Tuesday, May 25, 2021

Reflect & Learn: Post-Project Evaluation of Initial ROI Analysis

Source: Praxis

Upon completion of a project, have you ever gone back to evaluate the initial return on investment analysis used to justify the decision to proceed with that initiative?  This type of post-project evaluation can be very instructive.   Did the project deliver the type of return that was expected?  Why or why not?  Did the project fail, or were the expectations regarding the benefits and returns simply overinflated?  

The purpose of this anlaysis should not be to blame people for misguided cost/benefit analysis, or to punish those who did not deliver results in line with expectations.  Instead, spotting errors and and deriving lessons from this type of reflection can enable an organization to enhance the quality of its decisions moving forward.   ROI analyses will improve, enabling managers to make more informed, higher quality decisions.  

What types of issues and errors should one look out for when evaluating results relative to that initial analysis?  Here are a few questions to ask: 
  1. Were we experiencing confirmation bias as we collected and analyzed the data?  
  2. Did we make fail to engage a devil's advocate to challenge our forecasts and predictions?  
  3. Did we make some assumptions that were overly optimistic?   Did we back into certain assumptions simply to make the return on investment seem attractive?
  4. Were the initial investment figures unrealistically low?   Did we have to make substantial additional investments that probably should have been anticipated at the outset?  
  5. Did we fail to account for opportunity costs when considering the attractiveness of this opportunity?
  6. Were people hesitant to challenge or critique the analysis because they perceived the investment to be a "pet project" of the CEO or another senior leader?

No comments: