To MBA or Not To MBA – The ROI Question

This week a new client asked me why I had decided to pursue an MBA.  Specifically, what was the ROI for me? What an interesting question!  I’ve been so wrapped up for the past few years in work / school and just plain being in “busy” mode that I didn’t have a quick response … and that got me thinking …

Three years ago I decided to return to academia via graduate school and pursue an MBA.  I had been kicking around the idea of returning to school for several years and quite simply could not decide on whether or not an advanced degree would be beneficial.  Would the considerable investment of money and time have a return?

And therein was the faulty logic.

Earning an MBA has zero ROI.  There is no immediate return on the investment of time and money from a graduate degree. Sure, there is intangible achievement or return as your knowledge base and day to day application of Finance, Marketing, Operations, and Strategy increases.  But, intangibles are difficult to quantify and thus the difficulty in answering the ROI question and quite frankly, the lack thereof, of a firm Return On Investment to respond to the question at hand.

I learned about a financial return quantification method called EVA in Finance that may provide the best response.  EVA or Economic Value Added is a robust financial measurement approach that companies use to evaluate their economic profit – the value created in excess of the required return of the company’s shareholders.  The concept hinges on the fact that a company’s shareholders gain when the return from the capital (or investment) employed is greater than the cost of that capital.  In essence, EVA is the profit that is earned minus the cost of financing the firm’s capital.  Capital (or YOUR money) doesn’t just sit around doing nothing.  Companies spend or invest just as you and I do … although they may invest in R&D while you or I choose to go on a vacation, buy a pair of sunglasses, etc. An EVA analysis of pursuing an MBA is a better quantification as it accounts for the value of the investment rather than the return.

For me, the decision to invest time and money in an MBA hinged on the fact that the opportunity cost of NOT pursuing an MBA far exceeded the initial time and money outlay.  The economic value add of an advanced degree lays within the opportunities that become available – whether a new career path, skills to start a business, etc.   The EVA will continue to multiply throughout my life as I put the new skill set to work … the impact or intensity of the returns (whether financial or not) on my life is dependent on me taking actions based on the investment of time and money.

So, when asked about ROI … while the path to an MBA has been completed the journey has just begun … and the EVA will continue to exceed the opportunity cost for not investing in myself or my future.

P.S. Thank You to the University of St. Thomas  in Minneapolis, MN for a rewarding and AACSB Accredited learning experience.  Make sure to check out the UST MBA Program here: http://www.stthomas.edu/business/degrees/ustmba/eveningmba/

Atlas Shrugged In 2011

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2011 is off to a rather fast start with a bit of inspiration from Ayn Rand. I’m starting a new journey in marketing with a company based out of Ann Arbor, MI that is the industry leader in customer satisfaction / Voice of Customer measurements that drive informed decision making leading to increased revenue and customer satisfaction for a wide variety of F1000 clients.

My blog will continue to be focused on marketing and strategy but will be enhanced with the power available via analytics and knowledge … it is a reflection of my journey and not representative of my employers past or present.

So, how does Ayn Rand or Atlas Shrugged or The Fountainhead fit into all of this?  Simple.  You have the power to effect personal and professional change that influences your own journey … it’s your outlook (like the quote above) that will determine how successful you are.  In my humble opinion, of course.

Social Media ROI – Fact or Fiction?

Image Credit:  http://www.webguild.org/wp-content/uploads/2010/10/roi.jpg

ROI (Return On Investment) is a rather simple mathematical calculation that evaluates the efficiency of an investment or its performance in comparison to other investments.  How simple?  Here it is:  Gains – Costs / Costs = ROI.  Pretty nifty, right?

Here’s an example – if you use $100 of budget that nets $150 in revenue or gains your ROI is 50% (150 – 100 / 100 = .50).

The basic ROI equation becomes rather tricky in the Social Media realm.  How valuable is a Twitter follower?  What quantitative impact does a Facebook wall comment provide?  Is the quantity of LinkedIn connections more important than the quality?

Social Media is a channel of open communication that exists outside of the normal boundaries of push and pull marketing and is difficult to provide firm ROI in the traditional sense.  And this is where things get tricky …

Trying to prove the value of Social Media in a traditional ROI sense is rather difficult.  You cannot easily quantify the value add of a Social Media presence in terms of traditional ROI gains.  In fact, you’re more likely to show a loss when using a traditional ROI model.  Social Media, as a channel, should be analyzed from a branding, engagement, influence, and competitive value add perspective as a component of strategic marketing initiatives.  This allows for qualitative measurements of individual marketing channels that combined lead to revenue gains.  Strategic marketing encompasses the channels and messaging that will deliver on business initiatives (i.e. sales, hires, brand recall, viral marketing, etc.).  Thus, the Social Media aspect of marketing ROI cannot be measured alone.

I guarantee you that a marketing executive will get fired looked at funny if they delivered an ROI analysis that included this statement: “We spent $50,000 on a Facebook page and have not been able to prove that anyone posting comments on the wall or who has followed the page actually buys our products.  But, it looks cool. And, everyone else is doing it.”

Social Media’s ROI should (typically) be tied to branding and influence initiatives within the marketing budget and strategy.  Branding ROI is component of marketing ROI and should never be analyzed independently … rather, the entire marketing budget (thus, your strategy delivery mechanism) should be utilized against total revenues or gains to determine effectiveness of the strategy.  No results = Bad strategy.  Plain and simple.  Simply creating a corporate Facebook page or Twitter account is a tactical response to a strategic problem.  Changing your channels of communications as part of a shift in marketing mix that is quantifiable in gains (ROI) is a strategic move.

That marketing executive I mentioned earlier would look like a rockstar if their statement included:  “We built a fan base to mitigate negative public comments and bolster positive consumer opinions that would impact our brand.  We leveraged sponsored campaigns on this channel (Facebook) that were tied to the page and tracked click-throughs and sales via web analytics …”  and so on.

At the end of the day, it’s all about ROI.  Plain and simple.  Did your Facebook, Twitter, LinkedIn, Tumblr, etc. create gains on its own or was it part of a marketing mix that worked in unison from a strategic perspective to deliver gains?  The person signing checks or giving you a budget doesn’t care about fans, followers, comments, and so on … they are concerned with your strategy and its ultimate impact on revenue.  Positioning social media as a progressive and innovative component of your overall strategy makes you look like a rockstar – if, and only if, that strategy, as a whole, actually delivers something quantifiable like revenues, hires, etc.

Related Articles

• HOW TO: Calculate the ROI of Your Social Media Campaign (mashable.com)

Sales vs. Marketing – An MBA Opinion (Part 1)

The old adage still rings true at most organizations – sales and marketing do not get along.  In fact, most organizations fail to acknowledge (outside of quotas) that the sales team is ultimately responsible for revenue and unknowingly pit Marketing against Sales and vice versa.  In my opinion, ALL functions of the organization should be aligned to enable revenue growth. Too often, leadership fails the sales organization in properly aligning corporate resources and departments to enable the best performance of the sales organization.  Simply purchasing email lists, attending trade shows, etc. is NOT properly aligning marketing with sales.  Both departments should work in tandem towards revenue attainment.  If marketing, customer support, development, etc. do not have “skin in the game” then leadership has failed to enable a sales team that can deliver revenue.

The root cause of this, in my opinion, is the failure of business schools to provide sales theory and practice to MBA students (heck, even Business Undergrads).  All the marketing theory, product management, business analysis, financial modeling, etc. you learn in B-School means absolutely nothing if revenue isn’t ultimately generated.  There is definitely an innate skill set component to sales that cannot be taught – but, without a proper introduction or understanding of basic sales methodologies in an MBA program there is never an opportunity to understand the importance (and mechanics) of properly aligning an organization for revenue growth or attainment.  And the net result is almost daily conversations like this:

Related Articles

• Does Sales Care About Alignment with Martketing? (customerthink.com)
• Sales and Marketing Alignment (demandmetric.com)
• Aberdeen proves that Sales and Marketing Alignment pays off… (customerthink.com)
• Six Best-Practices to Improve Sales and Marketing Alignment (marketingprofs.com)

Recruiting Is Marketing

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On November 17th I’ll be facilitating a roundtable discussion for work at HealthPartners in Minneapolis.  “Recruiting IS Marketing” is the theme for the event and I’m excited to bring the best of marketing and recruiting practices together as well as learn what other major employers in the Twin Cities are up to with their Talent Marketing efforts.

I’m planning on introducing basic concepts like consumer behavior, marketing management, etc. courtesy of my MBA coursework at St. Thomas and how each of them is vital for organizations to leverage moving into 2011 and 2012.  We are fast approaching (believe it or not) a very significant shortage of skilled talent as our economy continues a shift from an industrial base to a knowledge base. The battle lines are being drawn …

Any major marketing organization, like a big box retailer, is in the midst of final preparations for Q4 business (their version of the battle line).  They’ve spent the past 12 months (since the end of the prior Holiday season) leveraging marketing practices to understand, engage, influence, and drive consumer purchasing behaviors.  They’ve built loyal followings and preliminary engagements via social media, have a presence on search engines, have optimized their advertising channels, invigorated their websites, and prepped their operations and processes as part of their execution strategy.  So, why am I talking about retailers and marketing?

Because, recruiting IS marketing!

Talent Acquisition / Retention should be in the business of executing an organizations overall business level strategy.  It is the Human Capital of an organization in an ever increasing global knowledge based economy that enables success or leads to failure.  Recruiting organizations are far too often leveraging antiquated methodologies when it comes to acquiring talent for their companies.  Bridging the gap between their B2C or B2B marketing efforts with their recruiting efforts should be a primary goal for Talent Acquisition in preparation for the impending shortage of skilled talent. A synergy between corporate marketing and human resources creates organizational efficiencies and drives additional value (and results) for both departments.  After all, job candidates are customers and customers are job candidates.

The battle lines are being drawn and plans are being made … the decisions that are made in the coming months will determine who gets the sale (or candidate) and who doesn’t in 2011 and 2012.

Related Articles

• Why Don’t More MBAs Go Into Sales? (willprice.blogspot.com)

The Shift Has Hit The Fan (Atlanta Style)

I’m looking forward to speaking at SHRM Atlanta’s Annual Conference in less than 2 weeks!  I’ll be presenting an updated version of “The Shift Has Hit The Fan”  which details a variety of significant shifts (organizational, workforce planning, human capital acquisition) that have occurred specifically in the field of Human Resources over the past couple of years and where the shifts will continue to occur in 2011 and beyond. Click the picture to check out the rest of the agenda and to see who else is speaking.

 

Related Articles

• The SHIFT has hit the fan (thehumanracehorses.com)