The Cost of Not.

We often think about how things cost, perhaps not that accurately but there is also a cost of not doing. If we say the actions that lead to the desired results are doing the right thing and things that get the wrong results as doing the wrong thing. Doing nothing is a decision and an action even if it is a passive, unconscious or in ignorance. You have to look for the right thing to do, not just hope or guess. Here I want to look at the cost of not doing some actions with some real world examples.

A common decision is to not pay for something as it costs too much. It is not common to analyse the cost of not paying. I will list some examples of where the results were catastrophic.

A historic decision made in 1966 by a Labour government (UK) was to stop development of a large aircraft carrier and to go for a small through deck carrier/cruiser with Harrier aircraft and helicopters. The through deck carriers proved quite capable and useful in action even beyond the specific designed roles. The Royal Navy is soon to receive a large carrier ordered by another Labour government suggesting that the benefits of a larger more capable ship is the right choice (all along). I would suggest it was the right decision in 1966 as well. Cost was the biggest factor although there were others. So HMS Invincible cost more than £175 (1980s) and operated small Harrier aircraft. Cheaper to buy and operate than a convention carrier with at the time larger Phantom and Buccaneer aircraft. These aircraft were though more capable in range, speed and payload. At the same time the larger carrier like previous carriers and as quickly brought to service AEW (Airborne Early Warning) aircraft just out of time for the conflict. Allowing earlier detection and ships to be kept further from danger. But the cost of not may well have been a war and 30 years of garrisoning the Falklands. So the first suggestion is that a large, capable aircraft is more likely to deter a war like the Falklands conflict where a decision was made to invade the islands by Argentina (Her Junta). Since the conflict there has been a presence of a garrison, navy ships and fighter jets. This garrison alone is more costly than the difference of cost between the through deck carrier and a larger carrier. Also if the carrier(s) could prevent the war where the UK alone lost 6 major vessels many helicopters and 255 dead. There were obviously many other costs not just equipment and financial, and of course Argentina paid a tremendous price. So the cost of not getting the more capable system may have lead to the cost and risks of a war and more military garrison costs for many years after (currently 30 years). Even if the large carrier did not deter the war it would of enabled a longer range operation against the Falklands with more capabilities while being out of reach of the Argentinian forces. Reducing the risk to ships and people. Soon a new full size aircraft carrier will enter service possibly pointing to the previous decision being ill thought out, but I do not want to suggest any one has learned any lessons!.

A commercial example was the Exxon Valdez oil spill (1999) where rather than employing a second person (or organising sensibly) the second in command of the vessel worked 36 hours straight. I am sure they could not afford the extra staff lets say $20,000 a year, but when in spite of receiving all the required information the ship was put straight into rocks causing the then biggest environmental disaster. One of the costs for the company (insurance?) was $3,000,000,000. I would suggest the cost of not employing or organising was slightly higher. The cost of not.

Many decisions are made daily on staffing levels on ground of cost. In the U.S. one stadium paid $100 million in costs for an unsafe stadium (security staff) when a customer was injured on the premises.

These are easily pointed out costs others will not be seen unless they are looked for. ‘Right first time’ philosophies of quality management are based on the higher cost of repairing faults and consequences of mistakes later rather than smaller costs earlier (especially systematic prevention).

Another situation is the panic response to events where ignorance of the law and other consequences effect reactions. A school teacher was escorted of the premises and sacked after physically restraining an unruly child who had vandalised and shouted abuse at people, and that was just that day. The law allows for adults to use force under certain circumstances, it also suggest training and procedures for this. As the Head did not know the law (I suggest they should have as part of their job) the reaction was expensive starting with the £70,000 awarded to the wrongly sacked member of staff. Of course the disruption of a sudden loss of a member of staff and the chaos after also has costs just less obvious.

Here the reaction was a common response where the head (and whole industry) feared the consequences of use of force. It is not related to the actual law but a fear perpetuated from above and other stakeholders (group think) of perceived consequences and practices not the actual law. The lack of understanding of not just the law which promotes professional actions for this kind of situation, but also the real world and scientific research and even common sense.

Day to day we do not calculate the cost of not exercising, eating well and sleeping, or the consequences of short term thinking (not delaying gratification). This also leads to acting without the consideration of cost because someone else pays and the attention gained while you have someone to blame (not yourself of course). These are a wide range of examples where uncertainty and fear of consequences have not been balanced by professional management and critical thought and analysis. These are common patterns that are met by professional actions where real and actual facts and information is used for decisions not emotion and pleasing others. Many social factors need to be addressed including the culture and group think of organisations that lead to costly decisions when they try to do things cheap.