Why measuring HRMS ROI improves your HR department's functionality

Having gone through the (often) lengthy process of searching out the best HRMS for your business and then implementing a new system with your workforce, it’s only natural that you want to know what the return on your investment is. And not a woolly, anecdotal well, everything seems just so much better kind of return but one which is measured, tangible and shows a clear impact on the running of the business.

Those tangible benefits might come in the form of lower costs, headcount reductions, better management of HR processes, and the freeing up resources for other, higher priority work.

However, for the HR department, there’s a certain ‘justifying our existence’ vibe to the exercise. After all, HR’s credibility is tied to HR performance, and automation via an HRMS should be a significant driver of performance, offering greater accuracy of data, new strategic insights, more efficient recruitment, more targeted training etc. as potential benefits.

In other words, to some extent HR’s credibility is directly linked to the HRMS. It’s not enough to ensure that the business reaps the benefits of a new HRMS, the business must know that those benefits are being provided by the HR team.

The business case for HRMS

It all begins with the business case. In order to secure the necessary backing for an HRMS purchase (if only to get the funds), you undoubtedly had to make a pitch - your business case. Somewhere there is a document promising improvements in terms of cost, efficiency and/or resources. The figures in the business case are the starting point for measuring HRMS ROI. They’re also what the rest of the organization is expecting to see from the new system.

Visibility of HRMS ROI for management

The key is to ensure that your ROI results are visible to managers. After all, tangible measurable outcomes of investment are the sort of hard figures-based improvements that managers like, right? Again, it’s not enough to measure your return on investment, you need to ensure that managers and other relevant stakeholders actually see and acknowledge your cost reductions, risk mitigation, and increases in service quality, and additional services that you are now able to offer.

Use our free guide to calculating HRMS ROI to find out the return on investment your HRMS will have

As far as the rest of the organization are concerned, you promised something. Measuring HRMS ROI is about proving that you delivered on that promise, that there were visible returns from the HRMS project.

Quantifiable returns

In addition to the tangible benefits, an ROI exercise will often give you:

  • Insight into the efficiency of your HR processes; including improvements where necessary.
  • Input to your future HRMS strategy (Additional technology? Better user training?).
  • Feedback on how well the HRMS selection and implementation projects went.

But what’s critical is the use you make of quantifiable metrics and data to prove the wider HR contribution to the business.

Having measured the real cost of the system (including ticket price, installation, staffing costs, system maintenance, and system upgrades) you can go on to assess the tangible benefits that the system has provided.

Consider the following as quantifiable improvements backed by hard data:

  • HR productivity (as measured by your department KPIs).
  • Time savings due to HRMS self-service transactions.
  • Improved employee retention (e.g. as shown by the impact of the HRMS on your recruitment metrics).
  • Reduced employee turnover (how many recruitment campaigns have you NOT run due to improved retention?)
  • A reduction in time-per-transaction for specific HR processes (e.g. making a request for paid time off, or setting up a recruitment campaign).
  • Better attendance for training activities and therefore better value for money.
  • Fewer sanctions or penalties for compliance issues.

All of these examples are measurable and contribute to the bottom line.

Ownership of HRMS benefits

However, while improvements to the bottom line are usually a shared effort with many contributors, this exercise is about demonstrating HR’s share of the input. In other words, you need to make sure you get your credit.

Fortunately, you have the channels of communication you set up during the selection and implementation phases of the HRMS project. And ROI is just the next phase. As part of gathering the information for the ROI exercise, you’ll undoubtedly be in touch with the previous contacts, patrons, stakeholders, and focus groups. Use these contacts to share any emerging good news stories from HRMS use, and to disseminate the overall ROI findings.

As for those findings, they’re probably contained in a single report, the kind of thing that is put on the Board’s agenda and nobody reads it. Consider how the information in that report can be used more widely, and more meaningfully. For example.

  • Break the information down into discrete chunks, preferably in the form of contained stories that help people see a human face to the HRMS benefits (Thanks to our new HRMS, Robert/a has saved 2 hours every week - well, maybe not that cheesy, but you get the idea).
  • Consider how you could distribute tiny snippets or headlines of information; kind of on the Twitter principle, the whole message in just 280 characters.
  • Tailor the messages to the audience. Employees, managers, specialists, and the C-suite all have very different priorities and concerns. Tell them the good news that applies directly to them.

That an HRMS provides clear and measurable business benefits is obvious. But promising that and people realizing that it has been delivered are two different things. The ROI exercise is important but so is how you present the results. This is the HR department’s opportunity to take a bow, accept some well-deserved credit and to do that, everybody first needs to know that the credit is HR’s. Don’t be shy.

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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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