Escalation of Commitment: Is Success Really Just Around the Corner?

1. Escalation of Commitment:Is Success Really Just Around the Corner? Special Topics Lecture Jeremy Woods University of Cincinnati

2. MHR 318 Course Objectives • “The ability to get along with people, to communicate with them effectively and to understand people are three critical skills necessary to be successful in business.” • “You will be provided with a series of introductory experiences in organizational behavior including organizational socialization, teamwork, leadership, group dynamics, problem solving, and ethics as they apply to the manager in a multicultural economic and political environment.”

3. What Is Escalation of Commitment? • The tendency of individuals and organizations to continue with a certain course of action when there are available indications that the course of action is failing to accomplish the individual’s or organization’s goals. • Three very different examples: • Individual • Corporation • Government

4. Individual Escalation of Commitment • An individual has spent three years working on an advanced degree in a field with minimal job prospects [for example, Philosophy or English Literature]. The individual chooses to invest more time and effort to finish the degree rather than switching to an entirely new field of study. Having obtained the degree, the individual is faced with the options of unemployment, working under dissatisfying conditions such as part-time or temporary status, or starting anew in a completely unrelated field. (Staw, 1981)

5. Corporate Escalation of Commitment • A company overestimates its capability to build an airplane brake that will meet certain technical specifications at a given cost. Because it wins the government contract, the company is forced to invest greater and greater effort into meeting the contract terms. As a result of increasing pressure to meet specifications and deadlines, records and tests of the brake are misrepresented to government officials. Corporate careers and company credibility are increasingly staked to the airbrake contract, although many in the firm know the brake will not work effectively. At the conclusion of the construction period, the government test pilot flies the plane; it skids off the runway and narrowly misses injuring the pilot. (Vandiver, 1972)

6. Government Escalation of Commitment • At an early stage of the U.S. involvement in the Vietnam War, George Ball, then Undersecretary of State, wrote the following in a memo to President Johnson: "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 non-cooperative 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." (Sheehan & Kenworthy, 1971, memo dated July 1, 1965)

7. How Does This Relate to MHR 318? (Part 1) • Getting along with people • Social antecedents to escalation • Communicating with people effectively • Project antecedents to escalation • Understanding people • Psychological & structural antecedents to escalation

8. How Does This Relate to MHR 318? (Part 2) • Organizational Socialization, Teamwork, & Group Dynamics • Social antecedents to escalation • Problem Solving • Project antecedents to escalation • Leadership & Ethics • Psychological & structural antecedents to escalation

9. Social Antecedents to Escalation*(self-presentation theory) • Decision makers facing outside evaluation are more likely to escalate in order to manage the impressions others have of them and “save face” (Brockner et al., 1981). • Challenges from others increases accountability and evaluation, and thus resistance attenuates pressure to escalate commitment (Fox & Staw, 1979). • Individuals identifying with cohesive groups are likely to experience conformity of perception and judgment (Hogg & Terry, 2000; Janis, 1972). Hence, as individuals acting alone tend to exhibit an escalation bias, the same tendency is especially likely to occur (cf. Myers & Lamm, 1976) in the presence of a cohesive group. • * Sleesman, Conlon, McNamara, & Miles (2012)

10. Project Antecedents to Escalation*(subjective expected utility theory) • Opportunity cost information provides clear decision benchmark in calculations of whether or not to escalate (Northcraft & Neale, 1986). Concreteinformation about a decision reduces ambiguity reinforcing the poor prospects for the decision (Bowen, 1987; Bragger, Hantula, Bragger, Kirnan, & Kutcher, 2003). • Uncertain information on decision prospects allows decision makers to focus on positive indicators (Bragger, Bragger, Hantula, & Kirnan, 1998). • Positive trends allow decision makers to focus on the potential positive outcomes of the situation and discount worst-case scenarios (Moon & Conlon, 2002); thus, decision makers expect greater utility in such circumstances. • * Sleesman, Conlon, McNamara, & Miles (2012)

11. Psychological & Structural Antecedents to Escalation*(self-justification theory, prospect theory, agency theory, & goal substitution effect) • Experience in a given domain may affect how decision makers react to negative feedback and engage in pressures to justify the decision to continue a course of action (Bragger et al., 2003; Garland et al., 1990). • Felt responsibility enhances the threat associated with decision failure and activates self-justification needs (Staw, 1976). • When objectively negative situations are framed in a positive manner, people become more risk-averse and are consequently less likely to escalate (Schoorman, Mayer, Douglas, & Hetrick, 1994). • As decision makers approach completion, they substitute a completion goal for their original project success goals (Conlon & Garland, 1993). • When agency problems exist, decision makers may act in a self-interested way and escalate at the expense of their organization (Booth & Schulz, 2004). • * Sleesman, Conlon, McNamara, & Miles (2012)