Understanding cost drivers
Breaking down and describing your costs enables you to generate actual cost data for your curation processes and services. To make the case for your investment, you will need to put this actual cost data into context. Senior management will expect an assessment of whether these costs are high, low, or about right in relation to the objectives that your organisation seeks to achieve.
Put your costs into context
Reviewing the mission statement, existing policies and organisational structure in use within your organisation is a useful first step to understanding the organisational context in which the curation costs have been incurred. Less formal reports such as draft business and strategic planning documents may also be helpful in clarifying your organisation's objectives in the short to medium terms. Reviewing your stakeholders and their needs also helps to put your costs into context. Keep in mind that these stakeholders may be quite diverse in nature, so a requirements gathering or consultation phase may be necessary to ensure you clearly understand your stakeholders' needs and values. Although requirements gathering can be time consuming, it does provide invaluable information to help you shape your support and services so that they remain useful and effective.
Throughout this review, focus on the overarching themes that govern your organisation's activities and investment. In particular, try to identify the benefits and the risk mitigation that have influenced the spending you have made. These will lead you to your cost drivers.
Categories of cost drivers
Many cost drivers may influence your organisation, but they can essentially be grouped into four broad categories. These four categories align with the first generation of the balanced scorecard performance management tool.
Financial cost drivers typically aim to improve the overall financial picture of an organisation and may be considered in light of refining pricing structures, identifying new revenue streams, or establishing cost recovery mechanisms. Specific drivers in this category include delivering benefit and value, realising impact, and moving towards improved sustainability of resources and service provision. All of these drivers help the organisation to demonstrate sound financial stewardship to its shareholders and/or funding body. In addition to the more direct benefits associated with understanding these cost drivers, specific risks may also be mitigated. For instance, is the organisation at risk of having to limit or cease a particular curation service if a cost recovery approach isn’t feasible? If so, what effect will the loss of the service have on the organisation’s overall ability to realise impact?
An organisation undertakes a cost exercise and determines it is spending quite a high percentage of its operational budget on dissemination and communication with stakeholders. The organisation wants to determine whether these expenses are justified. If the organisation has a key objective to maximise the impact of its tools and services among a particular community, then the relatively high costs associated with communication may be viewed as a perfectly reasonable expense as long as the impact is being realised. If the communication costs are high and impact isn’t being realised, the organisation may wish to investigate alternate customer relationships and distribution channels for reaching its target community to ensure that resources are being spent most effectively.
Customer-related cost drivers tend to revolve around increasing customer satisfaction and ensuring that the organisation is meeting its stakeholders’ needs. Specific cost drivers that may affect customer satisfaction include transparency about the organisation as a whole, the general trustworthiness of the organisation, the perceived quality and reputation of the organisation, the organisation’s ability to innovate, and the overall longevity of the organisation. While communicating the longevity of the organisation to your customers may be quite straightforward, other aspects such as trustworthiness and quality may be more difficult to demonstrate in a tangible way.
An organisation is considering whether to participate in a formal TRAC audit and certification process to demonstrate its ‘trustworthiness’ as a digital repository. The audit itself can take a substantial amount of staff time to prepare for and complete. In addition to the potential costs and effort required to complete the initial audit, you’ll also need to consider any ongoing costs to maintain your certified status. If trust in preserving access to digital content is a key objective for your organisation then, the costs associated with this formal audit and certification may be viewed as necessary for your organisation to remain competitive. However, if ‘trustworthiness’ isn’t something that your customers are particularly concerned about, then undertaking such costly procedures may not be a wise investment for your organisation. Before undertaking any such activity, it is always good to check with your customers to ensure that your investments align with their key interests.
Cost drivers under this category tend to focus on improving the organisation, innovating and creating new value. In many cases, these objectives are realised through building the capacity of existing staff or through the acquisition of new skills.
In light of funding body requirements for submitting data management plans (DMPs) with grant applications, a University Research Office is aiming to increase its value to researchers by providing dedicated guidance and support on writing DMPs. The Research Office does not feel it has the right skills in-house and has determined that a new post would need to be created to provide this level of support across the institution. To determine whether such an investment would be money well spent, the institution would need to assess the number of current funding applications being received and the overall success rates. If the numbers are relatively low for both, funding a new post may not be the best use of resources. However, if the University has prioritised the increase of grant capture in its overall strategy, then funding such a post may well help to support the development of a thriving research culture. In such cases, the institution may wish to go ahead with the investment but would also need to monitor funding success rates to ensure that their approach is yielding the desired results.
Cost drivers in this category include your organisation's overall efficiency; your organisation's flexibility and adaptability; as well as any requirements your organisation has to be interoperable with other service providers. When trying to streamline your processes and/or increase the quality of services, you'll need to bear in mind what it is your customers or users expect you to excel at. For example, users of an archive of clinical trial data may have far greater expectations about data protection and confidentiality than users of an archive of astronomical data would.
A social science data archive with vast holdings of personal information is looking for ways to increase its efficiency in ingesting data into the archive. At the moment, staff spend quite a lot of time stripping out sensitive information to ensure that data protection laws are not breached when providing future access to the data. However, given the expectation from users around data protection and confidentiality, you will need to determine how efficiencies might be made without compromising the quality of the data cleaning process. In such cases, the organisation may wish to interact with researchers earlier in the lifecycle to ensure that only necessary personal data is captured through questionnaires and interviews. This may be realised by delivering more training to researchers or through the provision of online guidance. By encouraging researchers not to collect extraneous personal data, the archive can reduce the amount of time needed to clean the data upon ingest thereby making the process more efficient while not compromising data protection and confidentiality.
Want to learn more about cost drivers, risks and benefits?
The 4C project has produced a series of reports relating to cost drivers. Our prioritised assessment of the indirect economic determinants investigates each of the fifteen cost drivers listed above in far greater detail. Our report on quality and trustworthiness discusses costs and benefits of audits and certification procedures. Our report on risk, benefit, impact and value investigates risks as cost drivers and explores the potential value of the business model canvas (BMC) approach. For more on the business canvas modelling, please see the next section on sustainability.
Now that you have a handle on cost drivers, it's time to consider how to plan for sustainability in your curation-related spending. Alternatively, refresh your understanding of how to describe your costs using cost models.