Escalation of commitment

Escalation of commitment is a tendency of people to continue to pursue a failing course of action because they are very invested in it. The investment can be any type of resource, such as time, energy, or money. This can lead to a variety of negative consequences, including project failure, missed opportunity or potential, and loss of even more resources. This is because the tendency to escalate includes the likelihood that people will continue to invest resources in a failing course of action in an effort to redeem it and avoid losing what has already been invested.

Experts say that anyone is susceptible to the risk of escalating a commitment, and it is not caused by lack of knowledge or a sign of incompetence. Rather, it is a form of self-protection. People who are invested in a failing project or unable to leave a dead-end job, for instance, feel like the time and other resources they have already expended will be wasted if they walk away. They may also fear that other options are not better or worry about the effect back-tracking on the decision will have on their reputation. Involving other decision-makers in the process and ignoring the resources already expended are some options to avoid making the situation worse.

Background

The concept of escalation of commitment arose from research in the 1970s into why people often refuse to abandon a lost cause. Psychologist Barry M. Staw addressed the tendency in research published in 1976, in which he identified that people who are part of the decision-making process for a project that struggles are often too invested in the project’s success to let it go. This investment often led people to continue to pour resources into the project rather than acknowledge it was not working out and stop it.

In the early 1980s, psychologist Caryl E. Rusbult proposed the investment model. This model uses four factors—satisfaction, investment size, quality of alternatives, and commitment—to determine how likely people are to continue pursuing something, such as a project, job, or relationship. Satisfaction is a measure of the balance between the good and bad aspects. Investment size relates to the cost if the commitment ended. Quality of alternatives refers to whether the person feels they would be better off in a different situation. Commitment is the degree to which the person is willing to work toward continuing the existing situation.

Rusbult and her colleagues applied the investment model to personal relationships and predicted how likely they were to last. Later, researchers began to apply the investment model and Staw’s idea of escalation of commitment to other situations, including things such as remaining with an employer and continuing with investments and business projects. For example, researchers determined that an employee considering leaving a job is likely to include in their “investment” how much time they have worked there and intangibles such as convenience of hours or location. The employee also factors in how happy they are working there and how likely it is that another job would significantly improve that happiness or provide another benefit, such as increased income.

The factors that are part of Rusbult’s investment model are also key to the concept of escalation of commitment. However, the investment model measures the likelihood of commitment in situations that can be good or bad. Escalation of commitment generally refers to situations where the ongoing commitment makes the situation worse.

Overview

Escalation of commitment arises when people become so invested in something that they ignore the negative aspects of it and continue to pursue it long after it becomes apparent to others that the situation will end badly. For example, an entrepreneur starts a new business, investing his savings and a considerable amount of time into the effort. However, sales are slow, and the business is not making any money. Some businesspeople would try for a reasonable amount of time and then close the business. A person caught in an escalation of commitment might max out credit cards to pay for advertising and then take a second mortgage on their home to try other promotions and buy more inventory. This would happen even if there were indications that none of these efforts would work.

Experts say that people get trapped in these situations because of a series of factors that make them lose impartiality, focus too much on the cost and what is to be lost if the situation is abandoned, and add their personal emotions and sense of well-being and ego into the mix. For example, the entrepreneur may tend to focus on a handful of sales or favorable reviews and dismiss the many people who walk into the business and leave without a purchase, signs that their ability to review the business’s performance impartially is impaired. They might also focus on the idea that they have invested so much time and savings into the business that they see no course but to throw more money into the effort, when the more rational thing might be to cut their losses and try something new. The idea of failing can also cause the entrepreneur to try to make the business a success no matter what it costs because they associate the business failure with personal failure.

There are psychological reasons why this happens. People tend to perform for a reward, even if that reward is small and inconsistent. So, the entrepreneur who has a few good sales might view that “reward” as something that can happen again and continue to pursue it, just as someone who wins a small amount in the lottery might continue to play to win again. The human tendency to see things from a desired perspective to the exclusion of other viewpoints also plays a role. The businessperson will tend to exaggerate the benefits of the few good days and downplay the bad sales days because they want to see the success. Another factor is that it is human nature to avoid failure, so the entrepreneur will have a natural aversion to walking away because it implies defeat.

Experts say there are a few ways to avoid the pitfalls of escalation of commitment. One way is to separate personal success from the success of the project. Another is to attempt to do an impartial analysis of the situation. People can also recognize the role played by inertia in such decisions and the tendency to continue on a course of action, even a bad one, rather than to initiate a new course. One way to combat all of these factors is to involve an outside person in the decision.

Bibliography

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Drummond, Helga. "Escalation of Commitment: When to Stay the Course?" The Academy of Management Perspectives, vol. 28, no. 4, 2014, pp. 430-446, doi:10.5465/amp.2013.0039. Accessed 17 Dec. 2024.

Grant, Adam. “How to Escape from Bad Decisions.” Psychology Today, 9 July 2013, www.psychologytoday.com/us/blog/give-and-take/201307/how-escape-bad-decisions. Accessed 17 Dec. 2024.

Jackson, Alexander T., et al. "The Reciprocal Relationships Between Escalation, Anger, and Confidence in Investment Decisions Over Time." Frontiers in Psychology, vol. 9, 2018, p. 1136, doi.org/10.3389/fpsyg.2018.01136. Accessed 17 Dec. 2024.

Lunenburg, Fred C. "Escalation of Commitment: Patterns of Retrospective Rationality." International Journal of Management, Business, and Administration, vol. 13, no. 1, 2010, www.nationalforum.com/Electronic%20Journal%20Volumes/Lunenburg,%20Fred%20C,%20Escalation%20of%20Commitment%20IJMBA%20V13%20N1%202010.pdf. Accessed 17 Dec. 2024.

Rusbult, Caryl E., et al. “The Investment Model of Commitment Processes.” Purdue University E-Pubs, 2011, docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1025&context=psychpubs. Accessed 17 Dec. 2024.

Sleesman, Dustin J., et al. “Putting Escalation of Commitment in Context: A Multilevel Review and Analysis.” Academy of Management Annals, 18 Oct. 2017, journals.aom.org/doi/abs/10.5465/annals.2016.0046. Accessed 17 Dec. 2024.

Staw, Barry M. and Jerry Ross. “Knowing When to Pull the Plug.” Harvard Business Review, Mar. 1987, hbr.org/1987/03/knowing-when-to-pull-the-plug. Accessed 17 Dec. 2024.