Return on Investment


Four Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part III – Commensurability

COMMENSURABILITY Assuming that we have obtained valid A-ROI estimates for multiple investments, there remain issues to be considered and addressed when using those results for investment comparisons and decisions. The issues center on the extent to which those different A-ROI estimates can be compared to gauge relative cost-effectiveness and, if the answer is yes, how to compare them properly. First, there is the issue of different outcome measures. For example, A-ROI is calculated for three investments that are intended to increase reading achievement, reduce suspension, and improve sense of belonging, respectively. It is apparently inappropriate to compare the results directly […]


Four Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part II – Uncertainty

In the first post of this series, I discussed validity of A-ROI as a measure of cost-effectiveness. In this post, I focus on uncertainty embedded in A-ROI results. In the business world, ROI is largely treated as an accounting measure with certainty, but the certainty only applies to the accounting period. That is, for a three-year investment, the ROI result is a both accurate and precise representation of its profitability over those three years only. Consumers of ROI information are admonished about risks when applying it to the future or other contexts. Generally, little is provided about those risks other […]


Four Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part I – Validity

INTRODUCTION Return on investment (ROI) is a concept that originated in the business world in the early twentieth century. According to the Hagley Museum and Library, the concept and the formula were first developed in 1914 by Donaldson Brown, the Assistant Treasurer of the DuPont Company, for monitoring business performance as the company was grappling with diversifying from explosives to lacquers, Pyralin plastics and dyes[1]. ROI was quickly adopted by the DuPont Company as their primary performance measure for all of its departments and later required for all capital appropriations and projects submitted for approval by the company’s senior management. […]