Calculating Your HRMS Return
By this stage of the HRMS ROI process, you know the system cost to you in terms of time, money and effort and, as best as possible, you’ve translated all of those factors into monetary values. The next step is to collect all the relevant data about your system’s performance and impact on the organisation, relevant to the metrics and measures you’ve decided are right for you, ready to make the comparison and find out the current position of your HRMS return.
First, consider how you might collect your data. Possible methods include focus groups, interviews, performance monitoring, surveys and questionnaires, and of course, statistical reports and analytics produced by the system itself.
Next, when collecting your ‘return data’, you need to look beneath the surface of your identified and agreed measures. Staff savings, HR time, system costs, and so on can all be expressed in nice, specific numbers, but what data do you actually need to collect before you can ‘do the sums’? Break it down a little and look at the finer detail, that way, your figures are built on a firmer foundation and are much more defensible if challenged.
Consider the following for your HRMS return:
- Improvements to your HR productivity figures (you do measure that, right?)
- A per capita time saving thanks to faster self-service HR transactions.
- More streamlined processes may mean that when HR staff manage a transaction, it takes less time – put a value on the time saved.
- Increased employee retention rates (e.g. from your new fancy social recruitment module that is finding more suitable candidates to fill posts).
- Lower dropout rates for training activities, meaning improved value for money.
- Lower employee turnover (calculate the number of recruitment campaigns you HAVEN’T run and allocate a cost value).
- Better legislative compliance (e.g. has your system’s automatic notifications reduced your penalties/extra work due to late or incorrect filing?)
And, of course, there’s the obvious (easy?) stuff like headcount reduction – if you are genuinely providing the same or better HR service with less HR staff then a simple FTE (full-time equivalent) calculation will give you a figure to throw into your HRMS return.
Recommended Reading: How to calculate your HRMS ROI in 5 simple steps
Finally, attempt to put a value on the more intangible benefits that may be accruing from a first-class HRMS, relating to wider organisational issues and performance, such as brand, competitive advantage, intellectual capital, and so on. Some may be difficult to quantify, or to attribute solely to the HRMS, but if you can convince the boss/Board/shareholders then HR just won some real credibility.
Ultimately, calculating your HRMS return is dependent on quantifying any business process efficiencies, staffing savings and any other improvements that came as a results from the HRMS implementation. Combine these calculated savings with any monetary figures you already costed and you have your HRMS return figure, now all you have to do is look at the cost of the overall HRMS investment.
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