ROI, Nonprofits & TechnologyInitiatives

Beyond “How MuchDoes It Cost?”

Beth Kanter, Beth’s BlogLegal Services Corporation: TIG ConferenceJanuary 31, 2008

Learning Goals

34

21

5

ROI = Return on Investment

What happens if you don’t useROI

#1: The Cool New Tool

Meet Charlie

Walter, his boss

Check please!

You should getiPhones for

your attorneys

Let’s get allthe attorneys

iPhones!

Charlie is thinking …

How do Iavoid adisasterlike …

Click to Play

Scenario #2: Lost in Translation

Meet Jim

No wasted time scrolling …..

Why can’t thisspreadsheet fiton the screen!

I need amagnifying glassto see read thison the screen!

And the response?

The monitors we have aren’t broken,

why fix them? We can’t afford it!

Scenario #3:Proposal - No Buy In and Numbers Only

Meet Sharon

I better copythose papers

now while no isusing the copy

machine …

The copy machineisn’t working!

It’s out oftoner!

I can’t find thestaff’s

performancereview from last

quarter ..

Will itpay foritself?

Why dowe need

this?

If Charlie, Jim, and Sharon had useda ROI thinking the endings to thesestories would have been different …

Why Use ROI• Measures contribution to mission

• Helps you understand the cultural changeissues for successful adoption

• Helps you decide whether to invest or not

• Focus on results, not tools and features

• Helps with forecasting staffing patterns,available resources

• Alters management and program staffperceptions of technology

What does ROI really mean?

ROI = Return on Investment

Return onInvestment(ROI)

Created by DuPontand used by AlfredSloan to makeGeneral Motorsmanageable.

Wall Street: Legitimate way to measurea business performance

A pre and/or post evaluation processand analysis of benefits, costs, andvalue of a specific technologyinvestment over time.

ROI = Return on Investment

A successful ROI process is …

Simple and Economical

Credible

Micro versus Macro

Considers more than just direct costs

When is ROI used?When should an ROI approachbe used?

Future

Investing in a Video Conferencing System

Past

How much time will staff members save with laptops?How does access to technology and information improve services to client?Laptop Project Pilot

Cost of travel time from monthly time sheet

Mileage

Value of Shifted Time

# Trips Needed w/out laptop

# Trips Needed w/laptop

Use ROI if Project …

• Long Life Cycle

• Mission Critical

• Linked to Strategic Goals

• Large Investment

• Visible or Controversial

• Large Target Audience

• And ….

How much doesit cost?

Can we afford it?

Benefits

Metrics

Value

Costs

The Four Building Blocks of ROI

Benefits

Efficiency

Effectiveness

• Improves the ability to maintaina system

• Eliminates duplicate systems

• Accommodates increases inworkload or demand withoutadditional costs

• Reduces manual operations

• Improves efficiency

• Reduces Travel Cost/Time

Efficiency

• Improves ability to deliver

• Improves access to services

• Improves access to information

• Improves accuracy

• Improves effectiveness ofinformation delivered

Effectiveness

Keep in Mind

• Effectiveness and Efficiency gohand in hand

Metrics

Value

Tangible BenefitsTangible Benefits

Objective

Easy to Quantify

Easy to assign money values

Tangible Benefits

We can reducestaff time and

cut travelexpenses andsave $25,000?

Intangible Benefits

Subjective

Less Credible

Usually Behaviorally Oriented

TypicalIntangibles

Job SatisfactionProductivityJob CommitmentWork EnvironmentMoraleEmployee RetentionInnovationCompetenciesLeadershipTeam workCooperationDecision-makingCommunicationClient satisfactionClient complaintsClient response time

Keep in Mind

• When gathering ROI data,include all benefits regardless ofwhether or not they initiallyappear difficult to support orquantify

1. Does an acceptable, standard metricexist for the measure?2. Can the conversion be accomplishedwith minimum resources?4. Can the conversion process be describedto an executive director and secure theirbuy-in in two minutes?

Conversion Test

“Anything can be measuredin a way that is superior tonot measuring it at all“

Can you Quantify Love?

ROI by the Numbers

You may need to collect data …

Staff SurveysStaff InterviewsClient surveysClients InterviewsData from systemTask AnalysisTimes Sheet AnalysisArticlesField researchObservationSecondary research reportsBenchmark studiesBudget and Financial Analysis

Now comes the calculations …

•Compare the total costsof different solutions

•Compare the total costswith the benefits

•Compare the costsof not doing the project

•Identify pilot the goal to identifycost/benefit

CRM System

Source: Steve Heye,YMCA National Software ROI Spreadsheet

C

Communicating Results

ROI Storytelling Techniques

What happens if ROI is negative?

Step-By-Step

Let’s Revisit the Scenarios …

Use ROI to Make Purchase orNo Purchase Decision

You should getiPhones for

your attorneys

What does Charlie need to do?

Looking at Cost/BenefitsNot features to justifyA technology investment

Jim

Large Monitor

The monitors we have aren’t broken,

why fix them? We can’t afford it!

Sharon

I can’t find thestaff’s

performancereview from last

quarter ..

Will itpay foritself?

Why dowe need

this?

Focus on benefits, not featuresResist fondling the hammerDon’t ignore intangiblesDon’t just present numbers onlyCompare costs of alternatives,cost/benefit, and cost of not doingPilot project to get credible numbersCollect the data you needGet buy-in by using a committee

Summary

Special thanks to

Marc LauritsenDouglas SimpsonEd MarksMichael L. MonahanCynthia A. VaughnRon WilhoiteWayne Pressel