The concept of management debt, like technical debt, is useful for forecasting the costs of consequences of decisions. Projections of recurring charges resulting from decisions can help discriminate among alternatives. Here are four tips for those who want to project the costs of management debt.
- Quantifying management debt is distasteful
- Even when we understand a decision's long-term costs, projections depend on market conditions, technological evolution, the legal environment, and many other factors. Quantitative projections can face criticism of their most basic assumptions.
- Still, there's an irony in these criticisms. We have little difficulty accepting three-year and five-year projections for projects we adore, or for the enterprise itself. The same assumptions used for those projections can serve for projecting the costs of management debt. True, some additional estimates might be needed, but they're usually no more difficult to construct than are the estimates we're already making.
- What makes the interest on management debt so much more difficult to project is very simple: it's distasteful.
- Opinions about management debt can be political
- Whenever we quantify the consequences of a distasteful decision, and the projections we make are debatable, politics enters the conversation. The likelihood and intensity of the politics increases with the importance of the resources under debate. Political activity in itself is not unhealthy, but long-lived, intense political debate can become toxic.
- A pattern of political activity surrounding issues of management debt can make effective internal resolution so improbable that the debate can remain unresolved long enough to threaten organizational survival. When this happens, seek credible impartial opinions outside the organization.
- Lost revenue opportunities are rarely considered
- When the What makes the interest on
management debt so difficult
to project is very simple:
it's distastefulrecurring costs of management debt prevent the organization from exploiting revenue opportunities, we must charge those lost opportunities to the cost of carrying management debt. And since revenue far exceeds the costs of generating it, the most significant costs of management debt are often lost revenue. - Yet, we rarely include lost revenue opportunities in the cost of decisions, especially decisions not to do something. Lost revenues seem so debatable, so flimsy, and so speculative. To break this habit, focus not only on unexploited opportunities for new revenue, but also on declining market share and lost customers.
- Stagnation is surprisingly expensive
- An often-neglected source of interest on management debt is the cost of doing nothing. For instance, if we must terminate people who've stagnated because we failed to keep our technology current, the costs of those terminations, and the consequent loss of organizational knowledge, trace directly to the decision to continue using outdated technology.
- Accurate accounting for stagnation requires not only recognition of the recurring charges for the management debt, but also accrual of the cost of ultimately dealing with the stagnation.
The decision not to account for management debt does itself incur management debt, because it distorts the organization's view of its available resources. Does your organization have an accurate accounting of its resources? First in this series Top Next Issue
Are your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!
Your comments are welcome
Would you like to see your comments posted here? rbrendPtoGuFOkTSMQOzxner@ChacEgGqaylUnkmwIkkwoCanyon.comSend me your comments by email, or by Web form.About Point Lookout
Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.
This article in its entirety was written by a human being. No machine intelligence was involved in any way.
Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.
Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.
Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.
Related articles
More articles on Personal, Team, and Organizational Effectiveness:
- Names and Faces
- Most of us feel recognized, respected, and acknowledged when others use our names. And many of us have
difficulty remembering the names of others, especially those we don't know well. How can we get better
at connecting names and faces?
- Achieving Goals: Inspiring Passion and Action
- Achieving your goals requires both passion and action. Knowing when to emphasize passion and when to
emphasize action are the keys to managing yourself, or others, toward achievement.
- Teamwork Myths: Formation
- Much of the conventional wisdom about teams is in the form of over-generalized rules of thumb, or myths.
In this first part of our survey of teamwork myths, we examine two myths about forming teams.
- Patching Up the Cracks
- When things repeatedly "fall through the cracks," we're not doing the best we can. How can
we deal with the problem of repeatedly failing to do what we need to do? How can we patch up the cracks?
- Why We Don't Care Anymore
- As a consultant and coach I hear about what people hate about their jobs. Here's some of it. It might
help you appreciate your job.
See also Personal, Team, and Organizational Effectiveness and Workplace Politics for more related articles.
Forthcoming issues of Point Lookout
- Coming May 15: Should I Write or Should I Call?
- After we recognize the need to contact a colleague or colleagues to work out a way to move forward, we next must decide how to make contact. Phone? Videoconference? Text message? There are some simple criteria that can help with such decisions. Available here and by RSS on May 15.
- And on May 22: Rescheduling Collaborative Work
- Rescheduling is what we do when the schedule we have now is so desperately unachievable that we must let go of it because when we look at it we can no longer decide whether to laugh or cry. The fear is that the new schedule might come to the same end. Available here and by RSS on May 22.
Coaching services
I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrendPtoGuFOkTSMQOzxner@ChacEgGqaylUnkmwIkkwoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.
Get the ebook!
Past issues of Point Lookout are available in six ebooks:
- Get 2001-2 in Geese Don't Land on Twigs (PDF, )
- Get 2003-4 in Why Dogs Wag (PDF, )
- Get 2005-6 in Loopy Things We Do (PDF, )
- Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, )
- Get 2009-10 in The Questions Not Asked (PDF, )
- Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, )
Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500-1000 words in your inbox in one hour. License any article from this Web site. More info
Follow Rick
Recommend this issue to a friend
Send an email message to a friend
rbrendPtoGuFOkTSMQOzxner@ChacEgGqaylUnkmwIkkwoCanyon.comSend a message to Rick
A Tip A Day feed
Point Lookout weekly feed