Acknowledgments from the Editors.
Principles of the ROI Methodology.
1. The Importance of Costs and ROI.
Why Be Concerned About Costs?
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Benchmarking.
Evaluation.
Cost Forecasting.
Efficiency.
Other Reasons for Monitoring Costs.
The Importance of ROI.
The Ultimate Level of Evaluation.
Types of Values.
ROI Is King.
The "Show Me" Generation .
The New Definition of Value.
Why ROI Now?.
Program Failures.
Increased Total Program Costs.
Trend Toward Greater Accountability.
Staff Support Managers' New Business Focus.
Evidence-Based or Fact-Based Management.
Limitations of Benchmarking.
Executive Appetite for Evaluation of ROI.
Why Forecast ROI?
Expensive Programs and Projects.
High Risks and Uncertainty.
Post-Program Comparison.
Compliance.
Final Thoughts.
2. Cost Tracking and Classification.
Cost Issues.
Pressure to Disclose All Costs.
Fully Loaded Costs as a Conservative Approach.
The Danger of Accumulating Costs Without Tracking Benefits.
Policies and Guidelines.
Cost Tracking Issues.
Sources of Program Costs.
Process Steps and Costs.
Prorated Versus Direct Costs.
Employee Benefits Factor.
Major Cost Categories.
Needs Assessment and Analysis.
Design and Development.
Acquisition.
Technological Support.
Delivery and Implementation.
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Facilitators' and Coordinators' Salaries and Benefits.
Participants' Salaries and Benefits.
Travel, Lodging, and Meals.
Facilities.
Program Materials and Fees.
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Evaluation.
Overhead.
Cost Reporting.
Cost Accumulation and Estimation.
Cost Classification Matrix.
Cost Accumulation.
Cost Estimation.
Case Study: Federal Information Agency.
Overview.
Problem and Solution.
Program Description.
Selection Criteria.
Program Administration.
Drivers of Evaluation.
Program Costs.
Final Thoughts.
3. The ROI Calculation.
Basic Issues in Calculating ROI.
Definitions Are Critical.
Annualized Values.
Benefit-Cost Ratio.
ROI Formula.
ROI Examples.
Example 1: Retail Merchandising Company.
Example 2: Global Financial Services.
Example 3: Healthcare, Inc.
Example 4: Metro Transit Authority.
Example 5: Midwest Electric.
Positioning ROI Evaluation.
Choosing the Right Formula.
Developing ROI Objectives.
Determining ROI Targets.
Other ROI Measures.
Payback Period.
Discounted Cash Flow.
Internal Rate of Return.
Utility Analysis.
ROI, the Profit Center, and EVA.
Final Thoughts.
4. ROI Issues.
ROI Can Be Very Large.
What Happens When the ROI Is Negative?
ROI Is Not for Every Program.
Concerns About ROI.
Cautions.
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Take a Conservative Approach When Developing Benefits and
Costs.
Make Sure That ROI of Programs Is Not Confused with Other
Financial Measures of Return.
Involve Management in Calculating ROI.
Fully Disclose Assumptions and Methodology.
Approach Sensitive and Controversial Issues with Caution.
Teach Others the Methods for Calculating ROI.
Recognize That Not Everyone Will Buy into ROI.
Do Not Boast About a High Return.
Choose the Place for Debates.
Do Not Try to Use ROI to Evaluate Every Program.
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ROI Myths.
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ROI Is Too Complex for Most Users.
ROI Is Expensive, Consuming Too Many Critical Resources.
If Senior Management Does Not Require ROI, There Is No Need to
Pursue It.
ROI Is a Passing Fad.
ROI Is Only One Type of Data.
ROI Is Not Future-Oriented; It Reflects Only Past
Performance.
ROI Is Rarely Used by Organizations.
The ROI Methodology Cannot Be Easily Replicated.
The ROI Methodology Is Not a Credible Process; It Is Too
Subjective.
ROI Cannot Be Evaluated for Soft-Skill Programs; It Is Only for
Production and Sales.
ROI Is Only for Manufacturing and Service Organizations.
It Is Not Always Possible to Isolate the Effects of a
Program.
Measurement of On-the-Job Activities Is Impossible Because
Post-Program Control of Participants Is Impossible.
ROI Is Appropriate Only for Large Organizations.
The ROI Methodology Has No Standards.
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Final Thoughts.
5. ROI Forecasting.
The Trade-Offs of Forecasting.
Pre-Program ROI Forecasting.
Basic Model.
Steps for Forecasting ROI.
Sources of Expert Input.
Securing Input.
Conversion to Money.
Estimating Program Costs.
Case Study: Retail Merchandise Company-Part A: Pre-Program ROI
Forecasting.
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Situation.
Proposed Solution.
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ROI Forecast with a Pilot Program.
ROI Forecast with Reaction Data.
Case Study: Retail Merchandise Company-Part B: Level 1 ROI
Forecasting.
ROI Forecast with Learning Data.
Case Study: Retail Merchandise Company? Part C: Level 2 ROI
Forecasting.
Cautions.
Advantages.
ROI Forecast with Application Data.
Case Study: Retail Merchandise Company? Part D: Level 3 ROI
Forecasting.
Advantages.
Guidelines for Forecasting.
If You Must Forecast, Forecast Frequently.
Consider Forecasting an Essential Evaluation Tool.
Forecast Different Types of Data.
Secure Input from Those Who Know the Process Best.
Understand That Long-Term Forecasts Will Usually Be
Inaccurate.
Expect Forecasts to Be Biased.
Commit to the Hard Work of Serious Forecasting.
Routinely Review the Success of Forecasting.
Be Aware That Assumptions Are the Most Serious Errors in
Forecasting.
Keep in Mind That Decision Making Is the Purpose of
Forecasting.
Final Thoughts.
Index.
About the Authors.
Jack J. Phillips is chairman of the ROI Institute, Inc. A world-renowned expert on measurement and evaluation, Phillips provides consulting services to Fortune 500 companies and workshops for major conference providers throughout the world. Phillips is the author or editor of more than thirty books and more than one hundred articles. Lizette Zuniga is senior consultant with the ROI Institute, Inc., and CEO of LCZ Integrated Solutions, Inc., a research and consulting firm focused on organizational improvement and accountability. With more than fifteen years of professional experience, Zuniga has expertise in leadership and team development, conflict resolution, diversity training, organizational culture assessment, merger integration, strategic planning, program evaluation, ROI, survey design, and needs assessment. The ROI Institute, Inc., is a benchmarking, research, and information sharing organization that provides consulting services, workshops, and certification in the ROI Methodology. Widely considered the leading authority on evaluation and measurement of learning and development in organizations, the ROI Institute conducts workshops and offers certification for thousands of practitioners through a variety of strategic partners.
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