Does the following describe your organization? Processing payroll has become a never-ending affair filled with errors, manual workarounds, and lost weekends. The human resource staff is continually reentering the same data in multiple places and workflow overall has metastasized into a seemingly irrecoverable sprawl. Worst of all, the entire HR department is awash in an ocean of paper and never quite sure whether the organization is complying with employment law.
The struggle is real.
What HR leadership must do now is make the case to the C-suite that selecting and implementing new technology for human capital management (HCM) is a clear and present need and in the best interest of the organization.
But those decision-makers in the corner office have their own concerns. Among them is the need to determine whether the deployment will be financially worthwhile, despite the pain HR staff and employees companywide may be experiencing. And everyone needs to determine which vendor’s solution best fits the bill.
These are not easy tasks. Even the best professional unfamiliar with the idiosyncrasies of one vendor versus the next, or the ins and outs of calculating and projecting return on investment, risks missteps.
Two of the biggest mistakes HR departments make in selecting new HCM technology are underestimating the potential return on investment and underestimating the differences between vendors.
Let’s look at each mistake more closely:
Underestimating the potential return on investment. Nucleus has analyzed the ROI of countless deployments of HCM technology. In the past three years, the lowest ROI we have calculated post-deployment is 142 percent. Part of this is attributable to the cloud. We find that cloud-based solutions deliver more than two times the value of solutions that exist on-premises or are merely hosted privately. In pre-deployment analyses, however, where Nucleus has entered the fray after buyers projected the ROI of a proposed new deployment on their own, we have seen prospect organizations typically underestimating that figure by at least 50 percent.
It can be challenging for buyers to fathom the benefits that modern HCM technology brings. Related to this, the HR department often fears overselling a new solution to leadership. They dread the possibility that a few short years down the line company brass will hold them to whatever the number is. They’re right about that. All the foibles and frustrations found in old or non-existing HCM technology are to blame—e.g., the lack of automation, circuitous workflow and excessive or redundant data entry. With little concept of the potential upside, buyers struggle to believe significant ROI is possible.
Underestimating the differences between vendors. When a buyer doesn’t know how two vendors compare, the assumption is that improvements to automation will be similar, even the same, no matter the vendor chosen. This is a mistake and effectively reduces the calculation of ROI to nothing but a comparison of total cost of ownership.
Usually, their misconceptions rest on an incomplete understanding of what constitutes modern HCM technology. Let’s just say some vendors are more modern than others.
To be considered modern, technology for HCM must be in a multitenant, public cloud and delivered via software-as-a-service (SaaS). But those are just the basic prerequisites. Modern technology for HCM must also provide as much as possible in one suite. It must have a straightforward, consolidated data model to produce as few datasets as possible. The user interface must emulate popular consumer-grade social media newsfeeds to promote interaction between employees and facilitate ongoing, in-the-moment performance management, learning and more. Because of these features found in modern HCM technology, predictive and prescriptive analytics can permeate these systems to provide information where and when users need it.
For many of these reasons, modern HCM technology can produce optimal automation of workflow to promote efficiency and gains in productivity. Beyond SaaS subscription and implementation fees, these are the building blocks of ROI in HCM technology deployments. Not all vendors’ newest solutions feature all these capabilities. In fact, Nucleus finds that an HCM technology’s potential to deliver sizable ROI varies wildly from vendor to vendor.
At Nucleus, we speak with users all the time to ask them about the usability and functionality of the solutions they deploy, and we publish annual reports presenting these findings. The differences in usability and functionality among vendors of technology for HCM are stark. Companies like Ceridian, Ultimate Software and Oracle tend to score highest in both areas.
Buyers only know what they know, and beset by the problems that a lack of modern HCM technology brings about, it can be challenging for them to fathom that a light awaits them at the end of the tunnel. This is where independent analysis and expertise come in handy. Without these, HR departments miss an opportunity. They present their company leadership with a ho-hum and inaccurate picture of what the future can hold.