Breaking Down the Aggregated

I was recently listening to a podcast by Rory Sutherland on how we perceive cost within organisations. He rightly observed that cost is typically viewed in an aggregated manner: How much does it cost the organisation to pay for something that repeats over X instances?

While this makes perfect sense through an accounting lens, does it hold true from a "value" lens?

It got me thinking.

The intangible value an organisation gains by spending on something that creates a positive impact—whether internally or externally—is not always reflected in its aggregate cost. For example, offering a welcome drink to a guest at a hotel may seem like an avoidable cost at an aggregate level. But what about the displeasure caused by its absence?

Organisations often fail to qualify the displeasure resulting from the lack of a gesture. This "cost of omission" can only be understood by visualising the experience of the person in question—using empathy as a tool to imagine the emotions they feel and the subsequent decisions they make.

These outcomes range from a customer choosing not to make a repeat purchase to a candidate rejecting a job offer, or a supplier choosing not to submit a competitive appraisal.

I believe Human Resources can play a pivotal role in helping organisations build this specific "muscle." HR can help decision-makers see the impact beyond aggregated numbers, encouraging more holistic choices on where to allocate capital.

This is even more critical in the age of AI. A small sigh or a disgruntled feeling is not something an algorithm can always capture. Those subtle human cues must be felt in person or visualised using empathy and creativity as our guides.