Return on investment (ROI) is a metric fundamental to business, government, nonprofits, and NGOs alike. Top executives, chief administrators, and managers recognize it, appreciate it, and often ask for it. It is calculated consistently, using a proven, conservative process, and recognized around the world by stakeholders with 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 literature and comments made in conference sessions, some would think ROI is a new phenomenon from which people should run.
For years, ROI has been used in learning and HR for quality and productivity training. 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.
This 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 other hand, if the ROI is extraordinarily high, a fear exists that the results will not be perceived as credible. This fear is unwarranted if you use a credible approach to develop ROI, follow fundamentally sound standards, and apply it consistently across all types of programs.
Still, many people would rather believe the negative myths than figure ROI out for themselves. Patti and Jack Phillips have published 50 books with ATD and even more with other publishers such as SHRM, Berrett-Koehler, McGraw Hill, and John Wiley. These books describe ROI’s use and importance in showing the contribution of programs and projects. These books, along with numerous conference presentations and workshops, offer L&D professionals opportunities to understand what ROI is, what it is not, and how to use it.
Essentially, ROI is a fundamental metric to business and government. Reported alone, ROI describes the economic impact of programs, projects, and processes. Reported in the context of other measures, it provides the complete story of program success and informs decisions about resource allocation. ROI provides organizations a process that can cut across organizational boundaries, linking programs, processes, and initiatives to bottom-line measures.