3 Effective Ways To Rescue Your Costs Before They’re Sunk
As R.J. Morris of Fistful of Talent discussed, sunk costs are something people psychologically find hard to let go. Sometimes, making a change would not only be difficult and possibly a setback, but the driving force of feeling like you have to “start over” is a huge deterrent for many people.
“I already spent so much time and money to get to where I am now…I can’t start over.”
When it comes to sunk costs, it is important to be forward thinking. Don’t focus on the time and money ALREADY spent, but direct your attention to what lies ahead.
Do You Need To Spend More Just To Attempt To Right This Wrong?
You may want to…try to…hope to hold out just a little longer until you are out of the red zone; but we are told this is fruitless. Cut your losses. Nip it in the bud. Continue on and never look back again. By not quitting, you are subscribing to a gambler’s fallacy of sorts – spend more to win back what you already lost. In most cases, this is not going to work.
Instead, make an economist proud by quitting. If something doesn’t work (especially if it’s costing money) it’s ok, in fact it’s ideal, to quit doing it. Too often in life, people continue doing something that is costing them a lot of money with little return, making them unhappy, taking up far too much time, or all of the above. Why? Because of the investment they’ve already put into it. Like sinking money into an old car just to keep it sputtering along until it ultimately dies for good; attempting to salvage sunk costs is often merely biding time.
But!! Maybe there is yet another option…the option to manage some sunk costs within your business before they happen instead of after you suddenly realize you sunk time and money into a project or employee with limited/zero results.
There are ways!
By monitoring, keeping track and utilizing some tactics from the get-go, you can keep appraising the situation as you go along – perhaps putting the brakes on a potential-sunk-cost-situation before it gets out of control.
How to Stop Sunk Costs Before It’s Too Late
This is a no-brainer for staying focused on the task at hand. Expensive projects will have a much harder time falling to the wayside or being mismanaged/neglected with a little management. Expectations can be met with proper checkpoints to ensure the project is getting the time and attention it needs to succeed. If success is not in the cards, routine evaluations will make it obvious that the fat should be trimmed before the sunk costs become too high.
Sometimes, a little feedback is in order. No employee wants their boss breathing down their neck, micromanaging, and checking in minute by minute; but routine evaluations are necessary for success; even if it’s just for positive reinforcement.
Depending on how in touch you are with each and every employee, a brisk, quick exam can do the trick. If you’re cost-conscious, rest assured – not every single evaluation has to be met with a raise. Put your employees on a pedestal when they deserve it. When things aren’t going as planned, help them understand how to get back on track.
Let employees self-evaluate to give them the opportunity to point out where they feel they need help. Don’t just let them continue on until their performance is so far gone there’s no redemption in sight. That’s how they will turn into a sunk cost – and you can help prevent it.
Employee Development Plans/Career Path Training
Does your employee even know how to get to the goal of “good”? An employee development plan is your rubric for telling employees what they need to do to meet or exceed expectations. If you ask someone to write a blog per week and they write two instead, is that really exceeding expectations?
Or would you prefer they spend the extra time doing something else…like effectively promoting the first blog? Which goals will help employees with great potential grow and advance to the next step in their career at your company? Tell your employees how to make the best use of their time and how they can contribute in a way that makes the most sense.
Failing to do so can be a factor in your sunk costs when you have employees who are staying stagnant at work; especially because promoting from within has been shown to cost less than hiring outside employees.
If you find yourself continually losing money on lost causes, try putting some of these ideas into practice to help keep sunk costs at bay. Eventually maybe you can quit sunk costs for good!
Are You Having Trouble Managing Your Sunk Costs?
Have you tried using some of the ideas mentioned in the article to help manage your sunk costs?
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