The cost-benefit analysis is the tool used for weighing up an investment decision
in HRIS objectively. It involves adding the benefits of a project or investment and then
comparing these with the associated costs. In HRIS, the cost-benefit analysis is used to determine
if an investment is a sound, hence ascertaining if its benefits outweigh its costs and provide a
basis for comparing investments and comparing the total expected costs of each option with its
expected benefits. In most cases, the important outcome of the cost-benefit analysis for an HRIS
is on its profitability for different reasons. During the evaluation of the cost-benefit analysis of
the HRIS, the major costs in the proposal are software, implementation costs, and the salaries of
the project team's members. Therefore, based on these costs, it is important to note that HRIS
will concentrate on the project's cost-reduction benefit to benefit the company.
The main reasons why the cost-benefit analysis outcomes for an HRIS project are
specifically based on the company's profitability are the analysis outcomes determine whether
the project is financially feasible. Depending on the specific investment being evaluated, one
needs to discount the time value of cash flows using net present value calculations. In most
cases, 55% of the HRIS projects' cost estimates exceed the projected costs and time estimates
(Johnson et al., 2021). That means that most of the HRIS projects fail due to poor cost-benefit
analysis. When the cost-benefit analysis is not conducted well, there significant rates for the
implementation of HRIS in major companies indicating HRIS projects need better planning and
cost estimate. When companies implement the automation of HR, it tends to reduce the
dependency on the hard copy of data and information related to employee data. The outcomes of
cost-benefit analysis determine the HR department's overall efficiency, and HR professionals
may focus on strategic decision-making and developmental functions of HR.
COST-BENEFIT ANALYSIS 3
Because most of the HRIS projects are underinvested, and these projects consume
much financial aid, it is necessary to consider the cost-benefit analysis outcomes to be more
positive and profitable. First, the underinvestment in HR functionality tends to result from
outdated cost-benefit analysis methodologies that emphasize cost reduction and do not
adequately recognize the value of organizational enhancements attributable to the new HRIS
functionality. Therefore, the cost-benefit analysis determines the outcomes of the company in
terms of profitability. It is not only for justification of the purchase but also for becoming an
effective organization (Alam et al., 2011).
The cost-benefit analysis outcomes are very important for the company's
profitability because the BCA team can examine the benefits of a change of HRIS functionality
before estimating the costs. In most cases, the CBA outcomes spell either the investment
project's success or its failure. Therefore, sometimes canceling the investment project based on
cost-benefit analysis decisions can foresee the HRIS functionality's profitability. Cost-benefit
analysis outcomes play a bigger role in the company's profitability because the HRIS team can
determine the benefits of a change and estimate the costs.
Finally, analyzing the HRIS implementation and functionality in HR through cost-
benefit analysis is crucial for the company's profitability because it helps determine whether and
to what extent it will improve the organization. Irrespective of the HRIS cost-benefit analysis
outcomes, it is necessary to develop the estimate, a separate and distinct process from presenting
and selling the investment opportunity to management decision-makers. The estimates produced
for cost-benefit analysis are based on forecasting future company events and may depend on
events outside management control; actual outcomes are likely to deviate from those estimated.
COST-BENEFIT ANALYSIS 4
Therefore, many companies rely on cost-benefit analysis outcomes to actualize the profitability
and efficiency of running and implementing the HRIS functions for automating HR activities.
COST-BENEFIT ANALYSIS 5
Alam, M. G. (2016). Critical factors influencing decision to adopt human resource information
system (HRIS) in hospitals. PloS one, 11(8), e0160366.
Johnson, R. C. (2021). Human Resources Information System: Basics, Applications and Future
Directions. California: Sage