Social Media Strategy: Let's Stop Talking ROI Already

Social Media Strategy: Let's Stop Talking ROI Already

There's been a lot of talk lately about ROI as it pertains to Social Media Strategy with regard to recruiting efforts. Most notable is a great post by Michael Long, "The Red Recruiter". Michael does a bang-em-up job of aggregating ROI-related posts and tossing in his own analysis.

And while I've migrated into Network Analysis and Social Business Design, a big part of my heart still lies in Talent Acquisition. That's why I don't like seeing the Recruiting Industry having the wrong discussion.

Here's what I mean. The Recruitosphere needs to look out for something I call . . .

"The ROI Monster"

I've noticed many in our industry (as well as the marketing industry) opine about ROI - it's a constant source of debate. However, in the mind of a finance professional (like the CFO you're likely pitching), ROI is not only a waste of time, it's a legitimacy-killer. Here's why:

ROI only accounts for the "what" (i.e. what will we get back for the investment? [i.e. "return"])

What ROI doesn't account for is time and risk. Trust me, I wish life was as simple as ROI. It would have saved me hours of projects in business school, to say the least!

Time = how long will it take to get the "what" above?

Risk = how sure are we that we're going to get the "what" above?

In my humble opinion, the absolute worst thing a Recruiting Leader can do is walk into a financial meeting talking about ROI. If they do, they won't even get to 2nd base.

What I'd recommend is not even talking $$$ in terms of justification. It's an investment to achieve parity with the competition, regardless of ROI. Even speaking in terms of legitimate financial measures such as NPV and EVA isn't necessary. Because if you ignore engaging a Social Media Recruiting Strategy and your opponent doesn't, that's a recipe for death. Now that's the real risk you should be talking about!

I'll follow up soon with a post about how to sell Social Media Strategy. Here's a quick tip before the post comes out: Play a little game theory with the CFO. Simply pull the prisoner out of the "Prisoner's Dilemma" and insert a recruiter. You'll get your money . . . quick. You just have to shift the discussion from one of ROI (just the "what"), and start talking in terms of both time and risk as well.

P.S. It's good to see the Recruitosphere shift from the ridiculous, wasteful process of massive-friending that plagued our space in the earlier days of Social Media. We were the laughing stock then, but things are swinging back in our favor as we find our way. Now we just need to start selling the right way, which means leaving ROI at the door where it belongs.

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Comment by Joshua Letourneau on January 18, 2010 at 1:30pm
Maren, great thoughts. Here's probably a better explanation of where I'm trying to go:

ROI accounts for the "what" (i.e. "what do we expect to get back?") Unfortunately, it doesn't account for time (i.e. "how fast?") or risk ("how certain are we that we'll get the desired return?") In that way, ROI only tells part of the story, so most people who approve budgets don't like "expected ROI" because it's a limited measure.

However, even if we use better metrics that finance-execs like to see, we still may be missing something.

It's the risk of doing nothing (i.e. not putting in place a Social Media Recruiting Strategy). I say that because if our competitor does, and we do not, we are positioning ourselves at a stark disadvantage. So, the "return" may not only be economically specific. A strong majority of the return may be our ability to limit our competitor's ability to out-recruit us within critical talent pools. So while the "ROI" may only be $xyz, the "return" we see also manifests itself in other ways.

I'll follow up with a post soon with what I think is a better way to get budgeting approval :)
Comment by Randy Levinson on January 18, 2010 at 1:58pm
I really like what you are saying here. While you have not called it out specifically - you are touching on what those of us in the recruiting world know as students of human nature. What it may be hard for a CFO to grasp in terms of an ROI because you can’t always attach dollars and sense to what it is that speaks to people and helps them make big decisions.

What you are essentially saying is that because people are more likely to value your business if they can learn more about it by having more information accessible and therefore may be moved to make the decision to join your company or use your services, the ROI is there but somewhat intangible.

We can easily measure the ROI when we have in our ATS a field where we ask, “how did you hear about us?” and the candidate checks off one of a few choices (Friend, Newspaper, LinkedIn, Website). But in the current state of business this needs to be something where a candidate can check multiple fields or enter free text when the answer is almost “all of the above and more”. Interestingly enough this also may point us to the savvier candidate.

So I think it does go beyond, “we need to be there because the competition is there” I believe it is also about getting in front of people, saturating the staging area with good info that will garner candidates who have done the research, learned a great deal, and subsequently both energized their enthusiasm for the business and taken some of the mystery out of what it would be like to work there. All essential, yet challenging to measure, elements of finding the right candidate and getting them to take the job.
Comment by John Heaney on January 19, 2010 at 3:18pm
The problem with social media programs isn't that there's too much focus on ROI, but that there's not enough.

Assets are allocated to those projects likely to generate the greatest return to the company. There is always an internal struggle between engineering, production, operations, and sales & marketing for limited capital to pursue their desired projects. How does management decide which projects to fund? They examine the potential returns in either increased sales or reduced costs. You either deliver one or the other.

Marketing managers have tracked the effectiveness of their campaigns for decades. Not a single commercial, but a tv campaign. Not a single billboard impression, but the results of thousands of impressions. They include special phone numbers, email addresses, promotion codes and a variety of other elements solely to track the effectiveness of their campaigns.

Why would social media efforts be any different? Should you devote your time to Facebook, LinkedIn, Twitter or blogging? Which reaches your target audience most precisely? What happens when they read or receive your message? How do you convert your new and strengthened relationships into increased sales or reduced costs? What's your ROI?

Insisting that SM will produce results without any evidence won't convince a single CFO or CEO to fund your project. Showing them case studies of successful SM campaigns and demonstrating how you intend to pursue similar strategies to reach prospects, clients and industry influencers and track the effectiveness of your efforts will give you the ammo necessary to justify your proposal. Ignore the necessity for ROI at your peril.
Comment by Joshua Letourneau on January 19, 2010 at 4:21pm
John, I understand the point you're making. I'm not discounting it, but you may be overlooking what I'm suggesting here. Let me be more overt so there is no misunderstanding:

1. ROI is a weak metric. It's the laughing stock metric of the Finance world. If we're going to come to the table speaking ROI, we need to be prepared to get laughed out of the room. ROI doesn't account for time and risk, so unless the Finance Execs are so misguided that they don't care about time or risk as it relates to return, we better bring out the big guns. That means EVA (i.e. account for the cost of capital as well) and NPV (discounting projected returns back to net present value). My point: If we're going to talk finance, let's not come in with the weakest calculation as if it actually means anything.

2. There is a benefit that isn't quite as easy to project in a high-probability range. In addition, it's dependent on competitive counter-moves. For example, let's say we move forward with a Social Media Recruiting Strategy to achieve parity with the competition. Where is the ROI there? On paper, it would look like little to none . . . but in actuality, this is not the case. Again, ROI fails to tell the whole story. Now let's assume that we move forward with a Social Media Recruiting Strategy and the competition lags behind. On paper, perhaps ROI looks to be nothing more than reduction in Exec Search fees, yet if we look deeper, we may see we've weakened our competitors by hindering their own ability to recruit niche pockets of top talent. Again, ROI fails to tell the whole story.

Case Example: Let's say the IT Dept and Recruiting Dept each come to the table requesting $100k in revenue. For the sake of discussion, let's say the business leaders of each department only know ROI because it's the 'easiest' calculation. IT suggests an ROI of $250k to implement a new ERP, while Recruiting suggests an ROI of $200k in saved Exec Search fees. On the surface, the IT Dept would win out if all we looked at was ROI. In reality, however, the IT Dept investment may have a higher total-cost-of-ownership (training, additional customization, etc.), while the Recruiting Dept may have an indirect benefit extending beyond the initial savings in Exec Search fees. Let's say one of those key hires earns their way to the HiPo program and 5 years later, successfully leads the firm into a new sector . . . while the former ERP system now needs replacement as it falls in the 'legacy' category? If all we considered was ROI, we'd have made the wrong decision.

Ultimately, I think it's a misguided decision to make decisions exactly the way that the Marketing function does, because we're talking about Talent Acquisition . . . an endeavor much farther reaching than a new-customer acquisition program, an advertising campaign, etc. While I am a fan of decision theory, I hesitate to recommend our market uses a plug-and-play approach to reviewing investments. We need to dig deeper.

To conclude, I'm not saying ROI doesn't have some part in the conversation, but it's my recommendation to leave the 1st yr undergrad Finance metrics at home and come to the table with legitimacy. When you know what ROI is and means, you realize the futility of it since it only tells 1/3 of the story (i.e. the "what", ignoring time and risk). We can think deeper, meaning we need to take in the noise of the Marketing world trying to calculate ROI for their own needs . . . but keep in mind that our game isn't quite apples-to-apples.
Comment by Slouch on January 19, 2010 at 4:43pm
What do you mean we were the laughing stock. Who was laughing?
Comment by Joshua Letourneau on January 19, 2010 at 5:00pm
Jason, do you mean the comment that ROI "is the laughing stock metric of the Finance world"?

I say that because ROI is about the "what" (i.e. "What do expect our return to be?")
However, ROI doesn't account for time (i.e. "How long will it take?") or risk (i.e. "How sure are we that we are to generate the return?")

From a consulting standpoint, any Finance-related conversation I've ever had has had to extend beyond ROI. Also, graduate-level (business school) Finance doesn't involve ROI discussions beyond a quick mention. You take it a step farther, so in other words, if your financial justification is only ROI, you're at a stark disadvantage to other business units that are vying for the same capital.

In most companies, capital is a scarce resource (especially in today's economic climate), so we're well served to come to the table with a deeper justification than purely ROI.

Does this help clarify what I was trying to say?
Comment by John Heaney on January 19, 2010 at 5:01pm
I haven't yet met the CEO or CFO who is easily persuaded with tales of wishes and fantasies. And trying to support my request for a social media program with a Terminator-like prediction of a transformative future leader that may be hired if we execute my program is likely to get me terminated.

Determining ROI isn't a laughing stock metric in the corporate world. Calculating potential ROI demands that you create a strategic plan, consider alternatives and project likely actions and returns from your program. It compels you to define precisely your plan's objectives, put them down on paper and support them when challenged.

Simply saying that we need a social media program because our competitor has a social media program is absurd. What if their program is drains scarce marketing dollars without noticeable effect? Do we want to copy that?

If you want funding, you need to justify your program with more than intemperate claims that we've just gotta do something. What's your goal? To increase revenue or decrease costs? How will you do it? Who will be involved? How much time is necessary to invest? What technology platforms will we support? How will our program fit into our current operational structure? What do we want our conversational partners to do? How will our success be tracked and measured?

If you don't know the answers, you don't deserve the funding. Social media marketing is no different from any other marketing, it just uses new channels and has interactivity built-in. If you can't tell me how you intend to leverage the medium and generate a positive return you can always try again next quarter after you learn.
Comment by Slouch on January 19, 2010 at 5:03pm
Josh, I mean it in yoiur last parapgraph about the recruiting blogosphere:

It's good to see the Recruitosphere shift from the ridiculous, wasteful process of massive-friending that plagued our space in the earlier days of Social Media. We were the laughing stock then, but things are swinging back in our favor as we find our way. Now we just need to start selling the right way, which means leaving ROI at the door where it belongs.
Comment by Rich on January 19, 2010 at 5:08pm

You really have to define it correctly to make that case. If you do not define it right, then I suspect it wouldn't be very valuable. In terms of marketing, time would be part of the measurement three-fold: the value of time to produce, the value of the talent producing it, and duration of the impact.

Risk is part of the measurement too, but only in how it delivers outcomes.

That said, I guess I agree. If we define ROI as you do, then there is no value whatsoever. Fortunately, I define it differently.

All my best,
Comment by Joshua Letourneau on January 19, 2010 at 5:14pm
Oh, my bad - I got ya. Well, it wasn't just us - basically, Gen-Y got a bad wrap . . . and a lot of Gen-X. That includes myself - I was as guilty of massive over-friending as anyone else.

Probably the best illustration of this phenomenon making massive over-frienders a laughing stock was this video here. It's the old "Stop Talking. Start Connecting" commercial.

Ironically, though, this commercial seemed like a tipping point for many Recruiters I know. After seeing this and forwarding it around, most of the Recruiters I know decided to see massive over-friending for what it was . . . and they started getting serious trying to make something happen with social media.

I think we've come a long way. I'm not just saying this, either, but I believe RBC is a part of that progress we've all made collaboratively. Collectively, we are capable of much than than any one individual. To quote the book "Connected", collective intelligence is like a flock of birds starting to migrate - the individual birds themselves don't know where they're going, but together, a collective intelligence takes the birds to their destination. It's a pretty cool idea that opened my eyes about the benefits of community - it's not just benefit to us and our friends, it's that we benefit each other altogether by driving progress collectively.


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