When it comes to HR priorities in 2023, purchasing the best HR solution is right up on the list. Research by Gartner found that 46% of industry leaders are planning to increase their HR tech budget this year, making it their #1 priority. However, purchasing the right HR tech solution for your business can be a challenge, given the mounting costs of HR administration, the plethora of options out there, and the unique needs of your company. That is why it is important to ask the right questions, conduct a thorough assessment, and always try before you buy HR tech.

What is HR Technology? A Quick Introduction

HR tech or HR technology solutions refer to digital systems that automate tasks related to human resource management, whether that is daily activities like attendance, regular programs like payroll, and surveys, or strategic work like decision-making. The first HR tech solution you buy can be one of the following types:

• HR point solutions: Point solutions take on a single business problem and address it head-on. They are easy to implement and are usually available in a Software as a Service (SaaS) model. A location-based attendance monitoring app is an example of a basic HR point solution that almost every company must use.
• HR integrations: HR integrations are retrofitted to your existing solutions, usually collaboration and teamwork tools. For example, Microsoft Teams has several third-party integrations to conduct HR surveys. This type of solution is also known as a plug-in.
• HR tech suites: Suite solutions address a number of HR business problems from a single platform. For example, you can have a suite solution that automates recruitment, candidate management, and onboarding tasks. Some suites cover all the fundamental HR duties in a single system.
• In-house HR solutions: In-house solutions refer to HR software built by your own organization. This is often the case with technology-driven companies — for example, a SaaS startup may program its own automated survey tool to measure employee engagement.

Depending on your business needs and the resources available to you, your first HR tech investment will include one or more of these categories.

Why is Choosing the Best HR Solution So Important?

Traditionally, companies start with a manual approach to HR and eventually scale up to an automated system and/or HR outsourcing. This is because, after 10-20 employees, core processes like payroll, hiring, attendance, tax, etc., get increasingly difficult to manage with generic tools like spreadsheets. At this juncture, you can automate one or all of your essential HR activities using digital solutions.

As your HR tech infrastructure grows, it starts generating enough information for analytics. Now, the company is ready to invest in strategic HR technologies like people analytics and process optimization to gain from the economies of scale.

You don’t just have a “carrot” for choosing the best HR solution — research suggests there is a very real “stick” as well. Gartner found that the costs of HR administration have increased from $155 per employee in 2021 to $194 in 2022. That’s more than a 25% increase in just one year! HR technology automates several of the most high-volume, iterative tasks involved in HR administration, which include updating databases, following up on people, making calculations, and generating reports.

How to Select Your First HR Technology Investment

To evaluate the market rigorously and arrive at an effective shortlist, follow these steps:

1. Identify the business problem(s) you are looking to solve.

Often an organization will start its HR tech adoption journey by simply saying, “We can no longer afford to do HR manually.” However, this is an ambiguous statement and could refer to a variety of challenges arising from your current HR approach. That is why the first step is to zero in on the specific issues you’re trying to solve. Identify which processes are consuming most of your HR team’s workday. Then, figure out which of these processes are iterative and without changing variables.

2. Evaluate the market and document your research

Dedicated HR technology publications and resources are a great place to learn more about the HR tech options out there. If you are headquartered in a mature economy, it might make sense to work with a local vendor as well. As you conduct your research, document a few details about the most compelling technology solutions you find. This includes the initial and maximum pricing, the support response time, any unique features (e.g., artificial intelligence), and the hosting infrastructure and uptime.

3. Self-review

Once you have a detailed document listing your findings about the available HR tech market, it is time to conduct a self-review. Several options will be automatically eliminated at this stage, as their cons become obvious. A few (typically 3-5) will stand out. Reach out to these vendors and ask about a demo and/or a free trial.

4. Collaborate with organizational stakeholders on the next steps

At the demo and/or trial stage, it is a good idea to have other stakeholders participate. This could be employee focus groups or teams who will be using the app every day. Or, it could be CXO-level leaders, in case you are buying HR technology for strategic needs. Throughout the trial process, document your and everyone else’s experiences to understand which HR solution is outperforming the rest. Make sure to prioritize security, since these technologies regularly handle sensitive employee data.

5. Make a decision

The best HR solution will be one that is within your budget and adequately addresses your core business problem while offering some extra value-add. Finding the most affordable solution should not be a priority, as low costs typically translate to more deployment effort and less responsive support. Instead, find a solution with several pricing tiers so that you can scale as your needs increase. Confirm the decision through a formal service level agreement (SLA), which must include uptime, support timelines, and backup and disaster recovery provisions.

Conducting an HR Tech SWOT Analysis

A strength-weakness-opportunity-threat or SWOT analysis is a useful tool for steps 3 and 5. Whenever you or other stakeholders are evaluating HR technology options, the SWOT matrix will represent, at a glance, everything that a tool has going for it, and where it is falling behind.

Strengths will refer to the exact benefits a solution brings; you can ask the vendor for case studies and metrics to support this. Weaknesses will become apparent from deeper reviews and the trial process. Threats are future projections of the risks your company may face if it were to invest in this software. Finally, opportunities cover potential areas of growth using the HR tech software, such as support for remote work or new integrations.

Conclusion: Easing the Implementation Journey

Choosing the best HR technology is not enough. You need a seamless implementation process to get the software up and running, and customized as per your needs. The implementation process should also involve user training so that your team can start getting value out of your HR tech investment. Once the software is installed, take your time to upload organizational data, automate processes, and set up user access levels. Also, negotiate a period of zero lock-ins in case you want to switch platforms within the first 30 to 60 days of usage.

Ultimately, there will be a certain amount of trial and error involved before you can zero in on the best HR tech solution. In the meantime, if you are new to the world of HR technology and want to know more without investing right away, make sure to check out the 12 free-forever HR software tools that you start using today.