Sunk cost thinking and recruitment are a terrible combination.
Ever hired someone you weren’t 100% happy with, but weren’t sure what to do next?
You were probably in the grip of sunk cost thinking.
Let us tell you a story.
You’re the owner of a small or medium-sized business, and you need to hire a new member of staff.
So you spend precious time drafting job ads, and money placing them in the right publications for your sector.
Happily, you get hundreds of applicants for the role.
Sure, it’s a bind to have to go through all those CVs and covering letters, but you do anyway.
Because if you don’t, the ideal candidate might be in the stack you’ve overlooked.
Finally, you set aside a couple of days from running your business so you can interview candidates.
You find exactly the candidate you hoped for, and hire them. You’re thrilled when they accept your offer.
You and your team invest time and money onboarding your new recruit.
But when the time comes for their quarterly performance review, you’re forced to face facts: the latest addition is a disaster.
So you arrange to invest more time and money in further training and team-building.
After all, you’ve already come so far and put in so much effort. You can’t face doing it all again so soon.
It’d be silly to let your disastrous employee go now. Wouldn’t it?
Uh-oh. You’ve just fallen into the trap of sunk cost thinking.
And, as we explained, earlier, the combination of sunk cost thinking and recruitment stinks.
What’s a sunk cost?
A sunk cost is an investment you’ll never recover. It needn’t be money, and it needn’t be precisely quantifiable. But you’ll always feel it.
Just think of that time you tried to bond with a significant other in your life by going to see the Twilight movie.
At some point you probably thought, “There’s 121 minutes I’ll never get back”. That 121 minutes is a sunk cost.
In our story above, the sunk cost is all the time and effort you put into hiring your new recruit.
What’s sunk cost thinking?
We’ve established that your disastrous new employee cost you time and money to recruit.
Sunk cost thinking is what motivates you to invest more in trying to bring them up to speed, instead of politely and quickly giving them the heave-ho.
The toxic duo of sunk cost thinking and recruitment is limiting the performance of companies all over the country.
It could be limiting yours, too. If you’re a small or medium company, the impact on your bottom line could be especially serious.
Why do we do it?
Don’t worry – you’re not alone in falling victim to sunk cost thinking.
Psychologists and economists say that it’s a blind spot afflicting even the brightest and best of us.
And the greater your up-front investment, the greater your tendency to sunk cost thinking.
What’s the solution?
There’s no universal antidote to sunk cost thinking.
But if you’ve made a disastrous recruitment choice and are sticking with it because you can’t face going through the process all over again, Top Five Percent can help.
Our innovative dashboard makes recruitment quicker, fairer, more objective and much less painful for you.
Some clients tell us they even enjoy recruiting with TFP.
Better yet, they’re confident that they won’t have to accept even a B+ employee.
Neither should you.
Sunk cost thinking and recruitment – your way out
Sure, TFP’s a tool designed to help you make the right recruitment choice most of the time. But nothing’s perfect.
When things aren’t working out, TFP empowers you to cut your losses and get it right next time.
If that doesn’t help you fight sunk cost thinking, we don’t know what will.
https://www.sciencedirect.com/science/article/pii/0749597885900494
