When the next budget cycle arrives, you know you’ll be making a pitch to the CFO for a large HR spend. You’ve done your homework. You’re selected the perfect vendor. You’ve run the ROI numbers, and even game-planned what the rollout would look like. Maybe it’s an HRIS upgrade, employee wellness program, high potential leader classroom training or the addition of a data scientist to your HR team. And you know that HOW you sell it to the bean counters in Finance is just as important as WHAT you are selling. Are you comfortable standing in the shoes of your CFO, and understanding what will make them include your project in next year’s budget?
More and more HR professionals are becoming conversant in Finance through continuing education classes and lifelong learning. Still, only 28% of HR job postings prefer applicants with an MBA, and only 50% of HR leaders reported in recent study that “Demonstrating general business skills” is “very important” to them when asked to rate important human resources skills. And yet, it’s never been more important for you to speak the mathematical language of the numbers guru in the corner office. The most recent edition of Harvard Business Review makes a compelling case, in an article called “How Financial Accounting Screws Up HR,” that Accounting and Finance executives misunderstand the financial impact of HR practices.
You always have to start with a Return on Investment calculation. Beyond that, as someone who has helped HR partners pitch executive coaching and leadership development programs to the C-suite for many years, I suggest that there are two more numbers you should include in any successful business case.
1: The Economic Risk of No-Investment.
Inject some Fear of Missing Out (FOMO) into the equation. What are some probable and worst-case scenarios that might occur if this HR expenditure does not occur, and how much could they cost your firm? Might you lose some of your key employees? If so, I’m sure you possess internal calculations on what turnover costs your business. Is there liability that might lead to a lawsuit if you don’t spend dollars now to shore it up? Do some research on other companies that have been sued. Want to persuade about that wellness program? Bust out a graph of how health benefits costs are projected to explode for your business in the next five years.
I once observed a board presentation by a VP of HR at a logistics and shipping company, attempting to sell Emergent Execs’ succession planning services during the budget cycle. Her first slide was a picture of a rising star in the organization. Everyone at the meeting knew this young man, and believed that in 5-8 years, he could work his way up to the COO seat. The savvy HR VP photoshopped this picture of the golden boy into a FedEx (their primary competitor) uniform, and announced, “If we don’t have a vertical path upward for our best people, FedEx does, and they are already headhunting our up-and-comers.” How’s that for FOMO?
2: A Weighted Decision Matrix for the Solutions
CFOs want to know that you did your homework, considered all of the best options, matched the right solution to your company’s unique needs and conducted some rigorous cost analysis. A weighted decision matrix is a simple tool that helps you list all of the primary evaluation criteria for your company in selecting the best alternative, and assign a numerical value to each option.
Let’s say you are contemplating the addition of a new Learning Management System. Some of your firm’s heaviest considerations may be ease of integration with your existing HRIS, great analytics for usage tracking, simplicity of onboarding and end user experience, ongoing service and support, ability to upload some of your existing training content and other factors. Be specific in your criteria. For example, don’t just make one of the measurements to be price. Maybe you want the pricing to be flexible based on usage so that you are not paying for users that are dormant. Maybe you need price to be within a specific range, or that it is a flat-fee instead of per user.
The next step is to assign appropriate weights to each criterion, based on how you value it. Once categories are assigned their weights, it’s now time to rate each vendor or solution in terms of its fit with each of your selection criteria.
I’ve prepped an easy, Google Sheet weighted decision matrix tool for you for making vendor decisions. It contains a template, plus an example for you to follow. You can copy it here for free and with no requirement for you to enter contact info. I’m happy to help!
And Always Show up with this Non-Number!
Any shrewd HR pro throws in one final element at the end of a business case presentation, but only when necessary. Always strategize a “Free Option” if your request for project funding is denied. No one wants to plan to fail, but inevitably a large percentage of “must-have” budget requests are shot down in any corporate environment. Is there a free, scaled-down or low-risk alternative you can implement if the CFO or board says no?
The point of a free option is to get your foot in the door and prove the concept, so that next year, when budget time comes around again, you have company-specific data that it is worthy of larger financial commitment.
Examples of free options in HR might be:
· Running a time audit to prove how many hours your team is wasting, because they don’t have a particular software tool
· Experimenting with a “Lunch and Learn” workshop led by your staff, before buying a big safety training program
· Running a pilot with one department in your company on a new rewards and recognition system before purchasing it for the entire company
· Hiring some temps or contractors instead of full-timers
· Taking Emergent Execs up on an offer to come to your company for a free 75-minute class of your choice for 10-20 of your leaders who want professional development
One word of caution: don’t include the free option in your slide deck, and don’t mention it as a choice until your first request has been turned down. Just keep it in your back pocket. You know CFOs, they’ll pick “free” any day of the week!
Paint a Compelling Story
A lot is riding on the Go/No-Go decision on your budget request. It’s worth your time and effort to get the numbers right. Make sure to bake the right calculations into your presentation – ROI, risk of no investment and weighted decision criteria. Finally, don’t forget that CFOs are humans with emotions. Tell a vivid story of all the benefits that your company will enjoy if they will just “swipe right” on your next HR project.