Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 10, Issue 39;   September 29, 2010: Management Debt: I

Management Debt: I


Management debt, like technical debt, arises when we choose paths — usually the lowest-cost paths — that lead to recurring costs that are typically higher than alternatives. Why do we take on management debt? How can we pay it down?
Soldiers of IX Engineering Command, U.S. Army Air Force, putting down a Pierced Steel Planking (PSP) Runway at an Advanced Landing Ground under construction somewhere in France following the Normandy Landings of World War II

Soldiers of IX Engineering Command, U.S. Army Air Force, putting down a Pierced Steel Planking (PSP) Runway at an Advanced Landing Ground (ALG) under construction somewhere in France following the Normandy Landings of World War II. ALGs were the temporary airfields used by aircraft engaged in air support of Allied forces. One of the most serious challenges faced by the engineers was simply keeping up with the speed of the advance. This imbalance of capability between combat and engineering units can be viewed as one consequence of management debt. It is possible that a heavier investment in engineering capability, relative to combat capability, was required. Naturally, precise projection of the relative requirements was difficult prior to the event. In peacetime activities suitable precision is more easily achievable. Photo from "The Air Force Engineer," Army Air Forces Engineer Command, MTO.

The concept of technical debt has been useful to decision-makers in the software engineering community, where it's used to evaluate relative costs of design choices. Choosing a low-cost approach that creates problems in the future is analogous to taking on a debt that incurs interest charges until it's repaid. Strangely, this metaphor isn't as popular in general management circles, where it may be even more useful as the concept of management debt.

Management debt arises as a consequence of making choices that might be very attractive in the near term, but which create recurring costs in the long term.

For instance, consider the problem of updating a mainframe-based IT operation. Although a less mainframe-intensive operation might be more effective, more nimble, and more compatible with today's labor market, the near-term cost of conversion can be staggering, due to the cost of replacing the capabilities of the custom software that has accumulated over the years. Continuing with the mainframe avoids those near-term costs, but it incurs ongoing costs in the form of inflexibility, high overhead, and inability to exploit modern technologies. These latter costs can be viewed as the interest on management debt resulting from a decision to defer payment of the "current bill" — namely, the cost of converting the mainframe operation.

Here are two essential insights about management debt for decision-makers and those who support them.

It's not the debt that matters, it's the interest
Since actual financial debt is usually undesirable, we sometimes regard "management debt" as undesirable in an absolute sense. Not so.
Management debt isn't the problem. The problem is the "interest" — the long-term, recurring costs that result from the debt. When resources are allocated to paying the interest on management debt, the organization sometimes misses opportunities because of insufficient resources.
When deciding Management Debt is the
consequence of decisions
that favor low-cost
approaches carrying
long-term, recurring
how to pay down management debt, emphasize those components that generate the highest recurring costs. Use the savings to pay down remaining debt.
Doing nothing usually seems best
There's a natural reluctance to commit large chunks of available resources to any effort, especially when that effort is unglamorous, or doesn't produce immediate revenue. We look longingly at alternatives that are more appealing, either because they do produce revenue, or because they generate good feelings or praise.
And when we do look longingly at alternatives, we tend not to focus on the long-term costs of failing to pay down management debt. Not recognizing these costs might be an example of the cognitive bias known as the Availability Heuristic. It's difficult to imagine the long-term costs of a decision, and it can even be difficult to accept the closely reasoned arguments of experts who are able to imagine those consequences. See "Nine Project Management Fallacies" for more.

In Part II, we'll take a slightly more quantitative approach to management debt.  Next in this series Go to top Top  Next issue: Management Debt: 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? rbrenIphmFRsisSfezIdTner@ChacOCQdPXfKZkqjcvoDoCanyon.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 stormEmailstorming
Most of us get too much email. Some is spam, but even if we figured out how to eliminate spam, most would still agree that we get too much email. What's happening? And what can we do about it?
Computer monitors being recycled by the Nevada Division of Environmental ProtectionHow Not to Accumulate Junk
Look around your office. Look around your home. Very likely, some of your belongings are useless and provide neither enjoyment nor cause for contemplation. Where does this stuff come from? Why can't we get rid of it?
A frost-covered spider webSome Limits of Root Cause Analysis
Root Cause Analysis uses powerful tools for finding the sources of process problems. The approach has been so successful that it has become a way of thinking about organizational patterns. Yet, resolving organizational problems this way sometimes works — and sometimes fails. Why?
Ammi Visnaga, a nile weed that has medicinal valueDown in the Weeds: II
To be �down in the weeds,� in one of its senses, is to be lost in discussion at a level of detail inappropriate to the current situation. Here�s Part II of our exploration of methods for dealing with this frustrating pattern so common in group discussions.
A bottlenose dolphinWacky Words of Wisdom: V
Adages, aphorisms, and "words of wisdom" are true often enough that we accept them as universal. They aren't. Here's Part V of some widely held beliefs that mislead us at work.

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

Forthcoming issues of Point Lookout

A tangle of cordageComing March 28: Four Overlooked Email Risks: II
Email exchanges are notorious for exposing groups to battles that would never occur in face-to-face conversation. But email has other limitations, less-often discussed, that make managing dialog very difficult. Here's Part II of an exploration of some of those risks. Available here and by RSS on March 28.
A Mustang GT illegally occupying two parking spaces at Vaughan Mills Mall, OntarioAnd on April 4: Narcissistic Behavior at Work: III
People who behave narcissistically tend to regard themselves as special. They systematically place their own interests and welfare ahead of anyone or anything else. In this part of the series we consider how this claimed specialness affects the organization and its people. Available here and by RSS on April 4.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenDpAscsDBNGOWfhFOner@ChaceHCDBlKqzJwvoeZwoCanyon.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

The Power Affect: How We Express Our Personal Power
Many The Power Affect: How We Express Personal Powerpeople who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about 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.
Technical Debt for Policymakers BlogMy blog, Technical Debt for Policymakers, offers resources, insights, and conversations of interest to policymakers who are concerned with managing technical debt within their organizations. Get the millstone of technical debt off the neck of your organization!
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.