You are in a leadership/management position with your firm, and you have been as

Question

You are in a leadership/management position with your firm, and you have been asked to support a major initiative to cut SG&A Costs across your organization. (SG&A: Selling, general, and administrative expenses are expenses incurred to run a company, such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries. These expenses are incurred to promote, sell, and deliver a company's products and services, and to manage the company, and generally not as a part of the production process.)

The CEO and the VP of Operations favor the idea of cutting the number of in-person meetings that your company holds each year. Your company has offices in New York, Los Angeles, and Miami, with five managers in each city. The managers typically fly to a central location every two months to have an in-person meeting and review the business, go over scorecards, etc. Although the CEO is not a fan of virtual collaboration because it is generally second-best to meeting in person, he has mentioned the possibility of replacing a few of the in-person meetings with virtual sessions in order to save costs. Both the CEO and VP are known for being "tough to convince" because they require a substantial amount of data in support of any proposal.

a.

You decide to propose increased use of virtual collaboration tools to cut costs. You want to put together a cost/benefit analysis in support of your proposal, and you decide to make it as quantitative as possible because William Clayton responds well to data-driven recommendations. What internal data will you request to formulate the analysis? What external data will you research to formulate the analysis? How would you use the data to support and present your proposal?

Explanation / Answer

Cost benefit analysis can be considered as an appraisal tool which can be used by the management so as to make some strategic decisions. Using this tool the benefit which can be gained through the investment can be identified. In this case the manager is requested to cut costs which are incurred in the in house meetings so as to reduce the cost of production. The CEO suggests the virtual communication as the second option. The manager can persuade the CEO and VP to adopt virtual method as the primary one so as to reduce costs. For this necessary evidence can be obtained through performing cost benefit analysis.

Some of the internal data required includes the availability and accessibility of the technologies which are used in virtual communications. The costs which are incurred in installing the technology are also required. The knowledge level of the managers for using this technology and the time required for training them. The external data includes the amount required for installing this technology in all its branches and its maintenance.

These data can be used for the preparation of the report for the proposal. Through this data an estimate about the benefit of using this technology can be highlighted.

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