Escalation of Commitment and Organizational Decision-Making
When does grit become insanity?
Two proverbs, taken together, do a wonderful job of demonstrating the insidiousness of the human condition:
"If at first you don't succeed, try and try again."
"Trying the same thing and expecting different results is the definition of insanity."
Both are true, albeit in different contexts. But in the same situation, only one can be wise. If you have talent that can be perfected by practice, then put in the work to reach your performance aspirations. But if you're tone deaf with no sense of rhythm, band class may not be for you.
And therein lies the rub of the human experience. Context is infinite. The answer to every question is, "It depends." No matter how much we prepare, plan, or strategize, there will always be unforeseen factors that we have to process in the moment, using our judgment. And that's where things get a little hairy, because in certain cases our judgment is wired not to work.
Escalation of commitment describes the tendency to increase our commitment to past decisions, even in the face of data indicating otherwise. We encounter this at every level of our lives, from personal arguments with significant others to political partisanship unaffected by new information.
At our worst, the more information we encounter to indicate the errors of past choices, the more we commit to those past choices, using extreme rationalizations and logical inconsistencies to explain away conflicting information. When escalation of commitment kicks in, our unconscious minds grab the steering wheel. Our unconscious minds don't care about what is right, only about what they need.
Escalation of commitment is the ultimate example of seeing the world as we want it to be, as opposed to seeing the world as it is. And that's a problem, because asking people to confront an uncomfortable reality is like asking them to go from a jacuzzi to an ice bath – words alone may not get the job done.
And that becomes especially problematic when escalation of commitment starts to affect decision-making at work, in individuals, and especially in groups. The Concorde Supersonic jet is a famous example of a project that continued to receive staggering investments even after it was perfectly clear that it could not possibly be profitable, but the historical business landscape is littered with similar examples.
Escalation of commitment is organically powerful and virtually impossible to avoid. But it can be contained, by forcing ourselves, and our organizations, to answer the right questions at the right time. The problem is getting people to do it.
Understanding why will help us understand what to do about it. As with all cases of systemic irrationality, the answer lies in biases, heuristics and behavioral science.
The Brain's Limitations
The human brain has enough mental energy to process only a tiny fraction of the information available to it. Were people to try to think through every decision, they would become mentally depleted, and effectively paralyzed, by breakfast.
To compensate, human beings have adopted what Daniel Kahneman calls The Dual Systems Theory. Kahneman suggests that people engage in two very different types of thinking: System 1, which is fast, easy and unconscious, and System 2, which is slow, difficult and effortful.
System 1 is like being in autopilot in sunny skies, while System 2 is like landing the plane in a storm.
By necessity, we spend the overwhelming amount of our time engaging in System 1 thinking (estimates typically reach 90% and above), reserving System 2 thinking for the relatively rare moments in the day in which we really need it.
If people are spending 90% of their time in unconscious autopilot, it begs another question: who's flying the plane? The answer to that is, "Biases and heuristics," the foundations of behavioral science.
Biases and Heuristics
Biases are mental tendencies, and heuristics are mental shortcuts that help us make decisions without expending mental energy. They fly the plane while we are in autopilot.
Fittingly, people have a bias against the word "bias," because they conflate it with racism, sexism, ageism, and all of the other isms that are worthy of our scorn.
Biases, however, are neither good nor bad. I have a positive bias for people who wear Canvas Chuck Taylor sneakers. As soon as I see them, I feel as though we have shared values and feel a kinship. It's just a mental tendency that helps me avoid spending any of my precious System 2 thinking.
Of course, bias can lead to all sorts of awful problems, especially when we perceive threats where there are none. But the answer is not to eliminate bias, because that is impossible. We could not survive without relying on biases. The challenge is learning how to recognize and mitigate the biases that our rational minds can understand are dangerous.
Heuristics face no such stigma, but play just as big a role in flying the plane in autopilot. Heuristics are mental shortcuts on which we rely when pressed to make decisions we can't "afford" to think through. The affect heuristic describes how we rely on emotions, or "our gut," to make decisions, rather than an extended thought process. Anchoring describes how we hold onto the first piece of information as our reference point in negotiations, without re-evaluating for accuracy or relevance.
And, of course, the availability heuristic describes how ease of recall affects our perception of probability.
So, what is the cognitive purpose of escalation of commitment? The same as every other bias or heuristic: to save mental energy. On the plus side, at least it's evidence that you don't have your head in the sand.
The Emotional Purpose of Escalation of Commitment
While we're engaged in it, escalation of commitment can feel like taking a principled stand, having confidence in ourselves, or seeing things that no one else can. Misguided as they may be, these are all affirming experiences which have the effect of soothing us.
But the reason we need soothing is because we're afraid. Escalation of commitment feels like courage, but it is actually fear. And while some of that fear is logical, most of it is not.
There are always consequences for poor choices, even if just emotional. So, it is quite logical that people feel strongly motivated to avoid making them. No one wants to face negative consequences if they can be avoided, so it is perfectly logical to hold out hope that a choice will ultimately prove itself out.
What can be quite illogical, however, is the internal pressure we feel to remain consistent with past choices. "Commitment and Consistency" is one of the six principles described in Robert Cialdini's Influence, and it describes the strong unconscious drive to maintain consistency in our choices and actions. Unfortunately, this can persist long after the data justifies a change of position.
Our need for consistency exists at both a conscious and unconscious level, making it particularly powerful. On a conscious level, we oversimplify consistency as principled, well thought out and successful. Inconsistency, on the other hand, signals hypocrisy, impulsiveness, flailing and failing.
To the extent we are aware of our motivations, we feel and behave as though our status is on the line for acknowledging an error, and do whatever we can to avoid doing so.
Unconsciously, our need for consistency is to provide us with a sense of control, and predictability. The perceived randomness of life can be very uncomfortable, so people look for ways to create meaning, structure and purpose. Consistency nurtures those beliefs, while inconsistency challenges them.
This helps to explain what happens to us when forced to confront the error of a past decision. It feels infinitely larger and more impactful than it really is, and we make very poor decisions as a result. Rather than learn from the experience and move on to more productive pursuits, we convince ourselves that despite the evidence, we're right. And to show ourselves we're not kidding, we double down.
If avoidance describes averting attention away from something unpleasant, escalation of commitment describes seeing something beautiful when looking at something unpleasant.
Common Examples and Effects
Escalation of commitment is closely related to another powerful bias called "sunk cost fallacy," which describes our inability to let go of something ineffective because of how much money, time and energy we've already invested. When people deal with sunk cost fallacy, however, they tend to struggle and reach decisions reluctantly. Escalation of commitment is much more aggressive and confident.
People can become more committed to relationships as they become more toxic, pursuits as they become more unrealistic, routines as they become more detrimental, or causes as they become more destructive. And all of these poor decisions are driven by a need to avoid a truth that, if acknowledged, would usually amount to comparatively very little harm.
Escalation of Commitment and Organizational Decision-Making
Escalation of commitment is perhaps strongest in professional settings, because that's where the stakes are most consequential. And there are so many opportunities for it to take hold, including virtually every stop along a product lifecycle, beginning with product development.
When an established organization commits to a new product development, there are usually millions of dollars and thousands of people hours already invested, meaning the pressure for success is immense. Those with the most on the line (at least in perception) will often advocate for doubling down as a way to convey confidence in the hopes of buying themselves more time to find success.
And when a startup launches around a new product, it's, "Succeed or die." And the organizational survival instinct is just as strong as the human one. From a certain perspective, most startups are exercises in escalation of commitment. The successful ones were able to buy themselves enough time to succeed.
If a viable product is lucky enough to emerge, then decisions need to be made about a go-to-market strategy, meaning that powerful individuals will sign off on the sales and marketing plans of slightly less powerful individuals tasked with execution. Positive results boost reputations, while negative results require damage control, so everyone involved will do whatever they can to ensure their decisions were the right ones. When strategies don't go according to plan, virtually everyone tries to buy more time. Why ask for a month to figure it out when you can get a year?
And when lightning strikes around a product-market fit, client success, product road map and organizational development strategies all need people's fingerprints on which they can advance their careers.
But the most famous examples of escalation of commitment are also the biggest, from huge real estate development fiascos to M&A deals gone wrong, often the result of ignoring red flags due to…wait for it…escalation of commitment.
The Existing "Solutions" for Escalation of Commitment
The solutions most commonly offered to combat Escalation of Commitment are very much aligned with most biases. Maintaining awareness during evaluation, using decision matrices and relying on data are among them.
And these solutions, when attempted, tend to produce great results. The problem is that these solutions are so infrequently attempted.
That is understandable for a number of reasons: it's far too much work given the sheer number of decisions we have to make, and we have far too little mental energy to do so.
Structured decision-making is to be reserved for our most important decisions, whether individually or organizationally.
For individuals, better decision-making requires intention and discipline, while groups require coordination and facilitation. But even those not enough to overcome Escalation of Commitment, because they still fail to address the most powerful obstacle of all: emotional resistance.
The New Solution for Escalation of Commitment
If following a structured decision-making process might make someone's past decisions seem foolish, it eliminates their motivation to do it. No one wants to appear stupid, to themselves or especially to a group. If forced into a group structured decision-making exercise, they will be concerned exclusively with impression management, muddying the waters for an honest and objective evaluation.
The point must be made forcefully and effectively upfront: errors in judgment from biases and heuristics are as universal as breathing. Every single human has and will make countless errors in judgment, both consciously and unconsciously. And hindsight is always 20/20. To feel foolish for making errors in judgment is, quite literally, foolish. And it is a huge blocker to growth and improvement.
This mindset is a requirement for an objective evaluation, and facilitators must be skilled in making the point. But even that is not enough.
People's status and positions are often tied to past decisions and/or supportive of the status quo. As such, they are strongly motivated to avoid or muddy any exercise that might threaten that order. This resistance must be eliminated as well. Fortunately, there's a framing to get us there.
"We're not doing this to question your past decisions or threaten to your positions or status. We're doing this to supercharge your agility moving forward, which will protect your positions and status."
Stories of agility success, like Play-Doh, Frisbee and Netflix, and of agility failure, like Kodak and Blockbuster, help to drive the point home.
What makes this the "new" solution to Escalation of Commitment is that it addresses the emotional blockers before proceeding to the cognitive exercises. Solutions are meaningless for people not motivated to use them.
The Questions to De-Escalate Escalation of Commitment
→What metrics indicate success?
→Why haven't those metrics been achieved?
→Do you have a viable strategy to achieve different results?
→What metrics would indicate the plan isn't working?
→How much data will be required before it is sensible to change course?
Escalation of Commitment is only relevant to those choices in which we have already made an investment of money, time, effort, status or social capital. Therefore, those original decisions must be revisited.
The purpose of asking these questions is to help people shift from an emotional mindset to an analytical one, while reframing the benefits of agility to lower the stakes and minimize the threat of consequences.
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