McKinsey on how companies spend money

Stack of golden George Washington dollar coins,. (c) 2007 Bill Koslosky, MD (CC BY 2.5)

From “How Companies Spend Their Money” [PDF] (McKinsey Global Survey)

A survey of executives from around the world highlights how frequently — and why — a company’s resource allocation decisions go wrong.

Companies start off well, respondents say: senior executives are heavily involved in these decisions and routinely assess the prior performance of business units and the valu…

Project Portfolios Require High-Level Capability

Mountains near Château-d'Oex. (c) E. Forrest Christian

In Waltzing With Bears, Lister and DeMarco describe the benefits of running IT projects within a portfolio. Not every one of them would have to succeed: you could take on several very high-risk (but high-payoff) projects and balance it with several low risk / low payoff projects. Having low-risk/high pay-off projects would be great, but most of the time those have already been done. You have a…

Risk Taking, Risk Management and Software Project Management

Since IT projects are particularly prone to ignoring risk and escalation of commitment, reviewing some of the research on how we make decisions will benefit any IT manager or PM.

The Abilene Paradox of Escalation of Commitment: How We Can All Agree To Go Over the Cliff

Run on East Side Bank, N.Y. 1912 February 16. Bain News Service via Library of Congress.

When a project starts heading south, you would think that the rats would start abandoning the ship and the sponsor would quickly pull the plug to minimize losses. But that’s not what happens. Sponsors’ commitment to projects going bad actually seems to grow. The literature is littered with examples of sponsors continuing to spend money on a project that is slipping (Denver Internationa…

De-escalation of Commitment to Projects

Leaving Yongsan Station. (c) Danleo (CC BY 2.5). Via Wikimedia Commons.

There is a large body of work dealing with the escalation of commitment in IT projects, how managers continue to throw good money after bad, increasing their commitment to a project that has little chance of succeeding. For example, Gustavo Dimello has an interesting summary (“To Pull or Not To Pull the Plug: When Managers Commit Themselves to Failure”) of some of the recent research in managers’…

Power of Mediocrity: Being Great Takes Risk

Meeting room, table and paper board. (c) 2008 Luis Argerich of Buenos Aires, Argentina. Via Wikimedia. (CC BY 2.0)

You’re never going to burn bright when your goal is to not get your fingers burnt.

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