Getting to No

Quick Insight

People tend to succumb to “commitment escalation” and throw good money after bad. Spreading out accountability across people and projects can help leaders make more impartial decisions of when to stop projects.

Decisions are always risky. We are setting a course of action in an unknown future. The results are not always pretty.

People tend to succumb to “commitment escalation” and throw good money after bad. Sunk costs of pride and money prevent us from killing loser projects. What should we do if things don’t turn out as we hoped?

Clear accountability for a project to a single person or team is generally good. However, they will be prone to commitment escalation. If company leaders decide on a strategy as a group, then accountability for taking (and ending) a strategy is diffused. These groups are less likely to succumb to commitment escalation. Checkpoints should be built into projects to allow the project team and company leaders to pause and decide whether continuing on is wise.

Another way to diffuse responsibility and commitment escalation is to approve groups of projects together. Some will work; some won't. This helps leaders take on risk when choosing projects. Few want to approve or lead a project that's likely good for the company, but a project failure could hurt them politically.

It also helps people end bad projects while still allowing good projects to continue. They knew at the beginning some projects wouldn’t work, so now they are just identifying which specific projects those are.

When considered alone, bad projects feel like a loss. When judged in the context of a group of good and bad outcomes, bad projects are just less of a win than if all the projects had worked.

I wish you the freedom and honesty to end bad investments. I wish you well.

- Rob Stephens

Further Insight

CFO Perspective Resources

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