Strategies for Calculating HCM Tech ROI Effectively

8 min read
July 27 2023

As technology advances, businesses need to be able to calculate the return on investment (ROI) of their Human Capital Management (HCM) technology. Calculating ROI for HCM tech can be a complex process. Still, it’s essential for organizations looking to maximize their investments and ensure they get the most out of their resources.

In this article, we’ll discuss how you can accurately calculate HCM tech ROI and why it’s essential. We will also look at common mistakes in calculating ROI and how to avoid them. By understanding what goes into calculating your HCM technology ROI and following best practices, your organization can ensure its investment in your chosen Human Capital Management platform is paying off in the long run.

Table of Contents:

The Business Impact of HCM Technology

Human capital management (HCM) technology is a broad term that encompasses a wide range of software and services that help organizations manage their employees. HCM technology can be used to automate tasks, improve communication, and streamline processes.

There are many benefits to using HCM technology. For example, HCM technology can help organizations:

  • Reduce costs associated with employee management
  • Improve the efficiency of HR teams
  • Increase productivity by allowing employees to focus on what matters
  • Improve employee satisfaction through self-service HR tools, like updating their direct deposit information
  • Attract and retain top talent through streamlined communication with prospective employees

HCM technology can also help organizations comply with regulations.

As you can see, this centralized approach provides a wealth of benefits for businesses looking to streamline their operations. Helping organizations comply with regulations helps executives quickly analyze vast amounts of HR data, leading to more informed decision-making processes.

The result? Improved business impact across the board.

However, there are costs to be considered before going to implement a new HCM platform within your business.

The Costs Associated with Implementing HCM Systems

When implementing an HCM system, costs can vary significantly depending on diverse factors. A typical range of pricing for HCM systems falls between $6 and $25 per employee each month (PEPM), which includes the core functionalities and features that streamline HR processes. 

However, it's essential to consider additional factors that influence the cost, such as 

  • Your organization's size
  • The complexity of your HR processes
  • Customization requirements
  • Any different modules or integrations needed to meet your specific business needs

By carefully considering these factors, you’ll be able to make an informed decision when selecting an HCM system that suits your requirements and budget.

Considering Ongoing Costs

Beyond initial setup fees, ongoing expenses like maintenance and upgrades should also be considered. These costs can accumulate rapidly unless monitored.

In fact, they should be a crucial part of your ROI calculation when building a comprehensive business case for an HCM system implementation project. These ongoing costs could include:

  • Software updates
  • User license renewal charges
  • Support services subscriptions

Managing these effectively requires solid project management skills from your HR team or IT department.

Calculating the ROI of Your HCM System

In order to maximize the impact of your business (and justify the platform expense to management), it’s crucial to determine the return on investment of your HCM system. By assessing the ROI, you can gain insights into the value and effectiveness of the system in driving organizational success. 

Let's explore the various approaches and methodologies you can employ to measure your HCM system’s ROI accurately.

Account for Cost Savings & Revenue Gains

The first crucial step in optimizing business operations is factoring in the immense cost savings that come with increased efficiency. This can be achieved through a wide range of strategies, such as streamlining HR processes through automation, leading to significant reductions in related expenses. Furthermore, businesses can leverage improved performance management capabilities to drive revenue growth and enhance overall operational effectiveness. By diving deeper into these specific areas, organizations can unlock greater financial benefits while simultaneously improving their ability to adapt and thrive in a competitive market.

Measure Reductions in Expenses

What's your next step? Evaluating cost reductions associated with HR tasks. Leveraging an efficient HCM platform can optimize operations, resulting in significant potential savings that become evident when calculating ROI. Additionally, integrating employee engagement metrics is crucial. Keep in mind that enhancing engagement directly translates to lower turnover rates and increased productivity— a win-win situation.

Now armed with this knowledge, let's explore another benefit of HCM technology - cloud-based HCM tools.

The Benefits of Cloud-Based HCM Tools

Embracing the cloud is a game-changer in Human Capital Management.

Research suggests that cloud-based HCM tools deliver 3.2 times the ROI compared to on-site systems, making them an attractive choice for businesses seeking cost savings and improved efficiency.

HCM Technology Scalability: A Key Advantage

One of the major benefits of this innovative technology is that it effectively eliminates any potential costs that may arise from system upgrades or expansions as your business continues to grow. This means that you can focus your resources on other important aspects of your business without worrying about the costly implications of system upgrades. With this technology, you can rest assured that your business will always be equipped with the latest and most efficient tools to help you succeed.

Ease of Technology Access Promotes Productivity

A key feature most HCM platforms share is their accessibility from anywhere with internet access; this flexibility can help organizations optimize productivity among remote teams.

Plus, this help eliminate many IT headaches! Moving HR data into the cloud reduces reliance on internal IT resources - no more worrying about server maintenance or software updates. 

Our Background Successfully Implementing HCM Platforms

PNI•HCM has been a leader in the HCM industry for many years, providing innovative solutions to help organizations achieve their goals. As technology progresses, customers need reliable solutions that can be quickly implemented and provide long-term value. Our successful implementation of an HCM platform is a testament to our commitment to delivering high-quality products and services.

Our platform integrates payroll, benefits, time tracking, recruiting, performance management, and more into a single system. It’s designed to be easy to use and provides an intuitive user experience for employees, managers, and administrators alike. The platform allows organizations of any size to streamline processes while maintaining the utmost security standards.

Our comprehensive suite of tools also helps organizations maximize productivity by automating manual tasks such as onboarding new hires or administering company-wide learning programs. Additionally, it offers integrated analytics that helps companies better understand employee performance and engagement levels across teams.

With its cloud-based architecture, our HCM platform offers the scalability, flexibility, and cost efficiency that businesses need to achieve long-term success. Moreover, customers can access the platform anywhere, anytime, and are provided with dedicated customer support in case of any queries or problems.

Finally, we place an immense emphasis on customer service excellence. We provide personalized services depending on the needs of each client. Additionally, we regularly run training sessions for our new customers to ensure they understand how to use their system effectively. These factors all contribute to the system's overall success in helping our clients manage their businesses efficiently while increasing employee engagement.

Taking these insights forward, let’s explore emerging trends shaping the future of HR Technology.

The Future of HR Technology

It’s no secret - the landscape of HR technology is ever-evolving.

Innovations like Artificial Intelligence (AI) integrations and predictive analytics are becoming more prevalent in HCM systems, offering new ways to improve workforce productivity. Forbes Tech Council predicts that these advancements could revolutionize how businesses manage their Human Capital.

Predictive Analytics for Talent Management

Predictive analytics for talent management is a powerful tool that enables organizations to make more informed decisions when it comes to their HR initiatives. With predictive analytics, companies can identify high-potential candidates, reduce time-to-hire, and optimize the performance of their workforce.

One of the key benefits of predictive analytics is its ability to help organizations identify and capitalize on opportunities. By leveraging historical data, predictive analytics can detect patterns in performance that may indicate a need for additional training or development, as well as a better employee engagement strategy. It also helps employers determine which employees are likely to stay with the company in the long term and how best to retain them.

Moreover, predictive analytics can be used to identify customer trends and opportunities for growth. This enables businesses to maximize their potential by focusing on areas where they can increase profitability. Finally, predictive analytics helps organizations stay ahead of the competition by providing insights into emerging industry trends that can help them stay competitive in a rapidly changing market.

HR AI Integrations: A Game Changer?

Harnessing the power of artificial intelligence (AI) within HCM platforms has the potential to completely revolutionize how we approach critical tasks like recruitment and performance management. By leveraging AI's advanced capabilities, we can streamline and optimize these processes, leading to more efficient and effective outcomes.

According to Built In, a leading technology publication, AI is rapidly emerging as a game-changer in Human Resources, promising to reshape how we manage and develop our workforce. With AI as our ally, we can unlock unprecedented insights, make data-driven decisions, and create a more engaging and productive work environment. The future of HR looks incredibly exciting!

FAQs On How to Calculate HCM Tech Roi

What is the formula for ROI on Human Capital?

The ROI on Human Capital can be calculated by dividing the net benefits (revenue increase or cost savings) from an HCM system by its total costs, then multiplying by 100 to get a percentage.


How do you calculate ROI in technology?

ROI in technology is computed as [(Financial gain - Investment cost)/Investment Cost] x 100. It measures the efficiency of an investment and helps determine if it's worth pursuing.


What is ROI in HCM?

ROI in HCM refers to measuring the financial return on investments made into Human Capital Management systems. It includes factors like:

  • Increased productivity
  • Reduced HR expenses
  • Improved performance management

How do you calculate ROI for HR projects?

To calculate the ROI for an HR project, subtract the cost of implementing and maintaining it from any financial gains achieved due to it. Then divide this value by implementation costs and multiply by 100%.


In Conclusion

HCM technology is a game-changer, transforming how businesses manage their most valuable asset - their people.

The costs associated with implementing HCM systems can seem daunting at first glance, yet the savings and productivity gains make it clear that these outlays often end up being well worth the cost.

Calculating your HCM Tech ROI isn't just about crunching numbers. It involves considering all aspects of employee engagement and how improved HR processes contribute to overall business success.

Cloud-based solutions offer numerous advantages, including scalability, accessibility, and reduced IT burden. These benefits further amplify the returns on your investment in an HCM system. Plus, the future of HR technology looks promising, with advancements like AI integrations and predictive analytics set to revolutionize workforce management even more so than today's leading-edge tools.

If you're ready to leverage this power for your own organization, consider investing in PNI•HCM. Our forward-thinking software offers a comprehensive solution for managing every aspect of the employee lifecycle, from recruitment through retirement.

Start optimizing your Human Capital today.

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