X + Qualitative Component > Y

…Math? Oh no!

This equation may seem odd, but let me lay it on you again: X + Qualitative Component > Y, where (Y) equals the cost of a project, (X) equals the monetary return of a project (what you expect to make by paying cost Y), and the Qualitative Component equals the unquantifiable benefit of the project.

I started off by pointing out this equation because intuitively you would never agree on a project that costs more than it will make in return. Regardless of if you are running a business or running your personal life, you never move forward with an action that will cost more than it will yield. If you are offered a job that will pay you $1,000 a month but will cost you $1,200 a month in transportation fees, you clearly wouldn’t accept the offer. If you are thinking about opening a new location for your business that will yield you an extra $5,000 a month but will cost you an extra $5,200 a month in operating fees, you clearly wouldn’t open that new location…or would you.

Don’t tell the finance people I told you, but there is a qualitative component to any business decision. Whether you are making a personal career decision or making a decision on behalf of your company, there is a piece of that decision that is difficult to measure. By making a business decision to accept or deny a measurable project, you end up affecting a qualitative component of your business or personal life that is hard to quantify. Some people refer to this qualitative component as company culture, some people refer to it as building relationships, other people refer to it as moral, but I refer to it as happiness.

Using the example above, it seems like you would never spend $5,200 in order to receive $5,000. But what if your employees are dying for a larger office space? What if you have suppliers in the area who you are trying to build better relationships with? What if the cost of living for your employees is lower in this new area and the standard of living higher? If the answers to any of those questions (among others) are yes, it might be a good move for both your employees as well as your business to accept the project. It all depends on how much happiness is worth to you. Plugging this scenario into the equation, you quickly see that if the qualitative benefits of the project – the increased happiness of your business – are worth $201 in your eyes, it’s something you should pursue.

The equation works in much the same way for your personal life. Take your job for example. If your salary (X), plus the increased happiness your job brings you, is greater than the cost of your job (Y), you are in great shape. If, however, your salary plus the increase in happiness is less than the cost of your job, it may be time to search for something else that brings passion to your life.

The trick here is to figure out the cost of your job (Y). The cost is everything you wish was better: the cost and time of your commute, the way your boss treats you, your colleagues, your job function etc. If all of these components are greater than your wage plus your increased happiness, get out.

This all seems pretty intuitive, but when you break it down in the form of an equation, the decision making process becomes a lot easier. Rather than trying to take emotion out of your business decisions, include it as a key component. By giving a measurable value to you or your business’s happiness as a qualitative component, you will begin to make decisions that factor in emotion and at the same time are not driven by emotion.

And to me, that sounds like the type of decisions I’d prefer to make.

Takeaways

– It’s not always best to take emotion out of a business decision
– When you do factor in emotion, make sure you aren’t being driven by it
– Quantifying your happiness is a good way to see if you are on the right track, both personally and in your business
– Ask yourself the question: How much is you or your business’s happiness worth to you?