Don't Be "Stupified" by HR Tech Vendors - 5 Ways to Measure Their Impact

We are in the throes of conference season again, with the HR Technology Conference in Las Vegas coming up, then ERE and SourceCon, and then the CandEs...and on and on. September and October are always a whirlwind. As we get into late October and November, others like HRTX, HireConf, and HRO Today take place.

1st Spoiler Alert - AI and Data Analytics will be a topic of discussion. #duh #nokidding #CaptainObvious

2nd Spoiler Alert - prepare for some major smoke inhalation. The amount of smoke, mirror play, and magic that will be pushed at you regarding intelligence and analytics is ridiculous. You won't know the difference, because a 5 minute dialogue with a well prepared sales rep is just enough to convince you the magic is real, and not long enough to figure out how it is a trick.

So with that, I present the 5 Ways to Measure Impact of a new HR / Talent System.

This should arm you well as you consider new systems or processes, and get you asking questions that will need a little more than 5 minutes of sales pitch.

Number 1 - Productivity Lift

Question to Ask: How much productivity lift in dollars should we expect per use?

In any system there is a natural tendency to have automation or outsourcing of current processes that humans or current systems do. Let's use onboarding as an example for this post. In onboarding, you would have a set of tasks that your current system or HR team does to help bring someone on board. Maybe forms are filled out by HR leaders to acquire technology, get business cards, register for benefits and so on. If your HR team or administrators are already doing that, there is an hourly rate associated with their work, and the work with those that need to ingest that information. If your new onboarding tool sidesteps any of that cost, you have LIFT in the other work that your HR team should be doing.

Get a hold of those costs related to tools, labor, and personnel, and equate them to $. Then make sure your team has something else they can do as they redeploy.

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Number 2 - Volunteerism

Question to Ask: Will this system create more work that is beneficial for me, but won't cost me anything?

Because you have executed the system, there may be people who are now doing work or engaging in that system who had not done so before, AND that work is now getting done AND it does not cost you anything more to have that work done.

In onboarding, this would be the newly hired candidate executing all kinds of inputs and forms prior to their first day of work. If you previously waited for them to do that when they started, you actually are PAYING them for doing that work. If they now do it BEFORE day one, they actually volunteered that information, much like they did for all the steps in the recruiting and hiring process.

Another example - if you were to engage an agency portal for your ATS that all your agencies and RPOs use, and they now have to enter information your team had to enter, the same volunteerism is made. They are now entering more information, and usually getting paid the same for their overall services.

It is on you to come up with a volunteerism $ value here. 

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Number 3 - Monopoly Money

Question - How can I save or redeploy with your product? 

Some of you are not going to like this one, just because of its name. In HR, we tend to count savings for things we didn't spend on. What a cluster that is. Of course, HR tech providers are quick to tell you all about the money you didn't spend or plan to spend. LOL. 

The classic example is "we sourced that candidate ourselves, and didn't pay an agency $50,000".

^^ OMG. That is the worst statement ever in recruiting analysis.

I hate it when sourcing says "we are saving the business so much $$". No - you are not saving money. They never budgeted for it, so how are you saving them money? Since you now HAVE a sourcing team, those savings were already realized, and thereby you can't count them again on a profit and loss statement. Ask ANY CFO and they will tell you the same.

Instead of counting it as real savings, I am submitting that you should count it as "Monopoly Money". This is some number that uses a calculation that says "we already counted these savings because they were never budgeted, but I am reminding you that you do not NEED to budget for these things because we have X process or Y system."

In our onboarding example, our Monopoly Money might be something like "we were able to get this person a training that used to cost $1,000 to administer, so we are saving $1,000 every time we use the tool". Of course the last time you did that training was like 24 months ago, so its cost was removed from budgeting in the last fiscal...but its worthy of a reminder that if you stopped the process or system completely, you would have to allocate new budget of $1000 per training.

Realize that Lift and Volunteerism eventually become Monopoly Money. That happens as soon as the business lowers or reallocates budget because of the Lift and/or Volunteerism.

Keep a running tally of Monopoly Money this system or process has per month. 

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Number 4 - Investment Expense

Question to Ask: In order to use this tool appropriately, how much time and effort will my team be spending in this tool that they have NOT been spending in previous tools?

So you have this new system that has your teams doing stuff they never did before. That does happen by the way. You never entered certain data, certain tasks were not getting done and ARE getting done now. Well, what are those tasks, and how much is that costing your team to do? There are no new savings here, just new work. It is possible that your team might be spending MORE time in the system that it used to, so you need to quantify that in hours and expense.

In our onboarding example, maybe your team never really filled out forms that were required, and your new talent did it on the fly. So you had a $200,000 executive on payroll filling out a form for a computer and mobile device. Well, in the new system, your HR team is doing that, so the new hire does not have to. You need to reflect that investment, even though we all know its actually going to be a net savings to the business.

Sidebar - in practice, this Investment Expense should be a lot less than your Lift. Your new system should be moving tasking to the lowest earning person or highest automation possible, even if that means someone new is investing time in this. 

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Number 5 - Causation Valuation

Question to Ask: What will happen in my business because I buy this system?

This is the hardest one, and you will need to first simulate these models, and then explore your data to affirm your hunches and potential insights. We all make claims that "if we install this system, we will (insert some wild claim on speed, cost, quality, or business outcome here)."

^^ Totally true that we do this, and in many cases, it is total bullshit. Correlation is not causation. Just because you onboard people faster or more cleanly does not mean that they all "stay with your business longer" or whatever other claim is said. With enough variables, such as wages, engagement, exposed learning, and email traffic I could run a regression that would easily show that "onboarding" would be insignificant on the enterprise versus those other variables. People don't leave your business because your onboarding is bad if your wages and engagement are also poor. However, if your wages and engagement is good early on, but your onboarding is poor, you may experience higher amounts of early stage turnover...but you need to really prove that out.

What is more likely is that onboarding enables people to achieve a level of productivity earlier and with less investment in learning and management - so you need to measure THOSE variables. You are looking for proof that says "because we are using this onboarding program, our teams are achieving a productivity goal 2 to 3 weeks faster than previously" and with all my data savviness, I can tell you that is going to be hard to prove without some really good data from operations. Sorry all - it is unlikely you will find this in HR data.

Example - What if I was evaluating a new onboarding system with drivers at UPS or Fedex. Drivers do the onboarding, and get through training and onto driving routes a week faster than normal. I would track the mean, median, and mode for daily deliveries of those new drivers during their first 4 weeks versus the first 4 weeks for new hires made a year ago. Maybe I would see a 8 to 10% lift operationally, as well as a reduction in overtime expenses since people are getting more deliveries done per hour.

^^ This is real workforce analysis, and takes a steady hand. Listen for case studies at the conferences that use operational dataas the foundation, not HR data. Results should come in dollars and operational measures, not really HR measures. Those case studies have legs to stand on.

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This is not easy stuff by any stretch, and takes some analysis and work (why you call folks like us) - but hopefully when you hit the conference circuit you start asking the hard questions listed above, and not get wooed into a demo because someone waved a magic wand at you :)