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HR and ROI (Return on Investment)

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Return on investment, or ROI, has been a focus of businesses for decades, but rarely talked about in education. It *SHOULD* be in every HR professional or talent manager's lexicon.

What is ROI? - Return on Investment


ROI Calculation 440 x 62.png

The ROI calculation was developed in the 1970s by Dr. Jack Phillips and used by organizations in the US in the 80s. It then became popular worldwide in the 90s. The tool was originally designed for improvement, but many organizations today use it as a measure of performance when assessing the purchase of a product or service, or after implementation, if the product or service was "worth it."

How do businesses use ROI?
Businesses use ROI to measure the efficiency or effectiveness of an investment. In my experience, ROI conversations are typically around products, services, processes, and assets (think machines, stocks, training, technology, plants, land, other businesses...) etc.

How do HR or Human Capital departments in business use ROI?
By definition, "human capital" means that people are an asset or investment and should be seen not just as "bodies" in seats, behind desks, but extremely valuable resources. Many human capital theorists (like myself) believe that an organization's most important asset are their people and that one must invest in products, services, processes, and assets to help people, and ultimately, the organization to be successful.

How should K-12 Talent Managers use ROI?
Like HR and human capital departments in business, K-12 talent managers should also use ROI to measure the efficiency or effectiveness of an investment like an asset, product, process, or service. Specifically, ROI can be used to measure the return on:
• Recognition Programs
• Innovative Rewards Programs
• Professional Development Learning Experiences
• Evaluation Models
• Onboarding Systems
• Hiring Processes
• Human Resource Information Systems
• HR Consultant Services

If you are interested in learning more, there are many books, articles, and resources available about the ROI of HR and human capital. I just finished reading "ROI of Human Capital: Measuring the Economic Value of Employee Performance" by Jac Fitz-Enz. However, you can find a number of high-quality articles for free on Business Week, Harvard Business Review, or the Society of Human Resource Management website.

In a future blog, I will look at the ROI of various HR or human capital activities and provide examples. Please share any questions you may have below!

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