Measuring the ROI of your construction software can be complicated. Learn how to accurately measure the ROI by establishing some benchmarks.
Whenever you invest in new technology, you do so because it promises to either increase your productivity or make your life easier in some way. Or maybe the investment was made to help you manage your business better or deliver some other benefit. Whatever the reason, you expect a clear return on your investment, otherwise, why do it? But how exactly do you measure ROI? How and when do you know you are getting your money's worth?
While there are some clear quick wins you can measure, many aspects are more difficult to determine, like the need to keep your technology current to attract and retain top talent. Fall behind and your most ambitious employees may get "shiny-object syndrome" and jump ship. Or how about the impact of aging technology and complicated systems on employee morale? Is it demotivating?
A business that lacks integrated construction software requires duplicate data entry, experiences tracking issues and is plagued by forecasting errors. By using a single point of entry on a shared database, it is relatively easy to measure the increased productivity and calculate the reduced time your accounting staff needs to spend manually entering data from the field-not to mention the benefit of access to data in real time versus waiting for spreadsheets to be emailed, entered and analyzed. You also avoid having the numbers presented a little differently in each spreadsheet. (It is tough to find consistency when everyone is doing his or her own thing.)
But if you stop there, you are missing a huge piece of the puzzle. The part that is intangible - how current tools can influence employee engagement and retention by implementing fluid systems. The tools should let them focus on the important jobs of managing projects and delighting customers.
How much of a distraction is it when technology fails? It can take you away from the higher levels of thinking needed to feed innovation-the kind of thinking that moves your business forward. Many say you can't put a price on morale, but look at a company like Zappos, built on making employees and customers happy. They focus on company culture in the belief that profits will follow. With more than $1.2 billion in revenue, the profits did follow, but it was not easy. CEO Tony Hsieh was pressured to cut the fluff to deliver the numbers by his board. That motivated him to sell to Amazon.com-forced by tensions caused by cash flow issues and a $100 million line of credit that could be pulled at any time. The board said the focus on culture was a nice social experiment and wanted him to spend less time worrying about employees and more on selling shoes. But the rapid growth of Zappos came from their positive culture, which created passionate employees. Fostering strong morale is not something that shows up on the balance sheet as ROI-just an expense. Nor does it pay off in the short term. It is a long-term vision that takes steady leadership and strong convictions.
Lou Gerstner at IBM also took a long-term approach to his turnaround effort. He presided over significant layoffs thoughtfully, changing how employees were compensated and rewarding fast-action teamwork. After eight years, IBM was back and more profitable than ever.
What does this have to do with Construction? Plenty. Regardless of your business-or industry-fundamental principles are at work. You can never forget about the people when you are measuring the ROI of your latest technology investment.
You have to account for the impact an engaged, passionate workforce has on your bottom line. The soft stuff matters as much as the hard numbers. People are a key differentiator in a world where any company can buy new technology, but can't buy the mix of talent you have assembled.
To Accurately Measure ROI, Establish Some Benchmarks
Know what success looks like before you make the technology investment. What return do you expect and in what timeframe? Is it increased productivity or easier collaboration across your company? Perhaps both? Or maybe it is improving profitability by getting better data sooner to enable smarter decision making. Set some quantifiable, objective benchmarks you can measure.
Be realistic. If you are changing your core technology, it is going to disrupt your company's workflow. Fortunately, a modern technology platform should be able to adapt to the way you do business. Plus, new implementations require some time to retrain your staff. Neuroscientists have proven that change causes physical pain and people naturally want to go back to what's familiar even if the new system is better for them. It takes focused effort over time for meaningful change to become part of your culture.
Set some subjective benchmarks, too. Although happiness is not something you can enter in a spreadsheet, it is a key intangible that can pay big dividends over the long term-in lower recruiting costs and increased productivity through passion and higher engagement, which translates into higher customer retention due to better experiences. To put some metrics to this, you can do pre- and post-investment surveys of both your employees and customers. Get the baseline before you start your implementation, then once up and running, do a follow up and measure success. Companies like Survey Monkey allow you to do this for free, or there are options like Vovici, offering more sophisticated survey design and reporting options.
By looking at both the hard and soft numbers, you are able to get a clearer sense of true ROI-and build the foundation for long-term sustainability. Many companies also talk about how their people are their most important asset, but few "walk the talk." Combining an investment in current technology with a culture that values employees delivers the best ROI. It gives good employees the incentive to stay while your productivity increases.
Sure, you can deliver short-term profits and immediate ROI by cutting expenses, but you can't cut your way to success. Spend wisely and watch your cash flow at every turn, but invest for the long-term. That's where the intangibles pay off and true ROI is realized.
In the Field
A company like Concord General Contracting, Inc., a mid-sized construction management firm discovered the very benefit of connecting their company on a single system. They were able to cut waste on jobs by eliminating issues such as incomplete buy-outs, poor projections, missed change orders and slow close out. In fact, after implementing their new software suite, they recorded savings of more than $100,000 in staffing and more than $200,000 in profit fade. Five years after implementation, Concord has more than doubled their construction volume yet added limited support staff, saving the annual cost of at least three employee salaries.
Construction Business Owner, October 2010
