And a simple calculation to help you with the business case
One of the significant reasons why Not for Profits should invest in IT is to reduce manual processes. Unfortunately, many organisations see this as a “nice to have” investment rather than one that could positively impact their mission objectives and bottom line.
My primary goal in this article is to show you how easy it is to calculate this value so that you can see the costs of manual processes in your organisation and understand the business case for such investments.
The Australian Charities and Not for Profits Commission (ACNC) recently released their Australian Charities Report 8th Edition. Unsurprisingly, more than 55% of all charity expenses were related to employees, a slight increase from the previous report.
With unemployment at record lows and increased CPI-indexed awards and superannuation obligations, this will no doubt go up further in the next report. To counter this cost increase during leaner times, many Not for Profits will consider layoffs and allow roles to remain vacant despite increasing service demands on their existing employees.
However, what if you could invest in reducing your employee costs over time instead?
Let me share a simplified but common scenario I see in Not for Profits all the time:
Cost of manual processes calculation
Let’s say that an organisation has two systems that require some of the same information. However, there is no data integration between them. Therefore, a staff member must physically type in the same information into both systems each time.
It often happens with internally focused systems such as separate payroll and HR systems. I also see this with CRMs and other externally focused systems like a Learning Management System. It’s also widespread with reporting requirements where staff enter data from two (or more) systems into Excel spreadsheets.
For this scenario, I’ll use the following simplified numbers:
- Employees repeat this manual process (to enter the information into the second system) 20 times/day.
- On average, it takes 2 minutes to complete this process.
- The organisation is operational 50 weeks a year, five days a week.
- The employees performing this task makes $25/hour.
To understand what this process is costing the organisation, the simplified calculation would look like this:
- Time Spent on this Manual Process
2 mins x 20 repetitions/day x 5 days/week x 50 weeks/year =
10,000 minutes, or approximately 167 hours a year, are spent on an unnecessary manual process.
- Wages Spent on this Manual Process
$25/hr divided by 60 mins = 41.6 cents/minute x 10,000 minutes/year =
$4,166/year is spent on this one unnecessary manual process.
The investment to reduce manual processes
Now, how much would it cost to build this data integration? It really depends on the systems involved and how easy it is to do so. Sometimes, the integrations are already available such as for well-known cloud-based software such as Salesforce, and therefore the costs are negligible.
If the data integration cost was $5,000, you might decide it doesn’t financially make sense with the above scenario. However, remember that our calculation was for just one process. Suppose the data integration would fix two manual processes of about the same value. Would it make sense for you then?
$4,166 savings/year x 2 processes = $8,322 > $5,000 data integration costs.
While this is a very simplified calculation, it hopefully shows the potential of such IT investments, and remember that this is just the first year of savings. I’ve helped clients with this calculation before and found that in some cases, they could potentially save the salary of an entire FTE or more.
A bit of a warning, though. This investment calculation will only make sense for processes repeated through a computer many times a day or month. Do not spend your money trying to automate a rarely-used process, as it won’t add enough value.
Summary
The costs of manual processes are both real and calculable. Data integrations are just one way to reduce manual processes in your organisation. Hopefully, the scenario above helps you calculate the potential business case if you reduce them through IT investments.
In reality, the costs are even higher if you could quantify staff job satisfaction and turnover to this calculation. For, even if your goal is not to reduce employee costs, think of what your team could do with the time they save with fewer manual processes.
Tammy Ven Dange is a former charity CEO, Not for Profit Board Member and IT Executive. Today she helps NFPs with strategic IT decisions, especially around investments.
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