Are you in any one of these situations?
Bogged down by labour-intensive administrative tasks
Manuel is an HR director in a company with 1,500 employees. His Payroll and Personnel Administration team manages all their day-to-day administrative HR processes using an ordinary application jumbled with a multitude of Excel sheets and other Office type files. Some of these files are used to make calculations or letters, others arrive via mail sent by managers. This keeps the team busy in labour-intensive administrative activities; they spend 90% of the time on procedures such as registering hires, terminations, changes in the employee’s status, and more. Manuel would like to be able to give more time to tasks that he knows would bring great value to the company, such as bringing in a welcome system for new employees or developing a digital talent appraisal program; but his team has hardly any time for this. So, he decided to research the internet for some suitable technology solutions to manage these administrative tasks better and more effectively, but he does not know how to convincingly present this need to his CEO and get the right backing. He is more than aware that demonstrating the return on investment in HR has never been easy and finds it daunting.
Several months into the HR project implementation with no visible results yet
Elena works as a director of IT projects at a famous international clothing firm based in The Hague. Nine months ago, the company decided to acquire HR software. The key goals were to unify data from various countries and to automate all basic administrative processes. Moreover, the company also wanted to go further and implement a system for career and development plans internationally. During this time period, Elena was travelling around the world and meeting different local leaders to roll out the software. It was turning out to be a difficult process but also very rewarding, because she could gradually see how this unification would greatly simplify various tasks. Nevertheless, much remains to be done; the employees have barely begun to use the software and so far, the benefits are not noticeable. After a year, just when Elena finished the project and the employees were all trained in the software, that’s when the benefits began to be visible. Unfortunately, she then realized that, at that point in time, for the company’s top management, this project had already started to lose credibility and received less attention.
The return of investment for HR technology
During my years as head of HR technology products and services, I have found myself often confronting similar situations. Elena's case is very common, since many managers are not aware of the time needed to carry out a project of this kind and both they and the teams are disappointed when they do not see results already in the short term. In the worst-case scenario, this leads them to precipitate decisions and resort to purchasing other software in the hope of finding a quick return. Invariably this kind of wrong thinking traps them in a vicious circle of looking elsewhere and never managing to solve their challenges properly.
Manuel’s case isn’t so unusual, there are still many companies that don’t know how to get the most out of applications or confuse digitalization as merely replacing pen and paper with a spreadsheet. This typically arises due to the lack of understanding about the complex relationship and dynamics between IT, change management and process reengineering.
What is hard to do is to put a value on these qualitative benefits and convert them into quantitative or tangible ones for crunching out the numbers that the C-level management (especially your CEO and CFO) needs for decisions.
The issue here really is how to show how these qualitative benefits of HR technology make work simpler by how they improve productivity and performance across the workforce. The C-level management needs to see how technology improves productivity in the workforce and tangibly changes the financial bottom line and the overall performance of the company.
Why is ROI so hard to demonstrate?
Showing the ROI of any technology has never been.
Focusing specifically on the HR software field, one of the main reasons why it is difficult to demonstrate the return on investment is to try to do it too early and not right at the moment when the technology is already up and running at optimal performance and all employees know how to use it.
Introducing technology into a company entails several phases and by being aware of them, you will know when it is the right time to start measuring ROI. To find out more details, we recommend you download our ebook on "Why does HR find it hard to show the ROI of their technology?" and you will also discover the ideal phase for this.
What are the keys for ROI?
Here we list the major keys needed for finding out and showing the ROI of an HR technology to your C-level management:
- Engage your employees: it is very important to make a distinction between the initial moment when a new technology was introduced into the organization and the subsequent phases of when and how users continue to use it. The actions that we took to motivate employees to use the new software at the beginning of the project will not be enough to keep them "hooked" or compelled to using the software forever. Hence, it is necessary to actions to engage your employees as users over the next two years. Several studies show that software rejection occurs right after it has been introduced into the organization. This is why we recommend good management of expectations and effective execution of a well-thought out communications plan that encourages employees to use the software. It isn’t enough to just bring in the right HR technology that is useful, easy to use, and provides good support.
- Transform the work processes of the HR department: for more productivity in an organization, it is crucial that work processes change. If the old processes are maintained with the new technology, it is very possible that the project will fail in the long term. However, it would be a mistake to make this process change at the same time as implementing the new software. It is best to make the change once the software is already up and running. Find out more on when the best time is and learn about the BPI methodology for process change in the ebook on "Why does HR find it hard to show the ROI of their technology?".
- Measure productivity at the right time: as said earlier, we not only have to consider how but also when. It would be an error to start measuring the return on investment of HR technology shortly after introducing it. Moreover, we wouldn’t be able to measure productivity successfully nor detect reliable KPIs.
- Enable your company to progress: ROI is not only measured in terms of productivity, but also in the ability to make the company progress or evolve. For this, it is best to analyse all the processes done manually and see which ones can be automated. This way we can make a plan and decide on how to use the resources in terms of manpower freed up from these time-consuming processes in tasks of greater value to the company. Besides, it will be interesting to determine which tasks can be digitized and decentralized from the HR department and delegated instead to line managers. Not only do line managers benefit from more independence to manage their teams, employees also enjoy more autonomy over their data and professional aspects. Similarly, there are further benefits to be had through the new services that the HR department will be able to offer, such as welcome initiatives, better training and development initiatives, to name a few.
Savings and growth balance
To help you in this process and to be able to get a ROI indicator to present to your CEO, we have developed a “savings and growth balance” template which you can download by clicking on this link. You can fill it out and calculate the resources saved in processes which can then be reinvested in others.
This template contains three sections:
- Parameters: for entering data on your company and to use in the calculation.
- Savings balance: for entering the various processes you want to automate. Once completed, you will have a calculation on the savings in resources.
- Growth balance: for showing the new technology processes you can invest in using the saved resources. These may be more advanced administrative processes such as talent management.