May 8, 2012

Measuring Engagement ROI – Getting Started

As an added value to our readers, we will include from time-to-time posts from guest authors. We hope you will find their viewpoints informative, engaging and relevant to the issues you face in your own business. Because ROI is of particular urgency in today’s economic climate, Marketing Innovators will be focusing increasingly on this area. With that in mind, we’ve invited Todd Hanson, president and founder of the ROI of Engagement Resource Center to be our first guest blogger. 

Good news. Labor productivity continued to increase in America throughout 2011, according to the Bureau of Labor Statistics. Some of this improvement is fueled by innovation and technology. An unidentified portion of this improvement has come from a practice that originated during the Great Recession of 2008: increased expectations placed on the current workforce.

We’ve all seen it. Reduced workforce, longer hours, higher demands, lower or non-existent raises and trimmed benefits. It isn’t a surprise Gallup has found that 71 percent of American workers are “not engaged” or “actively disengaged” in their work.

As the economy improves, smart organizations are shifting their strategy and beginning to actively invest in their people. We see it in renewed commitments to people performance management initiatives, namely incentives, rewards, recognition and loyalty programs.

Measurement Gap

When it comes to large investments in people, conversations frequently turn to return on investment or ROI. It’s a fair question. When organizations invest millions, they typically expect a financial analysis. Unfortunately, little action has been taken in the past to provide an objective answer.

Fear has been a frequent obstacle. What if measurement reveals poor results? Not knowing where to begin has been another challenge. Measuring ROI on traditional capital investments can be rather straightforward. Measuring results of an investment in people is a whole different animal.

ROI MethodologyTM

Getting started isn’t that hard any more. Over the last 25 years, the ROI Institute has developed and refined measurement and created a methodology that provides consistent and credible results. One of the secrets has been a logical approach to categorizing a myriad of possible metrics into five levels. The five levels include the following:

  1. Reaction and Planned Action
  2. Understanding and Learning
  3. Application and Implementation
  4. Business Impact
  5. Return on Investment

Using this approach to organizing program objectives becomes beneficial when you consider the need to achieve success with Level 1 in order to assure success with Level 2 and so on, right up to Level 5, ROI. In other words, we don’t just measure business impact and ROI without understanding what is going on in the heads and hearts of participants.

Another key to success with this methodology is the philosophy surrounding its use. When used properly, it serves as an effective process improvement tool. During the evaluation of a program, barriers and enablers to success will be identified. The real treasure to be found in identifying barriers, because once gaps are identified solutions can be developed and deployed.

The Process

Another benefit to the ROI Methodology™ is that it prescribes a step-by-step process to complete the evaluation of a program. Specifically, it provides a process to plan the evaluation, collect data, analyze data, calculate ROI and develop a report.

This process takes a seemingly complicated task and makes it doable. In fact, the ROI Methodology™ is used by thousands of organizations, including Marketing Innovators, who guide clients through the process in order to measure ROI for a multitude of programs. The net result is enabling more companies to build the business case for investment in their people.

In my next post, I’ll explore how to get started and make an investment in measurement pay off.

What are your thoughts on Todd’s post? Are you measuring the ROI on your engagement efforts? Let us know, using the text box below.

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