The Three Elements Of Sunk Costs You Need To Review For Better Business Decisions.

We’ve all done it, invested so deeply into something that we didn’t walk away even when all the signs were there. Instead, we dwelled on everything we sank into that business, job, relationship, home, health, finances, etc. and kept on truckin’ as if everything was fine. The problem with sunk costs is that once we’ve accepted them in one aspect of our life, they can easily slip into others. And the really annoying part is that when we’re finally able to view those situations in hindsight, we almost always wish we’d taken action sooner.
Sunk costs can often be divided into 3 general categories:

Time:  We’ve sunk an enormous amount of our time into something—time we’re never going to get back.

Energy:  It’s very hard to walk away from people, things, and situations we’ve sunk our honest and sincere energy and effort into.

Money:  Too many people cross over financial boundaries by sinking money that should have never been used as capital into their ventures.

The reality is that anytime we invest our time, energy, and/or money into one or more aspects of our life, failure is a risk. If you find yourself in a situation where you’ve been investing your time, energy, and/or money, but there aren’t any signs of your investment paying off in the near future, maybe it’s time to take a serious look at why you’re still plugging away at it.
You have proof it’s going to get better. If this is the case, it’s time to sit down and make sure you’re not trying to avoid reality. Believing in what you’re doing is important, but you still need to do a reality check every now and again to make sure you’re focusing your efforts and resources appropriately. Dale Carnegie has a few good thoughts about this:

·       What is the worst that can possibly happen?

·       Prepare to accept the worst.

·       Try to improve on the worst.

Planning for the worst may sound negative, but it’s a reminder that having a cut-off point, or an exit strategy, is always a good idea. Knowing how and when to get out can definitely reduce the stress of getting in.
Hoping things are going to get better.  Hope can be a funny emotion. We use it to stay positive, but it’s also evidence of doubts or fears, or that we’re struggling with clarity. If hope is keeping you from acknowledging the extent of your sunk costs, find someone you respect and have a conversation. Having an objective set of eyes on the situation can definitely be eye opening.
We’d rather fail than be found out. Sometimes we don’t walk away when we should because we don’t want our failures to be exposed. Here’s the thing: Everybody fails, and that means you’re going to fail sometimes too. Suck it up. Give yourself an appropriate amount of time to feel like crap, and then get over it. When you do, there will come a morning when you’ll wake up feeling refreshed and ready to move on.

Here’s the best tip of all for avoiding sunk costs. Before you enter into a sale, investment, job, or some other business arrangement, think hard about what you’re about to invest in. Put some time and effort into examining the true ramifications of your decision. Do your due diligence. It’s your best friend because every business situation comes with some degree of risk. The better job you do up front of proactively identifying and addressing those risks, the less likely you are to find yourself sinking under their weight.

Alan Luoma: I am a Sales Coach with extensive experience in industrial sales, sales management, new

product development, sales and product training. I work with a great national sustainable packaging company and their exceptional distributors to increase sales. My success has been and is in utilizing the Pareto 80/20 principal in business and life. I have become an expert in seeking out and eliminating behaviors that prevent business people from being successful. I am a member of The National Speakers Association and New England Speakers Association. You can view my profile on LinkedIn, or contact me at Luoma@snet.net 

Some Days Count More Than Others

Which is more important – the day you receive a diagnosis or the days of treatment that follow? The surgery or the recovery? Does a short-lived healthcare incident matter more or less than the many days that follow it?

A comment I’ve heard many times over the years as a consumer advocate for pregnant women is, “Why do people spend so much time worrying about the day of the birth, but they don’t invest the same energy into learning how to parent after the child is born?” While I understand the thought process at play, I disagree with the implication that the birth, which is only one day, is less important than the ongoing tasks of raising a child.  Similarly, the treatment of an illness can be a lengthy process, while the diagnosis stands out as a pronouncement, and the recovery from surgery happens over weeks and months, while the surgery itself only takes a few hours. Yet the diagnosis, the surgery, and the birth, while shorter in duration, lay the foundation for what follows. They act as ‘pivot points,’ which affect the way everything that follows unfolds. Because of this, it is worth investing the time and energy to make sure you are preparing for those important moments properly.

People make the mistake of believing that healthcare providers all practice the same way, hospitals all provide services equally, that care providers will tell them everything they need to know, and that our advanced healthcare system almost guarantees a good outcome. But evidence shows that there are big differences in quality of care between providers and facilities, and patients have to be proactive in learning about their healthcare needs and advocating for themselves. Just trusting “the experts” without checking to make sure that trust is warranted for your case can lead to serious and lengthy consequences.

If you aren’t seeing a truly skilled doctor or getting the right diagnostic tests, the diagnosis may be incorrect and all the treatment that follows will be less effective or not effective at all. A surgery that is botched can make recovery longer, more painful, or even cause greater damage than it was meant to correct. People clearly remember the birth of a child for their whole life, including how they were treated, what was said to them while they were in labor, and whether they felt fear or joy. Those memories form the basis for their feelings towards their baby and their sense of competence and as they do all those feedings and diaper changings for their newborn. Clearly, getting things right from the very start of a healthcare journey has an effect on how rocky or smooth the road is and where the journey ends up.

The secret to an easier journey is in the preparation. Those ‘pivot points;’ those days that stand out because they set a new life course, rarely stand alone. Instead they are the result of the work you did, or didn’t do, to get you to that point in the journey. So is it worth it to get that second or third opinion on a diagnosis? Is it worth it to interview surgeons and find healthcare centers of excellence for surgeries and procedures? Is it worth the time and energy to prepare for birth?

Absolutely.

What happens in the long-term needs planning and attention too. Having knowledge, making informed decisions, and being prepared for the treatment process, the post-surgical recovery, or parenting shouldn’t be ignored. It’s all important. Don’t make the mistake, though, of downplaying the ‘pivot point’ because it’s only one day. Some days count more than others.

Michal Klau-Stevens is a professional speaker and healthcare consumer advocate. She is a maternity consultant, pregnancy coach, and expert on consumer healthcare care issues, Past President of BirthNetwork National, a Lamaze Certified Childbirth Educator, and mother.  Her website is TheBirthLady.INFO. Find her on LinkedIn and on Facebook at The Birth Lady page!

Grit Part 1

   

        Angela Duckworth has just written a great book called, Grit. In her book she talks about what grit is and how we can grow it from the inside out, as well as the outside in. Take heed though, over the years many terms have been used that may sound like grit, but shouldn’t be confused with grit. Such terms as conscientiousness, self-regulation, self-control and executive-control and a few others do in fact have value in creating self-improvement and a higher quality of life like grit does, but differs from grit because grit emphasizes more of a long term passion over short-term control in what is doing and trying to accomplish.

            So, what kind of person is a gritty person? Well, Dr. Duckworth shares in her book that grit paragons are satisfied with being dissatisfied. In their own eyes their own performance is never good enough. They are grateful for their continual improvements, but they also know that there is always room for more improvement. They’re driven to constantly improve and enjoy the journey filled with all the hard work just as much as the highlight film and medals at the end. In essences, they believe that raising to the occasion has nothing to do with talent and everything to do with attitude. Grit paragons love to compete. They hate to lose. And maybe even more important, they love to keep going after failure when most others tend to give up.

            Those who defy the odds are especially gritty. Grittier kids stick it out longer in order to graduate high school. They stay on the job longer, thus are more often employed. They get advanced degree in college. But, surprisingly, many of the grittiest kids of all are the ones who graduate from two-year colleges where the dropout rate can be as high as 80%. Those who overcome adversity that causes many others to quit become especially gritty.

            Talent is constantly romanticizing our society. But the truth is that talent distracts us from what’s even more important… effort. Psychologists have long debated why some people are more successful than others. This on-going debate goes back to at least the spirited debates that Francis Galton and his very observant half-brother Charles Darwin used to partake in. Darwin was always surprised that talent continued to dominate Galton’s short list of what made people successful.

            The father of modern psychology William Henry James said that us humans live far within our limits and are only half-awake. Why? Well, Dr. Duckworth seems to believe that it is because many people are distracted by talent. Both their own talent and the talent of others is derailing them. If they blame others’ success on others being naturally more talented then it lets them off the hook for not being as successful as others. Furthermore, it makes the status quo okay. So why try? In addition, if they focus only on their own talent and the highlights of what they have become, chances are they never will put in the hard work necessary for actually becoming that person that they truly can become. Our culture fixation on talent, and constantly defaulting to the easy explanation of success through the well-known talent story is hurting us far more than it is helping us.

            Even the great Charles Darwin admitted to his half-brother Sir Francis Galton that he was never really that smart or talented. He was observant, but certainly not any more talented than others. Darwin equates his success to the fact that he would think about problems long after others had given up.

            So, now you must ask yourself if you have been fixated on talent at the cost of grit. Focus on the effort and overcoming adversity and you’ll become grittier.

Dan Blanchard is an award-winning author, speaker and educator. You can learn more about him at: www.GranddaddysSecrets.com.