Managing Projects with Present-Biased Agents

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.