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How to find the real ROI of HRMS tool?
In this blog, we have added a few key points that
are essential to calculate the real ROI of HR
software. These points will also assist you to
understand the exact benefits of your
HRMS. Today, most of the companies that use
manual spreadsheets to manage their workforce are
finding it difficult to match with the
fast-paced world. Such manual work is taking a
large amount of time from their working hours.
Thus, opting for cloud-based software that
replaces all the redundant manual tasks is a
smart move. However, this transition needs some
prerequisites. Firstly, companies need to
re-evaluate their current onboarding and
recruiting, core HR tasks, employee benefits,
performance management, time attendance, and
learning management processes. Considering such
requirements, there comes the budget part. Thus,
companies can shortlist the best HR software
with features they want within a specified budget.
But, how do you know if the features selected are
working at their best? Therefore, it is
necessary to calculate the output or the Return
on Investment (ROI) of your HRMS tool. In simple
words, the ROI of your HRMS tool is the cost
against gains. For instance, to eliminate the
cost of manual tasks, you have invested in an
HRMS tool. Thus, your HR software must reduce
the cost of manual tasks to deliver a positive
Return on Investment.
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The question is How to Calculate the ROI of your
HR software?
Here are the top ways to calculate the ROI of
your HRMS tool
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1. Track the costs incurred in Manual Tasks
Elimination of manual work is the prime reason
that majority of companies pick HR software.
Simply understand how many labour hours are
invested in performing manual tasks like
calculating payrolls, onboarding processes,
updating employee information, etc. These, labour
hours invested directly translates to money
invested in doing the manual work. After
understanding the cost of manual tasks, you can
calculate the time required for the same tasks
through HR software. This cost will give you a
clear idea to differentiate the manual and
automated work with exact money saved via HR
tools.
2. Productivity comes with Time Saving
As you understand the time spent on both manual
and automated tasks, productivity is one of the
important factors that increase as well. Because
the time saved with HR software can be utilized
in other tasks leading to more work done. With HR
software, employees get benefits like auto punch
in-out, easy to use the dashboard to fill daily
tasks and timesheet. With such features,
employees dont need to invest much time in
updating their details, and that ultimately
increases their work efficiency. In such a case,
productivity gain calculation is essential! There
may be chances that employees find the HRMS tool
difficult to use and they struggle with its
features which in turn affecting their work
performance and productivity. Thus, to ensure
higher productivity gains with HR software,
companies can compare work done before and after
the utilization of the HRMS tool. The comparison
will also help the businesses to rectify lagging
points in HR software.
3. Educate the manager's
the person that connects with employees on a
daily basis is the manager of their respective
team. If the higher management has deployed the
HRMS tool, the managers must understand what
real automation is. Most of the time, it may
happen that managers dont even know about the
time consumption on an HR software and they ask
employees to use it just because of automation.
However, automation doesnt mean digitalization.
The real automation is that reduces efforts in
doing the same tasks manually. Thus, if your
employees are wasting a large time on HR
software than they used to invest in manual
tasks, then it is clear that the ROI of your
HRMS is negative!
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4. Employee satisfaction
Best way to know if an HR tool is delivering the
results of employee feedback. Asking employees
for their feedback is where most companies forget
to interact with employees. Buying big research
reports, finding the future benefits,
understanding the percentage gain, etc.areonly
virtual factors that are calculated by taking a
constant figure. That constant figure is
employed in various research findings. However,
in a real work scenario, employee performance
and understanding varies.
Some users get it right and others struggle to
understand new software. Thus, considering the
person who is actually using the tool and facing
issues is one of the simplest ways to understand
the ROI of your HRMS tool. Companies can set up a
1 to 10 rating form for employees. 1 is the
least usable and10 is the highest usability. In
this case, it is really important to ask for
genuine feedback as employee satisfaction is the
most crucial part to gain higher productivity
and increase the companys performance gradually.
5.Cost of maintenance, updates, server capacity,
etc.
These are hidden costs that occur once a while on
fix cycles. The addition of such costs to
calculate the ROI can make a huge difference. As
the HRMS tool should be constantly updated with
improvements, it is essential for businesses to
add up the maintenance cost in the overall cost
of HR software. Sometimes, an HR tool may give a
ton of features but offer limited cloud storage,
and to go for higher storage, you need to
purchase an upgraded plan with extra cost. Such
extra costs are often neglected while calculating
ROI. Thus, whenever, you start the process of
calculating the ROI of your HRMS tool, ensure
that cost of maintenance, storage, updates, and
other related investment is also taken into
consideration. Today, there is stiff competition
among HR software providers. As most of the
organizations are going digital and bringing
automation in the first place, HR tool providers
are also luring customers with exciting
features. Going for a low cost and feature-rich
tool is a good idea however, it is also
essential to understand the real ROI of your HR
software. An HR software with a higher return on
investment is always a better way to achieve long
term benefits. Thus, the above-mentioned points
will help you to calculate the exact ROI of the
HRMS tool and select the best HR software for
your organization.
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