As businesses increasingly use HCM investment to drive strategic initiatives, they'll need data to weigh the true costs and benefits. While new investments in automation, integration and compliance can increase the productivity of the workforce, they also require upfront capital expenditures and occasionally changes in operational systems. Approaching ROI from a data-driven point of view with workforce analytics can help produce a more accurate analysis of such initiatives.

It Starts With Data

ROI calculations start with good data. Deloitte found that organizations that leverage people analytics outperform their peers in hiring, retention and brand reputation. Yet too few organizations are actively implementing HR analytics to address business and talent needs. According to Deloitte, 75 percent of businesses surveyed agree that people analytics is important, but only 8 percent felt their organization was strong in the area. Analytics not only help organizations attain a competitive advantage but can also help them make more informed decisions about investments in HCM.

The ROI of Data

Forbes reports that two-thirds of senior data and IT decision-makers obtained solid returns from their investments in analytics. Having clear insight into how the workforce performs helps you benchmark and evaluate your HCM investments and initiatives. "It's about being able to build data into the DNA of the company, which means you have to deal with people and process and technology, and build a culture to adopt it," reports Datanami.

Efficiency From Automation and Integration

Organizations are also looking to automation and systems integration to increase productivity by ensuring the appropriate levels of staffing and minimizing overtime cost. One of the easiest places to find a good ROI is in software that automates HR functions like scheduling, payroll, benefits administration and communications with employees. These solutions can reduce the workload of HR leaders, allowing them to spend more time on strategic initiatives than administrative tasks.

Many of these solutions can also help in the hiring process. Information Age says that from initial requisition to reference checking and setting final appointments, automation can produce savings without compromising the decision-making process. The value is not in replacing humans, but in making them more effective with such tools. But it's essential that organizations also factor opportunity costs into their ROI calculations.

Organizations should measure the potential ROI of business systems integration, which can help reduce costly errors. Tracking productivity by project or job can help organizations evaluate their workforce more effectively.

Managing Compliance

Many organizations are also looking to new systems to ensure compliance with the ACA, the Family and Medical Leave Act (FMLA) and a host of other changing regulations. These solutions can help reduce the risks of violations and fines. The complexity and changing regulations of the ACA will require employers to aggregate more employee and health-related data and use more transparent analysis of data across the organization. The high costs related to noncompliance can be great, so compliance technology can be a crucial long-term investment.

Evaluating the potential return on an HCM investment isn't always a scientific process and can be more complex than just evaluating numbers. Organizations need to first know where their workforce stands, then consider the potential for increased performance while also weighing opportunity costs and increased efficiencies.

Tags: human capital management technology ROI big data