How to Calculate ROI on a Project Using Business Process Management

Editor's note: this transcript was generated by AI and has been lightly edited for clarity and relevance — some sections have been shortened or removed, and minor transcription errors corrected.

Full transcript

00:00:44Guest

Why is calculating ROI on QMS projects so difficult? Direct ROI is reasonably straightforward to calculate, but still requires a judgment on what can be directly attributed to the project. Indirect ROI is much harder to quantify — this means the ROI often just isn't quantified, which is a real shame, because the returns are generally excellent.

00:01:14Host

To calculate the direct ROI on any given project, the cost is compared with any cost savings made or increases in profit.

00:01:29Host

Firstly, the cost of the project needs to be calculated — external costs for the QMS software, both initial and ongoing, and the cost of external consultancy and training.

00:01:54Guest

It also includes the cost of any internal resource used — mostly the time people need to spend on the project, not only the process improvement team, but subject matter experts and anyone else connected with the project.

00:02:14Guest

Calculating the cost of time requires a judgment on how a given employee's time is costed. Most organisations have already agreed hourly charging rates for differing bands of employees.

00:02:31Guest

If yours hasn't, don't make this too complicated — just calculate three cost bands for junior, senior, and middle salaried employees.

00:03:24Guest

But this is all just words. How about a real example of ROI in action?

00:03:31Guest

Taking a process-led approach using the Triaster platform, Interserve developed a mobilisation tool specifically to ensure new business is won and delivered to a reliable margin, whilst delivering a better service to Interserve's customers.

00:03:46Guest

For Interserve, calculating the increased profits is a matter of calculating the positive impact of their mobilisation tool on cost containment and the time taken to mobilise — this certainly needs discussion, judgment, and agreement with the bid and mobilisation teams.

00:04:08Host

Other Triaster customers have set up specific bid systems to support large tenders, which is particularly key for joint ventures.

00:04:29Host

When it comes to direct cost reductions, these are most obviously seen in a reduction in audit costs. Since 2012, Skanska UK has saved £40,000 in annual audit fees for their ISO assessment — this is an easy ROI to calculate.

00:04:51Guest

Then there's how a QMS drives efficiency. Every time a process is improved to cut out a wasteful step, costs are saved. Every time duplication is removed, costs are saved.

00:05:16Host

One cost saving that is very difficult to calculate, but which is likely to add up to many hundreds of thousands of pounds for large organisations, is the time saved every time an employee is able to quickly find documentation just by going into the QMS.

00:05:50Guest

This brings us to indirect ROI — much harder to calculate, but the benefits shouldn't be ignored. It can come from reducing risk, so that a quality failure is avoided and the reputation of the brand is protected.

00:06:14Guest

And from regulatory compliance — achieving compliance with ISO, Sarbanes-Oxley, the FCA, or whoever regulates your sector obviously delivers a great deal of value. ROI can also be calculated for quality, if you set out the issues that might arise if quality deteriorates.

00:06:36Guest

Return on investment can be one of the best arguments when making a business case for a process-led QMS. The savings in time, effort, and money speak for themselves.