How to Buy HR Software – A Step by Step Guide Complete with Best Practices

Buying HRTech (or WorkTech, PeopleTech, TATech…whatever you want to call it) can be very difficult.  There are many vendors, internal stakeholders, and general pitfalls that you have to look out for.  After more than a decade working in software, we thought it was time to help people buy the right tools faster while avoiding all the bad stuff.

Any business leader has to be able to select and implement the right tools to help them accomplish their personal and organizational goals.  This is no doubt also true of the HR world.

This page is dedicated to the process of buying any type of HR software.  It encompasses all of the best nuggets we’ve learned, and continue to learn as we talk to hundreds of HR practitioners, vendors, and everyone else under the sun.

The goal of this page is to be a comprehensive listing of the best tactics you need throughout the process of buying new HRTech.  We’ve put together a series of videos you’ll find throughout this post for those who are more visual/auditory learners.

‍The Business Case

Goal: Define the pain you’re going to address, along with how it will impact the business in terms your CFO would appreciate.

Why are you going to spend the time, money, and social capital to buy a particular piece of software or tool?  This is the business case.  

For example, in our organization we may want to work on a broad problem such as an under-optimized culture.  Or, we may have a specific problem such as the number of hours recruiters are spending on phone screens for entry level candidates.

A new tool or technology should always be accompanied by a business case which answers the essential question of why this tool is important to the organization, and the value it will deliver.

Process:

1. Define the problem your organization is facing in as much detail as you can
2. Articulate this problem into a statement such as “our organization has low retention due to a lack of employee engagement that is caused by a culture which doesn’t collect or act on employee feedback.”
3. Articulate how this problem is impacting your business, preferably with as many numbers and dollars as possible – “our current retention of 68% leads to talent acquisition costs over $XX million per year, training costs of $XX million, and lost productivity of $XX million.  Additionally, high turnover leads to lower productivity due to lower moral, as well as lost intellectual capital.”
4. Create a list of potential solutions such as “implementing an employee rewards and recognition platform, implementing an employee engagement platform, investing in senior management training, adopting OKRs”
5. Create a hypothesis around how these solutions will deliver value to your organization – “allowing employees to give feedback to management on a regular basis, and then acting on this feedback, will allow us to increase retention (from 68% to 75%).”
6. Calculate the potential ROI this initiative will bring to your business.  For example, increasing retention from 68% to 75%, may mean you have to hire 100 less people per year.  If your cost/hire is $5k, then you are going to save $500k on talent acquisition costs.  In addition, there are numerous studies that show each person who leaves their job hurts the business through lost knowledge, social capital, etc.  Each of these people is worth $XX, and therefore you’re going to also save $XX * 100 per year.

Best practices:

• Try to be as specific as possible in defining the problem.  It’s very hard to tackle “culture” as an issue.  Narrowing the pain and cause of that pain down as far as you can will be helpful in understanding how it can be fixed.
• Always tie your pain back to dollars and cents as closely as possible.  If there is no ROI from your efforts that the CFO will appreciate, it will be hard to get buy in and budget.  Use a spreadsheet to calculate the potential payoff from buying this new HR tool.  Make sure to call out the assumptions you’re making, and why you’re making them (research, benchmarks, etc).  See our HRTech ROI Calculators for inspiration.
• Creating a problem statement that acts as a north star for your project will allow people to continuously stay on track throughout what can be a long initiative.

Internal Stakeholder Management

Goal:  Make better decisions while getting the buy in from the relevant parts of the organization to make buying and implementing your solution that much easier.

Gaining consensus from the rest of the organization is key to any successful initiative.  The ultimate goal here is to get the organization to “pull” the solution, as opposed to you pushing it on them.

In addition, the perspective of other smart business leaders in the organization can provide valuable insights into how you can solve the pain point you are addressing.

Process:

1. Make a list of the potential key stakeholders in your organization who will need to be engaged in your process, and at what point you want to engage them.
2. If this is a big enough initiative, form a cross functional buying committee that allows you to gain the insights from multiple functions in the organization, as well as their buy in.  This will be invaluable when securing budget, and implementing the solution you choose.
3. Have an initial brainstorm meeting with your internal stakeholders to get their ideas on how to solve the pain you’ve laid out, and then drive them to a consensus around a proposed solution (either one from your original plan, or a better one that comes about as part of the brainstorm).
4. Create reminders of when you need to ping various parts of the organization.  For example, a month out you may put in your calendar (“Ask security for new vendor checklist to send to Employee Engagement vendors”) so you don’t forget.
5. Setup a bi-weekly cadence to keep your stakeholders up to date on your progress.  This could be a 5 sentence email that goes out with a short update (“We’ve done demos with 5 vendors, and narrowed our list down to 3.  Here they are and what next steps are with each…”).  In a more formal organization, you may want to setup a 45 min meeting that recurs each month.

Best Practices:

• Try to get a leader from each of the key functions in your organization that matter to your initiative.  If it’s a new career site, that probably means marketing and IT.  If it’s an employee engagement tool, it may mean getting a leader from each functional area during implementation
• Make sure you lead your cross functional buying committee and don’t allow it to go off track with too many cooks in the kitchen.  The people who are part of this should be advisors to your project, but not feel as though it’s their baby.
• Leverage the power of the people in your committee to get the right message in front of the person who controls budget early.  Other parts of the organization that aren’t viewed as cost centers usually have more sway when getting new budget.
• The ideas of many people are better than one.  An initial brainstorming session around solutions to your pain point is a great way to get started with this internal stakeholder buy in.
• Keeping people up to date, and asking them for the occasional piece of advice, keeps them engaged and on your side during this process.
• This is a great way to network across the organization and work with people you otherwise only see in the hallways.

Vendor Discovery

Goal: Develop a list of 5-7 vendors to look at to solve the problem you originally put together in step one.

Vendor discovery can be proactive when looking for a specific category of tool.  Vendor discovery can also happen through recommendations, conferences, cold outreach from sales people, etc.

When you’re looking at adding a new tool, here’s our advice on how to build a target list of vendors to do demos with.

Process:

1. Start with your network.  This is obvious and what most people do.  Who are the 2-3 smartest HR or talent acquisition peers you have?  Ask what they’d do – and why.  Try to understand their bias so you can figure out what advice is relevant to you.
2. Google is your friend.  An appropriate google search for “Best XYZ software” will give you a few lists you can start with.  Just be careful as most of these lists are too long to be useful, or are full of random vendors that don’t even do what you’re looking for.  Usually the top 2-3 vendors of a list are the ones worth looking at.  Also, any company buying google ads for that keyword will definitely be a vendor in that space that is doing well enough to buy expensive keywords (some of these cost $100/click)!
3. There are so many online HR and recruiting groups.  Asking an open-ended question like “what’s the best ATS” can leave you with lots of bad advice.  But, asking a slightly more detailed question is a great way to get started.  For example, “I’m looking for a new ATS to replace XYZ.  We’re a 400 person fast growing and distributed team that sources a lot to find new talent.  We want a CRM built in, along with a robust partner network as we want to keep using point solutions for onboarding, etc.  Any recommendations?”
4. Hopefully you’ve built relationships with a few people on the vendor or thought leadership side of things.  Ask them for advice – many times they are seeing vendors that are not obvious.  The sales rep at your favorite HRIS may have some insights into what ATS you should be looking at.

Best Practices:

• Be wary of online lists of vendors.  Most of these are put together for a specific commercial reason.  For example, I just saw a list of the top 20 vendors in a software category.  If you dug deep enough, you can see it was written by vendor number three, the only one that was linked to from the post.
• Online review sites can also be biased in the way they push information.  Some will try to get you on the phone and re-sell your information to whichever vendors will pay them for it.  Some of them are trying to drive you to a click event to a vendor paying them per lead.
• Generally speaking, you should be aware of the bias and incentives of any information you’re consuming as almost all top results in Google are there after lots of hard work from whoever wrote the post…and that hard work is done in order to make money.

Here are our tips on how to do vendor discovery when you’re not searching for a specific need:

• Set aside 45 mins every two weeks to do a demo with a new solution that seems interesting.  Don’t just let anyone snag that time on your calendar, but always be open to new ideas and ways of doing things.  
• Always respond to a sales person’s first email.  If you don’t, they will email you 10 times, and leave 5 voicemails.  That’s just the way the world operates.  Take a minute to see what they are selling, figure out if it’s worth your time, and then either say “let’s do a demo,” “not interested,” or “hit me back in 6 months.”
• Be open to being convinced.  You never know when you’ll run into an interesting technology.  Overly skeptical people never get a chance to be an early adopter.  Of course, if you have shiny object syndrome, then the key here is to limit yourself to that 45 mins every two weeks.
• Trust your gut on what is worth your time and what’s not.  That’s the most efficient and effective way to vet inbound recommendations/emails/etc.

Staying Organized While Vetting Vendors

Goal: Keep relevant notes on vendors that you can reference at the right time.

We all lose track of useful information.  Life is just too busy, and we have too many priorities.  Staying organized is essential in picking the right solution and streamlining the process of vendor selection.

Process:

1. Create a spreadsheet.  Column A should be your criteria to buy this new piece of software (each row is a new criteria).  Then, each column should be your notes on a given vendor.
2. Create a list of 5-7 must have criteria for your spreadsheet.
3. Create a list of 10-15 nice to have criteria for your new piece of HRTech.
4. Create rows for how much you like your rep, and the pricing scheme/amount for each vendor.

Best Practices:

• We have a sample spreadsheet you can download here if you don’t want to start from scratch.  We also have organizers with specific questions on many of our category pages (stuff like ATS, chatbots, etc).
• Make sure you check in with relevant stakeholders to include all the must have criteria in your spreadsheet.  There is nothing worse than thinking you are going to move forward with a vendor, and then realizing they don’t meet a must have security criteria (GDPR anyone?).  Make it clear you don’t want an exhaustive list…there’s only so much you can ask on a demo.  Just, what are the must have things you should be asking during a 45 min conversation with a vendor where you also want to see the product.
• The strength of your rep is a good tell about the strength of the company.  If they are good at their job, they will have the ability to choose where to work.  Sales people want to work at companies that have easy to sell products.  Easy to sell products are usually good products.  
• Sales rep trust is also important as they may be representing you down the line during a broader meeting with your colleagues.
• Make sure to understand not just how much something costs, but how it’s charged.  This may greatly impact the way you negotiate, or how much the pricing will change for your organization in the future.
• Use the spreadsheet on every call.  Don’t think you’ll remember the details of a call.  You won’t.  Take notes in real time, and make sure you get all your questions answered.
• If a sales person tells you a feature is “coming” – ask when it will be live and how they know that.  Really push them, and don’t be afraid to ask for an email from a product person so that you have something in writing – especially for essential features.

Early Stages of Vendor Vetting

Goal: Whittle your list down before you do a demo so that you don’t spend hours on the phone with the wrong vendors.

You have a job to do, and it’s probably not to buy new WorkTech.  You are probably also fighting fires all day long.  Bottom line, time is important.

Don’t spend time on demos with vendors that aren’t going to meet your needs.  Instead, use a few tricks to qualify them digitally.

Process:

1. Spend 10 minutes per vendor to check out how each company is doing by looking at:  LinkedIn employee headcount growth, stock price for public companies, the last time the company raised capital for private companies, the pedigree of senior management, how much they are hiring on the career site, their traffic patterns on SimilarWeb.
2. Ask for demos from the 5-7 companies you’re interested in.
3. When their sales rep responds, send them an email asking if they meet your “must have” criteria.  Ask them to be as specific as possible.  Mention you are moving quickly to buy a new piece of software and don’t want to waste your time or theirs.

Best Practices:

• The “signals” listed in step one of the process here are indicators, but don’t obviously tell the whole story.  They should be used to disqualify vendors that you are on the fence about (maybe a friend told you to be wary already, or you’re not sure from their website if it’d be a good fit).
• There are lots of amazing solutions out there from profitable, bootstrapped companies that aren’t public, and haven’t raised money from VCs.  So, again, this is just one of many criteria.
• Generally speaking, there are great companies founded by people who didn’t go to MIT and aren’t hiring.  However, if there are many negative signals, trust your gut.
• Glassdoor reviews can be more negative or positive than reality, but we feel it’s usually a decent indicator of where the business is going.  Positive reviews that seem genuine are a good thing.  When things go south, the reviews do too.

Demos

Goal: Whittle down your list to your final 1-2 vendors that you want to partner with.

Obviously, the best way to figure out whether or not a solution will be valuable to your company is to see a demo from a sales person and get all of your burning questions answered.

Process:

1. You’ve already requested demos at this point, so they should be setup on your calendar.  We recommend clustering them in the space of 2 weeks so that you can compare the various options while they are still fresh.
2. Take control of the call.  Set an agenda that ensures you get all of your questions answered – maybe you just start asking questions and going through your spreadsheet.  Maybe you let them go through the demo with the expectation that you will be interrupting them occasionally.

Best Practices:

• Sales people are protective of their time.  Make sure they know you are worth their time by outlining the timeline you’re on, and laying out that you have the power to make this happen.
• Sales people can be a tremendous resource when buying new HRTech.  Make sure to treat them as a partner, and they will (usually) do the same to help you understand the product, landscape, and buying process.
• Make sure to take notes and keep filling out your spreadsheet!  

Internal Buy-In, Part 2

Goal: Ensure that everything is in place internally to move forward with buying this new HR tool/solution.

Clearly, we don’t want any roadblocks when we are ready to select a vendor and move forward.  It’s important to ensure all key stakeholders are on the same page and ready to move forward.

This part of the software buying process obviously varies a lot from organization to organization, and from tool to tool.

Process:

1. Put together a PowerPoint or word document that outlines: the problem you’re addressing, why this problem matters to the organization, the work you’ve done to research this space, how you’re going to solve this problem through new HRTech, how your solution will impact the business.
2. Re-visit any cross functional buying committee that you have in place.  This is a great time to re-invigorate those relationships so that you have the necessary firepower to get those hard to win over stakeholders on board.
3. Address the necessary stakeholders either via email, video chat, or meeting depending on the size and scope of your initiative.
4. Get oral or written confirmation that everyone is on the same page, and excited about moving forward!

Best Practices:

• Use as much data as possible to defend your position.  Some of this will come from the vendor, from articles on various sites, and from your peer network of HR/TA practitioners.
• This is basically a sales process.  You’re now selling the solution internally.  Take on the persona of your sales rep.  Get people excited about this initiative and motivate them to take action.

Contract Negotiation

Goal: Get the best price and terms you can without delaying the buying process too severely.

Clearly, we want to get the best price for whatever we are buying.  We also want to understand key terms that may impact our relationship with this vendor around how a contract can be cancelled, data sharing, data security, and the other important points that you internal stakeholders care about.

Process:

1. Get an initial quote over the phone from the vendor.  
2. Ask them how they arrived at this quote – what is their pricing model (seats, employees, etc).  
3. Ask them how much wiggle room there is for negotiating straight up.
4. Ask them the things that they can give on, and what matters to them.  Expand the pie that you will eventually split by (?) understanding what levers can be pulled on both sides to make everyone happy.

Best Practices:

• Nearly any company that doesn’t list their pricing on their website has wiggle room to negotiate.
• Start contract negotiations before your heart has been 100% won by one vendor.  If you are dead set on moving forward with a given solution, you are going to lose leverage.
• Here are things that most WorkTech vendors will give discounts for: multiyear deals, upfront payment, case study data, offer to be a customer reference, great logos (either your company, or yourself if you have a personal brand).
• Many HR software companies will give discounts on one-time fees like implementation.  Most SaaS companies are valued on a multiple of their recurring revenues, and so the board (who sets the comp strategy for sales people) cares less about low margin one time revenues versus what you are paying each year for the software itself.
• Don’t allow your competitive streak to come out and get too contentious.
• Don’t allow negotiations to drag on for so long that you lose focus on the actual task at hand.
• Always act in good faith, this isn’t a game of poker.

Final Vendor Vetting

Goal: Select one vendor to move forward with.

This is it, the end of the line with buying your new HRtech.  You’ve got internal buy in, you’ve done your homework on the space, and now you’re down to one vendor.  It’s time for some confirmatory due diligence.

Process:

1. Ask to speak to one current customer as a reference.
2. Try to find one customer through your network to talk to that isn’t recommended by the vendor.

Best Practices:

• Customer references can be anything from a few text messages to an in-person meeting depending on the scope of a new project.
• Be wary of software review websites that have users writing about what it’s like to use a given piece of software.  Because of the way these reviews are collected, they can be incredibly positively biased.  Look up the reviews on 2-3 pieces of HRTech you know to be garbage to see what we mean.
• Any reference call with a vendor recommended customer should be used to get a feel for how they’re using the solution, their implementation process, and other fact-based questions.  Asking subjective and/or open-ended questions like “how much do you like the product” will yield biased and unhelpful results.

Capturing Value

Goal: Understand and communicate the value that your new HR software has brought to the organization.

You’ve bought your software.  You’ve gone through implementation.  Now, people are using it, and you can see whether or not the assumptions you’d originally laid out in your ROI model are correct or not.

This is an amazing time to learn, as well as gain credibility in the organization (even if the project was a failure).

Looking back at our process and outcomes allows us to be better managers, buyers of software, and colleagues.  The focus of this part of the software buying process should be on learning.

Process:

1. Revisit the original ROI model and any other materials you prepared to get internal buy in for your initiative.
2. Scrutinize what you were right about, and what went wrong.
3. Write up a post-mortem on your learnings for your colleagues in HR, along with others who were involved in the process.
4. Share these learnings in whatever medium makes the most sense.
5. Use the ROI model to show the business impact your initiative had.  Share the story of this process, along with the impact, through a lunch and learn/webinar/or blog post.
6. Congratulate yourself on a job well done with a nice dinner!

Best Practices:

• Be as analytically rigorous as possible to determine why assumptions you made in your model were right or wrong – and what you learned from each scenario.
• Be proud of what you accomplished.  Make sure that everyone in the organization knows how thoughtful you were, and the impact your initiative made.
• Be proud of your introspection and learning.  Further, make sure to share your learnings and process with others who may get value from it.

There you have it, our process and best practices around buying new HRTech, WorkTech, TATech, HR Software…or whatever you want to call it.

Our hope is that you can use this as a reference document as you move through the buying process.  We also hope you’ll learn new best practices along the way and share them with us so that this can be as comprehensive as possible as the world evolves.