Reference no: EM133029492

Justifying an HRIS Investment

Introduction:

This case focuses on a company that is in need of a more robust Human Resources Information System (HRIS) to keep track of and automate records. The company owner enlists the help of Sylvia to make a case to justify the need for the new HRIS. The case showcases the importance of the need to justify the cost of HRIS investments. Accurately identifying and estimating the value of the benefits and costs of new HRIS functionality will play a critical role in HRIS investment decisions in the foreseeable future.

Case Study:

Investment Associates, Inc. started as a small firm in 2001 with four employees plus its owner, Jim Tower. The company specialized in providing financial investment and tax advice to its clients. Jim had brought a substantial number of clients from his private practice, which had become too large for him to handle by himself. His four employees included three colleagues who had some experience in financial investment advice and a secretary/administrative assistant. Jim and his three colleagues were all certified public accountants (CPAs), and a considerable portion of the company's business was in tax consultation and the completion of individual and corporate tax returns.

Investment Associates was quite successful and, by 2007, had added 42 new employees-financial and tax advisers and additional administrative staff, including an office manager, Marian Sweet. In addition to the office manager's supervisory tasks, Marian had to complete federal and state reports on the employees as required by law.3 However, Marian was not trained in HRM, and she suggested to Jim that the company needed to hire someone with a background in HRM before they "got into trouble" with the government. Marian was particularly concerned about gender and racial discrimination but did not understand how to apply the provisions of the appropriate laws and guidelines.

In November 2007, Investment Associates hired Sylvia Wong, who had an undergraduate degree in psychology and four years' experience in HR. In addition, in December 2007, Jim was negotiating to purchase the financial consulting business of an old friend who was retiring. This purchase would mean the addition of 17 new employees in February or March 2008. Sylvia met with Jim in mid-January 2008 to discuss the growing burden of employee reports and payroll processing, all of which were currently being done using a paper-based HR system. She advised Jim that the company needed an HRIS to process employee records and complete the required government reports. As an example, she stated that, because she had to search through paper copies of all employee files, it took her a full week to complete the Equal Employment Opportunity Report (EEO-1)4 required by the federal government. Furthermore, based on this report, it appeared that the company could have problems in terms of compliance with several federal laws. She suggested that the company purchase an HRIS to assist with company record keeping and the production of required reports.

Since the company had been using computer-based applications for financial analysis and tax reporting, Jim thought that Sylvia's suggestion to computerize employee records was a good one. However, given his financial background, he wanted Sylvia to develop a business case, including a cost-benefit analysis, for the purchase of an HRIS. Your task is to help Sylvia justify the purchase of an HRIS.

Case Study Questions:

1. What approaches to justifying this investment might Sylvia consider?
2. What are some of the costs and benefits involved in this investment in an HRIS? Which would you be sure to include in your CBA of this project and why?
3. Explain how to estimate costs and benefits, both direct and indirect, in terms that Jim will understand. (Remember, Jim always has his eye on the "bottom line.")
4. Explain how to calculate a CBA to justify the HRIS project. Would you use cost reduction or organizational enhancement (or both) as a strategy for justifying the purchase?
5. What are the three common problems that could occur in your CBA for an HRIS? How would you avoid them?
6. What are some of the ways you can use the HR metrics that would be available after the implementation of an HRIS to justify its purchase?
7. Finally, and most important, explain how variance estimates that can be generated for a CBA would be useful to Jim in the management of his company.