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Article by: Bridgette Klein — View more articles by Bridgette Klein

Posted on: March 9, 2020

Creating Lifetime Value at Your Organization

In marketing, we have a key performance indicator (KPI) known as lifetime value or LTV. It’s a way of understanding the value of a customer brings to an organization. Essentially it helps marketers look at objective data about how we’re doing by collecting the numbers about average transactions, frequency of sales, and the customer lifespan. When combined with customer acquisition costs, marketers can zero in on the real benefits of retaining customers vs. acquiring new customers. The data ensures we make smarter and more efficient choices with our activities and marketing. It’s not enough to understand the LTV for your customer population at-large. By segmenting the different audiences, we’re able to make decisions and improve value within the various segments.  

That was a nice mini-marketing lesson, but what does it have to do with HCM technology, HR, and payroll? 

If you apply the concept of LTV to employee metrics, you’re able to look at employee retention beyond the specific impacts on human resources. Utilize the metrics you likely have around candidate acquisition costs, average tenure, and onboarding to understand the Employee Lifetime Value. This should allow you to make better decisions on salary, onboarding materials, and development opportunities.  


In the video below, I dive deeper into some ways that HR can steal the concept of LTV from marketing to improve their methods.  


I did forget to talk about one thing that is incredibly important to me*: the relationship between candidate/employee experience and your organizations’ reputation.  

Employee value doesn’t stop when an employee leaves. How people talk about your organization – whether that’s after candidate experience, while they work there, and when they separate – can be tremendous or detrimental to your organization. They can inspire or discourage people from applying and working there. They can impact the culture. And finally, they can affect the profits of your company. Virgin Media's research found that a poor candidate experience once cost them $5m/annually.  

While it is incredibly important to track your candidate acquisition and onboarding costs, don’t forget to understand the value employees bring to the organization both in tenure and in reputation. 


*Almost five (FIVE!) years ago I spoke on this topic at DisruptHR Cleveland. Check out the video here.