Calculating Return on Investment for Cultural Realignment

A. Overview:

Establishing a clear ROI for Cultural Realignment activities is difficult even though the connections are indirectly clear. Cultural Realignment activities focus almost exclusively on the human side of organization effort and are often associated with soft factors such as work force motivation, esprit de corps, and increased performance and productivity. An organization doing the wrong things with fiscal efficiency can be worse off than an organization doing the right things with poor financial and management controls.

Both the client organization and the consulting firm have a vested interest in carefully determining Return-on-Investment in any consulting project. Often, the client must "justify" expenses for consulting efforts in financial terms, and the consulting firm must assure that it is adding value in order to retain long-term clients.

Current popular literature also provides rationale for ROI calculations. If available, articles or extracts from articles, books and journals must be sought and used to support ROI methodology. Clearly, there is no single best solution to calculating ROI, nor will the "best" method today remain the "best" method tomorrow.

There are two alternative methods available to apply to a credible Return-on-Investment calculation: The Incident Method and The Systemic Method. Both methods are used by ODI to calculate ROI and both methods are explained briefly below. A third method has emerged and will likely be engaged in the near future for those clients who desire greater specificity. This third method is described as an integrated client-driven methodology. CommunityWare automatically performs the calculations on each of these methods based on ROI selections.

B. The Incident Method:

Connecting cost savings or value added financial criteria to specific incidents is possible, though it is usually difficult to fully attribute such savings or value added to Cultural Realignment. This is because Cultural Realignment, as an organization development activity, performs a catalytic rather than a direct primary role. It initiates a new train of thought, shifts an attitude that opens the way to a new understanding, or sparks a dialogue that builds a new relationship and connection. Any of these could lead to cost savings or value added.

If Cultural Realignment activities, for example, facilitate the acquisition of a $3M new account, the victory will be claimed by those directly involved with the sale even though the event may have been facilitated. Determining the exact level of contribution of the facilitator, although apparent to those in attendance, is difficult.

When the Cultural Realignment facilitator is an outside resource (such as ODI) the difficulty increases. People internal to the organization rightfully claim credit for improvements, savings, and the like. Attributing direct financial advantages to an outside resource can become competitive and thus act counter to everyone's best interests.

In at least one heated discussion on this topic, a frustrated employee blurted out, "If the only thing that comes of this is that we're in the same room talking about important things -- it will have been worth every penny!" We certainly agree if something good happens as a result of those discussions, but how does one attach value to such an incident? Unfortunately, organization development resources (especially those from outside the structure, like ODI) are in a weak position to follow-through to make sure something does happen. The authority to do so only resides within the structure.

It is reasonable to allow Cultural Realignment or organization development influence to claim a part of the success when it is clearly recognized that a significant influence has been brought to bear and when the principals are willing to infer a significant value added to this influence.

C. The Systemic Method:

Because organization development activities attend to the whole system and may not necessarily be evident by examining its individual parts, ODI has chosen to strongly attribute Return-on-Investment measurements to systemic enhancements rather than to specific incidents. We do, however, believe it is important to document known incidents where Cultural Realignment has been a catalyst for success, though direct achievement credit must always belong to those internal to the organization.

In determining ROI, the Unifying Human Systems (UHS) Model is used as the framework because it constitutes a whole system view. The UHS Model is used to establish a baseline status for the Cultural Realignment project. Progress is measured over time by movement in each of ten categories. Each category lends itself to dollar-value calculations. Movement in any category can be converted to a dollar figure based on criteria agreed to by all involved. In separate documentation we provide a general overview of each of the ten systemic elements as well as ROI criteria suggestions.

D. An Integrated Client-driven Method:

When appropriate, the client and consulting firm may engage in a negotiated third option. If the client desires and the consulting firm agrees, they may negotiate an integrated option based on weighted performance in any of the ten UHS elements, but may not exclude any individual element from having a weight assigned to it. This method may be advantageous to both parties when the possibility of performance-based "profit sharing" alternatives exist.

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