You may or may not know this about me, but I have a master’s degree in business. I went to graduate school full-time soon after my daughter was born. It was a great experience for the two of us. I was able to spend a lot of time with her while at the same time continuing my own personal growth.
So what does a Master’s in Business Administration teach you? Trust me, I learned a lot during my two years in graduate school, but one important aspect of business school is acronyms. The degree itself (MBA) is more known for the acronym than the actual words they represent. In business school you learn about IPOs (initial public offerings), COGS (cost of goods sold), NPV (net present value), PE (price-to-earnings ratio) and more. One of the more well-known business acronyms is the ROI. Return on Investment.
Here’s the formula:
It’s an equation that’s used to assess the amount of revenue that will be generated for the amount of investment (cash) that is required.
This ROI formula inspired me to develop my own. I call it: ROE or Return on Effort. Effort is what I view as my contribution in time and enthusiasm into a project. And time is a little like cash – there seems to be only finite amounts of it available. So each project or opportunity requires a little bit of evaluation on my part. What is my formula for ROE? It looks like this:
Here’s some information to help you calculate it for yourself. When you find yourself considering taking on a new project or task, begin by getting out a pen and paper. Draw a line horizontally across the middle of the page and then another line vertically dividing the top section in half. You can also write the words “Return,” “ON” and “Effort” in the appropriate boxes. See the illustration below for guidance.
- Return: To calculate ROE, the first thing you need to ask yourself is what’s the return. This is a subjective measure; only you can determine what qualifies as a return. It may be money or it may be doing something that helps someone else. For example, a neighbor girl asked you to mentor her in a special class. The return would be your gratification in encouraging a young girl who could use some support outside of her family. Or maybe you’ve been invited to serve on a community task force on preserving green space. This is a volunteer position so there’s no financial rewards, but the networking and community contribution return is great! Or maybe you have been invited to write an article about how you manage your time between being a parent, employee, and blogger. The magazine is willing to pay you $1,000 and you’ll receive national recognition for your contribution.
- On: I view the “on” in this formula as: “on top of everything else you’re doing.” What do you have going on that you’re committed to that is already taking time in your life? There can seem to be no end to the great opportunities that you can get involved in, but what reserve do you have available to you now? For example, mentoring the neighbor girl may be difficult if you have a child that has been recently diagnosed with a chronic disease and an ailing parent that is requiring more of your time. Or volunteering for a community task force may not be possible because you’ve recently been assigned to a new project at work that is expected to be very demanding. And finally, writing that article might be prestigious, but you just added a new member to your family and you were hoping for some quality family time while on maternity/paternity leave. Your idea of quality time does not include stressing over an editorial deadline.
- Effort: Here’s the part where you need to gauge what you think will actually be required of you. What does your involvement entail? Mentoring the neighbor girl will require 1 hour per week for 3 months. The community task force will set you back 2 hours a month for the next year. And that article? You estimate it will take about 2 hours a day for the next month in order to meet the deadline. Your time is one measure of the effort that is needed for this project, but what else may be involved? Will you be contributing ideas that will require a lot of creative energy from you? Will you need to network to help promote the work you’re involved in? Will this community task force ask that you give a presentation to various community groups? Basically, what does it take for you to do a good job?
The goal in assessing ROE is to help us stay within the realms of reason when committing our time and energy. It’s obviously not an exact formula but one that we can use to maintain life balance. It’s like the gas gauge in your car – you monitor that so you know when it’s time to fill up. I want to know I can do my best when I commit to something. That means saying the nasty “no” to some opportunities that come my way. However, I don’t want to say “no” so much that I end up with nothing on my plate. (That would be awful, eh?) ROE has been a great tool to help me spend my time wisely. I hope you find it helpful too!