I’m a big fan of the Heath Brothers. Their most recent book Decisive introduced a new concept for me, the trip wire. I love this concept. It’s a pre-determined point where you decide to stop or help someone make a different decision.
Sunk costs will get you every time.
A sunk cost is money and or effort that you’ve already put into a project. You’ve already put time and effort into something you think is important. If you just spend a little more time and a little more effort you know the project is going to be successful.
Here’s a sad fact, they often aren’t going to work. You can wish all you want, but unless you know when you’re going to stop you could waste tons of resources. I’ve seen more than one business fail because they didn’t know when to throw in the towel on a new product. You never want to be in a bet the store situation. If you establish a trip wire to know when to stop you might save your business.
Sometimes trip wires need to be put in place to eliminate those who don’t belong.
Zappos is one my favorite companies to study and do business with. They have a trip wire in place for new hires. Part of a new hire orientation for Zappos is interesting. They offer new hires $1,000 to leave the company.
You might ask why would any company do this? For me, the answer is brilliant. They know that spending a $1,000 on a hiring error is a smart move. People who shouldn’t be at your company will slip through. If $1,000 gets them to leave, that’s a pretty inexpensive way to help remove your hiring error.
A trip wire is not only about new products. It can also be about removing people you shouldn’t be working with.
Are you willing to commit to a stopping point?
If you set a trip wire and then ignore it, do so at your own peril. A trip wire is there for a reason. It’s designed to help you know when enough is enough.
I wish I had known about this strategy when I was negotiating a lease for a restaurant my food service company was going to run. The negotiation went on too long and it got to be too restrictive. I had spent lots of time and effort and wasn’t going to let this one get away. That decision ended up costing me more than $100,000. If I had a trip wire in place I would have walked away. Have you ever had something like this happen in your life?
Understand there are really powerful forces at work here.
Once you start on a project you’ve convinced yourself that your idea is a good one. You’ll spend money and you’ll put effort into your project. You know that success is right around the corner.
I see this with investment clients and I see it in new business ventures. I see it in hiring mistakes we make. I know I’ve done this. If I just try a little harder my new hire will be successful. This almost never works. The only that gets accomplished is that both the employee and I was lots of time and become frustrated with each other. Eventually they have to leave and it’s often with bad feelings on both sides.
The point isn’t to not make mistakes.
Understand the point of a trip wire is not to avoid mistakes. I don’t think that’s possible. The point in having a trip wire is to know when saying enough is enough moves from thought to action. If you spend time establishing trip wires in your company I bet you’ll save time and money. What do you think, is trying a trip wire worthwhile?
One of the most expensive mistakes you can make is making bad hiring decisions. We’ve put together a survey that helps you understand how good your hiring system is. If you’re interested in participating in this survey, click on the button below. I bet you’ll learn something useful.