How can HR validate the expense of proposed solutions?

In today's price conscious business environment, justifying added business expenses and weighing the expected return on investment is very often a critical consideration. And, with HR frequently being perceived as a cost center versus directly adding to the bottom line, the department often experiences added pressure to justify new line items like technology, outside services and other costs to upper management. HR must be prepared to address the company's needs and how they can be better met with emerging solutions if it wants to also further its mission within the organization.

HR can validate the expense of proposed solutions with a return on investment (ROI) analysis. An ROI analysis is a tool to help organizations gauge the expected success of a business decision. Many companies offer ROI figures about their products and services, but to be most effective, a true ROI analysis should be driven by several factors, including:

• What are we doing now? Assess the hard-those that require monetary transactions to be made and which may include monthly fees, consulting costs, expenses for hardware, etc.-and soft-those that are not paid for directly, but that do cost the company money and may include disgruntled employees, dissatisfaction over time spent correcting a system that is not working, etc.-costs of existing solutions, or lack thereof.

• What solution should we apply to this current situation? A solution that is not driven by need is not driven by ROI. Assessing the need-whether it is obtaining a more automated solution, reducing paperwork or increasing employee involvement in benefits management-is a critical first step.

• Should we or shouldn't we? Ultimately, the ROI should answer, Can we afford to, or can we afford not to, move forward with the analyzed proposition?

HR will have to present the analysis to management. When presenting the ROI analysis, HR should consider whether the estimate is accurate, fair and meaningful to management. This is important becuase during HR's presentation, management will be considering whether the ROI estimate is an accurate depiction of the organization's past experience. If the answer to the latter is no, management will quickly discount the ROI. By evaluating soft- and hard-dollar costs and presenting that information, along with addressing the organization's business needs, HR can present a more complete picture to educate management on the need for the solution.