Does everything need an ROI?

Of all these jargonish shortcuts, perhaps the one that gets pulses racing more than any other is ROI—the darling of the business metrics world, return on investment.

But does it get a little bit too much attention? We grabbed Candace Press, Propositional Strategist at EZRA, to get her thoughts.

Why ROI gets all the airtime

“It’s versatile, easy to grasp, and everyone speaks its language,” Candace explains.

Which is handy—because in a boardroom full of acronyms and initials, ROI’s the one everyone nods along to.

“In its most traditional form, it measures profit from invested capital – which means it’s a key way to measure a company’s ability to create value for shareholders,” she adds. Put simply, it shows the proverbial bang you’re getting for your buck.

And in a world that often worships shareholder value above all else, that clarity gives ROI star power.

But there are drawbacks

In some ways, this has made it a victim of its own success. “Because it’s such a flashy metric, it’s easy to want to go as BIG as possible with it,” Candace thinks.

And indeed, 45.7% think their employer overfocuses on ROI when judging effectiveness.

Truth is, ROI is not, repeat not, a business panacea.

It can be myopic

“Because of its simplicity – literally input vs output – it can miss context,” Candace cautions.

So, for simple linear causal relationships, happy days. But business is often more complicated than that.

As Candace points out, “Other things come into play – risk factors, social/environmental factors, time periods…,” that ROI conveniently ignores.

The law of diminishing returns. The time value of money. Associated risk. All swept under the carpet.

An overfocus can negatively impact culture

ROI is all about the money, baby. That means “Businesses that focus solely on ROI, and push an ‘ROI-based’ culture, can feel disconnected or harsh,” Candace points out.

Operating in what she describes as a “cold, numbers-game” makes people feel like no more than a relentlessly turning cog in an ROI chasing machine.

What’s more, an ROI-centric culture can undermine the things needed to drive success in the first place—like trust and collaboration.

And damage long-term sustainability

And by encouraging a culture that chases quick wins, it discourages investment in long-term, transformative innovation and leaves companies reluctant to experiment.

That’s a dangerous place to be in a world where navigating disruption successfully could be a matter of survival.

All this means “ROI can’t be looked at in isolation,” she thinks.

Beyond ROI

Because, yes, money matters, but business is fundamentally about people and the value they create and exchange.

That means “Looking at a metric like employee and client retention is just as important if not more important than ROI,” Candace says.

“A strong ROI doesn’t guarantee you will have continued success – but your employees and clients staying dedicated to you, trusting and believing in you, and sticking with you for the long run does,” she adds.

Amen to that.