Companies have several standard tools to calculate the value of a course of action. Return on investment, internal rate of return and payback period are all ways of quantifying the potential gains or losses of investing in a new venture, process or system.
Unfortunately, there are no tools for doing the same thing on a personal level.
How do you calculate the ROI of a career move? Does a new job have a net present value? You can certainly look at choosing one position over another as an investment, and the compensation as the return.
But does that tell the whole story? You probably need to look at the term as well. If you hold the job for three years, where will you be at the end of that time? The return may have been high, but the capital value of your investment may not have appreciated. That is, you may not be better-suited for the next job up the ladder.
Personal growth should certainly be considered as one form of return on investment in your career. There are others:
- Career field.
- Working conditions.
- Opportunities for learning.
- Sense of accomplishment.
Take this example: Compensation plans in new ventures often trade off current income for future capital accumulation. You're weighing the value of the total compensation package, salary plus potential gains. You can compare offers from different companies, but the comparisons are not direct: You must also make a judgment about the company's ability to deliver on its promise of potential gains. You not only have to know the company; you also have to know yourself. If the position makes you largely responsible for creating that equity, are you up to the job? It is a decision you have to make as dispassionately as possible, because your personal ROI hangs in the balance.
Compensation is pretty straightforward, while other factors fall into a more gray area. Working conditions are a prime example: What's the net present value of your leisure time? A new venture could require your attention 24 hours a day. If you assign high value to activities others might define as "leisure," whether it's writing a book or coaching your daughter's soccer team, they must be factored into your calculations.
Location is a similar issue. Where will the job take you -- and your family? Is that where you want to be? Location can have a very positive effect on personal ROI. A new company may move you to a great place where a lot is happening, a market where you will be in great demand. But it may also take you a long way from friends and family, the people and places that have defined your interests and activities.
These considerations obviously go far beyond the 9-to-5 and make calculating a personal ROI a very complex, subjective effort. But there's one further complexity: The factors involved will change over time. You will change. Your position will change. Your goals will change. Like any other investment, you cannot leave your career unmanaged. You must revisit your decisions on a regular basis. Recalculate your personal ROI every six months. It will help keep your major asset -- yourself -- out of nonperforming investments and producing the yield you expect.Articles in This Feature: