Making ROI Look Good

from the it's-so-easy dept

We’ve already discussed how no one ever seems to agree on how to calculate ROI, and that often leads to the following problem. When companies calculate their own ROI for decision-making purposes they tend to play around with the ROI numbers until it supports the point they’re trying to make. Want to prove that this project is worth keeping? Just figure out an ROI that says so. I think the fact that this is surprising to some people is surprising. That’s always the way ROI is calculated in most companies that I’ve seen. The scary part is how rarely anyone questions the ROI calculations. It’s similar to analyst reports. If you’re trying to prove a point, you find the analyst report that gives the most support to what you’re trying to prove. If you’re calculating ROI, you find the ROI method that gives you the best numbers.

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