Calculating the ROI of Your Strategy: How to Measure the Impact

You and your team started implementing a new strategy a year ago, based on a strategic plan that took months to create. You’ve been working hard since then, but you’re wondering if all this effort is really paying off.

Many organizations rely on gut feeling or anecdotal evidence to evaluate the success of their strategy implementation process. This approach fails to measure the true impact of their efforts. They wonder, “Are we moving the needle in a meaningful way?” — leading to wasted resources and missed opportunities further down the line.

Measuring ROI helps you see the value of your strategic initiatives. It shows their effectiveness, helps you optimize resources, and holds everyone accountable for results. It’s not just about tracking progress; it’s about understanding the true impact of your strategy.

The value of ROI for effective strategy implementation

Measuring ROI on a strategy implementation plan helps you understand the impact of your efforts. It ensures that executing your strategy goes beyond just checking off tasks. ROI doesn’t always mean financial return. For organizations like government agencies or nonprofits, it can mean citizen satisfaction, volunteer engagement, or ecosystem health. By tracking these metrics, you can see the real benefits and make informed decisions moving forward.

Some of the benefits of measuring ROI in strategic management include:

  • Data-backed decision-making. Measuring ROI quantifies the impact of different initiatives to help you see what’s working well and what’s not. This data allows you to objectively compare options, identify areas for improvement, and adjust your strategies for greater effectiveness. This ultimately leads to more strategic resource allocation and a higher likelihood of achieving strategic objectives and long-term goals.
  • Increased transparency and accountability within the organization. Tracking progress by measuring ROI shows the impact each initiative is having on the overall business strategy. This allows all stakeholders to see how available resources are being allocated and the results they’re generating. ROI metrics become a benchmark for measuring performance. This holds team members accountable for achieving their own goals and objectives.
  • Enhanced ability to communicate the effectiveness of your strategic management process. If you can’t show the impact of your strategy implementation, people will start to ask the question, “Well, why are we doing all of these things? Why are we wasting all of these resources and investment?” These questions could come from across the entire organization or any of your external stakeholders. If you can’t answer these questions with concrete evidence, you can face loss of buy-in, difficulty obtaining the necessary resources, and eroded trust and credibility.

Calculating ROI

The traditional formula for calculating ROI is:

ROI = (Net Profit / Initial Investment) x 100%

This gives you a clear way to measure financial returns for profit-driven strategies. It shows the percentage of profit made compared to the initial cost of the strategy.

For plans that aren’t profit-driven, like those of charities or government entities, the usual ROI formula might not fit. Their goals often go beyond just making money. You can measure successful strategy implementation with some of these alternative methods:

  • Social Return on Investment (SROI): This framework acknowledges the broader impact of initiatives by assigning monetary values to social outcomes. For instance, an environmental program might consider improved air quality or reduced pollution as part of its SROI calculation.
  • Outcome-Based Measurement: This approach focuses on tracking specific, measurable metrics or key performance indicators (KPIs) that are directly aligned with the program’s goals. A charity’s literacy program might track the percentage of participants who reach a certain reading level after program completion.
  • Balanced Scorecard: This framework provides a more holistic view of success by combining financial metrics with non-financial metrics. Non-financial metrics include things like customer satisfaction, employee morale, and innovation. This allows nonprofits and government agencies to evaluate the overall impact of their strategies.

When choosing the right approach for you, be sure to first define success in a way that aligns with your mission. Then, select metrics that accurately reflect your roadmap toward achieving that success.

How to integrate ROI into your strategy implementation

To truly enjoy the benefits of measuring the ROI of your strategic goals, you need to weave it into your action plan right from the start. Here’s how you can do it:

  1. Define objectives and metrics: Start by clearly defining your strategic objectives. What do you aim to achieve? Align these objectives with specific success metrics. For nonprofit or government entities, these metrics might include social impact, improved service delivery, or increased citizen engagement.
  2. Collect data: Throughout the implementation process, consistently collect the data needed to track your chosen ROI metrics. Tools like AchieveIt help you to gather relevant data points efficiently.
  3. Calculate and interpret ROI: Once the strategy is implemented, calculate your ROI using the appropriate method (SROI, Outcome-Based Measurement, Balanced Scorecard). Interpret the results to understand the impact of your strategy. Did it achieve the desired outcomes?
  4. Optimize the strategy: The ROI insights gained should inform future decisions. Use them to refine your strategy, adjust resource allocation, and improve future initiatives to maximize impact.

When planning your strategy and measuring ROI, be aware of any potential roadblocks you might face, like:

Lack of data accessibility: Are the right people getting the data they need? Take stock of your current data sources, spot any gaps, and prioritize what needs collecting. Embrace technology and automation to make data collection smoother and more efficient.

A company culture resistant to change: Build a culture that values data-driven decisions. Train leaders and staff on how to interpret data and use it to shape strategy. Share ROI results across the organization to promote transparency, build buy-in, and ensure everyone is accountable.

Measure true impact with AchieveIt

AchieveIt is an integrated plan management tool that’s perfect for boosting your strategy implementation and the value you’re generating. It helps you track your progress toward achieving your business goals and milestones. By automating and streamlining the update collection process, it makes life easier. Updates are collected and the data is readily available in one central place. This gives your management team the ability to continually review progress and share results publicly.

If you’d like to learn more, contact our sales team today.

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Meet the Author  Chelsea Damon

Chelsea Damon is the Content Strategist at AchieveIt. When she's not publishing content about strategy execution, you'll likely find her outside or baking bread.

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