firing is more important than hiring

Filed in archive Global Economy on January 4, 2005

I certainly agree with this post from Rob at Businesspundit if applied to larger organizations:

"Here is an interesting article about how to analyze projects to determine the right time to kill them off.

For
most managers, it's easier to assign resources than to terminate a
project, and the result is that unsuccessful projects often live longer
than they should. How does this impact business, and can the capability
to manage this process more effectively give a firm a measurable
competitive advantage?

Competitive advantage? I never
thought about it that way, but I guess it could apply. Learning when to
kill projects at the right time is difficult because of the sunk cost bias.
It's hard to terminate something that we have put a lot of money and
effort into, even if it won't payoff. But consider this:

According
to Coff, the tension between assigning resources and terminating
capabilities is something managers must come to grips with. "What's
more important," Coff asked in response to Guler's presentation, "the
ability to pick the winners or the ability to terminate the
[non-winners]?" Guler's numbers suggest that a firm's ability to better
manage the "non home runs" gives them a clear advantage.

On the flip side, VC firms that had a specific industry focus
tended to do better than those firms that did not. Guler's numbers also
indicated that companies that received fewer rounds of VC funding did
better over time."