No one launches an initiative assuming it's going to fail. "We start with truly high hopes for any project," says Meir Statman, a professor of finance at Santa Clara University and author of Finance for Normal People. "But then things happen." The market shifts, a rival crowds you out, or some minor-seeming tech hurdle reveals its Gordian-knot nature. But that doesn't mean it's easy to just walk away. "It's very hard psychologically for people to let go of sunk costs," Statman says. "As long as a project's still alive, there's some hope. Once it's terminated, regret floods in." Because of what psych experts call regret aversion, we tend to dig in and throw good money after bad. Learning how to fail is key to protecting your business from unsuccessful projects that just won't die.
Define the finish line
Before the team is off and running, figure out what they're racing toward. What does success look like? What are the budget and schedule expectations? What advantages do you have over the competition, and what remains a question mark or drawback? "Rushing to embrace a project often means skipping that objective assessment," Statman says. But without parameters defined up front, it's harder to gauge whether progress is being made. When an initiative's goals are squishy or ill-defined, there's a tendency toward revisionist history. When we said get to market by summer, didn't we really mean September?
Encourage red flags
People in the trenches, slogging day to day on the project, will be the first to feel the tremors that something is amiss. So "the lower down the right decision is made to terminate a foundering project, the better off everyone is going to be," says Statman. If employees fear that speaking up will irk the boss, they'll stay mum. Statman points to Theranos, the blood-testing startup that famously imploded: Allegedly, employees who expressed doubts about the project were reprimanded or fired. It's critical to encourage intellectual honesty to counter the instinct to keep bad news under wraps. "Explain that they should be the first to tell you if this is not going as hoped, and that you'll even reward them for being forthcoming," Statman says.
Invite the uninvested
You need to evaluate every project coldly. That's hard to do if you green-lighted one and the outcome is disappointing. Statman cites a 1976 study in Organizational Behavior and Human Performance in which half of the subjects were told to invest $10 million in one of two divisions of an underperforming company. Then, all subjects were given data showing that, after those investments, one division's business declined while the other's improved, and were told to invest up to $20 million in one of them. The result? Those who had allocated the original $10 million to the ailing division spent more of the subsequent $20 million on that same division than any other group did on either division. To counter bias, Statman says, "you need people in the review process who aren't emotionally attached to the project."
Walk on the sunny side
There's nothing wrong with a positive approach. "At the milestone meeting, start by eliciting all the good arguments for continuing the project--and not only from the team, but also from the C-suite and finance," Statman says. By focusing on the wins (a bit of IP,
a future idea), you take the team out of a defensive posture and reassure them that no one's questioning their skill or motivation. "Then," he adds, "when the head of the review committee says, 'Now let's hear possible reasons we might want to terminate,' the team could be relieved to share some market shift or insurmountable tech problem."
Embed the bean counters
Make the finance staff part of the team. It's easy for project champions to dismiss them as naysayers. But if you can get both sides to know each other as people--in project meetings, say--"they're more likely to cooperate and less likely to clash," says Statman. You need a scorekeeper to keep everyone current, not a ref to call off the game in the fourth quarter.
Separate projects from people
Is it possible to pull the plug on a pet project--and get promoted? It should be. When the project leader sees her career trajectory tied to a project's success, she might work weekends to nail that tight deadline. But she might also keep frantically pumping fresh blood into a corpse that should have been laid to rest months before. "Be clear from the start that you believe in the project and--separately--you believe in the team," says Statman. If you do kill the initiative, openly acknowledge the work the team put in.
Prevent future zombies
As painful as a postmortem might be after you've pulled the plug on a months- or years-long project, you have to do one or you risk repeating the failure, says Statman. Did you underestimate a competitor? Was there a market shift that should reshape your portfolio? Did you hit an IT wall that you never want to scale again? Do you need better or different talent? "The regret and disappointment makes people want to avoid thinking about it, but you have to battle that instinct," he says. Then, on to the next thing.