CXO

Keep sunk costs from influencing your support decisions

Behavioral psychology has identified several ways that human beings undermine themselves when making decisions. One trap that can affect IT shops in particular is the so-called sunk cost bias. Here's how to avoid that pitfall.

Behavioral psychology has identified several ways that human beings undermine themselves when making decisions. One trap that can affect IT shops in particular is the so-called sunk cost bias. Here's how to avoid that pitfall.  

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"Sunk cost" is a concept that might be familiar to any project manager or economist in the audience, but it's probably not a term known to most support techs. The help desk isn't insulated from economic value propositions, though. IT support is all about the allocation and investment of resources. Whether it's currency or labor hours, your help desk is spending each and every day. Are you certain that all those investments are actually to the department's advantage?

Let me present you with a scenario: A friend has been having problems with her laptop; to use her words, "It died." A techie relative has been helping her by trying to fix the thing, and to date he's purchased several parts for her from eBay. They've invested in a replacement CPU, a replacement motherboard, and a replacement power switch. So far, they've spent about $500 on parts, and none of them have fixed her machine. Frustrated with everything, she's thinking about just going out and buying a new laptop.

My friend's faced with a couple of "costs" in this situation. There's the purchase price of her laptop, which is money already spent that she can't get back, what economists would call the "sunk cost." There's the amount invested so far in the repair effort, both the money spent on parts and labor involved. Those are "variable costs," and they're dependent entirely on how long she lets this process drag out. (I'll be charitable, and I won't call those costs "sunk" just yet, since my friend's still holding out hope for a repair. Her brother thinks he can resell some of the parts they bought. We'll see.)

In cases like this, where one is trying to decide how much to invest in the repair of an expensive item like a computer or a car, it's very hard for that individual to ignore the amount they've invested so far. Whatever the purchase price of my friend's computer, that money is already spent; it's not coming back. The only question that has to be answered is whether the cost of repair is appropriate for the current value of the machine, or if the money would be better invested elsewhere (like in a new computer).

The position my friend is in is one that's prone to a sunk cost bias. That's when the idea of the unrecoverable costs invested thus far influence the decision on how to proceed. I've found that sunk cost biases are common with regard to computer support, and not just in the replace vs. repair dilemma. I know that there have been times I've spent far too many hours sweating over a software problem that could have been solved by a reinstall, simply because I'd already invested so much effort in troubleshooting the problem. Help desk techs have to be problem solvers by nature, and many of us are loath to let a problem get the best of us. I didn't want to have wasted my time!

That's where sunk cost considerations are a real danger: any time we're concerned about wasting resources. Relish the irony: when you're too concerned about wasting a previous investment is when you're most likely to waste even more.

So what can you do to make sure that you're not succumbing to sunk costs biases in your support efforts? Keep these tips in mind...

  • Get some fresh eyes on the issue. Always valuable when troubleshooting, someone less emotionally involved might see the situation more clearly.
  • Don't be afraid to give up on a problem. Your time has value, and it might be better spent elsewhere.
  • Remember that even good decisions can turn out poorly. All anyone can do is make the best decision they can with the information on hand. If the situation changes, there's no shame in changing course.
  • There's a difference between waste and investment. Investment is spending with a clear goal and plan of action. Waste is when one continues to commit resources to a hopeless case for emotional reasons.

What are some situations where you've seen sunk costs influence IT decision making? Let me hear about them in the comments.

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