TCO: The Hidden Costs of HR Technology
Over the past year, the pandemic forced most organizations to re-evaluate their HR technology to better support their workforce in a new work environment. It’s easy to see how these solutions impact expenses, regardless of whether your organization has grown or downsized and whether you’ve implemented one, two, or more new technologies. But upon further examination, you may find additional costs that you don’t see on a balance sheet. These downstream costs come in the form of voluntary turnover, disengaged employees, and a poor employee experience caused by disjointed systems. All of these add to the Total Cost of Ownership (TCO) of your HR technology stack.
Don’t get me wrong, these shiny new systems have the best intentions and also hold the potential to streamline processes and improve efficiency. However, they can cause confusion, digital fatigue, and an overall negative employee experience when brought together. This article will examine the cascading costs caused by competing HR technologies and shine some light on the TCO of those platforms, tools, and programs.
Multiple Buyers, Multiple Priorities
HR technologies span a broad spectrum of applications. PwC’s Human Resources Technology Survey estimates the total value of the HR cloud solutions space at a whopping $148 billion. You have solutions for time and labor management, talent development, benefits administration, payroll, HR administration, and the multiple use cases that fall underneath each of these. Filling the needs presented by your organization can result in a slew of point solutions patched together, ostensibly to support the employee experience. But are they actually improving the employee experience?
The problems often start with having multiple buyers working to get these solutions in place. Too often, organizations arm each buyer with a different agenda and different initiatives. Each has a keen eye on their own goals and what technology they are bringing in-house. But with multiple buyers in the mix, the bigger picture is often overlooked. And the bigger picture can be what makes or breaks the employee experience.
What is the bigger picture? It’s the TCO of the whole HR technology stack and how these solutions work together.
Too Many Channels, Not Enough Bandwidth
Throughout the workday, employees change directions more than a weathervane in a tornado. They constantly switch between systems to communicate, track time, view benefits, take a survey, complete a learning module, and—yes—even get some work done. It’s simply exhausting. Also, that only covers a few of the functions within the sprawling HR tech stack. Thinking about it gives you a headache, doesn’t it? Or perhaps, that’s digital fatigue you’re experiencing.
Moreover, we’ve seen (and continue to see) a race to upskill and re-skill, a trend that has created the need for even more learning and development, coaching and mentoring, surveys, and other tools meant to support employees. The increase in the number of people working remotely and forcing interaction with these disjointed technologies from home has exacerbated the situation. Also, while pushing forward with upskilling and re-skilling, only 12 percent of employers plan to reward employees’ skill acquisition. The current rise in voluntary turnover is kind of a no-brainer. People work harder and longer at home. They stretch themselves to learn new skills and take on new roles–for no reward.
The Effects: By the Numbers
We know the competing HR systems and the subsequent chaos they cause result in a poor employee experience. But what exactly does that mean for your organization? And what does that cost? Now we’re getting to the TCO of HR technologies.
Experts estimate that the healthcare costs of job-related burnout are between $125 billion and $190 billion. Once employees reach burnout, it’s often difficult to hit the reset button and get them back to their optimal performance engagement. Thus, voluntary turnover is often what lies next.
With the average cost of hiring a new employee at $4,129, and onboarding averaging roughly $986 per new hire, organizations lose $5,000 each time an employee leaves. That doesn’t even account for the costs of the skill sets you’re losing, and the loss of the intrinsic value an individual brings to your organization. You can’t afford to lose your employees to something so preventable as integrating HR solutions.
Disengagement costs companies between $450 billion and $550 billion each year. Yikes! And considering one-third of most employees consider themselves disengaged, organizations must work to boost engagement. Among the several levers you can pull to boost engagement, streamlining your technology is a relatively easy move.
Management tax: Add it to the tab
The struggle of dealing with too many solutions is not one-sided. While employees grapple with multiple systems each day, managers work to pull data from each of those systems, manage vendor relationships, and learn each solution from top to bottom. Managing a sprawling tech stack is a huge distraction and can easily be minimized by combining point solutions to a larger platform.
Streamlining HR technology will make life simpler—and more productive—for managers and employees. Of course, bringing these solutions together can also be more cost-effective for an organization. Which means you don’t need to eliminate existing systems altogether. Just simplify your systems. How? By integrating and combining forces. A lot is riding on this—more than you see when usually assessing TCO.
With this in mind, adopt an integrated approach that combines talent functions to create a more fluid experience for your people. Do it for the employee experience, higher productivity, and a better bottom line. When evaluating the number of technologies in your organization, less is more.