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Capital Budgeting: Hold managers accountable for overruns

Suggest some ways to hold managers accountable for spending overruns. Recommend when capital projects should be abandoned due to subsequent cost overruns. Support your position.

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Of course the best way to hold managers accountable is to make it in their personal interest: impact their pay! So, give a bonus for projects that meet or exceed their projections! This means, of course, that managers better be careful about padding their projections in capital budget requests because the actual returns will be compared to them. It will no longer be smart to show a terrific ...

Solution Summary

Your discussion gives a policy for holding managers accountable and a policy for recommending when to abandon a project.