Return on Investment: A Placebo for the Chief Financial Officer… And Other Paradoxes

Abstract

Background: Return on investment (ROI) is one of the most popular evaluation metrics. ROI analysis (when applied correctly) is a powerful tool of evaluating existing information systems and making informed decisions on the acquisitions. However, practical use of the ROI is complicated by a number of uncertainties and controversies. The article reveals some of these controversies in an engaging and thought-provocative manner. Purpose: The intent of this note is to highlight several of the ROI paradoxes in a format of an opinion or a viewpoint with a hope that drawing attention of the ROI practitioners and researchers to these issues will contribute to more transparent and responsible application of the ROI evaluation. Setting: Not applicable. Intervention: Not applicable. Research Design: Not applicable. Data Collection and Analysis: Review of current practice. Findings: The article reveals three weaknesses of the ROI evaluations, which in the absence of the commonly accepted ROI standard, can make results of the ROI evaluations uncertain or questionable.

Keywords

• return on investment
• ROI
• paradox
• evaluation