In today’s growing HR software market, you need a fully unified solution to deliver a consistent and personalized experience across recruiting, applicant tracking, onboarding, benefits administration and enrollment, and wellness program management. If you’re in the market to purchase a new human capital management (HCM) software tool, obtaining financial approval from your CFO is crucial — but it might seem as intimidating as seeking an investment on ABC’s “Shark Tank.”
Fortunately, Kevin Knapp — CareerBuilder’s chief financial and operations officer — breaks down what goes on behind the scenes once a request or proposal for a new software tool is submitted to him — and offers insights on how to build a solid business case so you can increase your chance of getting the green light.
CB: What do you expect to see in a proposal? What stands out to you and are there any immediate deal breakers?
KK: Over the past five to 10 years, SaaS tools have a proven track record of helping companies become more efficient in a variety of areas like CRM, accounts payable and HCM, allowing them to scale their headcount better than in the past, so generally CFOs have become much more open to these types of proposals for fear of being left behind.
The first step would be looking at the nominal cost versus the return on investment — for example if the tool will help us reduce ongoing costs or reduce constraints to accelerating revenue growth.
The next factor that most CFOs consider is making sure all the costs have been properly considered: What are the hidden “gotchas” that come up along the way? For instance, will there be a need for a person to administer the tool? Is effective service and support included or will there be additional charges? I might be saving in the sense that I don’t need as many recruiters because I’m going to be more efficient, but now I need two people to manage the tool and all the integrations with my other tools — and as a result all the savings I was planning on have evaporated.
CB: That segues into questions about implementation. Do you inquire about what resources will be required internally and address any productivity-related concerns?
KK: Absolutely. Asking implementation questions of the internal sponsor is where we always start. Remember it’s rare that your CFO would be the primary sponsor of a project like this.
Sometimes people think, “If I can get the CFO excited, he controls the purse strings so it’s a done deal.” In reality, he’s not going to be the one who has to implement it; he’d want to have the full commitment of the internal sponsor who is passionate about the tool’s success because he knows the internal sponsor will have to pull it through.
It’s ideal when the internal sponsor comes to me saying, “Here’s what we think it’s going to cost to implement up front, and here are the resources we’ll need ongoing to manage the tool.” Then we sit down and challenge those assumptions to make sure we haven’t missed anything.
I’m always eager to see somebody who has tested out the tool beforehand with a smaller group of people over the course of several months to glean insights. I get more enthusiastic about tools that don’t require large implementations up front so you can do those kinds of tests.
There are certain tools that require a ton of work up front before the team can feel confident that it will deliver — and those are inherently going to be harder to push through the system because they have a lot more risk associated with it.
If you’ve got a tool that requires relatively low implementation and you can test it out on one group or division first before rolling it out to a larger group, those are like gold and are much easier to approve because you accelerate the learning and reduce the commitment risk up front
CB: How do you prioritize software investments based on budget constraints?
KK: Each situation is a little different, but at the end of the day everyone has resource constraints, so you do need to prioritize — and it really comes down to a math exercise that is different for each organization.
Just having a large potential return on investment isn’t the only factor that goes into the decision. If your experiment has a low upfront cost and doesn’t have a long lead time before you start seeing results, even if its potential is smaller, oftentimes those are the types of investments that may get prioritized ahead of bigger projects.
CB: Because it’s lower risk?
KK: Yes, and also, you won’t have to wait as long to show progress to your team. For example, if you put in a new tool today and your team sees progress and is happier within a span of three months, it may be a more appealing investment than a more complicated system that might save the company millions of dollars but you won’t know its impact for sure until years from now.
Companies tend to fall into two different camps: 1) They’re growing and they need tools and partners to help make sure they don’t slow down as they get bigger, so they’re all about speed. Cost savings are not their primary concern. 2) And then there are other companies where growth is not as strong and they’re trying to be able to do exactly what they’ve been doing the day before, just a little more efficiently. So depending on what camp you’re in you’re going to approach that problem differently.
CB: Do you do a deeper dive into the more technical aspects of the proposed purchase or would you leave that to the discretion of the team making the request?
KK: Once the tool assessment process gets to a certain level, CareerBuilder uses a team of IT people to dig deeper into the underlying technology to try to identify anything a lay person may have missed — like assessing whether the underlying technology is getting outdated or how easily it will integrate with other tools already in place — and provide their informed assessment to the finance team and sponsor.
CB: What are some other considerations you take into account when a proposal comes across your desk?
KK: Data integration is one of the biggest technology questions we ask. One of the biggest technical concerns with purchasing a new software is integration with other tools. So you’ll want to ask: “I’m already using these three tools and these are the areas we’ll eventually want that data to flow between. Have you done that before with other customers?” It’s more of a gamble if they haven’t.
Another question we make sure is addressed is about whether the tool will offer proactive support through a customer success team. “Will I have a resource I can call — someone who can do the trainings and make sure the team is getting full use of the tool?” You’re looking for a vendor who has made a commitment, and you need to understand what they’ll do for you as part of the price. Ideally you’d have somebody who proactively calls you and says, “Hey, I see how you guys have used it for the last quarter; I think this particular group could use some extra training.” They’re more proactively trying to make sure that you get the maximum value out of the software.
CB: Is there an ideal window of time during the year to field these types of software proposal requests?
KK: That will vary depending on the organization. Traditional organizations have calendar years and they budget and plan on an annual basis — it may be 6/30 or 12/31. That’s a more traditional methodology that a lot of companies still follow.
There are other companies like CareerBuilder that are re-forecasting the business every month, so it’s not as critical to have a proposal submitted during the fall season as budgets for the following year are set. So it becomes less relevant for companies like CareerBuilder because similar companies are more agile and not so tied to annual planning cycles.
CB: What metrics do you request as a CFO? What do you typically want to see reported on so you can measure the success of the investment?
KK: It all comes down to what the dollar impact is — whether it’s incremental revenue or reduced costs — versus the all-in cost of the tool that’s not just the monthly subscription payment you make. That includes any extra people, [etc.], so someone has to do the math. In a lot of cases we have finance analysts assigned to groups, so they work with the sponsors to figure that out.
The hardest decisions are the ones where you have to spend the money up front and see the benefits much later — and that is one of the factors that have driven the high adoption of SaaS tools lately. In general, SaaS tools have a much smaller upfront investment compared to traditional on-premise solutions and the monthly subscription model adjusts quickly to the actual business needs. All of this makes it much easier for business owners and their CFOs to pursue opportunities to make their operations more efficient without making big risky bets.
CB: You mentioned there are finance analysts, IT folks, etc. weighing in on this decision. Who else from the company typically weighs in? Does anyone else in the C-suite have to sign off on such decisions?
KK: Not traditionally — beyond the sponsor of the group. So for example, if it’s HCM software, the CHRO should be the one who’s driving it.