The ROI Game
stevehaft | Human Resources, Investment, Leadership, Talent| By
Probably the most overused and perhaps overrated term in business is “ROI” better known as “return on investment”. The concept of ROI was built upon the premise that businesses could have an expectation of seeing gains and/or being made whole as a result of investing in a program, initiative, product etc. The operative word here is “investing”. When you invest in the stock market, you understand there are risks as well as potential for gains. You also understand some portfolios are riskier than others, but sometimes the more risk you incur upfront- the better your profits. Losses whether small or substantial usually result in feelings of anger and a dose of queasiness- nevertheless, those that invest would have it no other way-because they understand that you have to be in it to win it.
You get what you give.
In addition, those that invest also know that you get from your investments what you put in. If you choose the right financial advisor, stocks, and remain consistent in your investment- you stand to make profits and prosper. Likewise, when you put the same efforts, resources and investments in your business and your employees you are likely to see a return on your investment for your efforts.
It’s a shame that we don’t see how this formula works in other areas of business. We all know how it is. You want to purchase a new ATS because the one you have isn’t cutting it- your leadership wants to know “what is the ROI?” You want to implement a social media strategy for recruiting- again you will be asked somewhere down the line- “what is our ROI for utilizing social media for recruitment?” It’s understandable to want to see a return on your investments. However, you have to be realistic.
You have to ask yourself?
Am I whole-heartedly investing in this program and my people beyond just financially? Is your strategy sound and built upon reasonable forecasting of outcomes and risks?
If you are at a loss in answering these questions fully- you cannot have an expectation for ROI.
Here are some examples of how ROI expectations can be unrealistic:
- Your recruitment strategies are lackluster and built on hiring bodies vs. hiring a few quality individuals- you are not poised to receive a return on your investment of recruitment hours, advertising, interviewing hours, orientation time etc.
- Likewise, if you invest money and resources into a matrixed HR function and do not supply adequate support to the business partners piloting the program- you are likely to strain the program and all allocated resources before it begins to do any good for the organization.
- You purchase that new ATS, but fail to put in place an adequate implementation team and supporting members to ensure the project is a success.
These are some examples of decisions we make in business and HR that are not poised for ROI, because either you have made a poor investment or you haven’t set your strategies up for success. Stop using ROI as a term of entitlement. You aren’t promised anything even when you have taken the necessary steps to invest properly. Your probability of success drops even further when you make poor investments or no investments at all.
Measure for ROI when:
1) You have thoroughly assessed and understand the risks and potential gains involved in your investment.
2) Adequate financial backing has been allocated.
3) You have done everything in your power to make it a success.
Any practices outside of these elements will result in no return. Just like with most things in life- you cannot expect something for nothing.