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Introduction
Human Resource Management is a wide umbrella of systems put in place to manage the human capital of an organization. Human Resource department plays an integral role in managing talent, maximizing the performance of employees and helping businesses get an edge over competition.
Human Resource Management (HRM) technology includes transforming HR management services through automation, Artificial Intelligence (AI), data analytics, Machine Learning (ML), and Robotics.
Why Should Companies Invest In HRM?
At the basic level, HRM technology reduces everyday administrative burdens by automating a variety of mundane processes. At the next level, it makes HR services easily accessible to both employees and management.
With advanced levels of digital technologies, it also makes it easier for the management to identify workforce trends and make strategic decisions. HR tech makes granular real time data available and therefore enables faster decision making. Investing in technology also makes the HR department stronger and more business-aligned.
Here are some of the HR processes that are largely technology driven.
- Artificial Intelligence (AI) Driven Recruitment Drives : Robotic interviewers and Automatic Resume Screeners are being used to attract global talent.
- Analytics Driven Performance Management : Analytics help management make better performance decisions centered around increments, bonuses, and promotions.
- Cloud Based HR Storage Solutions : Starting from potential applications to resumes, background checks, and status updates, data is stored and retrieved smartly from cloud. This reduces the need for physical documentation and maintenance.
- Remote Monitoring : Remote workforce is a growing trend thanks to technology-inspired time management practices.
Change is always difficult. Most companies go through an initial bout of struggle during the transition period. The real challenge, however, with championing HR technology practices is demonstrating the Return on Investment (ROI). Historically, this is largely due to lack of quantifiable financial benefits which makes the management nervous about investing in expensive HR technology.
Calculating ROI of Potential HRM software
Organizations usually look at quantifiable benefits before making an investment. However, the case is different in the HR department. Many consider it to be a soft area of business since the data provided are qualitative and intangible in nature. To quantify the value of any potential HR software, organizations need to take into account both direct and indirect returns to calculate its ROI. To calculate the ROI, one needs to understand the costs of implementing and using technology and the direct and indirect benefits.
The Cost of Implementing HRM Technology
There are mainly four common costs involved in implementing new technology-based software for the HR department.
- The fixed cost of the solution (usually modern technologies have monthly subscription costs which are far less compared to the earlier lump sum onetime costs)
- Monthly expenses incurred to operate
- Costs including data migration, installation, and maintenance
- Costs for training HR personnel in using the new software solution
Many companies take into account only the original cost of the solution and monthly expenses while calculating the expenditure. But the last two costs that are left out can also be quite considerable. It can even affect the budget. In such a case, maintaining the software and training the HR team will be difficult. Hence, it is better to be prepared for the expenditure upfront. When you pitch for a new HR management software, be clear about both one-time and the recurring costs.
The Direct and Indirect Benefits of HRM Technology Investments
If you’re still on the fence about implementing HRM technology into your business, here are some of the benefits that will help you justify the investments.
Getting Rid of Extended Processing Time
When an HR department functions manually, employees have to wait for a longer time to get updates and solutions. An HR team that embraces technology can automate all time consuming manual processes. This will allow you to focus more on important tasks. Grievances can be handled and closed quickly. The software can also generate hundreds of reports, easily track employee queries, requests, and notifications, and answer them faster.
Eliminating Chances of Manual Errors
An unforeseen error while manually putting together a report or a document can cause a huge problem. Needless to say, such errors also increase back-end work. You can prevent such occurrences by investing in the right HR technology tools. The right technology can automate compensation planning, salary management, performance management, and execution. It can even take over on-boarding and exit processes and put together precise reports with far more reliable data that are needed to make management decisions.
Increasing HR Department Productivity
Understanding the value of time that is saved because of technology adoption is crucial to know the ROI of HRM technology. Using HR software, organizations can save time spent on processes that can be easily automated.
Modern technology also enables organizations to improve their performance management processes by making them real-time and continuous which has a direct impact on employee performance and productivity. Automating other HR components collectively improves employee experience with an organization leading to increased employee engagement.
Productivity Gains of HRM technology
|
Productivity gains |
How do they help? |
|
Man-hour costs |
Saved Cost to Company (CTC) with lesser manual hands on HR tasks |
|
Resource Management |
Ability to hire and retain best-in-class talent |
|
Learning & Development |
Remote learning facilities, flexibility for employees to choose learning, costs saved on hiring onsite trainers |
| Employee engagement |
Better workforce culture, innovative engagement practices |
Risk Reduction
The HR department needs to constantly ensure with hundreds of global compliance that are required for the company to function seamlessly. Starting from employee data collection and background checks to visa processing, medical, travel and tax compliance, etc. Even a small human error can result in legal issues that can cost the company millions. Adopting good HRM software can make these tasks error-free and help with litigation protection.
Competing in Global Markets
Technology will be the core of all business processes in the near future. If small companies want to compete with the top global giants in the market, then investing in HR technology software is one need that cannot be ignored.
Weighing Costs Against Benefits
As an organization, you have to do your research and figure out the pros and cons of implementing potential HRM software. This step is crucial as you need to approach the management with detailed costs/ benefits analysis of the technology. Since most of the benefits are qualitative and intangible in nature, convincing the management to make an investment can be quite challenging.
You should start your pitch by describing how the software has increased productivity. Every member of the HR team will benefit from the implementation of HR software tools. You will have free time in hand, which you can use to come up with better ideas and strategic changes that will benefit the company.
Don’t forget to talk about savings while making your pitch about the HR software. You can get tasks like recruitment, on-boarding, training, and exit processes done with ease. You only need a few individuals working on the processes. Employee satisfaction is also a major factor.
Returns on HR Tech Adoption
Employees find it more empowering to have a portal that can handle their everyday queries, grievances, leave requests, and training needs. Instead of having to meet with the HR team or email them for every small request, the portal gets their jobs done faster. This improves employee satisfaction and retention.
It would also help if you can track the efficiency of various processes done manually and compare it with how these processes would be done post-implementation of an HRM tool. Management will get a clear idea of what to expect post investing in such software.
Conclusion
Technology is the future. Companies have to adapt to the latest technologies to keep up with the changing times. There is no doubt that the benefits of HRM software will far outweigh the investment/cost needed. Increased productivity not just in the HR department but across the company as a whole, the time saved in doing mundane everyday tasks and employee satisfaction, all makes this investment worthwhile.
