It is an open secret how hard to kill projects in development. In the Harvard Business Review article “Why Bad Projects Are So Hard to Kill“, professor Isabelle Royer says that many projects are hard to kill because of a “fervent and widespread belief among managers in the inevitability of their projects’s ultimate success.” The desire to believe in something is primal. The excitement and exuberance associated with a project typically originate with the project champion, whose unyielding conviction that the project will succeed is often based on a hunch rather than on strong evidence. The champion’s exuberance spreads because others also want to believe, especially if the champion is charismatic and well networked within the company.
Even worse, when a project is going monumentally off the rails, people and organizations keep adding resources to the project despite all the evidence of impending disaster. The action that throws good money after bad is known as escalation of commitment. There are four reasons causing this behavior. One is sunk cost fallacy. When estimating the value of a future investment, we have trouble ignoring what we have already invested in the past. The second reason is anticipated regret: we would be sorry if we didn’t give this another chance. The third is project completion: if we keep investing, we can finish the project. The last but probably most powerful factor is ego threat: if we don’t keep investing, we will look and feel like a fool.
The million dollar question is how to find out if your team is victim to the subtle development of entrapment. Rita Gunther McGrath and Ian C. MacMillan offer a simple way in their “Discovery-Driven Growth” methodology. According to them, each team member should answer the following “yes” or “no” questions that reflects the four reasons of escalation of commitment:
- I fell we will lose the respect of others if this project is shutdown — nobody respects a failure.
- Giving up now would just be an admission of weakness.
- Stopping this project would have a negative effect on my career: bonus, raise, promotion, or position.
- Stopping this project would have a negative effect on the rest of the team’s careers: bonus, raise, promotion, or position.
- We made a public commitment to this project.
- It will destroy our record of past success.
- We have had some good results — it would be premature to stop the project now.
- There will be a big payoff if we succeed in the end.
- We’re nearly at a turning point; it would be a shame to stop now, when we are so close.
- We have already spent a lot of time and money, which would be wasted if we stopped now.
- It would cost us more to stop now than it would to finish the project.
- We won’t get anything back if we close the project now.
- Our part of the business is counting on us to succeed.
- People who want us to fail (rivals, enemies, competitors) will gloat.
- A lot of people are depending on us to succeed here.
- A lot of people left steady, secure positions to join this project.
- We’ve made commitments to outside parties that depend on the success of the project: investors, suppliers, distributors, customers.
- We’ve made commitments to inside parties to continue with the project: the board, top management, other divisions, employees.
- The firm’s reputation with banks and investment analysts has been staked on the success of this project.
- The firm’s reputation with regional, national or foreign government officials has been staked on the success of this project.
If you have a third or more “yes” answers, your team is at risk of escalated commitment. Each of these questions reflects a reason why people have consciously or unconsciously continued committing their talent and resources to projects that reasonably should have been shut down. If these subtle pressures are overcoming the better judgment, we have to make a tough call.