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Tangible vs. Intangible Benefits: What’s the Difference?

Tangible vs. Intangible Benefits: What’s the Difference?

What Are Tangible Benefits?

Tangible benefits are positive results that can be accurately measured and quantified with standard measurements. In business, the term describes any kind of outcome that is directly associated with financial gain or loss. You can always boil down tangible benefits to a monetary value relative to other types of investments or processes in the organization.

The Value of Tangible Benefits

There are several reasons why businesses need to recognize tangible benefits and know how to use them. Without measurement, there can be no consistent improvement. The ability to quantify different outcomes is essential for actually comparing them with each other to determine the best option. This means that tangible benefits are crucial for the “Measure” phase of the Six Sigma DMAIC protocol.

Tangible benefits are also much more predictable than intangible ones, which means companies can use this information to develop strategy and crisis control plans. The processes of measurement, prediction and control are all linked together, which is why many business leaders put more emphasis on these benefits.

How to Calculate Tangible Benefits

The process and difficulty for calculating tangible benefits depends on the specifics of the situation. It’s easy to quantify the impact of losing a sale because you know exactly how much value of the sale. However, isolating value-added benefits in a more complex process often require technical knowledge, industry experience and thorough data analysis.

What Are Intangible Benefits?

Intangible benefits are all the positive results of a process or action that can’t be easily or accurately measured. They are sometimes called “soft” benefits to distinguish them from the “hard” tangible ones. The nebulous nature of this concept can be discouraging to some leaders, but it doesn’t have to stay this way. Understanding and embracing these benefits is as important step in professional development.

The Value of Intangible Benefits

Just because they aren’t as easy to measure, predict or understand doesn’t mean they aren’t as important. Soft benefits can make or break a company just as easily as hard ones. They can have a widespread or long-term impact that can shift the overall trajectory of an organization. They can also have significant financial implications even if these results can’t be immediately connected to the cause.

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How to Calculate Intangible Benefits

Since businesses can’t measure intangible benefits in terms of financial gain, they need to develop “soft” metrics. This could include things like assessing employee morale, random public surveys or interviews with customers about their experiences with the process in question. Anecdotal and subjective data is one of the only ways to keep your finger on the pulse so you can try to maintain positive momentum.

Tangible vs Intangible Benefits: What’s the Difference?

Tangible and intangible benefits are opposite sides of the same coin. Any benefit in business is either tangible or intangible. It has to be one or the other and it can’t be both. The difference between them is entirely based on the ability to measure, quantify and compare the results.

The ability to accurately quantify the outcome leads to several other major differences, including predictability and consistency. Tangible benefits tend to be more predictable and stable. They usually rise and fall over time due to predictable factors. Intangible benefits are a lot more wild. They are hard to predict and they can fluctuate wildly.

Tangible vs Intangible Benefits: Who would use Tangible or Intangible Benefits?

Every business leader and every company should care about both kinds of benefits. Every action taken by a business should be done to obtain certain benefits and every business needs both kinds of benefits to succeed. Tangible benefits are often a high priority in lean business programs because they are data-driven. However, there is room for investment in soft benefits even in lean manufacturing or management environments.

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Tangible and Intangible Benefits: Real World Scenarios

A small sports supplier generates revenue by selling products at their physical location as well as online to a national market. As the brand gains recognition, the leaders decide to take action to boost their growth.

The company decided to expand their physical store hours by 2 hours each day. Sales numbers from this period show a steady increase in revenue since the change. In this case, the additional revenue from previous periods is the tangible benefit. However, this benefit should be greater than the cost of the extra store hours.

The same company also decides to expand their online marketing efforts. One of their strategies is to develop video content for posting on social media. Successful marketing could make a video go viral and increase brand visibility massively, or it could fall flat and make no impact at all. Even though it’s impossible to accurately link a financial value to the videos being posted, it can be a big part of building brand authority and recognition in the outdoors niche.

Learn to Appreciate Value

Leaders who learn how to balance and appreciate both tangible and intangible benefits have mastered one of the most difficult skills in the business world. Data science prizes tangible benefits, which is why they’ve become a modern management fixation. However, undue focus on tangible results can cripple a company. Just because you can’t put a price tag on something doesn’t mean it isn’t worth the effort.

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