12 top HR software and tool options to consider in 2024 13 HR software buying mistakes to avoid

How to build an HR software business case

HR leaders who want a new software system must conduct in-depth research on strategic technology needs and use it to build a strong business case. Here are tips on doing just that.

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.

As an HR leader, you need to understand what the technology buying committee is looking for. The committee may include IT, leaders of different departments and possibly the CEO, depending on the size of the company. They look for a return on investment (ROI), how the HR technology will fit with other planned 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 this list, speak to key stakeholders, such as employees, managers and job candidates. Some of the issues may be subjective, such as an employee experience that people say is nonintuitive or difficult to use. 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.

2. Assess your current HR system

Once you have a complete list of your needs, you should do a deep analysis of your current HR system and related applications. You may find functionality you did not know existed that will allow you to meet some of your needs. Cloud-based software changes often, so it's important to ensure 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 your existing software can't meet your needs, you should consider the additional, related functionality a new system could provide. Projects may be planned for the next few years that could benefit from a new application, improving the overall ROI. Make sure to include these milestones in your final business case template. Licensing new software may also help you get lower-priority functionality more quickly.

Graphic showing suggestions for building a business case for an HR system

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 for review. Use the needs you identified and your organization's business strategy to build the business case and to explain any other system options you've considered. The business case will also provide the data you collected as justification for your project.

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.

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 may already have an HR system it wants to replace, whereas another is considering implementing its first HR system.

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 may 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; and
  • an understanding of which systems will be replaced by the new HR system. For example, 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; and
  • the cost of using static and 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 may 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 get an approximate savings from a system that eliminates the need for manual intervention to build reports.

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. 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. They 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 some tasks are time sensitive and require quick turnaround. In that case, you may want to say that 80% of the time the system alone will be sufficient and 20% of the time a manual reminder will be needed. 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.

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 may 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 HR system, so you won't get a 100% savings.

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.

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 terms of 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 may take a long time to get a revised one considered. If you miss the budget cycle, you may have to wait for the next one, which could be the following year.

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 has to be used for all new investments. Some stakeholders may 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.

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 the new system is needed.
  • Finance often cares the most about cost, both short term and long term. Knowing the implementation cost and the 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 may have been responsible for choosing the current HR system and don't want to see it go, some may 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 buy a system that provides tangible benefits to HR and the entire organization.

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