Podcast
Questions and Answers
What is one major vulnerability associated with certain projects, as discussed in the provided content?
What is one major vulnerability associated with certain projects, as discussed in the provided content?
- They always exceed budget limits.
- They are generally too small.
- They are prone to erroneous abandonment. (correct)
- They fail to deliver expected benefits.
Why may managers become more risk-seeking rather than risk-averse?
Why may managers become more risk-seeking rather than risk-averse?
- When projects are too small to matter.
- When catastrophic losses are imminent.
- When faced with the potential for overrun losses. (correct)
- When facing challenges of budget renewal.
In what way can sacrificing benefits be seen as advantageous for managers?
In what way can sacrificing benefits be seen as advantageous for managers?
- It helps avoid budget renewal challenges. (correct)
- It allows them to gain financial reward.
- It eliminates all forms of dissent from stakeholders.
- It guarantees project success in the long term.
What is recommended as a preventive measure to avoid value-destroying abandonments?
What is recommended as a preventive measure to avoid value-destroying abandonments?
What was one of the benefits that were postponed instead of exceeding budgets and timelines?
What was one of the benefits that were postponed instead of exceeding budgets and timelines?
What might managers avoid by sacrificing certain benefits?
What might managers avoid by sacrificing certain benefits?
What is the focus of the countermeasures discussed in the provided content?
What is the focus of the countermeasures discussed in the provided content?
According to the content, what does the loss of benefits represent?
According to the content, what does the loss of benefits represent?
What is the potential benefit of applying the 'one good reason' heuristic in decision making?
What is the potential benefit of applying the 'one good reason' heuristic in decision making?
How can managers avoid overvaluing alternatives when considering switching from a current strategy?
How can managers avoid overvaluing alternatives when considering switching from a current strategy?
What does the phrase 'burn the boats' imply in the context of decision making?
What does the phrase 'burn the boats' imply in the context of decision making?
According to the content, which factor can lead to systematic overvaluation of alternatives?
According to the content, which factor can lead to systematic overvaluation of alternatives?
What is one recommended strategy for managers to break negative connotations?
What is one recommended strategy for managers to break negative connotations?
What is indicated as a way to address lingering uncertainty in decision making?
What is indicated as a way to address lingering uncertainty in decision making?
What does an option in the context of project management confer?
What does an option in the context of project management confer?
What does the concept of 'lock-in' refer to in the context of management?
What does the concept of 'lock-in' refer to in the context of management?
What can the abandonment of a troubled software project result in?
What can the abandonment of a troubled software project result in?
What advantage does taking an external perspective provide for managers?
What advantage does taking an external perspective provide for managers?
What is often a misconception about managing uncertainty in decision-making processes?
What is often a misconception about managing uncertainty in decision-making processes?
Why is it important for managers to consider potential options before abandoning a project?
Why is it important for managers to consider potential options before abandoning a project?
What is indicated by the act of flying in top technical experts during a project faltering?
What is indicated by the act of flying in top technical experts during a project faltering?
How can negative language affect project outcomes?
How can negative language affect project outcomes?
What is a potential consequence of selling off adjoining land to a factory?
What is a potential consequence of selling off adjoining land to a factory?
How can symbols be utilized effectively in management?
How can symbols be utilized effectively in management?
What effect can adversity have on individuals according to the insights provided?
What effect can adversity have on individuals according to the insights provided?
What does the text suggest about changing project managers as a measure to curb escalation?
What does the text suggest about changing project managers as a measure to curb escalation?
Why may conflicted managers struggle according to the insights on escalation?
Why may conflicted managers struggle according to the insights on escalation?
How does the text perceive the decision error associated with persistence versus abandonment?
How does the text perceive the decision error associated with persistence versus abandonment?
What should managers be aware of when they impose control and make changes?
What should managers be aware of when they impose control and make changes?
What consequence does the text imply about persistent but misguided reinvestment in doomed projects?
What consequence does the text imply about persistent but misguided reinvestment in doomed projects?
According to the provided insights, what can doubts and second thoughts lead to in decision-making?
According to the provided insights, what can doubts and second thoughts lead to in decision-making?
What is a general characteristic of managers who stall or persist halfheartedly in their decisions?
What is a general characteristic of managers who stall or persist halfheartedly in their decisions?
What is the primary focus of Keil and Robey's 1999 study?
What is the primary focus of Keil and Robey's 1999 study?
Which of the following variables is associated with project completion in Keil et al.'s 1995 research?
Which of the following variables is associated with project completion in Keil et al.'s 1995 research?
Which phenomenon is primarily discussed in the context of managerial perspective in the studies referenced?
Which phenomenon is primarily discussed in the context of managerial perspective in the studies referenced?
What unique aspect does the 2009 study by Kelman et al. highlight?
What unique aspect does the 2009 study by Kelman et al. highlight?
What does McAfee et al.'s 2010 study primarily investigate?
What does McAfee et al.'s 2010 study primarily investigate?
What finding is associated with Moon and Conlon's 2002 research?
What finding is associated with Moon and Conlon's 2002 research?
In the 1986 study by McCain, what concept is explored in relation to investment decisions?
In the 1986 study by McCain, what concept is explored in relation to investment decisions?
Which author discussed the limits of escalation in 1986?
Which author discussed the limits of escalation in 1986?
What research topic is primarily discussed in the findings of Staw and Ross?
What research topic is primarily discussed in the findings of Staw and Ross?
Which of the following theories is mentioned as being related to escalation in decision-making contexts?
Which of the following theories is mentioned as being related to escalation in decision-making contexts?
What is one of the potential unintended consequences of supervisor participation in hiring decisions according to Schoorman?
What is one of the potential unintended consequences of supervisor participation in hiring decisions according to Schoorman?
What does the 'Rosencrantz and Guildenstern effect' pertain to?
What does the 'Rosencrantz and Guildenstern effect' pertain to?
Which aspect of organizational behavior does Staw explore in his 1997 update on escalation research?
Which aspect of organizational behavior does Staw explore in his 1997 update on escalation research?
In which publication series are Schoorman, Mayer, and Douglas's findings presented?
In which publication series are Schoorman, Mayer, and Douglas's findings presented?
What is the focus of Staw and Fox's 1977 study mentioned in the content?
What is the focus of Staw and Fox's 1977 study mentioned in the content?
What is indicated as a solution to escalation situations according to studies in organizational behavior?
What is indicated as a solution to escalation situations according to studies in organizational behavior?
Flashcards
Sunk Cost Fallacy
Sunk Cost Fallacy
The tendency to focus on the original investment and ignore the current costs and benefits of continuing a project.
Intolerance of Failure Heuristic
Intolerance of Failure Heuristic
A mental shortcut that can lead to poor decision-making, where managers are quick to abandon a project without considering all the potential benefits.
Hidden Benefits of Persistence
Hidden Benefits of Persistence
The benefits that are not immediately apparent but can be significant over time for a project.
Persistence
Persistence
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Lock-in to Publicly Stated Limits
Lock-in to Publicly Stated Limits
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Not Invented Here Syndrome
Not Invented Here Syndrome
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Diffusion of Responsibility
Diffusion of Responsibility
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Heed Intuition
Heed Intuition
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Shifting Mindset
Shifting Mindset
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Option Value
Option Value
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Symbolic Actions
Symbolic Actions
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Positive Language
Positive Language
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Persistence Benefits
Persistence Benefits
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Lost Options
Lost Options
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Consider Lost Options
Consider Lost Options
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Demonstrating Commitment
Demonstrating Commitment
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Projects Big Enough to Matter
Projects Big Enough to Matter
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Sacrificing Benefits
Sacrificing Benefits
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Erroneous Abandonment
Erroneous Abandonment
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Countermeasures
Countermeasures
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Prevention is Better than Cure
Prevention is Better than Cure
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Risk-Seeking Behavior
Risk-Seeking Behavior
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Corrosive Doubts
Corrosive Doubts
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Budget Renewal
Budget Renewal
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Escalation of Commitment
Escalation of Commitment
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Persistence Bias
Persistence Bias
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Intolerance of Failure
Intolerance of Failure
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Conflicting Forces
Conflicting Forces
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Control Measures Backfiring
Control Measures Backfiring
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Psychological Pain
Psychological Pain
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Wrong Decision vs. No Decision
Wrong Decision vs. No Decision
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Study Notes
Escalation of Commitment: When to Stay the Course?
- Organizations may face dilemmas when a venture falters, choosing between persistence and abandoning a project.
- Escalation of commitment, a costly mistake, involves reinvesting in failing projects beyond economic viability.
- Organizations may continue despite losses, such as Sony's electronics business, despite a decade of losses totaling $8.5 billion.
- The opposite error, abandoning a viable project, is also a concern, as demonstrated by Pepsi abandoning Pepsi Raw after two years in the UK.
- Overconfidence, sunk costs, and self-justification are key drivers of persistence.
Forces for Persistence
- Overconfidence: Decision-makers overestimate their abilities and the project's success, evident in Tesco's United States venture.
- Sunk Costs: Past investments make quitting seem costly, even if irrelevant to future outcomes, as in the London Stock Exchange's IT infrastructure project.
- Perceived Need for Self-Justification: Managers may persist to justify past decisions to themselves, as seen in the decision to continue with the Taurus project.
- Denial: Managers might dismiss negative feedback or focus on positive aspects, obscuring the project's difficulties.
- Social Costs: Admitting failure carries social stigma for organizations and individuals.
- Completion Effects: Completing the project, even when unprofitable, may be prioritized.
- Exit Barriers: Organizational structures or vested interests hinder abandonment of a project.
Forces for Abandonment
- Aversion to Loss: Avoiding further losses can outweigh potential gains from continuing.
- Opportunity Costs: The potential gains forgone by continuing with a failing project can be significant, as in the UK's superfast rail project (HS2).
- Perceived Risk: Continued persistence raises the risk of greater losses.
- Intolerance of Failure: Managers might be unwilling to tolerate further setbacks or failure.
- Publicly Stated Limits: Limits on budgets or timeframes can pressure for abandonment.
- Shifting Tides of Organization: Changes in organizational leadership can affect attitudes toward a project.
- Lingering Uncertainty: Uncertainties about future benefits or costs can deter continued investment.
When to Stay the Course
- A project might be economically reasonable to continue even with present cost overruns (with a benefit projection offsetting it).
- Abandonment should be considered when major objectives are unmet, and costs exceed expectations, as seen in the examples of the Sidney Opera House, the refurbishment of London's Savoy Hotel, and Amsterdam's new subway system.
Avoiding Value-Destroying Abandonments
- Keep Project on Track: Maintain project progress to avoid further potential issues in the future.
- Sacrifice Benefits: Prioritizing project survival over perceived benefits.
- Keep Two Sets of Books: To ensure clearer perspectives of reality, rather than perceived reality.
- Don't Let Failure Become Self-Fulfilling: Avoid self-defeating expectations that can drive down investment/interest.
- Evaluate Alternative Investment Opportunities: Assess and consider different options to counteract loss perspective.
- Weigh Hidden Benefits of Persistence: Weigh investment from hidden, yet potentially lucrative, future possibilities.
- Apply the "One Good Reason" Heuristic: Focus on one main rationale to help justify investment in troubled projects.
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