Benefits are only part of the story in the business case. All benefits need to be balanced with costs. When identifying costs it is important to consider both one-off costs — that is, those attributable to the delivery of the HR transformation programme — and those costs that are ongoing — that is, those required to maintain the HR transformation solution. The following table provides guidance on this classification and example technology and people-related costs.
Cost | Description |
|---|---|
One off/transformation programme related costs | |
Capability development | Redeployment and redundancy costs |
Programme resource | Internal and external labour costs on the programme team, also including wider business costs covering development-related costs such as design workshops, testing and training |
Content | Development of initial self service content |
Hardware | Server and associated implementation costs |
Network | Costs of capacity to deliver HR to the desktop, telecommunications-related costs for service centres |
Method of access | Providing sufficiently high-specification machines and software to access HR functionality |
Licences | Initial software licence costs |
Ongoing/maintenance costs | |
Content | Maintenance of content |
Capability development | Development of skills and expertise to manage and maintain processes and systems |
Support | Both IS/helpdesk support and business support |
Operational | For example: software upgrades and licence maintenance costs, costs of running a service centre, outsource charges, HR staff costs, etc. |
Often some of the most significant one-off costs are those surrounding the people element of the solution or the capability development costs that support the main tenet of HR transformation — that is, the move from the administrative and transactional to business partnering.
The components of the capability development costs typically include:
- Increase in resources to support senior managers. HR transformation will result in an increase in resources dedicated to senior management support in the form of internal consultancy and business partnering. Some of these resources may already exist within the organisation, some may require a capability development programme, and others may need to be recruited externally. The cost implications are that whilst a smaller number of business partners may be required than the current HR generalist population, the total employment costs for this group may be as great as or greater than the current HR generalist population.
- Redundancy and redeployment. The combination of a reduction in administrative and transactional resources and an increase in consultancy and business partnering resources implies a reduction in the requirement for traditional HR management and HR transaction support. Clearly, some HR managers will move to business partnering roles and some transaction focused staff may move to service centre teams, but this will not be the case for all, and provision needs to be made for the costs of redeployment or redundancy.
- An increase in the capability and skills of HR staff. The implementation of new strategic roles, such as business partners and new roles in the service centre, such as helpdesk support will require HR staff to adopt new ways of working. These roles will also require new capabilities and skills, which HR staff may need to develop. It is, therefore, important to understand existing capabilities and to estimate the cost of investing in development courses and programmes to address any capability gaps.
- An increase in line managers' capability. Investment in line manager capability and increasing the amount of people management undertaken by the line can be a key factor in some HR transformation exercises. The degree to which line managers have become or are becoming responsible for people management processes such as sickness absence, performance management, career development and managing disputes varies across organisations. In some organisations, there is an increasing move to develop line managers into people managers who require limited support from HR. In other organisations, this is not the case.
However, regardless of the degree of people management responsibilities transferred for line managers, it is important to clarify to line managers exactly what people management processes they are responsible for delivering. It is, therefore, important to define the role of line managers and understand the level of training and support that line managers require to successfully deliver this role. This can include:
- training to use self service, delivered either through a classroom, interactive Web training or computer based training packages;
- training on how to manage specific issues such as sickness absence or performance management. This can be delivered through a classroom or through on line courses where line managers are shown scenario's and asked questions relating to the scenario's and given direction on correct responses to different situations and pressures;
- management and leadership training or training on such skills as how to manage conflict and resistance;
- HR guidance training where managers are advised through short courses on the people issues that they will have to manage, given the latest policy guidance and shown where, when and how to access support.
Capability costs are, however, only part of the investment requirement. HR transformation may also require an investment in HR technology. This provides a good opportunity to engage with colleagues from the IT function at an early stage. Key questions for IT include, do you enhance what you have by upgrading or is a new system the only feasible option? Working with your IT colleagues here will assist in getting the right solution and builds buy-in with the IT community.
Technology providers will usually be pleased to demonstrate their products and this can be an excellent way to capture the imagination of colleagues. However, do make sure that the technology provider covers their implementation strategy and other non-technical areas, as the technical elements of the solution are only one part of the costs. Key technology costs include:
- Labour. This will involve HR, IT and business staff as well as, usually, external consultants on the core programme team. It is also important to estimate the costs of providing cover or backfill for the HR and business people seconded to the programme team which may be needed and not to overlook 'hidden' costs such as HR and line people participating in workshops, testing and training.
- Developing content. HR technology is of no use unless the content supports the new ways of working, for example, online learning materials or performance management tools. There will be both one-off and ongoing maintenance costs associated with content.
- Software licences. It is important to consider the net effect of these, which is netting them off against the costs of the systems that are being removed. This is usually done by including the removal of the other systems in the benefits calculation.
- Hardware costs. Look out for opportunities to share costs and economies of scale with other programmes that are in progress.
- Method of access in order to interact with an HR system. Clearly, it is critical that employees have access to it. Costs will potentially need to cover laptops, desktops and other mobile devices, kiosks and possibly even home PCs, depending on the access solution defined.
- Ongoing support and maintenance of the solution. There will also be contractual costs if there are any outsourced arrangements here as well as the costs of system upgrades and other maintenance going forward.
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