The “At What Cost” Question
- Posted by Ted Hull
- On November 13, 2018
- At What Worth, Ends, Opportunity Costs
When boards – and specifically not for profit boards, are developing their Ends, they will determine who the beneficiaries are and what benefits will result for these beneficiaries. The third part of this process is determining whether or not it’s worth the cost of producing those results for those people. Underlying that is the question as to why it is – or is not – worth the cost.
Some boards develop migraine headaches trying to understand and make a decision around the at what cost question. In attempting to alleviate those headaches, let me suggest three questions your board might ask itself as it addresses this critical component of Ends.
- Could the same intended results for the intended recipients be accomplished by another organization or enterprise at less cost?
For example, if you are providing beds for homeless people, you may discover that there is another organization in the community which is providing the same service for the same intended recipients and doing it well and at a cost that is less than your anticipated costs. Is the other organization unable to meet all the need? Should your organization fill the gap, but at a higher cost? It would also make little sense if your costs would be greater than a hotel. At that point the targeted recipients would likely be able to receive the intended benefits without your help.
- If our organization did not currently exist, would we start it up?
Sadly, there are organizations which exist only because they are a fixture in the community. They have been around for so long that even to contemplate the idea of shutting down would be offensive. Their tag line is around since…Their legacy has long outlived their relevance. Regardless of how you answer this question, you need to probe more deeply. Why would we start something like this?
- What if our board decided to shut down our agency?
Imagine if your agency no longer existed. As you look at your Ends you will discover (or at least you should) that a particular group of people will no longer be able to access the benefits your organization provides. If they CAN access those same benefits through another organization, then your board has a tough decision to make. In considering the same benefits, these would include such things as the same distance, the same cost, the same frequency, the same quality, etc.
This question assumes that your agency has only one End, which is often not the case. It may be that a current End of your agency could be terminated while others are maintained, and even other Ends added.
- Would anyone else do it?
There are many not for profit organizations, including social service agencies, missions and churches, that have identified a peculiar need. The moral owners, those who have a passion for the results being produced in the lives of the intended recipients, know that no one else is doing or will do what they are doing. And even if it is being done, it will not reach the desired demographic focus or geographic area. In situations like this, it is well-nigh impossible to identify a benchmark cost. The at what cost component may only be identified by the willingness of donors to support the initiative. If these moral owners don’t do it, no one else will. Suppose it is children in a particular developing country receiving surgery for severe cases of cleft palate. The moral owners of this organization may decide that to have this treatment unavailable to these children is unacceptable to them. The cost of surgeons, equipment and all other ancillary expenses is huge, but it mustbe done. The cost is limited only by the funds available to provide these services.
To this point we have focused on the cost question as it relates to finances. However, in contemplating the question of at what cost, there are other considerations as well. These can include certain risks, such as other results which won’t be accomplished or other recipients who won’t benefit. There are human factors such as placing people in dangerous situations. These costs, if applicable, will require consideration by your board as well as hearing from your moral owners.
If your Ends are accomplished, the results will obviously be effectively achieved. However, this can be accomplished without the results necessarily being efficiently achieved. If effective results are obtained, but in an inefficient manner, is it still worthit? The at what cost question incorporates both the elements of effectiveness – is it worth it to produce this result at all? – and efficiency – did we do so using resources in the best possible manner?
There is no need to quiver when determining the at what cost aspect of your Ends. It will take some effort, but it is not as elusive as your board might have originally thought.