Why HR Software Is Critical to ROI
Updated: September 14, 2004
Why Is HR Management Important?
It costs approximately three times more to recruit and train a new employee than it does to retain and develop an existing employee. And this doesn't even take into account the hidden costs associated with misdirected management time spent on recruiting activities rather than effectively managing existing staff.
The fact is, employees are the lifeblood of every organization. The better they are—the better qualified, trained, and managed—the more effective and profitable your organization will be.
HR management solutions can help you manage your employees for greater profit with processes that help ensure:
| • | Employee performance is monitored. |
| • | Employee performance is rewarded where rewards are actually due. |
| • | Development plans are implemented and measured. |
Read on to learn about HR management solutions and how to use them to profit your business.
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What's Included in a HR Management Solution?
HR programs include a variety of legislative regulations and guidelines that must be tracked. Some of these requirements and guidelines include equal employment opportunity, pay equity, health and safety, employee and labor relations, and benefits program management. As a result of growing regulations, HR management software must be flexible enough to handle the many unique programs offered to employees. It's also important that your company has procedures and guidelines in place that help you meet specific employment legislation.
How to Select the Right HR Management Solution
The selection of a new HR management solution requires input and sponsorship from various areas of your business. A project team should be formed with representation from all levels, for example:
| • | CEO or Board Level—Sponsorship at this level is critical, as this normally represents the financial commitment to the project and leadership input to the project strategy. |
| • | Senior Management—As a minimum, this should include senior members from Finance, HR, and IT, and any other senior manager who has defined current HR information needs. |
| • | Line Management—Include line managers if your HR strategy includes devolving responsibility for some routine HR functions and reporting to these managers. |
| • | HR Administration—These are the people who will be using the new solution and their input is very important. |
Such a task force will represent a diverse set of needs and expectations which are important to capture. Below are 10 best practices your task force should follow.
Ten Tips to Help You Select the Right HR Management System
1. | Prioritize your requirements.
One very costly mistake many organizations make is to try to find or customize a system to accommodate every imaginable wish put forth by their cross-organizational task force. This can slow down the process and defeat the overall purpose. |
2. | Look at your primary business processes first.
Your team should focus on finding a solution that meets your company's critical requirements. |
3. | Document your business processes.
List them and try to diagram each process. This will highlight any irregularities and inefficiencies and help everyone understand the process better. |
4. | Look for a solution that matches the size of your organization.
Ideally, the software package you select should be designed to meet the needs of mid-size companies. |
5. | Look for a vendor that matches your organization.
The vendor should have a large base of customers that is similar in size and application to your organization. |
6. | Look for a solution that matches your existing and future IT plans.
The software should have an open architecture and the ability to easily integrate with third-party niche applications. |
7. | Check up on the vendor.
Ask for references from companies of a similar size and/or companies in the same industry as you. |
8. | Document your high-level requirements.
Documenting your requirements will help you to create a short list of vendors for demonstrations. Requests for Information, for example, is one useful way of documenting your high-level requirements and communicating them to a group of vendors. |
9. | Ask for a demonstration.
Once you have documented your business processes and requirements, demonstrations are a good way for your team to see how prospective software could map to your business processes. Try not to be too rigid, as there is always the possibility a vendor might just demonstrate a better alternative process. |
10. | Try to avoid lengthy tendering processes.
Many tendering processes end with no solution because the project loses momentum and becomes overly complex. Small and mid-size organizations should be particularly wary of minute levels of detail specifying what an application must and must not do. Often the creation of the tender document alone will cost more than most human resources solutions for mid-size companies. |
What to Do After You Have Selected Your New HR Management Solution
Cleanse Your Data
Most mid-size organizations store some form of employee data electronically, and there will be a desire to transfer as much of this data into the new system as possible to expedite a live date. However, it's important to question the integrity of the employee data. Is the information up-to-date? Little value exists in transferring inaccurate data into the new HR management solution, so use this opportunity to cleanse your data. Remove redundant department names and rationalize job titles. Entering data into the new application manually will not take as long as you think, and it can be an excellent training and familiarity exercise for your HR staff.
Evaluate the ROI of Customizations
Avoid customizing your new HR management solution to do everything the same way as your old system, or because you think you need to record that information. You only really need to store information that you want to measure or report on and information that is required to satisfy government and legislative requirements. The emphasis should always be on streamlining processes, maintaining data integrity, and providing valuable information in a timely fashion to those who need it. When considering customizing your new HR management solution, you should always challenge yourselves to define the return on investment (ROI) on that piece of tailoring. For example, if you are quoted that a modification will cost $2,000 in consultancy, you need to consider if there is $2,000 worth of efficiency to be gained by implementing the modification.
Measure Three Critical Factors
Every organization should be measuring three HR items. But measuring alone is not enough. The measures should be tracked and compared on a regular basis, and you should also correlate your findings with data that is not HR related.
| • | Headcount—You shouldn't just calculate your organization's headcount once a year. You should be measuring headcount month by month, organization unit by organization unit, job by job. The results should be tracked and correlated with information like production volume and customer satisfaction. By combining headcount data with non-HR data, you can begin to see how HR-related activities could be affecting the health of the business in other areas. Over time, trends will appear, which will enable you to make more effective plans and projections. |
| • | Turnover—Monitoring your turnover can yield very valuable information that can help you drive down costs. As with headcount, it shouldn't be measured only in terms of numbers. It's important to track turnover, but many variables exist, such as ethnicity, gender, age, department, job type, and line manager. Over time, interesting patterns may start to materialize that may indicate poor management in some areas of the business. However, turnover data becomes more valuable when it is correlated with other HR information gathered from exit interviews, such as reasons for leaving and new employers. |
| • | Cost Per Employee—Should you be considering self-service functionality in order to reduce costs? Self-service functions allow employees to access their HR information and take some of the cost and burden off HR professionals. |
Learn More About Microsoft HR Management
Microsoft Dynamics for HR management
