When Decision-Makers Argue That a Problem Doesn't Deserve to Be Addressed – Consider Potential Impacts
When decision-makers resist addressing a problem because the immediate cost of a solution seems equal to the benefit, extrapolate the issue across the entire portfolio to reveal potentially large cumulative losses. This shifts perspective from a narrow cost-benefit comparison to a broader, future-oriented analysis that can overcome resistance to change.
THE IDEA
When Decision‐Makers Argue That a Problem Doesn't Deserve to Be Addressed – Consider Potential Impacts
Distinguish an observed problem from a possible recurring one. Extrapolating the observed loss can help assess whether a remedy has value beyond the original case.
For example, Project X went $50,000 over budget against a total budget of $2.5 million (i.e. 2% over) because expenditure commitments weren't tracked. To solve this required, among other things, a cost tracking tool that would cost $50,000 to build. But management thought it was not worth implementing the change because the cost of developing the new tool and the benefit were the same.
However, we took the 2% overspend and asked the question; what if this issue was repeated across other projects? And we established that there were projects with a cumulative budget of $50 million. So, with a potential error of 2% across all the projects, this could mean we might save as much as $1 million (i.e. 2% of $50 million) for an investment of $50,000. In this light, the new tool to track commitments was recognised to be worthwhile, not least because it would also follow project commitments each year into the future.
When to use it
Project management: Justifying a new tracking tool that seems expensive for a single project but saves costs across the portfolio.
Business strategy: Estimating the cumulative impact of a small inefficiency (e.g., 1% delay in each process) across multiple departments.
IT: Deciding whether to fix a recurring bug that costs little per occurrence but affects many users over time.
Policy making: Evaluating a regulation change that appears burdensome on paper but prevents significant cumulative losses or risks.
FROM THEORY TO EVERYDAY LIFE
In practice
Project X: Cost Tracking Tool Justification
A project went $50,000 over budget (2% on $2.5M) because commitments were not tracked. Management questioned a $50,000 tracking tool. Applying the same 2% loss to the $50M portfolio suggested up to $1M in potential avoided cost if the problem recurred and the tool prevented it. This is a scenario for evaluating the tool, not an annual saving already demonstrated.
A MOMENT TO REFLECT
Put it to work.
Think of a small issue that was dismissed due to its immediate cost. How would scaling that issue across your entire portfolio change the decision?
What potential future problems are you currently ignoring because the immediate cost of addressing them seems high?
How can you use extrapolation (e.g., error rate × portfolio size) to quantify the cumulative impact of a recurring problem?
CONTINUE THE CONVERSATION
Source texts
- Beyond the Five Whys Root Cause Analysis and Systems Thinking (James C. Paterson)