Avoiding Sunk Costs - Emerging Nurse Leader

By Rose O. Sherman, EdD, RN, NEA-BC, FAAN

COVID-19 has changed the healthcare landscape in so many ways. So what if you just started an initiative before COVID-19 that now no longer seems either practical or needed? Do you keep going with your plans or do you regroup? That is the dilemma that a colleague presented to me recently. She had encouraged her organization to make a significant monetary investment in a partnership that now seemed ill-advised, and not the best use of current decreased resources. She felt conflicted but also was not sure how to pull the plug on an initiative that had involved so much planning. I asked her the question as to whether she would still make the same decision today with her current knowledge. Of course not – she said, but we have put so much effort into this. She seemed to want to double down on the decision even though she seriously doubted it was the right thing to do today.

Her dilemma involves a classic decision making bias that is well described in the literature – sunk costs. When we heavily invested in a project, it is hard to pull back because of the investments that we have already made. It can push us to do things that we should not do because we are loss averse. It is why investors hang onto stocks much longer than they should. It is also a reason that some couples stay in relationships for years when divorce might have been the better option. Letting go is challenging – especially when we have invested time, money, and other resources. We overlook the reality that a decision to continue a project also costs time and resources that would be better spent on other initiatives. Sometimes it is driven by ego – not wanting to acknowledge that the original decision while OK at the time is no longer a good one.

There are several ways we can avoid the sunk cost bias in our decision making. They include the following:

Ask others to critique the decision within the context of what is known today.
Evaluate the opportunity costs lost if you pursue the original decision.
Don’t see changing your mind as indecisive but rather as critical decision making about the best way to direct resources.
Let go of the personal emotional attachment.
Look toward the future – sunk costs are about past decisions.

I sense that this leader will not be alone in her dilemma. COVID-19 has been a game-changer in healthcare and will undoubtedly result in some systemic changes. As leaders, we need to acknowledge that fact and be willing to change our minds in the face of new circumstances. As the lyrics in the Gambler by the late Kenny Rogers so aptly note, “You gotta know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.’

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Read Rose Sherman’s book – The Nurse Leader Coach: Become the Boss No One Wants to Leave