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Demonstrating how you will measure return on investment is an important part of getting the green light for your intranet project. It’s easy to understand the value of improved communications and better employee engagement in the workplace. But how do you actually tie a dollar value to it?
Our Senior Analyst, Bryan Robertson, recently wrote an article on 5 Approaches to Measure Social Business ROI, featured in CMSWire. For those of you that are new to the social business industry and are not mathematicians, analytics ninjas, or Nate Silver, here’s a short and sweet summary of three different approaches.
1. Hard ROI
This is the traditional method favored by finance departments everywhere, where you spend $100 on software, you get $1000 in return. This works for simplistic processes that have a direct cause and effect. For example, automating a process that used to be manual, or outsourcing a portion of company operations.
However, social intranets have diverse and far reaching implications in your business. Social business benefits are often two or three cause and effect steps from the effort to the investment, which can make it difficult to attribute and measure hard ROI.
This leads us to options 2 and 3, which we find are much more practical for social business software. (If your finance department is still insisting on hard numbers, Bryan’s article recommends bundling and piggybacking approaches).
2. ROI of Solved Problems
What problems are you trying to solve with an intranet? This method looks at creating measurements related to specific problems. For example, maybe your office has multiple locations with cross-functional teams that have to work together frequently. A social intranet can help reduce communications expenses associated with multiple office locations. Measuring reductions in travel and communications expenses can attach a hard number to your social intranet return on investment.
Well known social business consultants Dion Hinchcliffe and Peter Kim used this method to approach intranet ROI in their recent book Social Business By Design. Their research offers several examples and benchmarks for this type of approach:
- Improved sales processes: 10% revenue increase
- Quicker location of expertise: 30% faster access to expertise
- Overcoming distance and and time zone barriers: 20% reduction in travel and communication costs.
As a social intranet solves several core business problems, such as finding information, collaborating internally and reducing dependancy on email, these measurements can be added together to uncover the real value of a social intranet.
3. KPI Lift ROI
The third method is looking at existing KPIs from your business and assessing how a social intranet can impact them. Your organization has selected key performance indicators because you truly believe these numbers will drive your business forward. These measurements are linked to your overall business strategy. A social intranet is a useful tactic to help drive these numbers. By tying your social intranet to key performance indicators, not only will you make your C-suite really happy, but you will also have a simple, quantifiable way to measure intranet success.
We hope that helps set you in the right direction to start measuring intranet ROI. We recommend you read Bryan’s full article on CMSWire.