Measuring Impact: Cost Justification for Information Services

1. Measuring Impact: Cost Justification for Information Services A Quantum2 Seminar

2. © Dialog Quantum2 Program 2 Quantum2 Quantum2 A professional development program for information professionals A combination of training, communications and a tools to help information professionals develop leadership skills and demonstrate the value of their services within their organizations Available free to information professionals worldwide quantum.dialog.com

3. © Dialog Quantum2 Program 3 Quantum2 Leadership Circle

4. © Dialog Quantum2 Program 4 Today’s Schedule

5. © Dialog Quantum2 Program 5 Facts of Life The Information Center needs to “Ask for Money” to operate. This is a fact of life. “Asking for Money” formally takes place once a year or so, but …. “Asking” informally when a customer expresses “Thanks” can take place much more frequently. Building in an ongoing process is the best way to ask for money

6. © Dialog Quantum2 Program 6 Components of Cost Justification The benefit of the services used must be defined The benefit can be qualitative or quantitative The benefit must be displayed against its cost The cost can be a “best guess” estimate The combination of benefit and cost creates an Impact Statement

7. © Dialog Quantum2 Program 7 WE CAN DO THIS! Knowing the sources and uses of information gives the Information Center a competitive edge over others who are also asking for money. Information Center projects affect many business units and may have multiple impacts The Information Center can provide linkage across different departments to identify common information needs Information Center projects involve research and packaging of knowledge

8. © Dialog Quantum2 Program 8 Two Opportunities for Cost Justification The annual budget process “Thanking and Asking” on an ongoing basis Create mechanisms for collecting feedback on value/benefit Communicate the cost of services delivered on a regular basis

9. © Dialog Quantum2 Program 9 Sample Feedback Request Here is the information you requested. Please call me at 999-999-9999 if there are any questions. By providing feedback on the outcome of this work, you will help us achieve our ongoing goals to quantify exactly how ILS provides direct business value. Your feedback is critical to our continuous improvement process. Please provide specific comments on how this information helped you-- for example, if it involved a contract negotiation, or a bid opportunity, what was the outcome? If we saved you research time, please quantify the hours saved, or estimate how much you would have spent trying to obtain the information. If the work promoted teamwork, created a new business opportunity, reduced cycle time, or otherwise helped produce a positive outcome, please provide us with an understanding of the value of the services. Contributed by Michelle Burylo from Air Products & Chemical, Inc.

10. © Dialog Quantum2 Program 10 Defining Impact Collecting feedback enables you to connect “Money Spent” to “Value Gained” The point of this process is the “Impact” of the information services on the organization.

11. © Dialog Quantum2 Program 11 Sample “Impact” Statement Impact statement from an architect: Project drawings 10 hours @ $50 Contractor meetings 5 hours @ $100 Client meetings 2 hours @ $100 Total $1,200 Thank you.

12. © Dialog Quantum2 Program 12 Sample “Impact” Statement What is wrong with this “impact statement”? Last month Department [X] used [zzz] and [yyy] files for [bbb] hours, resulting in a charge of [$$$] Or this one? Last month we provided services to [xxx] people, specifically [yyy] informational searches and [zzz] research projects, resulting in a charge of [$$$].

13. © Dialog Quantum2 Program 13 Exercise: Writing an “Impact” Statement Prepare an Impact Statement for your Information Center, using assumptions. Points to include: The nature of the Information Center effort (e.g. searches) Who benefits (not just who was billed) What business/organizational work this effort contributed to The cost to the enterprise

14. © Dialog Quantum2 Program 14 An Effective IMPACT Statement… “The Information Center provided search information in the form of briefing documents and executive analysis to the firm partners in support of a request from their clients, NewCo Telecom, to counter the merger of ABC and XYZ Telecoms . This information resulted in the firm offering advice that generated an additional $200,000 in revenue. The cost of this project was $35,000 in third party information and organizational staff time, representing $165,000 in additional income for the firm.

15. © Dialog Quantum2 Program 15 Cost Metrics For Determining Impact Cost metrics for impact can be gathered whenever information services are consumed. Measure transactional services at point of use. Allocate subscriptions and other fixed costs to projects or departments Collect portal or web site metrics Track researcher time by project Assess value consequence of user not finding or accessing info without Information Center intermediation

16. © Dialog Quantum2 Program 16 Hard & Soft Costs

17. © Dialog Quantum2 Program 17 Fixed & Variable Costs Fixed costs - “Overhead”. Fixed costs are what it takes to open the door and be in business. There is no direct link to sales. Variable costs - These change directly with sales. These are the incremental costs associated with selling each unit of a particular product or service.

18. © Dialog Quantum2 Program 18 Cost in Context One goal of cost-justification is to put money spent in context. Information Center budget in relation to revenue Information Center budget in relation to margin

19. © Dialog Quantum2 Program 19 How to Calculate Operating Margin To calculate your organization’s Operating Margin: Find the Income (or Profit & Loss) Statement. Subtract Operating Expenses from Revenue. The result is called “Operating Income” or “Turnover”. Divide Operating Income (or Turnover) by Revenue to get Operating Margin.

20. © Dialog Quantum2 Program 20 What Operating Margin Means to the Organization Information Center Costs come out of Operating Margin A company with 10% operating margin must book $10 revenue to have an extra $1 in operating income to spend on Information Center. A company with 5% operating margin must book $20 to get the extra $1. Showing that the Information Center can help improve revenue or margin is the most effective form of cost justification

21. © Dialog Quantum2 Program 21 Cost Justification for Value Cost Displacement One information service may cost as much as another but provide better value Cost Avoidance Information services can avoid “hard costs” and “soft costs” Cost Restructuring Information Center products & services help customer shift costs by type (fixed vs. variable), time, line item, etc. Added Value Information Center products & services help Information Center customer get revenue, or cash flow, in new ways

22. © Dialog Quantum2 Program 22 Tips for Cost-Justification Use project coding to allocate costs for impact Allocate Information Center overhead based on % of work Collect information over time Benchmark against competitors information budgets Marketing to communicate value Evidence-based value/recommendation statements Benefit/contribution to projects or revenue Connect Information Center work to “compelling business events” --

23. © Dialog Quantum2 Program 23 Tips for Cost-Justification Show increased efficiency or productivity Compare efficiency of Information Center research to research done by customer. Show savings or best value through evaluating, selecting, and licensing of external content products Continuously assess services and recommend modification or replacement if required Compare cost efficiency of Information Center managing external content vs. individual user departments Estimate increased productivity through training for effective user searching

24. © Dialog Quantum2 Program 24 Cost-Justification Worksheet

25. © Dialog Quantum2 Program 25 Key Learnings Showing impact requires linking information activities to specific projects, objectives and outcomes Cost justification requires quantification of value using metrics and putting them into context Value can be derived by asking customers Impact statements convey the real value of the information center. Construct them carefully and use them wisely

26. © Dialog Quantum2 Program 26 Closing Next steps Action Support from Quantum2

27. © Dialog Quantum2 Program 27