Incentives Of Software and Agency Cost

Incentives Misalignment in Software Management

• Misalignment of Financial Manager Incentives:

  • The incentives of the financial manager do not line up with the incentives of the software.

  • Resolving this misalignment presents a core operational question: how to fix and solve the underlying problem of misaligned incentives.

Agency Cost and Resource Allocation

• Definition and Mechanics of Agency Cost:

  • Agency cost is defined as anytime a business spends resources to resolve conflicts or alignment issues.

  • Spending business resources to align financial management incentives with software incentives constitutes an agency cost.

Shelf Categorization and Inventory Tracking

• Questions Regarding Remaining Shelf Items:

  • What number are we still on the shelf?

  • What category is still on the shelf?