If you are considering an investment in either your current HR and payroll solutions or are considering purchasing new or additional software, the first step of the system selection process is to create a sound business case. This will allow you to set out your reasons for the investment, the benefits it will bring vs the costs and also identify any risks associated with the project. This article will help you to determine how to start the business case process and will confirm why the business case is such an important document to start the project with.
Project fundamentals – what is a business case?
The purpose of the business case is to document the justification for the undertaking of a project, which will be informed by your business requirements. This will usually be based on the estimated costs of the development and implementation against the risks and the anticipated business benefits and savings to be gained. Ultimately, the document confirms the detail of the change to the business that must be considered which may be much wider than just the project development costs. The concept of the business case may exist under other names, e.g. project brief, project charter, and high-level project plan. Irrespective of the name, the purpose is to present justification for project start-up and initiation.
What should be included in the business case?
Change in your People and HR systems strategy inevitably arises reactively to change created elsewhere. Drive or you will be driven on the case for it! Consider:
- Organisational maturity drives change: a first implementation, a scaling up of operations, re-modelling of HR service delivery, merger and acquisition.
- The activity of suppliers drives change: tech providers de-support, release new products and services, contract cycles near an end.
- Appetite of employees or would-be employees drives change: tech-talented workforces, candidate pools, and culture change all demand different and better.
Identifying the benefits
A key part of the argument is the cost/benefit analysis for HR tech. You will need a clear expression of the why of the project. Be three things: relevant, realistic and real.
To be relevant, focus your arguments on the organisational or HR strategy. What needs to be happening? Do you need to grow, keep up with competitors, attract talent, reduce costs, achieve changing behaviours?
To be realistic, don’t over-egg the savings and include the costs (sometimes called “dis-benefits”). I’ve seen absurd estimations of time to be saved by automating the employee process.
To be real, give your points a decent sense-check. The nature of HR means that quantitative returns are only part of the story and you may have a very keen sense of the qualitative benefits that really justify the spend.
Benefits to include
Even your qualitative benefits are most effectively captured as precisely as you can. Think about a benefit as an outcome achieving an impact. Without the latter, benefits don’t convince. For example, it may sound great to achieve closer systems integration, but unless HR can point to the fact that integrated HR software reduces time in dual-keying and risk of error, then the case is not made. Where else should you look?
- Automation of process leads to time savings. Quantify hours saved and cost of hours, remembering time saved for the many stacks up to more than for the few!
- The availability of management information improves compliance. Identify where pain points are currently in managing this.
- Improving accuracy in HR or payroll cuts not only how much you could overspend but the effort made. Assess how much could be saved here.
- Productivity gains could be made from the availability of clearer analytics on performance, as well as from increased engagement. Perhaps you can assess the potential in pockets of the business or amongst your competitors.
- Changing contractual structure or the systems map could achieve a direct cost saving on licensing or avoid the payment, perhaps in duplicate, of services not used or over-charged.
- A change in system, closer integration or development of new modules may result in closer compatibility: with IT strategy or other internal and external partner systems and new technologies you need to work with.
- Fitting candidate and employee experience to your preferred employer brand may well reduce attrition, get you ahead of the game, and help attract talent. Can you evidence this guess?
- Address risk reduction as an end. Inadequacies in automation, information or compliance create considerable risk. Specify those that apply to your context.
- Solve day-to-day problems and ease the pain! Show that the impact will be upwards trends on employee satisfaction, motivations, involvement and innovation.
Let’s talk risk
When considering purchasing new HR technology or developing the technology, making sure you have risk mitigation is an extremely important aspect of the business plan – particularly as HR and payroll solutions are often used by the entire organisation. Categorise your risks under the following headings:
- Reputational – what are the reputational risks associated with either the current tech or with the thought of moving to new tech – think back to the last implementation, or how the end-users feel about the current product – how can you maximise engagement and use of the product to unlock the return on investment?
- Financial – there will inevitably be costs associated with the project, think parallel running (and therefore parallel license fees), implementation and installation costs from the supplier, back-filling Subject Matter Experts (SME) in the business and consider project management and implementation consulting. Be realistic about the costs and the potential savings which can be achieved.
- Technological – when choosing technology those involved in the selection process need to have a sound knowledge of technology (or bring those into the process who have that knowledge) think in particular about hosting, reporting, security and compliance as well as how you will cleanse and transfer data from legacy systems.
- Employee Experience – enhancing the employee/user experience is one of the greatest benefits of implementing new technology but also a huge risk point – identify what people processes will be affected by the new technology and how you will enhance those processes rather than harm.
Costs and budgets
The business case document is often used as the ‘bid’ for budget from the internal financial function and a clear-cost benefit analysis will be required to identify if the investment is worthwhile. Whilst reducing turnover may seem like a benefit, for example, quantifying the exact cost saving associated with this is difficult – and don’t over egg the pudding here. The budget should include the full Cost of Ownership of the product and should feature lines such as:
Current Financial Year
|License Fees – Current System||£0.00||£0.00||£0.00||£0.00|
|Hosting Fees – Current System||£0.00||£0.00||£0.00||£0.00|
|System Selection Consultancy||£0.00||£0.00||£0.00||£0.00|
|New Software License||£0.00||£0.00||£0.00||£0.00|
|New Software Hosting||£0.00||£0.00||£0.00||£0.00|
|New Hardware Costs||£0.00||£0.00||£0.00||£0.00|
|Project Team Costs||£0.00||£0.00||£0.00||£0.00|
Consider the fact that beyond the implementation there may still be costs for ongoing development of the solution and for training and ongoing support from the supplier or a third party.
READ THE SECOND PART OF THE SERIES: System Selection- Part 2: Identifying your requirements
This blog has been written by James Proctor, Director of Consulting & Services at Phase 3.