Use Standard Values
Many organizations have standard values to measure turnover,
productivity, and quality. If a measure has a monetary value
developed and accepted by the organization, there's no reason to
reinvent it. Standard values are generally grouped into three
categories: output to contribution, cost of quality, and employees'
When considering output to contribution, look at the value of an
additional output. For example, let's say you work at a passport
office and your entire role is to process passports. If you can
process one more passport, given the resources and time you have
available, the value of that one passport is equivalent to the cost
of processing one passport. This one additional output--the
passport--times the cost of processing the passport is the monetary
contribution of increasing the output to the organization.
Now consider the cost of quality, another standard value in most
organizations. Waste, reject rates, and defects often have assigned
monetary values. Other measures, such as re-work, can be converted
to monetary value by looking at the cost of the work. For example,
when employees make mistakes and errors in reporting, the monetary
value of those mistakes is the cost incurred in re-working the
Employees' time is probably the simplest and most basic approach to
data conversion. If time is saved due to a program, the first
question to ask is, Whose time is it? Then to convert time to
monetary value, take time saved multiplied by labor cost and add
the percentage of additional value for employee benefits. (This
benefits factor can easily be obtained from Human Resources.) A
word of caution: When considering employee time as a gain, remember
that the time savings is only realized when the amount of time
saved is actually used for productive work.
Turn to Historical Costs
When no standard values exist, go to historical costs. The question
to ask is, What has a similar incident cost in the past? An example
of using historical costs is the case of a sexual harassment
prevention program that was implemented in a large health care
organization. The measure of the investigation was formal, internal
complaints. The value of the complaint was determined by looking at
its historical cost, including litigation, legal fees and expenses,
settlement losses, as well as investigation and defense of the
Look to Internal or External Experts
When standard values are unavailable and developing the monetary
values through historical costs is not feasible, the next option is
to go to internal or external experts. It's important for these
experts to fully understand your intent and the business measure
you are targeting.
Leverage External Databases
External databases can also provide a wealth of information,
including the monetary value of an array of measures. An example of
how to use external databases to convert a measure to monetary
value is in the case of turnover.
Link with Other Measures
Another technique is to link the value of a measure with others
that have already been converted to monetary values. This involves
identifying existing relationships to show a correlation between
the measure under investigation and another measure to which a
standard value has been applied (as in the link between job
satisfaction and turnover). Remember, the further you get from the
actual monetary value, the lower the credibility of the
Estimates of monetary value can come from participants,
supervisors, managers, and even the WLP staff, and can be easily
gathered through focus groups, interviews, or questionnaires. The
key is to first clearly define the measure so that the people
providing estimates have a clear understanding of what you're
looking for, and then to determine the most credible data sources.
Consider the case of absenteeism. The table, below, shows
supervisors' estimates of the per-day cost of one person not
showing up for work, the confidence level in that estimate, and the
adjusted per-day cost for one absence at $1,061.
Since estimates are subjective, we reduce the error by adjusting
them with confidence levels. For example, if Supervisor One tells
you it costs $1,000 per day for an unexpected absence, then present
them with the other supervisors' estimates and ask how confident
they are that their estimate is indeed correct. After thinking it
over, they may say, "Well, I know what happens when people don't
show up for work and I can be pretty sure what it's costing us from
a time perspective. Given that it is an estimate and I'm not
totally sure, I'll say that I am 70 percent confident in my
number." Repeat the process with each Supervisor.
This additional step in the estimation process reduces variability
and provides a more conservative value. You have reduced the amount
of error and improved the reliability of the value of one absence.
Data Conversion Four-Part Test
For those times when you cannot decide whether you can credibly
convert a measure to monetary value, complete this four-part test:
- If the measure you want to convert has a standard value, then
convert it to monetary value.
- If there is not a standard value, is there a method other than
standard values to get there? If there is not a method, then report
the measure as intangible.
- If there is a method to convert the measure, can you do so with
minimum resources? If no, then report it as intangible.
- If you can convert the measure to monetary value using the
selected method with minimum resources, can you convince your
executive in two minutes or less that the value is credible? If no,
then report the measure as intangible. If yes, then convert it.
Five Steps to Data Conversion
Once you've decided to convert a measure to monetary value and have
chosen the technique that you're going to use, there are five steps
to complete the data conversion process:
- Focus on the unit of measure
- Determine the value of each unit.
- Calculate the change in the performance of the measure.
- Determine the annual improvement in the measure.
- Calculate the total monetary value of the improvement.
Finally, remember intangible benefits are those that you choose not
to convert to monetary value. Typical intangible benefits are job
satisfaction, organizational commitment, teamwork, and customer
While all measures can be converted to money, several factors
should be considered. One factor is the cost to convert the
measure. You don't want to spend more on data conversion than the
evaluation itself. Importance of the measure is another
consideration. Some measures, such as customer satisfaction and
employee satisfaction, stand alone quite well. In that case, you
might think twice before attempting to convert the measure to
money. Also consider credibility. While most business decisions are
made on somewhat subjective data, the source of the data, the
perceived bias behind the data, and the motive in presenting the
results are all concerns when data is potentially questionable.