The shortsighted insistence that a specific ROI be required of each and every element of the organization is simply an admission by leadership that it just doesn't understand strategy and is too lazy to figure it out.
A few days ago, I came across an article that sought to address the Return on Investment of chaplains in organizations that provide physical and mental health care services. The article said things like "chaplains need to be able to show a positive impact on the bottom line" and "that which can't be quantified is not valued."
I'm trying to find the words to express my distaste for and sharp disagreement with such sentiments without, myself, appearing to be disagreeable and I'm having trouble. The only way I can think of to say it is that leaders and managers who think this way are just simply not smart enough to be in charge and should resign. They don't have nearly enough "strategic intelligence" for the job.
Harsh words, I know. But here's the thing...the shortsighted insistence that a specific ROI be required of each and every element of the organization is simply an admission by leadership that it just doesn't understand strategy and is too lazy to figure it out. Such a view sees the organization as no more than the sum of its parts. Leaders who hold such views aren't imaginative enough, creative enough or just plain smart enough to understand how organizational elements can be integrated to create capabilities in ways that simply couldn't be done separately by those same elements. Going back to our example, the requirement that chaplains be able to show a return expressed in dollars is a frank admission by leadership that it simply has nothing resembling a mission, vision and strategy for its organization. The understanding of the manner in which a chaplain does (or does not) help create and carry out sustainable capabilities that provide value for clients will never come from a spreadsheet.
But what does all this have to do with manufacturing? The sad fact is that this lack of "strategic intelligence" afflicts leaders in all sorts of organizations, by no means just those that deliver health services. Whether we're talking chaplains or lean initiatives, leaders too often try to place the blame on someone or something else for their lack of ability to articulate a strategy for their own organizations. Leaders either have a clear idea as to their organization's strategy and the resources needed to carry out that strategy…or they don't. When they imagine that lean approaches and methods will serve only to reduce costs...they don't.
None of this is to say that all elements of the organization provide the same benefit (or, necessarily, any benefit, for that matter) with respect to building strategic capabilities. Nor is it to say that leaders shouldn't continually be assessing their organizations in light of strategy. But the notion that leaders should (or even can) isolate individual elements of their organizations and figure out the ROI of each of those elements separately from all others is fatuous. Instead, leaders need to take a holistic view of strategy AND organization, asking, first, how their customers and stakeholders define value, second, what capabilities are needed to create that value, and, third, what sorts of resources, processes, and culture must be developed in order to build and sustain those capabilities.
Let's look at a small, almost facetious, example: In a grocery store chain, what's the ROI of a shopping cart? By itself, it's probably zero. But, once integrated and aligned with fully stocked shelves, wide aisles, friendly and helpful employees, and competitive prices...the ROI of shopping carts is very high indeed. Still, nobody, but nobody, is wondering if each shopping cart "paid for itself" today. Could we have too many shopping carts? Of course. Or we could have too few shopping carts. We could also have shopping carts that are too old, too beaten up, too small, too large, too expensive, or too cheap but all those issues are resolved only in relation to strategy. None of them can be addressed by figuring an ROI for shopping carts and they certainly can't be addressed by asking, "How much money do we save because we have shopping carts?"
The question that leaders need to ask isn't "What's the ROI?" The question they need to ask is, "Does this resource, in its present state, provide a foundation for capabilities that we can't do without in order to fulfill our present strategy?"
Rick Bohan, principal, Chagrin River Consulting LLC, has more than 25 years of experience in designing and implementing performance improvement initiatives in a variety of industrial and service sectors. Bohan has a bachelor of arts in psychology from the University of North Carolina at Chapel Hill and a master of science in organizational development from Case Western Reserve University in Cleveland. He has published articles in National Productivity Review, Quality Progress and ASTD's Training and Development Journal. He is also co-author of People Make the Difference, Prescriptions and Profiles for High Performance. Bohan can be reached at firstname.lastname@example.org.