How To Tell If Your ROI Is Positive

by Chris Blaskey / Nov 7

Converting to a largely remote workforce has a significant upfront cost, both in tangible ways (such as supplying remote workers with laptops) and intangible ways (loss of face-time, and time spent learning to adjust to the new work setup.) In most cases, however, the long term ROI makes up for this many times over. When trying to determine ROI, there’s 4 key factors to consider:

1. Costs - What costs will the conversion incur?
2. Savings - What costs will be saved?
3. Profit Increases - What’s different about having mobile workers that will increase profits, and how much extra profit will result?
4. Profit Decreases - What’s different about a nomadic workforce that decreases profits, and how much profit is lost as a result?

Ultimately, of course, if the savings and profit increases exceed the extra costs and profit decreases, then your ROI on the conversion is worth it. Let’s examine each of these in more detail.

Costs
There are actually surprisingly few direct costs. Mainly, you need to provide everything necessary for a remote force to do their jobs. Forums, IMs, etc, can typically be set up at negligible cost, software for remotely using internal machines is usually pretty cheap, and there’s probably not much else you need to provide a remote worker that they wouldn’t normally have. The only major expense per employee would be providing a decent laptop for each - but there’s a good chance you do this anyway.

Savings
There are a lot of small savings, but there’s one huge one that stands out above the rest, and singlehandedly makes up for all of the costs many times over - office space. When a large portion of your staff is rarely or never on site, far less people need offices, and that means you can have a smaller building, saving a huge amount of money.

Profit Increases
There are MANY sources of increased profit as a result of converting to a dispersed workforce:

1. Larger pool of employees to draw from - When you’re bound to an office, you mainly have to hire people within commuting range of the building, or pay to relocate the few who are willing to move to work for you. With remote employees, there’s no such problem. Did you just find a guy that’s an expert in a rare skill you need, but he’s 12,000 miles away? This is no longer a problem.

2. More flexible schedules - You may not think of this as being all that great for your bottom line, but the simple fact is, not everyone works best during standard working hours, and given a choice, will generally choose a schedule that fits their natural cycle. Sure, this means you’re getting work submitted at 4AM, but it also means people are working at their best ability, and in the end, that’s means higher quality work, and therefore more profit from that work.

3. Happier staff - A happy employee is one who does good work because he actually wants to see the company succeed, rather than doing just enough to keep his job. When a worker gets to schedule his job around his life instead of the other way around, that alone makes a huge morale difference.

4. Better retention - This is really an extension of #3, but the more you like a job, the less likely you are to look elsewhere. Very new employees tend to contribute very little to a company, because they have to learn about both the company and the job. Employees who have been there several years, on the other hand, can get far more work done than the average employee, because they’ve learned all of the little tricks over the years, and they know your company inside and out. Therefore, the better you are at keeping people in your company, the more you’re making per employee.

5. Lower per employee cost of operation - Since you can have a smaller office, you need less cleaning staff, a smaller kitchen, etc. Additionally, employees that aren’t in the building aren’t consuming electricity that you’re paying for, aren’t using office supplies, etc. Over time, this can add up significantly.

Profit Decreases:
Fewer things lower profits, but unlike costs, these cause your company to take a continuous hit, so they’re important to look at.

1. Travel costs - If someone has to fly in to attend a meeting, your company of course has to pay for the trip. When your workforce is scattered around the world, this is likely to not only happen more often than normal, but be significantly more expensive when it does happen.

2. Loss of communication - It’s often harder to communicate with employees when you rarely or never see them face to face. This can lower efficiency in collaborative work substantially, and because of that, this is probably the biggest profit reducer of a nomadic workforce. Thankfully, there are many ways to reduce the effect this has, because there are many ways to improve the overall quality of remote communication. Discussion of this is worth an entire article in itself, and indeed, many have already been written.

3. Meetings are harder to run, and take longer due to not everyone being able to talk. This can be a significant issue, but thankfully, meeting software, as well as simple text chat programs, go a long way towards reducing this problem. Of course, a virtual meeting, regardless of the format, takes longer to accomplish the same results, so while this problem can be reduced, it cannot be fully eliminated.

The Bottom Line
Ultimately, while the initial costs of converting a workforce to telecommuters can be significant, and you will incur costs long after the conversion, in most cases, the savings of needing less real estate paired with the many sources of extra profit that come from not being tied to one physical location tend to make up for this by a large enough margin to be very much worth the change.

Of course, not every company comes out ahead, and you’ll have to look for things that may limit your ability to get the full benefits of remote work, and may incur additional costs and profit decreasers. These vary from industry to industry, so you will of course have to apply your knowledge of what makes your industry unique. Ultimately, however, nearly all types of businesses can benefit from having at least some of their staff being telecommuters.

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