Value for MoneyHow to Show the Value for Money for All Types of Projects and Programs in Governments, Non-Governmental Organizations, Nonprofits, and Businesses
Written by two of the world’s most well-known ROI (Return on Investment) gurus, this guide is indispensable for anyone involved in showing the value of money for projects and programs in governments, non-governmental organizations, nonprofits, and businesses. These range from human capital programs to marketing initiatives, technology implementations, systems integrations, quality and lean processes, public health initiatives, procurement procedures, public relations events, risk management policies, economic development programs, corporate social responsibility projects, public policy programs, branding activities, innovation programs, customer satisfaction projects, and everything in between. In a step-by-step process, the book shows how to measure the success of projects and programs, including measuring impact and ROI (Return on Investment). This book also shows how to forecast the value of the project in advance and how to collect data during and after project implementation. It addresses improvements throughout the process so that the project delivers optimum value. In addition to businesses, this book is appropriate for governments, NGOs, nonprofits, universities and healthcare organizations. As a reference for those who are seeking ways to assign value to what they have measured, the book will clarify and resolve much of the mystery surrounding the conversion of data to monetary values. Building on a tremendous amount of experience, application, practice, and research, the book will be based on the work of many individuals and organizations, particularly those who have been reaching the ultimate levels of accountability using the ROI Methodology. Developed in an easy-to-read format and fortified with examples, tips, and checklists, this will be an indispensable guide for those who seek to understand accountability issues.
Praise for Value for Money v Foreword xxv Preface xxvii Value is Changing… xxvii Need for a New Approach xxviii The ROI Methodology: The Enhanced Logic Model xxix We Can’t Measure Our Way to Success xxx Flow of the Book xxxi Acknowledgements xxxv Authors xxxviii 1 The Value Evolution 1 The Value Shift 4 Types of Values 5 The Importance of Monetary Values 6 The “Show Me” Generation 6 The New Definition of Value 7 Why Now? 8 Program Failures 8 Budget Constraints 9 Project and Program Costs 9 Donors are More Demanding 10 Measurement at the Impact Level Is No Longer Optional 11 Process Improvements Use 12 Managers’ New Business Focus 12 Case Study 12 Globalization 13 The Growth of Project Management 14 Evidence-Based or Fact-Based Management 14 Mistrust of Institutions 15 Benchmarking Limitations 15 The Executive Appetite for Monetary Value 16 Challenges Along the Way 16 Preparation and Skills 17 Fear of ROI 17 Time Commitment 17 Power and Politics 18 Misleading Hype 18 Sustainability 19 Final Thoughts 19 2 Six Ways to Show Value for Money 21 Six Ways to Show Value for Money 25 #1 - Actual ROI Calculation 27 #2 - Focus on Impacts and Intangibles 28 #3 - Meeting Expectations 29 #4 - The Payoff of Improved Behaviors 29 #5 - Cost-Effective Approach 30 #6 - Cost of Not Implementing the Program 31 Conclusion 32 Barriers to Showing Value for Money 32 We Don’t Make Widgets 32 Because there are No Profits, ROI is Not Possible 33 ROI is Just Not Appropriate for the Public Sector 34 We Don’t Have the Resources 35 This is too Complicated 36 No One is Asking for this 37 Final Thoughts 38 3 Needed: An Enhanced Logic Model 39 A Review of Models 42 Definition 42 Logic Model Elements 44 Other Models 45 Concerns about Current Models 47 Lack of Focus on Benefit-Cost Analysis 47 Lack of Emphasis on Attribution 49 Confusion on Outcomes and Impact 49 Little Focus on the Chain of Value of a Particular Program or Project 50 Unclear Timing of Data Collection 51 Needs Assessments versus Activities 52 Lack of Focus on Results 52 Inability to “Show the Money” 54 Not CEO- and CFO-Friendly 56 Managing Resources for Evaluation 57 Lack of Focus on Process Improvement 58 The Inability to Influence Investment 59 How Does Your Current Model Stack Up? 60 Focus of Use 61 Standards 61 Types of Data 61 Dynamic Adjustments 62 Connectivity 62 Approach 63 Conservative Nature 63 Simplicity 63 Theoretical Foundation 63 Acceptance 64 Requirements for the Value for Money: A Measurement Process 64 ROI Methodology 65 Terminology: Projects, Solutions, Participants 66 Final Thoughts 67 4 Introducing the ROI Methodology 69 Types of Data 70 Input 70 Reaction and Planned Action 72 Learning 73 Application and Implementation 73 Impact 74 Return on Investment 74 The Initial Analysis 75 Using Design Thinking to Deliver and Measure Results 77 The ROI Process Model 78 Plan the Evaluation 78 #1 - Start with Why: Align Programs with the Business 78 #2 - Make it Feasible: Select the Right Solution 81 #3 - Expect Success: Design for Results 81 Collect Data 82 #4 - Make it Matter: Design for Input, Reaction, and Learning 82 #5 - Make it Stick: Design for Application and Impact 83 Analyze Data 83 #6 - Make it Credible: Isolate the Effects of the Program 83 #7 - Make it Credible: Convert Data to Monetary Value 84 #8 - Make it Credible: Identify Intangible Benefits 84 #9 - Make it Credible: Capture Costs of Projects 85 #10 - Make it Credible: Calculate the Return on Investment 85 Optimize Results 86 #11 - Tell the Story: Communicate Results to Key Stakeholders 86 #12 - Optimize the Results: Use Black Box Thinking to Increase Funding 86 Operating Standards and Philosophy 87 Implementing and Sustaining the Process 87 Benefits of this Approach 88 Aligning with Business 89 Validating the Value Proposition 89 Improving Processes 89 Enhancing the Image and Building Respect 90 Improving Support 90 Justifying or Enhancing Budgets 90 Building Productive Partnerships 91 Final Thoughts 91 5 Start with Why: Align Programs with the Business 93 Impact Measures are Critical 96 The Challenge 97 Begin with the End in Mind 97 It’s a Change 97 It Requires Discipline 98 Avoid Paralysis by Analysis 98 The Alignment Model 98 Payoff Needs 99 Key Questions to Ask 102 Obvious versus Not-So-Obvious Payoffs 102 Reasons for New Programs 104 The Costs of the Problem 105 Case Study 107 The Value of Opportunity 107 To Forecast or Not to Forecast 108 Case Study 108 Business Needs 109 Determining the Opportunity 109 Identifying the Business Measure—Hard Data 110 Output 110 Quality 110 Cost 110 Time 112 Case Study 112 Defining the Business Need—Soft Data 113 Leadership 114 Work Climate/Satisfaction 114 Client Service 114 Employee Development/Advancement 114 Initiative/Innovation 114 Image/Reputation 115 Using Tangible versus Intangible—A Better Approach 115 Finding Sources of Impact Data 115 Identifying All the Measures 116 What Happens if You do Nothing? 117 Case Study 117 Final Thoughts 118 6 Make It Feasible: Select the Right Solution 119 Performance Needs 122 The Performance Dialogue 122 Examine the Data and Records 123 Initiate the Discussion 123 Case Study 123 Use Benchmarking from Similar Solutions 124 Use Evaluation as the Hook 124 Involve Others 125 Discuss Disasters in Other Places 125 Use Analysis Techniques 125 Keep it Sensible 126 Case Study 127 Learning Needs 131 Subject-Matter Experts (SMEs) 131 Job and Task Analysis 131 Observations 132 Demonstrations 132 Tests 132 Management Assessment 133 Case Study 133 Preference Needs 134 Key Issues 134 Case Study 135 Matching Solutions to Needs 135 Some Solutions are Obvious 135 Solutions Can Come in Different Sizes 136 Some Solutions Take a Long Time 136 Solutions Should be Tackled with the Highest Priority Items First 136 The Matrix Diagram 136 Selecting Solutions for Maximum Payoff 138 Short-Term versus Long-Term Costs 138 Consider Forecasting ROI 138 Time Needed for Implementation 138 Avoid Mismatches 139 Verifying the Match 139 Tackling Multiple Solutions 140 Final Thoughts 140 7 Expect Success: Design for Results 141 The Power of Expectations 144 Case Study 144 Keep it Sensible 146 Defining the Success of Programs 147 Designing for Results at Each Level 149 Level 0, Input 149 Level 1, Reaction 150 Level 2, Learning 150 Level 3, Application 150 Level 4, Impact 150 Case Study 151 Level 5, ROI 151 Use Empathy 151 Developing Objectives at Multiple Levels 152 Case Study 152 Reaction Objectives 153 Learning Objectives 154 Application Objectives 155 Impact Objectives 157 Return on Investment (ROI) Objectives 158 Case Study 158 The Power of Objectives 160 Application/Impact Objectives Drive Programs 160 Application/Impact Objectives Enhance Design and Development 160 Application/Impact Objectives Improve Facilitation 160 Application/Impact Objectives Help Participants Understand What Is Expected 161 Impact Objectives Excite Sponsors and Donors 161 Application/Impact Objectives Simplify Evaluation 161 All Levels of Objectives Inform the Stakeholders 162 Defining Roles and Responsibilities 162 Analysts 163 Designer 163 Developer 163 Program Owner 164 Facilitator 164 Participants 164 Sponsor or Donor 165 Managers of Participants/Significant Others 165 Evaluator 165 Other Stakeholders 165 Planning the Evaluation 166 Evaluation Purpose 166 Feasibility of Outcome Evaluations 167 Data Collection Plan 167 ROI Analysis Plan 167 Project Plan 171 Final Thoughts 172 8 Make It Matter: Design for Input, Reaction, and Learning 173 Communicating with Results in Mind 174 Announcements 175 Brochures 175 Case Study 175 Correspondence 176 Workbooks and Participant Guides 176 Changing the Role of Participants 177 The Necessity 177 Defining Roles 177 Documenting the Roles 178 Creating Expectations 178 Identifying Impact Measures Before Participating in the Program 179 Case Study 179 Involving Managers or Significant Others 181 Think ROI 181 ROI Review 182 Case Study 182 Actions to Take 183 Design Input for Results 183 Target Audience 183 Case Study 184 The Need 184 Case Study 185 Timing and Duration 185 Motivation 186 Readiness 186 Conclusion 187 Design Reaction for Results 187 Topics to Measure 188 Case Study 189 Measuring Reaction 191 Case Study 192 Using Reaction Data 192 Forecasting ROI at this Level 192 Design Learning for Results 193 The Learning Style 194 Sequencing and Time 194 Activities 194 Data Collection for Input, Reaction, and Learning 194 Questionnaires and Surveys 194 Measuring with Tests 196 Measuring with Simulation 196 Timing of Data Collection 197 Early, Detailed Feedback 198 Pre-Program 198 Collecting at Periodic Intervals 198 For Long Programs with Multiple Parts 199 Final Thoughts 199 9 Make It Stick: Design for Application and Impact 201 Data Collection for Application and Impact 204 Questionnaires and Surveys 204 Improving the Response Rate for Questionnaires and Surveys 204 Interviews 209 Focus Groups 210 Observations 210 Action Plans 211 Set Goals and Targets 212 Define the Unit of Measure 212 Place a Monetary Value on Each Improvement 214 Implement the Action Plan 214 Isolate the Effects of the Program 214 Provide a Confidence Level for Estimates 215 Collect Action Plans 215 Summarize the Data and Calculate the ROI 215 Performance Contract 217 Monitoring Business Performance Data 219 Existing Measures 219 Case Study 220 Developing New Measures 221 Selecting the Appropriate Method for Each Level 222 Type of Data 222 Participants’ Time for Data Input 222 Manager (or Significant Other) Time for Data Input 223 Cost of Method 223 Disruption of Normal Work Activities 223 Accuracy of Method 223 Utility of an Additional Method 224 Cultural Bias for Data Collection Method 224 Timing of Data Collection 224 Collecting Application Data 224 Collecting Impact Data 225 Built-In Application Tools 226 Improvement Plans and Guides 227 Application Tools/Templates 227 Job Aids 227 Case Study 228 Involving the Participants’ Manager or Significant Other 230 The Most Influential Group 230 Pre-Program Activities 231 During the Program Activities 232 Post-Program Activities 232 Reinforcement Tools 232 Case Study 233 Final Thoughts 235 10 Make It Credible: Isolate the Effects of the Program 237 The Importance of Pinpointing the Contribution 240 Reality 240 Myths 240 Preliminary Issues 242 Review Chain of Impact 242 Identify Other Factors 243 Quantitative and Research Isolation Methods 244 Case Study 244 Experimental Design 246 Trend Line Analysis 249 Mathematical Modeling 252 Calculating the Impact of Other Factors 253 Qualitative Isolation Methods 254 Participants’ Estimate of Impact 255 Steps to Measure Attribution Using Estimates 258 Manager’s Estimate of Impact 259 Customer Estimates of Program Impact 260 Internal or External Expert Estimates 260 Estimate Credibility: The Wisdom of Crowds 261 Case Study 261 Select the Method 263 Final Thoughts 264 11 Make It Credible: Convert Data to Monetary Value 265 The Importance of Monetary Value 267 Value Equals Money 267 Money Makes Impact More Impressive 268 Converting to Monetary Values is Similar to Budgeting 268 Monetary Value is Vital to Organizational Operations 269 Monetary Values Are Necessary to Understand Problems and Cost Data 269 Key Steps in Converting Data to Money 270 Standard Monetary Values 272 Converting Output Data to Money 273 Case Study 274 Calculating the Cost of Inadequate Quality 276 Case Study 278 Converting Employee Time Savings Using Compensation 279 Case Study 280 Finding Standard Values 281 When Standard Values are Not Available 281 Using Historical Costs from Records 282 Time 282 Availability 282 Access 282 Accuracy 283 Using Input from Experts 284 Using Values from External Databases 285 Linking with Other Measures 286 Using Estimates from Participants 288 Using Estimates from the Management Team 289 Using Program Staff Estimates 289 Selecting the Technique 290 Choose a Technique Appropriate for the Type of Data 290 Move from Most Accurate to Least Accurate 290 Consider Source Availability 291 Use the Source with the Broadest Perspective on the Issue 291 Use Multiple Techniques When Feasible 291 Apply the Credibility Test 292 Consider the Short-Term/Long-Term Issue 292 Consider an Adjustment for the Time Value of Money 294 Final Thoughts 295 12 Make It Credible: Identify the Intangibles 297 Why Intangibles are Important 299 Intangibles are the Invisible Advantage 300 We are in the Intangible Economy 301 More Intangibles are Converted to Tangibles 302 Case Study 302 Intangibles Drive Programs and Investments 303 Measuring and Analyzing Intangibles 304 Measuring the Intangibles 304 Converting to Money 307 Case Study 307 Case Study 310 Identifying and Collecting Intangibles 311 Analyzing Intangibles 312 Final Thoughts 313 13 Make It Credible: Capture Costs of the Program and Calculate ROI 315 The Importance of Costs and ROI 319 Fundamental Cost Issues 320 Fully Loaded Costs 320 Case Study 321 Costs Reported without Benefits 322 Develop and Use Cost Guidelines 323 Sources of Costs 323 Prorated versus Direct Costs 324 Employee Benefits Factor 325 Specific Costs to Include 325 Initial Analysis and Assessment 326 Development of Program Solutions 326 Acquisition Costs 326 Implementation Costs 326 Case Study 327 Maintenance and Monitoring 327 Support and Overhead 328 Evaluation and Reporting 328 Cost Tabulation in Action 328 Problem and Solution 328 Program Description 329 Selection Criteria 330 Program Administration 331 The Drivers of Evaluation 331 Program Costs 332 The ROI Calculation 333 Benefit/Cost Ratio 334 ROI Formula 335 Case Study 336 Monetary Benefits 337 Misuse of ROI 338 Social Return on Investment 339 ROI Objectives 340 Whose ROI? 340 Other ROI Measures 342 Payback Period (Breakeven Analysis) 342 Discounted Cash Flow 342 Internal Rate of Return 343 Final Thoughts 343 14 Tell the Story: Communicate Results to Key Stakeholders 345 The Presentation 346 Reaction and Learning 347 Application 348 Business Impact 348 ROI 350 Intangibles 351 Conclusion and Recommendations 351 Reflection 352 The Importance of Communicating Results 352 Communication is Necessary to Make Improvements 352 Communication is Necessary to Explain the Contribution 353 Communication is a Politically Sensitive Issue 353 Different Audiences Need Different Information 353 Case Study 354 Principles of Communicating Results 355 Communication Must be Timely 355 Communications Should be Targeted to Specific Audiences 355 Media Should be Carefully Selected 356 Communication Should be Unbiased and Modest in Tone 356 Communication Must Be Consistent 356 Make the Message Clear 356 Testimonials Must Come from Respected Individuals 357 The Audience’s Bias of the Program Will Influence the Communication Strategy 357 The Process for Communicating Results 357 Step 1: Analyze Reason for Communication 359 Step 2: Plan for Communication 359 Step 3: Select Audience 360 Step 4: Develop Reports 363 Step 5: Select Media 363 Meetings 363 Interim and Progress Reports 366 Routine Communication Tools 366 Case Study 367 Email and Electronic Media 369 Program Brochures and Pamphlets 369 Case Studies 370 Step 6: Present Information 370 Routine Feedback on Program Progress 371 Storytelling 373 Presentation of Results to Senior Management 374 Case Study 376 Step 7: Analyze Reaction 378 Final Thoughts 379 15 Optimize Results: Use Black Box Thinking to Increase Funding 381 Process Improvement is the Key: Black Box Thinking 383 The Aviation Industry 384 The Healthcare Industry 384 Failures in Programs 386 Making Adjustments in Programs 387 The Fear of Results 387 You Can Always Make it Better 388 When Do You Discontinue the Program? 388 The Timing of Changes 390 Level 0, Input 390 Level 1, Reaction Measures 390 Level 2, Learning Measures 391 Level 3, Application Measures 391 Level 4, Impact Measures 392 Making the Adjustments 392 Increasing ROI 393 Addressing Costs 393 Addressing the Monetary Benefits 395 Timing of Assessments 395 Influencing Allocation 396 Investment versus Cost 396 Competition for Funding 398 Anxiety and Downturns Translate into Cost Reduction 399 Final Thoughts 400 16 Forecast the ROI 401 The Importance of Forecasting ROI 407 Expensive Programs 407 High Risks and Uncertainty 407 Case Study 408 Post-Program Comparison 409 Compliance 410 The Trade-Offs of Forecasting 411 Pre-Program ROI Forecasting 413 Basic Model 413 Basic Steps to Forecast ROI 414 Sources of Expert Input 417 Securing Input 418 Conversion to Money 419 Estimate Program Costs 419 Case Study 420 Forecasting with a Pilot Program 422 ROI Forecasting with Reaction Data 423 Case Study 424 Use of the Data 426 Forecasting Guidelines 427 Final Thoughts 429 17 Make It Work: Sustaining the Change to a Results-Based Process 431 Overcoming Resistance 433 Assess the Climate 434 Develop Roles and Responsibilities 434 Identifying a Champion 434 Developing the Champion 435 Establishing a Task Force 435 Assigning Responsibilities 436 Establish Goals and Plans 436 Setting Evaluation Targets 437 Developing a Plan for Implementation 438 Revise Guidelines and Procedures 438 Prepare the Team 440 Involving the Team 440 Teaching the Team 440 Initiate ROI Studies 441 Prepare the Management Team 442 Remove Obstacles 443 Dispelling Myths 443 Delivering Bad News 444 Using the Data 444 Monitor Progress 445 Final Thoughts 446 References 447 Appendix A 459 Appendix B 467 Appendix C 471 Index 473
Patricia Pulliam Phillips, PhD is an internationally recognized author, consultant, and president and CEO of ROI Institute, Inc. Phillips provides consulting services to organizations worldwide. She has been an author or editor of more than a hundred books and numerous journal articles, and her work has been featured on MSNBC and EuroNews. Jack J. Phillips, PhD is chairman of ROI Institute and a world-renowned expert on measurement and evaluation. Phillips, a former bank president, is also the author or editor of more than a hundred books and has provided consulting services in 70 countries. His work has been featured in the Wall Street Journal, Bloomberg Businessweek, Fortune, and on CNN. Gina Paone joined the International Monetary Fund in February 2011 after nearly eleven years with the United Nations World Food Programme based in Rome, Italy and 10 years in the private sector in a marketing capacity based in Toronto, Canada. She is currently the Division Chief, Talent Acquisition and Operations. Cyndi Huff Gaudet, PhD, is director of the School of Interdisciplinary Studies and Professional Development at The University of Southern Mississippi's Gulf Park campus, a scholar-practitioner managing projects integrating the ROI Methodology, and a recognized national expert helping organizations implement a systematic approach for developing human capital
HOW TO SHOW THE VALUE FOR MONEY for All Types of Projects and Programs In: Governments Nongovernmental Organizations Nonprofits and Businesses The most thorough, comprehensive, and detailed explanation of showing the value for money in the public sector. Written by the world's most well-known ROI (Return on Investment) experts, this guide is indispensable for anyone involved in showing the value of money for projects and programs in governments, nongovernmental organizations, nonprofits, and businesses. In a step-by-step process, the book shows how to measure the success of projects and programs, including measuring impact and ROI (Return on Investment). This book also shows how to forecast the value of the project in advance and how to collect data during and after project implementation. It addresses improvements throughout the process so that the project delivers optimum value. As a reference for those who are seeking ways to assign value to what they have measured, this book clarifies and resolves much of the mystery surrounding the conversion of data to monetary values. Building on a tremendous amount of experience, application, practice, and research, this book is based on the work of many individuals and organizations, particularly those who have been reaching the ultimate levels of accountability using the ROI Methodology. Developed in an easy-to-read format and fortified with examples, tips, and checklists, this is an indispensable guide for those who seek to understand accountability issues. Value for Money: Lays the groundwork through the ROI Methodology, a unique and time-tested approach for assessing the value of investment in many areas in all types of organizations. Describes a results-based approach for project implementation while focusing on a variety of measures, categorized into five data levels: Reaction, Learning. Application and Implementation, Impact (tangible and intangible), and Return on Investment. Presents several ways to show value for money, in addition to calculating the ROI. Offers a discipline and step-by-step implementation for process improvement management, and many other areas within the organization. Useful not just for the professional but for the student as well, perfect for use in the classroom to teach ROI and the value of projects and programs.
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