Introduction - Section 4 - Rates of return on Investment (ROI)

Can use a cost-benefit analysis with the appropriate sensitivity analysis to identify and test different inputs and outcomes (expected vs actual). When doing this analysis, you need to understand what your key stakeholders want from the change process.

It works on the assumption that the more the change involves people, the higher the degree of uncertainty to predict the expected ROIs. For example, if the change involves renegotiating a lease on an office, the expected ROI is easy to predict. However, if the change is people-dependent, ie involves changing the way people currently work, behave, mindsets, etc, there is a chance of greater variability. On the other hand, the people-dependent (people change) activities have the potential to deliver the most value to the organisation.

In the cost-benefit analysis, the costs are

i. dedicated resource(s), eg people, time, money, facilities, etc

ii. cost of methodology and tools, eg Prosci, etc

iii. purchase of source materials, eg machines, materials, etc

iv. training time and costs, etc

The benefits are

v. human factor, eg speed of adoption, ultimate utilization and proficiency

vi. cost avoidance, eg change management is a cost-avoidance tactic

vii. risk mitigation, eg if the change is handled poorly, the organisation is at risk

viii. benefit realization insurance, eg value of project depends on how successfully the change is handled

ix. probability of meeting objectives, etc, eg how likely is the change project/activity likely to meet objectives

Furthermore, there is the opportunity cost of not doing it.


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