Why it is so hard to kill a failing project

Have you ever wondered why some projects seem to keep going, maybe even getting more investments and resources, than seems reasonable for the little they have delivered. Onlookers can clearly see the effort is doomed, but the insiders seem doggedly resistant to rational assessment and persevere down their chosen path.

Depending on the project, I’ve thought it was due to ego, a desire to save face, a preference to keep one’s head in the sand and not see the problems… but I recently came across another possibility: loss aversion.

Borrowing from behavioral economics, loss aversion is the tendency we all have to prefer avoiding a loss over making a gain. And when you think about that failing project, for the manager or sponsor, killing it is essentially the same as saying it’s a loss, the costs sunk, the time wasted.

Well, avoiding loss or saving face…does it really matter? It could, especially when you look at another finding of loss aversion research (Kahneman & Tversky). When faced with the choice between a sure loss or a gamble that has a high chance of an even greater loss and a small chance of no loss, people are inclined to take the gamble. Translated to the failing project, the choice becomes kill it now and accept the sunk costs or take a gamble. The gamble means spending even more in time and money (thus increasing potential sunk costs) but holds out a faint hope of turning the project around. Seen from this angle, continuing to invest looks more like default human behavior than an individual manager’s poor judgment.

Before we decide that the answer to one person’s default behavior is to have project decisions made by groups, consider Glen Whyte’s findings that groups may in fact exacerbate the situation and amplify the trend of an individual decision maker to increase the investments and commitment to a failing project. As he puts it ““Escalating commitment is the natural consequence of negatively framing a decision about the fate of a failing course of action”.

But therein lies a way to check and counter our default selection of the gamble over the sure loss.The negative framing of the decision steers us to the gamble.Word the options differently and you may find yourself giving a different answer.

It’s a simple enough exercise next time you’re involved in a project that seems to be hitting the rocks, as you go to make a decision about continuing or cancelling, reframe your options and see if your gut reaction changes. We may have natural inclinations but being aware of them can help us make better choices.

(Original posting on LinkedIn July 7, 2014)