Return on investment (ROI) is commonly used by companies as financial metrics or benchmarks to evaluate business performance and efficiency of investment.
Here is the ROI formula:
When it comes to Enterprise2.0, the gains and costs are very difficult to measure directly. Most companies prefer to use money to calculate returns and seek a lucrative investment, but it is really difficult and impossible to see the immediate financial benefits at the beginning of implementing Enterprise2.0. Calculating the ROI is more than math, and companies should from the financial and non-financial points to assess the benefits of using social media.
Before listing the gains, it is necessary to consider the general costs. For most companies the most attractive factor of using social media is the low costs. Companies do not need to spend too much time and money on training and technology as social media tools like Wiki, Facebook are free and open to the public. Even if the companies develop internal Enterprise2.0 applications, the investments will be much less than other IT software.
First of all, the immediate returns should be non-financial:
Gains from internal communication:
The information and knowledge are the blood of an organization. Massive communication and interaction within the organization by using social media tools can collect and integrate the ideas and experience from employees. The productivity effects of information diffusion are high and can increase over time. “MIT research shows that 40% of creative teams productivity is directly explained by the amount of communication they have with others to discover, gather, and internalize information. Employees with the most extensive digital networks are 7% more productive than their colleagues. Furthermore, those with the most cohesive face-to-face networks are 30% more productive” (Hodgson, 2009).
The gains from employees:
In some cases, many modern managers argue that the adoption of social media will make their employees waste too much time. However, it turns out to be an adverse to the facts. The problems and creative ideas can be gathered and monitored timely from social media platform. The managers don’t need to waste time on sending and waiting e-mails, and they can enhance their employees’ loyalty as the employees feel freer and sense of presence by sharing ideas and feelings. The feedbacks from employees can help the manager to make best business decisions timely. This can expand to several following benefits like: trust, reputation enhancement.
Non-financial benefits can generate financial returns over time. Here is a case study can give us a direct and clear example to demonstrate one of the financial benefits – cost saving. TransUnion – one of the big three credit report companies develop SocialText as their social networking and receive a significant success from it: an estimated $2.5 million in saving in less than five months while spending about $50,000 on a social networking platform. The savings comes from buying less stuff.
Besides, the companies can also attract more collaborators and investors as well as talents with strong reputation and brand image accumulated on the basis of non-financial influences.
There are many ROI calculation methods. When companies begin to measure the benefits, it is crucial to connect them with their own business objectives.
formula source: Return on investment — ROI
case source: ROI of Social Networking for TransUnion
Hodgson, Matthew. (2009, February 19) The ROI of being social at work. Retrieved fromhttp://www.theappgap.com/roi-of-being-social-at-work.html