Frequently, we make decisions which have long term consequences both in personal and professional life. Due to various pressing commitments, we tend to substitute quick decisions or quick fixes to address long term challenges.
Why do we do this?
It gives an illusion of saving’s of time, effort, investment, and resources. Most importantly, we start seeing immediate results in the short-term.
Then, why is it a problem?
Visualise addressing sleeplessness with temporary medication leading to unintended long term consequences.
A similar result is visible in business.The substitution of time and effort with short term thinking, to solve a business problem, gives an illusion of savings in time and effort.
This savings is nothing but borrowed time, a.k.a “Management Debt” which Ben Horowitz explains in his classic book, “Hard Things About Hard Things”
For every expedient short term business decision with a long term consequence, you start accumulating Management Debt. If not handled effectively, it will lead to “Management Bankruptcy.”
Management Debt Scenarios
Let’s take a look at the following examples for a better understanding of Management Debt:
1.Dual Accountability Centers
Imagine a situation arises wherein you have conducted a review of the organisational structure. You have two capable managers with the required complementary skills, but only a single position to fill in. The challenge for you is that both of them have been doing pretty well in their position. It is a tough choice to make.
Facing the difficult situation of converging the position, and handling a difficult emotional challenge, you skip the difficult task of investing time in finding a durable solution.
You end up satisfying both of them and create roles to meet individual needs when none exists.
You are making a trade-off. But, your actions will have long-term consequences.
It will result in a hectic system of dual reporting, organizational politics, and denial of accountability as both of them will look for excuses. This will eventually result in complaints of a lack of ownership to deliver.
In an ideal situation, you would have easily decided that there exists a requirement for only one position. A suitable person would have been identified based on relative merits.
You would have an honest conversation with both the aspirants and found an appropriate solution.
This process involves thinking and investment of time and energy. Thus, you decided to take the easy route. This made you satisfy everybody’s ego, which resulted in an adverse consequence for everybody, including the organisation.
2. Easier to Do it Myself
Many a time we have heard about delegating in a transactional context.
In a close-knit organisation, founding members spearhead across functions.
Why do they do this?
In the initial phase, it could be about affordability, resulting in the need to double-up on various tasks.After overcoming the initial challenges of affordability, they continue with ad-hocism to do it themselves instead of investing time and developing the team.
This refusal to invest catches up as the company scales up. The workload of the founding members increases , which results in a lack of attention across the spectrum.Eventually, this idea of saving money results in costly corrections. This could be lost deals, delivery issues, expensive resources solving for simple problems etc.
Thus, the idea of saving is again an illusion, resulting in silently accumulating Management Debt. Inevitably, you need to retire the Management Debt by making the appropriate investment in developing the team to scale up the organisation.
It is critical that you overcome the “it’s easier to do on my own” approach to each task.
3.Hiring Pliable Candidates
There is always the temptation to hire and recruit talent who will follow your orders without questioning them. This attitude helps in the quick execution of the task.
Let’s visualise this with the following example.
For a business, it is essential to have a reliable and experienced finance professional for taking sound business decisions.The finance professional is supposed to question, rationalise, drive justifications, and sign-off on the proposal.
Imagine a business leader decides that all this is unnecessary, and the company cannot afford this. So they do it efficiently and leave the professional to manage bookkeeping.The results of this decision are inevitable.
This allows personal biases to drive critical decisions and no alternate viewpoints.
Eventually, the results are a clear recipe for disaster resulting in a mismanaged organisation.This leads to a classic management debt trap wherein you have to take the expensive way to repay the debt.
In a fast-paced world with changing priorities, short-term and easy decisions are inevitable and imperative. However, the most important action is to be able to identify how those decisions are creating a Management Debt.
Once you become aware and conscious of the same, design a framework to repay the debt.
Simple steps to rectify Management Debt are:
- Identify and account for the Management Debt.
- Consciously work towards retiring the debt.
- Replace short term unsustainable solutions with long term scalable solutions.