A lot of companies want to know about the return on investment (ROI) of their policy management software. How much money will it save? Will I see an increase in profitability or can I reduce my expenditures? How much money will this save per employee?
While it's possible to answer that question (see below), the better question to ask is what's the value on investment, or VOI?
That's often a better indicator of the intangible benefits of an investment like a new phone system, a company-wide wellness program, a team-building weekend, or even a piece of technology like policy management software.
Of course, switching to a centralized, cloud-based repository for your policies and procedures manual results in benefits like simpler collaboration via workflows, easier policy updates and dissemination, tracking employee signatures, the ability to access important documents from any device anywhere in the world, and so much more.
Those things don't necessarily have a monetary value, so the ROI may not be the most accurate way to think of the benefits.
In this article, we'll help you understand the difference between ROI and VOI, and how the latter may be the better way to think of the benefits of installing a policy management software solution for your organization.
ROI vs. VOI
As we start thinking of the value of PowerDMS software, we should understand the difference between ROI and VOI. In many cases, ROI is not actually the best measurement of the benefit you'll receive from certain improvements. That's not to say it's not valid, but VOI might be better.
The Return on Investment (ROI) is a measure of the financial benefit you receive from a particular investment, and it's often represented as a formula: Benefit minus cost equals ROI.
For example, if a business attends a trade show and they get sales directly from the show, that's ROI.
Sales - Cost of the show = ROI
Or if an organization switches from electricity from the city's power supply to an all-solar setup, the ROI is based on the number of years the new setup is in operation.
(Savings x Number of years) - Cost of solar setup = ROI
Some people use the term "ROI" rather loosely, referring to any kind of benefit minus any kind of purchase – "What's the ROI of shirts for the departmental bowling team?" – but in the strictly financial sense of the word, it's the above definition.
On the other hand, Value on Investment (VOI) measures the intangible assets that come from an investment or purchase. For example, let's say your organization implements a wellness program that encourages people to participate in more healthy behavior at work and home (counting steps, serving healthier snacks, etc.). After several weeks, participants are happier at work, morale is higher, employee retention is up, and people are more productive. How should you measure that?
You can measure the ROI of the wellness program by looking at the number of sick days people take (or don't take), a decrease in healthcare costs, and a decrease in disability claims. But that's not the best representation of the benefit of the wellness program.
Instead, the VOI is the better principle to use, even if there are so many more intangible, unmeasurable benefits. After all, how do you measure "happier at work?" How much is morale worth? What's the dollar value of people producing more paperwork faster than before?
ROI of policy management software
It's rather easy to calculate the ROI of policy management software, especially if you're still using a paper-and-binder method or a mixed media method for managing policies. In those cases, especially the former, you're printing out a lot of paper and storing it in 3-ring binders for each and every employee. You may also be using filing cabinets which take up expensive real estate in your office.
Even the mixed media method – which relies on a mix of digital documents and paper documents – uses paper.
Printing requires printers, toner, someone to print and punch all the paper, and the binders to store the manuals in. Whenever there are new updates to a few policies, the updates also have to be printed out, punched, and stored.
Calculate the total cost of paper, ink, binders, filing cabinets, filing cabinet real estate, and all the manual labor involved in paper processes and that's how much money you could save with policy management software.. PowerDMS customers save an average of $10,000 on paper and printing costs alone, which is a powerful argument for getting off paper and going digital.
The right policy management software also saves you time. Someone (and often more than one person) has to organize and update policies, distribute policies to staff, track and collect signed policies, schedule training on new procedures, and find a way to prove compliance to accreditation standards. What’s their salary or hourly pay? How long do those inefficient processes take them? With these numbers, you can calculate the cost of your current system.
With PowerDMS, you can expect to save 2–4x the amount of time and money you’d typically spend on these processes. If you'd like to get a rough idea of the money you could save by switching to online policy management software, use the PowerDMS ROI calculator.
VOI of policy management software
This is where things get a little trickier to measure. How do you measure when something bad doesn't happen? How do you measure the absence of a negative event? This is one of the values we've been discussing, but it's hard to quantify.
Here's an example:
One of the benefits of policy management software is that it reduces the risk of liability and lawsuits. When you don't have policy management software in place, and you're hit with a major lawsuit, you could conclude that the lawsuit was the indirect cost of not having policy management software in place.
However, what happens when you implement policy management software and there are no lawsuits that year? What is the value of no lawsuit? How many lawsuits did you avoid? How much money were they each worth? You can't really know how much money you might have lost on incidents that never happened, so you can't demonstrate the savings.
Or what's the value of employees being able to access their policy manuals on their mobile phones while they're out in the field? If a law enforcement officer has a question about how to proceed during an incident, and she consults the policy manual first, what's the value of her following the procedure correctly? Is there a dollar value you can ascribe to her positive actions?
If a nurse receives some online training on a new life-saving procedure, which was only recently updated in her policies and procedures manual, what's the value of him doing the procedure successfully?
The question you have to ask yourself is, “Is NOT having policy management software worth the risk?” No organization thinks the lawsuit or cyberattack will happen to them until it does, and then they have to react because they weren’t proactive. This can result in tens or hundreds of thousands of dollars lost. Sometimes even millions.
In all of these examples, it’s hard to clearly define the monetary return of doing those things correctly. But we can easily see the value of keeping employees accountable to industry standards and regulations, equipping staff with access to updated procedures, and preventing potential lawsuits.
Here are a few (of many) ways that policy management software provides value:
- Employees can review and sign new policies and procedures online.
- The system can send out reminders to staff who haven't signed the policy.
- You can provide and control employee access to important documents
- You can ensure your employees are referencing the most updated version of every policy
- Through policy and training tracking, you can hold employees accountable to industry standards, laws, and regulations..
We may not know the exact dollar value of these benefits, but we know that they're incredibly valuable to the organization.
That's the VOI of policy management software.
Want to know more?
If you've never used policy management software before, it's hard to know what questions to ask or even what benefits you could see. PowerDMS can help. We've helped more than 4,000 companies with policy management, document storage, training management, and accreditation compliance. Learn more about how PowerDMS' policy management software can help you save time, money, and resources.