The Cost of Delay

Cost of Delay

As a leader, do you normally look at the return on investment (ROI)?  Do you use it as a tool to make a decision or do you use it as a tool to determine if an investment had a positive outcome?

 

Most of us are effectively utilizing ROI as a measurement tool prior to and following our investment decisions.

 

I normally do too.  But there is also another very important metric tool to utilize – the cost of delay.

 

There is a famous Indian fable that tells a story of six blind men describing an elephant.  Each one thought he knew what it was: the tusks must be a spear, the tail must be rope, the rough feet must be a tree, etc.  Each felt he knew what he was touching based on their limited experience and perspective.  They did not get the whole truth because they did not seek to explore or try and get the whole picture.

 

It starts with asking the right questions.

 

So what is the cost of delay?  It is the understanding and communicating the impact of time against forecasted outcomes.  It provides the means to calculate and compare the cost of not completing or implementing something now, but rather making an informed strategic decision to complete or implement it at a later time.

 

In short – it’s where you need to ask what will cost us the most, doing it now or delaying its delivery.

 

First, start by associating a cost or ROI for each project, then determine the time it will take for each project, and then divide the time into money, which will provide the multiplier.  Once you have the multiplier, identify the delay of costs for each project at the very end of the time to identify the cost of delay.  Then look at the various sequence or projects and see the delay of costs for each one at the very end of the time to complete them all. (a detailed example is in the article, “Prioritizing to Minimize Cost of Delay” – referenced and linked below)

 

 

 

This is a short summary and baseline for calculating the cost of delay – an I Power Seed.  Please see additional resources below for a deeper dive. 

 

For those who have not utilized cost of delay I encourage you to try it, I think you will be surprised at the results.

 

For further research and understanding:

 

Prioritizing to Minimize Cost of Delay
https://www.leadingagile.com/2015/06/an-introduction-to-cost-of-delay/

 

Cost of delay: how to calculate quantitative cost of delay and CD3
https://smallbusinessprogramming.com/cost-of-delay-calculate-quantitative-cost-of-delay-cd3/

 

What is Cost of Delay?
http://blackswanfarming.com/cost-of-delay/

 

Calculating Cost of Delay for software projects
http://blog.plataformatec.com.br/2016/11/calculating-cost-of-delay-for-software-projects/

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