(original post at http://blogs.infohrm.com/2009/07/21/roi-of-technology-through-analytics/)
A lot of resources are spent on technology. Not just the implementation, but the maintenance, training, upgrades, etc.
So the question is….do we get all of the value out of it that we should? Are we getting the ROI?
Technology: efficient process, valuable information.
Beyond process efficiencies, technology can provide significant advantage when the information enables a ‘decision science’ to take hold within an organization. For many technologies (and I think this is especially true for HR/HCM technology) the information from these systems can deliver value that far exceeds the value of the process efficiencies alone.
It is for this reason that I like the term ‘IT’ for information technology – and why I really like the ‘I’. Because it is within the ‘I’ – the information – that I believe there to be (and have firsthand found there to be) vast amounts of untapped value to the organization and, ultimately, undiscovered competitive advantage.
Technology for Process:
The process efficiencies of a technology implementation will save money. Sometimes these savings are more than enough to offset the cost of the technology investment, and this fact may be why so many organizations allow the the value chain to stop at that point.
Example: processing a new hire through 5 separate systems (timekeeping, payroll, benefits, info security, and building security) might require 4.5 hours. An integrated technology solution might get this down to 15 minutes. After factoring in the number of hires each year, the cost savings could be in the millions of dollars.
This is process efficiency. No difficult questions were answered. No strategic decisions were enabled as a result of the technology. Value was created through efficiency. The traditional ROI (return on investment) was achieved – but what about the ‘return on information’?
Technology for Information:
When we look beyond the process and into the data for competitive advantage, we enter into a whole new world of value that can be realized through analytics.
With an analytics perspective, the technology is a means to capturing information that can be used to drive additional value. Technology decisions should be reshaped to ensure that value is delivered in both areas: process and information. In some cases, it may even make sense to alter the process a bit to capture the information that will deliver value later (e.g., capturing an extra data point during the process that will allow for better integration with other systems).
Analytics: the other ROI (“Return on Information”).
Analytics is the disciplined use of data to understand root causes, identify levers of change and pockets of opportunity, and to provide predictive capabilities that inform strategic actions. Ultimately, analytics is the evidence-based foundation for determining the optimal allocation of the organizations resources.
It is with analytics that the value of the information bends sharply upward, creating opportunity for delivering ever-increasing value as the business evolves – even if the technology remains unchanged. This is where the ROI is, this is where information technology can start to deliver serious returns. I say ‘can’, because it is not just a ‘plug-n-play’ situation – analytics is a discipline that requires the right skill sets, tools, executive support, and organizational culture to deliver maximum value.
Working with many companies in the areas workforce analytics and workforce planning, my colleagues and I have found the ‘Center of Excellence’ model to be the best structure for getting started with analytics. (read more on building a CoE).
Mini Case Study:
A learning system in place for a sales team was capturing the information of who has taken which courses, adding a layer of efficiency to the process, and providing back reports and some metrics. The process was efficient, and there was some increase in the type and value of information available compared with the paper process it replaced.
It was only through analytics that the organization busted the myth of ‘diminishing returns’ on the training of more experienced sales staff. It was discovered that the sales volume continued to climb based on more courses taken – even when other factors were accounted for. The company knew what to do: continue investing in learning for all sales staff – experienced staff included. In the end, the analytics-informed decision led to increased revenue.
Return on Information: the ROI that matters most.
Questions for those implementing and managing information technologies:
How will you achieve more than process efficiencies from your technology?
How will you implement the technology so you get the maximum value of the data through analytics?
Having a vision for analytics is critical in getting the most out of a technology implementation. This is where the ROI of technology can become a competitive advantage – where the ‘Return on Information’ becomes the ROI that matters most.
Nicholas Garbis, Sr. Consultant
Infohrm - global leader in workforce analytics and workforce planning
Learn more about Infohrm’s benchmarking book here.