When money is tight, funding can be difficult. This is when ROI becomes more important than ever. But it’s important to remember that ROI analysis is not an exact science. There are as many prescriptions for performing the analysis as there are people who have prescribed them. Fortunately much commonality can also be found.

A review of the many and varied approaches to the process will reveal two central themes: first, ROI is not a predetermined set of calculations that one can learn and administer. This is both the bad news and the good news. The downside is that the topic is obviously not an easy one, but the upside is that it’s flexible and able to conform to your specific needs. And the second aspect of ROI analysis on which all agree, is that it is only one part of making effective investment decisions.

Sound investment decisions, in any enterprise, including K-12, start with developing a well thought out business case. This process, while particularly appropriate for IT investments, should actually be performed across the entire spectrum of potential projects, and should be standardized to the fullest extent possible. Effective decisions are best ensured through an equitable and impartial evaluation of the costs and benefits of all projects that compete for scarce resources.

A well-round business case will include the following 3 components:

Together, these components will provide a picture of both the tangible and intangible aspects of any proposal, and if sufficiently standardized, a sound relative metric for weighing one project against another.

The first two components of the business case are really two closely related aspects of the same general inquiry. The intent is to try and develop a reasonably objective approach to evaluating cost and benefit. Where ROI is focused on hard costs and hard benefits, on the quantitative elements of the analysis, the purpose of investigating Strategic Benefit is to give adequate weight to the more qualitative results.

In order to design an approach to this analysis that will promote a balanced evaluation of both the quantitative and qualitative, there are 4 types of question that will inform your process: financial, effectiveness, efficiency and impact.

Financial
Probably the most obvious area to probe, definitely a “hard” topic, the question is essentially, “Can we afford this?” This is not to focus solely on the availability of funding, but also on the costs versus savings and revenue increases over time. In order to adequately answer the question, you will rely on standard accounting practices and estimates for present value and future returns. Projections will then be evaluated within adopted periods for payback of your investment.

Effectiveness
Much “softer” than the strict financial question, effectiveness is really a qualitative look at how well a given project meets the overall goals and objectives of the organization. The key is to evaluate how well the investment will help to deliver the desired results. Consideration must still be given to costs and benefits, but more latitude is used on both sides of the equation. Costs will include the indirect and tangential, and benefits will look at things like increased productivity and both customer and employee satisfaction.

Efficiency
Once both the quantitative and qualitative questions are answered, you’re still left with making a decision. As all projects are in competition for scarce resources, it is not sufficient to simply identify whether or not a given project is worthwhile. The question that must be answered is whether or not a project offers the greatest possible value relative to its costs. It’s a “bang for the buck” question, and it must be answered in the context of all projects competing for shared resources.

Impact
The final area of inquiry exists in all markets but is much more prevalent and of higher visibility in the public sector. This is the question of societal impact. What are the larger economic and social costs and benefits of a given project? The factors considered here can extend far beyond the specific product of the project and will include the impact to the community and quality of life.