Faced with a bad decision, how do you quit before it is too late? Steven Neo finds out.
2013 has been called one of the greatest year for movies by Vanity Fair, which featured some of my favorite films such as “Gravity”, “12 Years a Slave”, “Like Father, Like Son”, “Pacific Rim”, and “Captain Philips”. I loved Tom Hank's brilliant performance in “Captain Philips” and one scene in the film stuck with me: Despite obvious signs that the hostage situation will end badly for the kidnappers of Captain Philips, Abduwali Muse, the leader of the kidnappers, declared that “I came too far, I can't give up”. This scene struck a chord in me as the inability to de-escalate from a losing course of action had been a focus of my dissertation studies during my university days.
Why can't you simply walk away from a bad decision?
Barry M. Staw, Lorraine Tyson Mitchell Professor in Leadership and Communication, first introduced the concept of escalation of commitment in his 1976 paper, “Knee deep in the big muddy: A study of escalating commitment to a chosen course of action”. Escalation of commitment can be described as the “tendency to invest additional resources in an apparently losing proposition, influenced by effort, money, and time already invested”. Escalation of commitment is a phenomenon that can occur for any type of situation, ranging from software projects, investment decisions, and queueing for a seat in a popular restaurant to political events such as the Bay of Pigs, Watergate, and America's involvement in the Vietnam War. In Mayur and Dmitriy's meta-analysis of research in escalation of commitment, they identified numerous theories that are associated with our inability to simply walk away from bad decisions and investments as follows:
a. Irrational escalation: Negative framing of decision (prospect theory), personal responsibility (self-justification theory), sunk costs, organizational inertia, norms for consistency, and proximity of the goal (approach avoidance theory).
b. Rational escalation: Reputation protection and incentives for agents (agency theory), investing in high-risk high-reward projects as behaving optimally (bandit theory), and value of information and management flexibility where “continuing a project has value for the firm due to various real options associated with the project” (real option theory).
Adam Grant, the youngest tenured professor at Wharton and author of “Give and Take: A Revolutionary Approach to Success”, reports that new evidence point to ego threat (not wanting to be seen as failures) as the main culprit behind our escalating behavior. Staw and Hoang's study on sunk costs in the National Basketball Association (NBA) reveals that teams played and retained their most highly drafted players even after taking into account factors such as on-court performance, injuries, and trade status. In Marcum and Smith's book, “egonomics: What Makes Ego Our Greatest Asset (or Most Expensive Liability)”, they described an experiment for the “dollar auction” where two groups of people bid to win a dollar. As bidding rises, individuals who received a threat to their ego will try to protect their ego by letting their bids escalate higher in almost every instance.
What can we do to walk away from bad decisions more easily?
In the article, “Transition to IS Project De-Escalation: An Exploration Into Management Executives’ Influence Behaviors”, Gary Pan and Pan Shu Ling highlighted a comprehensive list of activities that could potentially help to promote de-escalation behavior in a failing project, such as the following:
- Redefining the problem “in response to changes in the frame of the alternatives”.
- Changing top management or project champion to trigger a reassessment of the project.
- Appealing to external stakeholders to influence an organization into action.
- Publicizing resource limits to stop support for a failing project.
- Conducting regular project evaluations and monitoring.
- Setting minimum target levels to minimize project extensions.
- Raising awareness of software project risks to develop de-escalation strategies.
- Improving tolerance for failures in corporate culture, such as reducing the severity of penalties.
- Creating awareness for unambiguously negative feedback to minimize “mum effect”.
- Increasing visibility of project costs to promote de-escalation behavior.
- Separating the responsibility for initiating and evaluating a project as a project initiator might be emotionally attached to a failing project.
- Including both skeptics and believers in project teams to prevent warning signs from being ignored.
Besides the above activities, Adam Grant suggests the following actions that can minimize escalation behavior:
- Creating accountability for decision processes, such as getting individuals to explain their decision processes to invoke a thorough analysis of their decisions.
- Shifting attention away from yourself by considering the implications of your decision on others in order to make a more balanced assessment.
- Being careful of compliments as it can potentially inflate egos and promote escalation behavior.
By understanding why we commit to a losing course of action and how we can perform specific activities to promote de-escalation behavior, we can hopefully make better decisions and improve our chances of walking away from bad situations. As the saying goes, “Knowing is half the battle”.