#264: Maybe a quit coach is what you need
We are all looking for successes, but maybe someone to help you get out of a bad position is what you need
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#264 - Quit Coach?
The project you kicked off last year has results well below your expectations. However, you have a tremendous amount of money invested. You are now advised to hire an expert to review and tweak the process. Some people would call this doubling down; others call it the sunk cost fallacy because you can't just walk away, but can you?
When was the last time you had a coach or consultant tell you to quit?
In the September 4th Motley Fool Money Podcast, Annie Duke talked about her new book Quit: The Power of Knowing When to Walk Away
Business leaders, with millions of dollars down the drain, struggle to abandon a new app or product that just isn't working. Governments, caught in a hopeless conflict, believe that the next tactic will finally be the one that wins the war. And in our own lives, we persist in relationships or careers that no longer serve us. Why? According to Annie Duke, in the face of tough decisions, we're terrible quitters. And that is significantly holding us back.
Whether this is an investment in capital equipment, employees, or even in the stock market, humans wait too long to make that decision. Some of us have an emotional tie to the project. Others in the same position do not want to accept failure, and we just wait too long.
Although Duke's book won't be released until October, she went into a few details on how to avoid waiting. My main takeaway was this: when you decide to invest in the project, person, or position, choose when to get out. For example, according to your research, your investment is supposed to save you $50,000 this year. If it didn't save you money or 12 months into the project you still haven't implemented, will it be worth keeping around? Had you developed a decision matrix on when to get out at the beginning, pulling the trigger to shut something down becomes much easier. These triggers could be as simple as, we stop the project if it is not implemented by September 1st, 2023. Or, the project is cancelled if the first years results are less than 50% of our projection.
These decisions to quit, walk away or stop a project are just as important as investing in the first place. Regardless of how much you have already spent, keeping these projects alive will only cost you more than you originally budgeted. No one guarantees with 100% certainty that your investment will pay off. If you have that in writing, there is no risk. That is a decision to quit, given by the vendor. It is a decision you don't have to make - again.
We keep employees around much longer than we should as well. When you first have thoughts about cutting an employee, that is the time to do it. The adage, when the going gets tough, the tough get going, is only valid if you can still envision a positive return. If you have a 90-120 day onboarding process for an employee, and they just aren't cutting it, why give them 30 or 60 more days? Either your onboarding process needs to be improved, or you invested in the wrong human.
We don't like to fail
Do you consider it a failure when a bet doesn't work out? Or do you believe it is part of the risk/reward scenario you ran when you made that bet? For example, for a professional baseball player to be considered great, they need to get a hit 3 out of 10 times at bat. For other sports, NBA players need to make 5 out of 10 shots, and an NFL Quarterback needs to complete close to 7 out of 10 passes. So is it reasonable for you to think you will have 100% success in your decisions?
You bought a stock at $100 a share with every reasonable expectation for it to grow 10-15% per year. Yet, as you review your portfolio, you see it is now selling for $75! It hurts, but if the investment case no longer shows the growth you expect, it is time to take that loss and invest it in something else. When you bought the stock, did you set up an alert to let you know when it reached $75 or even $90? Buying stock is a gamble and you need to understand what the downside risk is. If that new $75 stock is going to take 3 years to get back up to what you paid for it, would it be better to invest that $75 into something else?
Proper Planning Prevents Poor Performance - Author Unknown
I am a firm believer in this saying. But also know the 'best-laid plans' sometimes go awry. Planning for the potential shortcomings of a project can help you as much as planning for success. There is tremendous information on sunk cost fallacy, commitment bias, and loss aversion. I will read the new book by Annie Duke when it comes out to pick up more tricks myself. This article is only here to create an awareness that you are most likely a terrible quitter - and most of us are!
As a business coach at the Kole Performance Group, we are responsible for giving you all the options. Making difficult decisions is not easy, but they will lead to a better tomorrow.
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