The Business Case for HCM Initiatives Part 4: Calculating the Benefits

Estimating the benefits of a human capital management initiative is not an exact science, but you can do it with the right help.

Partner with LOB Leaders

Your line of business partners are equally as important as Finance. They are the people with the operational requirements and tools to estimate the financial impact.

For example, if you are implementing mobile learning to deliver just in time training and sales support, you cannot come up with an exact amount of increased revenue – but your sales team is experienced in forecasting.

Work with them to develop best-case worst-case, and most likely case assumptions. Present all three estimates when you make your pitch for approval, and capture the source and rationale for the numbers so you can refer to it when a reviewer challenges your numbers.

Here are three more examples:

• Quality and frequency of manager support impacts performance in customer service. Can the customer service team help you estimate the impact of leadership training? Can Marketing then assess changes in consumer behavior?
• What will be the financial impact on time to productivity for a production team when you implement a new onboarding program?
• An improvement in tracking required training can impact risk exposure. Your risk manager may quantify the value of reduced liability risk and its impact on insurance rates.

If you cannot quantify intangible benefits, do not use them in your estimates. You can, however, use them in your presentation pitch. There will be benefits you cannot predict, but can measure. Mention those also, but do not include them in your estimates.

The Case for Analytics

If you do not have a human capital analytics team, you may get help from Marketing and Finance. They have been using predictive analytics for a long time, and may have the resources to help you predict outcomes.

This may be the opportunity you need to begin working on your own analytics initiative. The ability to predict with accuracy the impact of people on the organization is an important step in creating a data-driven culture..

Productivity Savings

Productivity presents a different challenge. One of the most common arguments we hear for automation is that it will free up administrative personnel to do more productive work. That is not a productivity gain – it is a reallocation of resources. Also, 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 your initiative will touch. Small changes to a process can often result in significant savings in rework, administrative costs, materials, and labor.

Challenge the Estimates

Raymond Sheen cautions against taking estimates at face value. Commissioned salespeople, he says, like to underestimate projections so they can beat their targets. Marketers want approval, so they overestimate their objectives. Sheen recommends asking what would happen if their estimates were 20% higher or 20% lower. If you get an emotional response, the target may be questionable.¹

Make sure the executive leaders responsible for outcomes will stand behind the numbers. Just asking an exec to verify the numbers may get you a more realistic estimate.

Next Steps

In our next article, we will show you how to calculate the return on your investment using the cost/benefit information you have gathered. We will also show how to factor risks into your estimates.

References: 

1. Sheen, Raymond, with Amy Gallo. HBR Guide to Building Your Business Case. Harvard Business Review Press.

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