RETURN ON INVESTMENT

Chapter 3
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Personnel costs
Personnel

is the largest
part of many
organizations' operating
costs
Costs can range upwards of
80% to 90% of total
operating budgets
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Importance of HRMS
Personnel also among most difficult
resources to manage
HRMS required to collect info, manage it,
and report
Access to such information increasingly
important for decision-making
HRMS becoming important strategic tool

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Cost Justification
As Stright (1993) points
out:
HR has to earn its keep. If you can't
specify exactly how you contribute to the
bottom line, you'll have increasingly few
resources available. Not only does the
HRMS have to generate a significant
return, but also, customers need to
understand exactly how it's accomplishing
that return (p. 70)".

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HRMS Cost-Justification
Justification of costs
associated with the purchase
and implementation of a Human
Resources Management System one
of the most pressing challenges
facing many HR Departments

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Cost-Justification (cont)
Many organizations already have a
policy of cost justifying new
technology, but this approach has been
adopted more frequently in functional
areas other than Human Resourcs.

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Human Resources Often

Undervalued and Misunderstood

HR practitioners have not been very

effective at justifying what they do
in a way that other managers readily
understand.
HR practitioners are not used to
cost-justifying what they do
HR Department often considered
anecessary liability, not a
corporate asset.
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Cost-Benefit Analysis
Outlined in detail in books by Casio and
Fitz-Enz
Not commonly known or used by HR
practitioners, although this is changing
Applies to organizations of all sizes

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Examples
Closer control of salary and benefits costs
Streamlining HR administrative overhead
Input into Labour negotiations
More effective use of personnel in support
of corporate goals and objectives

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Question 1
Perhaps one of the reasons that HR has
not been more successful in
communicating the importance of what
they do to others is because they have
tended not to explain what they do in
economic terms. Do you agree with this
statement? Are there some human
resources roles or responsibilities
that should not be evaluated in dollars
and cents terms? Please explain.
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Question 2
Traditionally, Chief Executive Officers of
Canada's major corporations were drawn from the
ranks of people with backgrounds in operations or
marketing. Increasingly, corporate heads are
being drawn from more diverse backgrounds such as
engineering, legal, or finance. It can be argued,
that individuals with mainly human resources
backgrounds are under represented as Chief
Executives. Why do you think this might be so?
Do you feel that it is justified? What might

HR personnel do to change this situation?

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Question 3
Many organizations required to implement pay
or employment equity have found this to be
very labour intensive without the support of
an effective HRMS. Why do you think this
might be so? What are some of the things that
these organizations might have done to better
prepare for the advent of these equity
programmes? Might ensuring that the
organization's HRMS was able to support these
programmes effectively, have broader
advantages for the organization? In what
ways?

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Question 4
Would an organization of between fifty and
one hundred employees have to acquire an HRMS
with the same capabilities as an organization
of more than one thousand employees? What are
some of the similarities and differences that
HRMSs of small, medium and large
organizations might share?
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