Dejargonised – Escalation Of Commitment – Learn With InsideIIM & MISB Bocconi

What do we learn from the failed 1996 Everest expedition? What do we learn from a famous expensive FBI project that cost 170 Mn Dollars but no results? Why did NASA launch Space Challenger in 1986 despite evidence on the contrary? Prof. Massimo Magni from MISB Bocconi and InsideIIM will help you dejargonize ‘Escalation of Commitment’ and tells you how a manager can avoid it.

 

Ever invested in a project or maybe a  relationship which was falling apart? The only two option you have at that point in time are to either drop the project or continue to invest in the project.

The logical option, in hindsight, you may think is to drop the project. But a surprising number of people still continue to invest (time, money and resources) into a failing project/relationship. So why do people do that?

  1. The first reason is a cognitive component called ‘The Sunk Cost Effect’: People experiencing the sunk cost effect tend to make decisions about continuing the project based on the amount of unrecoverable cost in the past investment. The attitude – “Itna kiya toh thoda aur sahi” is the main culprit in this case.
  2. The second reason is the Affective Component: In this, people find it difficult to distinguish between the identity of the project and the person’s own identity.  This is because of strong emotional attachment towards the failing project or relationship. Statements like – ”If the project fails, I will have failed too”, ”What am I without this project/relationship?” are some things to avoid. It’s important to know that you have an identity outside your project and that it doesn’t define you.
  3. The third and the last reason is Social Pressure: People who make their decisions to continue investing into a failing project based on ‘External Influences’ rather than on ‘Internal Motivators’, are a victim of Escalation of Commitment due to social pressure.

So what can you do to avoid Escalation of Commitment at your workplace? A lot of things actually.

Firstly, Fast Prototype everything you do. That is to say, Test Everything Immediately! Secondly, Appoint a Devil’s Advocate. The devil’s advocate is a person who challenges your every move and challenges the fact if you should continue the project or not. (You may end up hating the person but you will have saved yourself from Escalation of Commitment).

Next, you can Divide the Team into Sub-Teams. This will ensure that you have different perspectives and point of views at all times. Lastly, Separate the Group that initially decides from the group which decides if the project should continue or not.

At the end, it’s important to understand that we don’t need to let our egos dictate the rational decisions we need to make –  in professional or personal life.

 

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