“Our CFO is asking for the ROI for each new marketing hire,” shared an inquisitive 3X CMO from a SaaS startup. “This is a new one for me, and I’d welcome your formulas,” the CMO added. After my knee-jerk outrage, I had questions.

Can the ROI of Every Employee Be Calculated?

In theory, yes. You can create a formula that guestimates the impact that employee’s role will have on pipeline generation, close rates, retention rates, employee recruitment yield, and efficiencies gained by having a lower-cost employee do the work (versus the CMO). The formula looks like this: (Revenue impact + efficiency savings - employee cost) / by (employee cost) x 100.

Is It Really That Simple?

Of course not. Let’s say that the new employee is a content creator. And that content plays a number of roles in the acquisition process. For example, the content could result in an increase in organic website traffic, some of which become sales-qualified opportunities. If you have sophisticated attribution tracking, perhaps you can credit some portion of the projected value of that SQL to that content. Perhaps.

But this is only part of the value of this employee. What if they come up with the insight that drives an entire campaign that yields 5x ROI? How much do you apportion to that employee versus the entire team? How do you put value on a great collaborator who inspires others to do their best work? What if they understand the customer and market so well they contribute to a product innovation?

Where does “opportunity cost” fit into this calculation? In other words, what if you don’t make this hire and the competition kicks your butt with their content? And what about lifetime value? Won't a good employee create more value over time? Yeah, it’s feeling more absurd by the second.

So, Is This an Absurd Request by the CFO?

My first reaction was, “This is insanity.” How can CMOs possibly calculate the ROI for every employee in their department when they can barely calculate the ROI of their entire marketing budget? The CMOs in this Huddle were less chagrined than I and offered helpful suggestions on how to reply to this CFO. Their advice came down to speaking the language of the CFO. I’ll explain.

Learn to Speak “Spreadsheet”

CFOs live in spreadsheets. As Peter Finter, CMO of KX, shared on a recent episode of CMO Huddles Studio, “You need to know CFOs love language–spreadsheets.” “Show them how marketing will impact revenue on a predictable basis, and you're speaking their language,” he added. Admittedly, this doesn’t address the ROI per employee question, but it does provide an important place to start.

Every CMO needs to have a spreadsheet that projects marketing’s contribution to the business.

Final Thought

Whether or not you can precisely calculate the ROI for each employee, it is not a useless exercise. It will force you to consider where and how your department is making the greatest impact and allocate your investments accordingly.

Written by Drew Neisser