Escalation of commitment

Over the past few decades, researchers have followed and analyzed many examples of the escalation of commitment to a situation. The heightened situations are explained in three elements. Firstly, a situation has a costly amount of resources such as time, money and people invested in the project. Next, past behavior leads up to an apex in time where the project has not met expectations or could be in a cautious state of decline. Lastly, these problems all force a decision-maker to make choices that include the options of continuing to pursue a project until completion by adding additional costs, or canceling the project altogether.[3]

Researchers have also developed an argument regarding how escalation of commitment is observed in two different categories.[4] Many researchers believe that the need to escalate resources is linked to expectancy theory. "According to such a viewpoint, decision makers assess the probability that additional resource allocations will lead to goal attainment, as well as the value of goal attainment (i.e., rewards minus costs), and thereby generate a subjective expected utility associated with the decision to allocate additional resources."[4] The next phase of the escalation process is self-justification and rationalizing if the decision the leader made used resources well, if the resources being used were used to make positive change, and assuring themselves that the decision they chose was right. Leaders must balance costs and benefits of any problem to produce a final decision. What matters most often in assuring the leader that they made the right choice regardless of the final outcome is if their decision is what others believed in.[4]

Research conducted on the topic has been taken from many other forms and theories of psychology. Many believe that what researchers have done thus far to explain this behavior is best analyzed and tested through situational development and resource allocation.[4]

Other research has identified circumstances that lead to the opposite of escalation of commitment, namely deescalation of commitment. This research explains the factors that influence whether escalation or deescalation of commitment is more likely to occur through the role of budgeting and mental accounting.[5]

Escalation of commitment can many times cause behavior change by means of locking into resources. One of the first examples of escalation of commitment was described by George Ball, who wrote to President Lyndon Johnson to explain to him the predictions of the war outcome:[1]

The decision you face now is crucial. Once large numbers of U.S. troops are committed to direct combat, they will begin to take heavy casualties in a war they are ill equipped to fight in a noncooperative if not downright hostile countryside. Once we suffer large casualties, we will have started a well-nigh irreversible process. Our involvement will be so great that we cannot—without national humiliation—stop short of achieving our complete objectives. Of the two possibilities, I think humiliation would be more likely than the achievement of our objectives—even after we have paid terrible costs.[6]

Self-justification thought process is a part of commitment decisions of leaders and managers of a group and can therefore cause a rise in commitment levels. This attitude provides "one explanation for why people escalate commitment to their past investments."[7] Managers make decisions that reflect previous behavior. Managers tend to recall and follow information that is aligned to their behavior to create consistency for their current and future decisions. If a group member or outside party recognizes inconsistent decision making, this can alter the leadership role of the manager. Managers have external influence from society, peers, and authority, which can significantly alter a manager's perception on what factors realistically matter when making decisions.

Prospect theory helps to describe the natural reactions and processes involved in making a decision in a risk-taking situation. Prospect theory makes the argument for how levels of wealth, whether that is people, money, or time, affect how a decision is made. Researchers were particularly interested in how one perceives a situation based on costs and benefits.[4] The framing to how the problem is introduced is crucial for understanding and thinking of the probability that the situation will either work in favor or against you and how to prepare for those changes. "Whyte (1986) argued that prospect theory provides the psychological mechanism by which to explain escalating commitment to a failing course of action without the need to invoke self-justification processes. (Fiegenbaum & Thomas, 1988: 99)"[4] Prospect theorists believe that one's use of this process is when there is a negative downfall in the stakes that will affect the outcome of the project. To ensure they will not fail, the individual may add more resources to assure them that they will succeed. Although this theory seems realistic, researchers "Davis and Bobko (1986) found no effect of personal responsibility on continued commitment to the previous course of action in the positive frame condition."[4] Which means that escalation of commitment will be lower in the higher responsibility situation.

The attribution theory, originating from Fritz Heider, "attempts to find causal explanations for events and human behaviors." This theory approaches two methods of inquiry including locus of causality and stability. Locus of causality reflects on internal characteristics of an individual, such as intelligence levels and attention seeking, with the relationship of the external space such as weather forecasts and task difficulty. Aspects of control become a significant factor in how a manager justifies a decision made. Managers will use the relationship between internal and external factors to describe why they made a decision to a single point of view. Managers may justify their actions by explaining that this was out of their personal control of the event, or they could believe that the decision could not be controlled by anyone else. Research suggests that "the type of attribution made by an employee across these dimensions is likely to impact an employee's tendency to engage in the negative emotional activity referred to as escalation of commitment."

Identity is a large part of how we move through the world. Private thoughts and opinions as well as the effect of others create the social identity theory. People make connections between their use of groups and their own view of themselves, which researchers have discovered motivates people to keep their social status and to defend it whenever it is endangered.[8]

Groups engage in temporal comparisons, which means that you compare actions and behaviors at "different points in time."[8] This is a form of social identity scenario. This type of comparison can be made when a decision seems unproductive and forces team members to consider any threat to the group.[8]

"The aggregate model's emphasis is upon the accumulation and balance of forces rather than the ordering of effects over time."[1] The model is general and can provide an ideal view as to how the effects whether positive or negative are defined by micro and macro forces. This model goes by situation rather than what researchers have defined as the norm. There is no process to follow, which makes it very useful for researchers because they can understand a situation more clearly as well as see the bigger picture of the situation.[1]

Project determinants are those that refer to the original commitments and decisions made at a project's beginning. This includes general project characteristics and initial financial costs.[10] Among them, decision risk, opportunity cost information, and information acquisition have been found to have negative relationships with escalation of commitment. Decision uncertainty, positive performance trend information, and expressed preference for initial decision have been found to have positive relationships.[9]

High costs of ending a project or changing its course, potential financial gain upon completion, and extensive structure can factor in to escalation of commitment, making it difficult to walk away from the project. Preventing future monetary loss, potential savings, and having clearly available alternatives can allow for avoidance of the behavior. In studies by Teger and later Ross and Staw, situations where ending an action costs more than completing it resulted in decision makers being trapped in their current, costly behaviors.[1]

Psychological determinants are those that refer to internal views on the actions and information involved in a project. This can include cognitive factors, personality, and emotions as they relate to project elements.[10] Of these, sunk costs, time investment, decision maker experience and expertise, self-efficacy and confidence, personal responsibility for the initial decision, ego threat, and proximity to project completion have been found to have positive relationships with escalation of commitment, while anticipated regret and positive information framing have been found to have negative relationships.[9]

Optimism and belief that one has control over what will still be positive outcomes lead to continued self-justification of commitment to actions. People add to their initial personal investments in the hope they will overcome currently negative results. This was illustrated in a case study by Staw, where providing business students with manipulated responsibilities for initial decisions and their outcomes resulted in the greatest commitment to increased actions and resources when the initial decision assigned was made directly by the student with poor outcomes.[1] In these instances, people take further risk in an attempt to avoid further problems. This is even more likely when subjects view current issues as having unstable reasoning rather than stable reasoning, or when the individual is unwilling to admit mistakes.[4] They then believe the situation will stabilize or turn around. Confirmation bias can also lead to escalation of commitment as individuals are then less likely to recognize the negative results of their decisions.[7] On the other hand, if the results are recognized, they can be blamed on unforeseeable events occurring during the course of the project.

The effect of sunk costs is often seen escalating commitment. When the amount of investment is greater and can not be recovered, the desire to avoid complete loss of those resources and keeping with impression management prompts continued investment over pulling out.[7] Relatedly, as invested resources can include time, closeness to completion of a project yields similar results. More value is placed on project when they are early or late in their process due to the clarity of completion goals at those points.[11] It's more likely that risks will be taken at these points than in a project closer to a visible midpoint.

Social determinants are those that refer to the expectations and influence of other individuals or groups on project actions. Included in these, group identity or cohesive strength has been found to have the most influence on escalation of commitment while public evaluation of decision and resistance to decision from others has little significance in relation.[9]

Individuals present themselves cautiously to others in the environment. They don't concentrate on themselves and what they believe is accurate and competent—they are only interested in their organization appearing competent. Escalation of commitment is about decision making that usually comes in a form of a group or individual deciding a course of action. Managers have a responsibility to choose the fate of what a group of people have been working on. A manager who decides to back a team out of a project isn't concerned that the project failed, they are concerned that team members may think the manager is incompetent. Studies that tested this phenomenon included factors such as policy resistance, job insecurity (Fox & Staw 1979), and audience size (Rubin & Lang 1981). All showed a spike in commitment when these realistic factors are present. This mental and emotional response is referred to as the face-saving effect. Individuals who are responsible for others are constantly checking themselves to assure that their actions and beliefs are parallel to the expectations for their viewers. One's social identity to the public can decide your fate. For example, a team can identify a level of commitment and personal connection to an idea or project. Team members consistently use statements like "that project is Bob's baby," or "oh, we had the same idea." Both ends of the spectrum are crucial to how others view and analyze a situation, especially something that failed.[1]

Leaders are responsible for guiding a team through the difficult problems into a solution. Although many times, the negative aspects of commitments can be discussed in more detail and importance, there are many social rewards that are positive. One example of this phenomenon is persistence. A project on the verge of failure is a manager's responsibility to revive, but with persistence, a manager can get rewarded to turning a bad project into something great. Rewards are earned for turning around a team to produce something successful. When managers stick to their goals, and get their team to produce responsibly.[1]

Structural determinants are those that refer to the cultural and environmental features and resources of the project's overall organization. The minimal research available on them indicates that agency problems most influence escalation of commitment.[9]

There are macro-level variables that affect the organizational structure of a team and how they make decisions. Decisions are made based on individuals in a group setting with specific roles and responsibilities and effect decisions that are a product of interaction in the team. The determinant that affects escalation of commitment is institutional inertia. This phenomenon is used to describe how individual attitudes and behavior changes frequently, so therefore, a group's stature is also unpredictable and controllable. "Organizations have very imperfect sensory systems, making them relatively impervious to changes in their environments."[1]

This is one factor that plays a role in how issues are addressed. When there are a group of individuals involved in communication, decisions, and change, with the lack of consistency in the group, most of the tasks fail to complete. This phenomenon occurs in situations such as policy change, rulings and procedures.[1]

This issue can also cause havoc for an organization when they are too attached to a policy, thought process or identity because they are not free to change. "On occasion, a project, product, or policy can become so closely tied to the values and purposes of the organization that it becomes almost unthinkable to consider withdrawal."[1] One primary example of this phenomenon is the downfall of the Pan American World Airways company, commonly known as Pan Am. Pan Am was a well known airlines and hotel with hundreds of employees. With the turn of industry, airline policies were deregulated and caused financial downfall for Pan Am. The company over time made cuts to their company to stay afloat. The company believed that their image of being an airline was more important than being a successful company that they removed all of the assets that were in fact making them the largest amount of revenue only to save the image they thought they needed to remain to be Pan Am.[1]