The business case

Why HR drives your business

When looking to purchase or implement new people performance or talent management services/solutions, it is always important to look at the business case as to “why” this will be good for the whole organisation.

It cannot simply be a case for “better HR”, the business must be able to “see the return” and know what “better HR” actually means.

This may involve answering questions for your board such as:

“What constitutes better people performance and how can we measure it?”

Or

“How are our people performing and what does their people performance metric look like?

Impact

It is common knowledge that the loss of a middle to senior manager in an organisation can generate a cost of between 40 % and 140 % of their annual reward package.  Reducing staff churn and what this REALLY means should always be included when measuring the impact as should elements such as aligning staff behaviour with business values and improving efficiency of L&D budgets and tracking effectiveness

Benefits

As HR becomes a more strategic function, it has to show it’s awareness of where and how new projects add value to the organisation and drive efficiencies that impact the bottom line. This includes building sustainable talent management processes and utilising technology for effective and automated process management.  Ultimately, better motivated and better trained staff increase your competitiveness.

Costs

The costs of the services/solutions will lie at the heart of every business case and will typically involve both the start-up and investigative costs as well as the actual purchase costs themselves. It is important to get a complete overview of all the costs associated with the project so that there are no surprises later as well as look at the potential costs of not implementing the solution.

Risks

As with any project, there are going to be barriers to success that will need to be taken into consideration. Most organisations have experience of HR technology projects that have not delivered on expectations or been delivered late and over budget. It is very important to keep the initial project simple and make the deliverables obvious to the stakeholders.  Projects that fail have often lost sight of the original primary driver and have become too cumbersome to implement and use.

Keeping it Simple:

There are a number of areas to think about when building the case but sticking to the original brief, keeping the messages simple and being realistic are very important. Some general guidelines are as follows:

  • Remain true to the primary driver and refer back to the trigger event to ensure business buy-in.
  • Be completely open about the Total Cost of Ownership (TCO) of the service/solution to avoid it becoming an issue later
  • Give benefits a financial value where possible and have rational realistic arguments to back these up. (e.g. cost of recruitment, be realistic about the benefits that better performance management will bring)
  • A project plan and time to deliver benefit will help the business understand when the solution will start to pay dividends.

Example:

 

Do you believe that it is possible to increase individual performance by 1 % by

  • raising awareness of corporate goals;
  • ensuring that employee behaviour is aligned;
  • managing learning and development/employee objectives more effectively and
  • ensuring that personal development needs are met?

Do you believe it is possible to save 2 hours of a managers time per annum by automating the appraisal review process?

If you answered yes to those questions and assuming that you have 150 managers with an average salary of £ 30,000, the financial impact could be:

Performance Improvement Savings

£ 30,000 salary x 150 managers = £ 4.5 million

4.5 million x 1% improvement = £ 45,000 benefit/savings

Time Savings

200 days worked @ 8 hours per day = 1600 hours per year

£ 30,000 salary / 1600 hours per year = £18.75 cost per hour

£ 18.75 cost x 2 hours saved x 150 managers = £ 5,625

 

Total Potential Savings = £50,625 in first year

This is a very simple case-study based on a basic system and some standard calculations. The metrics used are easily backed up and not overly optimistic, if anything it pays to be more cautious with benefits as this brings more realism to the final result, especially if it exceeds your expectations.

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