Why does Escalation of Commitment Occur?
Why does escalation of commitment occur? There may be many reasons, but two are particularly
important. First, decision makers may not want to admit that they were wrong. This may be because of
personal pride or being afraid of the consequences of such an admission. Second, decision makers may
incorrectly believe that spending more time and energy might somehow help them recover their losses.
Effective decision makers avoid escalation of commitment by distinguishing between when persistence
may actually pay off versus when it might mean escalation of commitment. To avoid escalation of
commitment, you might consider having strict turning back points. For example, you might determine up
front that you will not spend more than $500 trying to repair the car and will sell it when you reach that
point. You might also consider assigning separate decision makers for the initial buying and subsequent
selling decisions. Periodic evaluations of an initially sound decision to see whether the decision still makes
sense is also another way of preventing escalation of commitment. This type of review becomes
particularly important in projects such as the Iridium phone, in which the initial decision is not
immediately implemented but instead needs to go through a lengthy development process. In such cases,
it becomes important to periodically assess the soundness of the initial decision in the face of changing
market conditions. Finally, creating an organizational climate in which individuals do not fear admitting
that their initial decision no longer makes economic sense would go a long way in preventing escalation of
commitment, as it could lower the regret the decision maker may experience. [8]
Motorola released the Iridium phone to the market in 1998. The phone cost $3,000 and it was literally the size
of a brick.
So far we have focused on how individuals make decisions and how to avoid decision traps. Next we shift
our focus to the group level. There are many similarities as well as many differences between individual
and group decision making. There are many factors that influence group dynamics and also affect the
group decision-making process. We will discuss some of them in the following section.