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The Little Book of Big Decision Models by Dr. Jim McGrath

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MODEL 60

COST–BENEFIT ANALYSIS: ACCOUNTING FOR NON-FINANCIAL FACTORS

Use this if you need to provide a financial value for non-tangible factors in a decision.

The McNamara Fallacy Model (see Model 2) shows how important it is to take account of data that is difficult or seemingly impossible to quantify such as staff morale. Cost–Benefit Analysis (CBA) tries to address this problem by allocating a financial value to all costs and benefits arising from a decision. It can be calculated informally on a Post-it note or as a detailed and formal process involving a thorough assessment of the future benefits and costs arising from a major investment decision.

CBA is often used in public sector projects. It is less popular in the private sector where ...

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