Video Transcript: ROI

All right, being an effective manager. We're already on task nine. If you made it  this far, congratulations. You're well on your way to becoming a good manager.  There's a lot of stuff, and I appreciate you hanging in there, doing the quizzes  and all the work. It's all worth it if you keep going. Task nine is return on  investment. Luke 14, Jesus said, If you do not carry your own cross and follow  Me, you cannot be my disciple. But don't begin until you count the cost. For who  would begin a construction of a building without first calculating the cost to see if there's enough money to finish it. Otherwise you might complete only the  foundation before running out of money, and then everyone would laugh at you  calculating the cost, what is ROI, the letters stand for return on investment. The  way to think about think about it in the business world is there's gross income.  That's any income that you have coming in. So for a church, let's say our  church, we have money coming in from offerings every Sunday. We have rental  income. Sometimes we rent out our building. We actually have the US Post  Office, our city post office in our building, and so they pay us rent every single  month we have a house that we rent out as well. So we have rental income,  miscellaneous income. Most of our income comes from offerings. If you're in a  business, your gross income would be the sales of all the things that you sell.  But your gross income is not you don't have all that money because there's  costs. So you take your gross income, all the income from all the sources, and  then you subtract the costs, and then hopefully you end up with a net income.  Now in a nonprofit, the goal is to have all the income that you get minus all the  costs and the net income should ultimately come to zero. In a nonprofit, you try  to spend all the money that comes in in a in a business, you hope to have a little bit left over so that you can invest it in your company and your company can  grow. Why is ROI important for an organization, or to be thinking about it?  Organizations, churches, businesses, exist to make or do something that makes a difference in the world. I mean, certainly a Church exists to make a difference  in the lives of the people that go there, but not only in the lives of the people that go there, but in the lives of everyone associated with your church members, and ultimately, to reach people who don't go to church or don't know Christ as  Savior. We we want to try to make an eternal difference. So everything that we  do, the services, the sermons, the the outreach things, the hospitality events,  any fun thing, everything that we do, ultimately, we're trying to help people walk  with God, support each other's walk with God, but then share that walk with God with others. So all that we do is trying to make some kind of difference in a in a  for profit organization, maybe there's a product or a service that the for profit  company does and but ultimately, you want that product to make a difference in  the lives of people, whether it's computers or softwares or some service or  whatever it might be you're trying to make a difference in the lives of people. If  you don't make a difference in the lives of people, then no one's going to buy it.  Number two, the goal is to make or do something that makes a difference, or to 

make or do something that makes a difference usually costs money, people and  time, so you want to make a difference, but it costs something to do that. It costs money. Generally, it costs people. You need personnel to do things, and it costs  time. Number three, in order to keep putting out the money, people and time. So  you want to do something, and it costs you money, people and time in order to  

keep you know, spending that to produce this thing that makes a difference,  someone has to be willing to either contribute the money, if you're in a nonprofit  and the goods are certain, services are free, or people have to be willing to pay.  Money for the goods and services, as it is in a for profit company, the money has to come from somewhere. You want to do this thing that makes a difference, but  it costs money, people and time to do it, and either someone has to contribute it, or someone has to pay that cost, or you can't keep doing it, if the organization  can lower the costs of the money and the people in the time, if you can lower  those costs and increase the money raised or earned, then you can accomplish  more stuff. And that's what organizations like to do. Ask RIO of everything the  organization does return on investment. We we make an investment of time,  money and people, and what do we get back from it? The ROI of meetings. So  you have a meeting at our church, we have a staff meeting every single week  that consists of the associate pastor I and the Secretary. Lot of times we end up  meeting for two hours. I think we could probably do it in an hour. The cost of a  staff meeting is the hourly salary of each staff member times the number of  hours you meet. So we have to take my salary for our for an hour, my associate  pastor his salary for an hour, the Secretary's salary for an hour. And now we  have to take that and times it by two and add it all up. If you do that, you realize  this meeting is not just a meeting. It costs the organization. It costs the church  so many dollars for us to sit here for two hours. So sometimes maybe in a staff  meeting, you should just get your job done and move on like you know, what  we're accomplishing in those two hours is not worth the total price that the  church is paying for this meeting. Number 2, ROI of every program, what's the  return on investment of every program? Is the thing that we're doing worth it? So if I teach a class, and the class is three hours and I have to prepare three hours, that class cost our church six times whatever hourly rate that I make, and is that  class worth it? Are we? You know, two people showed up, and I keep pouring  time and effort into that. I remember our associate, he wanted to do a pottery  class, and so he wanted to save money on glazes, so he bought these glazes  that was in powder form, and you had to mix each one, and you have to  measure and and he spent a whole day mixing these glazes to save money.  Well, he has to take the eight hours times his hourly salary, and that's the cost of all the effort to save money. It probably costs him three times the money in his  salary to save the money in the buying the product in the first place. So you  really have to think about, you know, the real costs of things, the ROI of every  single product. Before this was back in the middle 90s. I think my friend Henry 

Reyenga, who happens to be the president and CO or founder of Christian  leaders Institute. He and I formed our own non profit back then, and we we  wanted to make a Christian day planner. We thought that was a need, so we  bought computers, and we sat down and we figured it all out, and we found a  printer, and he printed them, and we went around selling these planners and  schools and so on. So we did that for like a year and a half on our own, and then we bumped into an organization called the Bible League, and they asked us to  do what we were doing with them, so we joined in with them. Now. We had a  budget from them. They had a whole print department. And so the next year,  when we were doing our planners, we went to the print DEPARTMENT OF THE  BIBLE League, and we said, well, we got all these planners we want to print.  And so what is that going to cost our budget? Well, they came with a price that  was way more than what we had paid the year before, the year before we went  out and found a printer and and because of that experience, the organization  stopped and looked at their whole printing department and decided that that isn't what they were good at doing, and they closed the whole print department down because you could find A printer outside the organization that could do it  cheaper, and that's often the case. When you finally look at your return on  investment of what you're doing, you may find out that this thing is not worth  doing, that you should stick to the thing that you're doing really well. And, you  know, let someone else do that. The ROI of every service that you provide. You  know, we're going to try to help people with housing, or we're going to try to help people with food, or we're trying to but what ultimately, does it cost us to help  someone? A lot of a lot of the social programs in our country are being run by  people with degrees in sociology, and they're getting paid a good salary, and a  lot of the money that goes to help the poor is for all these people that are really  helping the poor. And in the end, only 10 people get helped. So all this money is  being used, but in the end, it doesn't really get to the people, because there's all  these people that need to get paid that are doing the helping, and so ultimately,  is this really paying the ROI of every single employee in our church? I try to let  people know that are hired by the church. I try to let them know what their real  cost is. A lot of people think that they get paid. The amount that they get paid is  what is in their bank. So I'm I'm hired by my church, and ultimately I get so much money that goes into my bank account, and that's my pay. No, that's not your  pay. The pay is the taxes that your church pays, the health thing that your  church pays, every benefit that the Church gives you, the total cost to the church is what your pay is. Now I realize I don't see it all. I don't get it all, but that's what it costs the church. This is the number that the organization has to pay in order  to have you. That is the number I want all my employees to understand,  because that's the real cost that in the minute. You divide it by 40 hours a week,  and that's the real cost for every hour that you do. Mistaken notion by many  nonprofit organizations, if our efforts only reach one person, it will be worth it, 

because there is no price you can put on a person's life. Now, the last half of  that statement is absolutely true. There is a person's life is invaluable, but the  statement is a false statement, because maybe we could have done something  else and helped three people. In other words, there's a certain cost in terms of  time, money and and personnel and effort and so and if we use all our time,  money and effort, and we only help one person, maybe we could do things  better and we could help 10 people. So it's not it's not the value of one person or another. It's the how much we could actually get done. And people will use this  phrase as a way to not really look at the ROI or the return on investment,  especially in a nonprofit, in a profit organization, it's very simple, if you don't  make enough profit, soon you will be out of business. But nonprofits can keep  going as long as they can raise the money. And you can raise the money by  appealing to people and saying non specific things, and people will give. So it's  really up to the leaders of the nonprofit to actually analyze. What are we actually accomplishing? So we're feeding people, and our goal is just to feed people,  then next year, you know, let's just feed twice as many people as we did last  year, we're successful because we fed twice as many people as last year. Is that your goal just to feed people, or is your goal to help people? Well, how many  people did you help? You don't know because, because the you don't know the  accuracy of your return on investment. What you know we fed these 10 people,  but maybe because we fed them, they spent their money instead on food. They  spent it on cigarettes and booze. Well, you don't know you're not measuring the  right things. So it's not about the value of people. It's about getting the most and  accomplishing the most for your effort, and so at least knowing what everything  costs you. What does the service every Sunday cost us? What's the real price of this? What is the cost of every single program? What's the cost of all the the  employees? I'm not saying that they're not worth it. I'm not saying we don't pay  people. I'm not saying we don't do anything, but we should know, the manager  at least, should know what the cost is of these things, so you can evaluate which thing Do we really want to do, because that's really what it's about. It's about  priorities. There's a million things we could do. There's a lot of good things we  could do, but we can only do so many things. So what are the things that are  going to give us the most results that we're looking for?