Most managers are now asked to justify the decisions they make in terms of a ‘return' to the business. For example, will the business get a better return from an advertising campaign or a PR campaign? So …
What is Return on Investment? (ROI)
ROI is a family of measures that look at what is received in return for an initial investment.
Why is ROI important
Resources are not infinite – so every business and manager has to make decisions about how to use resources available to them. Making the best use of the resources available is actually the key to success in any area, not just business.
Measuring ROI in financial terms is traditionally done in 3 ways. A measure of time, a measure of proportion, and a measure of cash.
1. Payback - Simply put, the time it takes to get back the amount of money originally invested. So if I spend £1000 on a sales promotion, how long does it take until there are enough sales to generate an extra £1000 of gross margin.
2. Rate of Return - This is a percentage figure. It measures how much more than the original amount I will get back, as a percentage of the original amount. For example, if I spend £1000 and get back £2000 the rate of return will be 100%. If I get back £1500, the rate of return will be 50%.
3. Net Present Value - This is a cash figure, and really allows for the fact that getting £1000 in 12 months time is worth less than £1000 now. How much less depends on inflation. There is a standard (if complex) way to calculate this figure. Example: if inflation were 10% per annum, you would need to have £1100 in 12 months time for it to be worth the same as £1000 now.
Companies may make their investment decisions based on any one of these methods, or a combination of all three.
What about non-financial measures?
How can we measure ROI in training, PR, recruitment etc? It still makes sense to talk about ROI, whatever we are investing in. Marketing departments can measure the cost of acquiring, serving and keeping customers. Operations can put a value on the importance of key suppliers.
Once a discussion about the value of a business activity is underway, it is always possible to find some proxy measures that will indicate how fast that activity is improving or declining. It is then possible to make a broad value judgement about the likely return from a specific investment.
Is measuring ROI in training difficult?
You can make it difficult for yourself, or you can get help. There is a great tool to measure ROI on technology projects already available - more in the next issue.
Presenting the ROI
If you are a sales person – you need to be able to present the business case for your offer – which includes the ROI. Someone else may calculate it for you – but you need to be able to have a credible conversation about the results.
Thursday, August 30, 2007
Wednesday, August 29, 2007
Making time for Time Management
In our work, most of us have to make choices about how we use our time. We often find that we cannot achieve everything in the time we have to do it. So how can we
Make Time for Time Management
The underlying issue of time management is not about controlling time, because time ticks away regardless of whatever we do. Time Management is about personal decision making that will help us to manage what we do with our time more effectively.
Firefighting can be fun, but it isn't a good time management style unless you work for the fire service. When it happens, use these top tips to avoid being swept away:
Don't avoid the important things
Important things really are important. If you aren't doing the IMPORTANT things on your to-do list you probably
* are not sure HOW to do them
* are worried about FAILING at them
* are BORED by them (because they've been hanging around so long)
* don't really believe they are IMPORTANT
Find out HOW
If you aren't sure HOW to do something make it a priority to find out how to do it! This might mean that the first thing you actually have to do, is to go and talk to someone about what it involves.
Deal with WORRY
If you are worried about FAILING, you need to find a coach who can help you address the issues. If you are a habitual worrier, get coaching about how to deal with worry. If you don't normally worry, but this particular issue is causing you a problem, find a coach with the appropriate expertise who can help you mitigate any risks in the project.
Beat the BOREDOM
If you are BORED with something see if you can find someone else to delegate it to (who might be interested). Lacking that alternative, set yourself a time limit with the promise of a treat on completion.
Priorities
If you don't really believe it's IMPORTANT take it off your list. If you are responding to someone else's important agenda, discuss it with them and try to get it removed.
Strictly speaking, none of the above is time management and most time management programmes will not address these issues (except TIMEPOWER). But it is this kind of approach that actually helps you make the most of the time you have available.
Make Time for Time Management
The underlying issue of time management is not about controlling time, because time ticks away regardless of whatever we do. Time Management is about personal decision making that will help us to manage what we do with our time more effectively.
Firefighting can be fun, but it isn't a good time management style unless you work for the fire service. When it happens, use these top tips to avoid being swept away:
Don't avoid the important things
Important things really are important. If you aren't doing the IMPORTANT things on your to-do list you probably
* are not sure HOW to do them
* are worried about FAILING at them
* are BORED by them (because they've been hanging around so long)
* don't really believe they are IMPORTANT
Find out HOW
If you aren't sure HOW to do something make it a priority to find out how to do it! This might mean that the first thing you actually have to do, is to go and talk to someone about what it involves.
Deal with WORRY
If you are worried about FAILING, you need to find a coach who can help you address the issues. If you are a habitual worrier, get coaching about how to deal with worry. If you don't normally worry, but this particular issue is causing you a problem, find a coach with the appropriate expertise who can help you mitigate any risks in the project.
Beat the BOREDOM
If you are BORED with something see if you can find someone else to delegate it to (who might be interested). Lacking that alternative, set yourself a time limit with the promise of a treat on completion.
Priorities
If you don't really believe it's IMPORTANT take it off your list. If you are responding to someone else's important agenda, discuss it with them and try to get it removed.
Strictly speaking, none of the above is time management and most time management programmes will not address these issues (except TIMEPOWER). But it is this kind of approach that actually helps you make the most of the time you have available.
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