Communication. That soft, touchy-feely stuff. You can’t really measure it, right? Wrong!
We use many ways to measure organizational effectiveness, but if there’s one best tool to measure communication inside an organization, it’s the value to cost assessment (V2CA). More than one CEO has likened it to portfolio management–managing a portfolio of communication activities just as they would a portfolio of companies or business units. It can be a CEO’s best friend.
The V2CA is designed to improve the return organizations receive on their communication investments. It can be brutal. For instance, in one 300,000 employee company, nearly $5 million in underperforming communication activities was identified by the V2CA.
Using this tool revealed more than $1 million in underperforming activities at a power company and nearly $300,000 at a consumer package goods company.
But being brutal is not all bad. In each case, the companies used information from the assessment to adjust their communication dollars and produce better results and a stronger return on the investment made in them.
There are three dimensions of a V2CA.
- How important each of an organization’s communication activities are to helping employees perform their jobs well. Results change when work changes, so our focus is on helping people do their work in a way that produces better results.
- How well each communication activity performs or meets employees’ expectations.
- The fully loaded cost of each activity. Those costs associated with producing the activity, plus the pay and benefits costs of the people who do the work.
We calculate the costs separately then use a questionnaire to identify answers to the importance and performance dimensions.
Results are displayed on a two-by-two matrix with one axis representing importance and one representing performance as the simplified depiction here shows.
In this illustration, activities in the upper two boxes are important to people doing their job well. The two lower boxes represent activities that are unimportant. The right two boxes are activities that people believe are effective. The left two boxes depict activities that are ineffective.
What are the benefits of the communication value to cost assessment?
- An organization generates a far better return on the investment it’s making in communication activities.
- Business performance should go up because funds have been redeployed from activities that aren’t helping people do their jobs well to activities that do.
Using the V2CA data
The upper right box is where we eventually want all activities. As you can see, our hypothetical company is spending $75,000 on the activities in the upper right box.
In the upper left box are investments of $50,000 being spent on important activities but the communication activities aren’t considered effective.
And in the lower two boxes, $260,000 is being spent on unimportant activities–some that are ineffective while some are doing an effective job on unimportant things.
Then we need to identify how to reapportion the funds we have so we generate a much better return on our investment than the depiction is presenting.
For instance, let’s say that you spent that $260,000 on a variety of communication activities that had relatively no impact on financial or operating performance. It was spent on various newsletters, brochures, social media and meaningless meetings where nothing really ever got done.
Instead, suppose you took that $260,000 and identified root causes of communication breakdowns that were making it difficult for sales people to sell more international business.
You then helped one part of your organization increase sales by 23 percent and generate a 1,447% ROI in four months. Replicating that process in another part of your organization, you increased sales by $6.1 million and generated a 1,667% ROI.
That’s exactly what we did with one of our clients a few years ago.
How much are you getting in return for your communication investment?