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    How Proper Employee Onboarding & Training Can Increase Company Value
    The Vault

    How Proper Employee Onboarding & Training Can Increase Company Value

    December 2023

    We want to share a personal journey that has drastically changed the game for BGW as a firm, and that’s employee onboarding.

    (By the way, we try hard to hire the best people, and it’s embarrassing when we don’t, but we want to share this because it really has been impactful.)

    This past year, we realized we really had some shoddy processes and documentation when it came to employee onboarding. Of course, we trained people. We’d even check in with them now and again. And we’d do annual performance reviews. Still, someone could hide their performance for a year or better before we really discovered it. We simply had to overhaul our frequent and repeatable processes.

    Here’s how the lights came on for us:

    We had one employee with a salary of $100,000, fully loaded with benefits, and paid a recruiter fee of $25,000. As we looked back on this employee’s time, while he did work, a supervisor often had to redo it. And in his case, he had multiple supervisors covering for him who weren’t communicating with each other about his performance.

    The result? We effectively wrote off all his time. At the same time, we turned down some work because we thought we didn’t have capacity (which we would have if this guy had been performing, and we didn’t have rework). And the final straw, a client fired us – which is rare – due to a delay in delivery. Eventually, we had to face the music and hire a replacement. Similar salary and another recruiting fee. UGH.

    So, bottom line impact, at a minimum, was $150,000 between his salary and the two recruiting fees. Another way to look at it is the $350,000 of work we could have done (but didn’t) as well as the lost client ($50,000 annual fee X 5 years of the relationship = $250,000).

    We'd love to say that since starting the company in 2006 this is the only time a scenario like this has happened. We can’t, so we won’t.

    However, the new onboarding process that we’ve adopted in our journey through Sandler’s Organizational Excellence program has changed the game. Each employee has a very detailed six-month onboarding journey with a set of extremely specific skills they will be trained on and will have to demonstrate mastery of at weekly measurement points. We’ve tried it a few times now, and so far, so good. Optimistically, at a 5X EBITDA multiple, it’s possible that with this one commitment to change we’ve added around $2.5m in value to BGW if you look at the work we can now perform because we have people performing to their potential. That’s not necessarily triple, but it is a lot.

    Think about this in your employee onboarding experience. The most likely scenario is not that you hire bad people, but you allow bad habits to go unchecked until, in hindsight, some people look like bad hires. The truth is, there just aren’t enough check-ins or instructions, and no one knows until it’s too late.

    What’s that costing you now? What’s it costing you in value as you’re trying to grow and scale up for a potential sale at some point?

    If we can be of any help as you work on this part of your business, please reach out.

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