The Cost of Bad Decisions


What’s the Cost of Bad Decisions?

There is an economic concept that is beautifully profound in its simplicity, but often overlooked in the nonprofit sector. Opportunity costs are the cost (financial, time, resource, other) of what you have given up in making a choice between two or more options. Understanding the opportunity costs of decisions is particularly important when resources are scarce, as is the case in the nonprofit sector.

Key to the concept of opportunity costs is that you are consciously analyzing two or more options and what you must give up in choosing one over the others.

… Because the nonprofit sector is undercapitalized, money is king. A driving motivation in many nonprofit organizations is to preserve money, or go after money, at all costs. So the idea of opportunity costs is often thrown out the window.