Escalation of Commitment

In the last byte, we looked at the concept of risk aversion. In today's byte we look at the concept of escalation of commitment.

One often finds situations where good money is thrown behind a failing cause - this is an indication of escalation of commitment. Escalation of commitment refers to the tendency of people/organizations to continue to support a failing course of action. Escalation of commitment need not just take the form of investing more in a firm or a cause; it could also be in the form of bearing deeper losses.

If one were to wonder why this tendency occurs, it becomes clear that one of the reasons could be that humans dislike inconsistency and that when there is inconsistency among their attitudes or inconsistency between their attitudes and behavior, they strive to reduce the dissonance. The other reason could be optimism and control which over estimates the likelihood that positive things will happen to them.

One way to reduce the possibility of escalation of commitment in organization is to split the responsibility for decision of projects - one individual could be initial decision and another could make the subsequent decisions. Also it is possible to reduce such an act by making it a group decision scenario instead of an individual decision.