Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 10, Issue 40;   October 6, 2010: Management Debt: Part II

Management Debt: Part II

by

As with technical debt, we incur management debt when we make choices that carry with them recurring costs. How can we quantify management debt?
Eggs Sardou at Lucile's: poached eggs, creamed spinach, gulf shrimp, grits

Eggs Sardou at Lucile's: poached eggs, creamed spinach, gulf shrimp, grits. Right about now (late 2010), supplies of two of the products pictured here are threatened by two different incidents that affect their respective supply chains. Eggs have been recalled because of salmonella contamination (see the U.S. Food and Drug Administration's Web site), and the BP oil disaster in the Gulf of Mexico has interrupted supplies of gulf shrimp (see the U.S. National Oceanic and Atmospheric Administration's Web site). The two incidents are probably traceable, respectively, to relaxation of Federal regulatory activity in egg production and oil production. If indeed deregulation is responsible, it could be interpreted as a form of management debt on a societal scale. That is, the decision to achieve lower cost production by deregulation might have been a decision that incurred management debt, and the "interest charges" might then have been occasional supply interruptions caused by elevated recall rates or elevated incidence of catastrophic production accidents. To some extent, these consequences of deregulation are predictable, because deregulation shifts responsibility for safe operations from more impartial federal inspectors to producers, who have clear conflicts of interest. Photo courtesy squidish (Susan Michael).

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 distasteful
recurring 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  Go to top Top  Next issue: The Politics of the Critical Path: Part II  Next Issue

52 Tips for Leaders of Project-Oriented OrganizationsAre 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? rbrengAWhWwuqHKBSQmKYner@ChacFDJAJNXdgkNVcywIoCanyon.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.

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:

A Mastodon skeletonLearn from the Mastodon
Not long ago, Mastodons roamed North America in large numbers. Cousins to the elephant, they thrived in the cool, sub-glacial climate. But the climate warmed, and human hunters arrived. The Mastodon couldn't adapt, and now it's extinct. Change is now coming to your profession. Can you adapt?
A can of sardines — what many of us feel like on board a modern airlinerChanging the Subject: Part I
Whether in small group discussions, large meetings, or chats between friends, changing the subject of the conversation can be constructive, mischievous, frustrating, creative, tension relieving, necessary, devious, or outright malicious. What techniques do we use to change the subject, and how can we cope with them?
The giant sequoiaThe Good, the Bad, and the Complicated
In fiction and movies, the world is often simple. There's a protagonist, a goal, and a series of obstacles. The protagonists and goals are good, and the obstacles are bad. Real life is more complicated.
Christ's Indian PaintbrushFour Popular Ways to Mismanage Layoffs: Part I
When layoffs are necessary, the problems they are meant to address are sometimes exacerbated by mismanagement of the layoff itself. Here is Part I of a discussion of four common patterns of mismanagement, and some suggestions for those managers and other employees who recognize the patterns in their own companies.
Orient quad, photo by George H. Van NormanHow to Deal with Holding Back
When group members voluntarily restrict their contributions to group efforts, group success is threatened and high performance becomes impossible. How can we reduce the incidence of holding back?

See also Personal, Team, and Organizational Effectiveness and Workplace Politics for more related articles.

Forthcoming issues of Point Lookout

Balancing talk time and the value of the contributionComing March 29: Virtual Blowhards
Controlling meeting blowhards is difficult enough in face-to-face meetings, but virtual meetings present next-level problems, because techniques that work face-to-face are unavailable. Here are eight tactics for controlling virtual blowhards. Available here and by RSS on March 29.
kudzu enveloping a Mississippi landscapeAnd on April 5: Listening to Ramblers
Ramblers are people who can't get to the point. They ramble, they get lost in detail, and listeners can't follow their logic, if there is any. How can you deal with ramblers while maintaining civility and decorum? Available here and by RSS on April 5.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrennPkyxFpQjdOraIXXner@ChacuAwSMwBOGQoLNigHoCanyon.com or (617) 491-6289, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

Reprinting this article

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 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

Changing How We Change: The Essence of Agility
MasteChanging How We Change: The Essence of Agilityry of the ability to adapt to unpredictable and changing circumstances is one way of understanding the success of Agile methodologies for product development. Applying the principles of Change Mastery, we can provide the analogous benefits in a larger arena. By exploring strategies and tactics for enhancing both the resilience and adaptability of projects and portfolios, we show why agile methodologies are so powerful, and how to extend them beyond product development to efforts of all kinds. Read more about this program. Here are some upcoming dates for this program:

Conflict Resolution Skills for Leaders
ConflConflict Resolution Skills for Leadersict is inherent in collaborative work. When conflict is constructive, it produces better outcomes. When it's destructive, it can be an insurmountable obstacle to success. In this program, we explore the connections between the outcomes of collaboration and conflict in both of its forms. And we emphasize the skills needed most by leaders. The leader's task is to manage conflict so as to ensure that the group achieves its objective with its capacity to collaborate intact, or even enhanced. Rick Brenner shows team leaders and team sponsors the techniques they need to manage team conflict for relationship safety and better outcomes. Read more about this program. Here's an upcoming date for this program:

Influencing Outcomes Without Authority
Your Influencing Outcomes Without Authorityability to influence others — whether upward, downward, laterally, or within a team — always depends on both the quality of your relationships with the people you influence, and on your perception and their perception of your personal power. In this program, Rick Brenner shows you the techniques for making things happen not by using formal organizational power, but by using informal, personal power. Read more about this program. Here's an upcoming date for this program:

Strategies for Leading Teams in Hard Times
When Strategies for Leading Teams in Hard Timesa project team is on task, the contributions of leaders are important, and little noticed. Sometimes the team encounters unexpected difficulty, or requirements change, or budgets are reduced, or any of a number of other things might happen. In these cases, the leader must make or facilitate decisions about how to respond or how to revise the plan. We get through it somehow. Hard times are something else altogether. Despondency, disillusionment, resource shortages, unexpected and severe failure of the plan, and toxic conflict can erode morale. How can leaders deal with such situations? Read more about this program. Here's an upcoming date for this program:

Strategies for Technical Debt: A Workshop for Enterprise Leaders
TechnTechnical Debt Management for Enterprise Leadersical debt is more than mere IT jargon. It's a metaphor that refers to the accumulation of technical artifacts that really ought to be retired, replaced, rewritten, re-implemented, or, if absent, created. We can find technical debt in almost any system, including those that seem to be working well. So what's the problem? The problem is the "interest charges." Systems carrying technical debt are more difficult to maintain, more difficult to extend or enhance, and more difficult to use, than they would be if we "retired" the debt. This engaging and eye-opening program points the way to a path that leads your organization out of technical debt, to make it more adaptable, more transformable, and more agile. Read more about this program. Here's an upcoming date for this program:

Creating High Performance Virtual Teams
Many Creating High Performance Virtual Teamspeople experience virtual teams as awkward, slow, and sometimes frustrating. Even when most team members hail from the same nation or culture, and even when they all speak the same language, geographic dispersion or the presence of employees from multiple enterprises is often enough to exclude all possibility of high performance. The problem is that we lead, manage, and support virtual teams in ways that are too much like the way we lead, manage, and support co-located teams. In this program, Rick Brenner shows you how to change your approach to leading, managing, and supporting virtual teams to achieve high performance using Simons' Four Spans model of high performance. Read more about this program. Here's an upcoming date for this program:

The Race to the South Pole: Ten Lessons for Project Managers
On 14The Race to the Pole: Ten Lessons for Project Managers December 1911, four men led by Roald Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished. As historical drama, why this happened is interesting enough, but to organizational leaders, business analysts, project sponsors, and project managers, the story is fascinating. Lessons abound. Read more about this program. Here's an upcoming date for this program:

Follow Rick

Send email or subscribe to one of my newsletters Follow me at LinkedIn Follow me at Twitter, or share a tweet Follow me at Google+ or share a post Subscribe to RSS feeds Subscribe to RSS feeds
The message of Point Lookout is unique. Help get the message out. Please donate to help keep Point Lookout available for free to everyone.
21st Century Business TravelAre your business trips long chains of stressful misadventures? Have you ever wondered if there's a better way to get from here to there relaxed and refreshed? First class travel is one alternative, but you can do almost as well (without the high costs) if you know the tricks of the masters of 21st-century e-enabled business travel…
Go For It: Sometimes It's Easier If You RunBad boss, long commute, troubling ethical questions, hateful colleague? Learn what we can do when we love the work but not the job.
303 Tips for Virtual and Global TeamsLearn how to make your virtual global team sing.
101 Tips for Managing ChangeAre you managing a change effort that faces rampant cynicism, passive non-cooperation, or maybe even outright revolt?
101 Tips for Effective MeetingsLearn how to make meetings more productive — and more rare.
Exchange your "personal trade secrets" — the tips, tricks and techniques that make you an ace — with other aces, anonymously. Visit the Library of Personal Trade Secrets.