ROI: You've Got Some Explaining To Do!

By - cin.earthweb.com Staff

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By Jack M. Keen No one ever said explaining was easy. As kids we had to explain why we ate that cookie before lunch. As teenagers we had to explain why coming in an hour after curfew was really okay. As adults, we still have to explain our reasoning to others so they see things our way.

Explaining under pressure has emerged as a key lifetime success skill. Yet, we rarely step back to assess whether our "explaining skills" need a tune-up.

Take, for example, the approval of ROI projects. In my opinion, management rejects more ROI projects due to "poor explanation" than any other reason. Typically, the needed resources exist. What doesn't exist is managements confidence in our proclamations about the project's payoff potential.

Suppose we want to justify a Windows 2000 upgrade for the laptop computers of our salesforce. How can we best explain our ROI theme--the systems equivalent of a TV sound bite--to decision makers, so that it indelibly sticks in their minds and drives them to approve our project?

Let's say on our first attempt we come up with the following ROI theme: "We should invest $105,000 for upgrading our sales reps' computers to the Windows 2000 operating system because it will increase productivity and help our bottom line."

Do these words get the job done? The language looks good on the surface--execs always love money and business results--but fatal flaws abound if one delves deeper into the explanation.

In order to be sure you are saying the right things in your business case, try focusing on these four areas that make our ROI explanations more powerful: clarity, structured reasoning, credibility, and desire.

Clarity addresses the listener's admonition: "I must understand what you are trying to tell me." It is not easy to achieve clarity. English is an inherently ambiguous language; more than 14,000 meanings exist for 500 frequently used words. Busy executives have short attention spans for poorly worded ROI themes.

That's why most first attempts fail so miserably. We use technical words that may not be understood: What is an operating system? What is Windows 2000? What is an upgrade? Also, our benefit statements are too general.

To address these issues, we research and revise our ROI theme to read: "We can save $140,000 annually by increasing sales productivity by 15% via improved software."

In this rewrite, terminology definitions no longer distract from the main business message. The execs can be safely relegated to the technology-focused sections of the business case.

Structured reasoning tells listeners why it's logical to accept our ROI assertions. Useful guidance for this component comes from argumentation analysis, the analytical method summarized so well in Robert Horn's book Mapping Hypertext (The Lexington Institute, p. 185): We divide our reasoning statements into "claims," assertions for which we wish to gain acceptance; grounds, data that helps prove our claims; and "warrants," or shared values held by decision makers.

Using this approach, we add the following to our ROI theme: "This investment in improved software avoids lost revenues due to the sales reps' lack of access to customer buying histories (the claim). Sales Management magazine's annual survey revealed that 86% of buyers expect this data from their vendors (the grounds). Meeting customer expectations has always been crucial to our strategy for success (the warrant)."

This combination punch of claim-grounds-warrant drives our ROI explanation home in a clear and convincing way.

Credibility tells listeners what we are asserting is believable. So that our structured reasoning sounds relevant, we must garner political support for our ROI theme and ourselves. We must strategically spotlight subject-matter using industry experts who are well respected by the decision makers and who subscribe to our reasoning. Candidates for testimonials include bosses, subordinates, partners, consultants, and/or industry analysts.

Desire tells listeners why they should care about what we have to offer the corporation with our ROI theme. Winning ROI explanations must hit at the heart of a decision makers business concerns. And it's our job to tell the decision makers why they should care.

Back to our example. Confirm that the interests of key decision makers are really about increasing sales rep productivity, and not about other pressing issues, such as hiring additional people or reorganizing the department. Since executive hot buttons can change daily, we must be sure we're up to date.

Like it or not, getting our words right pays off in many ways, be it ROI project justifications or why we ate two desserts last night. //

Seen examples of ROI explanations you'd like to share? Explain them to me via e-mail to jkeen@decidingfactor.com.

Jack M. Keen is founder and president of The Deciding Factor, a Basking Ridge, New Jersey-based international consulting firm specializing in the development of simple, but powerful ROI calculation models, tools, best practices, and workshops for building better business cases faster. A frequent guest speaker, Keen has advised more than 100 organizations in 15 countries.