By Art Brooks, BeneTrac

In today’s price-conscious business environments, justifying added expenses and weighing the ROI, or expected return on investment, is often a critical consideration. And with HR frequently perceived as a cost center, justifying line items to upper management can cause added pressure. Many companies offer ROI figures about their products and service, but to be effective, a true ROI estimate should be driven by:

--What we are doing now? The hard and soft costs of existing solutions, or lack thereof. The existing solution may be “doing nothing” or using a solution that is not meeting the company’s needs.

--What should we do? Assessing the need—obtaining a more automated solution, reducing paperwork, increasing employee involvement—is a critical first step.

--Should we or shouldn’t we? The ROI should answer, “Can we afford to, or can we afford not to” move forward with the solution?

Among the potential downfalls of ROI estimates is that they can be confusing, viewed as not applicable, or slanted toward the presenter’s position.

An ROI estimate should address the needs of the presenter/originator to meet company needs and business goals, the recipient/management to ensure that all employees are goal-oriented to increase and protect income, cut costs, the employee to have a working environment that is safe, pleasant and challenging

In each case the presenter should consider: Is the estimate accurate, fair, and meaningful to the recipient?
If the answer is “no,” the recipient will quickly discount the ROI. By evaluating soft- and hard-dollar costs and presenting that information, along with addressing the business needs, HR can educate recipients on the need for the solution.

While hard costs might include people, processes, and capital investments, soft costs might include workflow/processes, current cost of processes, and change offered by the proposed solution.
The challenge often lies in identifying and putting a price on soft costs, since many (i.e., employee satisfaction) are not easily quantifiable, and some may not be recognized until after the solution is deployed.

If the case can be effectively built that hard dollars will be less than soft dollars, HR will have built a strong argument and the decision to go with a new solution will usually be made easier.

Truly assessing ROI, and making the best decisions for both the HR department and business, requires understanding the complete needs of the organization and how those will be impacted by the proposed solution. A true ROI assessment looks at and weighs all of the subtle cost factors.


Art Brooks is with BeneTrac, a Paychex company and provider of powerful, web-based electronic enrollment and employee benefits administration software used to manage benefit information. He can be reached at abrooks@benetrac.com