Calculating The Cost-Benefit Of Mentoring

Because most of the organisational benefits of mentoring are difficult to measure in cash terms, it is not easy to develop a convincing financial case other than for mentoring's effect on retention. A typical calculation for the latter might be:

The average cost of losing a skilled employee:

Recruiting a replacement (25% of salary)	£7, 000
Work not delivered during the gap between departure of one and arrival/getting into harness of the other	£7, 000
Loss of customers	£10, 000
Training the new recruit to the same standard	£5, 000
Total	£29, 000

Clearly, the more senior and/or more critical the employee is to the company, the greater the cost.

Average cost per employee lost (A) multiplied by the number of employees lost each year provides a baseline cost of failure to retain. The minimum expected impact on those covered by the proposed programme is 25 per cent additional retention (B). The minimum net saving to the organisation is therefore A times B. The larger the programme, the higher the overall saving.

An additional direct saving relates to re-recruitment costs. HR can (and probably should) track the volume of employees returning to the organisation, and the proportion of these who are doing so because they maintained a positive relationship with a former mentor. Some mentoring programmes aimed at specific groups, such as mothers returning from maternity leave, are particularly straightforward to measure in this regard.

The more mentoring can be tied to clearly defined business goals, the easier it is to make a financial case. Connections that have been made by programme co-ordinators include:

• the cost of senior management and HR time in dealing with employee tribunals related to equal opportunity issues

• the cost of ‘doing the milk round' versus that of having highly suitable graduates approaching the company (because of the reputation of its initial training, which includes mentoring) increased sales from newly appointed insurance agents

  (20 per cent higher during their first year with the company)

• reduced costs of managing succession planning, because movement of talent is mainly within the company rather than out of it

• (for e-mentoring) reduced travel costs compared to classroom training.

In general, however, the financial case is not what swings the argument for or against mentoring. The top team either accepts that there is a wide range of mostly intangible but highly valuable benefits from mentoring, or it does not. If it does not, then it often makes sense to begin their education about the value of informal learning by concentrating on coaching, both in the line and - where accepted - externally for the leaders themselves. The more comfortable they become with performance-based task-oriented informal learning, the easier it becomes to make the step to understanding and valuing the more holistic learning of mentoring.