Executive buy-in for investments in the realm of HR will always be crucial, but it’s usually difficult to secure. Maybe this is due to many assuming buy-in is like a purchase; you get it once and the transaction is complete, and the name ‘buy-in’ influences this mindset, but it’s a false equivalence.
Buy-in isn't a one-off thing to gain, but rather a continuous relationship between two parties where consistent feedback and updates are passed between the two. Demonstrating HR ROI keeps this buy-in relationship going, because despite how persuasive your argument can beexecutive management wants to see if a specific project, solution or tool is adding value to a company.
When selling ideas to the decision-makers, HR teams need to show just how much ROI is being captured. This blog delves into how you can do this by looking at the following areas:
- The difficulties of proving HR ROI
- Aligning HR with growth
- Can HR increase revenue?
- How HR can pitch ideas
- Using technology
The difficulties of proving HR ROI
Due to the sometimes intangible nature of HR, it can be difficult to provide quantifiable financial data. HR isn’t a department that necessarily creates revenue either, so proving the value of an investment in HR is never easy.
This issue is interesting, as there are studies common to most industries that show HR policies and company culture overall directly impact financial performance. Productivity, hiring, employee satisfaction, retention, absenteeism; all have an impact on overall profitability.
So how can HR prove ROI?
- Understand what metrics executive management are looking for. HR teams need to understand what metrics are valued in the eyes of the major stakeholders. Finding common language when discussing adding value can help to align HR solutions to the overarching strategy and elevate the prioritisation of HR in these high level conversations..
- Once you have identified consistent language around adding value, determine what type of data is needed to demonstrate those metrics. Understanding the type of data you need to collate will help inform your choice of technical solution and sell that solution to senior management.
- Any strategy for HR solutions needs to include frequent measuring and reporting. Quantitative data should be gathered regularly, at least every quarter, to provide consistent feedback.
The intention here is to showcase how investing into HR is a good business decision that aligns to the conversations that are already happening at a strategic level, and can add a further method by which to achieve and measure success. If you want to prove the ROI of a solution that hasn’t yet been implemented, get the answers from the organisations behind that solution. Partner with them to see what success has looked like in other businesses, and the targets that your organisation can aim to achieve.
Aligning HR with growth
HR must approach any strategies with the overall business growth plan in mind. When working in a specific department, it’s easy for departmental leaders or wider teams to slip into siloed perspectives on strategy, implementing solutions that actually clash with overall business growth.
To stop this from happening, HR executives need to develop a firm grasp of wider business goals.What are the business’ key KPIs? How can HR help drive those goals? Each solution or process undertaken needs reviewing through the lens of these questions. For example:
- Does the solution affect productivity, either negatively or positively?
- Does the solution have the potential of reducing costs?
- How does the solution help executive management?
- What visibility does the solution provide and how can that data inform the overall business strategy?
For each business goal or problem, create an HR hypothesis to show how an HR investment would support these goals or solve these problems.
Can HR teams increase revenue?
Ensuring HR teams receive buy-in can be easily done by showing what a specific implementation, process or solution can do to improve the financial health of business when onboarded.
In general, HR doesn’t contribute to revenue. However, it doesn’t present cost-saving opportunities. For example:
- HR teams can improve employee engagement. According to Gallup, companies with highly engaged employees are up to 21% more profitable.
- Levels of presenteeism and absenteeism can be reduced through effective HR protocols. Dealing with presenteeism alone can save up to £4000 per employee per year.
- Good HR practices improve employee retention and decrease turnover. This means the costs associated with termination, hiring, training and onboarding are lessened.
HR teams set up the conditions for both cost-savings and revenue increases, meaning they’re exactly the right teams to consider investing in.
How HR can pitch ideas
The way you pitch ideas is an important consideration when securing executive buy-in. Frequently, this requires representation - a champion who can continually act in favour of the project.
This entire process may look something like this:
- Assign a champion. Determine whether they're the right person for the job and if they'd want to represent the investment.
- Pitch the potential benefits using research and statistics. At this point, utilise the champion to address any concerns and how they'll be mitigated.
- State what will be expected of executive management. Essentially, this will just come down to communication, which is a two-way street, but set these expectations upfront.
- Ensure the HR solution or project is aligned with the overall business strategy, and outline how progress will be measured with clear KPIs.
Technology is one of the most beneficial and advantageous implementations for HR teams, who can use specific software or assets to report and respond on matters of employee wellbeing.
Technology can reduce administrative burden, help reduce costs, support strategic HR processes and help everyday employees to be a little more involved in the HR practices put in place to aid them.
Choose HR technology that fits into the business case you’re developing. For example, if you’re trying to eliminate instances of workplace bullying in an effort to reduce absenteeism, choose a specialised reporting platform that can accurately track incidents and provide support for those affected.
Onboarding technology that supports employees and helps them solve problems will only be met with acceptance and buy-in from executive management. HR departments need to make sure the software chosen will add continuous value across an organisation.