that employee experience is inextricable from business performance. Engaged employees who have the training and technology needed to excel in their work are more productive, less likely to leave, and more willing to deliver on company needs. The ripple effect of good employee experience practices goes way beyond the purely financial benefits.

Companies where leaders work with HR and IT to strengthen relationships, increase visibility into the employee experience, and make meaningful improvements in response, are more likely to maximize their employee ROI. The better the employee experience, the higher the ROX.