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Practical Steps to Measuring Social ROI

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.

improved communication and collaboration.png

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.

 

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