Sponsors sign contracts, make hires, and announce plans within their authority before a scheduled review, so stopping would mean a visible write-off and continuing becomes the easier vote.
Borderline: whether this move is justified depends on the situation, and only the person in it can judge.
An example
October's stage-two review of a regional insurer's policy administration replacement was going to be close, and the program's sponsor knew it. In the eight weeks before it, acting within approved budget authority, the sponsor signed a five-year hosting contract that carried a 30 percent discount for the longer term, hired a forty-person integration team, announced a launch date to brokers, and moved two product lines onto the new platform early. Each commitment was reported to the program board as it was made. The review pack listed all of them with their cancellation costs and set out a forward-looking comparison of finishing against stopping from that point. Stopping would cost $34 million and a public retreat with brokers; finishing would cost $51 million more. The board voted to continue, and one director asked that the next review carry the same comparison.
Why it works
Commitments made before a review make continuing look better, because they protect the narrative that earlier spending was wise and spare the people who approved it from backing a failure. They also make stopping much costlier: signed contracts turn cancellation into fees, announcements turn it into a public retreat, and new teams turn it into named layoffs. It works best on collegial, reputation-sensitive boards that co-signed the earlier approvals, when the gap between commitment and review is short. It fails when a fresh decision-maker arrives without a stake in the original vote, or when cash pressure forces a zero-based look.
The thinking behind it
Hal R. Arkes The Psychology of Sunk Cost (1985), by Arkes and Blumer, describes the sunk cost effect: a greater tendency to continue an endeavor once money, effort, or time has been invested, traced partly to a wish not to appear wasteful. A board looking at contracts signed, teams hired, and a launch announced feels that pull. Putting a forward-looking comparison in the pack lets directors weigh the future cost of each path against what has already been spent.
Barry M. Staw Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action (1976) found that people committed the most to a failing course when they were personally responsible for its results. Directors who co-signed the original approval are in that position at every review. That is why a fresh reviewer, someone who did not vote for the original approval, is the defense this move most often meets.
Thomas C. Schelling The Strategy of Conflict (1960) argues that the power to bind oneself can be a source of strength, because a party that removes its own option to retreat forces others to adjust. Contracts signed and launch dates announced before the review commit the company in advance. The board then adjusts to a commitment already made, which is the bargaining logic the absorbed version, front-loading commitments early in a program, relies on.
When it fits
Programs you are convinced should finish, facing a review where momentum could stall them, are the setting. You need budget authority for the commitments, a real operating reason for making each one now, and a review pack you are prepared to make fully transparent.
How to use it well
Make each commitment for a reason that stands on its own: a price that expires, a team needed for the next phase, a launch date customers need.
- Stay inside your approved authority, and report each commitment to the program board when you make it.
- Put every commitment and its cancellation cost in the review pack.
- Include a forward-looking comparison of finishing against stopping, from today.
- Expect a fresh reviewer, and welcome one.
The commitments raise the cost of stopping. Let the board see exactly how much.
What it costs and where it backfires
If the program is failing, you have made the failure more expensive and attached your name to every contract. A successor or a new director may take the write-off anyway and cite your commitments as the reason it was so large, and boards that notice commitments clustering before reviews tend to impose capital controls. The move stays above board only while every commitment is within authority and disclosed. Signing outside your authority, timing commitments to beat a review you expect the program to fail, or leaving cancellation terms out of the pack conceals material facts from the people deciding.
When it is used on you
Ask for a forward-looking comparison of each path from today, setting aside what has been spent. Bring in someone who did not vote for the original approval, and treat commitments signed just before a review as a reason to look harder at why they were made then.