Building a solid business case for a major technology purchase is critical to running HR strategically. That means mastering the ins and outs of the process to get the project approved.
As an HR leader, you need to understand what the technology buying committee is looking for. The committee might include IT, leaders of different departments and possibly the CEO, depending on the size of the company. They look for a positive ROI, how the HR technology will fit with other internal applications, and the benefits of the new HR system, just to name a few factors.
Here’s how to build and present a solid business case so those needs are addressed.
1. Gather HR requirements
Start by identifying and calculating HR system needs. This involves clearly documenting the issues your team is facing and how you can best address them. To complete the list, speak to key stakeholders, such as employees, managers and job candidates. Some of the issues might be subjective, such as a negative employee experience or an HR process that is difficult to complete. Others will be quantitative, for example, the 30 minutes it takes to process a candidate’s application. With quantitative feedback, you can assess the annual cost, calculate the ROI and look for cost savings.
You can also include past projects you haven’t been able to complete. For example, if the business asked you to automate a change request form for newly promoted employees and your team didn’t have the right software for the task, note it in the requirements portion of the business case.
With the list of requirements documented and vetted, prioritize them so that any future system evaluation focuses on the most important requirements.
2. Assess your current HR system
Once you have a complete list of requirements, you should do a deep analysis of your current HR system and related applications. You might find functionality you didn’t know existed that will meet some of the needs identified. Cloud-based software changes often, so it’s important to confirm the functionality your team requires isn’t included in a recent release. The assessment should be an honest look at what may or may not be possible with your current HR systems.
Assuming existing software can’t meet your needs, you should consider the additional, related functionality a new system could provide, on top of meeting your highest-priority needs. Projects might be planned for the next few years that could benefit from a new application, improving the overall ROI of a new HR system. Make sure to include these milestones in your final business case. Licensing new software can also help you get lower-priority functionality more quickly.
3. Use business needs to build the business case
With all the information you’ve accumulated, you are now in a good position to build a business case. Use the requirements you identified and your organization’s business strategy to justify the business case and explain other options you’ve considered. The business case will also provide the data you collected as justification for your project. The goal is to provide as much concrete data as possible and limit personal opinions.
If possible, start with the business case template that your company uses for all requests. This will ensure you provide all the information the purchasing committee requires. It also makes it simpler for the key stakeholders, since they will be accustomed to the format and can easily locate the details they are most interested in. If a template isn’t available, provide a summary of the business case before diving into the details. The summary highlights the reasons for the project and the key selling points you want readers to know. Also include a table of contents to make it easier for reviewers to jump to different sections of the document.
4. Identify and calculate the benefits of a new HR system
There is no magic formula for calculating the benefits of a new HR system, but there are a few things to consider and adapt for your specific work environment. No two organizations are the same, and few are starting from the same point. For example, one organization might already have an HR system it wants to replace, whereas another is considering implementing its first one.
Here are some factors to consider when determining the benefits of a new HR system.
Less rekeying of data. One of the tangible benefits that is often sought from a new HR system is eliminating the need to enter data more than once. Often, HR teams must enter employee information in more than one system, such as core HR, a learning management system and performance management software. There might be other teams in the organization that also must rekey data, such as payroll and IT. Eliminating these administrative tasks saves time with every change in an employee’s lifecycle, from onboarding the new hire to employment changes (such as a new manager) and termination.
To calculate the savings from a new HR system, you need the following information:
- The amount of time needed to enter employee information into each system.
- An estimate of the number of employee changes captured per year, such as the number of new hires, terminations and employment changes.
- An understanding of which systems will be replaced by the new HR system and whether interfaces to other systems can further reduce manual work. However, it might not be possible to eliminate all rekeying during the initial implementation.
With that information, you can do a simple calculation: average time required to capture and update information multiplied by the number of systems.
Enhanced HR reporting. Generating comprehensive reports from multiple HR systems can be problematic and time-consuming. Often, reports are run in each HR system and then merged in a spreadsheet. Not only do you end up with a static data set, the chance of human error increases by the number of manual processes involved. To calculate the benefit of using an HR system that produces comprehensive reports, you should consider the following points:
- How long it takes to generate each report that is required on a regular basis.
- The time required to generate ad hoc reports; This is important because there will always be a need for ad hoc reports.
- The cost of using static, error-prone reports, which is the hardest to put a value on. For example, someone might build a turnover report that the company will use to develop retention and talent acquisition programs, only to find out later that the report had errors.
To calculate the benefit of improved reporting, you might want to focus on the first two points above. Start by listing each report, the frequency and the amount of time to build each one. You can then multiply those figures to calculate the approximate savings from a system that eliminates manual intervention to build reports.
You should also consider the self-serve reporting options employees and managers get with a new system. This helps save time by eliminating back-and-forth communication to get the reporting requirements and produce reports for others on a regular basis. It also reduces the number of decisions made without looking at the data.
Streamlined HR processes. A typical goal of buying a new HR system is to streamline manual processes, eliminate unnecessary steps and provide better tracking. To that end, new HR systems typically offer features that allow you to automate workflows and provide notifications.
Workflows automate the passing of information from one person to the next, and are often used for approvals, such as for salary increases or time off requests. You might be able to configure the workflows to automatically escalate the approval to the next-level manager when the approver takes too long. This ensures that current HR processes remain efficient and can continue without the need for manual follow-up.
Notifications provide regular reminders to employees who have not completed assigned tasks and eliminate the need for someone to track the tasks manually.
To calculate the benefit, you need to estimate the time spent per week to follow up with employees on outstanding tasks. You will likely want to assume that some manual follow-up will still be required, since certain tasks are time sensitive and require quick turnaround. In that case, you might want to say that 80% of the time the system alone will be sufficient and 20% of the time a manual reminder will be necessary. You can multiply the average time it takes per week to follow up on outstanding tasks by the percentage of time you expect to save, such as 80%, then multiply that result by 52 weeks to get the savings per year.
You will also want to calculate the time saved by using an automated approval process compared to the time it takes to do the same process manually. For example, if an employee wants to take PTO, they might have to email their manager and follow up if it’s not addressed in a timely manner. If the request is approved, the email will have to be forwarded to HR so the employee’s PTO balance can be adjusted. Also, payroll might have to be notified to show the PTO taken and new balance on the employee’s pay statement.
Improved employee experience. One benefit of a new HR system is a better employee experience that comes from letting employees go into the system more frequently to update personal information and look up the information they need without involving HR. To calculate the time employees spend in your HR system, consider hosting study groups and have participants perform common tasks to determine an average amount of time per task. You can multiply the time for each task by the approximate number of times per year employees perform each task, then multiply by the number of employees. To complete the calculation, you might want to set a target for the savings to be earned from the new HR system, such as a 50% reduction in time. Regardless of the HR system chosen, employees will still be required to update and look up information in the system, so you won’t get 100% savings.
You can also consider how much quicker existing processes could be in a new system compared to the current one. For example, if the current system is not intuitive, it might take employees extra time to perform simple tasks because they must figure out how to do something that should be easy.
Simplified system administration. While many organizations already dedicate a limited number of employees to maintaining their HR systems, simplifying the configuration and maintenance of the system benefits everyone. When multiple HR systems are used, the HR system administrator will spend time updating and configuring each one independently. With one HR system, the administrator will have more time to fix issues and incorporate enhancements that benefit the whole organization.
To calculate this benefit, your HR system administrator will have to track the amount of time they spend maintaining each system independently and then estimate the savings from having one system. For example, security role changes might currently have to be made in multiple systems but only one if a new HR system is implemented.
Valuable new features. You will also want to consider how new features will provide benefits for all users of the system. A current example is the proliferation of AI in HR systems. Older HR systems may not offer advanced functionality, such as AI and machine learning. These new technologies can have a significant impact on how HR, employees and managers find the information they need and the quality of the data that is being captured.
AI is also highly integrated in recruiting and reporting modules, where users can measure significant time savings.
5. Focus on ROI
Once you are in front of the committee, be prepared to answer questions about your projected costs, savings and ROI. Implementing a new HR system is a major commitment in implementation costs, ongoing licensing costs, employee training and related costs and time associated with introducing a new system, so it’s important to ensure you justify the business need.
The committee will expect that you have sufficiently researched and validated the information. If you can’t defend your quantitative analysis, the key stakeholders will most likely reject your business case and it might take a long time to get a revised one considered. If you miss the budget cycle, you might have to wait for the next one, which could be the following year.
Also, include KPIs that will validate that the project is delivering the results that were expected, and when necessary, make adjustments to get the project back on track.
6. Know your audience
In addition to understanding the requirements, benefits and ROI, you will want to know who your audience is. Doing so will provide useful information, such as the following:
- You will understand how key stakeholders want information presented to them. For example, your organization might have a template that is expected to be used for all new investments. Some stakeholders might prefer a summary while others want a detailed presentation. By catering to their needs, you can increase the odds they will review the material.
- You will know who your detractors are so you can prepare a rebuttal.
- You’ll know who will support your project, so you can get them onboard early. Supporters can also share their experiences with similar purchase requests. You can incorporate this feedback into your proposal and presentation.
- You will learn when to work with an executive assistant to get on a person’s schedule and when to go directly to the person.
Knowing who your key stakeholders are and whose approval is required also helps tailor the message to each person. The following groups are important to cater to when trying to win approval for a new HR system:
- Executives will care about the system’s cost, its impact on employees and other major initiatives and generally why a new system is needed.
- Finance often cares the most about cost, both short term and long term. Knowing the initial cost outlay, implementation cost and long-term licensing commitment will be key.
- Legal will want to review the contract and determine the risk of going with a particular vendor.
- IT often focuses on security, which includes how the company secures its hardware and data and whether the system is compatible with your single sign-on. IT will likely also be interested in how the HR system can integrate with other systems in the organization.
- Payroll often reports into finance and isn’t directly involved in choosing a new HR system, but how the new HR system shares information with the payroll system is important to them.
- HR might be expected to support a new HR system, but that is not always the case. Members of the HR team might have been responsible for choosing the current HR system and don’t want to see it go, some like the current system, and others don’t want change because they are busy and don’t need the distraction. Getting and keeping your HR team engaged is critical since they are your ambassadors in selling the new system to stakeholders.
Choosing new HR software that lives up to expectations can be difficult. But if you do the research, justify your needs and present all the facts, you might get the green light to acquire a system that provides tangible benefits to HR and the entire organization.
Eric St-Jean is an independent consultant with a particular focus on HR technology, project management and Microsoft Excel training and automation. He writes about numerous business and technology areas.
