Tag Archives: roi

My 17NTC Report

NTEN Conference

Photo: NTEN

I’m back from NTEN’s annual conference, the biggest one ever with 2300 attendees here in DC. NTEN’s signature NPTech event continues to pull off the hat trick of continual growth, consistent high quality content, and a level of intimacy that is surprising for an event this large. It’s a big, packed tech conference, but it’s also a few days with our welcoming, engaging community. Here’s my recap. 

I attended three quality sessions on Thursday:

  • I learned much about the challenges in offering shared IT services to nonprofits, with an in-depth look at the work of the Massachusetts Legal Assistance Corporation, who offer discounted, centralized IT to legal aid programs. Their biggest lessons learned have been about the need to communicate broadly and bi-directionally. Shared services benefit the budget at the cost of personalization, and clients need to both understand and have a say in the compromises made. You can learn a lot more by reading the Collaborative Notes on this session.
  • Next, I learned how to move from a top-down, siloed organizational culture to a truly networked one (with great wisdom from Deborah Askanase and Allison Fine, among others). A great example was made by Andrea Berry, whose small foundation, Maine Initiatives, recently moved to crowdsourcing grant proposals, a move that is threatening to traditional funders, who want more locks on their purse-strings, but empowering to the community. Here are the notes.
  • Finally I attended a powerful session on managing your nonprofit technology career, with great presenters (and friends (Johanna Bates, Cindy Leonard, and Tracy Kronzak (who just landed a gig at Salesforce.org). They made great points about how imposter syndrome can hold people back – particularly the “accidental techies” that come to their technology career through nonprofits. Their advice: plow through it. You’ll question your competence, we all do, but the trick is to be confident anyway. I stayed after the session helping out with some of the tough questions from people who are trying very hard to move into tech positions without the degrees and focused expertise sought. At nonprofits, we tend to be generalists, because we’re expected to do everything. Notes are here.

Friday was the day for my two sessions. In the morning, I presented with Edima Elinewinga of the U.N. Foundation on Calculating Return on Investment (ROI), where we made a solid case for not spending money without thoroughly understanding the financial and non-financial returns that we can expect. The overall pitch is that an organizational culture that attempts to predict the benefits of their investments, and checks their work along the way, will get better at it. The toughest questions were about measuring hard to quantify benefits like improved morale, or advocacy/outreach, but we had some gurus in the room who knew how to do some of these, and an overall pitch that , while not everything can be translated to dollars, tracking the soft benefits is important. The soft ones might not justify the purchase, but they should be recognized as benefits all the same. Notes are here. And here are the slides:

My second session, with Dahna Goldstein, was a timely one: Leading in Uncertain Times. With the current political climate having potentially deep impacts on nonprofits (including my own), we weren’t certain how this one would go, but we set out to offer helpful advice and best practices for rolling with and surviving hard times. It ended up being, in many ways, a fun session, despite me having three slides on “how to do layoffs” alone. We also had a roomful of executives, which helped, and an enthusiastic conversation. Here are the notes, and here are the slides:

On Saturday, I had a blast attending Joshua Peskay and Mary O’Shaughnessy‘s session on IT Budgeting. After covering all of the nuts and bolts of putting together an IT budget that, in particular, identifies and eliminates wasteful spending, they broke the room up into groups  each putting together a quick tech budget. I was drafted (along with fellow senior techies David Krumlauf and Graham Reid) to act as the board charged with approving or denying their budgets, Project Runway-style. I now think that I’ve missed my calling and I’m looking for someone to produce this new reality TV show. Here are the notes.

Additional highlights:

  • #ntcbeer! was a bit smaller than usual this year, due largely to my not getting my act together until Jenn Johnson swept in to save it. Didn’t matter – it was still the fun, pre-conference warm-up that it always ends up being. Next year we”ll go big for the tenth annual #ntcbeer in new Orleans.
  • Dinner Thursday was a pleasant one with friends old and new from Idealware, TechImpactBayer Center for Nonprofits, and more, including my traditional NTC Roomie, Norman.
  • Friday morning started with an Idealware reunion breakfast at the posh AirBNB that the Idealware staff were staying at. Great to see friends there, as well.
  • Everywhere I turned, I ran into Steve Heye. Mind you, with 2300 people at the event, there were lots of friends that I never saw at all, but I couldn’t turn a corner without seeing this guy. What’s up with that? Anyway, here’s Steve, Dahna and I giving a  fax machine the whole Office Space treatment:
    Odffice Space Fax Machine Bashing

I’ll admit at the end here that I went into his NTC, my eleventh, wondering if it was getting old. It isn’t. As usual, the content was rich, and the company was excellent. Nobody throws a party like NTEN!

How to Measure the Value of an IT Investment

This article was originally published by Techsoup on July 8th, 2016

 Person's hand holding several dice that are about to be rolledSome say life’s a gamble. But gambling can be very random, as in the rolling of a die, or very scientific, as in the calculation of odds and percentages. Investing in technology should not be a gamble, in as much as you can predict what it will do for you. In the standard business lingo, we call this prediction “return on investment” or “ROI.” And whether you calculate that with all the vigor of two college students on a weekend trip to Reno, or a scientist who deeply understands the odds, is important. In this article, we’ll discuss the many factors that go into a fully informed determination of the ROI for a technology project.

What Is ROI?

The simplest definition of ROI is that, for any project or purchase, it’s the amount saved or realized minus the cost to invest. If we spend $75 for a new fundraising widget for our website, and we make $125 in donations from it, then our return on investment is $50.

Maybe.

Or maybe not, because we invested in web developer time to deploy the widget to our website and staff time to process the donations. Plus, we spent a portion of each donation on credit card processing fees, right?

Not Strictly a Financial Formula

So ROI is not a strictly financial formula. Actual ROI is based on many factors, including hard-to-quantify things such as organizational culture, training, and readiness for adoption. The benefits of a major tech investment are proportional to the readiness of your particular organization.

Let’s try another example. We’ll spend $2,000 to upgrade to a new version of our fundraising system. It boasts better reporting and data visualizations, which, per the salesperson, will allow us to increase our donations by 10 percent. We think we’ll make $10,000 a year in additional donations, and expect the upgrade to benefit us for two years. So the strictly financial return is $18,000 ($20,000 new revenue – $2,000 upgrade cost).

But that 10 percent increase isn’t based solely on having the new features available in the product; it’s based on using the new features strategically, which your staff might not know how to do. It assumes that the software will be configured correctly, which assumes you are fully cognizant of your needs and processes related to the information that the system will manage. And it assumes that you have a staffing level that might be larger than you can afford.

It Doesn’t Start with Dollars

The concept here is pretty simple: it is easier to bake a cake from a recipe if you buy the ingredients beforehand. Then you need to have all of the required mixing implements and receptacles, clear the necessary counter space, and know how to turn on the oven.

Similarly, successfully calculating the return on investments requires having a complete picture of what you will be investing in.

Ask Yourself These Four Questions

  1. Do I understand what improvement this investment will result in and/or the problems it will solve?Core to measuring the return on the investment is knowing what it is that you have to measure. That will be some quantifiable amount of anticipated revenue, productivity gain, staffing reduction, or increase in clients served. You should know what those metrics are at the start of a project.
  2. Have I thoroughly considered the staffing changes that this investment might enable or require?For any large investment, like a new fundraising database or constituent management system, or a new, complex initiative, you want to know upfront how your day-to-day operations will be impacted. A new system might automate laborious processes, allowing you to repurpose staff. Or it might well require additional staffing in order to maximize the return. Those costs or savings are a key factor in the ROI.
  3. Do I have the necessary buy-in from the board, executives, and staff that will result in a successful implementation?Key to any large project’s success is having the support from the key decision makers. If you’re in middle management, and your initiative is not well understood and appreciated by those in charge, then there’s a significant chance that the project will fail. As right as you might be that your organization would benefit, again, the return on investment requires that the organization is invested.
  4. Have I identified any required training and ensured that we have the resources to provide it and the time to take it?So much of the value in a new system is derived from people knowing how to use it. In resource-strapped nonprofits, training time is often seen as frivolous or less important than whatever the crisis du jour might be. Don’t let that happen, because what you get out of a system is all contingent on being able to use it well and strategically. Without training, people will tend to try and emulate what they did before the new system was in place, and that will more likely reduce your return than produce it.

Tools and Tactics

There are some techniques for calculating ROI. As noted above, you should start with metrics that identify your current conditions and can be tracked after implementation. These might be dollars received, hours spent doing tasks, or number of employees dedicated to a process. Consider this your baseline. From there, you can forecast a scenario based on the advantages that you anticipate having upon completion of the project.

For example, if your current fundraising system can’t track multiple donors at the same address, then you’re probably expending time and effort to track such things in creative ways. A system that properly supports “householding” will eliminate the workarounds that you’ve created to maintain that data. You can estimate the time saved.

Once completed, these before and after numbers will help you quantify the anticipated return, as well as guide the implementation. That’s because the forecast is a set (or subset) of your goals.

  • Be sure to track both short- and long-term impacts. One basic calculation is a 5- or 10-year financial analysis. It’s not uncommon to have increased implementation costs in the first year, so tracking the annual cost fluctuations over the expected life of the investment will give you a better picture of its value.
  • For example, say you decide to invest in a donor tracking system, replacing a laborious task of tracking donations in Excel. Your current annual fundraising is about $1 million. You have reasonably estimated that the new system will net you an additional $50,000 a year, after a two-year ramp-up phase with the system. It’ll achieve that via cost savings due to efficiencies realized and increased revenue based on superior fundraising tools. Here’s what a 10-year analysis might look like:
Example spreadsheet showing ten-year analysis of costs, revenue, and net revenue

Other things might impact revenue as well, such as improved marketing, so we’re only tracking anticipated revenue associated with this investment.

Finally, don’t work in isolation. Talk with peers who have done similar projects. Find out what worked for them and what didn’t, and what successes they were able to measure. Much of this forecasting is based on speculation, and your job is to fact-check that speculation and get it closer to reality as much as you can.

Checking Your Work

As noted above, you should start with metrics that identify your current conditions and can be tracked after implementation. These metrics could be dollars received, hours spent doing tasks, or number of employees dedicated to a process. Checking your work may seem unnecessary, as the dollars have already been spent, but tracking your progress is the best way to improve on calculating ROI on subsequent investments. You can learn a lot, not only about the particular project, but about your organizational effectiveness as a whole.

The Secret to Calculating ROI

This is the secret: it’s not the return on the dollars spent. It’s the improvements in your organizational capacity and efficiency that can be made if you develop a culture that can predict which investments are worthwhile.

Further Reading

Image: Twinsterphoto / Shutterstock