We talk about ROI, return on investment all the time. Another way to think of it is “How much profit will be made relative to an investment”? Very often ROI is discussed when a decision to engage in a project, product or service needs to be made to determine if it makes financial sense.
Interestingly, what often appears to be the largest expense item for a business or organization rarely is analyzed for ROI. I’m talking about staff, performance and a mindset. Here’s a great example; commissioned sales people are paid based on performance, the more they achieve the greater the reward…..makes sense, right? Has anyone experienced the stereotypical, self absorbed, not much of a team player, over sells and under delivers, “would sell their mother” salesperson? I’m certainly not suggesting that all salespeople are monsters, but they will often behave in accordance to the payoff if they are any good, so it’s important to set the proper target.
Could an ROI approach to compensation really make a difference? I thinks so, and here’s why. The idea of “reward for performance” creates a mindset of “I”, if “I do, then I get”. An ROI approach doesn’t eliminate the “I factor” but it certainly changes the focus from a “a goal and reward mindset” to a “performance impact on company bottom line mindset”. Combine this shift in mindset with an organization who offers a great product or service and you have exponential improvement to the bottom line.
I used the salesperson example to make a point, but I believe that this concept can apply to nearly every position within a company. Think of it as a KPI (Key Performance Indicator) for resource management. It provides clarity to the employees on the goals of the organization and how their performance directly impacts the organization, and it provides focus to the organization on its largest expense. Don’t get me wrong, it’s not just a numbers game when you’re dealing with people, but if everyone has their eye on the ball, so to speak, then there should be ample time for positive feedback, training, and of course, success sharing.