DB4 - Essay Example

Non-rational Escalation of Commitment Vani Aparna Chavali Non-rational Escalation of Commitment Introduction Decisions and choices are made with the backdrop of information available, the set limitations and constraints, which include both controllable and uncontrollable variables. Thus, loss is as much obvious as profit and wisdom lies in making exact choices following the feedback from the previous decisions. Common eventuality observed by social psychologists, in such situations is escalation of commitment and standing by the same decision.

Ensuing essay discusses the phenomenon in detail. Escalation Situations Irrationality in decision making is said to occur when financial and other resources such as time, efforts etc are further committed, even when a prior choice has consummated losses. Thus, the individual or organisation falling prey to this experience gets entrapped in the negative choice. While decision sciences consider escalation to be against organisational and managerial interests, economics acknowledges its rational implications for managers, when the results catch-up and point towards recovery (Chulkov, 2007).

Considering the circumstances and reasons that lead towards escalation of non-rational decision making and the individuals involved, the following facts are observed. When the original judgement has failed, escalation occurs when the same decision maker is involved, as he considers this as a step towards justifying and proving his adroitness in arriving at the past decision, thus managing personal image among his colleagues. Individuals’ perceptions stand biased when they try to prove their point as against the negative results.

They consider continuation of the decision as a measure for redeem losses including sunk costs. In such endeavours, they tend to gather false data and analyse situation in favour of their first decision, accruing judgemental bias (Karlsson, Garling, & Bonini, 2005). Investment in shares and stocks when the economy is under recession is one such example. Escalation also takes place when the manager to whom the decision is relayed, shares a similar ideology and comprehends it. Venture capitalists illustrate such empathy (Ross & Staw, 1987).

Organisations escalate irrational decisions mainly due to the inertia caused by the human, administrative and other resources entrusted. They are fixed and embedded in the framework caused by the previous choice. Decision-makers are more likely to lose their rationality and just join the competitors as they climb the same wagon. This is described as competitive irrationality, which occurs in case of auction and bidding, price wars etc.,. Element of Irrationality Escalation becomes irrational when the preferred alternative has not paid off, leading to loss of investment and the expected growth is not achieved or the results are not accrued.

Selective perception of available alternatives due to limited knowledge and uncertain future make the individuals irrational. People form emotional bond with their choices and own them, thus inducing inertness to change their decision. The melancholy occupying decision maker’s mind due to failed course of action and sheer hope of turning the situation in their favour throw humans and organisations into the arena of irrational escalation. Impact of Irrational escalation The absurd level to which commitment to a decision has been escalated definitely has an impact on the individual or the organisation.

It limits their thought process and efforts towards knowledge acquisition as all their capabilities are invested in supporting the choice. Managers tend to lose their sense of reasoning and imagine that they can control external variables, which not only influence the success of the alternative, but are also uncontrollable. Such thinking translates on to other issues in hand and result in sub-optimal decisions in these cases too. All these finally multiply the already accumulated losses manifold.

Conclusion Learning lessons from the previous actions and their consequences is important to avoid irrational escalation of commitment (Molden, & Hui, 2011). Determining limits to commitment, remaining vigilant of the environmental changes, scanning for all the available choices and making an informed, rather than emotion-driven choice, make a decision rational and keep it in the safe periphery of commitment. References Ross, J. & Staw, B. (1987). Knowing when to pull the plug. Harvard Business Review, 65(2), 68-74.

Molden, D. & Hui, C. (2011). Promoting de-escalation of commitment: a regulatory-focus perspective on sunk costs. Psychological Science, 22(1), 8-12. Karlsson, N. , Garling, T. & Bonini, N. (2005). Escalation of commitment with transparent future outcomes.Experimental psychology, 52(1), 67-73. Chulkov, D. (2007). Economics of escalation: when is escalation of commitment rational for managers and for firms?. International Journal of Business Research, 7(5),