One of the most thoroughly studied questions in business is how, at budgeting time, large corporations should choose among investment opportunities. In-house economists, management advisors and even Nobel laureates have worked on this problem and come up with an impressive array of quantitative and process-oriented resource allocation systems. Why, then, are so many senior executives frustrated with the process and convinced that their companies’ capital is not being invested as well as it could be?
One reason is that even the best-designed systems can be trumped by the power of personality. A forceful appeal sometimes carries more weight than even the most objectively accurate financial analysis built on highly reliable facts. It is now commonplace, in fact, for talented and charismatic managers to spin, manipulate and otherwise cajole senior management into funding their business ideas — often in the face of numbers that would, on their own, dictate a negative decision. Put another way, when people are economical with the truth during capital budgeting, the underlying economics get lost.
Having guided dozens of major corporations through the budgeting process and watched hundreds of presentations by line managers asking for capital, we have profiled five archetypes of bad behavior commonly used by managers to subvert decision-making standards and win resources. It is not uncommon for a manager to adopt more than one type, depending on how his... To read the complete article, login or sign-up using the form below.
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