ROI Methodology

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Prove the Value, Impact and ROI of Programs, Projects & Improvement Initiatives

Click diagram below to view 10 step ROI Methodology:

Phase 1 – Evaluation Planning
Step 1: Develop Objectives of Project
Evaluation begins with the objectives of the program, project, or solution. The objectives must go beyond typical learning objectives and include up to five levels of data:
Reaction objectives describe desired immediate reaction to the program, highlighting issues that are important to the success of the program.

  • · Learning Objectives communicate expectations for obtaining new information, skills and knowledge.
  • · Application objectives describe intermediate outcomes, including use of skills and knowledge, on-the-job.
  • · Impact objectives describe consequences of applying skills or implementing the project and are expressed as specific measures of output, quality, cost, time and intangibles.
  • · ROI objectives set the acceptable level of monetary benefits versus costs of the program and expressed as an ROI percentage.

Step 2: Develop Evaluation Plans and Baseline Data
Planning begins as soon as it is decided that an impact/ROI study should be conducted and typically involves key stakeholders. All important decisions for the study are made early through evaluation planning. This step involves completing three documents: data collection plan, ROI analysis plan, and evaluation project plan.

Phase 2 – Data Collection
Step 3: Collect Data During Implementation
Two types of data are collected during a project’s implementation: (1) Reaction and (2) Learning.

Step 4: Collect Data After Project Implementation
Two types of data are collected after a project is implemented: (3) Application and (4) Impact.

Phase 3 – Data Analysis

Step 5: Isolate the Effects of Project

One of the most critical steps in the process is to isolate the effects of the project.While this is sometimes difficult it is necessary for credibility of the study. Without this step, there is no proof that the project is connected to a business measure.

Step 6: Convert Data to Monetary Value

To calculate the ROI, improvement in business measures must be converted to money.

Step 7: Identify Intangibles

Intangible benefits are project benefits that we choose not to convert to money. They are measures that cannot be converted to money credibly with minimal resources. Intangible data should be collected in some way, even if participants must indicate the degree to which the project has influenced intangible measures. Intangible benefits are usually reported in a table in the complete report.

Step 8: Costs

When impact studies are conducted, the total costs of the project are needed for the ROI calculation. The costs must be fully loaded, i.e., must include all direct and indirect costs.

Step 9: Calculate ROI

Return on Investment (ROI) is a financial metric, representing the ultimate measure of project success. ROI is calculated using the project benefits and costs.
The return on investment calculation considers the net benefits divided by project costs. The net benefits are the project benefits minus the costs. In formula form, the ROI becomes:

Screen Shot 2014-08-11 at 3.02.56 PM

Phase 4 – Reporting

Step 10: Develop Report and Communicate Results

Reporting the results of the study is an important final step in the ROI Methodology. Properly identifying the audience and providing appropriate information is essential.

Step 8: Costs
When impact studies are conducted, the total costs of the project are needed for the ROI calculation. The costs must be fully loaded, i.e., must include all direct and indirect costs.

Step 9: Calculate ROI
Return on Investment (ROI) is a financial metric, representing the ultimate measure of project success. ROI is calculated using the project benefits and costs.
The return on investment calculation considers the net benefits divided by project costs. The net benefits are the project benefits minus the costs. In formula form, the ROI becomes:

ROI (%) = Net Project Benefits X 100
Project Costs

Reporting
Step 10: Develop Report and Communicate Results

Reporting the results of the study is an important final step in the ROI Methodology. Properly identifying the audience and providing appropriate information is essential.

The Phillips ROI Methodology is a step-by-step credible process that meets the need to show the value used by organizations all over the world. The methodology is a simple to use and proven process that will generate a balanced set of data that is believable, realistic and accurate – particularly from the perspective of sponsors and key stakeholders. To allocate funds to programs, projects and improvement initiatives that deliver the highest value you must have a method that credibly proves or “shows” the value.

The ROI Methodology is a balanced approach to measurement that captures six types of data:

  1. Reaction and Planned Action – Level 1
  2. Learning – Level 2
  3. Application and Implementation Level 3
  4. Business Impact – Level 4
  5. Return on Investment – Level 5
  6. Intangibles

The process always includes a technique to isolate the effects of the project, program, solution, meeting, event, system, procedure, or initiative.