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Business Case For An HRM Initiative Importance Of Cost-Benefit

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Question:

Discuss about the Business Case For An HRM Initiative Importance Of Cost-Benefit.
 
 

Answer:

1. HRM initiative

In every business the importance of the human resource management is one of the crucial elements in order to operate the business in an efficient manner. Human resource management is the upgraded form of the personnel development programme. In the past the use of the personnel development programme was prevalent in case of different organisation. The use of the personnel management was in use to enhance the skill of employees. Nowadays the different organisations have undertaken different factors to improve the overall performance of employees in the organisation. Human resource development has incorporated various other factors in order to improve the performance of employees & this includes the training & development programme, motivation & at the same times the safety & security of employees within the organisation (Fee, 2014). In the present business organisation the use of the human resource development programme is one of the essential components. The current study is going to discuss the initiative regarding the collection of the human resource information. The present discussion has been conducted on the basis of the organisation Sainsbury which is a retail organisation. Therefore the main initiative taken by the organisation is the development of a human resource management information system.

The human resource information system is defined as the combination of the human resource management & at the same time the information system. The human resource software is used by Sainsbury to manage information. Thus the human resource information system helps the company to collect & store information with the help of the electronic system. There are different issues which are handled by the human resource management team in an organisation. These include the accounting, different human resource activities & at the same time the payroll system of employees working in the organisation. The main responsibility of a human resource manager is to effectively utilise the resources of the organisation. Another objective of the human resource team is to manage the resources of the organisation towards different initiatives adopted by the human resource team of the organisation. In the present case scenario of Sainsbury, the human resource management has taken the above mentioned initiative to improve the present situation of the human resource team of the organisation (Armstrong & Taylor, 2014). In order to do this the human resource manager has to consider various aspects like the cost benefit analysis of the project, the analysis of the return on investment. These analyses will help the organisation to get information regarding the feasibility of the project. If the project is highly effective for the improvement of the business organisation, then the organisation would be in a position to invest large amount for the project. The human resource information system is useful for enhancement of skill level of employees and improves their efficiency within the organisation. The increase in the efficiency of employees helps in improving the productivity of the overall organisation. The human resource information system also helps in improving the efficiency of the human resource management process of the organisation. This is also useful for the human resource team in the decision making process. The quality decisions taken by the human resource team is essential in case of increasing the productivity of the management as well as employees within the organisation (Storey, 2007). There are numbers of HRIS available in the market, but it s the responsibility of the organisation to chose the best one which would be suitable for the organisation. This depends on various factors like the feasibility of the organisation, the requirement & at the same time the affectivity of the system.

 


For any business organisation, in order to initiate any project and to improve the business activity, it is important to have proper justification of the project. The company evaluates the costs as well as the benefit associated with any project. The business case is also defined as the documentation which incorporates all these factors. It is a kind of suggestion provided to an organisation to enhance the efficiency of the overall organisation. This is done with the help mentioning the anticipated future return out of the project. In case of Sainsbury, the organisation felt for the improvement of the human resource management. The organisation is using the manual system to record various data regarding human resource management, but it would be a challenging task to manage such a huge data base by the organisation’s human resource management. It is required to take the help of the modern techniques to improve human resource information system. This would be beneficial for the organisation from different perspectives (Boxall & Purcell, 2011). There are various key parameters which help in evaluating a business case & the initiative taken to improve the human resource management of the organisation. These key parameters are cost benefit analysis & at the same return on investment.

The main purpose of the business case is the improvement of the human resource information system by replacing the Position Information Control System (PICS) & at the same time the position & personnel Data Base. The main utility of these two systems are to store & track large number of data. The human resource management team is facing lots of difficulties in using these backdated technologies (Werner & DeSimone, 2011). It has to be substituted by modern upgraded technologies. The present business case will take into account different costs associated with the project, the in depth analysis of all these costs & different items related to the project.

 

Cost-benefit analysis

Cost benefit analysis is one of the most important parts of the business case analysis. To conduct cost benefit analysis the human resource team has to identify various costs associated to the development process. After the identification of the costs the next task of the human resource management team is to anticipate different benefits that the organisation will get in future from the present investment. This is essential for the organisation to compare the total costs associated to the new project related to the human resource management with total benefits the organisation can derive from the investment. After the thorough analysis of these data, the organisation would be in a position to take the decision regarding the investment in the project. If the costs are higher in comparison to the overall benefit, the project would be rejected by the organisation & on the other hand if the benefits are more in comparison to the overall cost of the new investment, then the project would be beneficial for the organisation (Boardman & Boardman, 2008). Therefore the cost benefit analysis is one of the most important tools for most of the organisation to adopt with the objective taking any decision regarding any investment decision in any project.

In order to accomplish the project it is required to prepare a cost structure of the overall project. In the present business case the organisation has taken the decision to replace all old technologies with new modern technologies to improve the efficiency of the human resource management (Jackson et al., 2011). The human resource management has to identify these costs associated with the business task.

Factors

Costs (in thousands)

Software

$25

Hardware

$20

Software engineer

$5

Project manager

$4

Testing

$8

Total

$62

After identification of all these costs the human resource team has to identify all those benefits that the human resource department can derive from the initiative adopted by the human resource team. The organisation can be benefitted from the human resource initiative as follows:

  • If the organisation invests in the project, it will help the human resource management team in the payroll system, training programme & at the same time in the recruitment process. The improved human resource information system will assist the team in managing all employees of the organisation in an efficient manner & improve the decision making process.
  • The installation of new technology in the system will help the human resource manager in effectively utilising the time in managing employees of the organisation. The time to deal with the non strategic tasks will be reduced & this can be utilised in other productive activities (Daley, 2012). This will help the organisation in improving the productivity and performance of people.
  • Beside the above benefits the employees of the organisation will be able to exchange their information easily & this will reduce the paper work of the department. As a result less number of employees will be required to manage these activities.

All these factors will help in improving the productivity of the organisation & at the same time in reducing the cost associated to the management of the human resource. These factors will be helpful for the organisation & the benefit can be measured in the following manner:

  • Since most of the activity will be done by software, as a result less number of employees will be in a position to manage these activities (Storey, 2007). It will lead to reduction in the employee cost.
  • Most of the work will be done by the new installed technology; as a result the requirement of different resource will be reduced. This will lead to the cost associated with these resources.
  • Since the same work can be done now at less time, therefore the time can be spent in other productive works. This will increase in productivity of the organisation.
  • Finally mistakes in maintaining large number of files can be reduced in this process. Hence, it is a great benefit for the organisation.

After analysing all these costs associated with the technology & large number of benefits, the organisation would be in a position to analyse the investment decision. The human resource team would be able to derive more benefit in comparison costs. This will help in improving the organisational productivity.

 

Return on Investment (ROI)

Another tool which helps an organisation in analysing the investment decisions is the return on investment. This is a tool which helps the organisation in identifying the return out of an investment. In case of the present project the organisation has to calculate the return on the investment. If the human resource management has taken the initiative to initiate a project to improve the human resource information system, there must be some returns that the organisation will receive out of this. This return will help the organisation in compensating the cost incurred in completing the project (Arrow & Kruz, 2013). If the percentage of return is more in comparison to the investment, then the organisation will invest in the project. The return on investment is calculated on the basis of the following formula.

ROI= (Net profit / cost of investment)* 100.

In order to calculate the ROI, it is important for the organisation to calculate the net profit from the investment in the project or the new initiative. It has been calculated by the organisation that if the human resource management invest in the human resource information system, then the cost of the investment is $62000. The net profit from the investment is $2000.

Therefore the ROI= (2000/62000)* 100

Hence the return on investment is nearly 32%. This is a good return on investment. Therefore the organisation will initiate the project of the human resource information system.

Evaluation

After the implementation of the project it is important to evaluate the project to identify the way it is facilitating the performance of the organisation in general & the department in particular. The evaluation of any project is useful in understanding the present situation & comparing it with the past performance of the organisation. Therefore the evaluation of the project is done on the basis of the cost benefit analysis & the return on investment. With the cost benefit analysis the organisation had taken the decision to invest in the project. The benefit attached with the project is more in comparison to the costs associated to it (Bulgurcu et al., 2010). Therefore it would be a wise decision to initiate the project. Similarly, the return on investment of the project is also very high. Therefore, both the analysis is in favour of the investment in the human resource information system. The investment in the current project has both the short & long term impact. Since evaluation process is one of the most important parts of the organisation, therefore it is important to prepare a plan to evaluate the performance of the new project. After six months the productivity of employees will be checked & it would be seen that whether the new initiative has helped in enhancing the performance of employees or not (Werner & DeSimone, 2011). With the help of the self evaluation, the 360degree method & the graphic scale method it would be possible to measure the performance of employees. Similarly, it is important to identify the impact of the initiative in terms of customer satisfaction. Since, it is expected that the new initiative will improve the performance of employees, therefore the quality of product & services will also improve. Therefore the feedback mechanism will fulfil the purpose of the organisation and satisfy the customers.

 

Business Case Summary

It is important at the first instance to assess the feasibility of the new initiative taken by the organisation. Therefore with the help of the cost benefit analysis & the return on investment method, the organisation has concluded that the new project would be beneficial for the organisation. The new initiative of the organisation undertaken to develop the human resource information system will surely have positive impact on the organisational performance (Noe et al., 2011). To improve the performance of the new project, following recommendations would be beneficial for the organisation.

  • The new system has to be implemented with proper care so that it would help the organisation to improve the performance of employees & at the same time in enhancing the satisfaction level of customers.
  • The cost structure of the project has to be set carefully so that the resource of the organisation can be utilised efficiently.

Critical Reflective Analysis

From the above analysis it can be said that the human resources information system has helped the company in getting a proper insight of the whole business process of the organisation. As a team member of the human resource management it has helped in gaining knowledge related to the process through which the human resource management can be improved. In order to initiate the project the various difficulties have to be faced like the financial issue, convincing the management of the organisation to initiate the project. In order to overcome this, the analytical tools have been carefully used to evaluate the whole process. This helped in overcoming the difficulties attached with the initiation of the new initiative.

 

References

Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. Kogan Page Publishers.

Arrow, K. J., & Kruz, M. (2013). Public investment, the rate of return, and optimal fiscal policy (Vol. 1). Routledge.

Boardman, A. E., & Boardman, A. E. (2008). Cost-benefit analysis. Pearson.

Boxall, P., & Purcell, J. (2011). Strategy and human resource management. Palgrave Macmillan.

Bratton, J., & Gold, J. (2012). Human resource management: theory and practice. Palgrave Macmillan.

Bulgurcu, B., Cavusoglu, H., & Benbasat, I. (2010). Information security policy compliance: an empirical study of rationality-based beliefs and information security awareness. MIS quarterly, 34(3), 523-548.

Daley, D. M. (2012). Strategic human resource management. Public Personnel Management, 120-125.

Fee, M. C. (2014). Human resources management.

Jackson, S., Schuler, R., & Werner, S. (2011). Managing human resources. Cengage Learning.

Mishan, E. J., & Quah, E. (2007). Cost-benefit analysis. Routledge.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2006). Human resource management: Gaining a competitive advantage.

Storey, J. (2007). Human resource management: A critical text. Cengage Learning EMEA.

Werner, J. M., & DeSimone, R. L. (2011). Human resource development. Cengage Learning.

Williams, B. (2008). Cost-benefit analysis. Economic & Labour Market Review, 2(12), 67-70.

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