Quantitative factors can be precisely measured in numerical terms, while qualitative factors are measured subjectively. Capital investments -- whether large, one-time purchases of facilities or productive equipment, investments in labor or assets purchased for profitable appreciation -- are generally driven by quantitative factors, such as price and an expected return on investment. However, managers today must consider a range of qualitative factors when making capital investment decisions. Ethics, safety, company culture and environmental concerns can affect the decision to purchase capital resources. Understanding these types of qualitative factors is part of making well-informed capital-investment decisions.
Capital investments can have an impact on the way work is performed in an organization. Adding a second office complex in another city, for example, may change the way communication and information flow between teams, or it may affect reporting relationships. Adding automation into a small-business production line, as another example, can change the team dynamic on a factory floor. Before making a capital-investment decision, a manager should understand the effects the resource could have on the company's culture, including the things people value, the way people work together, the overall morale and the employees' motivations to excel. Cultural considerations can be expected to come into play more heavily with physical productive resources than financial investments.
Capital investments can be made to increase a company's capacity to produce goods or deliver services. This being the case, the quality of capital resources can directly affect the quality of goods or services. This is one area in which quantitative and qualitative factors can be at odds, as the least expensive options in the marketplace can generally be expected to yield the lowest quality. A manager should strike a balance between cost and quality in capital resources to maximize the investments' cost efficiency. Purchasing the cheapest vehicles for on-site technicians, for example, can lead to service interruptions due to vehicle breakdowns. Purchasing low-quality kitchen equipment in a restaurant, as another example, can diminish the consistency of prepared food.
Capital investments can have varying degrees of impact on the environment, and the more financially appealing options frequently have greater impacts than costlier options. Because of this, the quantitative factor of price can be at odds with the qualitative factor of environmental responsibility. A manager must consider the impact that any capital investment will have on the environment. When purchasing new trucks for a delivery fleet, for example, she should balance affordability and environmentally conscious design.
Ethical concerns can inject a host of qualitative considerations into a capital-investment decision. Such considerations as employee safety, local employment and local air quality can all be affected by investments in new facilities and equipment, regardless of the financial benefits. Overhauling a production facility to automate manufacturing tasks while drastically reducing the staff, for example, can introduce greater cost efficiency and public animosity at the same time. Installing low-quality fire protection systems, as another example, can unnecessarily endanger employees on the job.
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