Project Management

ROI, Meet Reality

Ian Hayes
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ROI analysis can be an enormously valuable tool for directing project investments, but it requires an open mind, reasonable assumptions and accurate numbers. Even then, the numbers that tell the whole story usually don’t appear on silver platters and rarely lend themselves to cookie-cutter templates. Here are five pragmatic rules for constructing useful, believable ROI analyses.

The topic of return on investment (ROI) analyses inspires fear and loathing on the part of project professionals. Management requires them before funding projects or purchases, but few people are sure how to do them, or know where to get the "right" numbers. Many benefits are difficult to quantify in dollars, and it is often tough to meet the payback hurdles set by company policy. Besides, who really trusts an ROI analysis anyway? If the analysis comes from an outside party, it always seems to justify the product or service they are trying to sell, and if it is internally created, it just matches its author’s foregone conclusion. Many people have a way of making projects they don’t want to do fail any payback test, while personal favorites seem to generate enormous productivity returns. No wonder no one really believes ROI analyses.
 
But beneath these difficulties lies an extremely valuable management tool. And if properly produced, ROI actually accomplishes its …

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"If only God would give me some clear sign! Like making a large deposit in my name at a Swiss bank."

- Woody Allen

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