In my first blog on how we can Be Aware of Bias, I walked us through the powerful impact of confirmation bias—the tendency to seek out information that supports our existing beliefs while ignoring evidence to the contrary. Now, in the second part of our series on biases in business, it’s time to focus on another common trap: Escalation of Commitment Bias.
Escalation of commitment bias occurs when we continue to invest time, resources, or energy into a decision long after it’s stopped being a rational choice. Often, we persist because of the effort or resources we’ve already put in, and rather than cutting our losses, we double down. It’s a bit like Newton’s first law of motion: a project in motion tends to stay in motion, even if it’s not moving in the right direction!
What is Escalation of Commitment Bias?
Escalation of commitment is the tendency to stick with a decision, even as the costs continue to rise and the payoff becomes uncertain or unlikely. Personal attachment to a project or goal can intensify this bias, pushing us to rationalize our choices despite warning signs that it might be time to pivot or pull out. This bias shows up in various forms—from a failing project that keeps receiving funding, to a business initiative that keeps growing more complicated without measurable results.
A classic example is the “sunk cost fallacy,” where we feel compelled to continue because of everything we’ve already invested. Imagine a business investing heavily in a product that isn’t gaining traction in the market. Rather than pulling the plug, decision-makers might continue pouring resources into the project to “protect” the initial investment, leading to even greater losses.
Countering Escalation of Commitment Bias
The key to managing escalation of commitment is to set objective criteria for decision-making and to know when to walk away. Here are some practical countermeasures:
- Define Review Points: Establish regular checkpoints to assess progress and review the validity of the initial decision. Ask yourself: Are we on track? Does this project still align with our goals?
- Pre-Establish Decision Criteria: Outline the factors that would signal a need to stop or change course before you begin. Having these criteria in place can provide a clear exit strategy if things go off track.
- Prepare an Exit Strategy: Knowing when to cut losses is a crucial part of smart decision-making. Prepare a contingency plan that allows you to pivot without feeling like you’ve failed.
- Involve Objective Voices: Consider including people who were not part of the original decision-making process. They may bring fresh perspectives and can help evaluate whether the project is still worth pursuing.
Real-World Exercise: The $20 Gift Card Auction
To illustrate the impact in real-time, I love to use this fun exercise in my workshops on biases: a $20 gift card auction. Here’s how it works:
- I start the bidding at $1, with bids increasing in $1 increments.
- The highest bidder wins the $20 gift card and pays the amount they bid.
- Here’s the twist: the second-highest bidder also has to pay their last bid but receives nothing.
As the bidding continues, you’d be surprised (or maybe not!) at how increasingly invested participants become in “winning” the gift card, even when it no longer makes financial sense. People keep bidding to avoid losing, leading to both the highest and second-highest bidders paying more than the actual value of the gift card. It really shows how quickly we can escalate commitment to a decision without pausing to reassess if it’s still worthwhile.
In business, this pattern is common. Once we’re invested in an outcome, it’s hard to let go, even when it becomes clear that continuing isn’t in our best interest.
Avoiding Escalation of Commitment in Business
Escalation of commitment frequently occurs in design and development teams. At various decision points, teams should be asking, Should we continue? But rather than stepping back and reassessing, we might push forward, doubling down on our initial choices—even when those choices are no longer viable.
Here are some strategies to help you avoid this bias in the business world:
- Encourage Critical Checkpoints: Build in regular reviews to objectively evaluate the current status of the project and consider alternative options.
- Use Milestone-Based Decision-Making: Set clear milestones that the project must meet at each stage. If a milestone isn’t reached, that’s an automatic trigger to reassess.
- Incorporate Third-Party Audits: Bringing in an external perspective can provide a more objective evaluation. This person can review progress without the emotional investment that might affect those who’ve been part of the project from the start.
Building Trust and Credibility by Confronting Escalation Bias
In consulting, trust and credibility are paramount. Clients need to know that our recommendations are both grounded in expertise and delivered with their best interests in mind. If we’re not careful, escalation bias can undermine both trust and credibility. If clients feel we’re pushing a project forward only because of sunk costs, they might begin to question the objectivity of our advice.
I often remind clients and team members to actively seek feedback and disconfirming information. Randomly assigning someone the role of “devil’s advocate” in meetings can help ensure that all sides of a decision are considered. This approach maintains credibility by demonstrating that we’re willing to explore all options, not just the ones that keep the project in motion.
Recognizing Blind Spots
Escalation bias can create blind spots, especially when we’re unaware of how invested we are in seeing a decision through. Imagine being in a meeting where a particularly vocal leader continues to push a project, despite concerns raised by others. In situations like this, escalation bias might lead us to miss the diverse perspectives needed to make an objective decision.
One way to address this is by fostering an environment where all voices are encouraged to share their thoughts openly. In situations where the team dynamic feels too one-sided, try holding off on immediate responses and instead ask team members to send their thoughts later via email. This gives everyone time to reflect and share concerns without the pressure of immediate group dynamics.
Making Smarter Decisions by Recognizing Bias
Escalation of commitment bias is a powerful force in decision-making, especially when we’re dealing with long-term projects that demand significant resources. By staying aware of this bias and managing it actively, we can make better, more balanced decisions that serve the best interests of our clients, teams, and businesses.
By recognizing escalation bias, we’re not only protecting our resources—we’re also fostering an environment of transparency and trust. Responsible leadership requires that we question our decisions regularly and stay open to changing course when necessary.
So the next time you find yourself deep into a project, take a moment to ask: Are we continuing because it’s the right choice, or because we’re already invested?