Purpose
The purpose of this return-on-investment (ROI) study is to forecast the estimated potential benefits for human capital solutions as they relate to strategic company growth plans.
Background
MA Publishing* (fictitious name) is a subscription publishing company that publishes articles and information to subscribers. It focuses on providing timely content that aggregates industry research and articles, provides a viewpoint on current industry trends, and reviews vendor products and programs. Despite the recent economic downturn, MA Publishing is in a growth mode due to a transition in leadership that has motivated the company to review its current performance and the factors influencing that performance.
To define the "starting point" for the new leadership, MA Publishing conducted an analysis to identify the company's strengths, weaknesses, opportunities, and threats (SWOT). The goal is to provide information on how strong the company's current situation is to match the company's strategic direction to the results of the analysis (Thompson et al., 2008). MA Publishing used this analytical tool to determine the company's current state and to identify existing strengths the company can optimize, the weaknesses the company needs to improve, and what opportunities the company should take advantage of to increase its performance.
Results from the SWOT analysis revealed that MA Publishing holds deep experience and industry knowledge among its employees. A strong reputation for delivering value to its subscribers supports the company as it looks to strategically position itself to increase its market share. Challenges that could obstruct the optimization of performance include the lack of sufficient human capital on staff that limits the ability to produce necessary outputs. Further analysis revealed that the cause of these weaknesses include
- a lack of clarity of job expectations
- outdated job roles and descriptions
- outdated and informal communication systems
- a lack of transparency of current company performance
- an imbalance of staffing in key departments.
MA Publishing determined that training was necessary because without a revision and realignment of these human performance elements, company performance as it is today will compromise its ability for future growth.
Planned Solutions
The first step to resolve the performance challenges is to create clarity around the company's strategy and company goals by enabling employees to understand the purpose and mission of the company. Part of this plan will be to develop and release a measurement and tracking system to all company employees that will help communicate expectations and establish how the company does and will measure its success.
Second, the selected solutions will focus on creating or revising the foundational elements needed to optimize employee performance. Because of the revision of current structure and strategy, the company will need to implement initiatives that provide the proper base for good performance, such as
- revising written job descriptions
- realigning and reviewing staff
- creating formal company communication systems
- creating a measurement dashboard.
These solutions will eliminate the causes of the performance challenges and enable MA Publishing to achieve the results and growth the company seeks.
Data Collection
To best predict the ROI potential for these solutions, MA Publishing collected data that further clarified the current conditions in the company, as well as data to estimate what benefits the company can gain once it implements the solutions (Hale, 2007). This data included measures that MA Publishing used to identify performance gaps, such as current state of outputs, subscriber activity rates, and key performance indicators. In addition to these, MA Publishing conducted formal surveys to collect data on an employee's current understanding and knowledge of job roles; company vision, mission, and strategy; and company expectations. These surveys provided MA Publishing an accurate snapshot of where the company stands today and the impetus to act to improve performance.
Further, MA Publishing collected data specific to employee performance. This data came from assessments by supervisors and employees on current performance in areas that MA Publishing values, such as subscriber activity rates, sales teams' activity levels, and quantity and quality of outputs. Included in these ratings were questions regarding the likelihood that employees would improve performance because of newly defined expectations. To ensure anonymity on the initial assessments, MA Publishing gathered these ratings through online surveys and then followed those surveys with observations and a review of company reports. In this way, MA Publishing has data on perceived performance as well as actual performance, which will be helpful during the staffing review of the solution.
Because various mitigating factors must work in harmony with initiative implementation for MA Publishing to achieve the company's desired outcomes, it could not attribute all increases in business performance to the proposed solutions. Consequently, this study isolated the effects of the solutions to accurately forecast the direct value of the solutions on business objectives and gain support from senior leaders. MA Publishing used two methods of estimation: participant and management. While traditional isolation methods ask participants and managers to rate the impact of each initiative on results, because of time constraints within the company and the forecast nature of this study, the company asked participants and managers, in separate sessions, to estimate an overall anticipated impact of the plan on business results. This estimate occurred after MA Publishing provided employees and senior leaders a brief description of the plan to date as well as initial baseline data on the performance challenges the company collected.
Forecast Results
To convert data into monetary values, MA Publishing used the anticipated impact of the solutions on existing output measures collected. To ensure the highest degree of credibility, MA Publishing used existing standard values provided by the COO and expert values provided through research into industry benchmarks. In all other cases, MA Publishing used employee and senior leader estimates to convert data to monetary values. Table 1 outlines the data MA Publishing collected and the techniques used to determine anticipated impact.
To convert the data into monetary values, the company proposed a conversion chain that links increases in clarity, communication, and measurement to increases in employee productivity and sales team activity levels, and quantity and quality of outputs, which, in turn, link to increases in subscriber activity, engagement, and retention (Figure 1).
To convert these measures into dollar values, senior leaders and employees estimated the impact of the solutions on a number of key performance indicators:
- subscriber retention
- number of new subscribers
- productivity.
To determine the impact on subscriber retention, MA Publishing estimated the impact on subscriber activity and then used expert values from research on industry benchmarks to determine impact on subscriber retention rates. Once converted to a retention rate, it used a standard value to correlate a percentage increase in subscription retention to the number of subscribers that renew. From there, MA Publishing determined the number of subscribers that renewed and multiplied that figure by the standard price for subscription, thus calculating a potential dollar benefit.
To convert the potential dollar benefits of new subscribers, MA Publishing estimated the increase in new subscribers monthly. Using the difference between the current and estimated future subscribers, MA Publishing annualized the number of potential new subscribers and multiplied that by the standard subscription rate.
To determine the impact of the training on productivity, MA Publishing translated increased productivity into time savings and, therefore, cost savings. Senior leaders, supervisors, and employees estimated the impact on employee productivity and determined that the company would save 7.5 hours weekly per employee. Multiplying this by a standard value of 50 work weeks in a year, the company can anticipate saving 4,500 hours over the course of one year. Next, by multiplying 4,500 by the standard value of employees' salaries, MA calculated additional potential dollar benefits.
Combining the benefit dollars above, MA Publishing used the standard Benefit Cost Ratio (BCR) and ROI formulas. The company predicts the programs will produce a positive ROI. Through the qualitative data collected during this study, the potential for several intangible benefits also surfaced. Increases in clarity, communication, feedback, and accountability are predicted to help employees not only understand each employee's value and role, but also how all roles work together to contribute to the bigger picture of MA Publishing. Additional intangible benefits may include, but are not limited to, employee satisfaction, competencies, teamwork, and communication.
Conclusion and recommendations
Based on the positive ROI forecast, MA Publishing determined that the company should move forward with the solution as originally proposed. This plan includes multiple human performance solutions designed to increase clarity for employees around their job roles, expectations, and company performance.
To begin the implementation, MA Publishing should consider a strategy session to link present proposed changes to the company's future needs and communicate senior leaders' and employees' roles in the development of the programs to ensure buy-in and support. Currently, the company is considering additional solutions that could support those listed above, such as a review of its performance feedback and employee goal-setting systems.
Ultimately, with the potential for positive success shown, MA Publishing has an opportunity to affect the company in both tangible and intangible ways. Clarity on employee expectations and updated job roles and descriptions will enable employees to understand their roles in the company's growth as well as empower employees to make better day-to-day decisions, which can lead to positive increases in KPIs, such as increases in subscriber satisfaction and activity rates. Formal and structured communication systems, including a measurement dashboard to communicate company performance, will help employees track progress against goals optimally leading to increases in those same KPIs. Additionally, employee productivity increases will help the company to realign staff to better meet its needs instead of hiring new talent that costs more and is unfamiliar with the company. Further, increases in productivity will also result in greater outputs that fuel increases in subscriber activity.
References
Hale, J. A. (2007). The performance consultant's fieldbook: Tools and techniques for improving
organizations and people. San Francisco: Pfeiffer.
Thompson, A. A., Jr., Strickland. A. J., III. & Gamble, J. E.. (2008). Crafting and executing
strategy: The quest for competitive advantage: Concepts and cases (16th ed.). New York: McGraw-Hill Publishing.
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Cindy Thatcher is a senior consultant with Corporate University Xchange, a research and advisory services firm that specializes in consulting, research, and analysis on current topics that are deemed challenging to the learning and development industry. Cindy has earned a master's degree in training and performance improvement from Capella University and is MBTI certified and a Certified ROI Professional by the ROI Institute.