ROI for Dummies

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Imagine your most important annual meeting is coming up in three months. This meeting is strategic, expensive, high-profile and has senior management’s involvement. Now suppose that you are asked to evaluate this meeting to determine how it is contributing to the company’s business goals.

In addition, you’re asked to report your findings to company management across multiple departments. Your findings will help determine if that meeting receives funding next year or not. How would you proceed? What approach should you use?

Getting Started

First and most importantly, don’t be overwhelmed. If you take a systemic approach to return on investment (ROI) and set realistic evaluation goals based upon your resources and time commitments, you can start building a foundation for reporting results and showing stakeholders the benefits of a meeting or event.

Of course, your events have many moving parts, so to be able to evaluate them effectively, it’s helpful to break down all the data into several categories. We’ve found that meetings and events can be evaluated on five levels: reaction, learning, application, impact and finally, ROI.

Collecting post-event reaction data from your attendees is the first step in showing the payback of a meeting. This is usually achieved via survey questions, such as “Was this meeting useful, necessary, motivational, challenging and important to your success?” and so forth.

Next, move beyond reaction feedback and start collecting learning data. This tells you what attendees learned during events like an annual sales meeting or a user group conference.

For example, you may ask attendees questions such as, “What were the three new sales techniques highlighted in your breakout session?” or “Describe a cross-selling opportunity you will use during the new product rollout this fall.”

Once you have established the practice of collecting learning data, it is relatively easy to move on to higher levels of evaluation, which involve collecting application and impact data.

Collected after the meeting, application data helps you understand if attendees did anything differently back on the job due to attending a meeting. Did they implement something? Did they change a process? Are they using skills or knowledge learned­ during a conference ­— for example, new management skills, enhanced product knowledge or sales techniques? These behavioral changes, influenced by meeting content and attendance, can affect important business measures­ such as sales revenue, employee turnover and new product development. Evaluating how these behavioral changes effect business performance measures will lead you to impact data.

The impact of an event must be measured against defined learning, application or business objectives, so setting clear, measurable objectives with stakeholders before staging an event is critical to taking your evaluation to this level.

Examples of clear and measurable learning objectives include:

• Identify three new cross-selling opportunities.

• Score 75 or better on the new product quiz.

• Explain the advantages of three new product features.

• Describe the new product positioning and differentiation features. Application objectives could include:

• Within six months, all sales representatives will increase use of the new Web-based sales lead tracking system by 50 percent.

• Within one year, each product development team will introduce at least two new products into the development pipeline.

Business objectives could include increasing sales revenue, decreasing employee turnover and increasing market penetration.

Getting down to the Numbers

Now let’s define ROI. ROI represents the fifth level of evaluation and is the ultimate measure of accountability. ROI answers the question, “Is there a financial return for investing in a program, process, initiative, corporate event or performance improvement solution?” Below are the basic equations used to calculate the benefit-cost ratio (BCR) and the ROI:

BCR = Program Benefits / Program Costs
ROI (%) = (Net Program Benefits / Program Costs) × 100

What do these equations mean? A benefit-cost ratio of 2:1 means that for every $1 invested, you get $2 back. This translates into an ROI of 100 percent, which says that for every $1 invested, you get $1 back after the costs are covered (you get your investment back plus $1). For meetings and events, we recommend that you examine the benefits and improvements that accrue over a one-year period (a conservative measurement given that a meeting or conference can create positive consequences over a much longer period).

Data from the reaction, learning, application and impact levels must be collected in order to calculate the financial ROI for meetings and events. All five levels (see table on pg. 22) provide important, stand-alone data. Reported together, the five-level ROI framework represents data that tell the complete story of meeting success or failure. However, keep in mind that an ROI calculation is not intended to be a pass/fail grade for your meeting or event. At the outset of any evaluation or ROI study, the project leader should clearly position the study as an opportunity to provide process improvement data — what worked and what didn’t work — so you can make adjustments. For some programs, intangible, nonmonetary benefits also have important value, such as improved public image, increased job satisfaction, increased organizational commitment, reduced stress and improved teamwork.

Making the Case for your Methodology

The success of your ROI study also depends on its credibility, and this is a case you will have to make not only to yourself when you choose the methodology but to management and other stakeholders. You should be able to answer the following key questions:

• What makes this study credible?

• What method of data collection did you use?

• What costs did you include in your calculation?

• Was your questionnaire response rate high enough to attain
  meaningful data?

• At what time interval after the event did you distribute the
  second questionnaire?

What’s in it for Me?

In almost all organizations, the need for meetings exceeds the available resources. While evaluating at the ROI level is not necessary for all programs, the process provides data that can help eliminate unsuccessful events or reinvent those that are successful but expensive. This data can help you, as a meeting manager, justify meeting management expenses and set priorities.

Finally, collecting data at various levels and reporting results that are linked to key business measures is the best way to secure and even increase budgets for meetings. Meeting sponsors often want evidence that meetings are adding tangible organizational value and that the benefits of meeting participation are aligned properly with strategic goals — and now you’ll be able to provide that.

Editor’s Note: See the next article in this series, “Chasing ROI” in the November 2007 issue. (Must be logged in to access.)