6 min read
In some of our other blog posts, we talk about the importance of arming yourself with data. And as an HR professional, you should always be compiling useful, relevant data to help drive forward your programs. But you should also be using that data to help you create and present an ROI (return on investment) and VOI (value on investment) to your board. Whether it’s for a new benefit, a recognition program, an HRIS system or a communications portal, presenting these can help you get your board on board. They answer the key ‘why’, as in, why spend the money, time and effort on this new HR program?
So what is the difference between these measures and which is better? The simple way of explaining them is that ROI focuses on tangible measures (e.g. sales, revenue) and VOI focuses on intangible measures (e.g. engagement, turnover). As to which is better, I believe that in order to answer the question ‘why’ you need to present both. Some say that you should shake off ROI and embrace VOI, but I believe they both have an important and significant part to play, and should be mixed together for the perfect recipe for success.
By calculating both the ROI and the VOI of your programs, you’ll present business-focused evidence on the positive returns on investing in people and HR programs, which is ultimately the recipe we are trying to present and serve to our board and our business.
Here’s why you should develop a methodology process for ROI and VOI:
In theory, calculating the ROI and VOI for an HR program is pretty straightforward. You basically look at the cost of the program and compare it to the savings (either tangible or intangible) which the program would return, thus showing the return/value on the investment for the program. The cost is usually quite easy to calculate, but the savings, especially intangible savings, can sometimes be a challenge.
You sometimes need to ‘think outside of the box’, finding ways to quantify what you believe or estimate the savings will be. For example, about 10 years ago I was asked to present the ROI for allowing our employees to work from home. This was when it was still uncommon to do this, so when I asked our consultant to share with me figures on these savings they told me that there were no such numbers. As one who never walks away from a challenge, I found a way to quantify these intangible savings, looking at factors such as savings on office space, office equipment, power, etc., and went on to show how employees would be more productive working from home. It wasn’t perfect, but it did the trick to answer the question ‘why.’ (And yes, we did provide more teleworking at a result!)
By paying attention to the ROI (and VOI) of your programs, you’ll ultimately be able to answer that all-important question of "why." Your board, your CEO and your business partners will take your programs more seriously as a result, and you’ll have the flexibility to expand upon your great ideas. You’ll also be able to pinpoint - without emotion - what’s working, and what isn’t. And that’s key to implementing any HR program.
What other factors are you considering when you measure your ROI and VOI?
Debra is our Group Reward Director at Reward Gateway. She's our Rewards guru, having over 20 years experience as a rewards leader, speaker, teacher and an author of a book on employee communications.