Cost-Benefit Analysis

timer Asked: Feb 6th, 2018
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Question description

To do a cost-benefit analysis, you must find, quantify, and add up all the positive factors or the benefits. Then, to find the costs, you must identify, quantify, and subtract all the negative factors or limitations, including missed opportunity costs. The difference between the two indicates whether the planned action is advisable or worth pursuing. The real challenge is to be able to not only determine the real benefits and the real costs, but also to properly quantify them. When managing people, that has and will continue to be a particular challenge for HR professionals.

Some calculations can be fairly straightforward. For example, should we hire an additional salesperson? If the total compensation of a salesperson is $100,000 per year, but the average sales of our current sales staff is only $80,000 on a good month, it may not be worth the cost at the present time. This seems fairly straightforward until the picture is complicated. Suppose there is a performance driver to build a more qualified sales department, and suppose that the marketing staff is projecting business to increase in the last 6 months of the year. Taking time in March through May to find highly talented salespeople might then make sense from a strategic perspective.

In this Discussion question, you will consider cost-benefit analysis and how it can contribute to strategic decision making.

With these thoughts in mind:

Post a cohesive and scholarly response based on your readings and research this week that addresses the following:

  • Do you think it is necessary for HR professionals to have financial competency? Explain why or why not.
  • Discuss the benefits and limitations of conducting a cost-benefit analysis for an HR initiative in general.
  • Determine how a cost-benefit analysis and HR Scorecard might complement each other in strategic planning.
  • Explain the organizational costs and benefits that are most critical for HR professionals to be familiar with, and why.
  • Be specific, and provide examples with references to the literature.

Tutor Answer

School: UCLA




Cost-Benefit Analysis
Institution Affiliation



Cost-benefit analysis is sometimes called benefit-cost analysis. It is basically an approach
that is used by an organization to evaluate the strengths and weaknesses of an alternative. It helps
the organization in choosing the best option in a given alternative so that it can help the
organization make profits while preserving savings. Cost-benefit analysis can also be used as a
tool for calculation and comparison of costs and benefits of a given decision. There are two main
roles of cost-benefit analysis. One of them is to determine if a project is sound. This is by
checking if the benefits outweigh the costs, and by how much. The next role is to provide a
platform that can help to compare projects. This is done by comparing the cost of each project
against the benefits that are expected out of them (Bateman et al., 2014).
Financial Competencies for Human Resource Professionals
It is important for human resource professionals to have financial competency because it
evaluates the abilities they have in management. It also helps to direct the management of
organization's funds, so that it can cater to the needs of the organization. This involves collecting
data, integrating it and making the interpretation of that information. HRs should have financial
competency because it is reliable. This means that the information or results that are gotten from
the organizat...

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