Here's where things get really tough. How do you measure indirect savings? If an employee saves time or is more productive, what's that worth to the company?

Examples of indirect savings include "reducing the time needed to test new software by 25%" or "the financial audit now takes 1 week rather than 3 weeks." Be careful here. If you expect the company to increase sales by 10% because of the new sales support system, don't include both the profit on the increased sales and the value of your salespeople becoming 10% more efficient. You should reasonably expect that the increased salesperson efficiency causes the increase in profit. It's always better to count the more direct result (profit) rather than the indirect result (increased productivity). Unfortunately, in many cases, you need to look at this indirect change.

Here are the steps to follow when you are faced with assessing the value of an indirect benefit:

• Measure or estimate the expected change in time or productivity. For example, you estimate 1000 employees will save 10 minutes per year. That's 166.6 hours.
• Correct this amount based on inefficient transfer of time. For example, if you save an hour, you probably work only an additional 1/2 hour. This is a 0.5 correction factor. Nucleus uses a database of correction factors; pick one that seems right for your company (0.5 is a good guess if you're not sure). Now 166.6 hours saved becomes 83.3 additional hours worked.
• Multiply the gain by the fully loaded cost of an employee to calculate the value of the benefit. If you are using multiple loaded costs, do this calculation for each category of employee.

After the project is implemented, go back and look for a corroborating measurement. For example, if you estimated the legal department would save 10% of their time:

• Did they fire 10% of the lawyers?
• Did the legal department grow at a rate slower than the rate for the rest of the organization?
• Are the lawyers 10% more productive?