HOW SMITHKLINE-BEECHAM MAKES BETTER RESOURCE-ALLOCATION DECISIONS

Major resource-allocation decisions are never easy. For a pharmaceutic als company like Smith Kline 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 th e project champions who are competing against one another for resource s? In 1993, the company experimented with ways of depoliticizing the p rocess and improving the quality of decision making. In most resource- allocation processes, project advocates develop a single plan of actio n 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 think ing that only reinforces the project-champion culture. Project teams w ere required-and helped-to create meaningful alternatives to current d evelopment plans. What would they do with more money? With less? With none at all? In another important departure from common practice, SE s eparated the discussion of project alternatives from their financial e valuations. In doing so, SE was able to avoid the premature evaluation s that kill both creativity and the opportunity to improve decision ma king. The new process at SE has allowed the organization to spend less time arguing about how to value its R&D projects and more time figuri ng out how to make them more valuable. In the end, the company learned that by tackling the soft issues around resource allocation-such as i nformation quality, credibility, and trust-it had also addressed the h ard ones: how much to invest and where to invest it.