Investing in HR tech – getting your ROI
Do you use a human resources management system (HRMS) or other HR software? Are you thinking of investing in technology to support HR in your organisation? Whether it’s a straightforward database or the latest machine learning-driven recruitment and talent management package, getting a return on your investment (ROI) is something you should factor in from the start.
After all, you’re investing time, money and effort in new tech – researching the market to find the best option, the cost on the price tag, the inevitable extra or hidden expenses, setup and training, and just getting everyone to use it – you need to see a return on that investment.
The obvious benefits of calculating your ROI
Knowing you got your money’s worth should be motivation enough but it’s not the only benefit of measuring the ROI of your HR tech. An ROI exercise can give you:
- Confirmation that your original business case was sound (or not).
- An efficiency benchmark for your HR processes.
- Feedback on how you selected and implemented the software.
- A steer on your future HR technology strategy.
In a nutshell, ROI is…
A generic ROI exercise includes:
- Knowing what performance improvements and measurable impacts you can expect from your new system – setting metrics in advance that (non-HR) stakeholders can sign up to.
- Collect information and data that will show those improvements (or not).
- Contrasting the collected information with comparable performance data from the period prior to implementation of the system and assessing the ‘value’ of the system, its ROI, and using that assessment to influence future decisions and strategy
In other words, an ROI exercise is not a full stop; it’s part of an ongoing process of improvement, which is why you bought (are considering buying) the HR technology in the first place.
- Where to expect improvement
Ideally, you decide on the data and metrics that will form the basis of calculating ROI before you acquire the system. That way, you’ll know exactly what it is you’re aiming to improve with your software, and how you’ll measure that improvement. Consider:
- The flow of HR transactions
- Specific HR processes
- Employee engagement – measured via staff opinion survey or similar.
- Changes to HR expenditure
- Management time spent on HR
- The percentage of total operating costs devoted to your workforce.
- Recruitment metrics – e.g. measuring the time from vacancy to post filled.
- The rate of certain types of calls/queries to HR (if your system offers employees self-service functionality, the HR team should receive less queries).
A thought: ROI often conjures thoughts of cost reduction, because HR is often viewed as a cost, an overhead. But while a less heavy burden is an improvement, but it’s still a burden; you’re basically saying, “We’re not as much of a drain on resources as we once were.” Instead, look for ways to measure service quality, or additional projects and services that the HRMS has freed you up to deliver. Added value is what you’re looking to demonstrate.
- Totting up the financial cost
As hinted at above, the monetary cost of new HR software goes beyond the figure on the price tag. When calculating cost, include:
- Ticket price – either a licence fee or regular pay-as-you-go instalments to the vendor.
- Implementation costs – employee time (for the team implementing the software, meetings, stakeholder engagement, etc.), user training, possibly consultancy fees, any hardware/storage costs (if on-site).
- Maintenance – the cost of the vendor’s ongoing support package, any other contracted ‘extras’, plus the staffing costs for anyone internal involved in keeping the system up and running).
- Looking for the ‘payoff’
In essence, go back to the business case that justified buying the system. Compare the post-implementation measured benefits against metrics and goals that you set in the beginning. Was it worth it? Possible improvements include HR performance KPIs, time savings, improved employee retention and/or turnover, faster or more efficient HR transactions, better staff engagement; even fewer sanctions or penalties for non-compliance with employment legislation.
Unexpected sources of ROI
So far, we’ve talked about ROI improvements in terms of measurable efficiency and cost. There are other potential benefits that are less measurable but possibly still worth your time exploring.
- A less hierarchical organisation – Organisation-wide HR systems (e.g. enterprise-level HRMS) increasingly come with comms functionality, links to social media and so on that can help break down internal barriers and silos. Are your people collaborating more as a result?
- Increased automation – More and more HR technology is using robotic process automation (RPA) to streamline and automate routine, day-to-day, rules-based processes. So-called AI can be used for data collection, data verification, pre-population of standard forms, automatic running of reports, managing pro forma emails and even (with online chatbots) deal with simple queries. What impact is that having on the operation and perception of HR?
- Better teamworking – The comms tools and easy access to data can also improve how existing teams work together; especially virtual teams operating from various physical locations. How has your HR software impacted on COVID-mandated remote working?
Any new software is a business investment and you need to see a return on that investment. That ROI may be solely financial (reduced HR costs and overheads) or it might be greater efficiency. Or it may be some other unexpected benefit. But budget-holders, the C-suite and other stakeholders want to see value for money and that’s the bottom motivation for measuring your ROI.
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