We escalate commitment because of our own previous decisions. Of course, it is not always wise to quit at the first signal of failure. How should be separate between rational and non-rational tendency to escalate? One should determine the rational course of action, ignoring the fact that you personally made the initial monetary commitment.
Staw (1976) conducted an experiment to observe differences between two groups of decision makers and a second decision that follows an initial failure.
On group (high-responsibility participants) was asked to allocate funds to two operating divisions. Participants were told that after three years, an investment had either proven successful or unsuccessful. They were asked to make a second decision.
The second group (low-responsibility participants) was told that another financial officer had made a decision that was either successful or unsuccessful. They were then asked to make a second decision.
When the outcome was negative (unsuccessful) — a high-responsibility compared to low-responsibility participants allocated significantly more funds to the original decision in the second allocation. In successful initial decision, the amount of money allocated the second time was the same.
The mechanism that underlies escalation of commitment is self-justification. Once an individual makes a decision, negative feedback is dissonant with the initial decision. One way to eliminate this dissonance is to escalate commitment to the initial course of action in the belief that it will initially lead to success.
- Failure is perceived to be “explained away” with a causal account unrelated to individual’s initial decision (e.g. shift in the economy instead of port market appeal). In general, groups are less likely to escalate commitment. However, when they do, they pursue this in a greater degree than individuals.
- Group in forces support and thus increases the level of rationalisation of escalation of commitment.
- We are also positively biases towards our decision making thus we tend to do similar decisions.
Managers should be aware of the difficulty of separating initial decision from related future decisions. We should try to be cognisant of the fact that our decisions will tend to be biased by our past actions and that we have a natural tendency to escalate commitment, especially after receiving negative feedback.
Bazerman, M.H. and Moore, D.A., 1994. Judgment in managerial decision making (p. 226). New York: Wiley.