Initiatives get funded for benefits that land inside the sponsor's tenure, while the hidden costs, such as deferred maintenance and lost capability, pass to whoever comes next.
An example
Promoted after three strong years, the previous site director of a chemicals complex left the best reported numbers in the company: maintenance spending down 22 percent, two planned maintenance shutdowns pushed back a year each, contractor headcount halved, and a vendor consolidation that booked $3 million in savings. In her first month, the incoming director walked the units with the reliability engineers. One reactor was running past its recommended overhaul interval, a heat exchanger replacement had been capitalized and then deferred, and the consolidated vendor's response times had doubled. Her first budget request, to restore the overhaul schedule, cost more than all three years of savings combined and carried her name. A senior vice president asked why the site's performance had dropped since she arrived.
Why it works
Each initiative on the slate looks better, with clean metric movement inside the evaluation window. Each also looks cheap and easy to approve, because maintenance, overhauls, and capability loss are pushed outside the current accounts. Requests for lifecycle accounting are made to look worse, as obstruction or analysis paralysis. The slate needs three things. The measurement framework must be blind to deferred costs such as brand erosion, capability loss, and maintenance liability. A handover must be coming that turns those costs into someone else's problem. And the board or owner must have short-horizon incentives of its own.
The thinking behind it
Richard H. Thaler Mental accounting, from Mental Accounting and Consumer Choice (1985): people sort money into separate accounts and judge spending against the account it falls in, so the same sum can feel trivial in one account and unacceptable in another. Capitalizing a repair, deferring an overhaul, or booking savings now moves costs into accounts the current review does not weigh. Full-horizon accounting puts them back beside the benefit they paid for.
Jonathan Baron Outcome bias, from Outcome Bias in Decision Evaluation (1988), written with Hershey: people rate the same decision as better thought out, and its maker as more competent, when the outcome happens to be good. The departing sponsor collects the good results and the credit, and the successor arrives as the deferred costs land and is judged by them. A handover baseline separates what the successor inherited from what they did.
Warning signs
Every funded initiative books its benefits inside the sponsor's tenure. Maintenance lines are deferred, reclassified, or capitalized, overhaul intervals stretch, and payables extend. Requests for lifecycle accounting are called analysis paralysis. The sponsor has a known promotion, exit, or transition date, and the strongest results arrive just before it, leaving the successor to explain the decline.
How to defend yourself
As the successor, do a forensic review before you accept the role or sign off on the handover. Walk the operation, read the maintenance records, and talk to the engineers and the customers.
- Write down the state you inherited, with dates and figures, and get your manager to acknowledge it.
- Present deferred costs as inherited liabilities, separate from your own results.
- When reviewing an initiative before approval, ask for its full-horizon costs and when they fall.
If you are a colleague, keep records of the deferrals you see. When the gap between announced gains and conditions on the ground grows large, costs start surfacing, and the records establish whose they are.
How a leader shuts it down
Insist on full-horizon accounting for initiatives above a threshold, with deferred costs accrued in the period the benefit is booked. Build executive pay with deferred portions and clawbacks that reach past the handover. Give successors a formal handover review, and score them from the baseline it finds. Notice whose results peak just before they move.