Why ROI Isn’t Always the Best Lens for Big Decisions

When you have a financial lens on decision-making sometimes it’s hard to consider any other factors.  Leaders trained in a traditional ROI model often default to it in every situation.  I saw this play out in unforgettable meeting I attended over a decade ago.

I still remember exactly what the office looked like.  A huge round table with inlaid wood sat nearby.  The President’s desk which was equally stylish, with clean lines and fancy French legs. There was a taupe suede sofa. It was a powerful office; it was also a feminine office, which was fitting because the President was both, a woman, and powerful.

I was excited and also a bit nervous. I’d worked with her team in the past, but had never made it up this far. The President reached out to me to because she wanted my help solving a sales problem.  So here I was, both nervous and intimidated by the physical office, and what it represented.

We started with small talk.  We both had children who were high school juniors looking at colleges. I asked her how her daughter’s search was going. She smiled, saying her daughter wanted to attend a small private college. But she, the mother, wasn’t sold on it. Because of her good grades, her daughter could go to a state school tuition-free. She said, “If she wants to go a private, I’m going to need to see an ROI on that.”

My jaw about dropped. This woman was making over a million bucks a year, and she wanted to see a direct ROI on her kid’s college? She went on, the private school was a good one, she said, but was her daughter really going to make more money when she graduated?  I found myself thinking, it’s not like she wants to study pottery, she just wants to go to a smaller private school. Even if she does want to study ceramics, isn’t that the whole point of being rich? To give your children more choices.

Apparently, she didn’t see it that way.  For her, college tuition should return an immediate financial ROI.  Our chitchat opener was a hint of what was to come next.

I asked about the sales issue. “The team’s not hitting their numbers,” she said. “They’re not pursuing enough new business. When contracts renew, they let it come down to price. They’re not selling our value. That’s why I called you.” She went on, “I need help with the comp plan. Can you help me create an incentive program to improve our profits?”

Do you ever have one of those meetings where your brain is telling you one thing while you mouth is saying something altogether different?

My brain was saying, “You don’t have a money problem; you have a morale problem.” My mouth was not as confident. I mumbled something like “Uh, I’m not sure what you mean.”

The President said, “Look salespeople are like cash registers. You push the right buttons and the money comes out. I need to figure out which buttons to push.”

The rest of the meeting is a blur.  I mumbled and fumbled a few things before she showed me to the door.

I knew in that moment 10 years ago, changing the comp plan would not improve her team’s ability to create value. In the decade since, research has revealed: organizations that overemphasize short-term ROI create transactional relationships with their customers.  Said another ways, if you treat your employees like a commodity, that’s how they’ll treat your customers.

Money matters, but it’s not the only factor that drives performance.  When you use an ROI lens too quickly, you miss out on the nuance and the more emotional innovative options that may be available.

Financial return is one lens for evaluating your options, but isn’t always the best one.