ROI is a financial metric describing a return on investment for a business. Because benefits and costs are both measured using money, they can be compared using the same metric and it is easy to get the numbers from the finance system, like QuickBooks. ROI can be used to forecast benefits, and make investment decisions, but can also be used to measure past performance.
I was going to look up ROE to find a typical return on equity when I found something called return on expectations. This measure is often used to measure training, but what a neat idea it was. To focus more on the concept of Return on Expectation you need to know what you expect. What is it that you ‘expect’ to see, feel and experience from the business? What you need is an understanding of what it is you are really trying to achieve. When we do strategic planning, this is always the tough question. What is the vision of the business? What is the mission of the business? Without these two elements, how can you determine what your expectations are.
Think about the first time you went to your favorite restaurant, what were you expecting? Were your expectations based on a friend’s recommendation or a glowing review, maybe it was just the name of the restaurant. By the time you first walked through the door, you had expectations about the food, the service, the ambiance—by the time you walked out the door, those expectations were hopefully fulfilled. Your expectations were not always numeric or a metric, but somehow you knew if that expectation was met.
Nearly every goal-setting philosophy begins with a clear vision of the desired result. While this principle is quite simple and easy to understand, examples of people ignoring it are common. This should be easy, check the website for the mission and vision statements (if they exist), as well as a statement of what the business ultimately delivers. OK, so maybe not so easy because there is no statement available.
Many professionals use measures such as employee retention, client service, and delivered quality to track success. While all of these measures are important, they are not great vision statement elements. Rather, they are leading indicators that establish whether the business is on track to accomplish its mission.
I think it is a great idea to measure expectations, but what is the metric? The only thought I have come up with is to assign some metrics that can be measured or counted. Make sure all those metrics go in the same direction and track the trend. By going in the same direction, I mean if going up is good for one, then all must trend up to indicate good. For example, one of your expectations is good client service so track client complaints. Well, less would be good so either make all the metrics trend down or convert the complaint metric. I have found that businesses that have a balanced score card[1] tend to use this concept. Now we have moved from a simple financial metric (ROI) to a set of metrics that more closely represent the vision of the business. Call it expectations, goals or scorecard if you like.
[1] The Balanced Scorecard (BSC) was originally developed by Dr. Robert Kaplan of Harvard University and Dr. David Norton as a framework for measuring organizational performance using a more BALANCED set of performance measures.
