When a manager creates a virtual workforce, one of the main aspects they should consider is whether it will be financially viable. That can be difficult to determine until the workforce is up and running, but looking at the projected costs and benefits can help.
Once a virtual workforce has been in operation for a while, it is much easier to determine whether it is working for the company or whether it is costing more than the value it is providing. Here are some of the main considerations when looking at the return on investment (ROI) of a virtual workforce.
Included Costs and Benefits Should Be Significant
There are numerous costs to operating a virtual workforce, and numerous benefits that can be achieved from doing so. But only some of those costs and benefits are large enough to be included in an analysis of ROI. There are so many variables that it would not be realistic to include everything that could cost anything at all, and every possible benefit that could be seen from the virtual workforce.
Instead, the largest and most significant costs and benefits are the only ones that should be addressed. These are generally believed to be costs and benefits that make up more than five percent of their category. In other words, either five percent of the costs, or five percent of the benefits. If they are less than five percent they are very minor, and may not be noticeable in a way that is significant to the overall ROI of the virtual workforce.
Benchmark the Virtual Workforce Against Its Traditional Counterpart
One of the best ways to determine whether there is a strong ROI for any virtual team is to compare it to the traditional workforce as a benchmark. If a manager is operating a traditional workforce and then moves to develop a virtual workforce, there are ways to compare the two in order to determine which one is providing the best return on investment for the company. That allows careful consideration of the differences, so the right option can be chosen.
Since most companies have had traditional workforces for some time, comparing them to a virtual workforce can be an excellent way to focus on the true costs and benefits of both. While there are many reasons that a virtual workforce can be a good choice, it is not necessarily right for every company, project, or situation. Because of that, managers should study both situations so they can keep the virtual workforce only if it is truly cost effective.
The Ease of Cost-Benefit Factor Recognition Should Be Considered
There are some benefits and costs that are easier to see than others. They are obvious, especially when they revolve around actual expenses to operate the virtual workforce versus the money that is being brought in from the work those employees are performing. These are important components of ROI because they have a lot of value for the company. There are also costs and benefits that may be far less obvious on the surface, but that a deeper study of the virtual workforce would produce. Understanding how much effort is required to recognize these deeper ROI components is also important to factor into the equation.
ROI is Equal to the Benefits Divided By the Costs
Once all of the cost and benefit information has been collected, it is a simple formula to calculate everything that a manager needs to know. By taking the total dollar amount of the benefits and dividing it by the total dollar amount of the costs, managers can arrive at the ROI number they need to know. Then they can decide whether they are getting enough return on their investment to keep the virtual workforce operating, or whether they were better off choosing a traditional workforce. In some cases the type of project the workforce is focused on will affect the total ROI, as well.
Look Carefully at Objective, Bottom-Line Outcomes
The bottom line for any company generally comes down to profit. This is based on whether the virtual workforce is producing a good ROI for the company, or whether they are costing more than they are bringing in. If they cost too much and there is no profit to be made, a manager may choose to dissolve the virtual workforce in favor or a more traditional one. Even if a manager prefers the virtual workforce model, making changes may be required if profit is too low.
The only concern with this examination of the bottom line is that too many companies look only at that number. They see what is objective, which they should, but they fail to remember that there are also subjective areas where virtual workforces can be better for the company as a whole. A good manager will examine the bottom line objectively but understand that there may be more to the story than that.
Consider Subjective Outcomes, Which Are Harder to Quantify
It can be very difficult to put any kind of a price on a subjective outcome, but that does not mean these kinds of outcomes should be ignored. Along with the bottom line, objective issues that deal primarily with money, managers should also look at the subjective aspects of a virtual workforce. If employees are much happier, and therefore more productive, this is a benefit that is hard to put a specific price on. But it is still very important. It can affect how well a virtual workforce performs, and over time that can have an affect on deadlines, work quality, and profit margins, among other aspects of the company culture.
Input of Resources is an Often Overlooked Cost
Managers who are looking for the ROI of their virtual workforce should not overlook the input of resources required to get that workforce operational. This is a start-up cost that may not be repeated, but it is still part of the cost of the workforce. It should be factored in, as should all those smaller little expenses that can come into play when resources are diverted to the development and creation of something new.Download Article Infographics