how and why to make a "return on investment" case june 2016
TRANSCRIPT
How and Why to Make a “Return on
Investment” Case
LEE HUANG
ECONSULT SOLUTIONS, INC.
JUNE 30, 2016
1
Then
NOT-FOR-PROFIT
SECTOR
PUBLIC
SECTOR
FOR-PROFIT
SECTOR
2
Now
NOT-FOR-PROFIT SE
CTOR
ENVIRONMENTAL SUSTAINABILITY
ECONOMIC DEVELOPMENT
SOCIAL CHANGE
RETURN ON INVESTMENT
FOR-PROFIT SE
CTORPUBLIC SE
CTOR
3
Then
DONORS WITH RESOURCES
4
NOT-FOR-PROFIT
ORGANIZATIONS
INDIVIDUALS/
HOUSEHOLDS/
COMMUNITIES
IN NEED
Now
REGIONAL
ECONOMIES
INDIVIDUALS/
HOUSEHOLDS/
COMMUNITIES IN
NEED
SOCIAL
JUSTICE
FOR ALL
ENVIRONMENTAL
SUSTAINABILITY
LOCAL
TAX BASES
5
NOT-FOR-PROFIT
ORGANIZATIONS
INVESTORS
SEEKING
SOCIAL RETURN
DONOR GIVES $
NON-RUNS
PROGRAMS
PEOPLE ARE
SERVED
Now
6
Then
7
NOT-FOR-PROFIT
ORGANIZATIONS
DONOR GIVES $
NON-RUNS
PROGRAMS
PEOPLE ARE
SERVED
PEOPLE ARE
CHANGED
SOCIETY AS A WHOLE BENEFITS
THEORY OF CHANGE
RETURN ON INVESTMENT
Why
8
Reconciles the Conversation
Increases the Universe of Beneficiaries
Convinces Those Who Think This Way
Provides Cover to Those Already on Board
Funder’s Perspective
9
I’m Trying to Maximize Impact
I Have Choices…Why Are You the Best Choice?
Return vs. Investment
10
Upfront and/or Ongoing
Outlay
• Direct economic activity and
jobs
• Spillover impacts
• Broader tax base
• Reduced social service cost
• Better (and quantifiable)
quality of life outcomes
Gains to Society
Example: Health Interventions
11
• “An ounce of prevention is worth a pound of cure”
• Substandard living conditions create costly negative health outcomes
• Philadelphia Department of Health and St. Christopher’s Hospital Pilot: removing asthma triggers from old houses at $3,500 per house = 70% reduction in hospitalization, 50% reduction in school absences
Rowhouse on Wallace Street in Mantua. (Courtesy Ian Freimuth/Flickr)Courtesy Jukie Bot/Flickr
Example: Early Education
12
• “Every dollar invested in early interventions rewards $8 over the life of a child”
• Mathematically equivalent to a 4% annual ROI
• Derived from reduced social service costs, increased energy potential
Example: Cultivating the Arts
13
• Direct Economic Activity: $700K budget produces $2M in statewide impact
• Tourism Implications: 30K attendees produce $425K in direct spending
• Feeding the Creative Economy: resident/business attraction and culture ecosystem
• Educational/Health/Wellness Enhancements: youth offerings create cultural capital
Mainstage Center for the Arts performance of Little Shop of Horrors, October 2015
Example: Preservation of Open Space
14
• Direct Economic Activity: $500M annual impact supporting 6,000 jobs
• Property Value Impact: $16.3B accumulated gain to homeowners
• Ecological Services Rendered: $133M in cleaner air/water, flood mitigation, and carbon sequestration
• Direct Use Value + Health Care Cost Implications: $577M in recreational benefits, $1.3B in health-related savings
15
NOT-FOR-PROFIT
ORGANIZATIONS
200-RM HOTEL w/70% OCCUP =
51,000 RM NIGHTS / YR
$5,000 TO TRAIN 100
HOTEL EMPLOYEES
EMPLOYEES HAVE BETTER
CUSTOMER INTERACTIONS
HAPPY CUSTOMERS
RETURN AND/OR TELL
THEIR FRIENDS
TRAINING PAYS FOR ITSELF IF
+50 RM NIGHTS (= 0.1% GAIN)
THEORY OF CHANGE
RETURN ON INVESTMENT
Example: Customer Service Training
Limitations and Caveats
16
Keep Your Eye on the Real Ball
Harder to Measure Less Important
Comparing Others’ Results Which Are Not as Rigorous
Investment by Whom vs. Return to Whom
Questions?
17
Lee Huang, Senior Vice President and Principal
Econsult Solutions Inc.
1435 Walnut Street 4th Floor, Philadelphia PA 19102
PHONE 215.717.2777 EMAIL [email protected]
URL www.econsultsolutions.com TWITTER @econsultsolutns