Most of us have associated the acronym, ROI, with return on investment.
From a business perspective, it is defined as net profit divided by the capital invested.
Looking at it another way, when you invest in a business, what net profits are achieved in what period of time? You determine whether the ROI is worth the business investment. If your net profit per hour is negative, ie you are paying your customers to do their work, the answer is definitely no.
ROI also means return on inactivity.
This is the flip side. What does it cost you if you wait? If you don’t act? If you sit on the fence and don’t make a decision? This ROI is always negative!
Return on Inactivity can be incredibly costly. One owner had a manager who he knew had problems and was not performing. There were questions about his abilities yet nothing was done. Then the owner got a call from one of his major clients who told him that he didn’t want that manager on his jobs and proceeded to explain the problems that this manager had ignored.
This was a huge wake up call and a very expensive ROI (return on inactivity). After the dust settled and he hired another manager, his comment, “I should have fired him sooner.”
Another owner hired a very competent controller. However, she was dominant, abrasive, and not a good fit for the company culture. Everything had to be done her way. As a result, she caused a lot of problems with the entire management staff and constantly pushed back on established procedures. She left, after a screaming match with the owner. That was the last straw. Now there is a new controller, not as technically competent, but a hard worker who gets the financials right. She gets the help from the management team she needs to produce accurate financial statements. Again, the comment, “I should have gotten rid of her sooner.”
How many times, after you fire a known “bad apple” who is damaging morale and causing problems, even though he or she may be technically competent, do employees come to you and say thank you? Or they pull together to do the work of that fired employee. Or you walk in and the entire office environment becomes upbeat and positive again?
Don’t let the regret of waiting cost you a lot of money, headaches, customers or cash. If you know it is the right thing to let someone go, invest in a marketing plan, or another activity that you have been considering, estimate the cost of inaction.
Is it worth it?