There's a moment in almost every troubled transformation when the evidence becomes undeniable. The timelines are slipping badly. The costs are escalating in ways that weren't anticipated. The promised benefits aren't materializing. The team is exhausted. The business is getting restless. Anyone looking at the situation from the outside would say 'stop, reassess, change course.'
And yet the organization doublesdown. More resources. More time. More patience. Because they've already spent so much that stopping feels like admitting it was all a mistake.
Sunk cost thinking is particularly powerful in high-visibility transformations because the personal stakes are so high. The executives who championed the initiative have their credibility tied to its success. The project team has worked evenings and weekends for months. The board has been briefed on the expected returns. Admitting that things are fundamentally off track requires an uncomfortable conversation with each of these audiences.
So instead, the problems get reframed. The delays become 'we're being thorough.' The cost overruns become 'we're investing in doing this right.' The missing benefits become 'we haven't fully activated the system yet.' Every piece of bad news gets a narrative wrapper that makes continuing seem more reasonable than stopping.
- The official project status is green or amber when everyone on the project team knows it's red
- Key decisions that should have been made months ago keep getting deferred because there's no consensus on the right answer
- The business case has been revised multiple times to account for delays, but each revision assumes things will start going better from here
- People are afraid to surface problems because previous problem-raisers were seen as being 'not committed to the project'
- The original sponsor who championed the initiative is no longer actively engaged but also hasn't formally handed off accountability
The single most important thing is creating a mechanism for honest assessment that isn't controlled by the people most invested in the outcome. This might be an independent project review. It might be a board-level conversation that goes beyond the usual status reporting. It might be bringing in an outside perspective specifically tasked with finding what isn't being said.
That assessment needs to answer a clear question: if we were deciding today, with everything we know, whether to start this initiative, would we? If the answer is no, or even a heavily qualified yes, that tells you something important about whether continuing is actually the rational choice.
Changing course takes courage. It requires leadership that can separate the decision from the identity, and that can communicate a change of direction without it being perceived as failure. Those things are hard. But they're far less damaging than years more of investment in something that was never going to deliver what was promised.
The best time to ask whether you're in the sunk cost trap was six months ago. The second best time is today.
