Patti Phillips, Ph.D. [email protected] Show Me the Money: Moving From Impact to ROI.
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Transcript of Patti Phillips, Ph.D. [email protected] Show Me the Money: Moving From Impact to ROI.
Patti Phillips, [email protected]
Show Me the Money:Moving From Impact to ROI
Objectives
• Isolate the effects of a program• Convert benefits to monetary value• Identify the intangible benefits• Tabulate the fully-loaded costs• Calculate ROI
The ROI calculation is simple.
BCR =
ROI =
Program Benefits
Program Costs
Net Program Benefits
Program CostsX 100
Try it!
$750,000
$425,000BCR =
$750,000 - $425,000
$425,000ROI = X 100
Try it!
$750,000
$425,000BCR =
$750,000 - $425,000
$425,000ROI = X 100
= 1.76:1
= 76%
What Makes a Good ROI?
1. Set the value at the same level as other investments – 15%
2. Set slightly above other investments – 25%
3. Set at break even – 0%
4. Set at client expectations
While we don’t strive for a negative ROI,
negative is not always bad!
Levels of Evaluation
Measurement Focus
0. Inputs and Indicators
The input into the project in terms of scope, volume, efficiencies, costs
Participants, Hours, Costs, Timing
1. Reaction & Perceived Value
Reaction to the project or program, including the perceived value
Relevance, Importance, Usefulness, Appropriateness, Intent to use, Motivation to take action
2. Learning
Learning to use the content and materials, including the confidence to use what was learned
Skills, Knowledge, Capacity, Competencies, Confidence, Contacts
3. Application & Implementation
Use of content and materials in the work environment, including progress with actual items and implementation
Extent of use, Task completion, Frequency of use, Actions completed, Success with use, Barriers to use, Enablers to use
4. Business Impact
The consequences of the use of the content and materials expressed as business impact measures
Productivity, Revenue, Quality, Time, Efficiency, Customer Satisfaction, Employee Engagement
Typical Measures
5. ROIComparison of monetary benefits from program to program costs
Benefit-Cost Ratio (BCR), ROI%, Payback Period
ROI Methodology
Develop EvaluationPlans and
Baseline Data
Develop EvaluationPlans and
Baseline Data
DevelopObjectivesOf Solution
DevelopObjectivesOf Solution
Stage 1Evaluation Planning
Stage 2 Data Collection
Collect DataDuring SolutionImplementation
Collect DataDuring SolutionImplementation
Level 1
Level 2
Collect DataAfter Solution
Implementation
Collect DataAfter Solution
Implementation
Level 3
Level 4
CaptureCosts
Of Solution
CaptureCosts
Of Solution
Isolate theEffects ofSolution
Isolate theEffects ofSolution
Convert Data to Monetary
Value
Convert Data to Monetary
Value
Generate Impact Study
Report
Generate Impact Study
Report
Stage 4 Communicate
Results
Stage 3 Data Analysis
Calculatethe Return On
Investment
Calculatethe Return On
Investment
Level 5
Identify IntangiblesMeasures
Identify IntangiblesMeasures
Intangible Benefits
1. Report the complete story
2. Conserve resources
3. Use the most credible sources
4. Choose the most conservative alternatives
5. Isolate the effects of the program
6. No data no improvement
7. Adjust estimates for error
8. Throw out the extreme and unsupported claims
9. Use first year benefits for short-term programs
10. Include fully-loaded costs
11. Report intangible benefits
12.Communicate results to all stakeholders
Operating Standards
Reaction
Learning
Application
Impact
ROI
Isolate the Effects of the Program
Intangible Benefits
Inputs
• Use of a control group arrangement• Trend line analysis of performance data• Use of forecasting methods of performance data• Participant’s estimate of program impact (percent)• Supervisor’s estimate of program impact (percent)• Manager’s estimate of program impact• Use of expert/previous studies• Calculate/estimate the impact of other factors• Customer input
Methods to Isolate Program Effects
* Survey of Users, N = 235
Control G
roup
Trend Line Analys
is
Forecasti
ng Meth
ods
Particip
ant Esti
mates
Manager E
stimates
Sr. Manager E
stimates
Expert
Input
Customer In
put0%
10%
20%
30%
40%
50%
60%
32%29%
5%
55%
37%
11%13%
11%
Isolating the Effects of the ProgramFrequency of Methods Used
Classic Control Group DesignWhat is the difference in improvement?
Experimental Group
Control Group
Pre-Measure
Pre-Measure Program
Post-Measure
Post-Measure
Post-Program Only DesignWhat is the difference?
Experimental Group
Control Group
Post-Measure
Program Post-Measure
2%
1%
J F M A M J J A S O N D J
ERRORRATE
1.85% Pre Program Average
1.45% Projected Average
MONTHS
Example of Trend Line Analysis
CPI Program Conducted
.7% Post Program Average
Example of Estimation
Monthly increase in credit card accounts: 175 (fact)
Contributing Factors
Consensus Impact (%)
Average Confidence (%)
Sales Training 32% 83%
Incentives 41% 87%
Management Reinforcement
14% 62%
Market Fluctuations 11% 91%
Other _________ 2% 91%
100%
Influence Fact % Contrib. Est. Impact Confidence Adjusted Impact
Sales Training
175 32% 56 83% 46.48
Fact: 175 New Credit Card Accounts
% Contribution: 32%
Est. Impact: 56
Uncertainty 17%
Margin of Error: +/- 9.52
65.52
56
46.48
Example of Estimations
Data are converted by:
• Converting output to contribution – standard value• Converting the cost of quality – standard value• Converting employee’s time – standard value• Using historical costs• Using internal and external experts• Using data from external databases• Linking with other measures• Using participants’ estimates• Using supervisors’ and managers’ estimates• Using staff estimates
Cost of A Sexual Harassment Complaint
35 Complaints35 Complaints
Actual Costs from RecordsActual Costs from Records
Additional Estimated Costs from Staff
Additional Estimated Costs from Staff
Legal Fees, Settlements, Losses, Material, Direct
Expenses
Legal Fees, Settlements, Losses, Material, Direct
Expenses
EEO/AA Staff Time, Management Time
EEO/AA Staff Time, Management Time
$852,000 Annually$852,000 Annually
Cost per complaint = $24,343$852,00035
5 Steps to Convert Impact to Money
Step 1: Focus on a unit of measure
Step 2: Determine the value (V) of each unit
Step 3: Calculate the change in performance (∆P)
Step 4: Determine the annual amount of the change (A∆P)
Step 5: Calculate the total annual value of the improvement (A∆P x V)
Example Using Internal Experts
Step 1: One grievance
Step 2: V = $6,500 (from Director of nursing and HR Experts)
Step 3: ∆P = average of 7 out of 10 grievances prevented per month
Step 4: Annual ∆P =
Step 5: A∆P x V =
Example Using Internal Experts
Step 1: One grievance
Step 2: V = $6,500 (from Director of nursing and HR Experts)
Step 3: ∆P = average of 7 out of 10 grievances prevented per month
Step 4: Annual ∆P = 84
Step 5: A∆P x V = $546,000
Example Using Standard Values
Step 1: One sale
Step 2: V = 30% profit margin
Step 3: ∆P = $20,000 revenue per month
Step 4: Annual ∆P =
Step 5: A∆P x V =
Example Using Standard Values
Step 1: One sale
Step 2: V = 30% profit margin
Step 3: ∆P = $20,000 revenue per month
Step 4: Annual ∆P = $240,000
Step 5: A∆P x V = $240,000 x .30 = $72,000
• Assessment Costs (Prorated)• Development Costs (Prorated)• Program Materials• Instructor/Facilitator Costs• Facilities Costs• Travel/Lodging/Meals• Participant Salaries and Benefits• Administrative/Overhead Costs • Evaluation Costs
Fully-Loaded Cost Profile
Financial
• Program• Skills Based Pay Systems
• Business Impact • Employee Turnover• Staffing Level• Customer and Job Satisfaction• Product Sales• Cross Selling
ROI = 258%
Telecommunications
• Program• All-Inclusive Workforce Program (AIW)
• Business Impact• Attrition Rate • Employee Satisfaction• Communication• Cooperation & Teamwork• Diversity Mix
ROI = 163%
Health Systems
• Program• Sexual Harassment Prevention Workshop
• Business Impact• Turnover Reduction• Complaint Reduction• Job Satisfaction• Absenteeism• Stress Reduction• Recruiting
ROI = 1,051%
Technology
• Program• Customer Service Training
• Business Impact (Target)• Customer Complaint Escalation
ROI = -85%
Why do people like ROI?
The people who like ROI do so because the ROI Methodology:
• Generates a balanced set of measures• Employs a step-by-step process• Bridges evaluation disciplines• Balances research and reality• Offers a flexible evaluation solution• Provides a credible approach to measurement and
evaluation
Next Steps
Assess your readiness for ROI
Identify stakeholders and their data needs
Determine the purpose of your evaluation practice
Identify programs suitable for ROI
Develop capability in the ROI Methodology
Success with measurement begins with your worldview
If you are measuring,
you are estimating.
There are no absolutes.
Sometimes the crowd
knows best.
Be able to explain what you did, how
you did it, and why you did it
that way.
A statistic is an estimate of
what probably is… maybe.
Process without
standards is no process.
The rest is merely a balancing act.
34
Benefits
Costs
35