Few HR departments have the time to determine the value of an HR system, and therefore never get one.
Three years ago, when professional services firms Price Waterhouse and Coopers & Lybrand merged to form PricewaterhouseCoopers (PwC) it was clear they would need a new global HR system.
There were 150,000 people in 150 countries with information scattered around on multiple systems and databases.
“You can’t manage your organization without managing your people data,” said Sheona Campbell, senior HR Manager and HRMS Project Leader for PwC Canada. But while it was obvious a new HRMS was needed, Campbell and a team of HR professionals from around the world were given the task of proving to the rest of the organization why PwC needed the new system anyway.
“In order for HR to be effective in the future, HR staff are going to have to demonstrate the return on investment for HR initiatives,” she said. Implementing a new HRMS would be no different. “A lot of implementations are extremely expensive,” she said and so it is up to HR to prove it is a worthwhile expenditure. Employee self-service, for example, is a popular benefit of HR systems. “If HR can’t demonstrate that within six months, or 12 months that the initial investment in employee self service will pay for itself you have a problem. Senior management should be looking for it and HR should be very comfortable providing it,” she said.
This is still apparently a minority position among HR professionals in Canada.
While it is often said that HR will only get the respect it seeks from senior corporate leaders by being able to prove its value, very few are taking the time to determine the return-on-investment of an HR management system.
According to Canadian HR Reporter’s study of more than 370 Canadian organizations — HR Management Systems: Are They Making a Difference? — just seven per cent of those that have an HRMS in place did any return-on-investment analysis.
“Companies make decisions about investments in IT infrastructure based on which projects will produce the greatest returns,” said John Johnston, of HR systems consulting firm ARINSO International, a partner in the study. Because HR often isn’t able to project returns they either aren’t able to gain approval for a system or else once they do get approval for the implementation, they aren’t able to utilize the system to maximum potential because some functionalities get put on hold over the course of implementation, he said.
The message that emerges when talking to HR technology experts is that ROI can be done, and should be done, but often isn’t because it is not easy and it can take a lot of time.
However by not doing it, HR professionals could be locking themselves into a vicious cycle: they can barely find the time to keep up with the day-to-day workload let alone find time to review processes, crunch numbers, and come up with a business case to get a new HR system. But until they can somehow find the time to make that business case to get a new system, they won’t likely be able to reduce their workload. (This is to say nothing of the fact that HR systems are meant to assist all managers and not just HR, see page 24.)
In the survey, those that said they did calculate ROI, were asked to explain briefly how they did it. One respondent compared the cost of the application to staffing savings and work volume estimates. Another said they compared the cost to implement versus the value of the reduction of labour hours for HR.
One department determined that implementing the HRMS resulted in the increased availability of people resources two days per week.
Still another department measured ROI by how much time was spent running reports and how much time was freed up to work on other value added items.
At real estate firm Royal LePage, Siobhan Brewer, national director of HR, had to make nine different presentations to the senior team before she could convince them to go with a new HRMS. They looked at a number of factors but they definitely wanted to see what they were going to get for their money, she said.
In completing a standard capital expenditure report, Brewer had to show the entire cost of the system including training and the cost of a project manager. That was then compared to the savings to be realized over three years. In this case, Brewer figured the new system, chosen largely because it would enable employee self service with a new flexible benefits plan, would save the organization one salary of $45,000 per year.
Ian Turnbull, an HR systems consultant, and president of the International Association for Human Resource Information Management, said he isn’t surprised that few companies do ROI analysis when it comes to implementing an HR system.
It is very difficult to come up with firm numbers about the cost of introducing an HR system, said Turnbull. It takes some before and after projections but many HR departments don’t even have numbers on what they are doing at present. Some don’t measure what they do because they are worried flaws or bad management will be revealed. Others have never measured before and see little point in beginning to do so when they are about to overhaul what they are doing anyway. But without those measures it becomes almost impossible to figure out what the returns will be on an HRMS. “How can you do an ROI if you don’t have half the equation?” he asked.
And even when attempts are made to measure, it is tough deciding what should and should not be included in cost calculations. If an organization is going to introduce employee and manager self service, should the cost of training be included, for example.
Even more difficult to forecast is how efficiently the system is going to be used. If it is used effectively then it might be worth the investment, said Turnbull. But many organizations implement software without integrating it properly or changing the processes that surround it. “Automation in and of itself is not the answer, you also have to look at processes,” he said.
Indeed changing processes and becoming more efficient, not just in HR but throughout the organization, is exactly where the returns from an HRMS are found, said Campbell of PwC.
Traditional HR was — and in most cases is — characterized by lengthy, multi-step and costly administrative processes.
Simple things like an address change represent a waste of money. Campbell explained: “If for example, 10 per cent of your employees were to change their address in any given year, not an unlikely number, and if an HR person does it, the entire process can take 25 minutes and if the employee does it, it can take five minutes.” Once recovered time is calculated, it is relatively easy to come up with a total financial savings over the course of a year, for example. “That would be a hard-dollar savings,” said Campbell.
Campbell also said HR will not likely be able to convince the CEO of the need for a system by describing only the benefits for HR.
“When you talk about organizational effectiveness, in order to really sell this to senior leadership, you have to demonstrate how HR technology is going to provide opportunities to make changes in your organization. It is not just about HR effectiveness, it is operational effectiveness,” she said.
“I refer to what I did as HR business process engineering. But typically those changes can be made to other internal functional areas including payroll, accounting and so on.”
Organizations often start with a basic system and get that up and running before adding new layers, said Johnston, adding that this is the route chosen by many companies driven to buy new systems because of Y2K fears.
Companies put in the basic system but now that they are getting to the stage where it is time to add functions designed to make it easier for HR — career planning, recruitment or self service for example — and without a business case to spend the money on those additions, management wants to know why it is necessary. Projects stall, and as they drag on, cost overruns mount.
“If you don’t do ROI, you run the risk of a failed implementation,” said Johnston. “To me it is a form of risk management. If you spent the time to do this you lower the risk of failure significantly.”
For more information from the survey go to www.hrreporter.com, select search and enter article #1448.
There were 150,000 people in 150 countries with information scattered around on multiple systems and databases.
“You can’t manage your organization without managing your people data,” said Sheona Campbell, senior HR Manager and HRMS Project Leader for PwC Canada. But while it was obvious a new HRMS was needed, Campbell and a team of HR professionals from around the world were given the task of proving to the rest of the organization why PwC needed the new system anyway.
“In order for HR to be effective in the future, HR staff are going to have to demonstrate the return on investment for HR initiatives,” she said. Implementing a new HRMS would be no different. “A lot of implementations are extremely expensive,” she said and so it is up to HR to prove it is a worthwhile expenditure. Employee self-service, for example, is a popular benefit of HR systems. “If HR can’t demonstrate that within six months, or 12 months that the initial investment in employee self service will pay for itself you have a problem. Senior management should be looking for it and HR should be very comfortable providing it,” she said.
This is still apparently a minority position among HR professionals in Canada.
While it is often said that HR will only get the respect it seeks from senior corporate leaders by being able to prove its value, very few are taking the time to determine the return-on-investment of an HR management system.
According to Canadian HR Reporter’s study of more than 370 Canadian organizations — HR Management Systems: Are They Making a Difference? — just seven per cent of those that have an HRMS in place did any return-on-investment analysis.
“Companies make decisions about investments in IT infrastructure based on which projects will produce the greatest returns,” said John Johnston, of HR systems consulting firm ARINSO International, a partner in the study. Because HR often isn’t able to project returns they either aren’t able to gain approval for a system or else once they do get approval for the implementation, they aren’t able to utilize the system to maximum potential because some functionalities get put on hold over the course of implementation, he said.
The message that emerges when talking to HR technology experts is that ROI can be done, and should be done, but often isn’t because it is not easy and it can take a lot of time.
However by not doing it, HR professionals could be locking themselves into a vicious cycle: they can barely find the time to keep up with the day-to-day workload let alone find time to review processes, crunch numbers, and come up with a business case to get a new HR system. But until they can somehow find the time to make that business case to get a new system, they won’t likely be able to reduce their workload. (This is to say nothing of the fact that HR systems are meant to assist all managers and not just HR, see page 24.)
In the survey, those that said they did calculate ROI, were asked to explain briefly how they did it. One respondent compared the cost of the application to staffing savings and work volume estimates. Another said they compared the cost to implement versus the value of the reduction of labour hours for HR.
One department determined that implementing the HRMS resulted in the increased availability of people resources two days per week.
Still another department measured ROI by how much time was spent running reports and how much time was freed up to work on other value added items.
At real estate firm Royal LePage, Siobhan Brewer, national director of HR, had to make nine different presentations to the senior team before she could convince them to go with a new HRMS. They looked at a number of factors but they definitely wanted to see what they were going to get for their money, she said.
In completing a standard capital expenditure report, Brewer had to show the entire cost of the system including training and the cost of a project manager. That was then compared to the savings to be realized over three years. In this case, Brewer figured the new system, chosen largely because it would enable employee self service with a new flexible benefits plan, would save the organization one salary of $45,000 per year.
Ian Turnbull, an HR systems consultant, and president of the International Association for Human Resource Information Management, said he isn’t surprised that few companies do ROI analysis when it comes to implementing an HR system.
It is very difficult to come up with firm numbers about the cost of introducing an HR system, said Turnbull. It takes some before and after projections but many HR departments don’t even have numbers on what they are doing at present. Some don’t measure what they do because they are worried flaws or bad management will be revealed. Others have never measured before and see little point in beginning to do so when they are about to overhaul what they are doing anyway. But without those measures it becomes almost impossible to figure out what the returns will be on an HRMS. “How can you do an ROI if you don’t have half the equation?” he asked.
And even when attempts are made to measure, it is tough deciding what should and should not be included in cost calculations. If an organization is going to introduce employee and manager self service, should the cost of training be included, for example.
Even more difficult to forecast is how efficiently the system is going to be used. If it is used effectively then it might be worth the investment, said Turnbull. But many organizations implement software without integrating it properly or changing the processes that surround it. “Automation in and of itself is not the answer, you also have to look at processes,” he said.
Indeed changing processes and becoming more efficient, not just in HR but throughout the organization, is exactly where the returns from an HRMS are found, said Campbell of PwC.
Traditional HR was — and in most cases is — characterized by lengthy, multi-step and costly administrative processes.
Simple things like an address change represent a waste of money. Campbell explained: “If for example, 10 per cent of your employees were to change their address in any given year, not an unlikely number, and if an HR person does it, the entire process can take 25 minutes and if the employee does it, it can take five minutes.” Once recovered time is calculated, it is relatively easy to come up with a total financial savings over the course of a year, for example. “That would be a hard-dollar savings,” said Campbell.
Campbell also said HR will not likely be able to convince the CEO of the need for a system by describing only the benefits for HR.
“When you talk about organizational effectiveness, in order to really sell this to senior leadership, you have to demonstrate how HR technology is going to provide opportunities to make changes in your organization. It is not just about HR effectiveness, it is operational effectiveness,” she said.
“I refer to what I did as HR business process engineering. But typically those changes can be made to other internal functional areas including payroll, accounting and so on.”
Organizations often start with a basic system and get that up and running before adding new layers, said Johnston, adding that this is the route chosen by many companies driven to buy new systems because of Y2K fears.
Companies put in the basic system but now that they are getting to the stage where it is time to add functions designed to make it easier for HR — career planning, recruitment or self service for example — and without a business case to spend the money on those additions, management wants to know why it is necessary. Projects stall, and as they drag on, cost overruns mount.
“If you don’t do ROI, you run the risk of a failed implementation,” said Johnston. “To me it is a form of risk management. If you spent the time to do this you lower the risk of failure significantly.”
For more information from the survey go to www.hrreporter.com, select search and enter article #1448.
