OD Network Business Acumen

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Business Problem:
Business Impact:
Financial Impact:
Success Criteria:

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Why Important:
Why Important:
Why Important:

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Tangible or Intangible?

The following is a list of benefits that result from an HR, learning or OD program. Is the benefit tangible, intangible, or both? Note your response in the blank.

§ Specific business problem solved (e.g., business stragegy poorly executed) _____

§ Retention of intellectual capital ______

§ Increased employee longevity ______

§ Leadership development ______

§ Success planning ______

§ Performance management ______

List 3 or 4 tangible benefits associated with the following interventions.

Performance Management

Employee Development

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Estimated Cost Savings: $125,000

Estimated Revenue Increases: $200,000

Estimated Cost of Intervention: $75,000

Cost/benefit ratio ______

Cost/benefit percentage ______%

Net payback percentage ______%

Payback period (12 months) ______months

Obstacle / Methods for Resolving

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Benefits / Tangible / Intangible / Criteria Y/N

Refer to Module 2, Slide 25 for additional information about sources of either expenses or revenues for each category. Note the estimated total for each category in the space provided below.

Category / Estimate
Program Development Costs
Revenues
Cost Savings

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Recently, 3 people from a 20-member technical support team came to you individually to get advice about handling their new manager. They each said that while he is generous, he’s demanding, condescending when giving feedback and sets conflicting priorities. They like him as a person, but think he’s a terrible manager. They all realize he’s been on the job for only 6 months, but they are frustrated and don’t know what to do. They noted that other members of the team feel this way as well. Two of the people indicated that lately there’s a significant increase in absenteeism, putting the burden of getting the job done on the remaining team members. And, they are already understaffed so it is causing problems in efficiently resolving problems and resulting in duplication of effort.

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Based on the information presented in Case Study 1, complete the following.

Business Problem:
Business Impact:
Financial Impact:
Success Criteria:

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Ask “why” as many times as you need to in order to identify tangible benefits that can be monetized.

Peeling The Onion

Why Important:
Why Important:
Why Important:

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Program Development Costs $ 8,000

Total Cost Savings 25,000

Total Revenues 15,000

Gross Cost Benefit Percentage: Cost Savings + Increased Revenues
Cost of Intervention X 100 = ___%
Net Cost Benefit Percentage: Cost Savings + Increased Revenues – Costs
Cost of Intervention = ____%
Payback Period: Cost of Intervention
(Cost Savings + Increased Revenues) per month = # of months

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Your organization has been doing succession planning for the last two years. While everyone on the HR and OD team agrees that it appears to be retaining and developing future leaders, no one really knows for sure. But, everyone involved in the process (including high potentials and incumbent managers and directors) seem satisfied with its success in meeting its original objectives. Based on a high-level understanding of the succession planning process, the CEO believes it is needed, but is unaware of what the process really costs in time and money.

Currently, your strategy includes developing competency profiles for each mid and senior management position, assessing all the supervisors, middle managers, and directors (about 200), creating career paths, and providing training programs for the individuals demonstrating high potential. One-on-one coaching is offered for director-level folks.

The company has been in the midst of refocusing its business goals resulting in a reorganization and realignment in sales and product development. The good news is that the business is booming and the staff is projected to continue expanding 20% each year for the next 2 years. Between the rapid growth the company is experiencing and reorganization activities, there are 20 positions for which competency profiles need to be developed. Given the limited internal bandwidth, you’ll have to hire external consultants to get the profiles done within the next 6 months. This adds $160,000 to your already over-extended budget.

The finance group, which has a reputation for cost cutting, is looking at all systems within the organization in order to be sure they are worth the expenditure or investment. The succession planning process is now on their radar screen. In addition to having to present your business case, you have to justify the additional $160,000. Your boss, the VP of HR is turning towards you for cost justification.

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Circle the most accurate answer to the following questions based on Case Study 2.

1. Is it possible to develop an ROI for succession planning?

a. Yes

b. No

2. What is the first step in the process:

a. Suggest using leadership development as an example for demonstrating the efficacy of succession planning and its contribution to the overall success the company is experiencing.

b. Ask why this needs to be done.

c. Schedule a time to meet with the VP to begin the evaluation process.

d. Take 5 Excedrin for the headache you’re experiencing.

3. Once you meet with your boss, what is the best first question to ask?

a. Are there existing metrics for proving the financial value of succession planning?

b. What do you think the financial folks are looking for as a rate of return for our succession planning initiative?

c. What is the business problem being addressed with succession planning?

d. How would the organization be affected if we didn’t have a succession planning strategy?

e. What are the one or two areas of our succession planning that would be more easily financially quantifiable than others?

4. What is the next question you want to pose?

a. How would the organization be affected if we didn’t have a succession planning strategy?

b. What are the one or two areas of succession planning that would be easier to financially quantify than others?

c. What is the business problem being addressed with succession planning?

d. How would the financial performance of the company be affected without succession planning?

e. How do we measure the effectiveness of the succession planning activities?

5. And the next question?

a. What are one or two areas of succession planning that would be easier to financially quantify than others?

b. Was the company as successful before we had succession planning?

c. From your perspective, are the current succession planning activities meeting the stated objectives?

d. What organizational impact is succession planning having?

e. Are there any activities we can confidentially cut back?

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6. And, the next question to continue establishing the need?

a. What are the intangible benefits being realized from the succession planning strategy?

b. What are the success criteria you’re using to justify succession planning to the other members of the senior leadership team?

c. In what way has succession planning contributed to increasing revenues?

d. What compelling argument did you present to get the CEO’s buy-in for succession planning?

e. What was the initial business driver behind implementing the succession planning process?

7. What is the next step in the process?

a. Get more data by interviewing other managers for their feedback using the same set of questions you used with your boss.

b. Define the success criteria?

c. Determine tangible vs. intangible benefits.

d. Begin defining financially quantifiable benchmarks.

e. Start peeling the Onion (3 whys).

8. What do you want to do now?

a. Identify any existing metrics that can be used for the business case.

b. Analyze the leadership attrition rate prior to implementation of the succession plan.

c. Conduct a cost comparison between using internal vs. external consultants for developing the remaining competency profiles.

d. Determine if there are any challenges/problems you may encounter in getting the metrics.

e. Take more Excedrin.

9. What is the last step in the evaluation process?

a. Design a method for analyzing agreed upon metrics.

b. Work with your HRIS system to identify any tangible measurements you can use.

c. Convert as many intangibles into tangible benefits.

d. Meet with the finance folks to determine the type or rate of return they expect to see.

e. Begin getting the data to run your calculations.

10. Based on your evaluation, you and your boss decided to use leadership development for high potentials. What tangible benefits can be financially quantified based on these activities:

a. Longer retention of high potentials.

b. Increased per employee revenue generated for their units or teams.

c. Reduction in absenteeism.

d. Reduced time to market for new products.

e. All of the above.

f. None of the above.

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11. You’ve completed the evaluation phase and have identified the tangible benefits, what do you need to consider when running your calculations?

a. The overall costs of the succession planning activities.

b. The cost of using external vendors to supplement succession planning activities.

c. Cost savings which are realized from succession planning.

d. Revenues that contribute to the company’s profitability.

e. All of the above.

12. How do you want to handle the intangible benefits of succession planning? Circle all that apply.

a. Ignore them for the purposes of this business case.

b. Attempt to quantify them in some way.

c. Include them in the presentation noted as intangible benefits.

d. Offset them with tangible benefits.

e. None of the above.

Data for Calculations

§ 3-year projections

§ Direct & indirect succession planning costs: $3,000,000

§ Cost savings: $3,500,000

§ Revenue increases: $6,000,000

§ Payback period: 36 months

Cost/Benefit Percentage ______%

Net Payback Percentage ______%

Payback Period ______

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Circle the most accurate answer to the following questions based on Case Study 2.

1. Which calculations do you want to use in establishing the business case for hiring external consultants? Click all that apply.

a. Cost/benefit ratio

b. Cost/benefit percentage

c. Net payback benefit

d. Payback period

e. All of the above

2. What costs do you need to factor into calculating the cost/benefit percentage?

a. Internal OD consultant time and rate.

b. Additional value of the increased length of time to complete the process internally.

c. Cost of additional staff if needed.

d. External consultant fees.

e. All of the above.

§ Data for internal vs. external costs

§ # of profiles to be developed: 20

§ Current # of internal OD consultants: 3

§ OD consultant fully loaded hourly rate : $62.50

Cost of 4 additional months: ______

Total estimated costs: ______

External consultant fees: ______

Cost savings using externals (%): ______

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Complete the following ROI calculations based on the estimated costs, revenues and cost savings created for your current intervention at the end of Module 2.

Cost/Benefit Percentage: ______%

Net Payback Percentage ______%

Net Payback Period (12 mos) ______

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