What to Consider When Forecasting Your HRMS ROI

The chances are, you already have an HRMS ROI forecast. After all, when you made the business case for your new HRMS – when you sold it to either the boss, the board, or even just to yourself – you promised a certain level of improvement. You promised cost savings. Or headcount reduction. Or faster HR transactions. The point is, you promised something, otherwise it wasn’t a business case.

That promise is your starting point. That promise is the kernel of your HRMS ROI forecast.

Of course, it may need refining somewhat and that refinement process comes through deciding on the relevant measures and metrics that you’ll utilise to prove that the return has been made (or not).

Usually, the biggest restriction on setting your HRMS ROI metrics is the absence of good benchmark data. If you’re looking to compare pre- and post-HRMS costs, then it stands to reason that you need data that predates the system. This can mean you’re restricted to the metrics already in use (i.e. your existing historical data) or you introduce new metrics sufficiently in advance of HRMS go-live to gather at least a snapshot’s worth of benchmark data.

Possible metrics may be found in.

  • The percentage of total operating costs devoted to your workforce?
  • More efficient recruiting – e.g. measuring the time from vacancy to post filled.
  • Employee engagement – measured via staff opinion survey or similar.
  • A percentage reduction in certain types of calls/queries to HR (depending on what self-service functionality your HRMS offers).

Here’s something to think about… Most HRMS ROI exercises (in fact, most ROI exercises no matter the subject) place attention on cost reduction. This is because most leaders and organisations tend to view HR as a cost, an overhead, a burden… But, while costs will undoubtedly feature in your ROI metrics, they shouldn’t dominate. After all, a less heavy burden is great news, but it’s still a burden – however positive your ROI report, you'll still be saying, “We’re not as much of a drain on resources as we once were.” Where possible, look for ways to measure service quality, or additional projects and services that the HRMS has freed you up to deliver. Added value, that’s what you’re looking to prove.

Recommended Reading: How to calculate HRMS ROI in 5 simple steps

Another thought: consider risk mitigation. Part of your original HRMS business case may have included the risks of NOT purchasing an HRMS. Were those risks lessened once the HRMS was implemented? Were they avoided entirely? Can you prove that? If you can, then it’s tangible element of the return on your investment.

Through correct HRMS ROI forecasting you can have a clear (and measurable) picture of where you expect your HRMS to take you, then can begin measuring with confidence.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall

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