Enhancing Return On Investment
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Akash Dolas discusses methods for calculating return on investment (ROI) for new initiatives and applications. He provides examples of developing a web conference room application and online business card and vacation request forms. For each example, he identifies the costs of development and sources of savings from reduced processing times. He then calculates ROI using different methods such as percentage return on investment and weeks until return equals initial investment. The examples demonstrate how quantifying time and cost savings can provide a tangible ROI for process improvement initiatives.
Enhancing Return On Investment
- 1. Enhancing Return On InvestmentAkash Dolas
- 2. By Akash Dolas Quality Manager - Cybageemail: [email protected] LinkedIn: www.linkedin.com/pub/akash-dolas-pmp-lion/7/70a/b Twitter: @akashdolas
- 3. Focus of This DiscussionWhat is ROI?
- 4. Tactical ROI
- 5. ROI for a single initiative or application
- 6. Identification of sources of Return
- 7. Examination of task cost savings on a per-transaction basis
- 8. Emotions and Financial CycleWhat is ROI? Quantifiable profits set against investment
- 9. Some ROI Comparison MethodsReturn as a percentage of Investment over a fixed period(Return / Investment) x 100Return after deducting Investment for a fixed period(Return - Investment)How long until Return equals Investment(Investment / Return per week)
- 12. Identifying Sources of Return Savings through shorter task time
- 13. Savings through shorter processing time
- 14. Savings through the prevention of “leakage”A Method for Identifying SavingsObserve old process
- 16. Make sure to include all phases of both methods
- 17. Measure process times for both
- 18. Check for any statistical differences in outcome
- 19. Measure frequency of task
- 20. Understand fully loaded employee cost per hourOld Conference Room Application
- 21. Web Conference Room Application
- 22. Costs and SavingsCosts 3 days to develop interface 24 hrs x $40 =$960Savings Each reservation took 10 minutes less 4560 non-recurring reservations first year 760 hrs x $40 = $30,400
- 23. ROI Calculations:ROI CalculationsReturn as a percentage of Investment over a fixed period: (Return / Investment) x 100($ 30,400 / $ 960) x 100 = 3167%Return after deducting Investment for a fixed period: Return - Investment $ 30,400 - $ 960 = $ 29,440How long until Return equals Investment: Investment / Return per week $960 / $585 = 1.6 weeks
- 25. Identifying sources of returnCosts5 days to develop application and web interface 40 hrs x $40 = $1600Savings Each order took 10 minutes less time for routing and processing. One third of orders involved about 6 minutes for searching, questions, and re-submission of forms. 743 Orders first year of application. 148 hrs x $40 = $5920.
- 26. ROI CalculationsReturn as a percentage of Investment over a fixed period:(Return / Investment) x 100 ($5920 / $1600) x 100 = 370%Return after deducting Investment for a fixed period: Return - Investment $5920 - $1600 = $4320How long until Return equals Investment: Investment / Return per week $1600 / $114 = 14 weeks
- 27. Computer Crimes are vulnerableNew Business Card Request
- 28. Vacation Request
- 29. Identifying sources of returnOld process was to send e-mail to department admin, who forwarded to payroll after approval
- 30. Online approval process cut delays due to missing information, loss of e-mail
- 31. The rest of the story… Discovered verbal approvals sometimes skipped process E-mails not always forwarded No reliable record of requests existed “Leakage” may have been as great as one day per person per year
- 32. Costs and SavingsCosts 5 days to develop application and web interface. 40 hrs x $40 = $1600.Savings Each request took 10 minutes less time for routing and processing. 3218 requests in first year. 536 hrs x $40 = $21,440. Estimated 5% of employees correctly reported one additional day of vacation each. 5% x 800 employees = 40 days. 320 hrs x $40 = $12,800. Total savings = $34,240.
- 33. ROI CalculationsReturn as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($34,240 / $1600) x 100 = 2140%Return after deducting Investment for a fixed period: Return - Investment $34,240 - $1600 = $32,640How long until Return equals Investment: Investment / Return per week $1600 / $658 = 2.4 weeks
- 34. Emotions and Financial Cycle