In this final lesson we will talk about how to set performance indicators and evaluation arrangements that are capable of measuring returns on investment.

A Return On Investment, or ROI, measures the efficiency of an investment or the amount of return on an investment relative to the investment’s cost. ROI is typically expressed as a percentage and calculated by dividing the return by the cost, or:

Performance Indicators allow performance to be measured against outcomes, for example:

• the acquisition of x number of customers over a specific period of time
• the achievement of y sales per quarter

The key is that they are measurable and feed into determining ROI. Examples might be sales figures, profits, or turnover.

Evaluation Arrangements are part of the planning cycle (plan, do, check, act):

• Plan. Recognise an opportunity and plan a change.
• Do. Test the change. Carry out a small-scale study.
• Check. Review the test, analyse the results and identify what you’ve learned.
• Act. Take action based on what you learned in the study step: If the change did not work, go through the cycle again with a different plan. If you were successful, incorporate what you learned from the test into wider changes. Use what you learned to plan new improvements, beginning the cycle again.

Evaluation arrangements are used to identify when corrective measures might need to be taken. Good examples might be cost benefit analysis or a customer satisfaction survey