Seems like a simple rule. Simply choose the option that makes the best use of capital (and is therefore the lowest ‘cost’).
However, define cost. Define the time period costs are considered in.
I think a common thought many decision makers have today, is that costs you can’t clearly see today/within the payback period are costs which are not relevant in today’s decision. Wrong.
What are the costs to the general health of the market, to the environment, to your workers (and by extension their productivity; and potentially your customers’ productivity), costs to your customers (and by extension your revenues), costs to your country’s budget (and by extension the infrastructure available to you), costs to the health of your country’s economy (and by extension your revenues/customer base), and ultimately what damage can these inflict upon your company’s continuity assumption?
I get the “it’s not my job” argument. I do. I get that one person or team can only do so much and that trying to analyze all potential costs of a decision will leave you making no decision at all. However, that doesn’t seem like an excuse to not at least think about what other costs there might be and how this might affect the longer-term health of an enterprise.
While in the short-term we can all chase better payback periods, higher margin options, more automation, or more efficient ways of doing things (and more often than not, must do so or die from competition), what will the longer term consequences of these things do, to say, the customer base? If every company gradually shrinks its employees to boost its margins, then how will the company continue to sell products if customers have no salary to buy the products? For a time, the company can focus on increasingly higher-margin products, to make up for declining overall sales, but even this will have its limit. At some point, the total amount of companies will have to shrink as well, as there is simply less demand for products when there’s less money to spend on them.
It seems most of the time businesses see themselves as living in a one-way box, whereby they can be effected by external factors, but they themselves have at most minimal impact on longer-term trends of external factors. That it’s always just a matter of time before something “creates more jobs”, because it’s always worked like that and we don’t really need to think about the bigger consequences of our individual beats of butterfly wings. But just because something has always been like that, doesn’t mean it will be tomorrow. In general we’re usually keen not to worry about things unless they impact us directly. At which point it’s often far too late to make changes which can allow the immediate mitigation of repercussions.