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Publishers at Scrivener
Martin Scrivener (martin@scrivenerpublishing.com)
Phillip Carmical (pcarmical@scrivenerpublishing.com)
and
With the Assistance of Kylie McLeod
This edition first published 2019 by John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA and Scrivener Publishing LLC, 100 Cummings Center, Suite 541J, Beverly, MA 01915, USA
© 2019 Jack J. Phillips and Patricia P. Phillips
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Library of Congress Cataloging-in-Publication Data
ISBN 978-1-119-32265-8
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“There are very few constants in healthcare. Two of them – the push for greater quality and productivity – are comprehensively addressed by the authors. And in so doing, the direct connection between resource investment – time and money – and the return on those investments is concisely and profoundly made.”
Ross Mitchell
Vice President, External and Government Affairs
Brookwood Baptist Health
“Value for Money is a must read, must have for every leader at every level who wants to understand the science of showing value in their organization. The insights, learning, and practical impact of the examples provided throughout the book are timeless and will shape our understanding of ROI for decades to come. If you want to know about the monetary impact of your program, follow the principles outlined in Value for Money.”
Dr. Brad Shuck
Associate Professor
University of Louisville
“This book is a roadmap for all types of businesses, no matter whether profit or nonprofit, to find their way to true success. I personally have experienced the incredible impact ROI Institute makes of optimizing expendable resources to have the needed outcomes with greater impact. It is a must-read for anyone who wants to be successful and dynamic in their work and life.”
CH (BG) Charles R. Bailey, Ret.
Deputy General Secretary
General Board of Higher Education and Ministry
The United Methodist Church
“The publication of this book comes at a critical moment. Being in a position to clearly show value for money in non-for-profit, governmental and multi-lateral institutions has become critical for the survival of high impact programs for the well-being of the most vulnerable amongst us.
For as long as I have known Gina, she has been concerned about performance – not only the performance of individuals, but also of groups and Organisations. Her professional endeavours and dedication to making this world a better place for everyone, together with her first-hand knowledge of what it means to demonstrate value for money for donors, makes her an exceptionally powerful contributor to this arena.”
Michéle Pagé
Head of Human Resources
Organisation for Economic Cooperation and Development (OECD)
“Value for Money provides easy to grasp tools and concepts for anyone involved with program or project budgets. As a 30-year professional involved with programs and project budgets ranging from several thousand to several hundred million dollars, I can attest to the growing need to show value from a variety of data points. This book fulfills this growing need perfectly and should be on every program or project manager’s desk!”
Col. Garry L. Thompson
United States Army
“We live in a world where almost every sector in society is increasingly being asked to be more accountable, and to be able to demonstrate a return on investment. The NGO, Public and Multi-lateral sectors are not immune from this accountability landscape, where constituents, beneficiaries, donors and a range of other stakeholders are demanding demonstrable efficiencies and results. Building on a wealth of previous work in the area, Value for Money is the definitive guide for organizations and individuals grappling with this issue, from the Enhanced Logic Model to articulating shared responsibilities, to providing practical tools and templates – this book sets the standard, and will define how we think about demonstrating value for the next generation.”
Michael Emery
Director of Human Resources
United Population Fund
“Kudos to the authors for providing a logical, systematic project evaluation framework that incorporates both financial and key nonfinancial elements affecting an investment decision.”
Hank Walker
Partner, Andrade/Walker Consulting
Former CEO of a large Catholic health system
“There is no more important measure than business impact, yet many business professionals I encounter struggle with how to align their projects to business objectives. Jack and Patti Phillips not only use their years of experience in measuring impact, but also their vast network of contacts to arrive at 12 easy steps anyone can follow. If you want to produce real results, this book is a must read.”
Kevin Oakes
CEO
Institute for Corporate Productivity (i4cp)
“Having worked in the public sector for over 15 years for the United Nations and partnered with Jack and Patti Phillips of ROI Institute, USA, to develop two key measurement courses for the UN System on the ROI Methodology, it is evident, as highlighted in Value for Money, that there continues to be a global demand to show “value” and “results”, particularly in programs aimed at growing human capital. As noted in the book, the global financial crises, donor fatigue, and reduced resources reinforces the need to view financial contributions as an investment that must be accounted for with tangible results showing clear outcomes. “Value for Money” is a useful and practical guide that helps us to reassess the impact of our work in bringing about tangible results for organizational change.”
Mariama Daramy-Lewis
Chief, Human Resources and Training Section
United Nations Environment Programme*
*The views expressed herein are those of the author and do not necessarily reflect the views of the United Nations or the UN Environment Programme.
I discovered the ROI Methodology eight years ago in a partnership agreement between ROI Institute and my training and consulting institute, “Arab Institute for Marketing and Sales”
(AIMS), which was founded 17 years ago. To date, more than 90,000 professionals have been involved in our programs. We conducted several ROI Certification programs to develop human resources experts in measuring the return on investment. We have obtained consulting contracts, including one with Mobily, one of the largest communications companies in Saudi Arabia. I have also read several books from ROI Institute on measurement, monetary benefits, and return on investment, written by Jack and Patricia Phillips.
In my view, calculating the return on investment requires courageous stakeholders as well as an efficient skillful environment and a credible, scalable methodology.
I write this foreword today in Granada (Spain) where one-fifth of 100 young leaders (male and female) graduates receive a European Fellowship on managing the nonprofit organizations, in cooperation with the Euro Arab Foundation and the University of Granada. I have spent more than thirty years working with charities and nonprofits inside Saudi Arabia and outside Saudi Arabia in the Philippines, Pakistan, Jordan and Albania. I found that our business relies on trust.
Over the past fifteen years, the Kingdom of Saudi Arabia has had a big leap in the third sector, nonprofits, which achieved a growth of 100%. In Saudi Arabia, there are currently 950 nonprofit organizations. Annually, these organizations spend about one billion dollars in the social, economic, and human rights of the disabled, elderly, women, and children. The government spends more than 9 billion dollars for the same groups through the social security fund.
The role of the third sector has shifted from the role of pastoralism to empowerment and development, especially after the launch of the vision of the Kingdom of Saudi Arabia 2030 under the leadership of His Royal Highness Prince Mohammed bin Salman. The vision emphasized the role of the third sector to achieve the role of the goals of the vision and increase its participation in the gross national product from 0.05% to 3%.
This book arrives in a favorable historical moment where the entire environment in the state and society accepts and drives towards accounting and anti-corruption. We are asking, where do we place our resources? What is our role in development?
We must be honest with ourselves if we want to protect future generations that are the center of the concept of comprehensive development. The environment is favorable and the leaders are ready, now the methodology is present in this book. We were honored to host Jack Phillips in Riyadh this year with a seminar on the return on investment in nonprofit organizations. I was pleased with the large turnout which means that the environment is favorable. Now, we have decided to launch a forum on the measurement of return on investment in nonprofit projects. We expanded the subject to include the government sector as well as social responsibility programs in the private sector. We will have several events and workshops to suit the needs of Saudi Arabia, as well as providing courses to graduate specialists in measuring return on investment.
The book is a success. It begins with defining the terms, addresses the major questions, applies academic knowledge, and then guides readers to a roadmap for implementation. Additionally, the book explores the problems that will confront you and shows how to overcome them. ROI Institute and the book’s authors have created a great resource which will set the standard in measuring the impact.
We must expand the scope of application and adapt to the environment. We must simplify the procedures and present the results to expand towards change for the better. When we know the results and take the most important steps to maximize the impact, yield will increase, and costs will be reduced, while achieving fairness and equity in distribution.
As for me, I will translate the book into Arabic. I have embarked on that task now.
General Secretary
Princess Alanood Foundation
July 2018
Bill and Melinda Gates, cofounders of the world’s largest foundation, dedicated their 2017 annual letter to Warren Buffett. He donated the largest amount of money in the history of the Gates Foundation. In a cordial way, Buffett had asked the Gateses to describe the results of this contribution—essentially, he was asking for the value for money.
In their annual letter, the Gateses began with Buffett’s correspondence to them. They then showed the return on his investment. Essentially, the annual letter was Warren Buffett’s ROI for the roughly $30 billion investment in the Gates Foundation. The letter focused on the impacts of their various grants and initiatives. For one initiative, they actually showed the financial return on investment. This single act of responsibility and accountability portrays what is happening across the public and social sectors. Foundations, nonprofits, governments, nongovernmental organizations, religious institutions, universities, associations, and others are being held to higher levels of accountability than ever before.
Chaplains in hospital settings are being asked to show the value they deliver to healthcare organizations, otherwise, they face a reduction in numbers. The United Methodist Church is stepping up to this challenge by preparing chaplains to show the value of what they do in terms that funders can understand. This often means value for money and, in some cases, the financial ROI.
The president of the University of Malaysia Putra is asking the head of the library to show the ROI for all of the database subscriptions. Subscriptions represent an almost $20 million investment each year. “After all, isn’t all of this information on the Internet?” asked the president. This prompted the head of the library to show the ROI of having the database from the perspective of the students and faculty.
The largest foundation in Saudi Arabia, and one of the largest in the Middle East, is planning a conference for nonprofits. The theme of the conference is “Measuring the ROI for Non-Profits.” Part of the plans for this conference is to not only teach and show examples of how and why to measure ROI, but to also offer ROI Certification for nonprofit leaders so they can build internal capability to show value for money for the contributions they receive.
Various government agencies are facing tremendous accountability issues. The IT function within the Social Security Administration in the United States has been asked to show the ROI for major IT projects. Otherwise, its $1.3 billion investment would be in jeopardy. One intelligence agency is being asked to show the impact and ROI of a master’s degree program offered to high-potential employees on agency time, paid by the agency.
Alberta Health Services, the largest provincial health system in Canada, has challenged its Healthy Living group to show the impact and ROI of their various programs. Demonstrating such results comes with the prospect of allocating more funds into the preventive-type programs that they advocate and organize.
These, and hundreds of other examples, show what is happening in the public sector. Accountability is required in areas unaccustomed to demonstrating value beyond the activities they offer. This is caused, in part, by four major trends:
These trends are a reality for many organizations and will likely continue. In fact, we anticipate that they will become even more pronounced.
Moving toward fact-based outcomes is a challenge to all organizations as they attempt to show the value for the money that they receive. This book shows six ways to show value for money; some of the ways are closely related or interconnected. Of the six ways, the most credible is the ROI calculation. This is accomplished by following steps in cost-benefit analysis, an economic theory grounded in public finance. Development of the ROI metric follows standards and assumptions that meet financial officer approval.
ROI is not always necessary for public sector programs. Although, in theory, it can be accomplished, only a small number of projects deserve this level of analysis. This book describes how to take the analysis all the way through to the ROI calculation. A few shortcuts are possible, which creates a basis for some of the other ways to show the value. While the ultimate demonstration of value for money is ROI, it is reserved for specific types of projects.
The classic logic model has served organizations quite well for many years, particularly those in the public sector. This book presents an enhanced version of the logic model, responding to needs not addressed with, and concerns about, the classic logic model. Although this classic model has been successful, times have changed, and the accountability needs have shifted. The model presented here, the ROI Methodology, addresses these needs and the needs for measurement and evaluation across the spectrum of organizations. Chapter 3 in this book is devoted to why a new evaluation system is needed.
The ROI Methodology has been evolving for some time. Initially, it was developed in the business sector to help executives see value for money in terms they could understand, appreciate, and support. Along the way, it attracted the attention of governments—with 26 federal governments adopting and using this methodology. Many nongovernmental organizations (NGOs) have adopted it, such as the United Nations, which started using this method with a UN General Assembly resolution in 2008. Nonprofits are using it, including charities, foundations, associations, and religious organizations. Approximately 300 healthcare organizations are now using the process, sparked in part by the book Measuring ROI in Healthcare (McGraw-Hill, 2013). About 150 universities are using it to show the value of their internal processes as well as external outreach programs and services. Grant writers are now suggesting that if you can wrap ROI around your proposal and deliver impact and ROI data to the organization providing the grant money, you double your chances of receiving the grant. John White, one of the premier grant writers in the United States, agrees [1]. The ROI Methodology has been very successful and has become the most used evaluation system in the world.
This book responds to a need for a system that tackles these widespread applications head-on, with the emphasis on the public arena while not losing sight of the business applications. This book attempts to do what no other book has attempted: present a methodology that crosses boundaries of different functional areas and professional fields, types of organizations, cultures, and countries to have one system that can be used in those environments. The ROI Methodology is a proven process in those areas already, and this book brings that experience and focus to readers.
This will be a book that can help those who are measuring the success of any type of project, program, initiative, system, procedure, event, or process in these types of organizations:
The ROI Methodology is a flexible, versatile process that can withstand the scrutiny of critics, while providing CEO and CFO friendly data through a process that is user-friendly.
Whether it is a development program in East Africa, an economic development activity for Oman, a cultural event in Brussels, a military operation in South Africa, a UN peacekeeping mission in Lebanon, a women’s initiative in Brazil, a medical procedure in Canada, or a faith-based initiative in the United States, this process will be useful for delivering and demonstrating value for money.
Many of us in the measurement and evaluation profession have suggested, encouraged, and supported more measurement and evaluation. We, the authors of this book, have tackled this in different ways and through different media channels. Our premise has been that when evaluators measure at the business level, they also make adjustments and improve programs. However, four challenges have prevented the needed change: 1) fear of the outcomes, which prevents program owners from making needed adjustments; 2) the task of measurement appears impossible, as it will be difficult to collect needed data; 3) exposing concern of a flawed system that no one wants to correct; and 4) resources needed to measure, underscoring a lack of funds to support the effort.
We don’t mean to imply that others haven’t addressed this issue; they have. However, current systems still fall short of what is actually needed. Many great books have been developed to address part of these issues. For example, several books are available on aligning programs to the business at the beginning, selecting the right solution, writing objectives at multiple levels, and developing programs with impact in mind, as well as many books on measurement and evaluation. Some of the books have attempted to tackle several of these issues in more detail at the same time.
It is time to tap into the good work from other fields and bring those concepts into the accountability process. Excellent contributions have been made in systems thinking, change management, design thinking for innovation, process optimization, expectation management, and work culture. These contributions, with many books to support them, hold the key to rethinking projects and programs to make them successful. The goal is to design for success, with that success defined as credible data connecting programs to the business impact measures.
We are proposing to tweak what has been done and bring in important concepts from other fields, in particular design thinking, from the innovation field. This approach has five elements:
This comprehensive book includes 17 chapters presenting a logical flow of information about this enhanced logic model. It is divided into six parts. The first part sets the stage by explaining why this is even needed in today’s climate. The first chapter recaps the evolution of accountability—how it has changed in all types of organizations, with particular emphasis on the public sector. Chapter 2 describes six ways to show the value for money. This is a huge request these days, and it can be tackled in different ways. However, it is usually built around the framework of the ROI Methodology presented in this book. Chapter 3 makes the case for an enhanced logic model, built on a classic logic model that has served us quite well. There is a need for an enhanced version of this, which is what we offer in this book. The fourth chapter presents the system—the ROI Methodology—and all of the parts of it. It is a quick reference chapter that not only explains how we’ve addressed all the needs for an enhanced logic model, but also explores the parts of it and how they are interconnected, as well as the benefits of using it.
Part two addresses planning for evaluation and results. This includes three chapters that represent the first three steps to design for results. The first chapter (Chapter 5) focuses on clarifying why a program is being implemented. This involves business alignment and connecting the project or program to the business needs at the outset. Chapter 6, Make it Feasible, explores selecting the right solution to achieve business alignment. This chapter explains a new role in many organizations, performance consulting. Chapter 7 is perhaps one of the most powerful chapters and focuses on expecting success, which comprises four major parts. The first is to define the success of programs overall. That becomes the desired success with a goal of designing programs to achieve success. The second is to set objectives at multiple levels, including impact and sometimes ROI. The third is to be sure that the expectation for success permeates all of the stakeholders so they know what they have to do to make this program successful at the impact level. Lastly, it introduces the planning tools to plan an impact and ROI evaluation of a program.
Part three concerns data collection spanning two chapters. Chapter 8 focuses on making it matter to the individual, organization, community, or society to ensure that the program is important, needed, and relevant. This addresses collecting data for input to the program, reactions to the program, and the learning needed to make it work. Chapter 9 explores making it stick—ensuring that the program is properly implemented and driving the desired impact. This ensures that everyone involved is doing what they need to do in order to make the program successful. They are taking actions, such as using technology, following a procedure, conducting interviews … doing things with corresponding impact. The chapter also discusses the various ways of collecting data from these actions.
Part four addresses data analysis with four chapters. This is one of the most comprehensive portions of the book. It is designed to help readers make results credible enough so that a chief financial officer (CFO), top executive, or donor can understand, believe, and support the results that are delivered. Part four includes four major chapters. Chapter 10 discusses the attribution issue, detailing the different ways to determine how much of the impact results are connected to the program. This is a powerful and critical chapter. Chapter 11 focuses on converting data to money, which often appears to be more difficult than it actually is, even in the public sector. At least 10 ways are detailed to show you how to locate or calculate the money. Chapter 12 explores those hard to value measures that will ultimately represent intangible benefits of programs. These intangibles need to be connected to the program from the beginning, with credible data collected throughout the process. Intangibles are powerful—many programs are initiated based on intangibles, and you don’t want to lose that point in your analysis. Chapter 13 focuses on cost and ROI. All the costs that should be included in the project or program, including both direct and indirect costs, are detailed here. These become the standards for this methodology. Then the three ways the ROI is calculated are detailed, including the classic benefits-cost ratio that has been used for hundreds of years, to the ROI calculation, which is more of a business term and dates back at least 400 years (and is now the most-used way to show the value for both capital and noncapital expenditures). The pay-back period is also detailed, showing how long it would take to get the money back from the investment.
Part five focuses on reporting results and involves two chapters. Chapter 14 addresses how to communicate the data to various target audiences, ensuring that they understand and use the data appropriately. Storytelling is introduced as a way to present the results in a compelling way. The next chapter (Chapter 15) discusses using the data to make improvements and even justify future expenditures. Essentially, this step is optimizing the return of investment, leading to more allocation of funds to the program.
Lastly, part six, with two chapters, focuses on sustaining the process. Chapter 16 covers forecasting, which considers program value from another perspective. These days, funders may ask for a forecast of the ROI before contributing to a program. This chapter fully explores this issue. The last chapter, Chapter 17, explains how to implement this methodology into your organization so that it becomes a sustainable, routine process.
Collectively, these 17 chapters provide a critical reference to show the value for money in any type of program, project, or setting.
First, we want to acknowledge and applaud the great work of our clients whom we have served over the 25 years since ROI Institute was founded. We moved into a variety of new countries, cultures, organizations, and functional areas, not because it was part of our business development strategy, but because several innovative and forward-thinking executives from these different areas could see the potential of this methodology to show the value for money in their situations. They asked for this and were patient with us as we experimented, made adjustments, and made it successful for them. To those client groups we give tremendous credit for this book.
We also want to thank all of the ROI Institute team members, our collection of international partners (spanning 70 countries), and our associates across the United States. We learn a lot from them and, in many cases, they have brought us into new environments, cultures, countries, and opportunities to apply this methodology.
We also want to thank the ROI Institute staff. While our staff is busy organizing consulting activities, teaching assignments, speaking engagements, and research efforts, they all realize that the business thrives and builds on the books that ROI Institute authors write. As we often say, we would not have a business without our books, but books are not our business. This is a major book for us, and we thank all the staff who helped us make it better. We particularly want to thank Kylie McLeod, our Communications Coordinator, who has taken this project on with a vengeance to get it done in a short period of time with a very professional effort. Kylie, we thank you for your great efforts and look forward to the many great projects you have in front of you in the future.
From Patti: This book is a long time coming. We have waited for the right opportunity to develop it. Given our work with nonprofit, nongovernmental, intergovernmental, religious, educational, and private sector organizations has reached the level it has, this the right time. We could not have done it without a team working along-side us. Many thanks to our co-authors, Gina and Cyndi, for sharing your experience and expertise, and for your friendship. And a big thank you to Kylie, Hope, Staci, and Andy for making things happen for us while we’re out doing what we do best. You guys rock!
And a special thanks to Jack. It was May 20, 1997, at Chappy’s deli, when I first met Jack. There, a planned one-hour meeting stretched to four hours. It was during that conversation I first learned of his ROI Methodology – a process he developed in 1973 and perfected over the years through application and research. While its application began in the training and human resources industries, we have expanded its use well beyond. Our work in the nonprofit and nongovernmental sectors is some of our most inspiring. Through this work, while we help change organizations, we hope that in some small way we are helping change the world.
Jack’s constant effort to drive ROI is why the concept has reached ubiquity in disciplines that disregarded it in the past. He is the reason that every marketing piece alludes to ROI; why practitioners and their functions are lauded for their efforts to demonstrate ROI; and why measurement, evaluation, ROI, and accountability are the norms not novelties. Jack is my inspiration, my husband, and above all else, my friend. Because he laid the groundwork, I, along with many others, have a platform on which to stand and be heard. All I can say is, thank you, Jack, for all that you have done and all that you do. The past 21 years have been a journey like none other and I look forward to the next 21! I love you.
From Jack: Thanks to Patti for being the driving force for our work in governments, nongovernmental organizations, and nonprofits. Her heart is always in the right place when working with these agencies. She is a tenacious consultant, outstanding researcher, a keynote presenter with a strong message, and one of the best writers I know. Her facilitation sets the example for all of our global facilitators. Above all, she’s my best friend, a lovely spouse, and curious explorer. Thanks for all you do … for everyone – family, friends, and professional colleagues. For this book, I am particularly grateful for Gina and Cyndi joining us as co-authors. They bring unique perspectives and much experience from the public sector, an important thrust for this book.
From Gina: The last few years have been full of life changing moments and opportunities and I am so grateful to have had the chance to work with Jack and Patti on this book. This has been the culmination of the past 15 years of a professional learning relationship and more importantly a deep lasting friendship. Thank you, Jack and Patti, for allowing me to grow and change with your direction and leadership - you are both so very special to me. I also would like to thank my family. My husband Stefano for allowing me the space and time and support to do what I have done through the past several years, you sustain me, you support me, “ti voglio bene.” To my children, Matteo and Alessandra, there is not a day that your names are not mentioned out loud - I am so proud of the adults that you have become. Thank you to the rest of my family and friends; you have always encouraged me. To my mother, Elena, my mentor and my confidant and the life moments and learnings that we have shared, you are truly an amazing woman. Finally, to my father, John, to the moments we had and the moments we missed and now you are with me all the time, you are everywhere.
From Cyndi: Gratitude is an intentional, daily choice, the choice to look around and acknowledge the many opportunities that have come my way. I appreciate being able to partner and collaborate with the best of the best in Jack and Patti, and I’m incredibly grateful for their continued support and generosity to lifelong learners. I stand on the shoulders of all the amazing role models who have shaped and influenced my work. Thanks to my colleagues at Southern Miss who always inspire me to work hard, have fun and make a difference. The love and support from my husband, Robert, and our children and grandchildren has allowed me to pursue my passion, which makes for a happy life.