There is a large body of work dealing with the escalation of commitment in IT projects, how managers continue to throw good money after bad, increasing their commitment to a project that has little chance of succeeding. For example, Gustavo Dimello has an interesting summary (“To Pull or Not To Pull the Plug: When Managers Commit Themselves to Failure”) of some of the recent research in managers’ continuing to fund new product development when rational observers would stop.
There is certainly a problem with how companies (and certainly their IT departments) become increasingly committed to a losing project. INFOSEC’s largest client, Big Insurance Group (BIG), has a runaway project implementing role-based access control for their external and internal users. The project started with a two-year timeline and US$7.5M budget in 1999 and is still not integrated with costs running over US$42M and over 100 external programmers working. Escalation of commitment is part of the problem, but the other and more pressing problem is that no one knows how to cancel the project. Once started, it has to choke under its own failure.
Mark Keil & Ramiro Montealegre address this issue of “de-escalation of commitment” in technology projects in an article that appeared in the Sloan Management Review (“Cutting Your Losses: Extricating Your Organization When a Big Project Goes Awry“, Spring 2000). They posit a theory of de-escalation, based on the Denver International Airport’s fiasco with the automated baggage handling system. Managers can apply this framework to increase their chances of de-escalating commitment to failing projects, and so get the room that they need to turn the money faucet off.
While I found the article interesting, it does not provide much in the way of solid advice on how to design organizational structures to reduce the chances of runaway projects. Again, I suggest Elliott Jaques’s Requisite Organization as a potential risk reducer. By determining the preojct’s real level of complexity, sponsors can know what mental mode strata the project manager and leads will need to be in, and from there, the strata of the project staff. This is a part of our current research, and we will provide details on this at a later date.
In a recent article in the Harvard Business Review entitled “Delusions of Success: How Optimism Undermines Executives’ Decisions”, Dan Lovallo and Nobel-laureate Daniel Kahneman discuss several proposals for reducing runaway optimism in executives. These would assist management teams to check their optimism, necessary for undertaking projects, with a rational assessment of the project’s chances, necessary for killing projects.
Of course, escalation may be entirely rational, the thrust of Is Escalation Always Irrational?” by Helga Drummond (Organization Studies, Mid-Winter, 1998). She argues, quite persuasively, that looking at escalation studies through a different conceptual lens, one sees that the results stem not from excessive risk-taking but the irrationality of rationality, of logic gone amuck.