Question

A major consideration for organizations implementing new systems is the return on investment (ROI). ROI can be measured using tangible and intangible measures. List and discuss two examples of tangible measures and two examples of intangible measures.

Answer 1

1) a) Example- Tangible ROI typically takes on the traditional form of calculating ROI. For example, I will spend 100 dollars, and in a specified amount of time, I will receive 200 dollars in return. If 200 is greater than 100 and the amount of time to recovery is reasonable, then our investment would be deemed wise.

b) Example-Let’s say an employee makes $60,000 a year plus benefits of a 10% salary. The employee works a standard 40 hour week or 2,000 hours per year. We can quickly do the math and come up with an effective hourly rate of $33 per hour. Once I can calculate an employee’s effective hourly rate, I can then use it to quantify the costs associated with that employee to do almost any task. For example, if our $33/hour employee is spending six hours a month on administrative tasks such as stuffing envelopes and licking stamps, I quantify the cost of this task at $198 a month. Based on the hard dollars, I can then assess whether or not it’s the best use of the employee’s time to do administrative tasks (or whatever task I’m scrutinizing), automate the task or find a less expensive person to do it instead.

2) a) Intangible ROI Example-A local Metro Bank recently started running ‘Red Fridays’. When a customer comes into the store wearing red, they are immediately singled out and given some sort of small gift – a pen, a box of chocolates etc.

It would be a very rare occurrence that someone chose to be a member of a bank simply because they received a free pen, so where is the ROI for Metro Bank? Exposure. Tweets, Facebook posts, and general chatter around a bank that is a bit different. Being present and part of the community.

b) When a product is given free with another product there is n intngible ROI of dominnce.