The Phillips ROI Methodology

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The Phillips ROI Methodology

• Elements of the ROI Methodology
• Evaluation Levels of the ROI Process
• The Phillips ROI Methodology™

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Today, one of the most critical skills any professional can possess is being able to show the accountability of various processes and functions. More than any time in the past, senior executives and other stakeholders are questioning the value of a variety of programs, projects, and processes. Professionals must show how this value can be measured and reported in credible, methodical way. The ROI certification, which now boasts 10 years of success, is the standard for achieving and verifying that an individual possesses these skills.

Figure 1

Elements of the ROI Methodology

The ROI Methodology is best described by considering the five major elements (see Figure 1).  The five major elements include: 1) An evaluation framework 2) a process model 3) case applications and practice 4) operating standards and philosophy and 5) implementation.
Figure 2

Evaluation Levels of the ROI Process

EVALUATION LEVELS

LEVEL	MEASUREMENT FOCUS
1. Reaction & Planned Action	Measures participant satisfaction with the program and captures planned actions.
2. Learning	Measures changes in knowledge, skills, and attitudes
3. Application and     Implementation	Measures changes in on-the-job behavior and progress with application.
4. Business Impact	Captures changes in business impact measures.
5. Return on Investment	Compares program monetary benefits to the program costs.

The evaluation levels categorize data, reporting a chain of impact as reaction leads to learning, to application, to impact, and to return on investment (Figure 2).
Figure 3

The Phillips ROI Methodology™

The Phillips ROI Methodology™ model provides a step-by-step process for collecting data, summarizing and processing data, isolating the effects of programs, converting data to monetary value, and capturing the actual ROI (Figure 3). The Phillips ROI Methodology™ shown above is applied through a 10-step process.

Step 1
Develop/Review Objectives of Solution
First, the planning is initiated and the specific business drivers of the solution are identified. Discussion and decisions revolve around how the solution will satisfy the business drivers. Business measures are clearly identified. The objectives are established/revised to ensure that stakeholders agree on the application/behavior change and the business impact measures to be influenced.
Step 2
Develop Evaluation Plans and Baseline Data
The detailed planning process takes place in this step. The purpose of the evaluation is clearly defined and baseline data is developed/collected. If the purpose is to calculate the ROI, the entire ROI Process (10 steps) will be followed. If the purpose is only to determine behavior change, then the evaluation will stop short of collecting business impact data and calculating the ROI. If the purpose is to determine business impact, then data will be collected at all levels. Step 2 includes determining the data collection strategy and developing the necessary detail planning documents that specify how steps 3 through 10 will be carried out. 
Step 3
Collect Data During Solution Implementation
Step 3 begins the implementation of the data collection strategy that was planned in step 2. In step 3 the client organization usually collects the L-1 and L-2 data during the solution implementation (satisfaction/planned action and learning). This data is later reported along with follow-up data from step 4.
Step 4
Collect Data After Solution Implementation
In step 4 application/behavior change and business impact are collected. Business impact data is converted to monetary values to calculate the ROI.  Throughout the process, data is collected at all levels to show a chain of impact up to the highest level that satisfies the purpose of the study.
Step 5
Isolate the Effects of Solution
In step 5, the data analysis phase of the process begins. The effects of the solution are isolated to determine the extent that the business measures were influenced by the solution.
Step 6
Convert Data to Monetary Value
This step is applied when the purpose of the evaluation includes calculating the ROI.  If stakeholders have determined that there is no interest in the ROI calculation for a specific initiative, then the business impact and behavior change data is reported minus the calculation.
Steps 7 – 10
Step 7: Identify Tangibles
Step 8: Capture Costs of Solution
Step 9: Calculate the Return on Investment
Step 10: Develop, Repost and Communicate Results
Data from step 7 (intangible benefits) are reported along with business metric improvements. Barriers and enablers to implementation/behavior change are also reported. Any improvement in behavior and business metrics influenced by the solution (isolation) is reported in step 10.  When the ROI is calculated (step 9), the costs (step 8) are compared to the benefits that are converted to a monetary value from step 6.  Additionally, all of the data from steps 3, 4, 5, and 7 are also reported.
Conclusions and recommendations are also reported. Conclusions address information such as what caused the results, and what worked and what did not work. Recommendations address next steps and how the findings can be used to implement improvement.
Throughout the process of a follow-up study, data on behavior is always collected. Behavior change is one of the major key variables that determines if or how much the business metrics improve. Why behavior does or does not change and how it changes is of major interest. Data collection instruments and methods are carefully planned and developed to collect the most credible data from the most reliable sources to determine the contribution.

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