Where did all the money go? Okay, I’m starting with the end in mind. Why? Because I believe in self-awareness, Stephen Covey and how I can make the most impact on the world. More importantly, I have customers and this is the kind of thing that drives business owners crazy. You need to be able to track and view your costs and expenses on a daily basis and in real time, but how do you get to that stage? You invest in HR and today that’s what I’m here to talk about: making the business case for investing in HR. What does that look like (The 10-step guide to building a compelling business case for an HR system – SAGE): Define your business needs Ensure your HR visions match the business strategy Identify the benefits of investing in new HR technology Define what success will look like Compare vendors Identify and evaluate risks Outline requirements and make a recommendation Get management and key stakeholders to buy in Demonstrate the ROI of new technology Create a comprehensive plan Are you ready?
Your Biggest Asset
HR is the heart of your business and your biggest asset is the employees. Without them what you sell doesn’t happen. And without them you can’t execute. You might have an idea, but if you don’t know how to market it, support it, sell it, what good is it and how successful can you be? Ultimately then, the biggest benefit of investing in HR is a healthier bottom line. But also, it allows you to measure your company against your competitors, which is what HR is supposed to do: drive your assets and exceed your benchmarks. So, for example, customer satisfaction is a direct way to measure organizational success. Said differently, a direct driver of organizational success is customer satisfaction and customer satisfaction is driven by the employee. Which is what again? Your biggest asset.
So, why don’t people invest in HR?
People don’t invest in HR, because we live in an immediate impact world and it’s all about immediate ROI. But investing in HR isn’t merely something you throw money at and get results. It takes the heart and soul of the organization to commit to that. You also can’t do it without a plan. It’s not going to happen out of sheer happenstance. But what does success look like? First, you need to know what your intentions are. What I mean by that is, let’s talk about your expectations. If you invest $1 million what do you want to see happen? You want to see ROI, but how do you measure that? What are the industry benchmarks? We can help you figure it out. We can build out the analytics. It’s going to take 12 to 18 months though, and you have to commit to that. You also have to recognize that most of us don’t know what our data means anyway. For example, you may know that turnover is high, but do you know what it will look like when you fix it? Is that turnover actually healthy? Is it because people are being elevated at your company? Do you want to lower that? If so, then you have a problem with recruitment.
Knowing your Business Strategy
To accomplish any of this I need to know what your business strategy is for the next two, five and ten years. But do you know? If you don’t know your business strategy how can you align it with your people strategy? If it’s about sales, you need sales people. Or, if you’re going to grow by acquisition, are you going to terminate people? Are you going to keep people? There are questions for every strategy. How are you going to handle it? If you know your strategy, you know how you’re going to handle it, but if you don’t… The first step is understanding what your business is and what it does, then we can start asking questions about measurements and what those measurements look like.
Examples of Measurements
So, for example, payroll is a commoditized service. It’s just a function. If you look at it from the big picture all the information you need comes from payroll data. We’ve already established that an employee is an asset, and that asset comes with a cost. You invest in them. Vacation, training, you put all of this time and money into this investment. Every dollar you spend on them is a cost. Payroll measures all of those costs and it can be as sophisticated as you want it to be. Payroll is the first tool for gathering data. The costs for the asset. The next thing is to tie that to the job your employees do, Job costing or project costing. How much time does an employee spend per hour? How much does that hour cost you? How much do you make? How much of the hour is profit and how much is a cost? Say you’re manufacturing a widget. From payroll, you can measure the cost of materials and the cost of labor for every widget, and you can tell how productive that employee is and what your profitability is. Then you can drill down even further. Compare everyone in that category. Who your high performing employees are and who your low performers are. The low have to go, the high get elevated and you can spend your time on growing those in the middle.
Bottom-line, you don’t want assets that are underperforming. But you can also go further: Where does high performing employees intersect with highest satisfaction? And is this important? Some group is underperforming and you can look at that granularly, but you need to know what’s going on in your organization. Why is underperforming even happening? One of the biggest areas for learning is performance management and annual reviews. It gives you that opportunity to measure performance and it provides you with predictive analytics. Our technology incorporates all of that and you can see it on a real-time basis. It measures things you’re looking for. Where a lot of organizations fail is that they don’t know what they want to measure. But you invest in HR because you want to automate and that first step is huge to understand your business better and how it’s going to compare and move your business forward. We’re smack in the big data world and HR is lagging behind.
So, what are the tools? Payroll. As discussed above. Time, and that could be either linear or relative, but we’ll go with linear. That’s something that can be measured. Employees spend 40 hours/week. Can measure cost per hour. For example, attorneys have x amount of productive hours/billable hours. You can measure this by client or by case. You’re compiling both a bigger picture and concise picture of profitability, productivity, to give you data, to make your educated decisions, based on real information. The HR system, which is where you’re going to measure leave, sick time, vacation time, PTO, performance management. What are the measurements that you’re getting from this information? And all of this ties back to the number one question: how do you make what you make and how much do you keep? Which also begs the question: where did all the money go? Which is where we started.
The (Closing) Argument
A discussed, you need to be able to see these things on a daily basis, in real time, and how do you get to that stage? You make the argument for investing in HR and Tech, and you approach it like this: Define your business needs Ensure your HR visions match the business strategy Identify the benefits of investing in new HR technology Define what success will look like Compare vendors Identify and evaluate risks Outline requirements and make a recommendation Get management and key stakeholders to buy in Demonstrate the ROI of new technology Create a comprehensive plan And at each and every step you can contact me for feedback and direction, because I’m here to help.