Soft‐investments appraisal: Cost‐benefit analysis of the implementation of work groups as an example

Abstract

Aims to show that, by using a simple step‐by‐step approach to cost‐benefit analysis, we can deal with “soft” items (such as the restructuring of organizations) so that they are integrated within the overall business policy. The conceptual exercise is illustrated on the basis of a case study on the implementation of socio‐technical work groups in a Dutch factory. First, socio‐technical work groups are defined as an example of a “soft” investment. Next, the step‐by‐step approach is described, showing that qualitative considerations can be reworked into financial figures such as those used in traditional investment analysis. Subsequently, this approach is applied to the illustrative case study. In the randomly selected case study it appeared that the decision to implement socio‐technical work groups could be dealt with as an investment. Using traditional techniques, the investment was analysed as risky but profitable. In the casuistic step‐by‐step approach, management, with or without the help of a consultant, reworks qualitative considerations into financial figures. The transparency of this approach enables them to prove the reliability of the process as well as the validity of the conclusions drawn from the calculations based on their situation. Management’s discussion of the qualitative considerations and financial figures provides a description of the future situation that is as complete and clear as possible.

Citation

de Haan, J. and van Mol, K. (1999), "Soft‐investments appraisal: Cost‐benefit analysis of the implementation of work groups as an example", International Journal of Operations & Production Management, Vol. 19 No. 1, pp. 38-54. https://doi.org/10.1108/01443579910244214