How many times has your sales team “chased” a prospective opportunity only to lose it in the end? Why does your sales leader continue to pour resource into sales team members who are not succeeding? Why is the company leadership so committed to a direction when all of the indicators point to failure if the path is not altered?
How and why do we remain stubbornly committed to “X” (you fill in the blank) when that little voice inside says that it is not a good decision? It is because we are human.
In their study, “Escalation of Commitment”, Theresa F. Kelly and Katherine L. Milkman highlight the negative impact of commitment to a bad decision. They point out that decision makers have a tendency to escalate their commitment to a decision even though objective evidence “suggests that staying the course is unwise”. According to Kelly and Milkman, “escalation of commitment becomes a risk when the decision maker commits a resource to a course of action…in the hope of achieving a positive outcome and experiences disappointing results.”
Why do we want to “stick it out” in the face of evidence that says otherwise? Kelly and Milkman identify four reasons why:
Self-Justification: In the face of facts that tell us otherwise, a person “feeling responsible” will tend to justify their behavior and disregard any negative feedback on that behavior. By just staying the course and devoting more resources, the decision maker will do anything to justify their decision.
Confirmation Bias: We tend to be drawn and listen to those things which support our decisions while ignoring information to the contrary.
Loss Aversion: The thought of loss compels decision makers to commit additional resources to a losing decision.
Impression Management: Resource commitment decisions are rarely made in a vacuum; there is usually some degree of public disclosure. To justify decisions, decision makers will often pour more resources into a losing decision as opposed to admitting it was a bad decision. Additionally, as Kelly and Milkman point out, “people tend to punish decision makers for inconsistency” citing the example of candidate John Kerry in the 2004 Presidential Campaign when he was labeled a “flip-flopper” on his changing views on the Iraq War.
The influencing factors include:
Personal Responsibility: The decision maker who originally endorsed the commitment is more likely to commit additional resources
Sunk Costs: The greater the commitment of resources; the more likely there will be additional resources committed
Proximity to Completion: “We are almost done”; “let’s commit more to get it done”
Exogenous Explanations for Failure: We have all heard this one – by pointing to outside forces we can self justify any failed decision – we did not succeed because ______ (you fill in the blank with any “out of our control excuse”); it is never because it was a bad decision by the decision maker.
Group Decision Making: “Group Think” – a phenomenon where the desire to avoid intra-group conflict makes group members overly compliant, can support the original decision while ignoring alternatives
There are things we can do to avoid “chasing” and escalating our commitment. Kelly and Milkman highlight the following:
- Actively seek alternate and opposing points of view
- Reframe losses to gains to prevent risk seeking
- Structure incentives so decision makers are not punished for inconsistency
- Hand off decisions about whether to commit more resources to new decision makers
- Be careful not to consider expended resources when making decisions
- Make sure decision makers are frequently reminded of the goals of the commitment
Finally as the authors point out “escalation of commitment occurs in diverse management settings and can lead to serious negative consequences for decision makers” – which is a reminder to us all that we must be constantly on guard to escalating commitment, in ourselves and in others.
A disciplined sales process coupled with the knowledge and experience dealing with commitment escalation will help you and your sales team focus on the “chase” that generates revenue and not on the “chase to nowhere”.
