Schoolyard
Games with ROI
Focusing
on the Results
By
Jeffrey Hansler, CSP
Return
on Investment (ROI) is thrown around like challenges on a
schoolyard.
My
sister can whip your sister! Well, my dad can whip your dad!
Well, my ROI is better than your ROI, or more importantly,
your ROI is just not up to our standard.
Challenging
someone on the schoolyard to prove you were better didn’t
prove anything and throwing ROI challenges around where they
don’t belong isn’t much better.
ROI
is not an end-all-evaluation tool for determining the best
solution. It has become the finance or accountant’s power
tool. Yet, it is being thrown around willy-nilly in
the boardroom, purchasing situations, and in just about
every aspect of business America as validation for
decisions. It seems perfectly justifiable to seek lower
costs by deciding to alter IT or change vendors or issue a
purchase order based on ROI justifications. Being myopic in
evaluation through ROI might just be the beginning of the
end for some organizations. We may end up with the
‘best-managed’ companies with the fastest declining
business performance in the world.
In
the movie Poltergeist, they didn’t move the bodies in the
graves to build the homes, because they wanted to cut costs.
Cutting down a grove of 1,000 year old redwoods to build an
office building versus building around the trees reduces
costs. On paper, both yield a better ROI than the other
obvious option of doing the right thing. The consequences to
those decisions begin to play almost immediately in terms of
backlash, lawsuits, and bad or lost reputations.
Why
then is ROI being embraced as a trump-card solution?
Because business has become increasingly complex and it is
comforting to have some measure of what will be successful
– even if it not the right measuring tool.
A
friend of mine, Peter Jackson (the first CFO at SAIC and
major contributor to The Humpty Dumpty Conundrum), related
the story of Peter Guber’s presentation at Sony World
Headquarters from Larry Glidewell’s forthcoming book The
Humpty Dumpty Conundrum. As the newly elected chairman of
Sony Pictures in Hollywood, Guber was presenting to forty
Sony executives seated around a conference table.
Guber told them “We’re going to produce 29 films the
first year: 4 will be blockbusters, 6 will be verifiable
hits, 5 will be medium hits, 6 will breakeven, 4 will be
distribution breakevens, and 4 will be flops. The Sony CFO
politely raised his hand and asked, “Gubersan, why do we
have to make the four flops?” Guber replied, "You
never know before you put a movie in front of the audience
whether it's going to be a hit or not."
Unfortunately,
it seems that in the movie business, the accountants are in
charge now of the big studios now and guess what… the
independents are absolutely kicking their hind-end! Why,
because the big studios are making safe ROI based decisions
producing sequels and the independents are blowing our minds
away with movie scenes that entertain us for unique
perspective, surprise, and new experience – something ROI
has not been able to measure.
W.
C. Coleman, founder of The Coleman Company (1914) (the
camping stuff company) had a manufacturing problem at one
time and the sides of their camping stoves were not working
right. At a meeting to discuss a solution, Coleman, listened
to the accountant and manufacturing guys explain the cost of
manufacturing new doors and replacing the doors, the
marketing guys present a campaign to make the best of the
situation, and the analyst suggest it was more profitable to
let the problem go unannounced and handle customer
complaints on an individual basis.
After
hearing all this, W.C. Coleman said, ”Get the stoves
fixed!” and walked out. The Coleman Company is still going
strong.
ROI
isn’t bad. It’s just not the end-all, be-all. So when
the next person asks you, ‘What’s the ROI on this?’
Respond by saying ‘How about staying in business, serving
our customers, and keeping the best employees?’ By the
way, you might also want to ask yourself what are you
offering these days that is innovative and exciting?
© 2008 Jeffrey Hansler All rights
reserved
#
# # # #
Jeffrey
Hansler is a professional speaker, author, and consultant.
He is a frequent speaker at association events, creating change with communication
and is the
author of Sell Little Red Hen! Sell! He can be reached at jhansler@oxfordco.com.
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