Is ROI really that important!?!
Measuring ROI allows a business to ensure its investments are sound. It’s not rocket science to know that if expenditure provides no returns, the business can identify this and react accordingly. In an ideal world, a comprehensive financial plan would be put together to predict return on investment allowing managers to justify a case for further spending. As a previous L&D manager I often found the biggest challenge was getting the business to understand that if everyone was working at full capacity, all doing what only they could do, then that was a good starting point! People not being utilised effectively, or staff being unskilled, reduced the potential of any return because the investment was starting with an un-achievable perspective!
The difficulty lies in being able to make the training budget work and knowing how to prove that training is effective. I found the problem occurs when you try to measure L&D benefits in a purely financial model; which got me thinking - instead shouldn't we be looking at other ways of measuring ROI which can be used in the same way for similar benefits? We don’t do an ROI analysis on office furnishing spend, although furnishing an office is often a huge cost. Maybe there are other ways of looking at ROI for topics such as L&D, office infra structure and other similar areas which support the working environment as a whole.
This lead me to ask the question, "What does ROI actually mean?"