The concepts of cost-effectiveness and research are frequently intertwined because of the growing importance of both disciplines. The value of research has expanded to cover areas as diverse as investment analysis, business studies and pharmaceutical processes. However, budgetary cutbacks are a constant threat to government and business expenditures. With this mindset, finding a better way to make financial decisions is a practical goal for managers, business owners, politicians and investors. Assessing the cost-effectiveness of research activities is one answer to this critical challenge.
The Importance of Cost Effectiveness
The concept of cost effectiveness as well as the value of pursuing cost-effective alternatives has both been held in high esteem for at least 50 years. Peter Drucker, a prominent management and planning expert, once described his interpretation of cost effectiveness as follows: “Efficiency is doing things right; effectiveness is doing the right things.” While this is a straightforward perspective, the challenge for decision-makers is to find a practical method for determining what the “right things” are in each unique situation. Some of the questions to be answered when evaluating research and cost effectiveness are the following:
- What are the tangible and intangible results of pursuing the proposed research?
- Are we overpaying for the research?
- Is there a less-costly research approach that is equally effective?
- What are the consequences of not choosing the research strategies under review?
- What are we getting for our research money?
- Is the research worth the time and expense in comparison to other options?
- Using Drucker’s standard, is the research activity the “right thing?”
As suggested by the questions above, doing a thorough job of evaluating cost effectiveness for any research methods can be challenging and time-consuming. However, as Peter Drucker might have phrased it, “It’s the right thing to do.”
Cost Effective Research Activities
The health care system is a prominent example of multiple experts and institutions trying to achieve a delicate balance between increased health care costs and a desire to improve personal levels of health. According to Dr. David Meltzer of the University of Chicago, “Cost-effectiveness methods have the potential to help mobilize technology and science to control health care costs while maximizing health outcomes.”
Because technology can play a critical role in either increasing or decreasing expenditures, a “cost-effective mentality” can be beneficial in many other areas. One key example is spending money for investment research. There will always be some who prefer to spend little or nothing for research that contributes to positive results for investors. In a classic illustration of “you get what you pay for,” free research for investment analysis (or anything else) is not likely to produce a cost-effective outcome.
In the final analysis, cost-effectiveness is a valuable tool for everyone to use in making complicated decisions. Cost-effectiveness studies are no longer restricted to an academic environment. The “real world” uses are still expanding in a business and finance world that insists on managing challenges with fewer resources. The practical need to manage research and technology costs suggests that cost-effective analysis of research expenses should be actively used whenever possible.
– Research Optimus