If human resources professionals are to survive and prosper , it is that much more essential that they refocus their efforts on “building the business case” for investing in human capital programs. HR professionals need to shift from their all too common, “I think and I believe” approach toward a more businesslike approach where decisions are made based on data and facts. ROI and payback need to become more prominent in the jargon of human resources professionals. Human resources and recruiting functions have always undergone intense scrutiny by executives and financial officers. But even though CEOs are notorious for saying that people are their “most important assets,” they often become relative misers when it comes to funding people programs. Lately HR programs in general, and recruiting and training programs in particular, have come under siege by the “cost cutters” who have taken control of businesses during these tough economic times. If human resources professionals are to survive and prosper, it is that much more essential that they refocus their efforts on “building the business case” for investing in human capital programs. HR professionals need to shift from their all too common, “I think and I believe” approach toward a more businesslike approach where decisions are made based on data and facts. ROI and payback need to become more prominent in the jargon of human resources professionals. Unfortunately, to say that HR professionals have been weak in building the business case for HR programs is more than just a mild understatement. I have spent over 25 years teaching HR teams how to build their “business cases.” From HP and Cisco all the way down to small-business owners, there is little variation in what makes an effective business case. But it’s not as difficult as you might think. It turns out that most financial professionals and executives are very logical people. What they expect is surprisingly consistent in businesses of all different sizes. It’s also important to note that building a business case is a separate issue from “doing metrics” in HR (I’ve covered that in other articles). Doing metrics is a mostly a statistical exercise that focuses on internal HR effectiveness, while building a business is really just “selling with numbers.” Making a business case differs from metrics because it includes:
- Using business logic to sell an idea
- Proving business results using common business financial ratios
- Identifying the decision criteria that key executives use
- Effective word-smithing
- A short but powerful presentation, including a detailed decision support document, a few effective PowerPoint slides and a “wow” verbal presentation.
The remainder of this article highlights each of the steps you must take in order to build an effective business case. But while you are going through these steps, it is important to step back occasionally and remember the “big picture.” You are trying to sell an idea, just as a salesperson sells his or her product. In order to be successful you must focus on the decision-making criteria that your target audience uses. Be aware that the decision criteria listed below are, by their very nature, generic. If you want to maximize your effectiveness, you need to do your own internal research in order to identify the specific decision criteria and the “passing scores” that are utilized within your own organization. Following are the elements of an effective hr business case. Identify the Decision Makers You Are Trying To Influence Although we live in a world of computers, most “buy or don’t buy” decisions are made by real people. And even though they might serve as a team or work together as a unit, each individual has their own set of decision criteria that they use to determine if a project is fundable. You can treat all of the decision makers the same, but you probably won’t have time to influence them all. So you must prioritize the decision makers and focus on those who have the most influence on program decisions. Knowing these people and how they make decisions is the first, but most important step in building a business case.
- Identify and prioritize your target audience. Identify the most influential people. Also identify any strong individuals that frequently serve as gatekeepers or who frequently exercise “veto” power over proposed programs. Next, prioritize the target audience and focus your efforts on the most influential people. Whenever possible, try to get one of the most influential individuals to “sponsor” the program. If you can convince an executive known as a “HR program hater” to sponsor it, the game is already halfway won.
- Identify their decision criteria. After reviewing a variety of past program decisions (get your non-HR colleagues to help you track them down), you need to identify the critical success factors in getting each individual to vote yes. That means that for each influential individual, you must identify his or her primary decision “mindset.” Individuals make decisions in a variety of ways, but they generally fall under these “mindset” categories: financial, logical, scientific, emotional, image, personal relationships, selfish, or immediacy of impact. Identify the minimum acceptable “passing score” you need to reach for each of the criteria (for example: 11% is the minimum acceptable ROI percentage)
- Determine who is likely to resist or support it, and why. Identify which individuals routinely support or vote against HR or other “overhead” programs? Try to identify a “commonality” or a pattern in the decision-making in order to identify “why” they approve some but reject others
Demonstrate That the Individuals Proposing the Program Are Credible It’s unfortunate but true that mediocre programs supported and presented by great people get funded more often than great programs presented by mediocre people. In order to prove that you and your team are credible, you must make a strong case that you are “experts” in your industry, in your business, and in this topic area.
- Prove that you are an expert in the problems and opportunities of your industry and your firm. You can prove you are an expert by forecasting the future problems and opportunities in your industry and firm. You can increase your credibility by citing examples of the business impact that your past programs have had. Show that you have done detailed research in your program area and that you can answer any question on the subject without hesitation.
- Forecast trends and patterns. Show that you know where the business and industry are going by highlighting key trends and patterns. Include forecasts for the changing business and environmental factors.
- Demonstrate your success rate and your track record. You must demonstrate that the previous programs and projects you have presented have reached their goals and have had positive measurable business impacts. Quantify the success rate of your past projects in percentages.
- Show that the HR “owner” of the project is well known, trusted, and respected. Make sure that the person running the program is known and respected by the decision makers. Improve your case by providing information to show that they have the experience, track record, and expertise necessary to run a successful program. Determine whether the program sponsor has any major enemies or major program failures in their background. If they are new to the firm, assume that they will encounter the “NIH” (not invented here) syndrome. Provide information to show that they “think like us.”
Demonstrate That the Program Helps the Firm Meet Its Goals and Fits Your Corporate Culture All overhead programs come under scrutiny because it’s not always easy to show how they directly impact business results. However, executives still need to see the direct relationship between the proposed HR programs and the stated corporate goals and objectives for this year. No matter how effective a program might appear on the surface, decision makers often use a “cultural filter” to screen out programs that don’t seem to fit a company’s culture or values. If you are unsure on this one, get a “grizzled veteran” to do a quick cultural fit assessment. Convincing executives that there is a cultural fit often means the judicial use of key buzzwords, citing historical precedents, and mentioning corporate heroes. Having a corporate “veteran” sponsor to a program can also alleviate fears that it doesn’t fit your corporate culture.
- Show that your solution helps us meet corporate business goals and objectives. Be sure to repeat key objectives in your documentation and show how the solution directly aligns with the major ones. Quantify the estimated impacts.
- Clarify whether it fixes an existing problem or offers a new opportunity. Most executives choose fixing existing problems over seeking out “new” profit opportunities. If you select a problem to fix, first identify the problem, show its causes, and quantify the problem’s impacts. Then show how your solution solves the problem. Wherever possible, give examples of where this type of solution has solved this problem in other similar organizations. If it is an opportunity, demonstrate how the results will be superior to competing opportunities and demonstrate that there is a sense of urgency that requires immediate action.
- Demonstrate how it fits your company’s culture and your processes. Show how each other major program elements fits, supports, or enhances corporate culture and values. If the program has major potential impacts, show how the solution aligns or at least does not conflict with ongoing processes and systems.
- Show how it impacts on diversity. Where possible, quantify the impact the program will have on increasing the diversity of your workforce.
Demonstrate How It Helps Improve Your Firm’s Competitive PositionExecutives and decision makers are almost always competitive people. They love programs that give the firm a sustainable competitive advantage over rival firms and their products. HR programs are most effective when they are the first and only one in the marketplace. Once everyone has one, they become essentially a commodity ? which means it’s necessary to have one, but having one gives you no significant advantage.
- Show how it gives your firm a competitive advantage. Demonstrate (and then quantify) how this program is superior to that of your competitors. Provide a side-by-side list of the program’s features comparing what they offer and what you offer.
- Demonstrate how it allows your firm to differentiate itself. Show that the program is unique enough that it will stand out among the rest. Show how that uniqueness will get your firm “talked about” in your industry. Describe the unique programming elements and demonstrate how they are difficult to copy.
- Show how it makes your firm just like “them.” Senior managers almost always have a “model” organization that they want to be like. Demonstrate how this program will make your firm more like “Cisco” or some other benchmark organization. Show what they do and how this program will your firm emulate their successes.
- Demonstrate you have done your benchmarking. Show that you’ve done your research and benchmarking by outlining the best practices at each of the leading firms.
- Forecast where your competitors will be. If you assume that any program implementation will take some time, show that you have calculated how far the competitor will have advanced by the time your program is implemented, and what you have done to counter that progress.
- Forecast the response competitors will make to your program.Plan the steps you will take in order to combat their inevitable countermove or copying of your program.
Next week’s installment will cover further steps in making your business case to management, with an emphasis on the kinds of data and facts you’ll need to make your case effective.