Human Resource Information Systems

3rd Edition Kavanagh Test Bank

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 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

Chapter 8: Cost Justifying Human Resource Information Systems Investments

Multiple Choice

1. An HRIS can provide the primary infrastructure used to:

A. deliver HR programs
B. ensure HR regulatory compliance
C. produce the metrics that are used to evaluate HR programs
*D. all of the above

2. A preliminary estimate of the CBA of an HRIS investment should:

A. calculated when the HRIS actual implementation begins
*B. be presented to senior management before beginning detailed work on the project
C. be based on the reputation of the HRIS vendor
D. all of the above

3. HRIS functionality refers to:

A. the ability of the HRIS to function in a cost effective manner.
*B. the number of HR programs that are operational in the HRIS
C. the benefits derived from a CBA analysis
D. how well the HRIS is integrated with other IT applications, e. g. the marketing IS

4. Using HR audit metrics to measure the effectiveness of one company’s HR programs against other
companies is called:
A. organizational enhancement
B. baseline functionality
*C. benchmarking
D. risk avoidance

5. Basing the justification of a new HRIS system or upgrade on compliance with Equal Employment
Opportunity (EEO) regulations is an example of:
A. the integration of the HR and legal departments
B. an organization enhancement justification
*C. a risk avoidance justification
D. a compliance justification

6. To use a organizational enhancement approach for the justification of new HRIS, one must use:
A. benchmarking on HR audit metrics
B. the savings from self-service employee portals as the major savings
C. the savings from decreasing the number of HR employees needed to process the HRM
D. employee information
*E. a cost-benefit analysis

7. Which of the following guidelines should not be a guideline for a successful HRIS CBA?
*A. the objective is improving effectiveness of the HR department
B. focus on functionality, not products
C. develop the best estimate possible
D. know your business
 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

8. Investment analyses for an HRIS are based the following information:

A. sources of costs and benefits, cost of obtaining financing, the time when the organization will incur
each cost
B. the time when the organization will incur each cost, the availability of the new HRIS software, cost of
obtaining financing
C. an estimated dollar value for each cost and benefit, the availability of the new HRIS software, sources
of costs and benefits
*D. the time when the organization will incur each cost, sources of costs and benefits, an estimated
dollar value for each cost and benefit

9. Increased technical support needed for an HRIS implementation is an example of:

A. a direct cots
B. an out-of-pocket costs
*C. an indirect costs
D. all of the above

10. An indirect benefit of revenue enhancement from an new HRIS is:

A. increased technical support needed
*B. better decision making
C. saved staff time
D. new sales

11. An improved capacity to attract and retain higher-quality employees because of the implementation
of a new HRIS would be considered an example of:
*A. an example of an indirect benefit of the HRIS
B. an improvement due to software
C. an example of a numeric benefit of the HRIS
D. an example of a direct benefit of the HRIS

12. Indirect benefits are difficult to quantify because:

*A. their occurrence may be less certain
B. indirect revenue enhancements result from direct benefits
C. their dollar value cannot be determined
D. the HRIS does not contain the necessary data

13. In terms of estimating costs and benefits for a new HRIS, the critical time period is:
A. the first six months to one year
B. the first two years
*C. the first 5 years
D. the first 8 – 10 years

14. The focus of a CBA for an investment in additional or updated HRIS functionality must be related to
A. the ease of the implementation
B. the availability of technical support in the company
*C. improvements in organizational effectiveness
D. the size of the HR professional staff
 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

15. Variance estimates for costs and benefits are important because:
*A. they provide a range of values for expectations
B. they provide the overall average for expectations
C. they allow for the use of statistical analyses
D. they provide the data for estimating transaction values

True/False

16. A legacy HRIS system refers to an HRIS system that was borrowed from another company.
A. True
*B. False

17. The best approach to justify a new HRIS is to identify first what the new software applications are
included in the HRIS.
A. True
*B. False

18. A CBA is a comparison of the projected costs and benefits associated with an HRIS investment.
*A. True
B. False

19. Estimating benefits first provides a critical aspect of the business plan for the new HRIS and sets the
boundaries for its functionality.
*A. True
B. False

20. Average Employee Contribution and employees variance in work outcomes are used for the
determination of compensation levels.
A. True
*B. False

21. In the e-learning example in Chapter 8, better customer service leading to increase in repeat sales is
an indirect benefit.
*A. True
B. False

22. Direct costs for implementing a new HRIS application in training would include reduced
absenteeism.
A. True
*B. False

23. Indirect costs for implementing a new HRIS application in training would include Lost productivity
during conversion to new system.
*A. True
B. False
 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

24. Internal assessment for estimating indirect benefit magnitude provides the most precise estimates
of the baseline costs and current performance of existing processes.
*A. True
B. False

25. Packaging your CBA for decision makers should be done on a single page.
A. True
*B. False

26. Time saved by the implementation of an HRIS a direct cost reduction.

A. True
*B. False

27. An HRIS CBA that includes an extensive analysis of costs matched with a single source of benefits, e.
g. an estimate of direct cost reductions, is a common problem in justifying the purchase of a new HRIS.
*A. True
B. False

28. Estimating indirect benefits requires assumptions about the impact of a specific HRIS functionality
without any direct impact of the functionality.
*A. True
B. False

29. The total cost of an HRIS implementation will be driven by number of employees in the
organization.
A. True
*B. False

30. An integrated information system is one built on common platforms that permit single instances of
data to be used in several applications.
*A. True
B. False

Short Answer Essay

31. What is the differences between direct and indirect benefits and costs?
*Answer: Direct costs and benefits are those that (a) that are very likely to occur and (b) whose values
are easily estimated, e. g. the additional revenue an organization can earn by selling e-learning modules
it develops Indirect benefits and costs are often less easily quantified because their occurrence may be
less certain or because their value is more difficult to establish. Indirect revenue enhancements result
from improvements in intermediate outcomes that could position the organization to be able to
increase revenues. These may include outcomes such as an improved capacity to attract and retain
higher-quality employees.

32. What does average employee contribution (AEC) and Individual employee differences (variance) in
work outcomes measure in a CBA?
*Answer: Both are methods for estimating the value of employee time in a CBA.
 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

33. What are the three common problems that can occur in an HRIS CBA?
*Answer: 1. An extensive analysis of costs matched with a single source of benefits—typically, an
estimate of direct cost reductions.
2. A second problem is that in many instances items listed as direct cost reductions are actually indirect
cost reductions. Time saved is a prime example.
3. Third, be sure that value estimates assigned to time saved are reasonable. Many HRIS investments
purport to save employee time, making it a common component of HR technology CBA.

34. What are the two ways HR metrics can used for benchmarking HR activities and programs?
*Answer: 1. Benchmarking can be used to compare your metrics against other organizations’ metric,
survey data, and so forth to evaluate your performance.
2. Benchmarking can be used by designating a time frame (plan year, fiscal year, etc.) within the
organization for comparison. Data and results going forward using the same time frame (Year 1, Year 2,
Year 3, etc.) can show improvement or decline.

35. What is the difference between cost reduction and organizational enhancement as strategies for
HRIS investments?
*Answer: Risk avoidance strategies are used when investments are believed to eliminate or mitigate
significant future risks faced by the organization. The potential obsolescence of legacy computing
systems was a prototypical risk avoidance scenario.
Organization enhancement strategies, on the other hand, highlight how effectiveness of the firm will be
improved by the addition of a new or improved HRIS—as measured by increases in revenues or
reductions in costs.

36. What are some of the guidelines to a successful HRIS CBA?

*Answer: 1. The objective is improving organizational effectiveness
2. Be honest with yourself
3. Focus on functionality, not products
4. Estimate benefits first
5. Know your business
6. Develop the best estimate possible
7. Separate the CBA from questions of how best to justify a final decision

37. What does the term FTE mean in doing a CBA for a new HRIS?
*Answer: FTE is the budget term used to designate Full Time Employee positions in the organization. It
can used to show a direct cost benefit if the number of FTEs can be reduced by the implementation of
the HRIS.

38. What are the three approaches for estimating benefit magnitude?
*Answer: The three approaches are: (1) direct estimation, (2) benchmarking, and (3) internal
assessment.

39. Describe the internal assessment method for estimating benefit magnitude.
*Answer: Internal assessment involves the use of a firm’s own internal metrics (see Table 8.1) or other
forms of the firm’s specific data as the basis for estimates. Use of this method requires that the
organization has maintained historic records on previous information system projects. Internal
 Human Resource Information Systems: Basics, Applications, and Future Directions, 3e
by Michael J. Kavanagh and Richard D. Johnson

assessment is best done when investment scopes are large and direct estimation and/or benchmarking
suggests that benefits may not be dramatically higher or lower than costs (e.g., less than ± 30%). Internal
assessment requires that the organization possess the capabilities to gather the data about their own
processes necessary to support these analyses.

40. What are the three steps that should be used to construct dollar estimates of indirect benefits?
*Answer: The three steps that should be used to construct dollar estimates of indirect benefits are: (1)
estimating benefit magnitude, (2) mapping benefits to cost or revenue changes, and (3) converting
magnitude estimates to dollar values.