One of the most surprising observations one can make in the Project industry is the propensity of organizations to persist on Projects that are obviously failing. This psychological trait is observable in many human endeavors, still project-driven organizations could be expected to have a more professional approach on this effect. Our new White Paper 2015-12 ‘How to Overcome the Psychology of Project Failure and Know When to Cut Losses’ explores the psychology of project failure and gives a framework to overcome the risk of persistence on obviously failing projects.

The psychological effect of perseverance in the face of failure is in fact very widespread in many human pursuits and has been described under the terminology of ‘prospect theory’: “Many unfortunate human situations unfold […] where people who face very bad options take desperate gambles, accepting a high probability of making things worse in exchange for a small hope of avoiding a large loss. Risk taking of this kind often turns manageable failures into disasters” – as explained by Daniel Kahneman in the book ‘Thinking, Fast and Slow’.
And the more an organization has an emotional commitment with the Project, the more there is sunk cost in the endeavor, the more this effect is visible, often with dire consequences for the organization from the short to the long term.

We are all subject to this psychological tendency: it is extremely difficult to cut our losses in an endeavor in which we are emotionally involved. It is only with experience and practice that we develop the ability to overcome this natural tendency. Project-driven organizations could be expected to put in place a process framework designed to overcome this effect, for the sake of the organization.

We recommend to:

• implement a loss cutting rule with a fixed threshold (for example when projects overrun by more than 15%),
• setting up the organization to avoid persisting on a failing project, by relying on the view of people that are not emotionally involved in the endeavor.

It is essential for organizations to be organized in a way that project failure is recognized, managed by people that are not emotionally connected with the endeavor. We recommend to most of our clients to implement strict loss cutting rules and processes to avoid situations that can turn to be dramatic up to putting the entire organization in jeopardy. Discover more details in our new White Paper 2015-12 ‘How to Overcome the Psychology of Project Failure and Know When to Cut Losses’.