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
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.
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!
Update: March 26, 2018
Although this article and the next have held up well over the years, my work in technical debt has provided several insights that relate to management debt.
- Like technical debt, management debt can be incurred unintentionally
- Like technical decisions, management decisions sometimes have unintended consequences. For example, as the result of an acquisition, integrating the assets of the IT operation of an acquired business into the combined business might be more difficult than anticipated. The ongoing efforts to integrate the two sets of assets can be viewed as the interest charges on management debt incurred as a result of the acquisition.
- Interest charges on management debt can arise from external causes
- Again using an acquisition as an illustration, consider the case in which part of the acquired business — call it Site Beta — is located apart from the rest of the combined enterprise. Management decides not to relocate everyone from Site Beta, to save costs. But there are costs associated with maintaining this separation, too, and they can be regarded as the metaphorical interest charges on the management debt incurred by not relocating Site Beta. These charges aren't due to external causes.
- But now suppose that the products produced at Site Beta become wildly successful, because the new owners of Beta's principal competitor have decided to exit the market. As a result of the increased business, travel between Site Beta and the rest of the enterprise increases. This results in lost time, delays, and increased costs, which all contribute to the metaphorical interest charges associated with maintaining Site Beta as a separate operation. These additional costs are traceable to the unanticipated success of Beta's products, rather than to management's decision not to consolidate Site Beta with the rest of the enterprise.
- Some management debt masquerades as technical debt
- In the acquisition example above, describing the consequences of an acquisition, most would regard the IT asset integration difficulty as an instance of technical debt. My own view is that it is a technical manifestation of a management debt incurred in the course of the acquisition. The ongoing metaphorical interest charges ought to be charged to the acquisition, rather than to IT operations.
Your comments are welcomeWould you like to see your comments posted here? rbrenmhXARWRMUvVyOdHlner@ChacxgDmtwOKrxnripPCoCanyon.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.
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.
More articles on Personal, Team, and Organizational Effectiveness:
- Heavy Burdens: Should, Always, Must, and Never
- As a leader you carry a heavy burden. You're accountable for everything from employee development to
meeting organizational objectives, and many of these responsibilities conflict. Life is tough enough,
but most of us pile on a load of over-generalized rules of work life — a load too heavy for anyone
- Films Not About Project Teams: I
- Here's part one of a list of films and videos about project teams that weren't necessarily meant to
be about project teams. Most are available to borrow from the public library, and all are great fun.
- The True Costs of Indirectness
- Indirect communications are veiled, ambiguous, excessively diplomatic, or conveyed to people other than
the actual target. We often use indirectness to avoid confrontation or to avoid dealing with conflict.
It can be an expensive practice.
- Action Item Avoidance
- In some teams, members feel so overloaded that they try to avoid any additional tasks. Here are some
of the most popular patterns of action item avoidance.
- Decisions: How Looping Back Helps
- Group decision-making often proceeds through a series of steps including forming a list of options,
researching them, ranking them, reducing them, and finally selecting one. Often, this linear approach
yields disappointing results. Why?
Forthcoming issues of Point Lookout
- Coming June 3: Capability Inversions and the Dunning-Kruger Effect
- A capability inversion occurs when the person in charge of an effort is far less knowledgeable about the work involved or its purpose than are the people doing that work. In capability inversions, the Dunning-Kruger effect can intensify group dysfunction, sometimes severely disrupting the effort. Available here and by RSS on June 3.
- And on June 10: They Don't Reply to My Email
- Ever have the experience of sending an email message to someone, asking for information or approval or whatever, and then waiting for a response that comes only too late? Maybe your correspondent is an evil loser, but maybe not. Maybe the problem is in your message. Available here and by RSS on June 10.
I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenmhXARWRMUvVyOdHlner@ChacxgDmtwOKrxnripPCoCanyon.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 words in your inbox in one hour. License any article from this Web site. More info
- Bullet Points: Mastery or Madness?
Decision-makers in modern organizations commonly demand briefings in the form of bullet points or a series of series of bullet points. But this form of presentation has limited value for complex decisions. We need something more. We actually need to think. Briefers who combine the bullet-point format with a variety of persuasion techniques can mislead decision-makers, guiding them into making poor decisions. Read more about this program.
Here are some dates for this program:
- Time: 12:00 Eastern Time. Place: Wherever you are. It's a
Webinar.: June 24, Monthly Webinar, sponsored by Technobility Webinar Series. Register now.
- Time: 6:00 PM Eastern Time. Place: Wherever you are. It's
a Webinar.: June 24, Monthly Webinar, sponsored by Technobility Webinar Series. Register now.
- Time: 12:00 Eastern Time. Place: Wherever you are. It's a Webinar.: June 24, Monthly Webinar, sponsored by Technobility Webinar Series. Register now.
- 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.