A return on investment (ROI) forecast is exactly that: a forecast. While we can make good assumptions, true ROI can only be calculated in retrospect, and even then it's not a controlled environment and many variables are involved that are beyond our reach.
However, a ROI forecast is still essential for evaluating whether to proceed with an investment in Appraisd or any other solution and it will help to set expectations with stakeholders internally.
To many organisations, it's unthinkable to go without a proper performance management system, and so the need for the ROI calculation goes away. However, to the many HR professionals who've been asked to put forward a business case, we offer a comprehensive ROI calculation spreadsheet. Here's a preview:
A similar problem exists in the field of marketing with attribution. Which adverts produce the most revenue? As John Wanamaker said,
Half the money I spend on advertising is wasted; the trouble is, I don't know which half.
What are the predicted returns?
When using Appraisd to provide one-to-ones, performance reviews, feedback-giving and objectives-tracking, clients can expect the following improvements:
- Employees use Appraisd to get feedback faster, increasing engagement with their work and enabling them to increase their performance and productivity. The value of the work they produce per year increases.
- Employees attain a greater sense of purpose through more frequent one-to-ones with their manager and greater clarity on their objectives. They are less like to leave the company.
- Managers can more easily spot employees likely to leave the company and in some cases avoid thoses costs.
- Better understanding of diversity and inclusion which leads to improved business performance and meritocratic promotions within the company.
- Increase in employer brand (eg through Glassdoor reviews or support an Investors in People application) making it easier to hire new employees at reasonable rates and quickly.
- Ability for senior management to reduce exposure to the risk of sudden departure of key personnel without suitable successors.
- Value of time saved using when removing the old, cumbersome system.
In our calculator, though, we have focused on some key measurable figures: costs due to absenteeism, costs due to employee turnover/churn, and revenue per employee increase due to productivity.
What are the costs?
The costs are
- licence fees
- cost of time spent by employees conducting 1:1s, setting objectives, giving feedback and so on.
- cost of HR time implementing Appraisd vs cost of managing the old paper-based or online clunky system
Feel free to download the Performance Management and Engagement Calculator to use it for yourself or to see a worked example for a 100-person organisation.