Sunk cost: Each mistake is an exact science

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Reylito A.H. Elbo

Reylito A.H. Elbo

THE ENSIGN approached the ship captain as he was dining with his top officers. The ensign reported that the captain had received a message from the admiral. The captain told the ensign to read the message aloud. The ensign did as he was told and read: “You idiot! It looks like you have bungled another mission! You’re a poor excuse for a captain!”

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The captain paused for a moment and responded: “Ensign, have the message decoded immediately!”

In decision-making, this is considered to be a “sunk cost”—an appropriate buzzword for the navy. A mistake has been done and it cannot be repaired, no matter the type of decoding that people make. Over the past years, I’ve experimented with different ways to talk about my own sunk costs and that of other people. One of my biggest challenges is to develop an understanding of the lessons learned and to turn it into opportunities, if not innovative approaches.

I can tell people managers how not to do it. Don’t treat your workers as robots but empower them. Make them part of the problem-solving and decision-making processes. Ask their opinion. Most important of all, respect them as if they’re your sons and daughters.

Most managers don’t do a very good job in managing their workers. And yet, too frequently, they ask the same question: “Why can’t our workers be more efficient and productive?” The simple question of, “What job is the worker struggling to get done?” is a very powerful way to identify opportunities for improvement.

During a strategic review with a client, he asked me to identify new growth opportunities for his company’s business. I thought it was a great project. In a half-day session, we developed compelling and creative ideas to solve one of their killer expenses. Our final meeting ended in a standing ovation with the company clearly netting at least P10 million of savings per year.

That was it. The trouble was my client didn’t do anything when I checked with him after one month. I wondered, why did the client ask us to identify growth ideas for his company and dragged his feet, if not rejected its implementation? I felt disappointment all over. My task was to help him. He paid me my consulting fees, alright. But it’s nothing unless the client achieved the promised growth that was out of the company’s reach.

In fact, I could have rendered my services for free as I’ve done it so many times for many small businesses.

By that alone, I thought the project was a sunk cost not only for the client, but for me as well. This lesson helped me realize that in some cases, business advice is insufficient unless the client takes your word. Still, it puzzled me no end on why this person remains to be in limbo.

I tried asking what else I could do to help him. I was met with a blank stare. After all, the easiest way to discover the root cause to all of these is to ask at least five whys, just like what lean management experts do. For example: Why did you not implement it? What other issues do you have that make it difficult for you to implement it? And so on.

Careful analysis goes beyond functional consideration to get to the bottom of it. The goal is to move from a quicksand to a safe location, because deep understanding of the problem can make the solution obvious. This can be done by asking a simple question: “What issue is this person struggling to get done?”

I thought I serviced a government agency. You know what I mean with government programs having three parts: a beginning, a muddle, and no end!”

The important lesson for me from all of this is that, again, in business consulting, words of wisdom do not necessarily mean anything to a client. Adding to the confusion is the fact that, even when “words of wisdom” do mean something, it may not be what you think. Some people are not exactly big on saying things directly. Another way of putting this:

It’s easy to avoid giving criticism. All you have to do is to say nothing, do nothing, and be nothing.

My suspicion proved real. After background checking, I learned that my contact-client person has been kicked out from his job after top management discovered certain anomalies that were brought to light by my “words of wisdom.”

We should know it. To err is human, but when the eraser wears out ahead of the pencil, you’re overdoing it.

Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback toelbonomics@gmail.com or follow him on Facebook, LinkedIn or Twitter for his random thoughts.

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