Determining the return on investment (ROI) of an individual is a common challenge that both managers and HR personnel must deal with on a regular basis.

ROI is a term that often gets bandied about by those in corporate leadership, but it is also a useful device to help understand individual performance; and possibly the need to make any staffing changes. ROI is represented as a ratio of benefit (return) of an investment to the price of the investment.

To show the effectiveness of a current manager, follow their progression and possibly pick out areas for improvement, it’s critical to determine the company’s ROI on them as an individual contributor. A cost-benefit analysis is typically used in this area to determine ROI.

Costs

Every company leader understands that to be able to make money, you have to invest some money upfront. Hiring a manager is an investment in a team and in business. Sometimes, the investment takes a while to pay off and provide the return that the company wants to see. The element of time is crucial to think about when determining the ROI of an individual manager.

An effective approach to understanding the cost of a current manager hire is to start by breaking down the process used to hire them on a granular level, including any costs associated with posting a job, labor from those in the hiring process and various pre-employment screenings.

The costs of employing a manager don’t end there. In addition to salary and benefits, there also may be costs associated with the technology they use, their workspace, onboarding and training.

Benefits

When trying to determine the return a manager provides, it helps to be specific when quantifying benefits.

One critical metric for companies to follow with regards to their supervisors’ performance is employee turnover rate, as good management practices can significantly lower turnover. As you may know, high worker turnover hurts a company’s financial well-being. High turnover can also negatively impact staff morale and efficiency, especially if there are large numbers of people leaving the organization in a short time period. When a manager is able to connect their employees with a sense of purpose and to the company’s organizational goals, it can help them see the value in their work and a future with the company.

Higher productivity is another benefit of a good manager. Companies have to make certain that their workforce is engaged so efficiency remains high and staff members are working toward achieving organizational goals. Studies have revealed that highly engaged staff members have considerably more engagement with customers, fewer accidents and greater profitability.

Another benefit of good management is greater efficiency. If a manager can get her or his team to perform more services or produce more products in less time, the company reaps an enormous financial benefit.

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