Make a Better Business Case for Your Projects: 10 Steps to Secure Approval With No Budget

Patti P. Phillips, Ph.D., CEO, ROI Institute, and Jack J. Phillips, Ph.D., Chairman, ROI Institute

This article was originally published on October 9, 2020, on Training Industry.com.

As a result of the COVID-19 crisis, many executives, including the Congressional Budget Office (CBO), predict the global economy will be in a recession for the remainder of 2020 and into 2021.ย Consequently, budgets have and will be cut, and it will be difficult to secure the approval of projects in the future.

The Need

What happens if you have a need for a program, but no budget has been set aside for new projects? Perhaps the only opportunity you have is to show the value for the project compared to the cost. An ROI forecast will show the monetary value that the project will deliver compared to the proposed cost of the project. If there is a significant positive difference, this may convince executives to move forward and implement the project. The challenge is to make a compelling business case, one that will convince even the most conservative CFO to allocate funds for the project.

This article describes how to create a forecast for a program that was not expected. This type of forecast connects the proposed program to business measures that will improve if this program is implemented. When the monetary value of this improvement is calculated and compared to the projected cost of the program, a financial ROI is forecasted. The challenge is to be conservative with analysis and credible with the conclusions.

The Approach

The approach to preparing an ROI forecast for your program involves several straightforward steps:

  1. Start with why and connect to the business measure. The program should begin with the problem defined by a business measure or an opportunity defined by a business measure. The key is to understand why the program is needed. What business measure will improve if you implement the program? This is absolutely necessary when forecasting the financial ROI.
  2. Make sure you have selected the right solution. If you are implementing a learning program, you need to make sure that the program will drive the business measure. This may involve questions, discussions, analysis, or benchmarking. The key is to make this connection to business needs.
  3. Expect success for the project. This involves developing objectives at four levels for how you want participants to make the program successful. These four levels focus on:
    1. Expected reaction to the program
    2. Expected learning, what participants should learn
    3. Expected application, What participants should be doing with what theyโ€™ve learned
    4. The experts will estimate the impact that the application of the learning should have on the business measure identified at the beginning of the project. The precision for the objective for level 4 will come in the next step.
  4. Estimate the impact of this program on the business measure. Using the best experts, who understand the program (content) and where the people are working (context), ask them to estimate the impact on the business measure from this particular program. The experts may be the requestors for the program, the person who understands the need, the supplier, or someone who has a benchmarking study.
  5. Adjust the impact for error. Using a simple question, โ€œWhat is your confidence in your estimate on a scale of 0 to 100 percent?โ€ the error can be removed. ย That percentage is multiplied times the estimate, and this effectively reduces the number by the error in the estimate.
  6. Convert the impact data to money. The good news is for measures that matter to the organization, there are probably already monetary values available. If not, there should be experts who can help you with this value.
  7. Estimate the cost of the program. Typically, this is easy to do. To be credible, the costs should include all direct and indirect costs.
  8. Identify the intangibles. The intangibles are measures that we cannot convert to money, credibly, with minimum effort. We choose not to convert these measures to money, but they are still important. They are measures such as teamwork, collaboration, image, and stress. They are not included in the ROI calculation but connected to the program.
  9. Calculate ROI. We suggest the two most common ROI calculations be used: Benefit-Cost Ratio (BCR) and Return on Investment (ROI) expressed as a percentage. Also, perform a little sensitivity analysis by showing how the ROI changes with different estimates and assumptions.
  10. Present the results. The ROI forecast is presented to the management team to secure approval. Six types of data are presented as estimates (reaction, learning, application, impact, ROI, and intangibles). The key is to use storytelling with data to make the case.

If the project is approved, be prepared to conduct a follow-up evaluation. It rarely happens that a forecast is presented, and approval is secured without an actual follow-up ROI evaluation later. Ideally, you would like for the forecast ROI to be less than the actual calculated ROI. That will show that you are conservative in your analysis, and you are on target with the process.

 

So, there you have it. Ten simple steps to forecast the ROI. Good forecasting doesnโ€™t require powerful computers or arcane methods. It involves gathering evidence from a variety of sources, thinking probabilistically, working collaboratively, and being willing to make the necessary adjustments to deliver success.