There have been two transformational changes since we first wrote a series of articles on building the business case for your next HCM initiative.
In 2020, the global pandemic brought employee experience and wellbeing to the top of the agenda. We now work and live in new ways that created a new demand for technology—and HR tech companies delivered.
Yet, the pandemic wasn’t the cause. While it was disruptive, it only sped up changes already in motion.
Along the way, CEOs have discovered three things:
- Human capital has a measurable value that increases when you invest in it.
- When CEOs invest in upskilling their people, they create a more robust corporate culture. As a result, investment in people drives business growth.
As HR has led through the pandemic, HCM initiatives to carry out the agenda are now a top priority.
In doing that, we are creating a new conversation around people and performance, showing the connection between the employee experience and productivity.
This guide aims to help you make the connection by working with your colleagues on the technology that supports the experience.
We show you how you can:
- capitalize on the people, knowledge, and data that exist in your organization,
- use a low-risk, high-impact project to gain momentum, and
- Build credibility by having and proving the financial impact on the business.
We hope this guide helps you make the connection between the value of human capital and the success of your business.
This guide will take you through the team building, research, and number-crunching necessary to make a business case. You will also find tips on presenting your case to win approval.
Gather Intelligence to Build Your Case
HR has become the enabler for delivering value through people.
Because of that, the opportunity is ripe for HR to collaborate with people in the business to drive productivity.
Moreover, creating a business case will work best if it is a collaborative effort among experts, operational leaders, finance gurus, and tech wizards.
- Learn How Approval Works
Seek people in your organization who have had success in getting proposals approved.
If your company has a formal review, learn how it works.
Find out if reviews are on a regular schedule or if they happen when proposals come up.
See also whether your company reviews functional portfolios or individual cases.
2. Gather Intelligence
Study what drives decisions in the business.
If you can’t get the information directly, read financial reports, shareholder communications, and internal communications. Recent news articles can also help.
If you can, learn what is keeping decision-makers awake at night.
Build your idea on your business strategy. No matter what it does, the organization needs talented people to make it work.
Learn Who Makes Decisions
Find out who makes the final decision and what their priorities are. Review previous projects to see who approved them and why.
The ultimate decision authority may be the CEO, CFO, or a group of executives.
Several groups or levels may review your case before it reaches the final approval stage. You will need to know how to negotiate each level.
- Find out who has influence and build your idea around their priorities.
- Seek an executive sponsor who will champion your plan.
- Talk with leaders about performance and how you can help.
3. Form Alliances
We mentioned you need an executive sponsor, but you need other allies on your team.
Writing a business case proposal isn’t easy, especially for “people people” not inclined to love numbers.
That doesn’t mean you need to become an accountant. You only need to get Finance on your team.
Seek operational leaders who can benefit from your ideas. Explain that you want to help them get results.
Don’t go it alone, and don’t overlook the expertise in other business areas.
We hope this checklist will help you get off to a good start in building your business case. If you have any questions, contact us. We’d be glad to share our experiences with you.
Lay the Groundwork
Assemble Your Team
Your project team should be a small team of experts:
Finance: Ask your CFO to designate someone to guide your team in financial strategy, cost/benefit analysis, forecasting, and ROI calculations.
Line of Business: An expert in the corporate entity that owns the KPIs affected by the initiative. It may be experts in sales, production, research, human resources, logistics, or other roles. It may also include other stakeholders.
Marketing: If the problem and solution affect customers, you will need an expert who knows them and their needs.
Technology. Expertise in this area could include your IT group, vendors, or consultants.
Analytics: Include your people analytics team if you have one. If you don’t, you may get help from marketing or finance or need an analytics consultant.
Project Management: A certified project manager will provide expertise in analyzing and presenting your proposed activities and planning your resources.
Define the Business Need
In your conversation with executives, you will uncover problems you can help solve. Here are a few simple examples.
- We are losing people to our competitors.
- Unplanned absences are slowing production.
- We don’t know who our high potential employees are.
- People on the sales floor are not cross-selling.
- We can’t find qualified technicians.
Define the need and frame it in terms of your business strategy.
Identify the related key performance indicators (KPIs), or Objectives and Key Results (OKRs), or your business goals. If you want to solve a problem, you will need support from the person accountable for the results.
Analyze the Business Need
Tap the expertise on your team to explore why the business need or problem exists. Your organization may use Six Sigma or other disciplines to guide your analysis.
Some data you need will be in places other than HR. You may need to correlate sales, revenue, production, or logistics data with your people data. Work with the owners of the data to gain access.
If you are dealing with a process, develop a flow diagram to analyze it.
Sample Ishikawa Diagram
Document your analysis. You will need to explain how you got to your conclusions.
Use group brainstorming to generate potential solutions. You have team members from several disciplines, and each will have a different point of view. Bone up on your brainstorming techniques so you get a free flow of ideas.
Frame proposed solutions as hypotheses: If we do this, this will happen.
The best place to start might be your null hypothesis, i.e., what happens if we do nothing?
When you ask for approval, you will need to discuss your null hypothesis. Here’s an example:
- Define it in terms of business results—costs, revenue, or market share.
- Use analytical models to test your assumptions.
- Evaluate and compare your ideas. For each one, compare price, revenue, risk, and time.
- Eliminate or change those that are unworkable, unacceptable, or not in line with the business strategy.
- Work with your executive sponsor to identify which proposals have the best chance of being approved by your executive team.
- Narrow your list down to the best two or three alternatives and create a high-level plan for each.
Create a High-Level Plan
The purpose of the high-level plan is to understand the resources you need and get a rough idea of the costs and benefits. It’s the who, what, where, when, and how of your proposal.
The who is essential because you need buy-in and support from the people involved, especially those who do the work or provide funding.
To construct the high-level plan, list the major activities and milestones in chronological order—list who will do what, where, when, and how for each activity. If you need help, work with your project management expert.
Once you have your rough draft ready, it’s time to crunch numbers. In the next part, we’ll talk about calculating the costs and benefits.
Calculate Costs and Benefits
We’ve discussed the need to gather intelligence, form alliances, and influence decision-makers. Then, we showed how to clarify the business need, build the right team, and evaluate solutions.
Those steps prepared you for the number-crunching you must do to present a solid business case.
Finance and Procurement will be your best allies. They know the policies, procedures, and methods you need to follow and advise you on presenting your case.
You will need to estimate costs and benefits for each of them; how much of that analysis you present to your executive team will depend on their preferences. Your CFO and sponsor can guide you.
Rely on your Finance partner or use your company’s income statement as the format for your estimates. CXOs are accustomed to reading financial statements. They will expect items to be in a particular order and form.
Accountants break down costs into two areas: project costs and operating expenses.
If you plan to purchase software, you will need to show it as a capital cost instead of a subscription model. Finance will guide on how to amortize it.
Project costs can include:
- Implementation fees,
- travel, and
- any other expense not used to purchase an asset or license.
Transition costs result from temporary disruption. They include events like:
- spikes in support calls,
- onetime training costs, and
- temporary dips in productivity.
Explore them with your experts to make sure you capture realistic estimates.
To calculate the operating cost, you will need to consider:
- administration, and
- any other ongoing cost.
Consider costs that different business units may incur and discuss them with the business unit before presenting your case.
Some initiatives will lower costs. Be sure to include those in your numbers when you calculate benefits.
If you are automating or improving a process, you may have labor savings to add to the benefits.
Calculate the Benefits
Estimating the benefits of a human capital management initiative isn’t an exact science. Still, you can do it with the right help.
Benefits will include:
Infrastructure Savings. If you are moving from on-premises to cloud services, you may have IT savings in hardware and support.
Operating Impact. Your line of business partners are the people who help you calculate the impact. Work with them to develop best-case, worst-case, and most likely case assumptions, so you can present all three estimates in your case.
For example, how well managers support their people affects performance in customer service.
- Can the customer service team help you estimate the impact of leadership training?
- Can Marketing then forecast changes in consumer behavior?
- Or consider what financial impact will be on time-to-productivity when you create a new onboarding program?
Revenue. Suppose you are implementing mobile learning to deliver just-in-time sales training and support. What will the impact be on sales?
Risk Mitigation. Improvements such as compliance tracking can improve risk exposure. In that case, your risk manager may want to quantify the value and its impact on insurance rates.
Productivity Gains. Productivity presents a unique challenge:
- A common argument for automation is that it will free up administrative workers to do more productive work. That isn’t a productivity gain—it’s a reallocation of resources.
- You may need to upgrade your staff because “more productive work” requires a new skill set.
- Whenever you introduce new technology, someone must manage it. You may have a productivity loss to add to expenses.
Map and analyze the processes you will touch. Minor changes to a work process can often result in considerable savings.
We caution against taking estimates at face value. Make sure your executive partners will stand behind the numbers. You may get a better estimate when you get them to stop and think. You won’t know the exact revenue, but the sales team can estimate it.
Here’s an example:
Calculating revenue per employee is a straightforward formula.
So, if you want to estimate the impact of an employee experience program, ask the team:
- Will ROI move?
- How do you know?
- How much will it move?
If you can’t quantify intangible benefits, don’t use them in your estimates. You should, however, use them in your presentation pitch.
You can measure benefits only after implementing your improvement, but you can estimate them now.
When you have the costs and benefits, it’s time to move to the return on investment.
Calculating Risk and ROI
The next step is to calculate the risk and the return on investment.
The ROI you calculate assumes everything will go as planned. What if it doesn’t?
What if the project schedule changes?
What if your organization delays funding?
What if you must replace a key team member?
Be diligent in uncovering risks because the worst event in your project is the one you didn’t expect. Learn as much as you can about what could go wrong.
Ask people who have experienced what you are contemplating:
- colleagues in your professional associations,
- executive sponsor,
- your technology team (even if it’s not a technology initiative), or
- an experienced project manager.
Calculating and managing risk is essential for every proposed initiative or project in any business activity.
Impact and Probability
Standard practice is to:
- assign an impact rating to a risk,
- estimate the probability that the event will happen, and
- give a score to each risk.
The following table gives you an idea of constructing your rating values.
A risk factor with a 100% probability isn’t a risk—it’s a certainty. Build it into your plan.
After you assign impact and probability scores, multiply them to arrive at a Risk Score.
Some project teams prefer to assign colors to risk levels to help them see at a glance where they need to focus their mitigation effort.
Risk Analysis Worksheet
Here’s an example of how your team can calculate risk scores.
Risk Analysis Worksheet
Thoroughly explore the impact and likelihood of each risk.
Create a risk analysis worksheet to help you score it. Plan whether to avoid, transfer, or mitigate the risk. Document the strategy and mitigation plan for each risk.
Calculating the Impact of Risk
Your ROI worksheet can help your Risk Manager calculate the potential financial impact of risks.
When you present your risk analysis to your executive team, be straightforward in describing the potential impact and limits. You may find help where you least expect it.
Calculating the ROI of your human capital is a straightforward formula.
The ROI for a project is a bit more complicated. Which method you use will depend on your business practices and what you plan to do.
Partner with Finance
If your organization has a format, you may enter information in a template. Your partner in Finance will help you chart the right course. You will also lay the groundwork for your CFO to support your initiative.
Your ROI Worksheet is the working model to capture costs and benefits
We will now dig into the actual calculation to present to your approvers.
Payback Period Calculation
The payback period answers the question, when will we recoup our investment?
Calculate the cumulative values for each year until you see a positive cash flow.
Your business may require that you calculate the payback period beginning when you launch the project, or it may begin at the end of the project.
In a multi-module project, benefits will begin the first year but will grow.
You may need to present a thorough analysis of over one option. For example, if you prepare a case for new talent management technology, you may have approvers who favor best-of-breed solutions while others prefer a unified platform. Regardless of which you choose, the best approach is to present both cases in depth.
Once you have your costs and benefits in your worksheet, you are ready to create your presentation for approval. Read on to see how to do it well.
Present Your Business Case
Develop the Business Case Document
Your organization’s business practices will define how you shape and deliver your business case. Large organizations are likely to have a very rigid, prescribed format. Smaller companies may define it loosely or not at all.
Work with your executive sponsor to format your case. Your sponsor knows what your leaders want to see.
Study other cases — both approved and rejected proposals. You may learn more from failures than successes.
Business Case Format
If you don’t have a prescribed layout, you can use the following outline:
The executive summary may be the only thing decision-makers read. Tell a brief, compelling story of how you identified a business need and developed a solution.
- Name the characters in the story.
- Describe the business need and potential impact on the business.
- Describe the solution and how it will solve the business need.
- State the project cost and ROI. Using the payback period ROI method, state how long until the project pays for itself.
- Describe the problem or opportunity and link it to the business strategy.
- Convey urgency with data.
- Describe the solution and why you choose it.
- List alternatives and why you did not choose them.
- State the impact of doing nothing.
- Describe what business processes the change affects and how.
- Describe significant milestones and deliverables.
- Identify team members, business functions, and external entities and the roles of each.
- Describe the impact on the company.
- Quantify the benefits.
- Link each benefit to a key performance indicator (KPI) and the strategic plan.
- Discuss your risk analysis and mitigation plan.
- Include your risk analysis worksheet in the appendices.
Return on Investment
- State the ROI, payback period, or net present value, whichever is appropriate.
- Discuss the factors in ROI calculation and the rationale for estimates.
- Include a summary ROI calculation worksheet.
- Add the detailed ROI spreadsheet as an appendix.
- Restate the business need.
- State why the solution will work.
- Restate ROI.
Be ruthless in your editing. Remove every unnecessary word, and don’t jazz up your language with long, complicated words. Where a simple word will suffice, use it. Make sure each idea flows into the next, moving readers to the final decision.
Build Your Presentation
Your presentation should be a summary of your business case document. Avoid animations and gimmicks. Your purpose is to make an appeal that will engage your audience’s emotions. Instead of trying to entertain, seek to engage with simple, direct language.
- Don’t use paragraphs of text. People don’t want to read your slides. They want to glance at them to grasp the central ideas.
- Use simple charts and graphs that convey a single message.
- Try to keep phrases and bullet points to six words or fewer and present only four ideas on one slide. Remove articles (a, an, the).
- Avoid clutter. Keep presentations clean and crisp, especially if you present to remote users who use mobile devices.
Review your case with your sponsor, finance partner, and line of business partners. Use their suggestions to fine-tune your presentation and tighten up weak areas.
Some years ago, we talked with Mike Mooney, the principal trombonist of the New York Philharmonic Orchestra.
We asked how he dealt with the pressure of knowing 2,000 people were waiting for him to make a mistake so they could audition for his job.
He said, "I practice so much I can't make a mistake."
Be like Mike. Practice enough so you won’t make a mistake.
If you present your case in person, practice your delivery in front of a critical live audience. Ask your test audience to question your assumptions, jump ahead or back in the presentation, and interrupt.
- Practice using multimedia technology and prepare for it to go wrong.
- Make eye contact with each person in the room for brief intervals.
- Pause for a few seconds before you answer a question, then nod slightly. It signals that you heard the question and can respond—and gives you time to think.
- To avoid the newbie shuffle, plant your feet. If you move, pick a spot, move to it, then plant your feet again.lob
- Practice not looking at your presentation screen.
Present Your Case
When you make your pitch, things will go wrong.
If you present your case to busy people, they may not be a willing, attentive audience. It could be a group of executives who are reviewing 30 other cases along with yours.
Here are a few things we can share from our experience.
- Understand their impatience. It isn’t personal. They may be distracted by a business problem.
- Don’t give them anything to read until you finish. If you do, they will read the summary, glance at the ROI calculation, then start checking their messages or find an excuse to leave.
- There will be a “gunslinger” waiting to shoot down your proposal at the first opportunity. Do your homework and prepare for the challenge.
- Be flexible. You may have 20 minutes on the agenda, but you could get only five. Or they might hold you for an hour.
- Handle disaster with humor.
- Choose in advance which slides you will use if the team cuts your time. You may have time only for the executive summary and ROI slide—or only the summary. If your opening statement is a compelling message and the numbers work, you are on your way to approval.
We hope we have made your journey to approval easier to prepare for and less stressful.
We are a full-service technology company dedicated to helping clients solve business problems, improve the capability of their people, and achieve better results.