Multiple studies have indicated the degree to which business leaders are loath to kill projects. One such study developed by IESE Business School Professor Luis Huete found that companies and individuals that have had a track record of success have a harder time killing projects, because they carry with them an ingrained belief that they can turn everything into gold, so long as everyone works hard enough. Managers under these circumstances attribute more credit than is warranted to the person making or supporting an investment proposal than to the merits of the proposal itself. Compounding this belief is the sunk-cost fallacy, in which managers who are assessing projects lend more weight to the costs they’ve already incurred from an initiative rather than the costs to come. Not wanting to see past efforts go to waste, they put their pruning shears away and let projects grow indefinitely.
Authors: Dan P. Lovallo, J. André de Barros Teixeira, Tim Koller
Source: McKinsey Quarterly
Subjects: Management, Organizational Behavior