More Business Columnists

• Stacy Sacco: Savor 'Cheese' book's lessons on tackling change
• Randy Burge: Locally grown foods grow in popularity
• Stacy Sacco: Want to develop a situation card?

MOST RECENT TRIB STORIES

• ABQTrib.com to remain available
  08:48 a.m., February 25, 2008
• Congressman is indicted
  08:37 a.m., February 23, 2008
• Series of attacks target Green Zone
  08:36 a.m., February 23, 2008
• Iran is defying U.N., agency says
  08:35 a.m., February 23, 2008
• Waterboarding approval probed
  08:34 a.m., February 23, 2008

TRIB IN THE BLOGOSPHERE*

• Ty Murray Invitational thrills fans in Albuquerque
• Is Rome Burning?
• Ominous Skies
• The Road to Invalidation
• Albuquerque company participates in “Extreme Makeover: Home Edition”

*Note: The Tribune does not create and is not responsible for the blogosphere's headlines and stories. These links to blogs talking about ABQTrib.com are automatically generated. Use them at your own risk.

STORY TOOLS

• E-mail story
• Comments
• iPod friendly
• Printer friendly

SHARE THIS STORY [?]

In the graduate course I teach at the Webster University's Kirtland Air Force Base campus - BUSN 6200 Strategy and Competition - we spend a great deal of time discussing decision-making models.

The key point underlying all decision making is that every decision involves trade-offs. It's instructive to give some thought to that point as we end this year and plan the next in terms of where we want to devote our time or spend our money.

Some of the trade-offs we discuss revolve around time, whether we choose this or that based on the short-term costs versus our long-term gain. For example, in the financial services arena, many people, including me, have refinanced their mortgages to lower their monthly payments. Although I have improved my monthly cash flow in the short-run, I end up paying for it in the long-run.

Long-term vs. short-term decisions play out on a number of levels whether it's your financial or physical health. "Should I indulge myself with this high calorie dessert item at lunch?" is a question that I face every day, but always seem to make a short-term decision and end up with a long-term expanding waist line.

In the financial arena, we also spend a great deal of time discussing risks vs. rewards. The higher risk an investment carries, typically the higher the reward. But how much risk are you willing to bear? The choice here seems to be more about the avoidance of pain, or potential pain, than greed and the pleasure of earning higher than average returns. But then I'm risk averse so that decision gets easier and easier as I get older.

From an organizational point-of-view, we discuss the trade-offs between centralization vs. decentralization. As several local companies have discovered when they were purchased by a national corporation, many of their internal operations could be "centralized" and moved to a corporate headquarters. The trick here is in balancing the added value of having a local presence vs. the cost of doing so.

This always seems to make better sense in terms of marketing vs. accounting, especially if you're trying to meet the needs of a local market. Decentralizing your sales force so they are in the field and can make personal contact with current and potential customers just makes more sense. The trade-off becomes one of quality vs. quantity on some level.

From an economic point of view, trade-offs occur because we have, by definition, limited resources to draw from.

I know we are all familiar with arguments between time and money. I recently talked this over with Mark Riddle, a senior research analyst at the Raddon Financial Group in Lombard, Ill. He said his company has come to the conclusion that there are basically three key results you can choose from, only two of which can ever be achieved at one time.

The scenario he described was choosing between "Speed," "Quality" and "Cost." For example, if you want to improve your delivery time and increase your quality, you're going to incur higher costs. Conversely, if you want to increase your quality, it's going to take more time. You just can't achieve them all at the same time. It's a trade-off.

Ultimately, all trade-offs boil down to what you are willing to give up.