Don’t Buy the Lie on ROI

I was recently fiddling with one of those asinine “ROI Calculators” online—this one offered by Halogen Software, Inc. Halogen sells a suite  of nifty gizmos that automate the company-wide performance feedback process.   Central to Halogen’s marketing pitch is the infamous financial indicator, Return on Investment (ROI).  So their ROI Calculator asks me to plug in a few facts about employee-count, whether we use paper-based appraisals, frequency of reviews, that kind of thing.  My contact info too. I diligently follow the instructions, fill out the “calculator” web form and click Submit.

What happens?—Nothing—they say “Thanks” and a sales person will call to discuss. No output from the calculator. I am duped. I hate online marketing gimmicks like that. It said it was a “calculator” and it was not—that’s a lie—my very first experience with them as a potential corporate buyer. Now a kindly salesperson is going to call.  Think I should trust him?

In fairness, I knew up-front that I was asking for a lie, it just wasn’t the one that I expected.  The lie I expected was some bogus ROI number like those plastered all around the calculator on their web site:

• Reduce time and money… 85%
• 120% return on investment
• Annual savings $300,000.00

These extravagant claims are backed-up in “Customer ROI Case Studies” to give Halogen credibility by dragging  their poor customers into the sham.  One tall-tale purports to reduce a client-company’s 2200-employee count by 10 to 15 people, saving $300,000.00. The magic– time saved not filling out paper appraisals forms—direct return, they say, for investing a mere $40,000* per year in Halogen’s eAppraisal software.  Of course, it seems counter-intuitive that a dozen or so full-time jobs were eliminated because the layoff survivors now complete performance appraisals electronically. If we were talking enterprise supply chain systems here, well then maybe a modest-sized company can shave a few staffers with automation —but performance reviews? Give me a break.

ROI Lies

It’s a harsh accusation to accuse of a “lie” isn’t it?  “Marketing” is the preferred way to justify false advertising these days.  Technically, these tricksters didn’t really lie to me after all—reading it again carefully—it says, To request access to our…Software ROI Calculator, please fill out the form below.”  But then I don’t get that either– no calculator; instead a PDF marketing brochure (a “white paper” they call it)– so that’s the lie.  Hey, check it out yourself to see if I exaggerate. Here’s a link to the “ROI Calculator” of the offending web site that happily invites to “Discover for yourself how quickly our blah, blah, software can provide your organization with a measurable return on your investment.”  What’s the fine print on those case studies—“Actual results vary?” No kidding.

Personally, I find that kind of thing more offensive than outright false information—it shows that the deception was carefully crafted to bait and switch the consumer while leaving wiggle room to rationalize the fudging. Vendors who craft their lies and concoct false metrics to support them in the name of “marketing” teach consumers to be more cynical and less likely to buy. And when those metrics defy common sense, it turns cynicism into disdain.  That’s a lot of hurdles to overcome to sell a product. The real sad-side of the business story is that these games are so commonplace today that it’s expected, almost acceptable.  And, sorriest of all, it sometimes sells.

ROI and Money

Not me. You can trick me into wasting five minutes filling out a web form, but it’s preposterous to buy your lie on ROI—poetry, I know.   Let’s look a little closer at these confetti ROI models. Vendors and pundits go through pains to demonstrate ROI using various metrics of every shape, size, speed and opportunity cost.  This practice defies business 101. In fact—and this may surprise—you cannot measure ROI with any denomination other than money. ROI is a financial indicator, you see, and a pretty basic one at that—the amount of money returned for the amount of money invested. It’s about greenbacks. Money is the metric, nothing else. Nothing! I shout.

No where in the HR space is ROI more cockamamie than in the training and development arena. Infinite models abound—all of them chock full of holes. Most mention the famous Kirkpatrick Model created by Dr. Don Kirkpatrick in the late 1950s. His “Four Level Evaluation Model” wasn’t even devised to demonstrate financial impact, so a guy named Phillips has since added a “Fifth Level” that spits out counterfeit money (Jack Phillips Center for Research, part of the Franklin Covey Company). I have no qualm with these academics and they both publish interesting stuff. But the ridiculous applications that spawn from their good work defy business and common sense.

Here’s a link to examples of three such stupid models put out by “Knowledge Advisers” don’t you know: 1.) Human Capital ROI Model; 2.) Business Result ROI Model; and 3.) The Impact Study Model.  Note in each model, the intervening variables between dollar signs, including “estimating performance improvements”, “isolating relative time spent”, and—my personal favorite—”adjusting for bias, confidence and conservatism.” Dear reader, you don’t know what the hell I’m talking about, do you?  That’s because it doesn’t make any sense.  The tell tale is that each model poops different financial results, which doesn’t usually happen with basic arithmetic.  If it is not about money-in and money-out, it’s babble in and babbles out and it ain’t ROI. No exceptions, no return.

Time is Time

Employee time is money, you say? Smarty-pants HR types go for ROI gusto with the “payroll-saved” argument. In fact, most models try to go there one way or the other. And if indeed your software gizmo automates a process that reduces actual hours worked, then it may be valid, but almost always not. Why? Because if it saves an employee one hour a day to do something else, it doesn’t save payroll money—the employee is still working 40 hours per week, not 35.

I’m all for workplace efficiencies or training that free people up to do more important things. Who isn’t?  But even that doesn’t happen as the inflated “model” reports because employee minutes on the clock are usually not managed closely enough to ensure it. Are they doing more value-work now or longer smoke breaks?  Accumulating a bunch of payroll hours to demonstrate ROI at 15-minutes saved per person, per day across hundreds of people—makes the calculation all the more ludicrous.

Investments that result in actual workforce reduction—not hours, but entire jobs—are far more appealing to ROI pundits. “Reducing headcount,” they brutally call it, demonstrating mucho savings one head at a time.  But unless you know for sure exactly who was fired and when as a direct result of utilizing the software investment and nothing else, then it is not a valid ROI. Does any company employ 10 to 15 people who work full time just completing paper job performance reviews?  I hope not. If 50 unit managers save 20-minutes in paperwork every day for a year—that equates to only two jobs (unless, of course there are still 50 units to manage, then, sorry, it’s zero).  How did Halogen come up with 15?  So tell us about these layoff victims. What positions  did they hold? What are their names?  The truth is people’s time is usually not money. Time is time; money is money.  I’m so glad we had this little chat on business fundamentals, aren’t you?  If you want to know a little more, check out my posts of many moons ago about Business Value 101 and 102.  HR-types will especially benefit.

Money for Good Stuff

Some things cost money as the necessary price of the ticket and some things are smart to have—neither of these offer cash return, but are good in their own right nevertheless.  An Intranet for employee communication and knowledge sharing is good stuff, even if it cost a little money—that’s why we sell them! Training at reasonable cost for assimilating meaningful information doesn’t’ need an ROI model to be the smart thing to do—that’s why we offer it. Valid, candid, developmental feedback for employees is a good idea too, especially when keeping it simple and not investing tons of money in monster web-based versions of the same useless appraisal forms. You pay a few greenbacks for Switch HR’s feedback systems too, but beware of liar, liar pants on fire ROI models offered by the expensive competition. We don’t pitch ROI, we just sell good stuff.

Getting new hires trained up fast to interface with customers is very important and certainly “worth the money.” You don’t need a model to know that.  Training employees to saving customers’ time and make their transactional experience more appealing are real important too; even though you can’t substantiate the dollar benefits with anything more than a wild ass guess. Well structured leadership development initiatives, business planning facilitation, project management and process improvement training—all good, good, good.  No ROI projections needed there either; just common sense.

Invest to be Nice

Moreover, a lot of company’s actually invest in customers and employees to be nice of all things and because it’s the right thing to do.  And to be consistent with their values and to care about their fellows as we all collectively scramble for a few extra bucks meantime. In these nice-to-have cases the money-ROI is non-existent; yet the investment can be at the very core of the company’s long term success.  Certainly, companies that spend kindly are more appealing to employees and customers alike compared to organizations that don’t bother.

Do most companies treat people with dignity and ensure a safe place to work merely to avoid lawsuits and reduce insurance premiums? I think not.  If monetary ROI were always required to justify your programs, then where’s that leave the age-old human values practiced routinely by good companies everywhere—to pitch in for the sake of contributing; and to hit goals for the sake of achieving; to win for the sake of the team; to teach and learn for the sake of knowledge, career opportunities and professional development; and—most important—to lead for the sake of all of the above. Successful businesses promote these values far more potently than any non-profit, government agency or institution of higher learning, mostly because they have the money to do it, invested in employees, customers and the community with no return required.

And do spare me the party line that it’s all about profit. How witty to say, that without a profit there would be no company and no jobs and no employees and no customers.  What’s the point?—that breathing is required to live?—very insightful.  Business is not all about money—it just sounds good to say it is, especially for spinsters who smell a marketing opportunity to communicate their wares with business-bite conviction–so they lie ROI. There’s that refrain. And dare I say that there are some things that money can’t buy — we learned that one in kindergarten; we concocted ROI models long after—sometime in college or graduate school, I think. What was the name of that course?  Fool’s Tools 101 for Business, maybe?  I can’t remember.

Good for me.

*Halogen Software has a pricing model on their web site, which was used to estimate the cost of their  eAppraiser application for 2200 employees per the case study.