Page 42 - DMGT106_MANAGING_HUMAN_ELEMENTS_AT_WORK

Managing Human Element at Work

Notes 2.6.5 HR Efficiency

As stated earlier, many consultants claim that e-HRM contributes to the effectiveness of the
organization. One way of researching these claims is to look at the performance outcomes
of the organizations. Four outcomes of firm performance can be related to HR. The four
outcomes are HR outcomes as turnover and absenteeism, organizational outcomes as
productivity and financial outcomes such as return on investment and capital market. This
research suggests some objective performance measures that together can be used to determine
the HR efficiency.
Return on Investment

When companies are investing in technologies, they expect certain benefits due to this
technology. Automation should bring immediate value to the organization. In addition, it
is expected that the implementation of an e-HRM technology should create value for the HR
department. Return on investment (ROI) is probably the most often used metric for measuring
efficiency. When viewed from an economic perspective, for instance automated employee
selection technologies can provide a substantial ROI for organizations and reducing operating
and hiring costs. The expectation is that the adoption of e-HRM technologies can provide
a substantial ROI for an organization as well. Although ROI is a financial outcome, it will
be used as an HR outcome in this research as the ROI of the e-HRM technologies for the
research framework is going to be measured on the HR level. The ROI is a viable measurement
tool for identifying if the investment is worth investing. Although there are many, different
ways to calculate return on investment it often has two key elements:
1. The costs of the technology.
2. The savings or revenues these technologies generate.
Different types of costs were identified such as:
• Requirement analysis costs.
• Development costs.
• Implementation costs.
• Operating costs.
• Evaluation costs.
• Overhead.
The first costs are the requirement analysis costs as most organizations before they start with
a project conduct a need analysis. Then, there are the development costs of the e-HRM
technology, which belong often to the most significant costs categories and it includes the
designing and developing and/or investing of a specific e-HRM program (application), and
investing in the needed materials like hardware. Another substantial cost that has to be made
is the cost of implementation of the e-HRM technology. During the implementation phase of
the project to program has to customised and configured in such a way that it fits the
organization. Processes of the e-HRM technologies and processes of the organization are
integrated in order to create a workable e-HRM technology. These implementation costs are
often costs for hiring people who have the knowledge of implementing these e-HRM programs.
Other costs that can be categorised under the costs of implementation are the costs for: Training
of the project team and the end-users of the technology (job aid), guidelines and documentation,
and facilities for/and members of the organization needed for the implementation.
When e-HRM technologies are adopted, they need to be operated and they need maintenance.
Operating and maintenance costs are should also be adopted for calculating ROI. These costs
are major as they capture the full life span of an e-HRM technology. Operating costs include:
Salaries for employees who are kept/hired after for maintenance or development, costs for
office supplies and technology support.

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