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COST JUSTIFYING HRIS

INVESTMENT -- ANALYSIS

Arabinda Basu (06)

Ashok kumar Panda (07)

Binayak Mohapatra (11)

Lopamudra Barma (24)

Pooja Senapaty (30)

Pranab Sardar (33)

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AGENDA

PREVIEWHR MetricsJustification StrategiesEvolution of Justification

CBA of HRISDifferent ApproachesValue of Direct BenefitValue of Indirect Benefit

Indirect Benefit Magnitude 

PRANAB

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CONTENTS

Indirect benefit

Components

Process to estimate

-Average Employee Contribution-Utility Analysis

Avoiding common problems

Packaging

Role of variance

Conclusion

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PRANAB

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COMPONENTS OF EMPLOYEE TURNOVER

Increase Cost

Calculation of loss --- A*B (the value of thedaily loss contribution multiplied by the no. of days)

 The estimate based on –revenueenhancement

-cost reduction

-costimplementation

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BINAYAK 

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PROCESS FOR EVALUATE THE VALUEOF INDIRECT BENEFITS

 Two methods for estimating the value of timein different purpose---

Average employee contribution

Utility analysis

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ASHOK 

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AVERAGE EMPLOYEE CONTRIBUTION

AEC is not a metric- standard of measurement

It is the measurement of average daily grossmargin generated for sales person.

Estimate the value of the average dailycontribution {A* B}

AEC in an org.=(Net revenues- Cost of goodssold) / No. of employees

Used to estimate the average annualcontribution of an org.

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  ASHOK 

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CONCEPTUALIZING THE EFFECTS OF TURNOVER

Contribution

per EmployeePer Day

Days8

  ASHOK 

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CONTD….

AEC will higher in profitable org.

Not reduce contribution to employees by theamt. of capital exp. and other non-relatedexp.

 The tools provide no independent and uniquecontribution to the org. in absence of employee.

Avg. of this method---To establish a baselinecontribution value by jobs that is consistentwith the actual performance of org.

Difference in contribution can be developedusing internal assessment of same job.

Individual production rate can be monitored.

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  ASHOK 

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UTILITY ANALYSIS

A set of decision making tools andtechniques used to estimate the value of HRM program

Assumption that employees are not perfectlyinterchangeable

It provides a mechanism for convertingdifferences in estimated for performance

Performance is captured in a metric –standard deviation (SDy)

SDy represents the value of a 1 standarddeviation difference in avg. job performance

Possible to produce a dollar value estimate10

  LOPA

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COMMON PROBLEMS:

Problem of direct cost-improvingorganizational effectiveness

Ignores HRs strategic role.

E.g.- Online recruiting Items listed as direct cost reduction

belongs to indirect cost reductions.

E.g. Time saved

Values estimates assigned to time savedare reasonable.

E.g. reduction of no. of employees,overtime expenses 11

LOPA

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PACKAGING THE ANALYSIS FORDECISION MAKERS

Data that identify each benefit and costcomponent examined.

Estimates of the dollar magnitude of each,including upper and lower bounds.

Estimates of when the organization will incureach cost and receive each benefit.

Documentation justifying each decision thatare made for developing values.

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ARABINDA

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CONTD..

Managerial decision makers prefer well-organized and clear CBA’S to help themmake their investment decision.

Packaging analysis what data to be includedand how the data should be organized.

satisfactory for small projects, stand alone inHRIS application .

Inappropriate for complex HRIS project.

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ARABINDA

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ADVANTAGES

Most complete ,best estimate of the valueinvestment.

Fuller understanding of investment &organizational impact.

Indirect benefits, contigent actions, awaredecision maker of investment future success.

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ARABINDA

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 THE ROLE OF VARIANCE INESTIMATES

Estimates produced for CBA analysis arebased on fore casting future events & maydepend on event outside the control of themanagement.

Actual amount of reduction will vary depending

on mix of transaction types, operator expertise and other 

 job requirements.

 The primary estimate of intrest is the overall

average expectation. For direct estimation range and likelihood of 

various outcome levels.15

POOJA

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CONTD..

Variance estimates for benchmark data fromother organizations are more difficult toacquire.

Report averages do not report variance data.

Internal analysis : Variance estimate can be calculated from the

archival records of existing HR or IT process.

Estimate of the standard deviation of outcomes

could then be used to provide range of the mostlikely outcomes.

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  POOJA

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CONCLUSION

Cost justification of an HRIS is an challengefor–

1. Quantifying the cost of personal system

2. Comparison to financial and operationalsystem

3.Increasing the efficiency andcontribution of the employees

4.Multiplies the profit share of theorganization.

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  POOJA 

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