Steps in Making the Business Case for HR Programs

Human resources functions have always undergone intense scrutiny by executives and financial officers. But lately, HR programs have come under siege by the “cost cutters” in particular. If human resources professionals are to survive and prosper, it is essential that they refocus their efforts on building the business case for investing in human capital programs. Following up on last week’s article, here are some additional steps you can take to do just that. Demonstrate That There Is a High Probability of Success All programs involve risks, but “people programs” have some of the highest failure rates. It’s essential that you demonstrate, both in probabilities and in dollars, the likelihood of success of your program. Be prepared to show how you arrived at the success rate:

  1. Prove how often these types of solutions work. Demonstrate that you’ve done your research, and quantify how often these types of programs work and fail,
  2. List the critical success/failure factors. If you can’t show why a program will succeed, you are clearly not an expert. Show that you’ve done your research by listing and prioritizing the critical success factors for this type of program. Also make a list of the common problems that can occur in implementing this type of program and show that you have a solution for each.
  3. List the environmental and economic factors that impact the likelihood of success. Programs and solutions are impacted by changes in the internal and external environment. List the key environmental factors that impact program success. Show how you will monitor and track each of these.
  4. Demonstrate that YOU have the talent, technology, and other competencies needed for success. Great ideas fail without the right resources. Demonstrate that you have the necessary talent to manage and operate the programming. Show that you have the necessary competencies and experience, and that you have the infrastructure or technology necessary for success.

Demonstrate the Possible Economic Impacts Speaking the language of business means using dollars and numbers. HR professionals need to speak the language of business and finance if they expect to be listened to. Although every company has its own unique measures of business success, the following list is a good representation of most business success measures. Don’t get hung up on perfect numbers, though. Finance departments estimate such things as sales, profits, and goodwill all the time. But be sure that you run your proposed project success measures and metrics by someone in the CFO’s office before you formally present your program plan. Where possible, involve financial professionals in setting up the acceptable success measures. Beware of traditional internal HR success measures, because they are often too tactical. Senior executives focus on overall business impacts. Incidentally, great hiring, retention, and people-productivity programs generally have among the highest ROI of any business programs ? so don’t be shy with the numbers.

  1. Improve revenue, income, profit, margins, customer value and shareholder value. Estimate the potential impact of the program on profits. Next focus on shareholder value or stock price. Finally, can you demonstrate that through better hiring, training, pay practices, or technology, the firm will improve its productivity and profits?
  2. Calculate the payback period. Executives hate to wait a long time for the program’s breakeven point. Demonstrate how many months it will be before the program begins generating results and when the initial investment will be paid back.
  3. Minimize the amount of upfront money needed. The best overhead programs operate out of existing resources. Hiring new people and buying equipment is a red flag item. Executives want to minimize the amount of upfront money that is needed to get program started. Try to show that results will be demonstrated before any additional cash is needed.
  4. List the program success measures (metrics). List the five key success measures for the program or project. Be sure to include the minimal “passing score” for each measure.
  5. Calculate the program’s ROI. New programs or projects are frequently measured by their return on investment. Demonstrate that for every dollar invested at least $1.15 will be returned (a 15% ROI) ROIs of above 50% are not credible (outside of drug dealing circles).
  6. Calculate its impact on products and services. Anything that improves a product almost always impresses executives. Demonstrate, where you can, that the improved hiring, training, etc. will dramatically improve each of the following business impact measures:
    • Increased margins
    • Increased market share
    • Time-to-market for product development
    • Added product features or product quality
    • Improved response time or customer service
    • Decreased errors or rejects
    • Decreased cycle or process time
    • Increased customer satisfaction
    • Increased image, PR, or brand recognition
    • Increases product sales (which might differ from increased profit)
  7. Show that your program facilitates your company’s rapid growth.Modern executives love “top line” growth. Programs that facilitate or allow rapid growth almost always receive a high priority.
  8. Demonstrate the likelihood of external financial support.Programs that are partially funded by outside sources (strategic partners, the government, customers or vendors) have an increased likelihood of support. This is because you have already demonstrated that others also see value in what you’re doing and are willing to vote with their wallets.

Demonstrate That Your Project Plan Is Credible Great programs are often not approved because their implementation plans are weak. Generally, project plans are not judged as credible because they fail to answer key questions, or else they fail to anticipate potential problems. Have your plan reviewed by a successful internal project manager and, over time, develop a checklist for assessing program implementation plans.

  1. Show that the project lead person is credible. If you have to “sell” the individual to the management team, you are already in trouble. Pick someone they know and trust.
  2. Demonstrate that your team is competent. Provide a brief profile of each team member highlighting their skills and demonstrating their accomplishments in recent projects or programs. Delete any team members that might have a negative image.
  3. Show that you can attract any talent you might need. If it is a new program, you must demonstrate that you will be able to learn quickly or attract experienced talent either internally or from the outside.
  4. List the program steps. Don’t skimp here. Provide an appendix document that lists in some detail each of the steps you will take to implement the program. The goal here is to demonstrate that you have thought of all eventualities and that you have a logical, step-by-step process.
  5. Show that you have undertaken a pilot. Executives say that they are risk takers, but in reality they are “calculated” risk takers. By proposing or actually operating a pilot project or beta test, you can demonstrate that you are willing to try out and refine your idea before any “big dollars” are required. If you have already done a successful pilot by using your own resources, you’re halfway there.
  6. Highlight the program monitoring system. Great implementation plans include “milestones” or assessment points where the program is reevaluated. Sometimes weak programs are approved when they demonstrate that they have an effective feedback loop that allows them to continually improve and learn.
  7. Provide best/worst case scenarios. Executives live in a reality where things often go wrong. Effective project plans anticipate things going wrong and highlight every possible eventuality. Demonstrate that you have considered both best and worst case scenarios, calculated their probabilities, and have a backup plan for each.
  8. Show a plan for identifying any “unintended consequences.” Even great programs can have unintended side effects. Demonstrate that you have a formal program that is designed to identify any potential negative (or positive) “unintended consequences” that might occur as an indirect result of your program.
  9. Identify any potential legal issues. Executives often hate lawyers, but they hate surprises even more. Show that you have calculated any legal risks and taken them into account.

Individuals Perceive That the Program Offers Them Some Direct Personal Benefits Executives can be prone to selfishness. After all, getting to the top generally requires some degree of selfishness. Don’t ignore that fact. Treat them as individuals with egos, insecurities, and feelings. Make sure you demonstrate to each of the influential ones how the program will benefit them personally. In reverse, you also need to look at how the program might threaten them or their business unit. Ignore this element of the business case at your own risk!

  1. Establish a personal relationship with the decision maker. On more than one occasion, great programs have been rejected because the program manager failed to build a personal relationship with the influential decision makers. Remember, it is easier to reject strangers than it is friends. Make sure they are aware of any common interests or experiences you might share.
  2. Demonstrate that the program improves “their” chance of promotion or increased income. Where possible, demonstrate to each individual decision maker how the program might help their career or boost their income level.
  3. Demonstrate that the program might build “their” image.Executives can have enormous egos, so be sure to demonstrate how the project might improve their visibility and image, both inside and outside the corporation.

Other Factors To Consider

  1. Anticipate being offered a reduced budget. Be prepared for the eventuality that they will approve your project but at a reduced budget level. Anticipate this eventuality and have a backup plan that allows you to operate at partial funding. Be prepared, however, to say no if partial funding will doom you to failure.
  2. Include a continuous improvement process in your plan. Include in your plan a process for continually upgrading and improving every key element of your program. This program element will excite even the most mundane decision maker.
  3. Take into account their past experience with you department.Many executives have had negative experiences with the HR department. Don’t be na?ve; study the history and be prepared to show how you are different or have helped the department change.

If All Else Fails… Be aware that executives are almost always a macho group. Whether they are men or women, they are universally impressed with people who stick their necks out, because they themselves must stick their necks out every day. They are also painfully aware that most “overhead” people (and HR is no different) are risk adverse. If you really want the project to be approved, you need to “put a stick in the sand” and put your job on the line. This means:

  • Guarantee the date the program will be operational
  • Set that date to be within 90 days
  • Guarantee numerical results (and specify them) within six months of operation
  • Guarantee further numerical results at the end of the year

And finally… offer to resign if the above four don’t occur. Any questions?

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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