Increase Your Profits With ROI

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

00:00:08Host

You can't argue with results. And the simple fact of the matter is: the process approach works, and not only does it work, it can save you hundreds of thousands of pounds.

00:00:50Host

Return on investment from a QMS project can arise in two ways: directly and indirectly. Direct ROI is reasonably straightforward to calculate, but still requires a judgment to be made on what can be directly attributed to the project. Indirect ROI is much harder to quantify.

00:01:08Host

This means that the ROI on these projects often just isn't quantified. This is a real shame.

00:01:27Host

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

00:01:45Host

Firstly, the cost of the project needs to be calculated. This is pretty straightforward. It includes the external costs for the QMS software system, both initial and ongoing, and the cost of external consultancy and training services purchased to support the project.

00:02:04Host

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

00:02:24Host

Calculating the cost of time requires a judgment to be made on how a given employee's time is costed. Most organizations have already agreed hourly charging rates for differing bands of employees, taking into account gross salary and an overhead charge.

00:02:41Host

Now, if yours hasn't done this, don't make it too complicated. Just calculate three cost bands for junior, senior, and middle salaried employees, based on average gross salary and a sensible overhead charge for each band.

00:03:07Host

Calculating direct cost savings and increases in profit is usually straightforward. A difficulty that sometimes arises, however, is figuring out how much is attributable to the QMS project rather than other factors.

00:03:29Host

If, say, you've used your QMS to support your bid processes, you will be able to attribute an increase in profit to it.

00:03:41Host

Let's use one of our customers as an example. Taking a process-led approach using the Triaster platform, Interserve have developed a mobilisation tool specifically to ensure that new business can be won and delivered to a reliable margin, whilst also delivering a better service to Interserve's customers.

00:04:01Host

For Interserve, calculating the increased profits attributable to this is a matter of calculating the positive impact of their mobilisation tool on cost containment and the time taken to mobilise.

00:04:17Host

Other Triaster customers have set up specific bid systems to support large tenders. These demonstrate most effectively that they have the processes in place to support their bids and ensure that their systems are ready to go as soon as they win the projects. This is particularly key for joint ventures.

00:05:11Host

When it comes to direct cost reductions, this is usually in the form of 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.

00:05:27Host

Then we come to the QMS's bread and butter: driving efficiency. Every time a process is improved to cut out a wasteful step, costs are saved. Every time duplication is removed from a process, costs are saved. This is the value of a process-led QMS.

00:05:45Host

The ROI here can be quite difficult to calculate, however, unless your QMS enables you to capture and report on time, effort, resources, and so on.

00:05:55Host

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 organizations, is the cost saving every time an employee is able to quickly and efficiently find documentation or how to do something just by going to the QMS. This is where little things can become big things over time.

00:06:21Host

It's worth at least trying to make an assessment on this, based on, say, every employee saving 15 minutes' time a day. See how much that adds up to in cost savings over a year, over 5 years.

00:08:00Host

Achieving regulatory compliance with ISO, Sarbanes-Oxley, the FCA, HEFCE, or whoever regulates your industry sector obviously delivers a great deal of value, particularly if it is a statutory requirement. Even if it isn't, it will be a quality mark that your customers and potential customers will look out for.

00:08:26Host

This is one where the ROI is hardly ever calculated. Make a rough calculation of what the results would be if key compliances aren't achieved next year. Make some assumptions, state these clearly, and base your calculations on these.

00:08:57Host

Just as with addressing risk and achieving regulatory compliance, quality improvements are usually classified by organizations as a cost.

00:09:08Host

However, ROI can be calculated if you set out issues that might arise if quality is not improved or deteriorates. For example, inconsistent working in a customer services team will deliver an inconsistent quality of service, which can damage trust and ultimately lose customers.

00:09:36Host

Triaster QMS captures and reports on a great deal of data that will help with calculating the ROI on projects like these.