How SmithKline Beecham makes better resource-allocation decisions.

Abstract

Major resource-allocation decisions are never easy. For a pharmaceuticals company like SmithKline Beecham, the problem is this: How do you make good decisions in a high-risk, technically complex business when the information you need to make those decisions comes largely from the project champions who are competing against one another for resources? In 1993, the company experimented with ways of depoliticizing the process and improving the quality of decision making. In most resource-allocation processes, project advocates develop a single plan of action and present it as the only viable approach. In SB's new process, the company found an effective way to get around the all-or-nothing thinking that only reinforces the project-champion culture. Project teams were required--and helped--to create meaningful alternatives to current development plans. What would they do with more money? With less? With none at all? In another important departure from common practice, SB separated the discussion of project alternatives from their financial evaluations. In doing so, SB was able to avoid the premature evaluations that kill both creativity and the opportunity to improve decision making. The new process at SB has allowed the organization to spend less time arguing about how to value its R&D projects and more time figuring out how to make them more valuable. In the end, the company learned that by tackling the soft issues around resource allocation--such as information quality, credibility, and trust--it had also addressed the hard ones: how much to invest and where to invest it.

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