ABM & Sunk Cost Fallacy: A Billion Dollar Blunder or Comedy of Errors?

Recently, a hiring Manager contacted me about a job I'd applied for that she said I was perfect for. It looked like an excellent fit to me as well. However, the office was far from me.  

I live in Central London. This job, as head of Demand Generation, was in Manchester, which is a 4-5 hour drive, and over 200 miles from my house.

The job was described as 'hybrid.' Given the distance, I assumed this meant being in the office once a week at worst, at best, once a month, or a couple of months.

I had worked in a similar role in Cambridge, about a 2-hour drive and 60 miles, in 2019, pre-covid; Where 'hybrid' meant precisely that.

Right at the start of the interview, I explained that my daughter was struggling with her 'A' levels (final school exams determining what university you can attend).

She is also going through some mental health issues; therefore, I wanted to be home for a considerable part of the week to support her (and drive her to school).

However, this hiring manager insisted I be in the office twice a week despite my explanations. Her reason was that the C suite had just leased an expensive office that 'they now needed to fill.'

Judging by how this hiring manager described it, this company's investment in an office had been a failure. Besides, I thought to myself, If management wants people in the office so badly, at the very least, they could come up with a more compelling reason than to fill an expensive office with bodies!

The incredible irony was that this was one of the plethoras of 'company culture' companies - some of which unfortunately don't seem to 'drink their own Kool-aid.'

Here's a company that advocates for making the workplace more empathetic, worker-centric, and reasonable. Yet they are attempting to force a highly irrational and emotionally tone-deaf decision on me.

I even suggested taking on the role as a freelancer or contractor since the hiring manager said that she was desperate to fill this role as quickly as possible. However, this company, devoted to changing corporate culture for the better, couldn't bring itself to consider such a flexible option.

That evening, I was talking with my good friend Professor Orri Stefansson. 

He is a professor of  Philosophy who specializes in decision theory and ethics. His current research focuses on decision-making under extreme uncertainty.

Orri was intrigued by my story. He said, 'This is a perfect example of 'The Sunk Cost Fallacy'! 

You've bought a costly yet unbelievably uncomfortable pair of shoes you cannot return to the shop for a refund. So you must wear them every day until they are worn out!'*

We both laughed. The C suite sometimes selects Middle management because of its emotional intelligence and ability to navigate politics. 

Middle managers must consider the bigger picture and 'not rocking the boat'. However, this mindset unfortunately ensures that, at times, such bad decisions persist.

This story also demonstrates that independent experts within or outside organizations can be invaluable in changing such crazy decisions.

It's one of the reasons why, in the past, I've delighted in hiring accomplished & sometimes maverick freelancers. They tend to be 'straight shooters'.

They are not charming you with flattery just to get ahead. They are typically driven by a passion for the job alone. They are direct and honest in their feedback.

And often, they are your most talented assets.

Here are a few of such 'Sunk Cost Fallacy' situations, drawing from my 20+ years of experience, alongside some more well-known ones:

1. Continuing with a website refresh that had gone wrong and crashed all our SEO traffic. I've seen this happen at two different companies.                       
2. A CMO spent a large proportion of her annual budget on an Account-Based marketing platform that was supposed to solve all our lead-targeting problems. The rollout was delayed for months, and eventually, the person in charge of the implementation left. Finally, the CEO fired the CMO. I worked at another company where no one acknowledged that the ABM purchase failed. This was a different system bought before I started there.    
3. About seven years ago, at a company I worked at, the founder told his investors they had a fully functioning product. Yet it transpired that even the head of product said this company did not have 'product fit.' However, the investors continued to support the company until it folded.                          Below: layers of marketing problems I've encountered in my career (thanks to my friend Jon Miller, CEO of Demandbase, for sharing).                                                                                                    
4. I worked at a company that sunk a massive amount into a failed CRM and Marketing automation implementation. At another, I was brought in to try and fix it. But they needed a complete, expensive overhaul, which they didn't have the heart for. But the story ended positively for me because a few years ago, I got to implement, onboard, and train the company on a (successful) purchase of a HubSpot CRM and marketing automation platform! 
5. A country invades a country and expends immense efforts to win the war, which it can't do. The government has trapped itself in a quagmire. However, it cannot accept defeat since this would mean many of its soldiers would have 'died in vain'.                                                                                 
6. Sunk Cost fallacy is sometimes referred to as the Concord fallacy, because the French and British governments continued funding the doomed supersonic airliner long after it was likely it would not be commercially viable.

If you want to avoid the 'Sunk cost fallacy' or many other decision traps, why not let us help you do some of your valuable research before diving into the expensive and complex world of account-based marketing? 

Sign up for our virtual roundtable on Thursday, June 6th, at 5pm UK time/ 9am PST/ 12pm EST: Unlocking Growth: Leveraging ABM for Business Expansion

 *My father, Sir Kenneth Parker, commented on Orri's point: Interesting on sunk cost. What might be missing on the shoe analogy is budget constraint. The purchaser might not be able to afford another pair, or money for another pair might earn a better return/more welfare elsewhere. After the War it was commonly said that Germany had an advantage because it was compelled to re-build its factories with state of the art equipment. British industry struggled on with 18th century rubbish because the cost of replacement was high and it was not clear whether the investment would improve net returns. Undoubtedly a mistake in that instance.