Return on Investment (ROI) - Prioritization technique
Prioritize Impact with a Return on Investment
There is so much we would like to accomplish. Time and resources are often limited. A simple return on investment (ROI) calculation aids in prioritization, ensuring we are using our time, team members, and equipment to create the biggest impact and results.
BENEFITS OF A RETURN ON INVESTMENTS CALCULATION
- Decide if change/improvement is worthy.
- Gain support (leaders, team members, stakeholders).
- Create engagement and commitment to the change.
- Communicate and celebrate success.
- Refine/validate goal & targets.
CALCULATING A RETURN ON INVESTMENT (ROI)
ROI is a measure used to evaluate the efficiency of an investment. Return on Investment is Total Benefit / Total Cost.
Total benefits include both hard (reduced costs, more customers, increased revenue) and soft (more capacity, better productivity, freed up labor time, and other benefits to be realized with a future change).
Total costs include purchases, expenses, capital, or additional labor to create the benefits.
Aim for a ROI calculations >=1, on a one-year look-ahead is good. consider mult-year look-aheads for capital investments. See example -
WHEN TO CALCULATE A RETURN ON INVESTMENT
- Strategic and Annual project planning
- Validating a change or any improvement activity
- In a Project to select, validate, and celebrate gained improvements.
DEPARTING TIPS
- Use ROI to say YES / NO to changes. If the ROI is not >=1, return to the team's prioritization to look for additional benefits or other changes.
- Some projects with low ROI are enabling. These may be needed to accelerate or achieve future benefits, customer impact.
- Gain the skills and templates:
- Mini training (#24)
- Green Belt / Project leader training
- Annual improvement planning
- Strategic planning
- 1-1 coaching / technical assistance
