Problem statement: What exactly needs to be improved? Use problem framing and ca

Question

Problem statement: What exactly needs to be improved? Use problem framing and cause-and-effect analysis to develop a brief, preliminary problem statement. Note: You will expand your problem statement in the Unit 3 assignment. Background of the issue: Detail relevant historical data, including how long the problem has been occurring, and what it is costing the organization. Note: You are not expected to provide specific data results at this early stage of your investigation. Implications: What could happen if the problem continues as it is? What could happen if the process is improved? Outline both tangible and intangible pros and cons for improving the issue or ignoring it. Identify some potential general business results and impacts on business relationships. Desired outcome: How will your new process be different from the old? What competitive advantages will it yield? How will it impact stakeholders? Consider the cost-benefits of the process improvement, estimating how much will it cost the organization and outlining how costs will be offset by the benefits derived.

Explanation / Answer

Both cost - benefi t analysis (CBA) and cost - effectiveness analysis (CEA) are useful tools for program evaluation. Cost - effectiveness analysis is a technique that relates the costs of a program to its key outcomes or benefi ts. Cost - benefi t analysis takes that process one step further, attempting to compare costs with the dollar value of all (or most) of a program ’ s many benefi ts. These seemingly straightforward analyses can be applied anytime before, after, or during a program implementation, and they can greatly assist decision makers in assessing a program ’ s effi ciency. However, the process of conducting a CBA or CEA is much more complicated than it may sound from a summary description. In this chapter we provide an overview of both types of analyses, highlighting the inherent challenges in estimating and calculating program costs and benefi ts. We organize our discussion around practical steps that are common to both tools, highlighting differences as they arise. We begin with a simple description of each approach. Cost - effectiveness analysis seeks to identify and place dollars on the costs of a program. It then relates these costs to specifi c measures of program effectiveness. Analysts can obtain a program ’ s cost - effectiveness (CE) ratio by dividing costs by what we term units of effectiveness :

Cost-Effectiveness Ratio Total Cost Units of Effectiveness

Units of effectiveness are simply a measure of any quantifi able outcome central to the program ’ s objectives. For example, a dropout prevention program in a high school would likely consider the number of dropouts prevented to be the most important outcome. For a policy mandating air bags in cars, the number of lives saved would be an obvious unit of effectiveness. Using the formula just given and dividing costs by the number of lives saved, you could calculate a cost - effectiveness ratio, interpreted as “ dollars per life saved. ” You could then compare this CE ratio to the CE ratios of other transportation safety policies to determine which policy costs less per unit of outcome (in this case lives saved). Although it is typical to focus on one primary outcome in CEA, an analyst could compute cost - effectiveness ratios for other outcomes of interest as well. Like cost - effectiveness analysis, cost - benefi t analysis also identifi es and places dollar values on the costs of programs, but it goes further, weighing those costs against the dollar value of program benefi ts. Typically, analysts subtract costs from benefi ts to obtain the net benefi ts of the policy (if the net benefi ts are negative, they are referred to as net costs ): Net Benefits Total Benefits Total Cost =

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