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What does ROI in Project Management mean?

November 22, 2019

When people talk about ROI, they generally refer to a monetary comparison between the one investment versus other options.  A simple look at the formula to calculate ROI confirms this. 

Yet, improved performance and efficiency can translate in a variety of ways that may or may not result in a difference in size of your wallet at the end of the financial year. It’s important to look at ROI as a gauge, but it’s equally important to realize that it also has its limitations.  

It is common practice to identify 4 different areas that should be considered when discussing ROI.

Money

We already mentioned money. When our clients talk to us about the way the introduction of a Project Management Tool changed their ROI, they usually mention that they avoided the necessity to hire another person. Companies that introduce a Project Management Tool manage to complete more work in the same amount of time. 

Tip: Did you know the Proworkflow ROI calculator can help you calculate how much time and money Proworkflow is saving you. 

Time

Time is money. And it shows in the way we already mentioned the time factor in the above Money area. The reason for that is simple. Hiring an extra person means adding another salary.  Finding ways to work time-efficient is extremely beneficial to a company’s finances and I doubt you will encounter a person who argues with the fact that a good project management software does exactly that. 

Communication

One of the biggest reasons why projects fail is because of lack of or miscommunication. This is the exact reason why a good project management software should incorporate a collaboration and communication tool. 

Improvement in communication and collaboration is probably not as easily measured as the amount of time and money that was saved. But it could well transpire in these areas, as well as in customer satisfaction. 

Organization

You probably can’t put a monetary value on the benefits of organizing a project in the most effective way. But the results of streamlining and standardizing a project  (hurray to the template!) has a significant impact on both the people involved as the efficiency in which the project is run. 

Other Factors

But these days, even more factors are considered when discussing ROI. 

Not all that long ago additional terms such as SROI (Social Return on Investment) were introduced to explore a more rounded view in which an investment can bring an improvement on a social or environmental level. The introduction of LED lights for instance might be such a consideration. The cost may negatively impact traditional ROI, but the environmental consideration might be positively appreciated. 

And then, although not directly linked to project management,  there is the way clicks and shares in Social Media campaigns are valued but not necessarily translate in an improvement on the time nor the money front (or at least not directly). It’s just another example how ROI  has become a much wider multi-faceted concept than it was traditionally viewed.

What’s fact is that we live in a changing world and perception of what is success or improvement is redefined with it. A project management tool is no doubt part of that changing world.