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Faculty Insights

For Project Managers, Fewer Reviews Might Yield Timelier Decisions

By Wisconsin School of Business

October 12, 2018

From a young age, we’re told not to be a quitter. When the going gets tough, we’re supposed to persevere, to double down and try harder when our first (or second or even tenth) attempt doesn’t work out.
But in uncertain environments, the best course of action—including staying the course—is not always clear. Project managers often face ongoing uncertainty combined with a mountain of pressure and a project review timeline. With so much riding on high-stakes projects—time, expectations, reputation, money—project managers are forced to make decisions at each juncture during the review process: should they press on with a faltering project? Or do they make the call to throw in the proverbial towel?

Xiaoyang Long
Assistant professor of operations and information management

In my study with co-authors Javad Nasiry of Hong Kong University of Science and Technology and Yaozhong Wu of the National University of Singapore, we frame these choices as “continue or abandon” decisions. We know from previous research that people tend to delay abandoning projects, stalling the inevitable (think private or federal projects where money is poured into construction but the building remains unfinished). There are various reasons behind this phenomenon, but “sunk cost bias” is a main one—the notion that we’re too attached, that we’ve poured too much into a venture to let it go, even as we see that our resources aren’t able to turn the situation around.
We wanted to examine continue-or-abandon decisions against the backdrop of project reviews. Specifically, would the information gained during these review sessions affect continue-or-abandon decisions, and would these decisions change over the course of the project? Additionally, if review opportunities were limited and at the discretion of the project manager, how would this affect the process?
Our team built a behavioral model for continue-or-abandon decisions, and tested it in an online game that simulated a multi-stage project. The participants were asked to imagine themselves as the project’s managers, and reviewed the project under two different conditions—at regular intervals and when reviews were limited.
Our study yielded four key takeaways about continue-or-abandon decisions:

    1. There’s a trade-off. We found an interesting trade-off between the frequency of reviews and the danger of increased abandonment delay. Although conventional wisdom dictates that the more reviews, the better, our findings suggest that the exact opposite may be true. We found that human beings react irrationally to information, and in our case, project managers delayed abandoning a project longer the more often they reviewed it.
    2. Sometimes less is more. Given the above trade-off, managers might do well to limit reviews. Our study suggests that when managers review less often, they’re more likely to cut their losses rather than continue on a project that’s already on life support. More frequent reviewing is not synonymous with enhanced performance.
    3. When value drops, abandonment increases. If managers observed or perceived a drop in the value of a project, they were more likely to make abandonment decisions.
    4. Changes happen midstream. Our findings suggested that when managers did abandon a project, the rates were highest in the middle of the project rollout—not the beginning or the end.

There are several ways to extend our findings here. Our current study takes into account a simple setting with only one project manager. A future avenue to explore could be having more than one manager making key decisions. Another area for research might examine whether managers make better continue-or-abandon decisions when they have a portfolio of projects.
In summary, our research suggests that while project managers do respond to information gained at project reviews—they are more likely to abandon a project without delay after its value drops—it’s also clear that a more packed review schedule doesn’t guarantee better project outcomes.
Read the working paper “A Behavioral Study on Abandonment Decisions in Multi-Stage Projects.
Xiaoyang Long is an assistant professor in the Department of Operations and Information Management at the Wisconsin School of Business.