Tuesday, May 11, 2004

The Myth of Training ROI
I stumbled across this by Bob Dust from the 'Training' world, but it could just as easily be KM:

"The biggest problem with the ROI claim is the letter I, which stands for Investment. Contrary to almost all thinking in this profession, training is not an investment it is simply an expense. While investment sounds more important than expense, training is nonetheless, an expense. Investment is a business term that implies the adding of capital to an organization. Unfortunately, human capital does not qualify."

Too right! Its a play on words - we're dealing with lop-sided accounting that wants to call spending investing but can't value an intangible return.

Bob goes on to attack how ROI leads to decisions out of context:

"My college roommate worked at a local deli, one of several in the small town catering to the college students. With so much competition, the delis were price-competitive on their subs and sandwiches, almost to the point of selling them at break-even prices. My roommate told me that the owner didn’t care because he made all of his profit on the soft drinks, tea and coffee. His customers knew the prices of his sandwiches and his competitors’ sandwiches, but never mentioned the price of the drinks. If the owner had done an ROI analysis on his business, he would have eliminated everything but the drinks, and he would have found himself quickly out of business."

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