Door signs with action and inaction

Measure COI, not just ROI

When making decisions, assess the cost of inaction.

Written by Gihan Perera FAIM
2 minute read
Door signs with action and inaction

In March 2015, almost six years ago, Bill Gates, former Microsoft CEO and now one of the world’s leading philanthropists, delivered his sixth TED Talk, this time on the topic, “The next outbreak? We’re not ready”.

In his presentation, Gates described a global pandemic scenario that matched almost exactly the COVID-19 pandemic five years later.

He ends by urging the TED audience – and the world – to take action:

“Now I don’t have an exact budget for what this would cost, but I’m quite sure it’s very modest compared to the potential harm. The World Bank estimates that if we have a worldwide flu epidemic, global wealth will go down by over three trillion dollars and we’d have millions and millions of deaths … There’s no need to panic [but] time is not on our side.”

History shows we didn’t heed this warning, for reasons too complex to address here. But Gates made one key point that’s relevant for us all. When making a decision, asses the cost of inaction.

When creating an action plan, it’s almost axiomatic you calculate the return on investment, or ROI. But “investment” implies you’re taking action, and that’s only one part of your assessment.

Unless you also calculate the cost of inaction, or COI, the ROI alone doesn’t have enough context.

If you’re driving on a highway and meet heavy traffic, you calculate the ROI of taking a (slower but less congested) side road. But if the highway is taking you directly into the path of a bushfire, the COI is so high the ROI becomes irrelevant.

ROI answers the question, “What are the benefits of this change?”, and COI answers the question, “What is the cost of not changing?” Although you can think of them as two sides of the same coin, they motivate people differently at different times.

People in crisis resist all but the most essential actions. So, as you’re leading your team into recovery, you might bump up against this resistance in your team (and perhaps even in yourself). To help open their thinking, keep prompting them with COI questions:

“What is the cost of not changing?”

“What is the cost of not doing anything?”

“What is the cost of keeping things the same?”