Measuring the value of human resources can be a difficult task. Sales departments can rely on metrics such as conversions, advertising campaigns or product launches as a form of measurement. For human resources however, this can be tricky, as the assets are employees. While there is no question that employees provide a great deal of value to a business, this value can be difficult to measure.
Because we live in an age where data has become so important, the departments within companies are under increased pressure to correlate investment strategies with results that can be measured. Human resources is not an exception to this phenomenon. They must be able to provide data to their bosses which prove that the tactics and strategies employed by the department are effective. It is for this reason that HR software has become one of the most sought after tools by HR managers around the world. To understand the importance of these tools, you must first understand value, and how to measure it.
Value for Human Resources
Most managers have a basic idea of how value works. It is the part of your investment (represented by a percentage), that you get back through direct or indirect profits, as well as cost savings. If you select the correct HR software and install it properly, you will see a positive return on value, which means that you will get back everything you invested and more. To learn about this amount, you need two pieces of data, and this is the estimated financial value of gains and the complete cost for the software.
Complete Software Cost
There are many aspects to understanding the complete cost of software ownership. Many managers limit themselves to the subscription and licensing costs, but the problem with doing this is that it doesn’t give you a complete understanding of the investment in terms of ongoing expenses. For example, an additional cost that may be involved with owning software includes fees for installation, migration of data, updates, consulting and maintenance for IT.
The complete cost will be dependent on the needs of the HR department. Those that need only a basic cloud solution may pay a single monthly fee, while an HR department that needs a full enterprise suite will pay fees that are much larger.
How to Measure Your Results
You will next need to figure out how to measure your results. These are your gains, which includes things such as indirect and direct profits and savings in costs. This can be challenging for HR departments since you’re dealing with humans.
However, it is possible by looking at factors such as lower employee turnover, faster hiring processes, and reduced costs for recruitment and productivity for administration. All four of these things should be measured before the HR software is implemented, and then post installation, the software will be able to show you the progress which is being made. It is important to keep things simple and only monitor a small number of metrics at a time.