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The Executive’s Guide to Information Technology, Second Edition by Carr, Nicholas G., Piot, Jon, Baschab, John

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Chapter 16. Effective Decision Making and Risk Management

 

You want a valve that doesn’t leak and you try everything possible to develop one. But the real world provides you with a leaky valve. You have to determine how much leaking you can tolerate.

 
 --Arthur Rudolph, manager of the Marshall Space Flight Center Saturn V program office[1]
 

A foolish consistency is the hobgoblin of little minds.

 
 --Ralph Waldo Emerson[2]
 

Quit building me a space shuttle, when all I want is a trip to the grocery store.

 
 --Client CEO to IT department managers

This chapter outlines and illustrates the pitfalls of incentives inherent for IT managers that lower the priority on cost containment and increase the priority for minimizing risk, often at great expense. Many IT decision makers view risk as a binary decision—accept the risk or mitigate the risk. In the effort to eliminate risk, these same decision makers often show little understanding or appreciation for the high incremental cost required to mitigate all risk.

We examine key areas in which IT managers consistently over-mitigate risks with excess spending or resource allocation. IT managers too often submit additional capital and labor requests without investigation into other alternatives. In addition, these requests demonstrate the limited knowledge most IT organizations have about the underlying business and its economics. We illustrate the phenomenon with multiple examples from client engagements.

The chapter is intended to raise awareness ...

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