The ABC’s of ROI

ROI ChartAnalyze Benefits and Costs and Always Be Capturing ROI

Some project managers stop measuring ROI once they have sold the business case. Good project managers understand that capturing ROI is a continuous task that can continue even when the project is closed.

ROI stands for Return On Investment or, in other words, “What do I get for my money?” It is often used to decide whether or not to proceed with a project and to prioritize the projects worked on. ROI is taking all of the costs, the investment, of the project; working out all the benefits, the return, of the project; and calculating what you get for what you are spending. It is a great selling technique because people will invest when they see what they get for their money.

The first ROI calculations are often prepared as a part of the business case before the project is authorized. There are many unknowns at this stage of the project and assumptions are used. Another uncertainty in early stage calculations are the estimates used to quantify things that are not normally measured. The first step in capturing the project’s ROI is making sure the assumptions are confirmed and the estimates are replaced with facts as soon as is possible.

The associated (hidden) costs are the important part to think about when measuring costs for ROI, e.g. Benefits and Overhead for labor; OS, db and maintenance for hardware. Check for completeness and track the costs throughout the project.

The returns of an IT project are typically harder to quantify and it is the most difficult things to measure that can matter most of all: increased sales, productivity, happier employees, better customer service, better customer relations, increased number of leads, better corporate image… . Furthermore, many IT projects target these hard to measure areas.

You will need measures of “before” to measure returns. Analyze the current situation and identify what the project will change. Take the time to quantify the efforts/results pre-change to get your baseline. The only way to get “before” measurements is to measure the current state before you introduce change.

Start capturing returns as soon as they start. If you are staging the deliveries, then start measuring the impact of each deliverable from the day it’s delivered. If you are doing a big bang, make sure you are ready and able to measure the results.

Remember your ABC’s and your customers will be grateful because they can show they are smart investors. More importantly, you can show you are a good project manager with quantified results in your list of accomplishments.

Leave a Reply