PROVE IT! Why We Must Redefine “ROI”
You are an HR professional managing employee wellness programs.
You are a learning expert responsible for the organization’s development.
You are a leader pitching a culture change.
The ask seems simple: demonstrate that the investment delivered the expected results. Yet, the invitation to “prove” your initiative, program, or idea “worked” fills most of us with a deep sense of dread.
The problem is in our definition of “return-on-investment”. We lean on traditional formulas that reduce the benefits of a program to a financial calculation: costs vs. returns. While there are some circumstances where this calculation is a true measure of an investment’s impact, the expected results are often not direct outcomes of the program meant to deliver them.
Here’s an example.
A Company has introduced a new leadership framework to its middle and senior managers. The framework forms the basis of a high-performance culture that prioritizes the customer experience and will drive business results. Managers are being provided with the competencies and skills required to lead in this new environment through a leadership development program.
Question: What are the expected results of the leadership development program?
a. A new organizational culture
b. Increased profitability
c. Higher employee engagement
d. Managers leading using the competencies/skills from the leadership framework
e. Increased revenue
f. More satisfied customers
Answer: all of the above.
Problem: only (d) Managers leading using the competencies/skills from the leadership framework are direct outcomes of the leadership program.
Why is this a problem? If managers lead with these new skills, won’t there also be a culture shift that will increase profitability and revenue?
Maybe, but maybe not.
The issue is that while the leadership program might, indeed, equip managers with the skills required to lead in the new organizational environment, acquiring those skills (the desired outcome of training) and using those skills (behaviour change) are two different things.
Moreover, there are a number of factors that might prevent a cultural transformation even if every manager embraces the new skills from the leadership program, such as:
poor change management
employee skill gaps
lack of communication
…and that’s assuming the new culture is the right culture to promote the desired business results.
With so many variables affecting impact measures, ROI becomes an exercise of broken telephone. At best, it feels mysterious, maybe exciting, albeit hard to pin down. At worst, it delivers a false impression of the real impacts of an initiative, often to its detriment.
What are we really asking for?
Solving the ROI problem comes down to understanding what we are really asking for, which is whether a program or initiative delivered the intended outcomes.
In most cases the direct outcome of an intervention is behaviour change.
ROI is achieved if behaviour changes.
The degree of behaviour change, and the consequences of behaviour change at multiple levels go on to define the real value of an investment, and only then can ROI be translated into a measure.
It is no small task, but it is do-able, and starts with three questions:
How do these questions lead to measuring ROI? And how can we use these questions earlier in the process, to build programs that will generate ROI?
In the second post in this PROVE IT! series, we’ll look at how to translate these three questions into an ROI calculation by considering the key components of ROI.
**This post is part of the PROVE IT! Series of posts on measuring and using ROI to generate organizational insights and drive strategic decisions.