Profit growth is a convincing indicator of whether or not a company has performed and is based on how private decisions are made both internally and externally. Although this lesson discusses the conduct of managers and how they make effective decisions, it is important to understand that within larger companies, there are several levels of power and several individuals capable of making decisions. Regardless of whether profit growth is the most essential objective, decision making inside the company may appear diverse because of several factors.

Profit growth suggests that a manager's key obligation is to the company's shareholders. Other stakeholders include the company's consumers, employees, and the community. Based on these statements related to private decisions, one major question arises: "To what extent might management decisions be influenced by the likely effects of its actions on these parties?" (Samuelson & Marks, 2012, p. 14).

For example, assume company managers recognize that they must reduce staff to grow profits. Should the company still focus on growing profits even though a significant number of employees will lose their jobs? Managers may compromise among profit growth, additional goals, and community objectives.

Samuelson, W., & Marks, S. G. (2012). Managerial economics (7th ed.). Hoboken, NJ: Wiley.

In terms of public decisions, goals matter more than an evaluation of profit. Most onlookers would agree that public decision should increase the well-being of society or those individuals directly affected by a specific decision. However, public decisions often convey varying benefits to different groups. Within a public decision, some groups will benefit and others will not.

So, how does a company weigh benefits and costs to make the best decision for society? Managers can apply the benefit–cost analysis, the primary structure used to guide decisions that affect the public. "Benefit–cost analysis begins with the systematic enumeration of all of the potential benefits and costs of a particular public decision" (Samuelson & Marks, 2012, p. 17). It primarily assesses price levels that affect benefits and costs. Lastly, it provides guidance to pursue a project only if the total amount of benefits surpasses the total costs.

Samuelson, W., & Marks, S. G. (2012). Managerial economics (7th ed.). Hoboken, NJ: Wiley.