Monday, February 18, 2013

ROI – What to focus on in the world of never-ending things to do


Over the years I have worked with a number of organizations needing lots of improvement. When we honestly wrote down all they needed to improve, the list was several flip charts long. Despair would set in as they recognized there was too much to do and not enough time, money or personnel to do all the work that was glaring them in the face. Somewhere along the line, we came up with the concept of a simplified ROI Matrix that allowed us to prioritize the challenges– using no math whatsoever.

To use this concept, the facilitator makes a 2x2 chart that shows cost versus effectiveness. After some lighthearted give and take, we are able to determine what high cost and high effectiveness looks like to the front line dominated organization. The facility manager gets put on the spot and has to answer the question of how much funding they can locally sign off for and what kind of return they would expect for that amount of money. A typical example would be something like “$10,000 and the elimination of at least one medical injury.”  We now have the upper limits set for the ROI Matrix team exercise. 


The upper right hand quadrant is the high-cost, high-effect solution. This usually involves a fair amount of capital, like purchasing new equipment. The upper left hand quadrant is the high-cost, low-effect zone, in other words, "I thought I was doing the right job by spending this money, but indeed, I was not." I call these two the “engineer zones” because generally high-cost items are more technically challenging in nature and engineers often like to work on technically challenging projects. The lower left zone is the low-cost, low-effect solution. I affectionately call that the "bean counter" or “accountant zone.”  A common paradigm deals with money people seemingly being interested in cheap, not necessarily effective, solutions. The lower right low-cost, high-effect quadrant is the “endless kaizen zone” (“kaizen” is a Japanese word that translates to small changes forever, or continuous improvement).

As the team focuses on the many potential solutions to its problems, we put up an ROI Matrix. Each member of the team talks about a particular solution that interests them. The group then engages in an energetic discussion, as to both cost and effectiveness. Examples could include things like; painting guard rails, launching an observation program, fixing a weak incident investigation system, etc. The team then places each one of the potential solutions in its appropriate location on the ROI Matrix. As this teamwork exercise progresses, it quickly becomes evident where to focus the scarce available resources. Thus the team uses a very effective visual mechanism for quickly sorting down to what is going to be worked on by the continuous improvement teams.

If you have too much to work on, with too little time and financial resources to do so, why not try this kind of ROI Matrix approach?

The Doc

1 comment:

  1. Safety Culture World brings the thoughts and inspiration among the people who is working in engineering field.

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