Social collaboration and the use of enterprise social networks (ESN) have taken the business community by storm. In June of 2013, David Sacks, corporate vice president at Microsoft announced that Yammer had achieved over 8 million users worldwide. Pretty staggering numbers for just one of the many ESN providers in a crowded marketplace. With the IDC estimating the enterprise social market to reach $4.5 billion by 2016, many companies are adopting ESNs as integrated business tools.
There is a great deal of data available that point to a significant increase in productivity for companies that adopt ESNs. Studies like the one developed by McKinsey & Company point to an increase in access to corporate knowledge, a reduction in communication costs and increased access to internal experts. These benefits are taken from surveys from several companies that have been using these technologies to drive innovation and change.
Measuring the ROI for traditional information technology solutions has always been an issue for organizations. Social implementations are even more of a challenge. This is due in part to the misunderstanding of what ESNs provide from a value perspective, the resistance to change in traditional business models and the lack of implementation strategies. The proliferation of freemium-based ESNs has contributed to the challenges, and made it difficult for business units and IT departments to work together in planning deployments based on use cases and defined analysis processes. Without a clear understanding of how your organization will use the ESN you cannot measure its success.
So how do you drive your organization towards measuring ROI for your social effort?
The business landscape is littered with failed collaboration and social projects due in large part to lack of planning and execution. Letting an ESN take hold in an organization without careful planning will lead to an uncontrollable environment and will be open to misuse and misalignment with corporate goals.
Whether you are just starting your social initiative or you have already deployed across the organization, the steps below will help you to implement the ESN solution, measure your success and define a reliable ROI for your effort.
Define the Vision
Defining the vision for your ESN is crucial to getting buy-in from the business and IT department. This step starts the discussion on what your ESN will provide the organization and will drive buy-in from the Corporate Executives. Ensure you capture the vision and use it as the charter for the implementation.
Agree on Metrics
Once you have the vision, you can proceed with defining what you want to measure and how you’re going to compile the numbers. One of the biggest hurdles to overcome is defining a common language for measuring success. Getting agreement on what you’ll measure and how you'll describe the metrics is crucial to ensure everyone is on the same page when you report success back to the executives. Be realistic about the KPIs you will track and ensure everyone agrees to the calculation.
In any business, time is money. If you can show how your social initiative can reduce time and effort for specific tasks that leads to an increase in productivity, you can relate the savings to the cost of an employee’s time.
A simple formula for measuring the cost of an employee is:
- Annual Salary + Salary Burden (typically 15 percent - 20 percent of the Annual Salary) / 2,080 Hours (total hours in a working year).
For example: Jane is an HR Analyst making $60,000 per year. Using the formula above you can extrapolate the following:
- $60,000 per year + $12,000 (20 percent Salary Burden) = $72,000
- $72,000 / 2080 hours = $34.61 per hour cost for Jane
According to a McKinsey & Company study, social collaboration can increase internal communication and collaboration by 25 percent to 35 percent and overall productivity by 20 percent to 25 percent.
If we take the overall productivity number at face value (using the lower percentage) we can calculate the cost savings for Jane the HR Analyst based on the following algorithm:
- 40 hours per week * 20 percent increase in productivity = 8 hours per week
- 8 hours per week * $34.61 = $276.88
- $276.88 * 52 Weeks = $14,397.76 per year.
This is a very simple algorithm that can guide you in showing hourly savings for a specific employee. There are more complex algorithms that can be used to calculate employee cost but I wanted to keep this simple for the purpose of this exercise. You can find free calculators online that will provide you a deeper breakdown and more options to input if this algorithm is too simple.
Getting agreement on the method you use to calculate your employee cost is critical to the success of your ROI calculations.
Choose a Pilot Group
Choosing a pilot group within your organization is an effective way to control the analysis, design and implementation of the solution. Smaller groups are easier to influence, manage and engage as you move through the ESN implementation. When selecting the team to work with consider the makeup of the team -- ensure you have the right mix of users.
You want to ensure your pilot team has people experienced with using Social Networks like Twitter, LinkedIn or Facebook. Your team should also have members that are excited about using an ESN and see the value of the solution. The pilot group might be a project team that is dispersed across the country, or a departmental group that has specific tasks that can be streamlined with social collaboration. Choosing the right pilot group is critical to the success of your deployment.
Define Use Cases
Defining a use case clearly defines the parameters of how you will use the ESN. Defining the requirements and processes needed gives you the map for how the ESN will be implemented. You can use the use cases in educating the end user community, documenting processes (before and after) and gaining buy-in from the user community. If you can show an end user how you are going to reduce the effort in common tasks, improve their ability to find information or experts, give them more time to do their work, and improve their lives they will buy in to using the solution.
Be sure to develop visual processes and detailed requirements as you build your use cases for the effort. This will ensure the team and the user community will understand the process flows and there will be enough detail to assist in measuring the work processes to determine the cost of effort by employee.
Measure the Work Process
Measuring the “before” work process prior to implementing the ESN pilot will allow you to capture the cost of effort expended before you implement the ESN and streamline the processes. Be sure you get agreement on the calculations for the effort from the users, the project team and the executive stakeholders. Getting agreement at this step will ensure the “after” costs are accurate.
Design the ESN Implementation
The next step is to design how the ESN will be used. If you’re integrating the ESN into a collaboration site or just creating a group that the team will use you’ll need to ensure you have the implementation steps documented. This provides the pilot team with the documentation they need to understand how the solution was implemented in the event the organization re-uses the solution for other groups.
Implement the Solution
This is the key step in the entire process. Now it’s time to build the solution for the pilot group. This step should include comprehensive training and support to make sure the pilot group understands how the solution works, the benefits they will see and assure them that support is available for a period of time. This is the beginning of the transformation and will prove out the vision you’ve defined.
Measure the Work Effort Again and Calculate
Once the implementation is complete and the solution has been used for a period of time, you can begin to measure the efficiencies. Interviewing the pilot group and documenting the efficiencies gained will allow you to determine the key points that will be measured. Once this is complete you can compare the “before” and “after” to derive the ROI. The success should be shared with the pilot team, executive sponsors and the company as a whole. Broadcasting the win will generate buzz and will add to the desire to repeat the process with other teams.
This article has provided a simplified process for calculating the ROI for your social effort. By taking a prescriptive approach to implementing your social effort you will realize the benefits of the technology married with your business process. There are more complex and scientific methods that can be applied to calculating ROI but I have always subscribed to the KISS method when defining return on investment. Hopefully this provides you with a reasonable path to deriving the value your ESN will bring to your organization.