Know the 6 Steps in Cost/Benefit Analysis

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We all know we should make an investment when the benefits outweigh the costs, but few people understand what really goes into the analysis. HBR newsletters Know the 6 Steps in Cost/Benefit Analysis Management Tip of the DayHere is another valuable Management Tip of the Day from Harvard Business Review. To sign up for a free subscription to any/all HBR newsletters, please click here.

Alternative Development Best Practice 4 – Common Cost and Value Identifiers

Strategy Driven

Beginning with the end in mind, it is important for those developing business cases for the organization’s various ongoing operations and proposed initiative alternatives to do so in such a way that leaders can compare the cost and benefits of the proposed activities. Therefore, business case developers should use a common, pre-established set of cost and benefits identification standards.

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How to Make the Business Case for Change

Lead Change Blog

Anticipate the question “How much will this cost?” Identify potential funding sources for both upfront and ongoing costs. If future cost savings will fund the initiative, show the payback calculation. Provide a cost-benefit analysis. Include non-financial costs and benefits along with the financial ones. Leaders are naturally suspect of proposals that include all benefits without acknowledging the potential for failure or setbacks.

Competence, Commitment, and Character

Lead Change Blog

If the greater good couldn’t be quantified in a cost benefit analysis, it wasn’t important. “Cash is kind” was the CFO’s favorite go-to line when vetoing spending requests. The CEO always agreed. Therefore, over time, “make money” became the company’s informal mantra. Over time, company culture changed too. Ethical corners were cut. Legal lines were crossed. Compliance became the norm, as did cutthroat competition.

Farsighted: How We Make the Decisions That Matter the Most

Leading Blog

What’s best for me or what’s best for the greater good or some other cost-benefit analysis. L IFE GIVES US CHOICES, and we make decisions. Some choices are easy like “Should I get vanilla or chocolate ice cream?” Most of our decisions are like this, and the consequences aren’t life-changing. Most books on decision-making describe these kinds of intuitive, gut-reaction decisions. But not all decisions are of this type.

When Training and Coaching Fail

Lead Change Blog

Because she is relatively new to the organization, you are inclined to give her the benefit of the doubt. Instead of presenting a cost-benefit analysis to Sally, clearly spelling out that she is costing the organization more than the value she is delivering, they transfer her from team to team or adjust her role, somehow hoping for better results.

The Leader as Witness

Lead Change Blog

If you did a cost-benefit analysis on some of the items on our shelves, you’d see the demand is way too low to make these items profitable,” says owner Gary Meschi. My mother is north of 100 years old and still active. She resides in an assisted living facility in a tiny town in South Georgia.

Ethics Is Serious Business

Great Leadership By Dan

They require careful analysis, not gut feeling or simplistic platitudes. When does cost saving become worker exploitation? Gioia supported Ford’s decision at the time, based on a plausible cost-benefit analysis. Yet the flaws in Ford’s analysis are immediately evident to someone properly trained in ethical reasoning. Training in ethical analysis can play a key role in developing ethical leadership.

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Intangible Loss of Outsourced Innovation

Mills Scofield

I’ve wondered about the cost-benefit equation of in vs. outsourcing for a while. Most cost-benefit analysis focuses on tangibles: lower labor rates, higher freight, etc. Are 2 nd and 3 rd order effects accounted for in the equation: benefits of training and professional/career development, adjacent businesses in manufacturing or services, other opportunities? Today’s New York Times front page features “ How U.S.

Communicating at All Levels of the Organization | Survive Your.

Survive Your Promotion

Here are some focus points for each group: CEO – Focus on business benefits and competitive advantage. If you are proposing a new initiative or requesting approval for training or other tools for your team, the CEO will want to know how it fits in with the vision/mission of the organization and how it benefits the company as a whole. CFO – Three words… cost benefit analysis. Survive Your Promotion!

Take It, Leave It, or Change It

The Recovering Engineer

The decision was to do a “cost-benefit analysis&# of our new situation. do your “cost-benefit analysis&# and choose one of these options: Take It Accept the change with all of its good and bad components, and realize that it is your choice to stay.

7 Ways to Leverage Your Power at Work

Marshall Goldsmith

Don’t assume that executives can automatically ‘make the connection’ between the benefit to your unit and the benefit to the larger corporation. 4) Present a realistic cost-benefit analysis of your ideas–don’t just sell benefits. Be prepared to have a realistic discussion of the costs of your idea. Power is an interesting concept when leading and working within organizations. Power is not always just as it appears on the organizational chart!

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Bad Boss Blues « Survive Your Promotion!

Survive Your Promotion

I create an in depth cost benefit analysis and make sure I run the presentation by another finance person before I send it off to the big chief. the benefit of the doubt and not asking for perfection. Survive Your Promotion!

Self-Confidence for Leaders

Marshall Goldsmith

The best that you can do as a leader is to gather all of the information that you can (in a timely manner), do a cost-benefit analysis of potential options, use your best judgment. I was recently teaching in a seminar for MBA students at the University of California at Berkeley's Haas School of Business. A young second-year student seemed anxious to talk with me. He finally asked: "I have read your book, What Got You Here Won't Get You There.

HR Cost Cutting Measures to Trim the Fluff

HR Digest

Cutting costs is the oft-repeated phrase that companies are using to meet the downturn in the economy and the declining revenues and sales. For most, cost-cutting translates to job cuts in the organization. In a bid to cut costs, organizations tend to get rid of high salaried employees or those who are perceived as high maintenance. Research has shown that new talent costs more to train and onboard. Do away with unnecessary costs.

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5 Leadership Signals that Turn Culture into Advantage

Skip Prichard

Again, very costly in the long run. We try to help leaders make a very rational cost/benefit analysis about what clinging to the raft is costing them. Your readers might already have experience with fishbone diagrams as a tool for analysis and continuous improvement. The more candid and self-critical you are, the more helpful the resulting analysis will be. Take your first cut at the analysis, and then invite colleagues and employees to weigh in.

Why Businesses Fail | N2Growth Blog

N2Growth Blog

Show me someone who hasn’t made a bad decision and I’ll show you someone who is either not being honest, or someone who avoids decisioning at all costs, which by the way, constitutes a bad decision. Information is therefore derived from a collection of processed data where context and meaning have been added to disparate facts which allow for a more thorough analysis. Is the input being provided for the benefit of the source or the benefit of the enterprise?

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Ideas Don't Equal Innovation | N2Growth Blog

N2Growth Blog

Not only do raw ideas have little intrinsic value, but they are often very costly. My advice to you is not to let your business get caught up in embracing random ideas – at least not without some initial analysis being conducted to determine the likelihood of success. Failed initiatives are costly at several levels. Assess : Put the idea through a risk/reward and cost/benefit analysis. mikemyatt: RT @thinkBIG_blog: Cheap always costs you mo.

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Influencing Up

Marshall Goldsmith

Don't assume that executives can automatically 'make the connection' between the benefit to your unit and the benefit to the larger corporation. Present a realistic cost-benefit analysis of your ideas--don't just sell benefits. Be prepared to have a realistic discussion of the costs of your idea. Such action ultimately benefits your company, your customers, your co-worker and yourself.

Don’t Talk Yourself Out of Trying a Second Career

Harvard Business

Since they are starting “late,” they believe they should do a cost benefit analysis to see if their reorientation is “worth it.” If you only included financial costs and benefits, your analysis is flawed. You need to also include such intangible benefits as pride in your work, personal growth, less stress, opportunities for advancement and social interaction.

Air Pollution Is Making Office Workers Less Productive

Harvard Business

For policy makers, the evidence changes the cost-benefit analysis of environmental regulation and suggests that prioritizing industrial expansion over environmental protection may actually undermine economic growth. Indeed, a quick back-of-the-envelope calculation suggests that for Shanghai, air pollution is costing its service sector billions of dollars each year in lost productivity.

Just How Bad Is Business Travel for Your Health? Here’s the Data.

Harvard Business

Physical, behavioral and mental health issues such as obesity, hypertension, smoking, depression, anxiety, poor sleep, and alcohol dependence can create costs for employers through higher medical claims, reduced employee productivity and performance, absenteeism, presenteeism, and short-term disability. It will continue to be an avenue of professional advancement, and the opportunity to travel is often touted by companies as a benefit in their recruitment of talent.

What to Do If You Catch Your Boss in a Lie

Harvard Business

Do a cost/benefit analysis. Focus on the benefits of developing the skill, not on your boss’s wrongdoings. Six months ago, at your request, your boss agreed to put your name forward for a new position that works directly with the CEO. Weeks went by, and you heard nothing. Then someone else got the job. When you asked your boss about it, he gave a long, confusing explanation for why the CEO considered you a strong candidate but “had to go another way.”

How to Beat Procrastination

Harvard Business

That’s because it’s easier for our brains to process concrete rather than abstract things , and the immediate hassle is very tangible compared with those unknowable, uncertain future benefits. It’s all about rebalancing the cost-benefit analysis: make the benefits of action feel bigger, and the costs of action feel smaller. To make the benefits of action feel bigger and more real: Visualize how great it will be to get it done.

A Better Metric for the Value of a Worker Training Program

Harvard Business

That lack of knowledge is costly. But according to the World Bank , only 30% of youth employment programs are successful, with many of those offering only marginal benefit. Many measure cost per student. These metrics are useful but miss the big picture, in part because they mistake a program’s cost for its value. Cost per student is good to know, but it doesn’t mean much if students don’t succeed in the workplace.

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Effectively Influencing Decision Makers: Ensuring That Your Knowledge Makes a Difference

Marshall Goldsmith

Don’t assume that executives can automatically “make the connection” between the benefit to your unit and the benefit to the larger corporation. Do a thorough analysis of ideas before “challenging the system”. Present a realistic “cost-benefitanalysis of your ideas – don’t just sell benefits. Be prepared to have a realistic discussion of the costs of your idea. Think about how your knowledge can potentially benefit your organization.

An Entrepreneurial Society Needs an Entrepreneurial State

Harvard Business

Static cost-benefit analysis cannot capture the transformative impact of strategic, market-creating public investments. Innovation-led growth can square a circle that is challenging modern capitalism: how to generate sustained and sustainable economic growth, built on high-value, well-paying jobs. This is at the core of entrepreneurial societies, and it is a good objective. The problem is how to get there. Although many countries have set the goal, few have achieved it.

7 Myths About Coming Out at Work

Harvard Business

Research shows that coming out increases job satisfaction , intention to stay , and emotional support from co-workers, whereas staying “in the closet” has costs — both for the individual and the company. Coming out is a constant cost-benefit analysis and requires weighing different risks. hh5800/Getty Images. More and more big businesses are providing workplace protections for LGBTIQ+ (lesbian, gay, bisexual, transgender, intersex and queer) people.

Followership : Blog | Executive Coaching | CO2 Partners


Wars are usually won by armies with the best soldiers, teams with the best athletes usually win the most games, and companies with the best employees usually outperform their competitors, so it is to a leader’s benefit to surround him or herself with the best followers. Evolutionary psychology hypothesizes that people follow because the benefits of doing so outweigh the costs of going it alone or fighting to become the leader of a group.

One Year After India Killed Off Cash, Here’s What Other Countries Should Learn from It

Harvard Business

In light of this, every economic policy ought to be preceded by some essential process elements: a sound theory; a rationale for why the underlying assumptions are valid, and the evidence for those assumptions; and cost-benefit analyses, including accounting for the systemic effects, unintended consequences, and learnings from similar actions elsewhere. A fact-based cost-benefit analysis is essential. Mint/Getty Images.

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How Freelancers Can Make Sure They Get Paid on Time

Harvard Business

” They “help you prepare taxes, make sure your costs are under control, and ensure your business is structured properly.” “Mostly it’s a cost-benefit analysis” that involves calculating the amount that’s owed you, your odds of success, and the hassle of hiring — and paying for — a lawyer, says Pearce. One of the most stressful things about being self-employed is managing your cash flow.

Networking for Introverts

Harvard Business Review

Every networking event should be subjected to a cost-benefit analysis: if you weren’t here, what would you be doing, instead? Running the numbers is particularly important for introverts, because even if the alternative isn’t something overtly productive like writing a new business proposal, the cost side of the equation can be steep: you may be exhausting yourself emotionally for hours or days afterward.

How to Avoid Collaboration Fatigue

Harvard Business Review

And it’s easy to assume that your team will know that its objective is to produce the highest quality solution at the lowest possible cost in the shortest amount of time. For example, when your team inevitably has to choose between the lowest cost solution and the speed-enhancing solution for the supply chain, which objective wins? These decisions require a shared strategic direction, not an on-demand cost/benefit analysis.

People Skills

Marshall Goldsmith

We believe they’re smart and something else, and we give them the benefit of the doubt on skill. If we do a “cost benefit analysis,” we conclude that our relationship with our partner or friend is far more important than winning an argument about where to eat.

Don't Let a Spreadsheet Decide Where You Locate Your Business

Harvard Business Review

Michael Porter's article in the March issue of HBR on choosing the United States makes the point that in choosing where to locate even high value-adding business activities, many companies don't do a very thorough costs/benefits analysis. They tend to focus on the obvious and most easily measured benefits (lower wage costs, tax rates, etc.) and on the cost side struggle to even identify half of the items, especially those incurred in the future.

Should You Offer Different Prices for Cash and Credit?

Harvard Business Review

Since I pay my bill in full each month, the price for these benefits is reasonable — an annual $40 fee. While merchants are quick to grumble about the 2-3% fee they incur for the privilege of accepting credit cards, they reap strong benefits. While the outcome of a cost-benefit analysis on offering lower cash (vs. This is part of the HBR Insight Center Marketing That Works. I use my credit card to pay for everything.

People Skills

Marshall Goldsmith

We believe they're smart and something else, and we give them the benefit of the doubt on skill. If we do a 'cost benefit analysis,' we conclude that our relationship with our partner or friend is far more important than winning an argument about where to eat. The reason I devote so much energy to identifying interpersonal challenges in successful people is because the higher you go, the more your problems are behavioral.

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Teaching Teenagers to Develop Their Emotional Intelligence

Harvard Business Review

Their rate of psychopathology is five times that of 75 years ago, according to one meta-analysis. Nobel Laureate James Heckman writes that investment in the education of children’s “non-cognitive” skills — like motivation, perseverance, and self-control — is a cost-effective approach to increasing the quality and productivity of the workforce. If the U.S.

How to Do Walking Meetings Right

Harvard Business Review

Merchant traded her coffee-shop meetings for walking meetings and immediately saw the benefits. Based on this, we undertook an exploratory study of the benefits associated with walking. However, look at these findings through the lens of a cost-benefit analysis. The costs associated with regularly participating in walking meetings are next to nil. Just how do walking meetings produce these positive benefits in the workplace?

The Skills Gap That's Slowing Down Your Career

Harvard Business Review

If your speed bump is a lack of the right skills, it helps to first do a quick cost/benefit analysis to see if investing in an upgrade will be worth it. Career speed bumps (much like their counterparts in the road ) can take you by surprise. If you don't slow down to navigate and learn from them, they can trip you up again and again. Take not having the right credentials, one common career speed bump.

Learning from Microfinance's Woes

Harvard Business Review

The third benefit is that microfinance represents a new industry that generates jobs and services. To make a judgment, a comparative cost-benefit analysis would be necessary. And we couldn't throw in the benefit of poverty-reduction as a mitigating factor since that doesn't seem to be happening. A few weeks ago, I attended a lecture about microfinance, and got sucker-punched.

Why Excom Meetings Are the Wrong Place to Make Decisions

Harvard Business Review

Such non-interventionism does not demonstrate a lack of courage, as some (mostly non-executives) would claim, but rather results from a rational cost-benefit analysis. It’s an age-old complaint: executive team meetings are “a waste of time.” ” Probe further and you’ll hear they’re “boring,” “serial one-on-ones with the CEO,” and a place where “decisions are avoided — not made.”

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Business Resilience Comes from Working with Nature

Harvard Business Review

But there are more subtle benefits: forests also clean our water and coastal wetlands and reefs provide natural defense from storms and floods. So a city or company looking to safeguard its water supply, for example, could invest in protecting or restoring lands instead of building a new water treatment plant (which is exactly what the New York City did when it bought land in the Catskill Mountains in 1997 — this initiative avoided up to $8 billion in costs for a new filtration facility?and