How do you measure the ROI of social software??

Posted on May 14, 2008. Filed under: Facebook, social media, Web 2.0 | Tags: , , , |

Unfortunately, this is the most common question I get asked. I say unfortunately because, in my view, the obsession with this question reflects the sorry state of business and government today – namely, if you can’t count it, it doesn’t count. We are driving quality, innovation and creativity out of our businesses and institutions in favour of quantity. It has been shown again and again that our obsession with targets simply perverts activities to meet those targets at the expense of doing something useful or meaningful.

Anyway, rant over, back to the original question. If you’re expecting a neat answer to the ROI question, it’s probably best to quit here and go back to whatever you were doing two minutes ago – provided it was legal of course!

My rather messy and frustratingly incomplete answer to this question is:

  • Don’t spend lots of money and people won’t harass you for pointless justifications – this stuff is cheap to do … if you’re not doing it cheaply then you’ve probably lost your way somewhere.
  • If asked for financial ROI by some senior manager, I would ask them: Would you rather our employees were connected or disconnected? Would you rather we did things once and reused that effort or did it multiple times in different geographical locations? Would you rather know what our employees think and how they feel, or would you rather ignore them and let the grapevine and rumour-mill corrode employee engagement? Do you want the brightest young talent to join our organisation in the future, or would you rather they joined our competitors? Did we measure the ROI of our telephone system or e-mail or were the benefits so blatantly obvious we just deployed them!? etc. etc. etc.
  • This is going to happen anyway … in fact, this is happening already (the BT Facebook network now has over 10,976 people in it and rising) … now is the time to decide if you want to be one step ahead, or one step behind.
  • You can spend months arguing the toss over whether or not to try this out, or you can just give it a try … sometimes, ‘the only form of transportation is a leap of faith’!

My experience is that senior managers who are afraid of social software hide behind pointless ROI arguments. Senior managers who get it, make it happen without endless hoops and hurdles – if you’re faced with the former, then you’re probably talking to the wrong person. Try someone else …

If no one will listen, then just do it anyway … inspirational leaders be the change they want to see, they don’t wait for permission … did Muhammad Yunus give up on micro-credit because everyone told him the poor weren’t credit-worthy??

I know this isn’t the language of accountancy and I know this might seem a daunting prospect in your organisation … but you can try this very simply and cheaply and on a small scale and you will see benefits very quickly.

My last bit of advice is … take it one step at a time and proceed until apprehended! :-)

Related post: Top tips for launching social media in the enterprise

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18 Responses to “How do you measure the ROI of social software??”

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How do you measure the ROI of ANY moral boosting strategy

Microsoft havefree cold drinks
Many Japanese forms have a morning work out
Many organisations offer multifaith prayer rooms
Many organisation sponser and support various real social groups

Some of these have financial implications, yet they still exist..

Just because there is no obvious financial benefits, does not mean to say there is not benefit

Blogging may never repalce the coffee machine banter or office gossip. But anyone who has been a home worker, or works in an office where everyone around them is in a different LOB, will probably agree that blogging and more importantly comments and feedback provide a great feeling of belonging. After all humans are a tribal animal

Lee – couldn’t agree more!

Richard

You’d enjoy books by Jeffrey Pfeffer – see his website on event-based management!

Loved the “proceed until apprehended”

Will it work for setting up a facilitation practise as well?

[...] How do you measure the ROI of social software?? « Inside out Measuring ROI for social media aka don’t – just get an do (”until apprehended”)! Good stuff. (tags: social media enterprise2.0 networking) [...]

Sally,
The ‘… proceed until apprehended’ was something I found in my notes from the Margaret Wheatley course I went on … can’t actually remember who said it or in what context but I thought it was very apt for getting social software kick-started in an organisation!

I’m sure it would work in any context!

Richard

[...] as Richard Dennison points out, “Did we measure the ROI of our telephone system or e-mail or were the benefits so [...]

ROI – NPV – break even etc can be calculated against Social Networking tools but it requires an understanding of the tasks that employees will perform with those tools. When we think of a Business process we can make a reasonable stab at calculating the benefit as it will (hopefull) improve the efficiency of the process. (hard dollar benefit)

The challenge comes when employees start using the tools to do things that you never considered!! This area is where the real value of SN tools come from hence the problem with ROI and other finanical justifications. We can be creative and calculate a soft dollar benefit to the client but my experience is that the CFO usually wants hard dollars.

I agree with the article that you just have to get it but for software vendors we have to show financial value where we can and many clients wont just let you install some code in a box in the corner of the office :o(

Cheers!

http://www.slideshare.net/sparkbouy/slideshows

Hi Richard,

I have came across the useful BT case study on Wiki’s some time ago, so it is good to discover your blog :) I agree with your post and have recently also been blogging (http://nickpoint.wordpress.com/wp-admin/post.php?action=edit&post=51) about ROI on collaborative tools and in my experience during the early days of email it was not justified on ROI but on early mover competitive advantage. SN are the same and investments need to be based a gut feel and a leap of faith to do the right thing.

Nick

There are different types of ROI.

There’s the hard quantitative ROI, but there’s also the subjective qualitative ROI. From an Executive Mgmt point of view – you can’t have an organization run all willy nilly. You also have limited constraints (time, resources, money), and fierce competition from projects trying to get a slice of those constraints.

Any initiative needs to start with a problem definition – what are you trying to solve? And is how is what you’re trying to solve aligned against corporate objectives?

If what you’re doing is supporting a corporate objective – you immediately get past a hurdle by automatically inheriting a certain level of support.

With social networking, are you trying to improve the collaborative nature of the culture? Is the company trying to improve the retention of staff? Improve subject matter expertise knowledge capture and transfer?

There’s always a way to measure the results, even if it’s subjective. E.g. if you do a survey every 6 mos to get a pulse on how long the avg person thinks they’ll stay with the company… Keep track of how long it takes to ramp up a new employee before they become proficient… Etc…

If Earth continues to have these problems, I may have no choice but to blow it up with one of my Star Destroyers.

Oh dear Richard.

Here I was with my head stuck safely in the sand and you come along…

‘Darth’ has expressed my concerns very well – “Any initiative needs to start with a problem definition – what are you trying to solve?” – as I don’t think that process has happened here (I see a severe case of ‘bright shiny objectitis’), but your article has given me some hope that ‘just do it’ might ‘just work’.

Steve Kent

what’s a friend worth if they won’t click on your ads?

[...] sure I’ve said some of this before … but I don’t think it can be said [...]

Hi Richard,

Is it OK to quote you in an article I’m writing on overcoming social media resistance?

“My experience is that senior managers who are afraid of social software hide behind pointless ROI arguments”.

So you understand the context, similar articles are here:

http://www.snapcomms.com/snap/articles/Internal_Communications-free_resources.aspx

Kind regards,
Sarah

Sarah – sure, that’s fine by me.

[...] terms of quantifiable results: A high value and share of knowledge. Lets say it is quite generic. But as Richard Dennison writes here, that is exactly a problem: If you can’t count it, it doesn’t count. We are driving quality, innovation and creativity out [...]

WHat is ROI? It would have been nice if this was first explained in the article.

regards

An auful lot of what you say here applies to supporting communities of practice (which usually means using social technologies for a group, whether inside or outside of the enterprise). Gotta be cheap, gotta watch out for false measures and measurement strategies.


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