2. Budgeting and controlling activities such as R&D is difficult. Nonetheless some control must be exercised. The firm should attempt to track the costs and progress of individual projects. Periodically the projects should be evaluated by the personnel doing the research, by other scientists, and by operating managers; the goals is to assess the progress and commercial potential of the project. These evaluations should form the basis for setting priorities on existing projects. For new projects the firm might use a proposal system. Researchers would prepare a short proposal outlining planned research and its expected benefits. A committee of scientists and operating personnel could then set priorities for the various projects. For control of overall spending, the company's approach of comparing its spending with the spending of competitors seems reasonable.
Source: Steve Hamm, “Is Silicon Valley Losing Its Magic?: A Road Trip Finds Risk Aversion, Short-term Thinking, and A Few Bold Ideas,” Business Week, January 12, 2009, pp 29-33.