How do you justify investment in HR technology when the ROI is not quantifiable?
Guest post by Mike Maiorino, CEO and Founder of HRMS Solutions. With 24 years of dedication to the HR technology profession, he has earned a reputation for being a subject matter expert regarding HRMS software and SaaS solutions. As a FinancialForce partner and thought leader in the HR tech space, he’s here to help you get buy-in for your project.
Everything is in place for you to start researching a new HRIS system – you’ve got executive approval to start researching different technologies, your projected growth is on target and your potential acquisitions are planned. And since you’re the project manager for this new HRIS initiative, it’s your job to present the cost justification, direct financial savings and overall value your company will receive from deploying a new HR system.
So how do you show this unquantifiable ROI?
While replacing your current disparate systems and manual spreadsheets seems like a daunting task where you’ll need to re-evaluate your current recruiting, onboarding, core HR, benefits, performance management, time & attendance, and learning management solutions and processes – the cost and time benefits are plenty considering that employees are by far the #1 expense for any U.S. business.
The most common quantifiable financial savings in an HRIS investment are tied to these:
1. Elimination of Manual Processes
- Online benefit open enrollment
- Electronic Data Interchange (EDI) of benefit enrollment data to insurance carriers
- Automation of performance appraisals
- Automation of salary and compensation planning
- Standardized recruiting and onboarding processes
2. Significant Reduction In Time To Process Transactions
- Elimination of data entry into multiple systems
- Decrease in data entry errors
- Automatic generation of reports
- Automated employee tracking, alerts, and notifications
- Reduction of time spent on administrative tasks
3. Reduction in Risk and Litigation Protection
- Federal compliance (e.g. EEO, AAP and OSHA)
- ACA compliance reporting
The most valuable component to an HRIS investment is not the operational efficiency, the sexy UI, or the potential 30% savings by eliminating transactions, but the ability to access meaningful data and measure your strategies against user-defined metrics. Here are several examples of what I would consider to be “meaningful data” or unquantifiable attributes as a result of investing in an HRIS:
- Identifying best hiring sources for employees based on performance ratings in their respective jobs.
- Empowering employees to freely discuss and enroll in company benefit plans in the privacy of their homes. Providing this control, convenience and privacy is important to employees today.
- Initiating an e-Learning strategy to increase employee skills, increase productivity and measure the impact of their performance based on target goals could return a 5% increase. E-Learning also provides employees with the ability to have some control over their career development, which positively impacts each employee’s morale and self-worth.
- Increase employee recognition by publishing time-sensitive contributions with badges and notoriety via HRIS collaboration tools. Modern HRIS applications have a type of internal online chat which offers real-time text transmission. Managers use this mechanism to provide better coaching, motivation and team alignment.
- Ability to instantly identify high, medium and low performers based on user-defined criteria combined with a compensation strategy to push employees in a specific direction. Leading individuals with carrots versus hitting them with a stick instils loyalty and a sense of belonging.
- Creating user defined reports and dashboards with KPIs to measure the predictability of the business and trends in your workforce.
- Implementing a recruiting and onboarding system. As an executive, you are constantly trying to find ways to distinguish your company with your customers, your employees and your competition. First impressions are critical as they distinguish your company’s brand. Creating an efficient, modern and easy-to-use talent acquisition and onboarding process via self-service portals creates an impactful and memorable impression.
Businesses that are only looking for a “quantifiable ROI” never seem to find enough direct savings and, as a result, the project stalls in the sales cycle and never gets funded. In the end, I find businesses resolving their HRIS ROI concerns with a combination of hard and soft dollar savings. The combination of the two offers a more balanced approach in terms of what executives have stated regarding the justification of an HRIS ROI.