Benefit analysis

Benefit analysis: Decision-making aid for complex alternatives

Benefit analysis is a proven method for making decisions in multi-dimensional issues. It helps to evaluate various options for action based on defined criteria and to identify the one that offers the greatest benefit. This method is used in many areas, including investments, site selection, and product development.

Definition and principles of benefit analysis

Benefit analysis is a systematic method for evaluating alternatives based on the analysis of multiple criteria. It makes it possible to combine qualitative and quantitative criteria and thus to create a comprehensible ranking of options for action. It was developed in the 1970s and has been used in many industries ever since. It is typically used in decision-making situations where financial and non-financial factors are equally relevant.

Areas of application of benefit analysis

Benefit analysis is used in a variety of areas. The most common areas of application include:

• Investment decisions: Evaluation of capital projects and investment alternatives.
• Site selection: Selection of the optimal location for companies or production sites.
• Product development: Comparing product ideas according to marketability and production costs.
• Human resources: Evaluation of applicants or employee training programs.
• Marketing strategies: Deciding on advertising campaigns or product placements.
• Environmental protection: Comparison of environmental protection measures according to their ecological and economic benefits.
• Transport and logistics planning: Optimizing supply chains and transportation routes.
• Risk management: Evaluation of risk management strategies and measures.

Carrying out the benefit analysis

The benefit analysis is divided into several steps, which enable structured decision-making:

1. Defining the alternative decisions: First, all possible courses of action are identified, which should be evaluated.
2. Selection of evaluation criteria: This is followed by the selection of relevant criteria, which should be objective and independent of each other. Typical criteria include costs, quality, sustainability and customer satisfaction.
3. Weighting of criteria: Not all criteria are equally important. The criteria are therefore weighted according to their relevance to the decision. This weighting can be carried out, for example, through expert assessments or surveys.
4. Evaluation of alternatives: In the next step, the alternatives are assessed with regard to the defined criteria. The evaluation is often carried out on a scale (e.g. 0 to 100) to represent the fulfilment of the criteria by the respective alternatives.
5. Calculation of utility values: The individual ratings are multiplied by the corresponding weightings and added up. The result is the utility value of each alternative, which represents the overall advantage of the option.
6. Choosing the best alternative: The alternative with the highest utility value is selected as optimal. It offers the greatest overall benefit and should therefore be implemented preferentially.

Advantages and disadvantages of benefit analysis

The benefit analysis offers some clear advantages, but also potential disadvantages:

• advantages:
  • Structured decision-making: It provides a clear process for systematically evaluating alternatives.
  • Transparency: The method makes the decision process comprehensible and thus promotes acceptance of the decision.
  • Diverse criteria: It allows both qualitative and quantitative factors to be taken into account.
  • Flexibility: The method can be adapted to different decision-making situations.
• Disadvantages:
  • Subjectivity: The weighting and evaluation of the criteria are often subjective and may depend on the assessments of those involved.
  • Risk of manipulation: There is a risk that targeted weightings or evaluations could influence the results.
  • Simplified presentation: The method abstracts complex issues and does not always take into account all dependencies and interactions between the criteria.

conclusion

Benefit analysis is a versatile and flexible method for making complex decisions in various areas in a well-founded manner. It offers a transparent and systematic approach that combines qualitative and quantitative criteria. Nevertheless, the subjectivity of weightings and evaluations should always be reflected on and critically questioned. Despite its limitations, benefit analysis remains a valuable tool for decision-making, which is helpful in many fields of application.