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Managing HR with spreadsheets in a growing company leads to inefficiencies and record-keeping challenges, making tasks like vacation tracking and rapid hiring difficult.

Using smart HR software can be an easier solution than you think, especially for small businesses with tight budgets.

How to build a business case for HR software:

  1. Business Needs And Vision
  2. Identify Pain Points
  3. Current Process Steps
  4. Define Measures Of Success (ROI - Return On Investment)
  5. Get Initial Buy-In And Approval
  6. Gather Requirements
  7. Contact Vendor
  8. Build Business Case And Get Approval
  9. Make A Decision

Step 1- Business Needs and Vision

Your business needs are the specific requirements and challenges your company faces in managing human resources efficiently, while vision is more like the long-term goals and direction the company aims to go with the successful implementation of HR software.

The first step is to write out the vision for HR and ensure it aligns with the business direction and vision. 

The benefit of doing this is to create buy-in from the key stakeholders and decision-makers. List out your key needs and the reason why. 

Align your direction and vision

Here's an example of how you can align your business needs with the reason why you should invest in HR tools.

Business NeedWhy?
We are planning for an increase of X headcount this year. Our current process is time-consuming and error-prone. Feedback from candidates has been that our process is slow and confusing. By investing in an ATS, we can speed up the resume review process, scheduling interviews, and candidate selection by x%
Tracking of employment contracts is manual With the headcount growth targets, we need an automated and integrated way to track signatures on contracts.
Increase employee engagementOur engagement is concerning and we currently have a manual performance review process and surveying process where the data isn’t easily accessible and actionable.

Stay up-to-date on all things HR & leadership.

Step 2 - Identify Pain Points

Pain points in this context refer to the specific difficulties and inefficiencies a company experiences in its current HR management processes, which HR software aims to address and alleviate. List out all your pain points and don’t hold back.

Pain point identification checklist example

  1. How many spreadsheets do we have to update when we add or change an employee?
  2. Can employees update their own information?
  3. How often do I come across data entry errors?
  4. Where do I spend most of my day today?

The responses to the questions will be the basis of your business case for acquiring HR software.

Step 3 - Current Process Steps

Current process steps is the way you're doing things now in HR, like how you handle employee records, leave requests, and hiring (I'm guessing you're mostly using spreadsheets and emails).

Start by listing out the main processes, the steps for each process, who is responsible for each step, and the time each process takes you.

Sample Simplified Process Map

Main ProcessSub-ProcessProcess StepsWhoTime
Employee RecordsAdd new employeeOpen up a spreadsheet and add a new row with employee information
Make sure employee number is updated
Add employee to benefits and update benefits spreadsheet tracker
Update payroll tracker
Email Payroll with employee information
Enroll employees in payroll platform etc.
HR30-45 mins
Employee RecordsUpdate employees addressOpen up spreadsheet #1 and update
Open up payroll tracker and update
Email Payroll with new address
HR15 mins
Employee RecordsEmployee vacation balanceEmail manager for their reconciliation
Compare their notes to HR notes
Open time tracking application and verify 
Calculate balance based on any proration (if needed)
HR and Manager15-45 mins

Pro tip: You can take the process mapping a step further and, next to all the process steps, include if the step adds value to the organization (VA - value add) or doesn’t add any value (NVA - non-value add).

Step 4 - Define Measures of Success (ROI - Return on Investment)

This could be higher engagement, quicker turnaround on filling roles, or more bandwidth in the HR team for things like connection, training, and value-adding activities. If you can save time by investing in HR software, what would you be doing with that time?

Decision-makers like to see the ROI numbers. With HR software, this is typically measured in time savings and therefore you can add a dollar amount to the savings.

Example (many assumptions being made and we encourage you to state them): 

Salary = $80,000

Time per given task = 15 mins

Tasks per Month = 50

Total time per month = 750 mins

Total cost per month = (124,800/$80,000 = $1.56 of salary per minute). $1.56 * 750 mins per month = $1,170 per month in labor cost.

52 weeks per year * 8 hours a day = 2,080 hours. 2,080 hours * 60 minutes per hour = 124,800 minutes.

Step 5 - Gain Initial Buy-in and Approval

Use this time to present your findings from the above steps and ensure you have buy-in to continue or if you need to shut down the process. If you have verbal approval, keep going! 

Examples of how to gain initial buy in

  1. Case Studies: Present case studies of similar organizations that successfully implemented HR software, showing tangible benefits.
  2. Cost-Benefit Analysis: Show a detailed cost-benefit analysis highlighting the financial savings and efficiency gains from the software.
  3. Demonstrations: Arrange a demo of the HR software to showcase its capabilities and user-friendliness.
  4. Productivity Statistics: Show statistics on improved productivity and time-saving from companies using HR software.

Step 6 - Gather Requirements

I know that this isn’t the most fun step but it is one of the most important. Before contacting software vendors, be clear on your requirements and have input from all your key stakeholders. 

Key RequirementWhoWhy
One single source of employee data truthCEO, COO, HR, Manager, EmployeePrevent errors, increase speed, and ease of use
Goals tracked and visible to the executive teamC-Suite, Manager, HR, EmployeeAll goals need to roll up into one view for the exec team and for the team leader.
Resumes are viewed by hiring managerHR, hiring managerAs of now, HR copies resumes and pastes them into a folder on the shared drive. Managers need to be automatically notified when a resume comes in so they can quickly filter it in or out.

Step 7 - Contact Vendors

Shop around, get a few demos, share your requirements and hear how the software will make your life better!

If the platform you are interested in doesn’t have all the features you need, keep in mind how easy it will be to integrate into other applications.

Once you have connected with vendors, make sure you are tracking their product offering against your requirements.

Key RequirementCritical (Yes/No)
Built-in contracts and signature acknowledgmentNo
Employees can update their own dataYes
Vacation is tracked via a system and approved by the manager. HR has visibility.Yes

Step 8 - Build Business Case and Get Approval

With all the above data gathered, it's time to put together your business case. This doesn't have to be a 10-page document, it can be as simple as a one-page memo (because who has time to read 10 pages anyways).

 Decision-makers are looking for the following:

  • How much it costs 
  • What pain points the software will solve
  • If we didn’t invest in the software, then what
  • How long will it take to implement
  • Why do we need to invest now
  • What is the ROI of implementing this software

You may not know the answers to the cost question; however, seeking approval at this stage will set you up for success.

Here's a business case template you can use for HR Software:

  • Executive Summary: Brief overview of the proposal, key benefits, and conclusions.
  • Current Situation and Problem Statement: Description of the current state and specific challenges or problems being addressed.
  • Proposed Solution and Benefits: Detailed description of the proposed solution and its expected benefits, including a cost-benefit analysis.
  • Implementation Plan and Risk Assessment: Step-by-step implementation strategy, timeframe, and a summary of potential risks with mitigation plans.
  • Conclusion and Recommendations: A concise summary of the business case with final recommendations for decision-makers.

If the answer is no, then don’t waste time talking to vendors. You may have already connected with a few to gain preliminary pricing (great) but be cautious when selecting a vendor before gathering requirements.

Use the calculation in step 4 to compare against the potential software cost and list out the savings. 

Step 9 - Make the Decision

Hooray! You have gotten this far and have the approval to go ahead with your vendor of voice. 

But remember, gaining approval through the business case process is not even half of it. Next up is vendor selection, implementation, and training.

HR software makes HR more efficient

Automating your HR processes will make for a better employee, manager, and candidate experience. Spending time on creating a detailed business case will have the following benefits:

  • Outline key processes that need to change or be improved
  • Capture feedback and requirements from the right people
  • Identify what time can be saved and spent on value-added work
  • Demonstrate where software investment should take precedent. You may think you need a performance management platform but in fact, you need to start with a human resource management system.

Regardless of how in-depth or detailed you are, creating a solid business case for HR software will improve your organization. 

In my experience, when we implemented an HRIS, ATS, goal tracking, and performance management software (all at the same time), we saw a measurable increase in employee satisfaction, a decrease in admin time, and more time spent on value-added activities.

Good luck and hit me up in the comments or in the community with any questions.

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By Tim Reitsma

Tim has deep experience in HR, people & culture, leadership, business strategy and operations with a focus on building great teams who are excited about their craft and their organization. With over 15 years of leadership experience, Tim has always been guided by his core values: faith, family, curiosity, and fun. He is a coach, mentor, speaker, advisor, and an active volunteer in his community. Tim loves spending time outdoors with his wife and two kids as well as mountain biking in the north shore mountains.