Decision Making Tool: Cost/Benefit Analysis
The decision making tool to be discussed is a cost/benefit analysis. A cost/benefit analysis generally is used within management to generate solutions to problems and help teams decide what course of action is best based on a set of established criteria. The solutions developed as a result of a cost benefit analysis may or may not prove worthwhile; however they do allow management the opportunity to decide whether or not it is 'worth' their time to invest money and effort into solving or addressing a specific problem or proposition (Mind Tool, 2004).
Cost/Benefit analyses are widely used in many different fields, primarily as a means to determine whether or not change needs to be implemented. The technique generally requires that management decide what the value of a particular change may be or what value a change may add to an organization. It is one of the simplest organizational and decision making tools available for use.
The cost benefit analysis requires the decision maker to determine whether costs are a one time incursion or ongoing. Benefits are weighed against the costs over time. The decision maker can use a cost benefit analysis to calculate what that "payback" will be from implementing a change (Mind Tool, 2004).
Generally cost benefit analysis is used to help the decision maker project the risk associated with investment in a particular resource or change and promote efficient...
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