ROI, return on investment, is a metric fundamental to business and government alike. Executives and chief administrators recognize it and business and operations managers appreciate it. It is calculated consistently and recognized across sectors around the world by those stakeholders with fiduciary responsibility for investments in people, projects, and processes.
Unfortunately, misinformation and misuse cloud the value of this simple, yet powerful, metric. While its existence in performance improvement, learning and development, and human resources is not new, when reading much of the literature and comments made in conference sessions, one would think ROI is a new phenomenon, and one from which people should run.
ROI’s use in learning and HR began in the 1970s when my husband and business partner, Jack Phillips, conducted the first ROI study on a cooperative education program. It has been used for years in quality and productivity training. In more recent years, it has grown to be a standard metric for many leadership development and coaching programs as well as other ‘soft’ solutions. Yet the confusion around ROI remains.
The crux of the confusion lies in how and when to use ROI and how to report it so stakeholders recognize the complete success of a program or project. Fear and angst around ROI exist because, like most investments, a negative ROI is inevitable for poorly implemented and misaligned programs. On the flip side, if the ROI is extraordinarily high, fear exists that the results will not be perceived as credible. This fear is unwarranted if you use a credible approach to develop it, follow fundamentally sound standards, and apply it consistently across all types of programs.
Yet, too many people would rather listen to the naysayers than figure it out for themselves. We have published over 40 books with ASTD and even more with publishers such as SHRM, Berrett-Koehler, McGraw Hill, and John Wiley. These books describe its use and importance in showing the contribution of programs and projects. These publications along with many conference presentations and workshops offer learning and development professionals opportunities to understand what ROI is, what it is not, and how to use it. Yet, many professionals still don’t get the point—they miss the bottomline.
ROI is a metric fundamental to business and government alike. Reported alone, it describes the economic impact of programs, projects, and processes. Reported in the context of other measures, it contributes to the complete story of program success and informs decisions about resource allocation.
This article was reprinted with permission from the author.