Management Debt: I

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
costshow 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  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

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:

Message Mismatches

Sometimes we misinterpret the messages we receive — what we see or hear. It's frustrating, and tempers can flare on both sides. But if we keep in mind two ideas, we can reduce the effects of message mismatches.

Games for Meetings: II

We spend a lot of time and emotional energy in meetings, much of it engaged in any of dozens of ritualized games. Here's Part II of a little catalog of some of our favorites, and what we could do about them.

Games for Meetings: IV

We spend a lot of time and emotional energy in meetings, much of it engaged in any of dozens of ritualized games. Here's Part IV of a little catalog of some of our favorites, and what we could do about them.

A Message Is Only a Message

When we receive messages of disapproval, we sometimes feel bad. And when we do, it can help to remember that we have the freedom to decide whether or not to accept the messages we receive.

Virtual Communications: I

Participating in or managing a virtual team presents special communications challenges. Here are some guidelines for communicating with members of virtual teams.

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

Forthcoming issues of Point Lookout

Coming June 28: Tackling Hard Problems: I

Hard problems need not be big problems. Even when they're small, they can halt progress on any project. Here's Part I of an approach to working on hard problems by breaking them down into smaller steps. Available here and by RSS on June 28.

And on July 5: Tackling Hard Problems: II

In this Part II of our look at solving hard problems, we continue developing properties of the solution, and look at how we get from the beginning to the end. Available here and by RSS on July 5.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenunaYPawisLIrvpCJner@ChacEOKCPZPDNcsGRjkfoCanyon.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:

• Get 2001-2 in Geese Don't Land on Twigs (PDF, USD 11.95)
• Get 2003-4 in Why Dogs Wag (PDF, USD 11.95)
• Get 2005-6 in Loopy Things We Do (PDF, USD 11.95)
• Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, USD 11.95)
• Get 2009-10 in The Questions Not Asked (PDF, USD 11.95)
• Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, USD 28.99)

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 people 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. Here are some upcoming dates for this program:

• Wherever you are: it's a Webinar: 12:00 PM June 29 (Eastern Time), Monthly Webinar, Technobility Webinar Series. Register now.
   
• Wherever you are: it's a Webinar: 6:00 PM June 29 (Eastern Time), Monthly Webinar, Technobility Webinar Series. Register now.
   

Creating High Performance Virtual Teams

Many people 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:

• Baci Grill, 134 Berlin Road, Berlin, CT 06416: September 19, Monthly Meeting, Southern New England Chapter of the Project Management Institute. Register now.
   

The Race to the South Pole: Ten Lessons for Project Managers

On 14 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:

• CTCPA, 716 Brook Street, Rocky Hill, CT 06067: September 20, Full-day Workshop, Southern New England Chapter of the Project Management Institute. Register now.