How to Justify Investment in Technology

You've decided you need HR software to make better use of employee data, reduce administration or take a more strategic approach to people management. But how do you justify the expenditure to a sceptical finance director or chief executive?

Made wary by past IT projects that perhaps failed to deliver promised benefits or return on investment, the board will need reassurance. They will need to know that the proposed expenditure will represent good value for money in both the short and long term, and will often expect this to be expressed in concrete figures.

Return on investment can be tricky to demonstrate before a project begins, especially in hard money terms, but it is by no means impossible - and your supplier should be working with you to build a strong financial case. But there are many other non-financial and "softer" issues to be considered.

1. Talk their language
   Translating HR into business-speak is more than half the battle. Approach the board armed with quantitative and qualitative arguments, backed with specific examples of how this will affect your department and the business as a whole, and you are far more likely to succeed.

2. Examine your motives
   It is essential to be clear about what you want to achieve from the investment and make this explicit to the board from the start. If you do not intend it primarily as a cost-cutting exercise, say so to avoid confusion later.

   Otherwise, you may be expected to supply detailed financial return on investment figures, rather than evidence of less tangible benefits, at the evaluation stage.

   If you are looking to cut costs, identify where technology will save time and increase productivity. Consider, for example, the number of ad hoc enquiries the HR department receives each week and estimate how these can be accelerated by processing them electronically.

   Look closely at time-consuming administrative processes such as generating large numbers of letters. Your supplier can help you to calculate time savings from HR technology that can then be converted into financial terms.

3. Find out what the competition is doing
   A little research on competitor activity can help gain approval for HR technology projects. Scan trade magazines and web sites for news of HR software deals. The chances are that your competitors are making use of HR technology. Read case studies in the press to find out what they are using it for and what results they have achieved. Then apply your findings to your organisation by seeking areas in which HR technology can provide competitive advantage.

   HR technology can help you to stay ahead of your competitors in many different ways. Training and development can be more efficiently administered to maximise staff potential. HR can also produce reports to monitor retention levels and other metrics. Helping the organisation to compete effectively in its market makes a compelling case for HR to present to the board.

4. Conduct an internal audit
   Audit HR processes by assembling an internal group that includes potential users of the new technology at all levels. Consult employees and ask about their daily activities - which tasks are time-consuming, demotivating and dull? Which processes have a high incidence of error? Do they have doubts about the integrity of the data they are using? Most importantly, which higher-level strategic tasks and projects do they wish they had the time to do? You can convert the findings into financial benefits where possible, as well as setting out the potential for more intangible improvements.

5. Consider your reputation
   The way your organisation is regarded is intrinsic to its success. Your reputation as an employer, both internally and externally, is crucial to recruiting and retaining the best people and forms an integral part of your business reputation as a whole. Present a case for how HR technology influences what others think of you and ask them to consider the business benefits of a good reputation.

   This has a direct financial impact through reduced staff turnover and the improved retention of key skills. What would be the impact of a 10 per cent reduction in staff turnover? Are there skills that are in strong demand? What would be the impact on the business of a 10 per cent increase in motivation/productivity?

   Is your organisation working towards industry standards or benchmarks such as Investors in People or ISO9000? HR technology gives you access to data that will help you to attain them - for instance, training records and financial forecasts. Such standards add prestige, bringing with them bottom-line benefits.

6. Put forward the 'grassroots' perspective
   Getting the whole of your department behind you will make all the difference to your proposal to the board. It will reassure them that the staff are enthusiastic about the project and want to get involved, reducing the risk of credibility problems. Your arguments will have more weight if you can give specific examples of how the system will help HR to deliver a better service to employees and the whole company.

   Getting information straight from the horse's mouth will ensure that you are in touch with common issues and problems that your staff regularly encounter. With their support, the board can be sure that the system will actually be used and won't be a waste of time and money.

7. Look to the long term
   Although the board will want to see evidence of results quickly, it is important to impress on them that the investment is part of a long-term vision or strategy.

   Think about ways in which HR technology can help your organisation to manage and reduce risk. It can, for example, help avert costly and damaging litigation by monitoring compliance with health and safety, equal opportunities or data protection regulations.

   Your supplier should work with you to ensure that your new system will grow with your organisation and is flexible enough to keep up with its changing needs. Choosing a supplier that will stick with you after implementation is complete ensures that your system will still produce good results in five or 10 years' time. This helps to reassure the board of the long-term business benefits of your technology investment.

• Not talking to the right person - ie, the main influencer in the budget decision.
• Not knowing what you want to achieve from the technology.
• Not having specific examples of business benefits to support your case.
• Not clearly defining the expected results at each stage.
• Not presenting evaluation plans to monitor progress against expected results.
• Attempting the impossible.
• Being afraid of figures.
• Not doing enough research.
• Not asking your potential supplier to give figures for return on investment.
• Forgetting to talk about the long-term perspective.

The expert
Michael Richards is chief executive of Snowdrop Systems.