are sunk costs impacting your decision making

Are sunk costs impacting your decision making?

Years ago, a customer of a company I worked for halted their capital spending program. The entire program, no matter how far along the construction was. Some facilities were more than 80% complete. And the amount of capital spent was in the billions. The market collapsed and no longer supported new capacity coming online. So they just stopped.

It was an amazing decision. But it was the right one for them. From that point on, they would have been throwing good money after bad. It takes guts to walk away from that much invested capital. But it was a sunk cost.

Whether it is time or money spent, once the resource is spent it is a sunk cost. Sunk costs are anchors that drive bad decisions. How often do sunk costs impact your decision making?

Posted in Financial Management, Leadership, Risk Management, Strategy.

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