I was speaking at a conference last week in Sydney.
“What’s the business case for a new CRM?” asked a Not for Profit executive in the audience.
“The business case is usually additional revenue growth for a CRM, but frankly, most business cases are ultimately a waste of time,” I responded.
The executive looked at me, incredibly puzzled. For this reason, I’ll share my reasonings for this answer here now.
What’s a business case?
A business case is essentially a proposal that provides justification to decision-makers (often a Board) for an outlay of money in exchange for something else, such as an IT investment.
It usually considers costs, benefits and risks with various options or vendors.
While the terminology and method were very different, the origins of a business case likely began centuries ago.
Explorers, missionaries, and conquistadores with ideas but not funding presented their cases to those who could invest. The rewards of such adventure-type investments could lead to large returns through financial bounties, more real estate or perhaps religious converts.
At the end of the mission, the funding recipient would report back to their investors (if they didn’t die in the process) and either deliver the benefits or ask for more funding so that they might be able to try again.
The modern-day business case
The modern-day business case still carries many of the same intentions as those delivered years ago. However, for Not for Profits (NFPs), one major element is often missing – the report back to the funders with the results.
While I have written, assisted, and seen many business cases in my day for IT investments, I have yet to see any organisation report back the financial benefits to the Board years after the implementation. This is especially true with business cases built around additional revenue generation.
Instead, the business case is used to justify the initial funding approval by the Board, and the direct financial results of these decisions are either never measured or can’t be measured (at least not very easily).
Why you should avoid a FTE-reduction business case
While some may disagree with me, I’m very much against most FTE-reduction based business cases for Not for Profit IT investments. The reason is that most NFPs are incredibly lean already, especially when it comes to staffing.
Building a business case that proposes that a FTE reduction could occur through a technology investment is full of risks. After all, your mission could suffer for the sake of showing a headcount difference in your annual report when you’re better off redeploying or better-utilising existing staff.
I had more to say about this in the article I wrote last week.
By the way, the exception to this view is for new shared service models or mergers that allow back-office staff reductions. This is usually the one solid business case for using a FTE-reduction business case in an NFP.
What are the stronger IT investment business cases?
If we avoid the FTE-reduction and additional revenue generation business cases, what else is there? I’ll give you a few ideas:
- High current costs – One of the most obvious IT investment business cases is when the current costs for an existing “broken” system are higher than the ongoing costs for a new, purpose-built system. I see this frequently when an organisation has a bespoke, highly configured or customised system that no longer meets their requirements. In these cases, it’s not unusual for the maintenance and support cost to exceed the cost of a different system that’s already fit for purpose.
- Out of vendor support – Another strong business case is when a system has or will run out of vendor support. This basically means the old system is obsolete, and the vendor is no longer developing the product nor even providing security patches when issues are detected. An out-of-support system creates both business continuity and cybersecurity risks. This is, therefore, one of the strongest business cases you can give to a Board.
- Frustrated stakeholders – Regardless of your mission, all Not for Profits have important stakeholders. They could be donors, members, customers and even governments. One common complaint I hear about IT systems from NFP staff is, “We make it hard for our stakeholders to give us money.” As per my previous shared view, though, I’m not recommending that you use a revenue-generation business case. Instead, it may be around donor or member retention or customer experience. Boards know how important these stakeholders are, and so when in doubt, conduct a survey that may support a business case around their needs.
Gaining support for business cases from your Board
Ultimately, a business case should be written with the decision makers in mind – usually a Board, as in the case of Not for Profits. Understanding what their motivations are make it easier to frame the reasoning in your document.
If your Board is concerned about risk mitigation, use that as the primary driver of the business case. If you have an influential director who sees opportunities for innovation and modernisation, consider language that meets those desires.
Just make sure that whatever you write in the business case is aligned with the actual need and intention of the investment. Otherwise, you may quickly find yourself in a rabbit hole of additional Board discussions.
I regularly help Not for Profits make IT investment decisions. Let me know if you need some help.
P.S. If you found this article helpful, you might want to read these ones too:
Tammy Ven Dange is a former charity CEO, Association President, Not for Profit Board Member and IT Executive. Today she helps NFPs with strategic IT decisions, especially around investments.