Comments on: Definition of payback period http://tynerblain.com/blog/2006/03/19/definition-of-payback-period/ Software product success. Sun, 12 Feb 2012 19:10:25 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Michael http://tynerblain.com/blog/2006/03/19/definition-of-payback-period/comment-page-1/#comment-498 Michael Tue, 21 Mar 2006 06:58:35 +0000 http://tynerblain.com/blog/2006/03/19/definition-of-payback-period/#comment-498 Scott, I believe payback period is almost always the wrong metric to use. It may have some value for those focused on very short-term results, but that's about it. A company should be run for the long run, and so should the projects funded. NPV, IRR, ROI are all good measures - but not payback period. In my opinion, the only time it should be even looked at is (like you said) as a tie-breaker for projects with the same ROI or NPV. - Michael http://michael.HighTechProductManagement.com/ Scott,

I believe payback period is almost always the wrong metric to use. It may have some value for those focused on very short-term results, but that’s about it.

A company should be run for the long run, and so should the projects funded. NPV, IRR, ROI are all good measures – but not payback period. In my opinion, the only time it should be even looked at is (like you said) as a tie-breaker for projects with the same ROI or NPV.

- Michael
http://michael.HighTechProductManagement.com/

]]> By: Scott Sehlhorst http://tynerblain.com/blog/2006/03/19/definition-of-payback-period/comment-page-1/#comment-482 Scott Sehlhorst Mon, 20 Mar 2006 16:42:47 +0000 http://tynerblain.com/blog/2006/03/19/definition-of-payback-period/#comment-482 Here's a comment I just received in email. Thanks for sending!: Great idea to add the payback period. I've seen it used so many more times than ROI, especially at the mid-management level. The mid managers that I've worked with have very short term vision. They would choose measures that make them look good in a short period of time and that are easy to demonstate. After all, that's what goes on the annual review... Here’s a comment I just received in email. Thanks for sending!:

Great idea to add the payback period. I’ve seen it used so many more times than ROI, especially at the mid-management level. The mid managers that I’ve worked with have very short term vision. They would choose measures that make them look good in a short period of time and that are easy to demonstate. After all, that’s what goes on the annual review…

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