April 25, 2024
Author: Joanna Hagelberger, Vice President Customer Success
Acronym Soup
There are so many acronyms in the regulatory compliance arena that I have created an acronym dictionary at each of my jobs so new people can get up to speed quicker without constantly having to ask what our alphabet soup means. Most of them are relatively logical and easy to understand: PDB is Producer Database, JIT is Just In Time, DRLP is Designated Responsible Licensed Producer. All of these acronyms can be explained pretty quickly and painlessly, but what about ROI, Return on Investment? Conceptually it is not difficult to understand: if I spend money on this, how long will it take for me to recoup my investment? Fair enough. But how do I calculate such a thing? How do I know what impact this purchase will have on my business processes and bottom line? Below are a few items to consider as you are weighing the value of new technology.
Opportunity Cost: What I mean by this is probably not what you are thinking. When I buy new technology, it should improve my processes significantly enough that it creates the opportunity for my team to elevate. To do new things they haven’t done before. To spend their time being thoughtful and doing exception processing instead of rote processing. To grow my business without hiring new staff because the team I have can handle it. It should create new opportunities!
Efficiency savings: Those opportunities should be quantifiable. Before I implement automation, how much time does it take to do that task? 5 minutes? How many times a year do I do that task? 5,000 times? And how much do I make, fully loaded, on a per minute basis? That one is easier than you think – take an annual salary and divide by 129,600 work minutes in a year. I end up with:
5 minutes times 5,000 times ($84,240/129600 = $.65) = $16,250
So, the automation of that one task saves $16,250. Once you think through all of the tasks you could automate, those savings start to add up.
Hard savings: With new technology (or a new technology partner), can you decrease some of your actual spend? Lower monthly subscription, lower per transaction fees, lower integration fees? Can you eliminate any costs that you no longer need?
Soft savings: These are clearly harder to quantify, but important to consider. By increasing your compliance posture, are you decreasing your risk of compliance fines? Are you decreasing your risk of reputational damage? Are you increasing your producer satisfaction so you get higher quality producers that stay with you longer?
Increase Revenue: Some of those soft savings and opportunity costs can lead to increased revenue as well. If I can onboard a producer faster, they can start selling faster, thereby making my company more money. If my IT team isn’t spending valuable time supporting my technology, they can be working on other initiatives that will help grow the company. If my team isn’t rekeying data and imaging files, they will be happier and more productive.
Bottom line? It’s all about the bottom line. (Sorry, I couldn’t resist.) But it’s incredibly important to evaluate the benefit new technology brings from all sides, not just whether or not your bill will be lower. Return on your investment includes public perception, staff engagement, producer experience and IT efficiencies. So, mind your PII the next time you send an RFP to an ABP to connect with the NIPR and State DOI to manage your CE and keep your CCO happy. Would you like a salad with that alphabet soup?