"The emphasis should be on why we do a job"
W. Edwards Deming
You can't understand it unless you can measure it - directly and precisely. We will not be able to engineer greater productivity in people without relatively accurate and precise, that is valid and reliable, means of assessment. In the world of work, assessment procedures should be organized in a coherent system of procedures for collecting, interpreting and applying information; Tom Gilbert.
One cannot adequately engage in evaluation at the end of a project unless a thorough analysis has been completed at the beginning of the project. It is impossible to evaluate whether training impacts on-the-job behavior unless one has first determines through analysis what behaviors should be added, changed, or deleted. Likewise, one cannot evaluate return-on-investment unless one has identified during analysis in what the organization is investing. Finance and how to measure the worth of performance is the area in need of the greatest attention. It is important to incorporate planning, design of evaluation results and return-on-investment (ROI) in the beginning of every performance improvement project so you can influence the business case. Measurement and evaluation should be part of every human performance system. An old adage says, "what gets measured get managed". Simply put, what gets measured stands a better chance of becoming successful within the context of an applied strategic business plan. If we are not capable of measuring the true value of a performance improvement project, then we cannot begin to appreciate in quantifiable terms its true potential. The evaluation process must accommodate the changing economic times created by the information age and globalization. It is important to become familiar with the most significant impacts on long-term business growth and development. These aspects include organizational development and organizational effectiveness. It is critical to ensure performance improvement metrics are recognized and valued on an equal footing with other business metrics routinely used by the CEO and management to ensure an equitable position with key members of the senior management team. The metrics must measure the ROI in human capital to the organization. Learn how to plan and design in a way that you can measure results and ensure measurement is done well. A key feature of performance technology is that it is recursive; it provides the means for self correction. The North Star--the means by which the evolving design is kept on course, is continuing feedback and evaluation. Become comfortable with a model and a process for measuring ROI as well as forecasting ROI and business results. Learn how to develop a solid business case that can show why decision makers should choose a given Human Performance Improvement (HPI) solution to improve utilization of financial resources. Connect measuring success with planning for success. Ensure HPI project credibility and be able to affect progressive change within organizations. Adapt to planning and designing for improvements that can prove their effectiveness in supporting the business goals and financial health of an organization. Evaluation includes but is not limited to: Can your employees perform tasks correctly at the end of training? Are they performing those tasks three months later on the job? If not, why not? Learn that although Worth = Value - Cost, how to determine value and how to determine costs. Learn about The Potential for Improving Performance (PIP). It is the ratio of exemplary performance to typical performance. Do you have potential for improved performance in your organization? How much do you have and what is it worth? Would improved performance help you better accomplish your business goals? Worksheets are available for both.
Learn how-to:
- Maximize value and minimize cost.
- Implement and evaluate intervention solutions on human performance.
- Design ROI measurements and evaluation as part of the business case initial phase of every project.
- Ensure the method of measurement is included in the solution proposed.
- Include ROI data and sources in the initial analysis and then return to a know data source that has an existing baseline and an established method of measurement
- Produce a plan for implementation of evaluation of interventions solutions and use of data from assessment of post-intervention performance.
- Use measurement of ROI to enable reporting of success or failure and the degree to which either condition was met.
To create profits, organizations make strategic investments that generate positive cash flows over the life of the investments. The best figure of merit to use in calculating ROI is Net Present Value (NPV) because is uses all cash flows for the project discounted to the present time. NPV = present value of net cash flows. NPV is an indicator of how much value an investment or project adds to the value of the organization. NPV is a standard method for the financial appraisal of long-term projects. Used for capital budgeting, and widely throughout economics, NVP measures the excess or shortfall of cash flows, in present value (PV) terms, once financing charges are met. NVP is the most comprehensive and accurate decision making-tool available for business executives. Because most Chief Financial Officers (CFOs) have a strong finance background, using NVP means you are speaking their language. Investments need to be evaluated in today's dollars. Cash flow analysis determines the flows and the NVP technique values them in today's dollars. In that way different projects can be compared regardless of timing. The basic idea it remember is: a dollar today is worth more than a dollar received in the future. The further into the future a dollar is received, the greater the uncertainty that it will be received (risk) and the greater the loss of opportunity to use those funds (opportunity costs). Accordingly, cash flows received in the future will be discounted more steeply depending on the riskiness of the project. The evaluation of any project depends on the magnitude of the cash flows, the timing, and the discount rate. The risk of the project should determine the discount rate. Even if an NPV analysis justifies a project, there may be strategic reasons that overshadow it.
Tip: Always work with the client's budget specialist to calculate NVP when calculating potential ROI of a project.
For any questions, comments, concerns, work requests, or to schedule in-house workshops please send email to: doug@dougmead.com,