1

I want to initiate a project to enable communication within the organization. Although the cost is pretty clear, the benefits are obvious but not easily quantifiable. I am reticent to make unsubstantiated statements. Also there is no clear and present risk that this initiative aims at mitigating.

To some extent this question is related to a previous one. however this project is purely a strategic enabler which can after be leveraged by many other projects with much clearer ROI.

How can I quantify a Return On Investment for this initial initiative? Should I even try to justify it by a classic cost/benefit analysis?

  • Part of my recent book addresses this issue by proposing a method to quantify the impact of poor communication on a project or organization. There is a link to the book in my profile. – Mark Phillips Sep 18 '14 at 3:29
2

TL;DR

Regardless of whether or not you use ROI or something else as a core metric, your real problem is that you need a way to measure the current and future value of communications. Measuring value often requires some a priori assumptions about the dimensions you will use to measure value, but once you have those dimensions you can generally assign a cost or potential return to them.

Estimating Current Communication Costs

As a thought experiment, consider some ways you might measure the current cost of your present communications:

  • Time elapsed for "messages" (whatever that means to you) to initiate with a customer and filter down to the development team.
  • Man-hours required to create, collate, approve, disseminate, or transmit information throughout the organization.
  • Opportunity costs associated with missed or outdated communications.
  • Labor costs associated with "idle hands" directly attributable to message cycle time.

This is by no means a thorough or canonical list. It's just some ways you might be able to attribute costs to the current communications processes.

Estimating Potential Value of New Processes

Once you have those numbers, you can then plug in the numbers for your proposed efficiencies. For example, you might say something like:

Currently, it takes 5 business days to solicit feedback about a feature from the customer. This cycle time represents a risk of US $237k in time, labor, and task-switching overhead in the event that the deliverable needs to be reworked or re-prioritized within the project. In comparison, a cycle time of 24 hours for feature approvals would result in an a risk profile of only US $7k, for a net risk reduction of US $230k.

This isn't the ROI calculation itself. Rather, it is a way to assign an estimated value of some sort to your proposed process. This estimate can then be used within your ROI calculations and projections.

Calculating ROI for Communications

Now that you have a set of costs and value estimates, you can estimate how much your business process change might cost to implement, and how long it might take to recoup those costs. For example using this calculation:

return on investment = (gain from investment - cost of investment) / cost of investment

would use your proposed cost-savings to determine if the investment in new communications processes and infrastructure would pay off within some acceptable time horizon.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.