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Benefits calculation

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  • #37808

    TBB
    Member

    In most transactional projects, it’s difficult to tie your solutions directly to the benefits derived from the project. For example, I reduced customer waiting time from 1 hour to 10 minutes, how do I measure the benefits? It is the increase in sales? If it is, how can I prove that that increase in sales is directly derived from the solutions I implemented?
    Pls help. Thanks.
    TBB

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    #112169

    Johnny Guilherme
    Participant

    TBB
    Its seems like some of your benefits are not tangible. You could assess though what each customer spends on average. Then look at your capacity for customers i.e. how many you handled before the improvement. Now after the improvement how many more customers can you handle. The extra customers that you can now accomodate times what each customer spends on average could give you some sort of return for your efforts. So yes your increase in sales is directly derived from your solution implemented. This however depends if you will get more customers.
    You have basically turned no productive time into productive time. You certainly have happier customers.
    Hope that helps.
    Johnny

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    #112480

    MGB Geronimo
    Participant

    Dear TBB,
    I agree with Mr. Guillarme’s response since we recently went through a similar project. May I just add that aside from the increase in the number of customers as well as the increase in sales, we also noted the number of repeat customers that we had and new ones as well.  This is in the belief that better service not only keeps our old customers happy, but these same customers bring us new ones as well through word of month.
     
    Hope this helps as well. 
     

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    #112493

    Deanb
    Participant

    TBB,
    Sales increases may not be the best test of value contribution here. A test of customer satisfaction, referals, or client retention may be more relevant. But do not get too caught up in proving the “direct” economics at the exclusion of many worthwhile “indirect” economic gains.
    In my view, the waiting time reduction speaks for itself and requires no further value proofing. You have saved internal and/or external  customers time at a minimun, which has value to them. Goodwill also has value, just ask any accountant. Part of quality is adding value to others, directly and indirectly, not just “directly” to your own organization.

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    #112501

    GR
    Participant

    TBB,  While I agree that it is difficult to tie solutions directly to the benefits, it is not impossible. In your case, Metrics derived for Customer Sat will show significant improvement. Apart from that,  reduction in customer waiting from 1 hr to 10 minutes itself can be a metric that can be measured and reported. Reduced customer waiting time can be tied down to increased no. of customers served during the specific period in question, which can then be tied to increase in sales. While it is possible to get a tangible result, it involves a lot of work at the backend to derive and report. Also, consider the fact that the increased in sales can be due to other improvements made in the same period. Hope this helps.

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    #112502

    Ed Barkley
    Participant

    Great work, TBB!I’d like to suggest (possibly on your next project) that following the DMAIC process should help you “tie your solutions directly to the benefits derived form the project”. In (phase 1) defining the improvement activity goals or “future state”, you agree with the champions and stakeholders what the outcomes of the project would look like in real benefits to them before even launching your project. Some have been mentioned in previous replies to your query. Accomplishing phases 2 & 3 will help you develop focused PI initiatives & clear metrics to measure the success of the project.  May I also suggest that you visit ASTD.org & ISPI.org? Their HPI & HPT models are very powerful in helping enterprises achieve their objectives by removing impediments or barriers to human performance. These are very powerful concepts and tie quite nicely to the DMAIC approach. Feel free to contact me anytime if you’d like more information on these, business hours, CDT. Ed Barkley, 913-908-5185

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    #112507

    James D
    Participant

    Yeah, but…
    Some projects are only there to make sure the dog doesn’t bark. I’m working on one now whose only measurable goal is to eliminate the possiblility of the client being sued. I suppose an example everyone knows about is the Y2K thing – there was no disaster when the clocks turned midnight, so all that money was well spent – or was it?
    To answer that question properly, we’d need to know how likely it was that the “bad thing” we’re seeking to avoid would have been if we hadn’t taken action to avoid it. This is not easy when the “bad thing” in question doesn’t happen very often. At this point statistical notions of probability cease to apply and then we have to rely on subjective measures of probability. This is not far short of allowing the project sponsors to label the project “must do” and getting on with it regardless.
    Any ideas on how to get out of this kind of bind?
     

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    #112510

    Mike Carnell
    Participant

    TBB,Consider this. Anytime you have trouble calculating the benifit of a project – forget the transaction nonsense because it is irrelevant – you have a very distinct lack of understanding of the effect of a particular variable on your business which means you have a lack of ability to understand how that piece functions. The lack of understanding is typically a function of _____? (hint: Y=f(x)) Apply the SS problem solving equation to your benefits capture process.If that doesn’t work look up the articles on this forunm by Cristian Ulloa and the interview with Rob Tripp, Adam Bowden and Karen Lay-Brew. I think their emails are with the articles and they are typically willing to help you.Good luck.

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