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The market dipped. If you got nervous, you might have an ROI problem.

February 6, 2018 2:29:00 PM CST / by Ricardo Pellafone

A blip in the market shouldn't make you nervous—unless you're not sure of the ROI of your compliance program.

If that's you, here's what to do about it. 

Downturns happen

I'm writing this the morning after the biggest one-day drop in the history of the Dow. And as someone who has most of his rainy day fund in investments, I'm glad that—as of this moment—it looks like a temporary correction, not the start of a bear market.

But downturns happen. And when they happen, some companies double down and advance, and others retreat and wait it out—but all of them take a hard look at spending. 

We haven't had to deal with this in a meaningful sense in almost a decade, but virtually everyone reading this will remember what 2008 was like—even if we've practically forgotten it during a remarkably long bull run. 

So, here's the question: when you heard about that plunge, were you nervous for your compliance program? Your job? 

If so, you have a problem with ROI.

 

ROI matters

In a bull market—like, say, almost the last decade—you might be in a position where no one asks you to justify your program. You get enough budget to be comfortable and you just focus on "solving problems," not measurement and ROI.

Until cuts come. And then you start getting questions like:

"How do we know this actually works?"

"Do we really need to do this?"

"Do we really need this many people on the compliance team?"

And the answer to those questions is being able to show ROI, in dollars, for *specific* initiatives and projects and programs. 

The "specific" part is key.

Because you get budget to accomplish specific things and hire specific people, not just "have a compliance program" in the abstract. That's how budgets work.

And if you cannot show that a specific initiative solves a specific business problem and saves money by doing so, you have not actually solved the problem.

That is, if your "solution" costs more than the original problem, it's not a solution—it's just a different problem. 

And so ROI matters because you work in a business, or a nonprofit, or a government...and all of those things run on money. And when money is tight—for whatever reason—things with strong ROI stick around, and things with questionable (or no) ROI go away.

And—spoiler alert—you want your program and your headcount to be in the "strong" bucket, not the "go away" bucket.

This does not mean, by the way, that every project you do has to have immediate, short-term ROI. That's short-termism. You can still make a compelling argument for a compliance initiative based on a long-term return—but you still have to make the argument and do the math.

 

How to do this

So, great. Caring about ROI makes sense, because you're in a business and businesses run on money.

What now?

First, decide that you're going to do it. For a lot of people, this is a sticking point—because they think deciding to measure ROI means (1) you might learn your stuff doesn't work and (2) you have to do math, and both of those things are not fun.

And they're absolutely right.

You definitely will find some stuff doesn't work. We go through that here when we evaluate our projects and strategies and how we spend money. And it is always painful to hear something failed. But I'd rather know—so I can juggle resources—than have my team do busywork that isn't accomplishing anything.

You will definitely have to do math, too. And look: I know math stinks.

I'm an ex-lawyer; do you think I like doing the budget and financial planning at Broadcat? No. I opted to take "Accounting for Lawyers" pass/fail in law school.

But ROI calculations do not involve crazy, next-level math. It's really basic stuff. It'll be hard at first because you'll have to think in a different way, but it's totally achievable. Trust me: if you're smart enough to handle the complexities of a compliance job, you can handle this.

So the first step is to simply make the mental committment that you're going to learn something new and power through.

Second, get help. You have a couple options here.

We have a free book that walks you through this with color-coded equations and whatnot. We still have some free hard copies left, and we can send you a free digital copy if we run out. Go here to read an excerpt and request a copy.

You can also ask someone from your business team for help. Find a project manager in operations and ask them for help and templates on how to do this. This is what they do all day. (And if you start with our book, you'll walk into the conversation with some background that makes you look smart.)

Or, of course, just use the internet. That's how I kinda learned all of this.

But no matter what, get ahead of it.

You shouldn't be nervous when the market dips or your industry gets squeezed. That's a terrible way to live—to be afraid because you believe on some level that your job is non-essential. 

And it's not only terrible, but false; the truth is that your job is valuable and compliance is important. In fact, it's important enough that you should be confident you can prove it when things get rough—and that means learning to do ROI.

 

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PS: I met someone at a conference where I was presenting on this stuff, and she said "oh, but that's not what you do," since we're commonly understood as a training company. You might think that too.

That's understandable, but here's the thing: we want to sell stuff that works. Because the underlying goal here—ethical and compliant behavior—is too important to waste on feel-good metrics and participation trophies. And that means we have to empower our customers to know how to measure if it does, and that's why we talk about this.

Ricardo Pellafone

Written by

Ricardo Pellafone

Ricardo used to be in-house compliance, leading investigations for a sovereign wealth company in Abu Dhabi and a Fortune 500 tech company in California. He has degrees in psychology and law.