6 ms·

This is a trust problem. Trust problems don't usually get better when you start hiding more shit. Isn't the real solution to make organizations feel confident t

This is a trust problem. Trust problems don't usually get better when you start hiding more shit. Isn't the real solution to make organizations feel confident that they can let unused funding go because they can get it back in the future if they need it?

endtime 4y ago
It seems more like an incentive problem. I'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus.
- DubiousPusher 4y ago
  That sounds like a great way to get "deciders" to override good uses of money from the people below who actually have an understanding of when it needs to be spent. It is a trust problem because organizations generally aren't worried about losing money they don't spend that year or the next. They're worried about never getting it back. When you use a ratchet approach to budgets it doesn't allow organizations to respond to responsibilities which may be cyclical in nature. This leads to permanent worst case thinking which leads to hording.
- dorgo 4y ago
  I wouldn't go for it. Suppose my budget is Y and I could reduce it to Y/2 and get X%*Y/2 as a bonus. But in subsequent years I would only get a budget of Y/2. With half the budget I can only employ half the staff and be half as important. I don't think it works out. edit: on the other hand: If I'm going to quit the job next year and I don't like my successor I'm definitely going to cut corners and budget.
  - bumby 4y ago
    Since the original context here is an army procurement, I don't think that hypothesis works out. Civil servants are not going to get that type of monetary incentive structure.
- robocat 4y ago
  Then the inventive is to add $50million of unnecessary budget one year, and cut $50million the next year to get the EOY bonus. The same dynamic can occur with hedge funds, where the incentive is to increase variance (because high volatility pays the fund managers a lot more on average) or increase risk (example swing for the fences if underwater).
- ska 4y ago
  > It'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus. We already know the answer to this, on average at least the system will be gamed to put money in their pockets, to overall detriment of service.
  - bumby 4y ago
    How do we already know this? Is there actual studies that show this impact?
    - kelnos 4y ago
      I don't think we need a study to show the obvious outcome when you set up incentives in certain ways.
      - bumby 4y ago
        Then we're no longer making evidence-based policy. That's just hypothesis-based policy. And unfortunately, humans are reallllly good at rationalizing whatever hypothesis suits their biases.
        lfpeb8b45ez 4y ago
        I’ll need evidence for that claim.
        bumby 4y ago
        In academia, behavioral psychology is rife with examples if you want to dig deeper. In culture, so is religion.
  - jslaby 4y ago
    I think we have a real world test case with the Russian military
bumby 4y ago
I agree that trust is part of it, but I don't think it's the whole story. A lot of this is also due to cognitive biases. For example, optimism biases make public works project managers continually underestimate cost and schedule. Then sunk-cost biases make funding managers scramble to find additional money to make up the difference. Often, those funds come in the form of "unspent" funds from other projects. That's the generous interpretation. There's also the case when project managers deliberately low-ball their project estimates to take advantage of the phenomenon. I'd put that in the trust problem category.
implements 4y ago
If you pre-approve but not fund certain desirable projects, and allow unused funding or surpluses gained through efficiency to spent on those, you get the double-win of maintaining trust and making efficiency organisationally desirable.

endtime 4y ago

It seems more like an incentive problem. I'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus.

DubiousPusher 4y ago
That sounds like a great way to get "deciders" to override good uses of money from the people below who actually have an understanding of when it needs to be spent. It is a trust problem because organizations generally aren't worried about losing money they don't spend that year or the next. They're worried about never getting it back. When you use a ratchet approach to budgets it doesn't allow organizations to respond to responsibilities which may be cyclical in nature. This leads to permanent worst case thinking which leads to hording.
dorgo 4y ago
I wouldn't go for it. Suppose my budget is Y and I could reduce it to Y/2 and get X%*Y/2 as a bonus. But in subsequent years I would only get a budget of Y/2. With half the budget I can only employ half the staff and be half as important. I don't think it works out. edit: on the other hand: If I'm going to quit the job next year and I don't like my successor I'm definitely going to cut corners and budget.
- bumby 4y ago
  Since the original context here is an army procurement, I don't think that hypothesis works out. Civil servants are not going to get that type of monetary incentive structure.
robocat 4y ago
Then the inventive is to add $50million of unnecessary budget one year, and cut $50million the next year to get the EOY bonus. The same dynamic can occur with hedge funds, where the incentive is to increase variance (because high volatility pays the fund managers a lot more on average) or increase risk (example swing for the fences if underwater).
ska 4y ago
> It'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus. We already know the answer to this, on average at least the system will be gamed to put money in their pockets, to overall detriment of service.
- bumby 4y ago
  How do we already know this? Is there actual studies that show this impact?
  - kelnos 4y ago
    I don't think we need a study to show the obvious outcome when you set up incentives in certain ways.
    - bumby 4y ago
      Then we're no longer making evidence-based policy. That's just hypothesis-based policy. And unfortunately, humans are reallllly good at rationalizing whatever hypothesis suits their biases.
      - lfpeb8b45ez 4y ago
        I’ll need evidence for that claim.
        bumby 4y ago
        In academia, behavioral psychology is rife with examples if you want to dig deeper. In culture, so is religion.
- jslaby 4y ago
  I think we have a real world test case with the Russian military

bumby 4y ago

I agree that trust is part of it, but I don't think it's the whole story. A lot of this is also due to cognitive biases. For example, optimism biases make public works project managers continually underestimate cost and schedule. Then sunk-cost biases make funding managers scramble to find additional money to make up the difference. Often, those funds come in the form of "unspent" funds from other projects. That's the generous interpretation. There's also the case when project managers deliberately low-ball their project estimates to take advantage of the phenomenon. I'd put that in the trust problem category.

implements 4y ago

If you pre-approve but not fund certain desirable projects, and allow unused funding or surpluses gained through efficiency to spent on those, you get the double-win of maintaining trust and making efficiency organisationally desirable.