Knowing the Important Costs is Often Difficult

Companies can’t be faulted entirely for missing important costs.  It is human nature to measure what is easily measured, and to optimize that which is measured.  Admittedly, that’s like the drunk looking for his wallet under the street light, instead of where he actually lost it, because the light is better under the street light.  The important costs may not always be the obvious ones, however.  The savvy manager who understands human nature will look more deeply into costs and find hidden opportunities.  I will discuss the nature of costs and give some examples of hidden costs and the mishandling of cost information.