Return on experience: What employee ROI is and how to measure and improve it

In this article, find out what employee ROI really means, along with key strategies and ways to use employee experience tools to quantify and enhance your organization’s return on talent.

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For internal comms and employee experience (EX) teams, proving value isn’t just about engagement – it’s about demonstrating how your efforts influence employee ROI and overall organizational performance.

In this post, we’ll explore practical strategies to connect employee experience initiatives with bottom-line results, show how internal communicators and EX pros can quantify their impact, and share actionable steps to boost ROI through better employee experiences and smarter use of internal comms tools. We’ll also cover the business uses of intranet platforms and employee experience tools in supporting engagement, productivity, and ultimately, higher employee ROI.

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What is employee ROI and how is it calculated?

What does employee ROI mean?

Employee ROI, or employee return on investment, is a metric that quantifies the financial benefit an organization gains from employing and investing in its workforce. It considers factors such as:

• Net profit generated by employees
• Total employee costs
• The impact of engagement, training, and retention strategies

By understanding employee ROI, organizations can make informed decisions about resource allocation and employee experience initiatives.

How is employee ROI calculated?

In its simplest form, the formula for employee ROI calculation is:

(Net profit generated by employees – total employee costs) / Total employee costs x 100%

A common variation is “revenue per employee,” which equals total revenue divided by total number of employees. Though McKinsey & Company calls this metric a “a blunt instrument” because it’s influenced by many factors beyond productivity, it consistently separates high-performing companies from their competitors, according to the firm’s years of benchmarking data. 

Of course, these high-level calculations don’t paint the whole picture. Let’s dive a bit deeper into other dimensions that impact employee ROI.

What factors influence an organization’s employee ROI?

An organization’s employee ROI can be influenced by factors such as:

• Operating expenses, training investments, and compensation (wages and benefits)
• Absenteeism or unearned PTO
• Turnover, which can cost a company one-half to two times an exited employee’s salary to refill the position
• Quantifiable evaluative and perception data, such as satisfaction survey responses, performance reviews, tracked goals, and customer satisfaction scores

Many online calculators exist to help you quantify employee ROI across these and more metrics.

What is return on employee experience (ROX) and how is it calculated?

A related measure communicators and EX pros should pay close attention to is return on employee experience, or ROX. This is another – often superior – way to quantify the employee experience and can be used in tandem with employee ROI to paint a more effective picture.

What is return on employee experience (ROX)?

Return on employee experience (ROX) measures a company’s financial profit from investing in EX and engagement strategies. This is the metric communicators and EX pros can use to articulate the value of employee experience to leadership.

How is return on employee experience (ROX) calculated?

The typical formula for calculating return on employee experience is:

(Net profit generated by EX investment – total EX costs) / Total EX costs x 100%

More nuanced calculations might consider the range of engagement metrics that can influence performance and satisfaction at the employee, function, and organization levels. This can include time spent onboarding, in meetings, and searching for information, along with visits, likes, and shares on employee-facing tech.

Why is measuring the return on employee experience (ROX) important?

Measuring the value of employee experience is crucial for understanding employee experience ROI and its impact on overall business outcomes. ROX is also the surest way that internal comms, culture, and people professionals can boost their organization’s return on talent.

That’s because strong engagement – the product of an enviable employee experience – has an outsized impact on company success. Gallup found that organizations with high employee engagement are 23% more profitable, while poor engagement cost employers $1.9 trillion in lost productivity last year alone.

Engagement can make or break key dimensions of employee ROI. In its 2024 meta-analysis encompassing more than 300 organizations around the world, Gallup found that companies in the top quartile of engagement saw the following median advantages compared to their counterparts in the bottom quartile:

• 10% better customer loyalty
• 23% more profitability
• 14% more productivity based on production records and evaluations
• 51% lower turnover for organizations in low-turnover industries
• 78% lower absenteeism
• 70% higher wellbeing

They also fared substantially better in terms of safety, quality, and participation.

With such profound stakes, visionary communicators are investing heavily in creating experiences that fuel engagement. According to Edelman’s Future of Corporate Communications study, 60% of internal comms leaders identify employee experience as the single most critical area to prioritize in the near term.

What drives employee engagement and disengagement?

Creating covetable experiences starts with identifying the factors that fuel – or stall – engagement.

As an example, McKinsey found that organizations can save up to an estimated $56 million annually by resolving these six drivers of disengagement:

1. Inadequate resource accessibility
2. Lack of geographic ties and travel demands
3. Unsustainable work expectations
4. Uncaring and uninspiring leaders
5. Lack of support for employee health and wellbeing
6. Non-inclusive and unwelcoming community

Further, the experiences likeliest to produce strong engagement, according to Gallup, are:

• Purpose
• Development
• A focus on strengths
• Ongoing conversations
• A caring manager

How your digital workplace can impact employee ROI

A thriving digital workplace can help you reinforce drivers – and avoid detours – in employee engagement. Understanding the business uses for intranet platforms and other employee experience tools is essential for maximizing employee ROI and driving organizational efficiency.

Investing in the right employee experience tools can lead to increased productivity and performance by providing employees with the resources and support they need to drive efficiency and contribute to better business outcomes. Digital tools also amplify the value of employee experience by making engagement measurable.

See the table below for an idea of EX software features that can enable each core driver of engagement.

Driver	Detours	Example features
Purpose	Lack of geographic ties and travel demands Lack of support for employee health and wellbeing Non-inclusive and unwelcoming community	Content management Mobile intranet Personalization Workplace social networking Workplace search
Development	Inadequate resource accessibility   Unsustainable work expectations	Content management Mobile intranet People directory
Ongoing conversations	Lack of support for employee health and wellbeing Unsustainable work expectations	Communities Forums Idea management Mobile intranet People directory Personas Workplace social networking Surveys
A focus on strengths	Uncaring and uninspiring leaders Unsustainable work expectations	Rewards and recognition
A caring manager	Uncaring and uninspiring leaders	Communities Content management Workplace social networking

Let’s dive deeper into each driver and its digital workplace enablers.

Why is purpose important for employee ROI?

Nearly two-thirds of executives from highly regarded organizations attribute 30% or more of their companies’ market value to culture, making employee ROI the “most underrated” determinant of “a company’s future success,” Korn Ferry found. When it comes to cultivating a culture imbued with purpose, collective and individual experiences are equally important.

How do shared values affect employee engagement and ROI?

Shared values are central to the value of employee experience and its ROI. Unfortunately, according to Gallup, only 27% of U.S. employees strongly believe in their organization’s values, and less than half even know what those values are. This disconnect can lead to checking out: One in five employees feels disengaged from their work when they aren’t connected to the company or culture, says videoconferencing vendor Owl Labs. 

An employee experience platform or intranet business’ uses include reinforcing shared values and improving cultural alignment. Look for employee experience software that can broaden access to tools and resources, thereby radiating your organization’s commitment to not only a clear mission, but also top values of today’s workers, such as sustainability and inclusion.

EX software features like content creation tools, enterprise search, topic tags, and social functionality can help improve employee ROI through creation, organization, and promotion of a knowledge base of resources and inspiration that embeds and radiates your values.

A mobile app, meanwhile, can allow deskless workers – who make up 80% of the global workforce – to stay connected to colleagues, leaders, and your organization’s north star, whether they’re on the factory floor making your products or the open road delivering them to customers.  

How does personal clarity contribute to employee ROI?

To feel a sense of purpose and fulfillment at work, employees must understand their role in achieving the company’s mission.

Personalization features in an employee experience platform can boost employee ROI by clarifying, reinforcing, and energizing your people around their distinctive contributions. Organizations can deliver on it through personas, permissions, and built-in intelligence, ensuring relevant content is delivered to each employee based on factors including role, location, and preference.

Profiles and past interactions, for example, can help pinpoint and push relevant news, announcements, and resources to everyone, as well as ensure content being created and shared by active employees is reaching audiences interested in the subject matter.

An AI-driven recommendation engine, meanwhile, can facilitate the automatic discovery of new content, while geofences – virtual perimeters set up around specific locations – can ensure employees see only content intended for them each time they log on. This can be especially helpful for individuals who travel frequently and require different content depending on their context (e.g., salespeople or senior leaders on location visits). 

What role does employee development play in ROI?

According to McKinsey, one of the top ways to build a higher-return workforce is to focus L&D efforts on skill-based learning journeys, which can be “more cost-effective than building traditional cohort- or role-based journeys.” Plus, reskilling current employees for new opportunities cuts down on the recruiting costs that so commonly impact employee ROI.

Here again, personalization can play a role. “The most effective organizations encourage personalized, adaptive learning,” McKinsey explains. “Employees are motivated to own their journeys by deciding which skills and areas of expertise they want to focus on. They are given feedback, along with coaching and peer-learning opportunities, and they are supported by a digital ecosystem that can help them track their progress over time.”

Enabling this dynamic experience can be tough in today’s ever-more distributed world of work: According to Owl Labs, nearly half (48%) of hybrid workers believe they’re missing out on impromptu feedback and development that could hamper their career growth.

So look for software features that spark in-the-moment learning and collaboration, such as a comprehensive knowledge base of courses and materials, a searchable directory of in-house experts to call up at a moment’s notice, lively discussion forums that allow team members to crowdsource precise solutions to their queries, and a mobile app that makes it all available on the go. 

How does focusing on strengths improve employee ROI?

Strengths-based feedback is critical to increasing employee ROI through engagement. According to Gallup, employees who get enough information on goals and successes are 2.8 times more likely to be engaged. But it’s far too rare an experience: One of the hardest statements for an employee to strongly agree with is, “In the past seven days, I have received praise or recognition for doing good work” (Gallup again).

To cement and scale a culture of recognition, look for employee experience tools that reward good work and citizenship with points that can be redeemed for gifts and distinctions.

Why are ongoing conversations vital for employee ROI?

The ability to use talent feedback in transformational ways will set the best companies and internal comms leaders apart in the future of work. The ones “to watch will be those that actively listen to their employees, harness the power of their sentiments and insights, transparently communicate next steps, and drive meaningful change while involving others in the journey,” says Julia Christenson, Edelman’s U.S. Chair of Employee Experience.

How does employee listening enhance ROI?

Employee listening, also called continuous listening, involves the ongoing capture, analysis, and actioning of employee sentiment. In short, it’s how you tap into how your people are doing, individually and collectively, so you can respond in smart and helpful ways. And it can be a powerful driver of employee ROI.

This practice can also boost goodwill and the bottom line. Yet it’s an experience that’s markedly uncommon: Only 30% of U.S. employees strongly believe that their opinions count at work, Gallup says.

To help power your listening strategy, look for employee experience tools with features like:

• Surveys and questionnaires
• Social intranet and advocacy features
• Idea management
• Personalized content

Just don’t overdo it on the outreach. Gallup found that employee engagement efforts are prone to failure when they introduce too much surveying or complexity.

In its 2023 corporate communications report, Edelman points to a few creative ways to solicit and action feedback, including ideas jams that empower all people to weigh in on important decision points and councils that allow frontline workers to regularly engage senior leadership.

Also consider taking your listening to the next level with employee activation. In this emerging practice, your employees become catalysts of company culture, strategy, and reputation through your systematic collection, synthesis, and application of their insight and enthusiasm. It’s a propulsive combination of listening, empowerment, and advocacy that’ll mark the future of an engaged workforce and a peerless employee experience.

How do collaboration and knowledge sharing impact employee ROI?

Today’s employees are overwhelmed by their workplaces – which have have grown so unweildly that many don’t know where to find the people and information they need to do their jobs. This drags down ROI in a significant way.

One of the key business uses of intranet is to serve as a central hub for internal comms and resources. To reduce such digital friction and facilitate seamless collaboration, look for an EX platform or modern intranet that lets you:

• Cut through the digital glut with features like single sign-on (SSO) that eliminate the need to remember numerous passwords; biometric authentication options, such as Touch and FaceID, that improve speed, security, and ease of use; and intuitive integrations that curate access – and guide attention – to a single source of truth
• Create a one-stop shop for core tools, processes, policies, documents, and other information that your employees use the most, all quickly discoverable with built-in intelligence and enterprise search functionality
• Ensure your entire workforce – including members who are on the go far more often than they are at a desk – to instantly access the tools, information, and colleague connection they need from a shared digital headquarters via a mobile intranet and people directory
• Promote seamless, accessible information sharing through features like multilanguage translation of text communications, alt-text generation for images, automatic captioning of video content, and text-to-audio conversion for a podcast-like way to digest company news

Why is connection important for employee ROI?

According to Owl Labs, more than a third of managers (34%) who lead remote or hybrid teams cite maintaining cultural connection, team camaraderie, and communication as a top concern. Social intranet features are among the most valuable business benefits of intranets and other employee experience tools for fostering connection. An employee experience platform’s social features can forge strong bonds across ever-more distributed workforces.

Look for social media functionality that makes your platform sticky and keeps your people in conversation. Think @mentioning, #hashtagging, image-friendly newsfeeds, commenting, sharing, and gamification. Also curate forums, discussion boards, and communities of practice that give employees a place to connect over specific challenges or interests.

How do managers influence employee ROI?

The link between manager and employee experience is inextricable. 

McKinsey research on organizational health shows that leaders who effectively “run the place” – e.g., by making good decisions, allocating the right resources, and leading thriving teams – build healthier organizations, which, in turn, deliver three times the total shareholder returns compared to unhealthy organizations.

Managers influence all the dimensions of employee experience discussed so far. EX software can facilitate their success through features that allow them to do things like:

• Foster development by curating goals-focused learning resources and making career-building connections with the help of a people directory
• Cultivate team camaraderie through communities, forums, and social capabilities
• Promote smooth transitions and healthy dynamics through onboarding and enrollment features that get newcomers up to speed quickly

How can communicators demonstrate their impact on employee ROI?

Organizations that prioritize the value of employee experience see measurable improvements in employee experience ROI, engagement, and retention.

Using hard data to measure and enhance your employee experience initiatives can significantly boost your employee ROI. As an example, in addition to a free intranet ROI calculator and guide, Interact has advanced analytics and integrations that help organizations deliver on numerous dimensions of experience and engagement.

As you use such enablers, synthesize the data they collect to quantify your impact on your organization’s overall return on talent. Reporting on employee experience ROI validates the impact of EX initiatives, and highlighting the business uses of your intranet or other employee experience tools in your reporting can do even more to strengthen the case for EX investments going forward.

Frequently asked questions about employee ROI