Definitions

The term return on investment is often misused, sometimes intentionally. In some situations, a broad definition for ROI includes any benefit from the program. In these situations, ROI is a vague concept in which even subjective data linked to a program are included in the concept of the return. In this book, the return on investment is more precise and is meant to represent an actual value developed by comparing program costs to benefits. The two most common measures are the cost/benefit ratio and the ROI formula. Both are presented along with other approaches that calculate the return.

For many years, leadership development practitioners and researchers have sought to calculate the actual return on the investment for leadership development. If leadership development is considered an investment, not an expense, it is appropriate to place the leadership development investment in the same funding mechanism as other investments, such as the investment in equipment and facilities. Although these other...