ROI, Yes. What about ROF?

September 29, 2016


Did the title of this blog stump you? Well, it was purely intentional and not a coincidence!

As professionals, we all understand what ROI or Return on Investment is. What is ROF? Well, we will come to that in a while.
Allow me to set the context.
Organizations, both in the private as well as government sectors, undertake a host of initiatives as programs or projects with a fond hope that they will be successful. They plan to execute these projects thereby expect to reap the rewards in the form of better financial performance. Return on Investment or ROI is one of the popular metrics, while the others being Payback Period, Net Present Value and Internal Rate of Return. We will discuss ROI and save the rest for another day!
On any program or project, ROI is a measure of the net profit made as a percent of the investment that has gone into it. Common sense will tell us that higher the ROI, better it is for the enterprise.
So far, so good!
Different studies in project management have highlighted the poor state of project success worldwide. The numbers are scary – just 40% success (based on Chaos Research Report published by the Standish Group). This harsh statistic simply proves that a majority of projects and programs don’t deliver planned value or in plain terms ‘failure.’

Now did you get any clue to ROF? Not yet?
Ok, I will let the cat out – ROF stands for Return on Failure!

How do companies usually deal with failed projects or programs?
Most organizations conduct a standard Lessons Learned session and document:
• What went right?
• What could be improved?
Now for the not-so-nice part: the lessons learned session ends with ‘plain documentation’! Why? Just to ensure they are well-covered in the case of an audit!
Some stronger reactions to projects gone bust include:
• Pass the buck,
• Change or fire the team,
• Modify the roles of specific members,
• Rejig the organization structure and,
• More (creative ones, I guess)

What do the above symptoms tell about the organization?
An indication of an enterprise not yet on the path of greatness!
Would you disagree?

So what should be an ideal approach to deal with failed projects or programs?
Borrowing insights from a recent Harvard Research by Julian Birkinshaw and Martine Haas, companies need to conduct reviews that are:
1. Fast and to the point
2. Frequent, through good and bad times
3. Forward-looking, with an emphasis on learning

Now, what should a good project review consider?
Create your Project Balance Sheet and evaluate the Assets and Liabilities that arise out of a failed project.
Some of the Assets could include insights into:
• Our customers’ needs and preferences and our current markets
• Validity of our assumptions
• Future trends and the need to align our forecasts
• Internal organizational team dynamics
• Effectiveness of our structures and processes
• Individual and team skill development
• Trust and goodwill
Some of the Liabilities could include:
• Direct costs
• External costs: unfavorable impact to our reputation or weakened competitive position
• Internal costs
• Organization structure fallout
The Bottom Line: What are the key insights and takeaways for the business?
In addition to the above analysis, it is equally important to look for patterns of failure.

REMEMBER: It’s not ‘Are we making good decisions?’ but ‘Do we have a process for making decisions that are statistically working?’
In the above context, organizations MUST implement suitable applications to facilitate relevant processes that lead to better decisions.
I am sure you are keen to avoid or minimize the ROF on your projects by enhancing the quality of decision-making. Get in touch with our sales team for a demonstration of TouchBase, an industry leading project management software by ProductDossier. 



ProductDossier - The makers of TouchBase PPM solution, that is configured specifically to the needs of your industry and organizational standards & processes. TouchBase is designed uniquely for external customer projects, new product development, and internal initiatives. TouchBase supports multiple project management approaches such as predictive, agile, and hybrid. TouchBase digitizes your project management landscape, offers holistic solution to your project management needs, and integrates with your existing enterprise applications such as ERPs, CRMs, Accounting, and others - to deliver one version of project management truth!