Making a Business Case for a new HRIS

Article Summary - If you are looking to cost justify a new HRIS system or upgrade one, this article will prove very beneficial for those who are having problems receiving management approval for their much needed new HR software. The article was created by Al Donran at

One of the most significant challenges facing human resource managers today is the justification of the costs associated with the purchase and implementation of HR Information systems. Most organizations already have a policy of cost justifying any new technology, and today's tight economy dictates that this be done for every new investment of this nature.

The cost justification of HR software has always been a challenge as methods for quantifying the costs of personnel systems have only recently received much attention by executives and human resource practitioners. In comparison to financial and operational information systems, cost benefit analysis for HRIS' are recent and still quite rare.

Today, however, this is changing; there is a growing realization that human resources cost money and that their inefficient use may lead to red ink on the corporate ledger. For many companies, as much as 90% of the corporate budget is spent on salaries and benefits. However, few are able to make the link between their people costs and the corporate bottom line.

In the following paper, we outline many of the bread and butter issues facing HR managers today. Each of these challenges can easily be addressed through the effective use of a Human Resource Information System. The actual savings will vary depending upon the situation in your organization. Each scenario can be expanded to determine the actual cost savings by applying personal knowledge of your own situation. In the first scenario, the production of address labels is discussed. If this activity normally takes two days for one resource to complete, then the direct savings will be the cost of that person's salary for two days. There may be indirect savings if, for example, a penalty can be avoided through the timely distribution of key corporate data using the address labels.

The issues addressed in this paper are some of the first that an organization will face as they implement their new system. As experience with the system grows, it will become clear that the HRIS is a powerful tool for assisting with many of the strategic issues facing the company. The HRIS will become an effective tool for dealing with a number of critical Human Resource Planning and Development issues which, in one way or another, will integrate and make use of many of the functions addressed in this paper.

Issues dealing with corporate strategy and human resource planning and development go beyond the scope of this paper. However, these matters must be kept in mind when selecting and implementing a new HR solution. These major strategic issues will become more prominent as the company works with the new HR software and realize its full potential. Therefore, it is essential that the system chosen to handle the basic issues also be capable of growing with the company to meet its future needs.

Address Labels

This is a simple but very common and important application. Most organizations have accurate information regarding each employee, including his or her work or home address in paper files. Such information may also be available in automated form in payroll files, but may not be accessible so that it can be used easily to identify different groups of employees, and to communicate with them for various purposes such as:

1. Distributing surveys to assess employee attitudes to proposed changes: in administrative policies, or benefits programmes;

2. Communicating widely regarding employee recognition programmes;

3. Advising affected employees about changes regarding administrative, or operational programmes; or

4. Saving money on postage by sending T4s to each individual's work address rather than to their homes.

Lists of Employees

There are many reasons during the course of a year for managers at all levels to identify employees with specific characteristics, and to be able to produce tables of the numbers of individuals having these characteristics. These lists should be simple to produce, but many organizations do not have the means of doing so quickly and accurately. Such lists should allow employees to be grouped by plant, department, sex, age, years of service, grade, salary, employee affiliation, employment status (part-time/full time), etc. for such purposes as:

1. Providing a record of all the employees reporting to a new manager;

2. Documenting all employees in Department A, age 60 and older listing name, job title, grade, age, length of service, as background information for a human resources planning exercise;

3. Producing a list of casual employees by time in position to monitor violations to a collective agreement; and,

4. Producing a list of full and vacant positions by department.

Attrition Reporting/Monitoring

If Canadian organizations are to compete successfully in the increasingly international marketplace, employees must be regarded much more as a renewable resource than they are now. This means attracting well qualified applicants, making the most of these talents through progressive training and effective employment practices, and retaining the ones that you want to keep. There is a considerable body of research evidence which suggests that North American organizations lag behind others in the industrialized world in making the most of their human assets.

As automation and information technology become more pervasive, investment in associated skills in a broader range of employees increases. The generic skills of typing or shorthand for secretaries or administrative assistants, for example, have largely been replaced by word processing, spreadsheets, electronic mail, electronic information and storage devices, all resident on local area networks. Further, these applications are often tailored to the specific organization, so that knowledge of them from one organization may require retraining before the individual can be fully productive in a new organization.

Thus, in today's competitive environment, an organization requires effective recruiting, selection, training, compensation, and employment programmes, along with effective information systems to support these programmes. It also requires the means of monitoring who is leaving the organization, and for what reasons. Depending on ones analysis of the reasons for attrition, its consequences, and the options available to the organization:

1. One could accept the situation and:
a. Do nothing; or
b. Respond to the high turnover by increasing recruiting and training costs.

2. One could try to decrease attrition by:
a. Increasing compensation and benefits in an effort to make it too costly for individuals to leave;
b. Addressing motivation problems by examining leadership practices, increasing employee empowerment, quality of working life, etc.

Employment Equity Tracking/Monitoring

For many years, employment equity legislation of one sort or another has applied to all employers and employees in Canada. More recently, both federal and provincial legislation has made it absolutely essential for organizations to develop accurate information gathering, retrieval, and analysis systems capable of:

1. Reporting on the numbers and status in the organization of individuals from four designated groups (women, visible minorities, individuals with disabilities, and aboriginal people);
2. Supporting the development of action plans for ensuring that individuals from the designated groups are approximately represented in all functions and levels in the organization in the same proportion that they are represented in the population from whence employees are recruited; and,
3. Monitoring the effectiveness of these action plans and modify them as required.

A complication for those organizations covered by both federal and provincial legislation is that the reporting requirements for each, while similar in principal, differ significantly in specifics.

Salary/Benefits Budget Reporting

These reports must be able to be integrated into routine budget and monitoring processes. As with other assets, it is important that one be able to accurately and efficiently track salary and benefits costs to-date, and to make projections both against authorized budgets, given staffing levels and authorized complement.

This capacity is important for budget management and for budget planning.

Salary/Benefits Modelling

The compensation (salary and benefits) structure of most organizations having more than one or two hundred people can become quite complex. Yet situations arise (e.g., contract negotiations, pay equity planning, corporate restructuring, social contract planning) in which it is essential to be able to quickly estimate the costs of various changes in salary and benefits plans. In a typical application, the organization might have a total amount of money that can be divided between salary and benefits in different ways. A series of "what-if" analyses might have to be done within a short time-frame to demonstrate that what is negotiated does not exceed budget limitations. Horror stories exist in many organization about the lasting effects of agreements that were not accurately costed.

Seniority Lists

Seniority is an important consideration governing employment conditions in many union contracts. Included are rights to:
1. Overtime;
2. Vacation scheduling;
3. Bids for new positions where more than one employee meets the qualifications; and
4. Bumping when positions are declared redundant.

Obligation typically rests with the employer to produce accurate seniority lists to be sent to the Union and posted to be seen by Union membership. Errors or omissions in such lists are then open to grievance/arbitration processes.

In situations where seniority can be affected by different kinds of leave or working relationships, calculating seniority can be complicated. However, being able to produce accurate lists is very important to both the organization, the union, the individuals concerned, and the relationships among all three.

Applicant Tracking

In the current economic climate, there are typically many applicants for each job advertised. It is important to be able to cross-reference applicants from one competition to another, and to be able to track each applicant through the selection process. Frequently, applicants passed over from one competition may be a good match for another. If this matching can be done effectively and efficiently, it is possible to save significantly on recruiting costs (e.g., advertising and administration).

Information collected should also be able to be passed on to other human resources systems modules so that biographical information does not have to be collected a second time in the case of selected candidates, and information on the characteristics of all applicants is available for employment equity reporting.

Grievance Tracking and Analysis

In unionized settings, there is the obligation on both parties to process grievances according to steps and timing stipulated in the contract. An effective automated grievance management system information can save money, avoid unnecessary ill-will, and avoid the prospect of losing grievances or arbitrations for technical reasons.

The information gathered to manage the grievance processes is also very important in providing a picture of the "who, why, what, where", and the incidence of grievances and arbitrations. By analyzing trends one can often identify problem areas which can be worked on to reduce grievances, and effect better employee relations. An important aspect of this is to feed back to managers the types of grievances that have arisen over particular time periods, as well as their disposition, and cost to the organization.

Workers Compensation (WCB) and Long Term Disability (LTD) Tracking

Organizations that have established effective means of managing WCB and LTD costs can save hundreds of thousands of dollars annually. In order to be able to manage these costs effectively, one must be able to track the incidence and reasons (who, what, where) for accidents or illnesses. Effective management of WCB and LTD means:

1. Determining what kinds of accidents or illnesses are happening, where, and when, to provide the basis for identifying and addressing problem areas;
2. Identifying potential fraudulent claims, and taking corrective action; and,
3. Getting individuals back on the job as quickly as possible even if this means appropriate workplace accommodation.

WCB provides financial inducements to employers that are successful in reducing workplace accidents and minimizing costs. The situation for LTD is similar except that, instead of being funded through a crown agency like the Workers' Compensation Board, LTD is self-funded (in the case of large organizations for whom this is economical), or funded indirectly through the payment of premiums to an insurance carrier.

While traditionally WCB has focused on workplace accidents, stress related illnesses have recently begun to be funded. If the analyses shows that these, or similar ailments funded by LTD are prevalent, wellness programmes or employee assistance programmes may be useful in reducing costs by either stopping them from developing, or stopping them from getting worse.

Al Doran, CHRP and Glenn Rampton, Phd
Copyright (c) 1993 Phenix Management Int'l
Phenix Management Int'l, Inc. 10520 Yonge St., Unit 35B, Suite 217
Richmond Hill, ON, Canada L4C 3C7

phone: 416-505-6204 fax: 416-352-7456

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