Measuring Business Process Automation Cost Savings
Part of being a CIO is to build a business case for IT projects. Typically, the best way to construct such a plan is to demonstrate cost savings. The only problem is, how do you do that?
Measuring the return on investment (ROI) of any particular project can be a challenge. Calculating the cost savings created by implementing business process automation is no different. “If you can’t save as much money in a year or two as the new system costs to build, it should give you pause as to whether the project is worth doing,” writes Carl Erickson in Crain’s Detroit Business. “Many times, the irritation of a clunky or buggy system is disproportionately painful to the actual time it wastes or errors it causes.” The cost of automating the final 10 percent of a process, or of handling all exceptional cases, can be disproportionately expensive to the benefit gained, he adds.
The good news is that we live in the age of the Internet of Things, big data, and cheap storage. While it’s certainly easier to accumulate the data than to analyze it, in practice there are many different ways in which an organization can collect data about the efficiency of its business process automation projects and then find all sorts of analytical methods of slicing and dicing the data.
However, as the saying goes, garbage in, garbage out. It’s easy to collect all sorts of data and make conclusions about it that don’t necessarily make sense. In fact, there’s a whole academic study of the phenomenon, known as “spurious correlations.”
“We all know the truism ‘Correlation doesn’t imply causation,’ but when we see lines sloping together, bars rising together, or points on a scatterplot clustering, the data practically begs us to assign a reason,” writes the Harvard Business Review. “We want to believe one exists.” It goes on to cite a number of examples, such as increased iPhone sales mean more people falling down stairs.
Consequently, when attempting to measure business process automation cost savings, you first need to measure the right thing. It’s tempting to use something that’s easy to measure. But like the person who looks for their lost keys under the streetlight rather than on the dark corner where they were actually lost, because the light’s better there, you’re not going to find what you’re looking for. AIIM has a long list of potential cost savings and revenue enhancement services that could be applied to a business automation project.
At the same time, if what you measure is based on employee activities, and employees find out about it, chances are they’ll adjust their activities to make sure their measurements look good—and that won’t necessarily be conducive to good business practices. For example, customer service staff who are measured on how many phone calls they can complete in a day could end up rushing through calls before customers feel satisfied. Similarly, programmers measured on how many lines of code they can write in a day could end up generating millions of lines of nonworking code.
Ideally, what you want is a measurement of some kind of proxy, which your employees don’t know about so they can’t game the system. In the IT industry, examples include the number of email messages sent, or, for employee morale, how much time employees spent on LinkedIn.
Once you’ve decided on what you’re going to measure, next you need to establish a baseline, or what the statistics are before you implement business process automation. After all, if you want to demonstrate improvement, you first need a basis for comparison. And as with any other measurements, it’s a good idea to keep staff from finding out about it, because otherwise they may adjust their behavior and give you erroneous results. In fact, what might be best is if you can use existing data to help establish the baseline figure. Only then can you start comparing the data between the existing way of doing things with the business process automation method.
After collecting the data, you then need to find an easy-to-understand way to display it. While spreadsheets have all the data, it’s often easier to understand pictures. But in the same way that measurements can give erroneous conclusions, so can graphs.
One common metaphor for presenting a large amount of information visually is through the use of a dashboard. Now, you may feel that your information is too complex for a dashboard display. On the other hand, if it’s good enough for the U.S. government to display the progress of its IT projects, chances are that a dashboard display can handle the complexity of your organization. Dashboards and automated alerts can be used by non-technical managers to enhance the decision-making process, writes Darren Greenwood in Computerworld New Zealand.
The best part about calculating the cost savings for business process automation is that it’s continuous. That means that as you work on it over time, the process continues to improve and costs continue to go down. Plus, while the initial setup might be arduous, once you’ve calculated it you can just adjust it over time. In fact, that should save you some money right there.