capital-allocation
Evaluates where to spend limited capital — investment appraisal, hurdle rates, payback, and comparing proposals that are not alike. Use this to evaluate an investment or major purchase, compare competing funding requests, set a hurdle rate, decide between building and buying, or review whether past investments delivered what was claimed.
git clone --depth 1 https://github.com/cbrock84/headcount /tmp/capital-allocation && cp -r /tmp/capital-allocation/plugins/finance/skills/capital-allocation ~/.claude/skills/capital-allocationSKILL.md
# Capital allocation Choosing among investments is choosing what not to do. This is the appraisal of individual proposals; which businesses and bets the company should be in belongs to `corporate-strategy:portfolio-strategy`. ## Appraise on incremental cash Only cash flows that change because of the decision belong in the analysis: - **Sunk costs are irrelevant.** Money already spent is not a reason to continue, though it is reliably presented as one. - **Allocated overhead is usually irrelevant.** If the cost occurs anyway, it does not belong in the incremental case. - **Opportunity cost is relevant**, including the capacity consumed that then cannot serve anything else. - **Working capital is a real outflow.** Growth that consumes cash is not free because it is growth. Discount for time and risk. A hurdle rate should reflect the risk of the specific proposal — applying one company-wide rate systematically overfunds risky projects and starves safe ones. ## Read payback for what it tells you Payback ignores everything after the threshold and so is a poor ranking tool. It is a good *liquidity and uncertainty* measure: how long capital is at risk, and how far into an uncertain future the case depends on. Use net present value to decide, payback to understand exposure. A proposal with strong NPV whose returns all arrive in years four and five is a forecasting question as much as an investment one. ## Interrogate the case, not the sponsor Every proposal arrives advocated for. The useful questions are structural: - What has to be true for this to work, and which of those is least certain? - What is the counterfactual — what happens if we do nothing? - Where is the optionality: can it be staged so a small commitment buys information before the large one? - Who is accountable for the benefit after approval? Stage-gating dominates all-or-nothing commitment where uncertainty is high. Paying for information first is usually cheaper than being right by luck. ## Look back, or the numbers stay fictional Compare realized outcomes against the approved case, and make it routine rather than punitive. Where nobody looks back, forecasts drift optimistic because optimism is rewarded at approval and never tested afterwards. ## Never - Include sunk cost in a forward case. - Apply one hurdle rate to proposals of different risk. - Rank by payback. - Approve a benefit with no owner after approval.
Corporate Strategy (CSO). Owns plugins/corporate-strategy/** and nothing else. Delegate work in this department's remit here.
Customer Experience (CCO). Owns plugins/customer-experience/** and nothing else. Delegate work in this department's remit here.
Data & Analytics (CDO). Owns plugins/data-analytics/** and nothing else. Delegate work in this department's remit here.
Demand Generation (CMO). Owns plugins/demand-generation/** and nothing else. Delegate work in this department's remit here.
Office of the CEO. Owns plugins/executive/** and nothing else. Delegate work in this department's remit here.
Finance (CFO). Owns plugins/finance/** and nothing else. Delegate work in this department's remit here.
Corporate IT. Owns plugins/it-operations/** and nothing else. Delegate service desk, systems and network administration, virtualization and cloud, telephony and conferencing, endpoints, assets, identity lifecycle, and backup work here.
Reviewer-class. Read-only review of what other departments commit to — contract terms, privacy and data handling, risk acceptance, and compliance findings. Holds no write surface. Its findings are not overrulable by the department under review.