What should a firm do to reduce the temptation for planners to inflate their estimates of the benefits associated with the project to get it approved?

Question

Quizplus · Accepted Answer

Conducting regular capital investment post-audits helps to ensure that the benefits estimated during the planning phase of the project are in line with the actual benefits realized. This can reduce the temptation for planners to inflate their estimates as they know they will be held accountable for their projections. firing managers who miss their cost or benefit estimates may create a culture of fear and may not necessarily address the root cause of the inflation problem. Recognizing that the capital budgeting process is based on subjective estimates may be true, but it does not provide a solution to the problem. Promoting based on the size of projects or number of employees does not address the problem of inflated estimates.

What Should a Firm Do to Reduce the Temptation for Planners