Friday, June 19, 2009

Sunk Costs

Are you a good decision maker? Do you consider the facts? Explore the options? Look at the big picture are well as the details?

How do sunk costs play into your decisions. If you've invested a lot of time and money into a project, does that influence your decision on whether or not you should kill the project?

Sunk costs is what has already gone into a project that you can't recover. At one telecommunications company I worked for, sunk cost played into decisions. They didn't want to kill a project that they've already spent so much on.

Sunk costs should not influence your decision. You need to look at the current situation and decide if the investment from today forward will result in the benefits you are aiming for. It doesn't matter if you've already dropped $2 million on a project, what matters is what it will take to complete the project and what your benefits will be. What this can mean is that if you are behind on schedule, over budget, and it's going to take a lot more to finish the project, then maybe you need to kill it even if you already spent a bunch of money.

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