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Forehead Slap Math for ROI

Forehead Slap Math for ROI
Posted on Monday, September 17, 2018 by Businessolver Team
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Here’s a formula for quantifying return on value.

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On the final full day of the HR Tech conference, I took in several inspiring educational sessions for HR pros trying to show certain applications’ return on investment. Or “return on value,” as I blogged about yesterday, no presentation was more helpful than this one: “Measuring the ROI Impact of HCM Investments: What Factors Matter?”

Nucleus Research VP Rebecca Wettemann introduced us to five considerations that help remove the “politics and emotion” from prioritizing the many HR and HCM initiatives HR pros would like to introduce. First, she says, make a wish list of all the applications you think would help your organization. Then think about the value each would bring to your organization in the categories described below and objectively score them on a 1 to 5 scale. Here’s how it works. (You probably won’t need a calculator.)

Breadth: This refers to the number of people who will use the application. Take payroll software, for example. It impacts 100% of the people working in an organization. On a scale of 1 to 5, that’s almost certainly a 5.

Repeatability: Think about the frequency with which an application will be used. A good example is a benefits administration solution. How much time and energy do you currently spend answering the same question over and over? If your annual enrollment period means putting in 60 hours a week and gaining 10 pounds due to stress eating, chances are this is a 5. If your organization is smaller or you have less complex benefits, score this lower. (Just know we’re all jealous.)  

Risk: If you’re exploring an application related to compliance, the greater the potential return. Think ACA and the threat of fines. Enough said?

Collaboration: This refers to whether the application allows employees to share information and work together more effectively. Investing in a new time keeping application would have a low score. But a performance recognition platform, depending on the culture within your organization, might score a 4 or 5.

Knowledge: The more a project has the potential to disseminate information and awareness, the greater the potential return. If the application relates to training resources, it might score high if it helps drive revenue or productivity. Depending on the complexity of your offerings, a benefits enrollment solution might score in the upper range as well. If you’re introducing a high deductible health plan for the first time, heaven help you! That’s a 5, especially if the application includes robust decision support tools.

If you and your team discovered an application with a score anywhere between 23 and 25, that’s a forehead slap! Talk to your CFO or the other folks holding the purse strings. They like numbers and will appreciate your efforts to quantify investments so objectively. 

Check out this short clip from yesterday about “return on value.”