Nonrational Escalation of Commitment
Nonrational Escalation of Commitment
If decision-makers fail to take caution, they might end up yielding to their emotional biases to escalate commitment, especially in difficult situations (Drucker et al. , 2001). When things are not proceeding as planned in a high stakes activity, there is greater urgency for the parties with something to lose to proceed with the course of action with the hope of achieving the intended outcomes (Greitemeyer, Schulz-Hardt & Frey, 2008). Outcomes of escalation of commitment could lead to either success or failure.
The escalation of commitment should be rational to secure benefits (Hammond, Keeney & Raiffa, 2002). In a discussion with co-workers, a situation emerged reflecting the nonrational escalation of commitment by a former store manager and the impact of this on the business, a newly opened fusion restaurant. Faced with three-months of low sales and pressure to triple sales in the next quarter, the manager considered two options. One is to change and diversify the menu. The other is to advertise at the local television network.
The manager opted for advertising since he believed that limited public exposure of the restaurant was the root of low sales. It was apparent that the manager felt strong pressure to turnaround sales to avert the risk of termination. The decision involved high stakes on the part of the manager to create the potential for impression management bias. This is the propensity for commitment escalation to establish a positive impression on the boss even if pursuing this is irrational. (Bazerman, 2002)
Escalation of commitment happened after the first month, when the manager looked at sales reports and learned that even with significant advertising expenditures marginal revenue would not triple sales. Desperate to keep his job, the manager increased spending in advertising by taking prime time advertising slots and doubling reruns with the hope to triple sales and make a good impression on the boss. Doubling expenditures did not triple sales and the branch manager ended with losses and a replacement.
Escalation of commitment was nonrational because the motivation was to make a good impression on the boss instead of expected returns on investment and other rational measures. Even by doubling expenditures, the probability of tripling sales had low probability. By covering up the initial failure, the losses reflected on the company’s finances. It required additional capital investment to revive the business. The outcome of commitment escalation is either a success or a disaster depending on the rationality of the action in a given situation (Hammond, Keeney & Raiffa, 2002).
In the described situation, impression management bias constituted the irrational motive underlying commitment escalation. To ensure that escalation of commitment leads to success, checks on nonrational bias or commitment becomes a necessity. Reference List Bazerman, M. H. (2002). Judgment in managerial decision making (5th ed. ). New York: John Wiley & Sons. Drucker, P. F. , Hammond, J. , Keeney, R. L. , Raiffa, H. , & Hayashi, A. M. (2001). Harvard business review on decision making (6th ed. ).
Boston, MA: Harvard Business School Publishing Corporation. Greitemeyer, T. , Schulz-Hardt, S. , & Frey, D. (2008). The effects of authentic and contrived dissent on escalation of commitment in group decision making. European Journal of Social Psychology. Retrieved February 2, 2009, from http://dx. doi. org/10. 1002/ejsp. 578. Hammond, J. S. , Keeney, R. L. , & Raiffa, H. (2002). Smart choices: A practical guide to making better decisions (2nd ed. ). New York: Random House, Inc.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 17 November 2016
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