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Good ROI Doesn’t Mean Project Success

Get into some discussions with finance-savvy business peers, and your assumptions about ROI might start to change in very strange ways. This happened to Karen Munro recently. Far from being a catch-all indicator of project success, Munro finds the return on investment standby must be qualified by an understanding of what it cannot achieve.

The Business Case

Management is the first area where a failure to execute properly will simply not translate into appropriate ROI. There is the business case. This must be the golden standard by which you measure a project’s failure / success. Anything short of delivering the agreed upon value cannot be classified as a total success. Numbers can be fudged while value cannot.

The heart of the problem lies in the fact that ROI is calculated mathematically…using numbers…on paper. In other words, it is a measurement that only represents the achievement of value, but cannot replace it. Even well-meaning attempts to reflect project value in ROI carry implicit assumptions that are not always uncovered in the course of measuring costs and benefits.

Project Value in Flux

What it all means is that value, the thing you are actually tracking, will fluctuate through the project. This phenomenon is especially likely if you’ve failed to create a strong set of business requirements at the outset of the project. New value will be added midstream, and if ROI fails to account for this added value, then it is basically a useless indicator. By the same token, if expected value is found to be otherwise missing mid-project, you now face a situation where cost suddenly outstrips the originally projected value creation.

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About Eric Anderson

Eric Anderson is a staff writer for CAI's Accelerating IT Success. He is an intern at Computer Aid Inc., pursuing his master's degree in communications at Penn State University.

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