Over the years, the role of HR technology has evolved significantly, becoming a pivotal component in organizational success. In this pursuit, we’ve consulted professionals, ranging from founders to vice presidents, to share their expert strategies on measuring the return on investment (ROI) of HR technology. Uncover strategies, including evaluating workforce productivity, assessing operational efficiency, and gauging the time it takes for employees to reach peak productivity to measure the ROI of your organization’s HR tech investments.
Evaluate Workforce Productivity and Operational Efficiency
One significant method to measure the ROI of HR technology investments within our organization is by evaluating the enhancement in workforce productivity and operational efficiency.
We can assess this through measuring changes in knowledge, behaviors and attitudes among employees and stakeholders to track shifts in business outcomes like productivity, quality and sales. Moreover, the accuracy and reliability of data analytics are improved, reducing the risk of costly errors and compliance issues.
Additionally, HR technology can positively impact the employee experience by enabling self-service options and ultimately contribute to cost reduction through streamlined processes. By quantifying these improvements in productivity, accuracy and cost-effectiveness, we can gain a more comprehensive understanding of the true value these investments bring to our organization—both in terms of efficiency and employee satisfaction.
Principal Associate and Head – Assessment Practice, NamanHR
Track Recruiting Efficiency
As a founder who has partnered closely with our HR team, I can share how we measure the ROI of HR tech investments. Quantifying the impact of new HR platforms can be tricky, but invaluable. Here’s one effective approach we’ve used:
We specifically look at how HR tech improves recruiting efficiency and retention rates. When rolling out a new applicant tracking system, for example, we tracked time-to-hire metrics before and after implementation. The 20% faster hiring translated directly into dollars saved on recruiting costs.
For engagement platforms, we correlate employee NPS or satisfaction scores to turnover rates. If satisfaction rises 5% after adopting the tech, which reduces turnover by 2%, we can quantify the associated retention cost savings.
By tying HR tech ROI to tangible recruiting, retention, and other workforce metrics, we’ve been able to justify and expand our HR tech investments.
Monitor Employee Retention Rates
One effective way we’ve measured the ROI of our HR technology investments is by tracking employee retention rates. Before implementing our new HR software, we had issues with turnover.
After the implementation, we noticed a significant improvement in employee satisfaction and a drop in turnover. We calculated the savings from reduced hiring and training costs against the investment in the technology. The numbers clearly showed that the HR system paid for itself within a year, proving it was a worthwhile investment.
VP of Growth, Airgram
Measure Tenure of Best Talent
Great HR teams measure the tenure of their best talent and understand how their HR tech investments impact that number.
Turnover isn’t always a bad thing, but when companies lose their best leaders and employees, it’s painful. Most HR tech is built for the HR, executive team, or corporate, so pay extra attention to the software that is focused on employee usage. This includes your employee experience tech, performance management tools, rewards & recognition, etc.
Vice President of Marketing, Motivosity
Compare Past and Present Recruiting Costs
ROI calculations often involve fuzzy math and comparing different attribution models. It may not be possible to nail down an exact figure, but you can look at different indicators.
One way to measure the ROI of HR technology is to compare your past and present recruiting costs. Compare your recruiting costs for the year following implementing new HR technology to the year prior to implementation. If those costs decreased significantly, then it’s an indicator that the technology may help keep your employees engaged.
If not, then it might indicate that your HR tech stack hasn’t produced tangible improvements. Just keep in mind that other factors matter, too. When you implement new HR tech, you probably also put new systems in place to support the outcomes you want. Try to look at the big picture of all you’ve done and think about how you might attribute different measurable aspects of your success to technology versus other factors.
Digital Marketing and Leadership Consultant for Startups, Snackable Solutions
Assess Time-to-Productivity Metric
One pivotal way to measure the ROI of HR technology investments is through assessing the “Time-to-Productivity” (TTP) metric for new hires. This essentially tracks how long it takes for a new employee to reach optimal productivity after joining. Pre-implementation, you’d record the average TTP using your existing processes. Post-implementation, with the new HR technology in place, you’d do the same over a defined period.
A noticeable reduction in TTP post-implementation is a tangible benefit. This shorter TTP not only implies faster onboarding and training but also translates to cost savings, as employees are contributing to business goals more quickly. Additionally, this accelerated productivity can boost team morale and improve overall operational efficiency.
By juxtaposing the TTP before and after your HR tech investment, along with associated costs and benefits, you can paint a clear picture of the technology’s ROI.
Founder and CEO, Evinex