The Opportunity Cost Of Bad Decisions

or,
Why Performance Measurement is an Investment, not a Cost

I was chatting with a colleague recently and he used the phrase 'the opportunity cost of bad decisions' (yes, that's what my conversations are often like, I have no life ;-) That made me think about performance measurement in a new way i.e. as the means to avoid and/or correct bad decisions. Let me explain . . .

What's the reality in the public sector these days? It's often reduced funding, layoffs, program 'shrinkage' and an emphasis on cost-cutting in general. This makes it more important than ever that resources be allocated where they will do the most good i.e. to efficiently achieve program objectives.

And that means choosing between alternatives, from setting policy to establishing programs to carry out that policy. But how do you know you have allocated resources in the most effective way to achieve your goals? You need the right data at the right time to test your assumptions and measure your results. Nothing else works.

A simplistic example, if you have a million-dollar budget (discretionary), a 'mis-allocation' of 5% represents $50,000 that could be better used. Of course it's not that simple in real life, but you get the idea.

There may well be alternatives that provide a greater net benefit than your chosen path. But it's unlikely you will seek those alternatives without accurate information to identify the impact of your decisions on the organization and your clientele i.e the opportunity cost.

Now if you had invested (say) $50k in a performance measurement system that reliably tells you what is working and what's not, that system has paid for itself first time out. Of course, that assumes you have a good understanding of what the organization is trying to achieve, and how the mechanisms you have chosen will influence that goal (by building a Logic Model for example).

Bottom line, bad decisions aren't fatal to the success of the organization, so long as there is a mechanism in place to detect and correct. Bad decisions become simply a learning opportunity. We diagnose the problem identified by our performance measurement system, and determine what correcting or mitigating action is needed.

Uninformed decisions cost; performance measurement is an investment in helping you make better decisions.



If you would like some help in understanding and applying the above, contact PRS Vice President Charlie Snelling 613 744-4084,  csnelling@rogers.com,   PRS President Scott Kelland 613 302-3924 skelland@ripnet.com or use the form below.

We offer a full range of solutions with respect to measuring and improving performance for public sector organizations.

And, don't forget to check out my next one-day training course on Reengineering and Change Management in the Public Sector. Details and registration here


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