Question

Describe the escalation of commitment bias, and give an example. What can managers do to reduce this bias?

Answer 1

Escalation of commitment bias sometimes refers to as sunk cost bias. Escalation of commitment is a bias in which the decision-maker stick to the decision made even if the decision is not beneficial.

Example: A manager identified that project of a building was beneficial. After completion of 25% of the project, the manager found the project is not beneficial. As the manager spent a lot of time and cost for that project, the manager does not stop the project. The tendency to work on the project even though the future benefits of the project are not definite is called escalation of commitment. The managers tend to commit this bias due to the inability to not accepting failure.

Managers can follow the following steps to reduce bias:

1. The managers should decide minimum targets for the performance and regularly check on the actual performance to compare with targets.

2. The managers should not take decisions to satisfy ego. The managers should learn how to reduce the ego in decision making.

3. The managers should track the cost of the project or investment to understand the impact of continuing the project on the budget.