Leaders and sunk cost fallacy

You’ve been there too, huh? Or atleast, you’ve seen someone make this decision. Maybe even multiple times.

The trap of sticking with a project or decision just because you’ve already put time or money into it is very real in businesses.  It’s frighteningly close to how a gambler behaves at the casino.

It’s counter intuitive when you are on the outside. Detached from it. It’s obvious that letting go is the best course of action. But instead, you see them hold on tighter. For dear life even. Perhaps to save face. To let time work things out.

Years ago, we had an employee who was good, real good. His role evolved into something that he didn’t love anymore. But, he was still very, very good at his job.  We’d invested a lot into him, but it was clear: the role wasn’t his path. As tough as it was, letting them go was the best option.

But that decision, was a game-changer for him. He found his calling, discovered what he loved as pursued it. He went on to became a successful entrepreneur.

A few years later, we were in the process on onboarding a CRM that was doing wonders for our competitors. So we explored it, but we keep looking at it with a lens of “we must have what the market leader has”.

We poured time and effort into it. But as we got deeper, it got challenging and restricting. It was obvious that it was not a good fit, but we kept powering through. Rationalised the issues. What opened our eyes was one of the less experienced members of the team explaining how things would hurt operations and throughput at the grassroots. They were right. What was obvious to them was not obvious to us. Not in the beginning anyway. So, we bailed. That put us a few months behind schedule to get a new CRM onboard. But those few months of pain was worth it compared to the years of anguish we would have locked ourselves into.

Just like the harder you grip rice, the easier it falls out of your fist.

Leadership isn’t about stubbornly holding on. It’s about making the right calls. Even if it means letting go.  Even if that is a tat late.

That’s how you move forward.