The Value and Properties of HRMS ROI
Why ROI? Well, any investment is made in the expectation of a return, preferably a substantial one. And purchasing a new HRMS is most certainly an investment – of time, money, and effort – and it’s reasonable that the boss/board/shareholders that have made that investment will want to see what they got for it.
In HRMS ROI terms, that return may take a number of forms; cost reduction, staff gains (either a reduction or the freeing up of HR staff to deal with more complex issues), or the more efficient handling of management information. The trick is to know exactly what benefits you expect to realise; thus allowing you to know what you need to measure and why.
So what is ROI in a nutshell? Put simply, a generic HRMS ROI exercise includes:
Deciding what performance improvements and measurable impacts you realistically expect from your HRMS – these may include HR staffing levels, certain HR transactions, number of calls to the HR department, and so on. You should ensure that relevant stakeholders are involved in these measures, unless you want your ROI calculations to have no worth outside of the HR management team! Also, these measures should be ones for which ‘pre-system’ data exists, don’t forget to agree who will have responsibility for making these measurements – the process may be led by HR but they won’t be able to do it without company-wide cooperation.
Collecting data, statistics, and any other relevant information about the agreed activities that you expect to be improved by your HRMS.
Contrasting that information with comparable performance data from the period prior to HRMS implementation – back to the above point, if you don’t have pre-HRMS data then you can’t make the comparison and so can’t measure the return (if your past HR data gathering has been a little sparse, then at the very least, an early part of the implementation project should be to gather information to establish a ‘pre-system snapshot’).
Drawing conclusions about the value (the “return”) of your HRMS to date and making decisions about what further actions can be taken to maximise that value.
Recommended Reading: How to calculate HRMS ROI in 5 simple steps.
In other words, for your HRMS, an ROI calculation is not a conclusion or an endpoint; in fact, it’s part of the ongoing continuous improvement process, helping you refine and enhance the benefits that you’re seeing from your HR technology.
The basic question that your HRMS ROI exercise is seeking to answer is, was it worth it?
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