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Publication date: May 17, 2018

Key Performance Indicators to Consider When Measuring an RPA’s Project ROI

Are you starting your RPA (Robotic Process Automation) journey? Or you have implemented and have an RPA strategy and bots running?

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Written by Angela Polania

Angela Polania, CPA, CISM, CISA, CRISC, HITRUST, CMMC RP. Angela is the Managing Principal at Elevate and board member, and treasurer at the CIO Council of South Florida.

Organizations can benefit in several ways after implementing Robotic Process Automation (RPA) projects. However, one of the challenges faced by organizations is quantifying and tracking those benefits. Nevertheless, an organization can measure a project’s Return on Investment (ROI) by first identifying key performance indicators that can be used to measure and track benefits.

Implementation Costs

As compared to IT infrastructure projects, an RPA implementation can be done with a lower budget and within a shorter timeframe.  A typical enterprise-wide IT infrastructure project can end up costing millions of dollars in licensing and developing costs and could take years until deployment.  Whereas, an RPA implementation can be accomplished at a fraction of the cost mainly due to the short implementation time, which is typically three months per bot.  Consequently, it is critical to measure implementation costs because they can significantly impact a project’s ROI.

Cycle Time

Besides low implementation costs, other benefits of RPA include decreased cycle times, increased throughput, and improved accuracy. Cycle time is the average time it takes to complete a process from beginning to end. RPA significantly decreases cycle time by performing repetitive tasks faster than a human can. As a bonus, a bot can continuously work 24 hours per day without taking a break. This means that a bot has more time available to produce more output; this brings us to the next point which is increased throughput.

Throughput

Throughput is the rate at which output is produced at a given time.  For instance, if a company produces 1,000 widgets per hour and after automating some processes it now produces 1,050 widgets per hour, then throughput increases by 5%.   It is vital to identify the bottlenecks throughout an organization’s processes to automate the key processes that most benefit from RPA. Sometimes, automating a process can create bottlenecks in other areas because dependent processes don’t have the capacity to process the increased output. Hence, it is a good idea to first identify end-to-end processes and potential bottlenecks before introducing RPA to an organization.

Accuracy

As compared to humans who can make errors, a bot is programmed to perform a task over and over again without making a mistake.  As long as a bot is programmed correctly, it is expected to increase the accuracy rate for the process or processes that it automates. Increased accuracy can be translated into fewer human errors, which can prevent losses to an organization.

Qualitative Indicators

There some benefits that may not be easily measured, but those are benefits that can have a positive impact in an organization. Some qualitative benefits include increased employee morale, increased customer satisfaction, better compliance, and flexibility and scalability.

For example, employees may use their extra time resulting from RPA efforts to work on value-added activities, which could be reflected in increased employee morale. Moreover, customers can experience increased customer satisfaction as a consequence of quality improvements, which in turn reduce errors. Hence, by improving quality, an organization can better meet compliance and regulatory requirements.

So finally, to determine the Return on Investment (ROI) …

It is important to identify the different benefits that an RPA project can bring to an organization and how to measure them.  Some benefits such as lower implementation costs are easily visible as soon as RPA licensing and development costs are being reviewed. Other benefits, such as cycle time increase, throughput increase, and improved accuracy, can be estimated based on facts and some assumptions. For example, to estimate the decrease in the cycle, it is necessary to first calculate the time it takes a human to complete a process and then compare it to the time it takes a bot to complete. In some cases, the processing time depends on the volume of transactions, which can vary from month to month.  In this case, assumptions can be made to estimate average savings. In the case of qualitative benefits such as an increase in employee morale and improved customer satisfaction and compliance, assumptions have to be made and most likely benefits would be realized over the long term.

Conclusion

Although various types of performance indicators can be used to measure an RPA project’s ROI, not all indicators are suited for all types of projects.  It is critical to become familiar with the process to be automated to find the most appropriate indicator used to measure the ROI.

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