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.
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.
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:
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.
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?
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:
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.