DIY Nonprofit Technology: 4 Steps for Measuring ROI on Your Next Tech Project

Submitted by Annaliese on Wed, 10/24/2012 - 8:10am

[Editor's note: The following is from the September 2012 issue of NTEN:Change, NTEN's quarterly journal for nonprofit leaders. Read the rest of article, and the complete issue on "Data-Driven" when you subscribe to the journal for free!]

By Tanya Lee, Network for Good

Let's say you've been asked to recommend a solution for your organization's next big technology investment. Whether the initiative is purchasing smart phones for staff or replacing your accounting system, measuring the Return on Investment (ROI) should be a key aspect of your decision. While "measuring ROI" may seem like a daunting task, it can be broken down into a few simple steps which are feasible for projects of all sizes. Taking the time to think through these items will help to provide a clear picture of the value of the project and provide good material for socializing your decision across the organization.

1) Identify the Benefits

Questions to Ask:
  • How will this help internal staff?
  • Which aspects of our service to clients will be improved?

Make a list of the key benefits that will be achieved by the investment. Benefits should align with organizational goals and processes and usually fall into the categories of efficiency or effectiveness. Efficiency gains are those items related to saving time, money, or other resources. Effectiveness relates to quality improvements for your program delivery. Together, these items represent the reasons you are considering the investment.

As you make the list, be sure to focus on benefits and not features. For example, a smartphone providing on-the-go internet access is a feature. The resulting benefit might be the ability for staff to better answer client questions during home visits. Also, remember that benefits are not always tangible. While some benefits are easy to quantify or measure, others can be less straightforward. However, this does not make them any less important. Improved team morale, job satisfaction, and innovation are all examples of intangible benefits which are worth noting.

 

2) Identify the Costs 

Questions to Ask:
  • What are direct costs of this technology?
  • What are costs of alternatives?
  • What are the costs of doing nothing?

This step is the one most commonly associated with "measuring ROI," but looking at costs goes beyond the price of purchase or implementation.

First, capture the basic costs associated with implementing the technology. This includes the direct costs of the hardware or software as well as costs of any technology services that may be required for installing and implementing.

Next, consider the costs of alternative solutions including competing providers or different approaches. You should also consider the costs of not implementing the project. What are the associated costs if you continue in your current environment?

Finally, look at how these costs compare to the benefits. Does the value outweigh the resources needed to move forward?

 

3) Do a Pilot

Questions to Ask:
  • Were the projected benefits accurate?
  • Were the projected costs accurate?
  • Were there unexpected costs or benefits?

Before you make the full investment, test the initiative out on a smaller scale.

Instead of purchasing smart phones for everyone in the office, purchase for just a few staff members. Before buying the full accounting system, ask for a one month free trial.

During the pilot, have users (staff or clients) try to complete their day-to-day activities and observe for a period of time. Collect data to test the accuracy of your projected benefits and costs. Capture tangible measures like time and cost savings, but also evaluate the intangibles. Conduct interviews or surveys to understand user experiences.

 

4) Tell Your ROI Story

Questions to Ask:
  • How will this person be affected by this project?
  • Which benefits will be most important to them?

Once you have completed your evaluation, don't just file it away. Use the results of the process to socialize the project and get buy-in. Help stakeholders understand how the initiative supports the organizational goals and more importantly, their particular role. For example, you might highlight cost savings to your CFO or Board but emphasize time savings to your staff. If relevant, explain the resources required to implement and how you all can monitor and measure results. Avoid presenting numbers and spreadsheets, but rather translate your findings into the highlights that will create supporters.

Tanya Lee is the Vice President of Program Management at Network for Good.