Preface

Value is Changing .

Bill and Melinda Gates, cofounders of the world's largest foundation, dedicated their 2017 annual letter to Warren Buffett. He donated the largest amount of money in the history of the Gates Foundation. In a cordial way, Buffett had asked the Gateses to describe the results of this contribution-essentially, he was asking for the value for money.

In their annual letter, the Gateses began with Buffett's correspondence to them. They then showed the return on his investment. Essentially, the annual letter was Warren Buffett's ROI for the roughly $30 billion investment in the Gates Foundation. The letter focused on the impacts of their various grants and initiatives. For one initiative, they actually showed the financial return on investment. This single act of responsibility and accountability portrays what is happening across the public and social sectors. Foundations, nonprofits, governments, nongovernmental organizations, religious institutions, universities, associations, and others are being held to higher levels of accountability than ever before.

Chaplains in hospital settings are being asked to show the value they deliver to healthcare organizations, otherwise, they face a reduction in numbers. The United Methodist Church is stepping up to this challenge by preparing chaplains to show the value of what they do in terms that funders can understand. This often means value for money and, in some cases, the financial ROI.

The president of the University of Malaysia Putra is asking the head of the library to show the ROI for all of the database subscriptions. Subscriptions represent an almost $20 million investment each year. "After all, isn't all of this information on the Internet?" asked the president. This prompted the head of the library to show the ROI of having the database from the perspective of the students and faculty.

The largest foundation in Saudi Arabia, and one of the largest in the Middle East, is planning a conference for nonprofits. The theme of the conference is "Measuring the ROI for Non-Profits." Part of the plans for this conference is to not only teach and show examples of how and why to measure ROI, but to also offer ROI Certification for nonprofit leaders so they can build internal capability to show value for money for the contributions they receive.

Various government agencies are facing tremendous accountability issues. The IT function within the Social Security Administration in the United States has been asked to show the ROI for major IT projects. Otherwise, its $1.3 billion investment would be in jeopardy. One intelligence agency is being asked to show the impact and ROI of a master's degree program offered to high-potential employees on agency time, paid by the agency.

Alberta Health Services, the largest provincial health system in Canada, has challenged its Healthy Living group to show the impact and ROI of their various programs. Demonstrating such results comes with the prospect of allocating more funds into the preventive-type programs that they advocate and organize.

These, and hundreds of other examples, show what is happening in the public sector. Accountability is required in areas unaccustomed to demonstrating value beyond the activities they offer. This is caused, in part, by four major trends:

1. Budgets are constrained, reduced, and tightly monitored, more so than any time in the past.
2. There is more competition for funding within an organization than ever before, and the competition frequently makes a compelling case for portions of budgets other than their own.
3. Organizations are moving from activities to results and on to fact-based outcomes, and sometimes to the financial ROI.
4. Donors and funders are requesting more accountability for their contributions. For government, it's the taxpayers. For foundations, charities, and nonprofits, it's the donors. And for businesses, it's shareholders and top executives.

These trends are a reality for many organizations and will likely continue. In fact, we anticipate that they will become even more pronounced.

Need for a New Approach

Moving toward fact-based outcomes is a challenge to all organizations as they attempt to show the value for the money that they receive. This book shows six ways to show value for money; some of the ways are closely related or interconnected. Of the six ways, the most credible is the ROI calculation. This is accomplished by following steps in cost-benefit analysis, an economic theory grounded in public finance. Development of the ROI metric follows standards and assumptions that meet financial officer approval.

ROI is not always necessary for public sector programs. Although, in theory, it can be accomplished, only a small number of projects deserve this level of analysis. This book describes how to take the analysis all the way through to the ROI calculation. A few shortcuts are possible, which creates a basis for some of the other ways to show the value. While the ultimate demonstration of value for money is ROI, it is reserved for specific types of projects.

The ROI Methodology: The Enhanced Logic Model

The classic logic model has served organizations quite well for many years, particularly those in the public sector. This book presents an enhanced version of the logic model, responding to needs not addressed with, and concerns about, the classic logic model. Although this classic model has been successful, times have changed, and the accountability needs have shifted. The model presented here, the ROI Methodology, addresses these needs and the needs for measurement and evaluation across the spectrum of organizations. Chapter 3 in this book is devoted to why a new evaluation system is needed.

The ROI Methodology has been evolving for some time. Initially, it was developed in the business sector to help executives see value for money in terms they could understand, appreciate, and support. Along the way, it attracted the attention of governments-with 26 federal governments adopting and using this methodology. Many nongovernmental organizations (NGOs) have adopted it, such as the United Nations, which started using this method with a UN General Assembly resolution in 2008. Nonprofits are using it, including charities, foundations, associations, and religious organizations. Approximately 300 healthcare organizations are now using the process, sparked in part by the book Measuring ROI in Healthcare (McGraw-Hill, 2013). About 150 universities are using it to show the value of their internal processes as well as external outreach programs and services. Grant writers are now suggesting that if you can wrap ROI around your proposal and deliver impact and ROI data to the organization providing the grant money, you double your chances of receiving the grant. John White, one of the premier grant writers in the United States, agrees [1]. The ROI Methodology has been very successful and has become the most used evaluation system in the world.

This book responds to a need for a system that tackles these widespread applications head-on, with the emphasis on the public arena while not losing sight of the business applications. This book attempts to do what no other book has attempted: present a methodology that crosses boundaries of different functional areas and professional fields, types of organizations, cultures, and countries to have one system that can be used in those environments. The ROI Methodology is a proven process in those areas already, and this book brings that experience and focus to readers.

This will be a book that can help those who are measuring the success of any type of project, program, initiative, system, procedure, event, or process in these types of organizations:

• Publicly traded businesses
• Privately held businesses
• Governments (federal, state, and local level)
• Nongovernment organizations
• Nonprofits
• Universities
• Community colleges and technical institutes
• K-12 school systems
• Foundations
• Charities
• Trusts
• Networks and alliances
• Associations
• Religious organizations

The ROI Methodology is a flexible, versatile process that can withstand the scrutiny of critics, while providing CEO and CFO friendly data through a process that is user-friendly.

Whether it is a development program in East Africa, an economic development activity for Oman, a cultural event in Brussels, a military operation in South Africa, a UN peacekeeping mission in Lebanon, a women's initiative in Brazil, a medical procedure in Canada, or a faith-based initiative in the United States, this process will be useful for delivering and demonstrating value for money.

We Can't Measure Our Way to Success

Many of us in the measurement and evaluation profession have suggested, encouraged, and supported more measurement and evaluation. We, the authors of this book, have tackled this in different ways and through different media channels. Our premise has been that when evaluators measure at the business level, they also make adjustments and improve programs. However, four challenges have prevented the needed change: 1) fear of the outcomes, which prevents program owners from making needed adjustments; 2) the task of measurement appears impossible, as it will be difficult to collect needed data; 3) exposing concern of a flawed system that no one wants to correct; and 4) resources needed to measure, underscoring a lack of funds to support the...