A lot has been written over the years about calculating the Return on Investment on training. As a former CFO, I bristle when I hear about ROI calculations that use measures like number of people trained, number of participants who achieved their objectives or even number of people who applied the training. These may be valuable metrics, but they are not about ROI.
Let’s be clear, ROI is a simple calculation: the amount of money that can be reliably attributed to the training, divided by the total amount of money (including the time of participants spent in the training) spent.
The amount of money spent on the training is easy. Tracking the amount of money returned is far more challenging. Here is how our Total Customer Focus (TCF) clients determine the financial returns generated by TCF.
Measuring the Financial Impact of Training is Not an Option
Part 3: Generating ROI and Tangible Business Results
Customers and Service Suppliers gain from TCF in 4 quantifiable ways:
- When service suppliers effectively shift to Being Proactive, they anticipate the challenges their customers will have in achieving their most important business goals; what we call their Big Picture. By taking action proactively, service people help their customers to address these challenges and achieve significant financial results.Helping customers to improve their business results and achieve their Big Picturenaturally drives greater loyalty to the service supplier, resulting in more revenue and margin over time. However, helping the customer by being proactive leads directly to significant financial return for the service supplier in the short term as well.
- TCF skills and behaviors such as Active Listening/ASQ and Creating Empathy enable front line service people to get to get to the root cause of problems faster and better. Using tools and techniques such as Active Listening/ASQ and the Iceberg technique, service people quickly identify issues that the customer might typically keep ‘below the waterline’. Issues such as a lack of knowledge in the technology, pressure from their own boss and low trust in the supplier limit open discussions and prevent accurate determination of root causes. In addition, poor communication with customers inhibits the free flow of ideas on possible solutions.
- Service people often feel trapped when confronted by a customer request that is not reasonable or not even possible. Either the service person says no, often causing the customer to escalate his demand to a higher level. Or the service person says yes, potentially resulting in significant give aways in parts and service. The application of TCF tools such as the Reasonable Possible Matrix and the SHAPE technique provide an alternative that results in significant reductions in give-aways by the service supplier.
- Managing escalations efficiently and effectively is a challenge for all service providers. When a manageable escalation becomes out-of-control, tens of thousands of dollars in service costs due to additional resources, senior management oversight and direct costs are expended to bring the situation back in control and restore customer confidence. TCF tools such as the TAUC technique and Fire-Fighting Checklist enable front line service people to maintain customer confidence during high-stress escalations and to regain customer confidence when escalations start to slip out-of-control.
Systematically Collect and Summarize Case Studies That Document Quantifiable Returns
As part of Global Partners’ Embedding process, TCF participants create case studies that document the impact on business results (as well as soft measures such as improvements in relationships with customers) from their application of TCF skills and behaviors. We have collected more than 350 case studies that describe tens of millions of dollars in new revenue opportunities and direct cost savings for suppliers and their customers. These cases also report thousands of hours of reduced equipment downtime for customers and reduced man-hours spent on escalations, cycle time and rework.
A key TCF metric that is tracked and reported is the expansion of Bandwidth for front-line service people. While not necessarily part of the ROI calculation, Bandwidth is an important metric for the front-line people themselves. Greater Bandwidth means that service people can handle their daily workload more efficiently and with less stress, which leads to a better work-life balance and greater job satisfaction.
Calculate Return on Investment
Using the data from the case studies makes the calculation of Return on Investment straight forward. Simply divide total amount spent/invested in the program by the quantified return. In the example above, the total net dollar amount of return from TCF is well into the millions. The total amount invested for the 20 people in the reporting group is roughly $100,000 including the costs of the man-hours for people participating in the program.
The ROI therefore is 10x.