Chapter 7 Flashcards
(10 cards)
What is “Escalation of Commitment”?
Escalation of Commitment” is the tendency to continue investing in a decision, even when there are signs that it is not yielding the expected results. This persistence often occurs because time, money, or resources have already been invested in the initial choice, making it difficult to make a new decision, even if it would be more rational.
What is an example of “Escalation of Commitment” in a work setting?
One example is hiring a new manager who is not performing as expected. Even after additional training and resources, their performance remains below expectations. Instead of terminating the employee, the employer decides to invest further in the hope that performance will improve, despite evidence suggesting otherwise.
Why do people fall into the escalation of commitment trap?
Escalation of commitment happens because people tend to value what they have already invested in a prior decision (known as “sunk costs”) and because they want to avoid admitting that their initial choice may have been a mistake. This bias is reinforced by factors like external impressions, confirmation bias, and the difficulty of accepting losses.
What are “sunk costs” and how do they influence decisions?
“Sunk costs” are investments made in past decisions that cannot be recovered, such as time or money already spent. These costs should not influence future decisions, but people often consider them when deciding, making them more likely to persist in a course of action even when changing would be more logical.
How can escalation of commitment be avoided in future decisions?
To avoid escalation of commitment, it is essential to focus on the future costs and benefits of available alternatives and not on past losses. Involving a new person in decision-making or seeking external evaluations can also help maintain objectivity. Creating performance monitoring systems and actively seeking information that contradicts the initial decision are also effective strategies.
What is the difference between unilateral escalation and competitive escalation?
In unilateral escalation, the decision to continue investing is made individually, often disregarding rationality. In competitive escalation, the escalation process is exacerbated by competition, with each party attempting to “win” over the other, even if it leads to losses for both, as seen in auctions where bids continue irrationally increasing.
How does confirmation bias contribute to escalation of commitment?
onfirmation bias leads people to pay more attention to information that supports their initial decision and ignore information that contradicts it. This fuels escalation of commitment, as individuals keep justifying their original choice rather than evaluating alternatives objectively.
How does impression management influence escalation of commitment?
Impression management occurs when individuals persist with a decision to preserve the image they have created for themselves or to avoid admitting a mistake. For example, a manager may hesitate to fire an underperforming employee for fear of seeming inconsistent or incompetent. This focus on self-image contributes to escalation of commitment, as individuals prefer to appear consistent rather than change course for the organization’s benefit.
How can companies prevent escalation of commitment from negatively impacting their decisions?
Companies can promote a culture that values rational decision-making and does not penalize changing course, helping managers focus on future costs and benefits. Another strategy is to ensure reward systems align with organizational values and prioritize high-quality decisions rather than rewarding perseverance in initial poor choices.
What is “competitive irrationality” and how does it relate to escalation of commitment?
“Competitive irrationality” is when two parties engage in a contest where both end up worse off, driven more by the desire to “win” than by rational objectives. In the context of escalation of commitment, it means that parties keep investing resources in competition even though the cost of winning exceeds the potential benefit.
