We set milestones, develop metrics and create plans to monitor our success. We know exactly what it takes to accomplish our goals and get where we need to go. We monitor the variables that affect our trajectory, the availability of resources and the pace at which we use them.

There is no question that we must set up systems and an infrastructure to know exactly where we are on our path. However, we are often a lot less clear on what we are supposed to do when we continue to veer off the path. Yet understanding how long to try, how many versions to work through and how much of our resources we should continue to commit before we call it quits is equally as valuable.

Here are three ways to tell whether to push through or cut your losses.

Escalation of commitment

The first step is understanding the concept of escalation of commitment.

This classic '80s business article walks through the idea that can otherwise be summarized as: drop the shovel. In other words, we can dig ourselves into a hole and then justify continuing to dig by referring to the time and energy we have consumed digging this far. Quitting now would be a waste of those resources.

Thus, a strong indicator that it may be time to stop a project is the rationalization that continuing is necessary because of what has already been committed; or conversely that not continuing would mean that all those resources were wasted. To avoid this problem, include firm limits on the projects and be clear that if those limits on time or resources are met, the project will be wound down.

The war is lost

Challenging problems, high-stakes developments or pet projects can all inspire passion and a deep-seated motivation to push through obstacles, regardless of the time, energy or resources being committed. While it is great to have project leaders who are willing to do whatever it takes, those same project managers often have a difficult time letting go.

Instead of recognizing that the war is lost, they continue to ask for support fighting small battles — missing the bigger picture because they are too focused on the current problem. If a project leader continues to return asking for one more chance while failing to acknowledge the overall failure of progress, it is time to pull the plug on the project.

To avoid this problem in the first place, separate the decision making. Allow the impassioned employee to run the project, but give the overall supervision and final decision making to an impartial project manager. Ensure the roles are clear and discuss the reasoning so all parties are clear up front on the why behind their roles.

Taking no action is an action

Even with firm limits and separate decision-makers, companies can still overcommit resources to a project.

The most common reason for this is avoidance. In other words, leaders slow-play or stall on deciding to pull the plug with the hope that something will change before their hand is forced. This inaction is an action and a sign that it is likely time to cut losses on the project.

To avoid this sticky situation, it is imperative to set and stick to clear evaluation and review points in the project.

The bottom line is: Regular progress assessments combined with established resource limits and objective decision-makers will ensure that viable projects are supported and money going to failing projects can be redirected before it is too late.