Value vs. Cost

By Rick Forbus, Ph.D.

People evaluate things one of two ways: through the lens of value or through the lens of cost. Value has several connotations when regarding ethics, economics and quantity. The same is true with cost.  It can refer to the price of something, an unpleasant action or an estimation of the price of something such as “costing out a job”.

In decisions, people usually look at things from the vantage point of what they cost or how valuable they are. It is interesting to me as our company negotiates life-changing coaching services and professional training how certain companies and organizations want to over analyze cost.

Price is what you pay. Value is what you get.
Warren Buffet

One of the examples of value vs. cost is a piano lesson. My parents thought it valuable that my little sister and I take piano lessons.  I am sure it was a financial sacrifice because we were a typical middle class family. One of the sacrifices for me was the practice time. The music itself was challenging but the separation from my friends and the outdoors was much more difficult. One of the prices my parents paid for these lessons was my smart mouth, whining and resistance to practicing the piano.

I started to take lessons when I was around seven years old and my sister even earlier. It was easier for her it seems but for me it grew harder and harder because my growth years included, baseball, football, basketball, trumpet playing and fishing, to name a few activities. Sometimes the cost was incredible to my parents because of my attitude.   Around the junior high years my Dad said, after much complaining, that I could quit taking lessons after I graduated from high school. By then, my playing had become fairly high level and I was having fun with it in bands and was experimenting with various styles. Somehow I could play almost anything I heard by ear. Most times I played a hybrid of what was written and what I wanted it to sound like.

The high emotional cost for my parents and me began to have great value. The financial cost and the emotional cost did not compare with the value of the new level of playing and enjoyment. If what I measure in enjoyment, fulfillment and even financial gain through playing were on a spreadsheet, the cost and value would be incomprehensible.

What does this have to do with leadership development, organizational coaching and training?

Admittedly, I have a pet peeve in our professional services industry with business and non-profit leaders who want to take a hard line on cost cutting when it comes to human capital investment. Many organizations will spend thousands of dollars on a retreat to boost morale with their leadership teams, all the while, rejecting any expenditure on coaching, training and leadership development. Think about it. They will spend thousands per team member to wine and dine, entertain and enthuse them, and very little, if any, on life-changing executive coaching services. Some companies spend more on logo-ladened gifts (many of which just take up space) than on personal development and training for their employees. It is the value vs. cost debate in reality. Arguably, the economy has caused many executives and owners to cut and slash budgets. Cutting coaching and training for essential personnel is like not going to the dentist because of the cost. The long -term results will certainly lead to greater problems and costs.

Cost is an interesting word. How do you measure excellence, work ethic and contribution? Is there a way for one to calculate what is valuable and what is costly? Recently in a coaching session the discussion became very important. The question I posed was, “Is it possible that you (the coachee) are paying a high cost with your time, but losing value for yourself and the company?”  We came to the conclusion that the time spent on unnecessary job-related issues had eroded some of his value to his children and family. Hard work is not in question here. Poor delegation skills, time management and a fear of losing control are in question here. Balance and the difference in cost and value are crucial to grasp as leaders.

Tom Peters is the co-author of two of the most widely read books on the subject of work in the twentieth century. His second book, A Passion for Excellence, sets forth the mandates for excellence in the work arena. He is emphatic about the need for prioritizing the customer, backing up your product with thorough service, and working from the strength of integrity. He draws his discussion of excellence to a conclusion by talking about its cost. An honest but alarming statement appears in the last page of the last chapter of the book.

“We are frequently asked if it is possible to ‘have it all’, a full and satisfying personal life and a full and satisfying, hard-working professional one. Our answer is: No. The price of excellence is time, energy, attention and focus, at the very same time that energy, attention and focus could have gone toward enjoying your daughter’s soccer game. Excellence is a high cost item. However, counting the costs may bring about some valuable outcomes.”

Twenty plus years ago an interesting article came out regarding this issue. For most of the last decade, Chicagoans who worked in the Loop, the booming downtown business district, could easily ignore the city’s budget crisis; Washington’s cutback of aid to cities didn’t seem to hurt business. Last week, they learned one price of neglecting the underpinnings of all that economic growth. A quarter billion gallons of murky Chicago River water gushed into a 60-mile network of turn-of-the-century freight tunnels under the Loop and brought nearly all businesses to a soggy halt.

It turned out that a top city official had known about the leak, but, acting for a cash-strapped government, had delayed repairs costing only about $50,000. The final cost of the damage could run higher than $1 billion.

U.S. News & World Report, April 27, 1992

Now that is a great example of cost vs. value in decision-making.

Recently, an organization asked our Trove team to provide a proposal for a project that would address their dysfunctional team behaviors. These behaviors had resulted in such outcomes as:

• loss of great talent
• prolonged, ineffective and energy-sapping meetings
• fear
• conflict avoidant team members
• downward trend in profits
• lack of creative ideas
• general losses in individaul productivity
• tardiness and absenteeism
• no synergistic crossovers in work assignments
• gossip
• lack of respect for the owners and leadership

We carefully designed a project plan. This level of intense dysfunction is tandamount to a flood damaged home; it needed a stripping away of the bad behaviors and rebuilding the team behavioral structure with the good. Behavioral change and cultural rebuilding is tough and tricky work. Trove does it all the time and it is not easy to rebuild dysfuctional behaviors that have been either neglected or inculturalized for a long period of time. When we presented the project the owners were overwhelmed with our careful attention to detail and our intuitive discovery of their real issues. However, that is where the value VS cost scenario emerged. They said they needed to take some time to examine the price. After a few days they wanted us to come in and discuss. In a few minutes we realized that cost was more important than value. The short-term goal of cost-saving was much more apparent than the long-term results of value. We felt like vendors rather than the “miracle workers” that most of our clients describe us as. We walked away leaving them with the knowledge that there were coaches and advisors available who will work for less “cost” and hoped they would find another firm to tackle their dire problems.

What we obtain too cheap, we esteem too lightly: ‘Tis dearness only that gives everything its value. – Thomas Paine

Of course money does play into many decisions, but it can be more costly to cut back on the contract amount and live with the long term damages occurred by not estimating the value of professional help correctly. The same is true for personal health as it correlates with a company’s health. Avoiding a health physical exam because of the time and financial costs may lead to some devastating consequences. It is impossible to cost out the value of healthy living and the ability to work because of good health.

We know the cost of everything and the value of nothing. – Anonymous

Not too many years back a friend from the past wanted to have lunch and discuss his possible life-transition. He bought my lunch at a nice restaurant that must have cost him a small fortune. The time got away from us as he gave me his deepest concerns, ideas and dreams about where he would like to be ten years from then.   I listened, coached, and offered advice. A few days later I sent him an email thanking him for the lunch, commenting on the expensive restaurant and our lenghthy time together. He said that lunch was the best investment he had ever made and the return on the investment was immeasurable. He specifically responded in the email saying that “one thing you said was worth around $100,000 to my future.” Knowing this individual and how his future unpacked, this lunch was of profound value. Actually, he got a really good deal. The lunch was not a billable session for me just a casual “catching up” with an old friend. However, the value was great for him and me.

Take some time to list those intangible items in your life that are of great value to you. It could be that you should do the same calcualtion when considering your company, organization or even family. The value of things like peace, talent, experience, enthusiasm, passion and loyalty are certainly incalcuble. Since these things cannot be bought it would be difficult to count the cost on them. However, their value to any organization is clearly understood.

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