ROI Before or After (Part 2) "The Process"
DSA thanks Ray Halagera, President and COO, Career Systems, Intl., who started us thinking about Pro Forma ROI and came up with this handy tool.
In the previous TIPs column we discussed the idea of Pro Forma ROI and that decision makers want to know before they invest what the return will be for learning or other performance interventions. We provided some definitions, a formula and a spread sheet calculating tool for calculating Pro Forma ROI.
In this Tips column we will describe the Pro Forma ROI Process and provide sample checklists on common learning and performance intervention benefits, costs, and investments for you to use.
The process for a Pro Forma ROI on any contemplated learning and or performance intervention is to list the benefit and cost components and then estimate the value of each in quantitative terms. Next, we estimate the investment in the learning and/or other performance intervention again in quantitative terms.
This will give you the numbers that you can plug into the Pro Forma ROI formulate.
"What might be all the benefit, cost, and investment components"? We will need to provide these. Click here for a handy checklist on each of the three component categories. Now, armed with the checklist and the calculator for Proforma ROI from the last tips column, you are all set. Well - not quite!
How will you get the actual numbers on salaries and benefits or facilities cost etc. to plug into the formula?
This is where you need to see someone associated with the financial information for your organization. They will have the real data to allow you to plug in accurate numbers in the formula. Here are a few possible sources.
- Financial analyst
- Controller for your area
- Purchasing
- Vendors
- Your manager
Remember Proforma ROI is an estimate. Come as close as you can, but usually you don’t have to go too far before you can have a good idea of the value of one intervention over another. Stay practical, and have fun with the process.