When making a decision, it’s useful and appropriate to consider your return on investment, or ROI. But that’s only one factor in making a decision. Also consider what happens if you don’t do anything, and include the cost of inaction, or COI, in every decision.
I was recently speaking with a client who has engaged me to work with the senior leaders in her organisation to do some scenario planning. We’re looking at what’s around the corner, over the horizon, so they can plan now.
I told her I was impressed she’s doing this now for her team and organisation, to look ahead at future scenarios. She replied,
“Well, what choice do we have? It would cost us much more if we didn’t do it.”
I was then even more impressed! Because she’s considering the cost of inaction – which many leaders ignore or downplay.
When you’re making a decision, you might be calculating the return on investment, or ROI. That’s useful, because you weigh up the time, effort, money, and resources against the potential return.
But that’s only one factor in calculating the cost of a decision. The other side of ROI is the cost of inaction, or COI. If you don’t take action, what will it cost you?
To make a well-informed decision, include both ROI and COI.
For example, in 2015, five years before the COVID-19 pandemic, global philanthropist Bill Gates presented a TED Talk, titled “The next outbreak – we’re not ready”. In it, he warned us of – and predicted very closely – something like COVID-19, and urged the world to take action to prevent it.
He ends that talk by urging us to take action:
“Now I don’t have an exact budget for what this would cost, but I’m quite sure it’s very modest compared to the potential harm. The World Bank estimates that if we have a worldwide flu epidemic, global wealth will go down by over three trillion dollars and we’d have millions and millions of deaths …”
He was right (and the world didn’t listen to him, for reasons that I won’t go into here), and this is exactly the cost of inaction. The COI was much greater than the cost of taking action.
That’s why it’s so important, when making a decision, to consider both ROI and COI.
For more, download my worksheet for six factors to consider when measuring COI – and then use this with your team in making important decisions.
