Finance for Non-Financial Managers training in Lausanne · canton of VaudFinance for non-financial managers in the canton of Vaud: when should you stop funding a project?

In the canton of Vaud, universities such as EPFL and UNIL, medtech businesses, food-industry groups on the Riviera and SMEs provide varied settings for investment decisions. For a non-financial manager, particularly in a Lake Geneva region scale-up or an international sports organisation in Lausanne, the question is precise: which future expenditures remain justified when a project disappoints?

1. What the literature establishes: the influence of sunk costs

Hal R. Arkes and Catherine Blumer (1985, Organizational Behavior and Human Decision Processes) show that previous investments of money, time or effort can increase the tendency to continue an activity. This is the sunk cost effect: past expenditure influences a decision that should compare the future consequences of the available options. For managers, the essential distinction is therefore between irrecoverable past expenditure and costs that can still be avoided.

2. A complementary mechanism: defending the initial decision

Barry M. Staw (1976, Organizational Behavior and Human Performance) observes, in a simulated decision-making experiment, greater additional commitment in response to negative outcomes when participants are responsible for the initial choice. This finding is consistent with a self-justification mechanism: continuing may serve to defend a previous decision rather than reassess the project. A financial review therefore benefits from examining assumptions independently of the status of the person who advocated them.

3. The hasty conclusion: every delay requires cancellation

These studies do not imply that a disappointing project should automatically be abandoned. In a hypothetical example involving a medtech venture emerging from a Vaud university, completed technical validation may improve future prospects even if obtaining it cost more than expected. Managers need to distinguish irrecoverable expenditure from what it has produced, then compare continuation, a reduced scope and cancellation, taking account of exit costs and benefits that remain plausible. (our executive and employee training programmes)

4. The limits of the evidence and budget monitoring

These experimental studies measure neither the frequency of this phenomenon in the canton of Vaud nor its magnitude in medtech or sports projects. In practice, a table comparing the original budget with actual expenditure cannot, on its own, establish whether the next funding commitment is justified. Contractual obligations, regulatory uncertainty and the value of learning also need to be made explicit, without assigning them spurious financial precision.

5. A practical check in Lausanne

Within the SHR “Finance for non-financial managers” programme, an exercise applicable in Lausanne is to prepare a decision sheet for a hypothetical digital platform project at an international sports organisation. Before the next funding commitment, separate sunk costs, avoidable future costs and unavoidable commitments, then document the expected benefits, assumptions and a dated review criterion for each option. The check measures the proportion of reviewed proposals containing these elements and a genuine cancellation or reduced-scope option, without automatically inferring an improvement in profitability. To go further: explore the Finance for Non-Financial Managers training in Lausanne in the canton of Vaud, or browse our executive and employee training programmes in Switzerland.

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