Managing Cost Salience and Procrastination in Projects: Compensation and Team Composition

44 Pages Posted: 11 Jun 2009 Last revised: 29 Oct 2015

Yaozhong Wu

National University of Singapore - Business School

Karthik Ramachandran

Georgia Institute of Technology - Scheller College of Business

Vish Krishnan

University of California, San Diego (UCSD) - Rady School of Management

Date Written: October 15, 2012

Abstract

The rising trend of projects with high-skilled and autonomous contributors increasingly exposes managers to the risk of idiosyncratic individual behaviors. In this paper, we examine the effects of an important behavioral factor, an individual's cost salience, the common behavioral tendency in inter-temporal decision-making wherein workers may attach greater salience and perceived cost to immediate effort than for future work. Cost salience, which may differ across individuals, often leads to procrastination in early stages of a project and backloaded effort over the course of the project. We model the problem confronting the manager of a project whose quality is adversely impacted by such distortion of individual effort over time, which also (indirectly) influences the effort allocation of other project contributors. Complementary to prior works focused on the planning and scheduling tasks of project management in the absence of human behavior, we find that a behaviorally focused manager should reward contributions made in earlier stages of a project. Our analytical results also yield interesting insights on the optimal constitution of project teams: project teams with diverse levels of cost salience will perform better than teams with similar cost salience. We also show that nuanced information exchange policies can help managers elicit smoothed effort, suggesting that the practice of creating fluid teams might have previously unrecognized benefits when behavioral aspects of projects are considered. We conclude this groundbreaking work on behavioral project management with insights and organizational implications for project managers.

Keywords: Project Management, Procrastination, Cost Salience, Behavioral Operations Management

Suggested Citation

Wu, Yaozhong and Ramachandran, Karthik and Krishnan, Vish, Managing Cost Salience and Procrastination in Projects: Compensation and Team Composition (October 15, 2012). Available at SSRN: https://ssrn.com/abstract=1417683 or http://dx.doi.org/10.2139/ssrn.1417683

Yaozhong Wu (Contact Author)

National University of Singapore - Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Karthik Ramachandran

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
(404) 894-8631 (Phone)

HOME PAGE: http://www.prism.gatech.edu/~karthik37/

Vish Krishnan

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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