Return on investment (ROI) is a financial tool to measure and communicate public health effectiveness for policymakers, funders, administrators and the general public. Often time, the ROI is conducted as an afterthought, after a project is completed and the funder/stakeholders/executive board needs a report that the money that they invested were justified. What happens if the ROI is lower than expected? We can turn back time. Instead of using the ROI as a ‘back-end’ financial tool, use ROI as a ‘front-end’ as a forecasting tool to assess the ‘potential benefits’ (in monetary terms) given the ‘cost of the program’.
Questions to Ask:
- Are we making the right investments?
- Are we becoming more efficient?
- What outcome/benefits are we getting for our buck?
- What is our budget accomplishing?
- Are we being resourceful?
The purpose of measuring the ROI is to analyze Investment effective to generate profit or benefits and is often expressed in percentage (%).
ROI = [ (cost of the benefits) – (cost of program) ] / (cost of program) * 100%
When the ROI is greater than what your rate of return, expected value, or threshold of acceptability, then this project/program/policy is probably worth investing. However, we cannot predict the future (financial tool) is a crystal ball. However, we can conduct a ‘sensitivity analysis’ to assess a range of unknown variables, uncertainly, and unpredictability that may impact our risk tolerance.
Subscribe and stay tune for the next post on “Sensitivity Analysis.”
Kee Chan, PhD, MBA 