Measuring Return on Investment (ROI) to ensure successful change | Practicus Background Motorbike
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Deborah Feakins, Change Management Expert, examines the value of measuring Return on Investment (ROI) and how it can be used as a tool to drive meaningful change.

"Once you have a word for something, it becomes more tangible, much more accessible. The shapes of your thoughts begin to include these different ways of seeing."Ella Frances Sanders

Sanders was talking here about gaps in language and the way that things can get lost in translation. It strikes me that this idea, of the intangible becoming tangible by pinning down a meaning, is the same for many change projects.

Change itself is meaningless if we don’t really understand why we’re doing it. However, by establishing the benefits and having clear goals we can discover a whole new world of opportunity and purpose.

While there is often a general sense of why a project exists, there is not always a meaningful criterion to quantify its success. In fact, ROI in its purest, simplest form is a surprisingly easy formula to understand:

Return On Investment

However, it proves remarkably difficult to apply in practice. Consequently, many organisations are disappointed by the lack of a clear, meaningful result. Indeed a recent study led by the Boston Consulting Group shows that only 37% of companies can point to a tangible financial impact for their change project.

In my last post we discussed the organisational value of change management. Good change management can be the difference between success and failure. However, it is important to understand that this value can only be realised if the management of change activities includes, at its heart and at the beginning of a project, time to identify, agree and clarify what the return on investment might look like. Having something tangible to measure will enable you to have something to gauge your success by.

Clarity empowers and motivates success

Defining ROI also allows you to build measurable goals that provide a structure of governance around delivery and this sets clear parameters in which to make astute decision making. For instance, in the event that the project, or parts of it, aren’t going so well, or, if market variables change, you are able to plan around these obstacles and be flexible. It’s a worn cliché but we live in a world of constant change so being able to adapt to the environment we work in keeps us visible, ahead of the curve and the competition.

The ROI for your project may have a tangible financial benefit, but it may be cultural or behavioural, or indeed a mix of all three. Spending time contemplating why change is needed, how it will benefit the organisation and what the ROI might look like is a powerful exercise for leadership teams. Not only does it provide a good base for core messaging and communications across the organisation, but it empowers teams because they understand and align behind a clear company strategy.

Measuring the benefits

How do you decide what to measure? Sometimes the best answers for how to arrive at meaningful metrics start with the best questions:

  • What are the organisation's critical business goals?
  • How do senior executives measure the organisation's performance and success?
  • What kind of return is likely to be most valued in this organisation>
  • How do executives talk about success?

Measuring the intangible benefits that cultural or behavioural change brings can be a more complex prospect than measuring quantifiable benefits such as increased revenue. However, there are ways of assessing whether the people change in your organisation is successful,including measuring your rates of staff retention, and assessing employee’s reasons for staying or indeed going. Asking for employee feedback will allow you to measure whether your culture is one of engagement, or control and command based.

A virtuous circle: ROI and people change

Clear measures may drive the right behaviours. However, it is equally true that dependence on people change can affect the chances of a clear ROI being proved. That’s why organisational leaders need to embrace this people centric approach to change looking at the particular drivers and ROI for the stakeholders involved. Figure 1.1 illustrates this virtuous circle.

Figure 1.1: Organisational leaders of change need to embrace this people centric approach to ROI.

Virtuous Circle

Start small

The reasons why organisations don’t think about ROI when planning change are complex and can vary hugely from company to company. Often though, it comes down to the same hurdle; obtaining the level of detail needed to identify ROI can be onerous. Usually for the following reasons:

  • Lack of alignment between business units
  • Difficulty in obtaining the correct data
  • Conflicting sources of the same data
  • Lack of available bandwidth
  • The desire to get to market first

And for some cash rich organisations, where they’ve perhaps not had to consider a value for money proposition in the past, embarking on projects in such an unstructured way may be part of their organisational culture. Changing that mindset can be a huge project in itself.

In this instance, my advice would be to start small and easy. Build up data and metrics where you can in key areas. The same applies if you’ve begun on a change project without identifying how you will calculate ROI. You may have started to realise some benefits already –start measuring them.

We all know that announcing quick wins aids momentum and ensuring clarity around your ROI and the core purpose of your endeavours is the key to preventing projects running without appropriate management.

What does successful change look like?

Even today, with all we know about managing change, organisations are failing to achieve their transformation goals.

I am often asked whether change management is really needed when embarking on a transformation initiative. In my experience organisations are simply not clear on why and how change management should be considered or implemented.

The secret to success is identifying measurable benefits and then taking the long view to work on how the change is embedded. How else will you achieve the sustainability and ROI your project deserves? To put it simply, managing change is managing ROI.

Without this reflection we are, as the Japanese say, boketto: gazing vacantly into the distance without really thinking about anything specific.

How do you measure ROI?

Read our full article and join the discussion via our Change Management LinkedIn Group.

Deborah Feakins Profile Thumb

Deborah Feakins
Change Management Expert

Passionate about Change Management with experience across sectors including Oil & Gas, Media and Pharmaceuticals. Deborah is a Change Management Institute Assessor for Foundation & Master levels.