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, which 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 two-hour drive and 60 miles away, in 2019, pre-COVID, where 'hybrid' meant precisely that.

Right at the start of the interview, I explained that my seventeen-year-old daughter, Charlotte, was struggling with her 'A' levels (the final school exams that determine which 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, despite my explanations, this hiring manager insisted I be in the office twice a week. 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 was not going well. Besides, I thought, If management wants people in the office so badly, couldn't they come up with a more compelling reason than to fill an expensive office with bodies? 🤔

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

This company advocates for making the workplace more empathetic, worker-centric, and reasonable. Yet they want me to force their irrational and emotionally tone-deaf decision on me before I have even started working for them!

I suggested taking on the freelancer or contractor role since the hiring manager said she was desperate to fill this role as quickly as possible. 

- I suppose my skillset is in short supply in the local area?

However, this company, devoted to improving corporate culture, 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 that you cannot return to the shop for a refund. So you must wear them every day until they are worn out!'*

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.

Besides, it's one of the fastest-growing employment trends, so I might as well get used to hiring contractors & freelancers before they become 50% or more of the workforce!

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 was crashing our SEO traffic. I've seen this happen at two different companies.                       
2. I worked at a company where no one acknowledged that the ABM system was ineffective. This was a different system bought before I started there. Since the company was focused on field marketing, nothing was done to fix it.  
3. The company's founder told his investors they had a fully functioning product. Yet even the head of product said this company did not have 'product fit.' However, the investors continued to support the company until it folded.                                                                                                                                                                                         
4. I worked at a company that sunk a massive amount into CRM and marketing automation implementation, which involved numerous issues. I was brought in to try and fix it. It would have been easier to start again. This 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. The Sunk Cost fallacy is sometimes called 'The Concord fallacy' because the French and British governments continued funding the doomed supersonic airliner long after it was likely that it would not be commercially viable.

 *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 19th 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.