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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. This article will explain the steps you need to take to build a strong business case to get the new HR software you're after.

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 new HR software.

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

The benefit of doing this is to create buy-in from the key stakeholders and decision-makers on your leadership team. 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 a new HR system.

Business NeedWhy?
We need better tools to track our headcount. Our current headcount process is time-consuming and error-prone, with key metrics calculated manually.
We need to streamline our recruiting process since we are planning for an increase of X new hires this year. Feedback from candidates has been that our process is slow and confusing. By investing in a new 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.
An example of business needs and challenges, and the reasons behind them.
Download our 2024 Workplace Trends Report to stay ahead in a transforming HR landscape. Get insights from leaders on trends that will define your strategies in AI, talent dynamics, and DEI.

Download our 2024 Workplace Trends Report to stay ahead in a transforming HR landscape. Get insights from leaders on trends that will define your strategies in AI, talent dynamics, and DEI.

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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 you have to update when you add or change an employee?
  2. Can employees update their own information?
  3. How often do you come across data entry errors?
  4. What tasks take up most of your day?

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

Step 3 - Current Process Steps

Current process steps are the way you're doing things now in your HR department. This should cover all your core HR tasks, such as how you handle employee records, leave requests, hiring, and onboarding. (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 tracking spreadsheet.
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
Examples of common and time-consuming tasks HR professionals typically manage.

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, better retention rates, 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): 

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

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.

The formula above shows illustrates the positive impact of finding a new HR solution that uses automation to eliminate a 15-minute task that your HR professionals are performing frequently — as often as 50 times per month.

By eliminating that task through automation, your company would save $1,170 per month in labor costs. That is a significant cost saving for your bottom line!

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 from your HR leaders 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 cost savings and improved efficiency you'd expect to gain from the new HR technology.
  3. Demonstrations: Arrange a demo of the HR software to showcase its capabilities and user-friendliness and how it compares to your current system.
  4. Productivity Statistics: Show statistics on improved productivity and time-saving from companies using similar 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 providers, 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.
Compatibility with other software already in useCTO, IT ManagerTo get the most out of your new HR technology, you'll need to ensure it is compatible with other software your organization is already using.
An example of common requirements, who is responsible for each item, and why each requirement is crucial.

Step 7 - Contact Vendors

Shop around, request a few demos, and share your requirements with each software provider. Doing so will help them demonstrate how their software can make your life better!

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

Once you've connected with vendors, make sure you're tracking their product's capabilities against your unique 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
An example of tracking key requirements.

Step 8 - Build a 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 anyway).

 Decision-makers are looking for answers to the following questions:

  • How much does it cost? 
  • What pain points will the software 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 questions; 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 (Use the calculation in step 4 to compare against the potential software cost and list out the savings).
  • 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.

Step 9 - Form the partnership

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

But remember, gaining approval through the business case process is not even half of it. Next up is implementation, onboarding, 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 precedence. 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. This, in turn, creates a better employee experience for your employees, managers, and HR professionals, alike.

Good luck — and if you'd like more support, feel free to join our community for HR leaders to connect and share insight with industry peers and thought leaders.

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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.