How to Measure RoI

Pete: Hello, I’m Pete Fullard, CEO at Upskill People.

Welcome to the first of three short conversations with Ken Denny, from Murray Uniforms. He and I will be sharing with you some of what we know about getting a return on investment (RoI), a return on expectation (RoE), and effective people strategies.

There’s a lot written and spoken on these topics, so we’ll be focusing on our experience working with a range of organisations, what we’ve seen work, and what doesn’t.

We’re starting with ‘RoI & RoE Demystified: Practical Examples and Rookie Errors.’ In this first part, we’re not just talking theory; we’re diving into the real world and how to measure your project returns.

Looking at how these concepts can directly benefit you and your organization, how to avoid common pitfalls, and make smarter decisions that translate into success.

Ken, thanks very much for chatting to me. It’s nice to see you.

Ken: Likewise Pete. Thanks for this opportunity. Good to catch up.

Pete: A return on investment, something that we see a lot in our various clients, so I guess we should start with what do you define as return on investment?

Ken: Yeah, that’s a good question to start with. So return on expectation, it helps measure the effectiveness of a programme on overall productivity.

But return on investment measures the financial return on the investment expense and in my opinion, return on investment is more rigorous, more acceptable to the C and D-suite, if you agree with that.

Pete: Return on investment for me is the easy one because it’s numbers and it’s normally fiscal numbers and it’s normally where you’ve gone ‘we did this over that period of time’ and ‘this much was saved’ or ‘this much was gained’. Return on expectation, I almost hear a different definition with every person I speak to, but it’s basically something that’s less tangible but ideally you still want to go to numbers, I think, in order to feed it back up to the C-suite and into the project team.

And I guess where I’ve seen examples with moving it into numbers is you might say we expected an increase of X in our employee engagement survey, which said we felt better about this or we did that. Likewise, you can also look at something I was talking to with a client where they said, we want to see promotion of managers internally at over 80%, and that’s as a direct result of the way we develop them.

So although that’s not quite a financial payback or measure, that’s where I come from, the return on expectation. Have you seen any other examples of where people have used an expectation measure and then either converted it into numbers or then fed that back into the end of the process?

Ken: I don’t want to be unfair, but I think there’s a lack or a weakness in some of the organisations out here in the failure to educate their clients. It’s easy to say that we expect a certain outcome and we may even be able to put a finger in the air and take a stab at what we’re expecting to see, the return, and if you can identify those metrics and the productivity measure, you can then do a before and after, which enables a benefits review, which I think is much more acceptable to C and D-suite.

Pete: That’s very interesting and one thing I would say about that is quite often I’ve seen situations where a justification is planned and put in as part of the proposal, which gets sign off, but it’s not always measured at the other end.

I don’t know if you find that as well that they got the sign off, they got the budget, they did the project. Let’s move on to the next one. And it’s important not to forget to measure out at the other side

Ken: Absolutely, because we often engage with FDs and they’re very keen to understand what return are we going to get from the investment we’re going to make?

And we spoke to one, CFO recently who said look, we’re going to bake this into our financial projections for the following year. So we need to be quite specific. And what that did, it kind of drove best practice in terms of a benefits review afterwards so that you can say look, we have delivered what we pledged that we were going to deliver or actually we need to make further tweaks to the programme we’ve just delivered to achieve it.

And I think if you can get to that level you will get buy in from the board in terms of projects, when it’s an expectation and there’s no after or post programme review, you know, we’ve delivered the project, we did what we said we were going to do, but actually what’s the tangible uplift?

Pete: I would agree. And certainly the other thing I’ve found is that clients who do a really good assessment during, after and maybe a little while after they find it easier to get budget next time, which is which is ultimately the goal.

Ken: Absolutely. And we talk about a dynamic programme. It’s not a deliver and run. It should be a dynamic programme that there’s a continuous or periodic measurement because business is changing. We’re in a fast paced business environment at the minute. Retail, which is a sector I primarily look after, retail is having to be agile.

Pete: And something else that I’ve encountered is looking at actually what the investment is, because there’s an investment in getting the project defined that takes time and money and effort. Then there’s the build, the creation of the project and the deployment. Then there’s people’s time to get involved in that. In my case, it’s upskilling and taking the time to learn.

Then there’s the time and effort to measure, and then there’s also an investment in failure. And it’s something that not many people are bold enough to do, but it’s good to plan in that there will be some failures and that might be a complete failure, as I’ve seen on a number of occasions, or actually a small failure, which you’re then going to reinvest to correct.

And that’s why I think it’s important to consider the whole cost and then finally, the cost of ownership. So whether that’s a uniform or a piece of learning or a piece of software, you’ve got to maintain and own it. And it’s the cost of longevity as well as just the initial cost of purchase. Do you find that, particularly in the things you’re seeing, that most clients these days are planning the whole life cycle as the investment, or do they often miss bits out?

Ken: We certainly see there’s an increase in business cases behind projects. But what we still see is a lack of rigor that return on investment drives. Now your before pre after and the failure aspect is very interesting. And I think if companies were to measure that, it would drive best practice at the purchasing end. See where we see a lack of business case or a lack of investment structure, it invariably gets pushed to procurement and procurement what they don’t understand, they try to commoditise. And I’m not suggesting that certain products, certain widget type products that can’t be commoditised, but anything that is remotely technical or complex and particularly a product or service or solution that involves a large number of stakeholders, to try to commoditise it normally leads to a negative return on investment or a negative total cost of ownership.

Pete: So, Ken what would you consider a negative cost of ownership then? That’s a term I’m not familiar with.

Ken: Well we see many companies now divide procurement. So you have procurement involved in the purchase and then you’ve got a cost control team that look after usage. So procurement are now driving down the cost because that’s what they’re KPId on, and invariably it leads to a poorer or lower quality product, which then drives or increases usage.

So you’ve got this doom loop internally, you’re being driven by cost per piece as opposed to the cost of ownership.

Pete: When something is complicated and it’s not just purchasing a widget or even paperclips or whatever it might be, you’ve got to consider all these different aspects to get the true value and the true cost out of it as well.

If they’re just ticking the box and looking at the cost of purchase, there’s so many other factors to get involved. And I think L&D are getting better at that and that’s our job really is to help them and share best practice and support.

That’s the first of our three short chats, the second picks up with the option of doing nothing, is it really an option?

Pete: Welcome to the second in our series of three conversations. ‘Decision Impact: How Your Choices Shape Success.’ We’ll show you how taking an holistic view of any project, and its broader impact, can shape your success and your organisation’s future. Highlighting the importance of ongoing review and continuing to update what you’ve put in place. We finish with a summary of all the key points of this and the previous segment. To begin, we’re picking up with a critical question: What happens if you choose to do nothing or choose wrongly?

One other side of it and may be linked in to that negative return on investment, is very much the cost of not doing something. If everybody else is doing something or everybody else is implementing something and taking advantage of it, just doing nothing doesn’t become an option. With uniforms, if you’ve got lots of other organisations who really have good uniforms that are perfect for people and help their engagement, do you see that the cost of not doing something is very high as well potentially?

Ken: Yes, absolutely. And I think, again, there’s a failure particularly with suppliers like ourselves sometimes to help companies identify what the cost of remaining the same would be. If they can’t identify the metrics that are going to be positively impacted through change, status quo becomes the norm

We certainly when we’re working with clients, we will do a 360 review of the business and look at the metrics we believe uniform can positively impact, and then we can put them down in a business case which can then be shared amongst the other stakeholders, because it’s also tricky when you’ve got multiple stakeholders. For yourself, you’re primarily focused on learning and development, I guess. But yeah, we’re engaging with brand teams, with marketing teams, with the HR departments, with the central operation teams, but what you can put numbers to removes the fear of the unknown or the fear of change.

Pete: Couldn’t agree more. And people we work with are learning and development because we do online learning, but what’s very interesting is the clients that are broadening their view of what the stakeholders are. So we’ve got, for example, the C-suite, so the finance director, the CEO and the COO, they’re all interested in different things. Then you’ve got the operational managers who have to release their teams and encourage them to go and learn.

So we have a stakeholder there. We’ve then got the HR and learning and development function and they’re very interested in is it best use of their time and resources and can they align with the business strategy? And then we’ve even started to see clients are looking at external stakeholders. So our particular growth area at the moment is in people management skills and we’re seeing clients are considering both suppliers and their customers because better managers are going to deliver a better business performance, which is noticed by their customers and even their suppliers. So there’s a whole load of areas to look at and also potentially to measure the impact on those stakeholders. Are you mainly focused on those internal stakeholders?

Ken: Primarily it would be internal stakeholders. Although we are sometimes working with a third party. We were recently engaging with a large retail client who was going through a internal change in terms of store format, and we were working with their creative company that were helping them design their store of the future. So we do step outside of the company, but only if it is likely to have an impact on something that we would be doing for the client.

But I think what you’ve touched on there is very interesting because we’re both involved in people, you’re involved in the training element and we’re involved in the clothing element of it. But again, we were working with a big retail client recently and it was very interesting when we were engaging with the wearers to discover that the company was spending tens of thousands of pounds on customer service training for the staff, yet the cost of uniform had been driven down and down and down over a period of time to the point where the uniform was uncomfortable. It didn’t fit properly, the wearer’s didn’t enjoy wearing it and it was having an impact on how they engaged or didn’t engage with their customers. And we found that a percentage of their staff were actively avoiding customer interactions because of how they felt or perceived themselves.

So you’ve got this internal disconnect one department spending money, another trying to save money, but it’s detrimental to the P&L in the final reckoning. So I think you’ve touched on a really important point there, that our job is to educate the client in terms of what could this achieve for them that they’re not aware about, what other stakeholders should be engaged, what other stakeholders should be interested, and trying to help them internally to bring it together for the good of the whole. A holistic viewpoint.

Pete: And I remember our first conversation when we met and I thought, what’s the relationship here between uniforms and online learning? And it was so obvious when you said, well what you do affects what we do and vice versa. If we don’t get both right, then it’s not going to work and there’ll be some wasted money. And I think again, looking at return on investment or return on expectation, you’ve very much got to consider the case where how can we really do something in isolation and say that delivered that if there’s other influencing factors. You could spend a fortune on a store fit out, if we stick with the retail analogy, loads of POS, really good marketing, but if the staff aren’t very skilled and or they’re not comfortable in their uniform, then some of that money will be wasted really. When you do your measurement, do you look at a particular time frame?

Ken: It would depend on the metric that we’re focused on. So for every client, the productivity measure can be different. If it’s retail, it might be average transaction values. If it’s HR it may be staff turnover, attrition. So an implementation that we recently did for a retail client during the engagement stage, we unearthed that they had a customer trust issue and they were unaware of this themselves. We included consumer trust in the metrics that we had to improve. And as a result of the work done and incorporating consumer trust within the project objectives, it actually lifted the revenue within store.

But there’s many other things that impact your wellbeing and employee morale. It’s sick leave, it’s annual holiday allowance, it’s pay, so it can’t be solely put down to uniform. But in the stores we measured where there was a refit and these other projects going on, there was a tangible uplift. It’s not as simple as just the cost of the product.

Pete: Again, from our experience, just to build on what you’re saying there, we find that we’re looking at not just the results of a learning programme and the immediate sort of skill level that they’ve got, but we want to go to behaviour change. So we look to measure over maybe 12 weeks or beyond that they’re still doing the thing that the organisation needs them to do. So again, it’s not as simple as just saying we spent this one simple metrics happen. So I guess we should sum up, Ken, what would be your main things to think about when looking at defining how you’re going to measure return on investment?

Ken: So I think number one for the department you’re engaging with what are their KPIs and what are their challenges? If they can identify the metrics that they’re working with and the challenges they have, then you can build a programme around it. I think number two is be specific, identify those metrics. I think number three would be to look at the other departments and the other stakeholders that are going to be impacted too, either positively or negatively and work towards getting them engaged. And I think four would be build a solid business case and don’t forget to do a benefits review.

Pete: I couldn’t agree more with that. And I would just add that, as you say, it’s not simple. So I would say look at all the true costs that you should factor in. Also, even the cost of things that don’t work out, and keeping the product or the project alive during its life cycle. And then make sure you do that measurement at the end and convert that into something that everybody can understand. Ken really interesting to chat once again. It’s amazing to think two products that I thought were completely different have a lot of overlap and we share a lot of observations with clients. Really appreciate your time.

Ken: No, thank you Pete, That finishes off some of the things we’ve learned about RoI and RoE. Next up, in our final segment, we discuss a good people strategy, what it looks like, and the importance of aligning it with the business needs. See you there.

Pete: Our final conversation, ‘People Strategy: Building a Winning Team’, is all about how a well-crafted people strategy, can transform your organisation. We discuss adapting to diverse workforce needs, overcoming resistance to change, and aligning your people strategy with your organisation’s goals while avoiding being overly complex. We wrap up with a summary, covering being proactive and creating a dynamic team that really performs.

Ken, good to see you. The topic today is very much around people strategy. We both work with HR departments and we’ve seen lots of examples. So hopefully between the two of us we can share some ideas, what works and what perhaps doesn’t work. I guess we should start with what do you think are some of the key elements of a people strategy for an organisation?

Ken: Yeah, that’s an interesting one Pete. So I think a successful people strategy has to look at the employee life cycle. It’s easy to focus on one or two components, but the employee life cycle and the initiatives that are required to optimize it and extend that I think are really important. And the way, the reason I say optimize, is because if you’re extending the employee life cycle, you want to ensure your employees are performing.

Pete: I couldn’t agree more and there’s a lot said about retention, but one of the things, particularly with the more recent generations and the Alphas that are coming on course in a few years, one of the things beyond retention is when they’re onboarded, are they up to speed, happy and productive quickly and then do they stay productive? Because we know that the certain characteristics of generations are they don’t hang around quite so long. So maybe it’s not so much about attrition, but it’s more about effectiveness. And in a lot of organisations, people return as well. And I think that’s a very powerful thing. So what particular examples have you seen where maybe that whole life cycle hasn’t been considered and obviously had the negative impacts that you’d expect?

Ken: Well I think at the base of this we see two types of companies. We see companies that build their people around their corporate strategy and we see companies that build their corporate strategy around their people. And invariably those that build their strategy around their people are the most successful.

Pete: One of the other things I’ve noticed in some of the comments you’ve made is having that look across the whole strategy rather than just focusing on something that’s an urgent need now. You’ve got to step back and look beyond that 12 month period. I’ve seen also that really effective organisations seem to have strategies that they tweak and adjust a little bit more often than perhaps would have been the case in the past. And if your people strategy isn’t completely aligned with the business strategy and is a bit out of step, then you’re always reacting as a HR department rather than being proactive and actually driving from the front, if you like. Do you notice that in any of the organisations you’ve worked with of late?

Ken: Absolutely. And I think where they’re particularly challenged at the current time is the overlap of generations in the workforce. You briefly touched on it now, but the baby boomers are still in the workforce. Yes, a good percentage of them are now retired, but some are still in the workforce. You’ve got Generation Z, you’ve got the Millennials. And I think, you know, successful people strategy has to take into account that we’re only 4 to 5 years away from Generation Alpha joining the workforce. And if we think Generation Z have been difficult to recruit and retain, I think we could be taking it to the next level with Generation Alpha.

And let’s not underestimate the challenge that HR departments have currently got, because even if you look at uniform, what may suit or be appreciated by the baby boomer generation is quite different to Generation Z. Yeah, their requirements or what they perceive to be right is quite different. So HR have got a battle to try and juggle these different requirements to build one overall holistic successful people strategy.

Pete: I think it’s fair to say Ken, it’s getting more complex. But if you’re not thinking in a sophisticated way, you’re being left behind and you’re missing out on attracting and retaining all the best talent. And something I know that when we first met and started chatting, it was the interplay between all the strategic elements that was very important.

So you can have the best package in the world and you can even have really good pay. But the reality is I can help clients train all their people to have brilliant skills, but if they don’t feel comfortable in that uniform, they’re not going to perform. I can train brilliant managers to motivate their team, but if they’ve not got the right package or a uniform they feel comfortable in, or any other element or the values of the organisation are incongruous with their own, it’s not going to work. And I think the sophistication of the strategy and the adaptability of it is where I’m seeing organisations that are achieving the most and very much, as you say, putting the people at the centre of it because they are the most important part of the organisation.

Ken: What I would say is complexity isn’t met with complexity.

Pete: A little bit of simplicity but sophistication can go a long way. And certainly when we’re looking at return on investment or return on expectation measuring the things that you’re doing and figuring out what’s made the greatest difference can often reveal situations where a relatively modest spend is having a big impact.

Ken: I think it’s challenging for HR at times with the people aspect, particularly when you’re talking uniform, there’s sometimes a fear of change. Yeah, if I get this wrong, I’ve got 20,000 people that are going to be creating a lot of noise. So from an HR perspective, it can be quite challenging. But I think again, it should drive best practice in terms of identifying the project objectives, what are the metrics we’re going to look at, what am I KPId on, where have I got challenges currently, now how can the solution actually help me achieve the objectives, the departmental objectives. And that becomes the framework or the bones of a business case. And then you can work on the business case and get it to the point where you have some tangible numbers and metrics that you can deliver to the boardroom table.

Pete: How would you sum up then? What’s the difference between the best people strategies you’ve seen and the ones that aren’t delivering as much as they could?

Ken: So I think it’s important primarily to put people at the centre of your corporate strategy, not the other way around. Don’t treat them like numbers. They are important. And I think their wellbeing is important. People don’t mind change providing it’s positive change. There’s a fear of change and I understand why HR departments may find it difficult to drive change through fear. I think it’s important for HR to work on business case. If they can create a great business case, it helps to remove the fear of change. And if they can remove the fear of change, it will help them when they present their projects and solutions to the C and D-suite to get sign off.

Pete: I agree with all that, Ken. From my point of view, I would probably say that I’m seeing more alignment with the HR strategy and the business strategy so it addresses the business needs. More flexibility, tweaking the elements of the strategy to focus on the areas that will make the greatest difference and also looking across the strategy and seeing where each element interplays with others, and what’s really important now, but probably more importantly into the months ahead and looking forward to make sure it’s very much a proactive HR strategy, not a reactive one. Thanks so much for your time, Ken. Really appreciate that. Some interesting insights as ever when I talk to you.

Ken: Pleasure, Pete,

Pete: Thanks for listening, we hope we’ve given you some useful insights, and some ideas to consider. If you’d like to find out more about anything we covered, let’s talk, you can find us both on LinkedIn and via our company websites.