Don’t talk about ROI, but the Cost of Continuing as We Are

The first step in an effective change effort is the business case. Unfortunately, it’s easy to get caught in the trap of establishing a case for Return on Investment, and that’s the wrong place to start. Don’t get me wrong. A good change effort should absolutely deliver business value that can be measured in ROI. That’s just not the place to start.Leaders hear proposals for improvement all the time, and their job is to select the ones that will give them the most value for the cost. The challenge here is to get a really good handle on the Continuing Cost of Poor Quality. It needs to include both the overt and the hidden costs, and it needs to be converted to dollars.

Things to consider:

ongoing rework (whatever you have to do more than once)
lag time/wait time between two dependent activities
context-switching time from multitasking workers (time wasted resetting from interruptions; generally adds 50% to a task)
absenteeism (lost opportunity costs)
turnover (new hire, train, and mentoring costs to productive work, plus amortized lost opportunity from partially ramped-up employees)
cost of poor business, decision, or technical processes (too much or too little)
unnecessary meeting costs (wasted time in meeting with little value)
other…(no doubt you can add some here.)

The point here is that most people, most of the time, are more responsive to a perceived threat or negative condition than a positive one. You want to be able to say,

“We’re now bleeding #xx annually in rework, $yy in absenteeism, $zz in current turnover with an expectation of x% increase next year, and the risk of losing our top three customers at 50/50. Are you okay with that?”

If the answer is “Yes”, then no case for ROI will work. If it’s “No”, then you now have the start of a useful conversation.