![]() ![]() It will take quite a lot of man hours to put together a good analysis. Secondly, a cost benefit analysis is time consuming and therefore expensive. In the worst case, highly optimistic assumptions are made to push a particular project through or highly pessimistic assumptions are made to stop another project (just watch the TV news on political projects and you know what I mean…). Even if the current data is available, data on future events is nothing more than guesswork. Besides requiring a lot of current data, it also needs substantial data on future events to give a reasonably accurate value. First of all, a cost benefit analysis is, in my experience, usually very imprecise. However, in my view for most lean projects, a cost benefit analysis or a ROI analysis is overkill. The most preferred project is the project with the fastest return on investment. In most industries, this ROI is desired to be less than two years, (i.e., the project should pay for itself within two years). In this case, the time when the upfront costs are returned by the benefits is calculated. After calculating the cost benefit for all possible projects, the project with the largest benefit is chosen.Ī variation of this is the time until the return of investment (ROI). Future costs and benefits may be discounted with inflation to estimate a current day value. A cost benefit analysis determines a joint metric (usually monetary), including all the costs and benefits for each project. The obvious solution to determine the project with the best cost–benefit ratio is to do a cost benefit analysis. Which project will give us the largest benefit for our effort? The Overkill – Cost Benefit Analysis Costs vs Benefits What we want is the biggest bang for the buck. Last Come First Serve (the older ones are being forgotten, and it shows action on new problems).Just picking one is already much better than starting with all tasks, but there are still plenty of wrong reasons to pick a task: The question is now, among the many different projects waiting, which one do we start? There are many different ways of how not to pick the next project. In the previous post, we determined it was best to start a new project only when a previous project was completed. ![]() Wrong Reasons for Picking the Next Project I describe some simple tools on how to quickly determine the most important task at hand. Here I want to emphasize the importance of prioritization. This second post now details which project to start next. Start a new project only when a previous one is completed. The key was to limit the number of active projects. In our first post of this series, we discussed how to avoid void work overload using a project management board.
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