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 ATD and even more with other publishers, such as SHRM, Berrett-Koehler, McGraw Hill, and Wiley. These publications describe ROI’s use and importance in showing the contribution of programs and projects. They, 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 bottom line.
Reported alone, ROI 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.
About the authors:
Patti Phillips is president and CEO of the ROI Institute and is the ATD Certification Institute’s 2015 CPLP Fellow. Since 1997, she has worked with organizations in more than 60 countries as they demonstrate the value of a variety of programs and projects. Patti serves on the board of the Center for Talent Reporting, as Distinguished Principal Research Fellow for The Conference Board, and as faculty on the UN System Staff College in Turin, Italy.
Jack J. Phillips, PhD, is chairman of the ROI Institute and a world-renowned expert on measurement and evaluation. Phillips provides consulting services for Fortune 500 companies and workshops for major conference providers worldwide. Phillips is also the author or editor of more than 100 articles and 75+ books, including Measuring the Success of Leadership Development: A Step-by-Step Guide for Measuring Impact and Calculating ROI (ATD Press). His work has been featured in the Wall Street Journal, Bloomberg Businessweek, Fortune, and on CNN.
To learn how to show the ROI of your programs, projects, and initiatives, register now for an upcoming offering of ATD’s Measuring Return on Investment of Trainings.