Beware the Cult of ROI

Mike, the shop guy where I take my car for service, taught me a very important business lesson.  On the invoice, there’s a line item called “Shop Charge”.  It’s always just a few dollars or even less and I never paid any attention to it until one day when it caught my eye.

Mike explained, “Rather than figuring out exactly how many paper towels the mechanic used on your car, plus maybe a few inches of tape to hold some wires, and a couple of tiny screws, we just charge you 0.5% of the total and call it a shop charge.  It doesn’t make sense for me to force the guys to track every one penny washer or nickel’s worth of grease they use.  I trust them and anyway, obvious waste is well…obvious!”

Compare that to some companies that require time sheets to the minute, demand ROI analysis on the smallest purchases, and use cost justification to bully employees into doing without.  Who’s being the better business person, Mike the mechanic or Mary the MBA?

The next time you’re tempted to say, “Show me the ROI on that,” ask yourself if you really aren’t sure or if you just want to see how badly the employee wants to take the training.  Are you looking for the best use of the money or are you seeing how much abuse you can get away with and still keep the “chickens laying”? 

ROI is an important concept, but it’s only one metric among many.  Not every good decision can be reduced to, “If I spend X, I’ll recoup X+3”.  Sometimes you have to trust your people, go with your instincts, and take a risk.  Beware the cult of ROI.