How To Calculate the ROI of a Company Retreat
Article Author: Kirk Reynolds
Introduction: The Benefits of a Company Retreat
You manage a team of remote employees and you intuitively know a company retreat would boost team morale, build essential relationships and get everyone on the same page. But how do you justify the investment? Company culture, by nature, is not easily measurable so calculating an ROI may result in frustration. Fortunately, there's significant and substantiated research to prove that when done properly, company retreats can have profound and lasting positive impacts.
In a recent article in Forbes titled "Why Retreats Are Worth Their Weight In Gold," author Michael Yoerger claims that there are many benefits to a company culture that encourages employees to spend time together outside of work hours, and they aren't just limited to having fun. Retreats can help improve work-life balance, increase employee happiness and morale, as well as help improve problem solving skills and overall productivity at your company.
The benefits of a company retreat are many. Retreats are a great way to build trust and relationships, as you're forced to spend time with each other in an environment outside of work. This gives you the opportunity to get to know each other better, which can be helpful when you're facing complex decisions and challenges together. Retreats also help foster team building because they give employees an opportunity to interact with their peers outside of their department. In addition, retreats can greatly increase employee happiness by providing them with opportunities for personal growth and development through workshops or seminars that may not be offered at the office.
In this article, we are going to show one way to calculate the potential ROI from a company retreat. The return will be generated from two categories: employee retention and employee productivity. Given the number of variables, this is not intended to be a fixed formula for all businesses. Rather, it's a guideline to help you determine if a company retreat will make not just a positive impact on team morale and happiness, but to the bottom line.
Calculating the ROI of a Corporate Retreat
The ROI on Company Loyalty
Company retreats result in the employees having a deeper connection with each which leads to loyalty to the company. So why is company loyalty important and how do you measure it?
According to The Society for Human Resource Management (SHRM), loyal employees are up to 87% less likely to leave their current company. SHRM also reported that the cost of replacing and training an employee is approximately 6 to 9 months of their salary. For example, an employee making $100k per year will result in an incremental $50k to $75k in costs for recruiting, hiring and training. Additionally, there's the cost of lost productivity as well as the productivity of the surrounding teammates. The overall cost of replacing a lost employee as well as the lost productivity is in the range of 90% to 200% of the employee's salary. Using the same example of an employee earning $100k annually, the overall cost of the employee quitting is $90k to $200k.
To calculate the overall ROI on a retreat, take this example:
A company with 100 employees and a $10M annual payroll loses 15 employees per year due to attrition. That's a 15% attrition rate (15 employees who quit / 100 total employees).
If the company invests in a positive culture through programs such as offsite meetings and retreats, employee loyalty increases and attrition is reduced by up to 87%. To be conservative, estimate that company retreats can only take credit for 25% of the reduced attrition. That's an improvement of 22% in employee retention.
The calculation for the ROI: total payroll * current attrition rate * improved retention rate * overall cost of attrition.
In this example, the math is: $10M payroll * 15% attrition rate * 22% improved retention * 90% to 200% in overall costs of attrition.
The benefit in retention to this company is $297k to $660k.
The ROI on Employee Productivity
Company retreats are proven to increase connection among employees which has a real and positive impact on happiness. Research has proven that employee happiness lifts nearly every business measurable index. Productivity is boosted by 31%, sales are increased 37%, task accuracy is improved 19% and customer ratings go up 10%. Taking all into account, happy employees can boost profitability by up to 21%, according to Harvard Business Review and Gallup.
Building on the example above, assuming a company has 100 employees and an average of $250k in revenue per employee, the business will have a total revenue of $25M. Assuming 25% of the boost in employee happiness is attributed to the investment made in company offsites and retreats, the ROI is calculated by: revenue increase * number of employees * revenue per employee * 25% (the attribution we're giving to company retreats for increased employee happiness) * net profit margin.
In our example: 37% increase in revenue * 100 employees * $250k revenue per employee * 25% attribution to company retreats results in an increase in revenue by $2.3M. Assuming a net profit margin of 10%, that's $230k to the bottom line as a result of the company retreat.
Yes, Corporate Retreats Have a Positive ROI
While your company's inputs will vary, this will be a good starting point to calculating the ROI of a company retreat. In the example above, the company will realize a savings of $297k to $660k in attrition plus an increase of $230k in net profit due to boosted productivity. That's a total of $527k to $890k to the bottom line. And while the ROI helps you justify the investment for your company, you will enjoy having a happier, more connected and more loyal team.
If you would like to discuss your next corporate retreats with the experts here at Wilder Retreats, we would love to hear from you. We can help with corporate retreats in Southern California, company retreats in Austin, corporate retreats in Utah, and retreats across the US and abroad. We would be happy to send you a proposal.