ROI or the Return on Investment is the measure which is used to calculate profit or return earned from investing cash. Organizations and corporate measure ROI for various training and knowledge/skill development program in order to calculate the efficiency of the program. To calculate the ROI of mentoring all the involved parties or beneficiaries of mentoring program/relationships have to be considered namely, the mentor, mentee and the organization.
An evidence based research revealed three areas that can be used for mentors and mentees to calculate the ROI. They are: salary rates, retention rates and promotion rates. According to the study, both mentors and mentees were found to have had 20% increase in salary grades than the control group (i.e. the non-mentored employees). Similarly, attrition was 20% less among mentors and mentees when compared to the control group. Promotion was five times higher among mentors and mentees than in control group. This research as well as other previous studies has proved that mentoring has a key impact on ROI. The ROI of the organization can be calculated by using the following areas: retention, talent recognition, talent attraction, lesser investments on training and development programs and creating competitive environment in the organization.
An example to calculate ROI in an organization:
- Calculate the total cost of mentoring program for a year
- Calculate the cost of each employee attrition
- Multiply the number of employees leave in a year with the cost of each employee attrition which you call the total cost of attrition for a year
- Subtract C-A which is turnover rate
- Divide D by A and multiply by 100 which will give the ROI percentage
This is one way of measuring ROI of mentoring but not a standard methodology. There may be other variables such as other training programs which need to be added to the employee CTC. Whatever be the methodology used to measure ROI, research has proved a positive significance on the ROI of mentoring.