Calculating a HR tool ROI and making soft items hard to ignore

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Running a business, “soft items” may have much more value than the ‘“real things”. But to understand it and to make it visible, you have to put it into hard figures, into euros or dollars. 

At Moticheck, providing employee experience screening technology, we talk to tens of HR (People and Culture) managers daily. Before making the sales pitch and introducing our always-on employee survey solution, we try to find out the customer pains and potential gains we can offer. Usually our sales meeting includes four simple questions: 

  • What is your experience with employee surveys so far? 
  • Why do you do this? 
  • What is the purpose of your people surveys? 
  • What is the return on the investment or other economic criteria you expect the solution to meet?

The first questions usually have good answers and are illustrated with nice storytelling, but it is rather a rule than an exception that companies and organizations do not know the value of the HR programs (such as OKRs and score cards) and software systems (survey tools, IT systems) they are running. 

It is easy to state at a value and mission statement that the organization is driving for employee happiness and professional development, for example. But what is actually meant by this? How do you measure it? And is it the real purpose? Happiness can be the ultimate goal, but it may also be just a name for a vehicle to achieve better performance. How do you quantify happiness in euros? 

Implementing or using a HR area tool or an IT system always serves a purpose, a higher purpose. In practice, an employee survey tool such as Moticheck is used to enhance employee performance thus driving the profitability, effectiveness and speed of delivery. These are all measurable targets. But there are problems in putting it into euros and dollars. The profitability is driven by many other contributors in addition to the change in an employee experience score. So we have to dig into details and to do this we sometimes have to calculate alternative costs in addition to positive effects. 

Take the time to do the math!

I propose to use one of the two approaches or the combination of these:

  • calculate the cost of time and potential savings
  • calculate the price of potential gains

Let’s have an example I’m more familiar with. The logic should be applicable to other fields and tools as well though. 

At Moticheck we advise our customers to calculate how much admin time they would find in the HR team in running Moticheck instead of their old solution. Usually it is a surprisingly big cost saving. Weeks of HR work. Also the employee time contribution should be evaluated in minutes, hours and it totals up in months of a FTE (full time employee) time. 

On the other hand we advise our customers to calculate the gains. For example, how much can you decrease your employee churn, if you manage to improve your employee experience by one unit in a particular category or 5% overall? Cost of replacing one FTE equals a 9 month payroll as a rule of the thumb (including replacement, recruitment, training, reduced performance etc). 

Don’t get stuck into minor details and decimals.

It is quite enough if you do a rough calculation. Say you believe that you can reduce the churn by 5 whose monthly salary with taxes is 6000 per FTE. So you would save €270 000! Now let’s say you believe that having an always-on automated system would cut back your cost in the HR team by 20 hours per quarter and improved user interface would save annually 8,5 months of total work time. Multiplying the hours and months with average payroll cost would see you ending up in 7-digit territory in euros or dollars. 

Now let’s imagine that you are discussing in your board meeting or development committee if you should invest EUR 40k into employee experience screening software service in order to unlock the 7-digit gain. I don’t know what alternatives could be on the agenda, but I believe it is obvious that the “soft items” are hard to ignore once they have a value tag attached.

Martin Rajasalu, CEO

January 2022