Re: Weighing the benefits of productivity improvements #value


Andrew Gent <ajgent@...>
 

Yao and Bill,

With improved enterprise search ... knowledge workers can reduce the amount of the time spent on search ... a saving 10% of the time (1 hour per week) can be translated into potential saving of $1,425 a year per worker.

I am going to play devil's advocate here. Not because I don't like your arguments. I have used almost the exact same argument myself. But I have also had the following discussions with senior business managers. The conversation goes something like this:

  • We just spent $XXX thousand dollars last year on a new search engine. Where are the savings from that improvement?
  • 1 hour a week is 2.5% of a 40hr week. Show me where I am getting a 2.5% increase in production or performance? (Not theory but actual improvements in the bottom line.)
  • "... a saving of 3,000 x $1,425 = $4,275,000" $4 million return on an investment of what? -- say 4 people for a year, approximately $500K -- that's an ROI of 700% in one year. Who are you kidding? Real ROI for things like SAP are 200-400% over a 6 year period, not even breaking even for 2-3 years. I don't believe it.
Now having said all that, it occurs to me that there are two types of conversation like this. The justify-your-program discussion with your direct manager and the justify-your-expenditure discussion with upper management. What I have just described is the latter, which is why justifying KM programs is so difficult. Saved time and unmeasurable performance improvements simply don't go over in budget discussions.

However, for justifying your program to your direct manager, the argument concerning saved time is important, because usually that person is also managing the people whose performance you will impact. So I would suggest three things for that discussion:
  • Keep the argument about saving time. This has meaning to that manager (since they directly manage employees such as yourself)
  • Don't bother getting into the theoretical monetary savings, because it is meaningless. That manager is not going to see that money, so it is a waste of time.
  • As Stan has suggested before, use multiple arguments. Argue the saved time. Also provide supporting evidence -- emails, forum postings, performance review input -- from people who say your program has helped them save time or be more effective. It is best to  collect this information on an ongoing basis so you have it handy when you are asked to justify your program. It is hard-to-impossible to collect in a hurry at the last minute.
Best,

Andrew Gent
ajgent@...
(603) 888-0370


 

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