Investment Associates
Identify three ways that the HR metrics can be used to justify the purchase on an HRIS.
In the contemporary business environment, many organizations have identified that an effective Human Resources (HR) management enhances organizational effeciencies. To enhnace the functions of HR department, firms have realized that the integration of Human Resources Information System (HRIS) provides primary infrastrutures by which HR department performs effectively. Despite the benefits that an organization could accrue from the integration of HRIS investment, effective cost-benefit analysis (CBA) is critical to make an investment decision. Without a comprehensive CBA on HRIS investment, the HRIS project may be disatratrous and a firm may not enjoy the benefits from such investment. One of the effective methods that a firm could employ for the justification of HRIS investment is the use of human resources metrics. The HR metrics reveal the number of factors human resources contribute to the business advantages. By using HR metrics, an organization will be able to measure whether there is a need to invest on HRIS. While there are several methods HR metrics can be used to justify HRIS investment, this paper considers three of them.
One of the most effective HR metrics to justify HRIS investment is the use of Human Capital ROI (Return on Investment). A Human Capital ROI measures the "return on investment ratio for employees" (.( Calson. & Kavanagh P. 124). The decision to continue with the HRIS investment will depend on the ratio of rate of returns that an organization is getting from employees. A formula to calculate the Human Capital ROI is as follows:
Revenue - (Operating Expense - {Compensation Cost + Benefit cost})
(Compensation cost + Benefit cost)
Using the formula will assist a firm to make an HRIS investment decision. Typically, a firm will proceed with the HRIS investment if it revealed that HRIS project will increase the company's the ratio of return on Human Capital investment.
Human Capital Value Added (HCVA) is another HR metrics to justify the HRIS investment. Human Capital Value Added is used to measure the level an employee add values to an organization. The workforce knowledge is very important...
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