Part 3: ROI Components - Benefits, Metrics, Value, and Costs


What benefit does the technology offer our staff or clients?


· How much time or expenses can we save?
· Analysis of work processes, estimated costs


· How will this investment contribute to program goals and results?
· How will this investment contribute to effectiveness of staff to serve clients?

Efficiency and effectiveness go hand and hand.


  • Benefits clearly answer the question, "What does this investment provide to our clients, staff, or organization?

  • Benefits should describe how the technology enhances programs or improves services or increases efficiency through reduced costs or increased revenue or improve effectiveness.

  • When gathering data to prepare a ROI analysis, include all benefits regardless of whether or not they initially appear difficult to support or quantify

Effectiveness: Better Use of Time To Serve Clients or Improve Quality of Work


Efficiency: Time or Cost Savings



Metrics are a unit of measure. Value is the process of quantifying the benefits with a metric and if possible, translating into dollars. Tangible benefits are those we can easily measure and convert. Intangible measures are the benefits or detriments directly linked to the IT project, which cannot or should not be converted to monetary units, but may be quantified.

Dollars are not the only metric of value, the best metric will align the investment with its intended objective. Intangibles may truly make a difference in the success of the project and enhancing the organization. These include staff effectiveness, morale, customer satisfaction, business relationships, and others. Some of these are clearly more quantifiable than others, but all are important to consider in a ROI analysis. Intangible measures are often noted in the upfront proposal and tracked as part of project implementation.

What is tangible versus intangible?


Tangible: Benefits that are required for organization operation and are readily visible, rigorously quantified, and are presented as a line item on a budget.

  • Objective
  • Easy to quantify
  • Easy to assign money values
  • Common measures
  • Credible with executive directors

Intangible: These are key to organizational effectiveness, but may be difficult to quantify and are not tracked through budgeting or accounting procedures.

  • Subjective
  • Difficult to measure and quantify
  • Difficult to assign monetary value
  • Less credible as a performance measure
  • Usually behaviorally oriented

Some Typical Intangible Measures
These measures are often presented as intangibles. For each measure, there may be exceptions where the organization can convert the data to monetary value.
Job Satisfaction
Job Commitment
Work Environment
Employee Retention
Team work
Client satisfaction
Client complaints
Client response time

"Anything can be measured in a way that is superior to not measuring it at all" - Gilbs Law
Conversion from Intangible to Tangible
1. Does an acceptable, standard monetary value exist for the measure?
2. Is there a method that can be used to convert the measure to money?
3. Can the conversion be accomplished with minimum resources?
4. Can the conversion process be described to an executive director and secure their buy-in in two minutes?

In Glib's Scales of Measures: How To Quantify, he suggests:
You should learn the art of developing your own tailored scales of measure for the performance and resource attributes, which are important to your organization or system. You cannot rely on being ‘given the answer’ about how to quantify. You would soon lose control over your current vital concerns if you waited for that!.
His point that some intangible may be quantified, but it takes some discussion around the attributes. He gives an example of quantifying love.


ROI by the Numbers

Now it is time for the financial calculations that answer these questions:

  • What is the total cost of the technology?
  • What is the cost of alternatives or not investing?
  • Can we afford this technology?
  • Will it pay for itself?

How can nonprofits do the traditional ROI Math that is designed for “for-profit” corporations?

The traditional calculations:

  • Benefit/Costs Ratio: A benefits/costs ratio compares the annual economic benefits of the project to the cost of project. A BCR of 2:1 would indicated that for each dollar spent on the project, two dollars were returned as benefit. Note, there are not standards for what constitutes an acceptable benefit to cost ratio.

  • ROI Formula: This takes the net project benefits divided by the cost and converts it into a percentage by multiplying the values by 100. This formula expresses IT investments similar to how other investments are articulated on financial statements.

Example: TDD/TTY
A legal services organization recently switched from analog TDD machines that had to be maintained on an old style analog phone line. They looked at the benefits of moving to a software solution where staff could access the TDD from their desktops. They calculated the cost of keeping the analog phone lines and the staff time that was wasted running around the office to use the TDD machine. ($75,000) They compared that against the cost of software licenses and one digital phone line ($45,000). They also identified a few intangibles like improved service to clients and improved staff productivity (better use of their time to work with the client than running around the office to use the TDD machine.)

Centralized In-Take System
The legal services organization invested in a centralized in-take system several years ago that ultimately decreased costs and improved services to clients. The service was so successful that they saw a major increase in calls. So much so that clients were being put on hold for too long a time. Complaints soared.

They further analyzed their complaint log to determine the nature of the complaints. It was the fact that clients had to wait on the phone on hold for over 20-30 minutes until they got served.

Researched software solutions that allowed the client to push a button and hold their place in the line and the system would call them back. That way they didn’t have to sit there with the phone plastered to their ear. Researched how many additional screeners required to reduce waiting time to an acceptable level.

Example: Video Conferencing System

A statewide legal services organization wanted to invest in a video conference system to facilitate communication, training, and program delivery between regional offices. It was a large upfront investment over $100,000. They analyzed the staff cost of travel time and gas against the cost of the system over 3 year period. They also estimated the income that could be generated if the “saved staff time” were applied to direct program work versus travel.

This same organization looked at the outcomes of being able to do more trainings between offices. They also do a lot of staff mentoring. The video conference system allowed them to assign mentors based on expertise versus geographic location. That provided a huge value. They also saw value in improved client service. For example, if a client came into the office with a Medicaid issue, but the person with expertise was in an office an hour way. The client would have had to wait to schedule an appointment or drive over. With the video conference system, they are able to serve the client faster.

They also look at the cost of the investment and ask what is the impact if they spent this money on something else? For the conference system, they compared the cost/benefit of investing in more staff.

Some tips from Legal Services field

  • Compare the costs of different solutions
  • Compare the costs of not doing the project
  • Don’t use numbers alone, show how the investment supports goals