HR Tech Can Transform Businesses, But Many CEOs Are Hesitant to Invest in It. Here's How HR Leaders Can Prove Its ROI. Struggling to justify HR tech spend? For SMBs, every dollar counts. This means justifying a strong ROI is paramount to advancing people strategy.
By Brent LaBathe Edited by Chelsea Brown
Key Takeaways
- Small and mid-sized business leaders often view HR tech as a cost center and don't prioritize investing in it.
- To convince them otherwise, HR managers must advocate not for the people side of the business in a way that speaks the language of bottom-line impact, operational efficiency and strategic growth.
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In the world of small and mid-sized businesses, every dollar counts. Leaders are constantly faced with difficult decisions about where to allocate limited resources to drive the greatest impact. With HR often viewed as a cost center for businesses, it comes as little surprise that a recent study found 64% of small to mid-sized businesses allocate less than 1% of their annual revenue to HR technology investments, and 36% are using virtually no HR technology.
Not only does this make HR teams' jobs more difficult, requiring them to spend hours prioritizing labor-intensive back-office tasks, but it also reduces their ability to spend time on supporting employee needs and engagement initiatives that can have a real impact on a business's bottom line.
To shift the tide, HR managers looking to make the case to leadership for technology investment in the coming year must advocate not only for the people side of the business but also do so in a way that speaks the language of bottom-line impact, operational efficiency and strategic growth.
As we approach the end of the fiscal year, now is the time to prepare a business case that resonates with executive decision-makers. Here's how HR leaders can frame their proposals around real pain points and offer grounded, practical solutions that deliver measurable value.
Related: These HR Techs Are Making Employee Management Easier
Pain point 1: Limited budgets and uncertain returns
Small and mid-sized business owners often face a barrage of competing priorities. With limited funds, it's not always clear which investments will stretch furthest or deliver the most meaningful results. HR, workforce management and payroll solutions can seem like overhead — until their impact is clearly articulated.
The solution:
To overcome the misconception around workforce investments, HR leaders should start by reframing HR technology as a strategic enabler rather than a cost center. By demonstrating how a unified workforce platform reduces administrative burden, alleviates compliance risk and frees up time for employees to focus on high-value work, leadership can more easily understand the business case for investing.
For example, automating time tracking and payroll reduces errors and ensures accurate compensation, which in turn boosts morale and retention. These are not abstract benefits — they translate directly into fewer costly mistakes, lower turnover and more productive teams.
Pain point 2: Difficulty connecting HR to business strategy
In many small businesses, HR is either a one-person team or a shared responsibility across multiple departments. This makes it challenging to connect people-related initiatives to broader business goals like profitability, customer satisfaction or growth.
The solution:
Use data to bridge the gap. Even basic workforce analytics can reveal patterns in absenteeism, turnover and productivity that correlate with business performance. For instance, if your busiest sales periods coincide with spikes in employee fatigue or scheduling conflicts, that's a clear operational risk. By investing in tools that provide visibility into workforce trends, HR personnel can offer insights that help leadership make smarter, more strategic decisions.
Moreover, when employees are supported with intuitive, mobile-friendly tools that make their jobs easier, they're more likely to go the extra mile. This often-overlooked discretionary effort is a key driver of profitability in small and mid-sized businesses.
Related: 4 Ways Technology Improves the Human Resources (and Human) Experience
Pain point 3: Lack of actionable data
Many small businesses rely on spreadsheets, manual processes or disconnected systems that don't provide a clear picture of what's working and what's not. This makes it difficult to justify investments or identify areas for improvement.
The solution:
Advocate for a single source of truth. A consistent, integrated platform for HR, payroll and workforce management removes operational silos and ensures that decision-makers have access to real-time, reliable data. This enables proactive planning, whether it's forecasting staffing needs, managing compliance risks or identifying opportunities to improve employee engagement.
With built-in reporting and AI-driven insights, even small HR teams can deliver executive-level intelligence that not only builds credibility but positions HR as a strategic partner in driving business outcomes.
Making the ROI case
To make a compelling case for investment, HR leaders must speak in terms that resonate with executives: cost savings, risk reduction and revenue impact. Here are a few data points to consider:
According to a recent McKinsey report, organizations that make data-driven decisions are 63% more likely to adapt to changing business environments.
A study conducted by UKG in partnership with HR.com found that HR teams equipped with the right data are five times more likely to make strategic recommendations.
A Great Place to Work report found that prioritizing employee experience can lead to 50% less turnover and 36% higher levels of discretionary effort, while a recent Gallup report found it can lead to a 34% reduction in absenteeism and 41% fewer safety incidents.
Addressing disengagement can yield up to $56 million in annual savings, even for mid-sized organizations, according to McKinsey.
While your business may not operate at that scale, the principles hold true. Every hour saved, every employee retained and every process improved contributes to a stronger bottom line.
Related: How Technology Will Shape The Way Startups Manage Their HR
The right investments in people and processes can transform an organization. For HR managers at small and mid-sized businesses, the key is to align your proposals with the strategic priorities of the business. Focus on outcomes, not features. Show how your recommendations will reduce friction, improve performance and support growth.
In uncertain times, there is temptation to cut back. But the businesses that thrive are those that invest wisely — especially in their people. By presenting a clear, data-backed case for HR, workforce management and payroll solutions, you're not just asking for budget. You're offering a roadmap to a more resilient, efficient and profitable future.
