ROI

Feb 1, 2006 12:00 PM, By Michael Fickes

Do not try to tell a chief executive officer that a brand new $1 million access control, intrusion alarm and closed circuit television (CCTV) security systems will provide a return on investment (ROI) in the form of reduced legal liabilities, fewer thefts and employee morale.

Granted, all businesses want these good results. But good as they are, they do not add up to ROI as defined by business. ROI means that a manager creates a plan promising a certain ROI, gets a sum of money from the company to execute the plan, invests the money, generates new business or cuts existing costs and returns more than the original investment to the company at a time in the future specified by the plan.

In a business setting, ROI is reasonably predictable. If you spend $100,000 on a computer system that reduces a work force by one individual who is paid $50,000 per year, the ROI is $50,000. After two years or so, depending on accounting methods, the investment has returned to the company and may be invested in something else or allowed to flow directly to the company's bottom line.

Reduced liability from enhanced security is supposed to be predictable, too. Then again, two companies operating similar businesses in similar locations with similar security systems may experience dramatically different security results. One company may find that employees and outsiders constantly walk out the door with company property. The other company may experience nothing of the sort. Why?

That's life, some security directors say.

No. That's pure coincidence, say executives of Strategy X Inc., a Harrison, Maine, security consulting firm that deals with commercial and government clients. According to Clifford Lewis, president and CEO of Strategy X, most commercial security systems do not meet the objectives they were originally set up to meet.

“When we make a presentation, we do a computer analysis of the prospective client's security system, and we go in physically and try to defeat the existing security system,” Lewis says.

“We almost always get in,” adds Wayne Hawkins, chief operating officer of Strategy X. “We go in and take pictures of ourselves walking around areas that are supposed to be secured from outsiders.”

First, make the security system work

Lewis and Hawkins contend that many security systems, in fact, do not work. Which means that the money these companies have spent planning, buying, installing and managing their security systems has bought essentially nothing. So these companies remain vulnerable to threats identified during security planning: property theft, muggings and employee theft.

Of course, a security system that cannot do what it is supposed to do cannot provide a foundation to generate a ROI, either. Further investments will simply add to the waste that has gone before.

“Security is continuous process,” Hawkins says. “Perhaps the shortcomings of a baseline system can be improved with new tactics, techniques and procedures. After that, we will think about whether or not we need technology to meet the company's security objectives.”

Second, look for ROI opportunities

Suppose for a moment that new tactics, techniques and procedures remedy the problems detected by a security systems consultant.

Business, like security, is a continuous process. Once a customer service technique has been developed and refined until it is effective, a manager can roll that system out to the customer base and try to generate a return. Perhaps the basic technique cannot return more than it costs to carry out the technique. In that case, the manager will look for ways to automate the process and do it faster or with fewer people. An investment that accomplishes that produces ROI.

In the same way, a corporate security director can build returns on investment into a security system.

Suppose a company has decided to replace an aging time-and-attendance system. A security director might suggest building time-and-attendance capabilities into an existing access control system. The cost might be significantly less than the outlay required to buy an entirely new system. If so, the access control technology can produce ROI.

Years ago, the development of CCTV systems made it possible for companies to reduce the number of security officers on the payroll. At that time, CCTV technology made it possible to achieve tremendous ROI. Now that time has passed, that ROI is no longer available from CCTV. Instead, it is already part of the basic security system design.

Of course, technology continues to advance. Today, for example, advancing intelligent video software makes it possible for the security officer that monitors the CCTV system to manage the CCTV system and respond when the intelligent video software sets off an alarm. Most of the time, this officer could do something else, thus increasing the department's productivity, another ROI.

At some point, for some kinds of corporate endeavors, emerging security technologies may finally automate activities carried out by a number of security officers. At that point, staff might be pared to extraordinarily low levels, creating a large ROI.

Or maybe the company will grow, making it necessary for security to grow as well. The first step, of course, will be to design, install, test and refine the new and larger security system. Once the new security system has proven that it works, a security director can once again go looking for ROI opportunities.

But first things must always come first. “The security system must always achieve its objective,” Lewis says. “If it does not, you have to fix it.”

All companies today have a responsibility to provide a safe and secure workplace for their employees. Likewise, companies have a responsibility to investors or stockholders to protect the company's assets from thieves inside and outside of the company. Security related to these goals is part of a company's cost of doing business today.

Once that cost has been paid — and the system achieves its stated security objectives — a security director can search out ways to help improve the company's business performance by generating ROI. But not until the security system has been made to work right.

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This page offers an opportunity for readers to share management lessons they have learned and to provide other helpful information to their peers in the industry. To offer suggestions, or to contribute to this page, contact Larry Anderson at (770) 618-0118 or e-mail larry.anderson@penton.com

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