Most of the projects I have to find ROI for are related to Process Improvements. Obviously, if a process improves then it takes less time, time can be related to a loaded cost/hour and then you can find an ROI. Is the methodology I describe above valid? Saving Changes...
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Kristina Frazier-HenryDigital Practice Leader| Fusion AllianceFishers, In, United States
Bryan - sure - the method you described is valid - to some extent. What I find with PI type of projects is that they often start out as PI - but really - there was no process in place to begin with. In that case, I looked at cost avoidance as a motivator along with some other metrics like improvement in customer satistfaction (or something else measurable which is currently in place). Saving Changes...
Michael WoodProject Manager / Business Analyst / Business Process Improvement Guru| Independent ContractorGig Harbor, Wa, United States
The funny thing about ROI is that it should be self evident as one of the motivators for doing the project in the first place. This is especially true of PI projects that are driven from the GAP that exists in operations between how things function today vs how they would need to function in order to achieve core business objectives. Of course virtually all PI projects should stem from the need to achieve strategies and objectives and not from suggestion boxes and brainstorming sessions.
Having spent the last 25 years or so doing BPI I have found that the justification comes with the request. Requests in search of an ROI rarely deliver the breakthrough value management is hoping to achieve.
If you are having ROI and justification issues I suggest that the PI driver is not aligned to the organization's goals and objectives.
For more on this check out my October article on Business Process Alignment - Cheers Saving Changes...
Robert PennSr. Project ManagerAlexandria, Va, United States
I've been involved in process improvement efforts for many years, with mixed results. The real bang for the buck usually comes from increased quality so that time and effort are saved in rework rather than because the process can be executed faster. This is especially true during the first couple of process iterations that include PIs because when people are trying to get it right, they often slow down to take more care. These factors, quality improvements and slower execution, combine to complicate seeing and measuring ROI. Saving Changes...
Additionally to the need for a good business-related rationale, and the careful and well-planned measurement methods, there's some danger in thinking that just because 'speed' we have a good ROI. We're usually not just talking about improving the speed of a machine, or some bit of a supply-chain. We're often talking about people doing things. If we improve the process, they might be able to 'do things faster'. If your calculations show that this improvement will enable them to 'do more things per day'... do we have enough 'demand' for this additional productivity? If the improvement will enable the involved people to 'finish sooner'... will they have other activities to perform with this extra time? It may sound silly at first, but it I've seen occasions where apparently great ROIs proved to be missleading because of that. Saving Changes...
Agree, unless the PI project and ROI is linked to the Business Strategy then it sounds more like justification for doing the work. Hopefully the Business Strategy reflects Customer Impact as well. So a good ROI is win-win for everyone. Saving Changes...
James HeiresPresident| James Heires Consulting, Inc.Cedar Rapids, Ia, United States
In addition to the other posts to this topic, don't forget that you need to "show me the money" or executives will get bored with the typical 18-24 lifecycle of your PI effort. To do this, you need an "as-is" quantitative benchmark before the PI effort gets underway, and another after something meaningful is put into place.
And don't forget political pet-projects - I was leading a CMM Level 2 effort and documented a 6:1 ROI, but was overruled by a competing LEAN initiative that was part of a big executive-level push. Needless to say, my project lost out in the end. Saving Changes...
