Organizations tend to cut spending during economic uncertainty, but investing in technology solutions for HR can improve business performance and efficiency, leading to greater profits in the long run. In this blog post, learn how to build your business case for HR tech investments even when your organization’s budget is tight.

The first quarter of 2024 has left many large organizations tightening their purse strings in the face of a volatile economy. Organizational leaders may reduce spending wherever possible to brace their companies during these uncertain times. Unfortunately, that often comes at the expense of the employee experience, meaning fewer workplace perks and professional learning opportunities, as well as underfunding for critical programs like diversity, equity, and inclusion (DEI) initiatives.

Forrester predicts that only 20% of companies will fund a strategic DEI program by the end of 2024, down from 33% in 2022. Forrester also estimates that employee engagement will dip to 34% this year, and culture energy (a measurement of an organization’s adaptability, purposefulness, commitment, and motivation) will be down to 55% in 2024 compared to 63% in 2022. HR professionals know that cutting funding in areas that directly impact employees can lead to a disengaged workforce, something companies can’t afford since only 32% of employees feel engaged with work in the first place. 

Budget cuts during an economic downturn are to be expected, but investing in HR technology can lead to improved employee experiences and engagement, increased performance, and more efficient business processes. Even facing an uncertain economy, 89% of HR leaders plan to increase their technology budgets in 2024. The following strategies will help you make your case for a technology investment amid budget reductions.

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Conduct a Cost-Benefit Analysis

Your company’s leaders might need help understanding why investing in technology like talent management or org charting software is “worth it.” A preemptive cost-benefit analysis will demonstrate the value the tech will bring to your organization. It also shows your leadership team that you’ve carefully considered the systems you’re presenting and believe that they are the best option for improving the HR functions of your organization.

To start your analysis, you need to estimate the total cost of owning an HR solution. Vendors will have different pricing models, so be sure to consider whether you’ll be paying for a monthly subscription, a multi-year license, or something in between. Since you’re still building your business case and haven’t selected a vendor at this stage, research a few providers and offer your leadership team multiple potential cost options. In addition to the initial price of the software, you’ll also need to estimate the following:

• The cost of labor during the vendor selection and software implementation processes
• The price associated with data migration, system maintenance, and software upgrades
• Training costs to ensure your workforce is ready to use the new technology effectively

After you estimate your total cost of software ownership, the next step is to determine the benefits that the technology will bring to your organization. These benefits can include:

• Improvements in performance, productivity, and employee engagement
• Labor cost savings
• Possible reduction in headcount
• Time savings due to streamlined processes
• Improved retention rates and reduction in turnover

Benefits like labor cost and time savings might be challenging to quantify while you’re building a business case. Without internal data, it’s hard to know how much your organization will benefit from HR technologies. That said, you can conduct research to see how other organizations have benefited from implementing solutions and include that information in your analysis.

Commit to conducting an official cost-benefit analysis after implementing a solution. Estimates are great for making your case, but leaders will want to know that their investment is paying off the way they anticipated.

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Quantify the Impact of Your Investment

It’s one thing to demonstrate how a technology investment will impact a single department, but showing your C-suite the positive impacts an HR solution can have across your entire organization makes an especially impactful business case. The right HR solution can potentially save every employee time and lead to improved performance, which then leads to other business enhancements like higher productivity and increases in revenue. For instance, investing in a performance solution can streamline tasks for your HR teams, facilitate meaningful conversations between employees and their managers, and improve engagement rates.

Investing in organizational charting software can help your C-suite executives visualize the structure and hierarchy of the organization to make informed decisions that impact the company’s bottom line (and possibly reduce operating costs). Leaders can gain insights into every office, department, and team to truly understand how talent is deployed within the organization. The software also assists with “what if” planning, making it easy to see where positions may have overlaps in their responsibilities or how resources could be redeployed. This information is useful in the event of budget cuts to ensure that departments aren’t bearing too much responsibility after organizational restructuring.

A robust learning management system can improve employee satisfaction with their work experience in addition to building your organization’s skills and competencies. It’s important to consider all of the business advantages an HR solution can bring to your organization, whether they’re easy to quantify or not. One way to quantify difficult metrics like employee satisfaction is to conduct internal surveys before and after implementing a solution and use the results to make informed decisions about future software purchases.

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Explain the Long-Term ROI

Getting your C-suite to buy into a technology purchase means explaining the return on investment (ROI) they can reasonably expect. The problem is that technology investments aren’t as easily measured with traditional ROI formulas. Instead, you’ll need to focus on the specific outcomes that are likely to occur that result from implementing new HR systems. Doing so will help your leadership team see the potential long-term ROI of an HR solution.

While each HR tech system will bring unique benefits to your organization, time saved is a common benefit associated with many software solutions. You can estimate the cost associated with saving time via software tools and include that estimate in your ROI explanation. Consider the following example:

Let’s say you want to implement a compensation management system capable of automating analytics reports that will inform your organization’s total rewards decisions. Let’s also assume that you have one employee currently responsible for manually assessing compensation data and creating similar reports. That employee is paid an annual salary of $80,000 with an hourly rate of roughly $38.47. It takes them four hours to create one report, costing your organization about $153.88 each time a new compensation report is needed.

The compensation management system creates the reports in seconds, saving the employee hours of work and the company hundreds or thousands of dollars each year, depending on how many reports are needed. Presenting this kind of data to your executive team can make your case stronger because it gives your leaders a tangible example of the cost and time savings that are possible with such a tool.

Regardless of the HR solution you hope to implement, you can use these strategies to demonstrate the potential value that a technology tool can bring to not only your HR department but your entire organization.

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