Friday, June 2

Big Skill: Cost-Benefit Analysis

One Big Skill is Cost-Benefit Analysis.

Just because something is good, doesn't mean that we should do it.

Relevant questions to be considered are,

  • How much will it cost?
  • How much of the possible benefit will be realized?
  • What is the range of possible costs, and what makes the costs increase or decrease?
  • At what cost will it no longer be worth it?
  • How will we know, once we are into it, when to back off or when to "stay the course"?
  • What other things could we do with the resources that might be better?

Likewise, just because we can do something to get rid of something that is bad, doesn't mean we should do it. The same questions apply.

One should be doing cost-benefit analysis across multiple categories every day for themselves personally, as well as for every project, what their work group is doing, and what their organization and even industry is doing.

There are at least two traps with Cost Benefit Analysis.

Plenty of so-called leaders try to circumnavigate the cost-benefit analysis, and present activities as things that


Others, typically staffers, often misuse and subvert cost-benefit analysis as an excuse

  • not to do something that makes sense to do; to support the easy, seemingly no-risk status quo (one classic obstructionist staff scam is to apply a much higher standard on justifying new activities as justifying existing activities (including their own pay));
  • to give themselves a reason to let something fail rather than do the hard work necessary for success.

So given the importance of this Big Skill, is anyone formally spreading that knowledge? If so, how? And more importantly, if not, why not?

1 comment:

Bruce Hokin said...

I agree Clark, Cost Benefit Analysis is a REALLY big skill which can be and should be used in EVERY company, corporation, not for profit and charity in the world. If one is able to implement a change that creates more net benefits than the "do nothing" option then the company benefits, the community benefits, the country benefits and the WHOLE WORLD improves!

However, just because some staff members do not treat Cost Benefit with the respect it deserves does not render it any less effective.

I want to spread the message globally that this is a simple yet powerful method to improve company performance and increase shareholder value.

I am spreading this knowledge from my website