HR technology was a popular theme at the 2017 SHRM Annual Conference; Joe Rotella, SHRM-SCP, SPHR, chief marketing officer of Delphia Consulting, joined the conversation with a session on how to justify the expense of investing in HR. For today's human resources leaders, investing in technology is critical. It can alleviate many administrative burdens and help you deliver on the employee and candidate experience you need to stay competitive.
Yet for many HR professionals, this might be the first time navigating the business-case process to persuade executives to make a significant investment in technology. So what should you consider when building a justification for an investment in HR and technology? Rotella offered the following:
Why Build a Business Case in the First Place?
A business case can help demonstrate the needs, benefits, costs, and solutions that underlie the justification for specific investments. In many cases, companies have limited budgets and IT bandwidth. HR may be competing with sales or other departments for technology resources. Rotella said bringing a strong business case to the table helps demonstrate to key decision makers that you've thought through your proposed approach and solution – and it shows that you’re ready to help them understand the potential return on investment. Some elements of a strong business case include:
- The need: What is the specific problem we’re trying to solve?
- The impact: How is the problem negatively impacting the business? For example, a slow recruitment process could lead to multiple problems such as leaving critical positions unfilled for an extended period.
- The benefit: What could the business look like if this issue was solved? For example, how would filling those critical positions speed up production or provide better sales support?
- Potential solutions: Often, business problems have many different potential solutions. Create scenarios with the pros and cons of different options.
- Recommendations: Lay out optimal recommendations and explore how technology plays a key role in effectively addressing the challenge.
Quantifying Return on Investment: An Example
An important component of advancing conversations around HR technology purchases is exploring return on investment (ROI). For example, consider the justification for investing in an applicant tracking system. A breakdown of current and potential future costs might look like this:
- If a company hires 30 new employees per year and each search takes an average of 50 hours, that's 1,500 hours, or over 37 weeks of staff time, creating job descriptions, publishing them on various platforms, vetting resumes, conducting interviews, and beyond.
- If the process is handled entirely by one person who makes $30 per hour, the basic recruiting function is costing your company $45,000 per year, plus any benefits. However, that one person may be overburdened by such work and could make mistakes or certain tasks may fall through the cracks.
- An applicant tracking system might cost $5,000 per year and could cut recruiting time in half.
At a basic level, this represents significant savings to the bottom line. However, there are other factors to consider when it comes to ROI. For example, the HR resource might be able to spend half their time developing retention programs that can further save the company money. Having an applicant tracking system might offer additional benefits, such as reporting for compliance reasons and a better candidate experience. Think broadly as you quantify ROI to make a compelling business case, but ensure that there's a clear impact on the bottom line for cost savings or revenue generation.
HR and technology go hand-in-hand today to meet the increasing workload on human resources departments. But to secure the investments you need for world-class technology, you may find that you first need to create a thorough business case that clarifies the potential ROI and positive impacts it can have on the company.