Must we measure ROI?

Here’s a question for you: What determines organizational success? Is it the stock market, profit margin, liquidity, a combination of 101 factors or pure luck? The irony is – no matter which way you look at it, you will probably land at 1010 factors, half of which you can’t define. So may I ask why we begin and end investment decisions with the question of returns?

I have been and am a big fan of input and output measures; and an even bigger fan of numbers. I have written endless posts on the importance of demonstrating results, but today I am going to sing a slightly different tune. As much as I believe in measuring return on investments (ROI), I am a bigger fan of experiments and in my profession, these rarely come with trustworthy measurements on returns. Let me attempt illustrating with a current project that am working on. While I can’t tell you what the project is, what I can share is that it is related to organizational culture. In one particular meeting, a potential sponsor questioned us on output metrics. He asked how we planned to objectively measure the impact of the project on sustaining and building culture. At first, I felt guilty for not having an answer apart from asking employees if it worked. Did I plan to execute a set of beta tests on a control group over three years to check for objective measures? No. My proposal was to take a leap of faith and operate on a set of well-measured intentions. Even as the data lover in me screamed, I knew that this was an organization and not a laboratory. I could get away without the same rigor as long as I had other mechanisms in place. I would keep a close eye on a set of indicator variables, pivot as needed, and trust that a strong set of output indicator metrics would act as a replacement for objective measures. Long story short, we got the sponsorship we needed.

However, the more I thought about it, the more I uncovered the many commonsensical practices that do not come with measures on return on investment. And almost all are linked to long term organizational growth and success. Take for example tuition reimbursement. How many organizations that offer these have invested in measuring the ROI on the reimbursements? The same holds true for almost all learning and culture projects. It also holds true for several blue ocean experiments; sometimes even new device launches. It may take 3-5 years to launch a brand new concept in the market. The measurement of ROI takes place years later, after billions of dollars have been poured into the funnel. It all happens because organizations understand that not everything needs to demonstrate value within the year, three years or ever. Sometimes the focus on return on investments end up being counterproductive and push out time sensitive initiatives.

Is this uncomfortable? Definitely, yes. Which is why we back up the lack of that single measure with other indicator metrics. These numbers ensure we aren’t diving blind. ROI isn’t the only way to justify investment. As much as we’d like to have this number to back our cause, sometimes others will have to do.

As you head into setting goals for the year ahead, do keep this in mind. Define input and output metrics, but know that return on investment is just one of the many available.