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On Leaders and Escalating Commitment

3/5/2015

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When do you abandon a project? When do you stay the course? Helga Drummond addressed these questions in an excellent, easy-to-read article in the November 2014 issue of The Academy of Management Perspectives. Drummond is scholar of managerial decision making at the University of Liverpool.  In this contribution she examined the forces to persist and the forces to abandon projects based her review of the literature. Many of these studies have been about “escalating commitment,” basically spending good money on a poor project beyond the point at which it should have been abandoned.

Drummond suggested that managers are taught to avoid escalating commitment but they need more guidance on when to persist and not give up.  My brief review of the literature supports this. Among the forces to persist are overconfidence, sunk costs, and exit barriers; forces to abandon, opportunity costs, reluctance to renew budgets, and organizational factors. Drummond’s analysis is  thorough and of significance to decision makers. 

When are people likely to abandon a project when they probably should not?
  • When there is a crisis. Managers overreact, overcome by a “vivid event” or events that grab attention -- although statistically the odds favor continuing. 
  • Where there is high risk and an absence of leadership. For example, projects where project managers come and go during the life of the project. 
  • Where there are conflicting factors that offset each other such that managers reinvest enough to keep the project alive but not enough to make the project a success.

My take-aways:

1.  Drummond’s article should be required reading for all leaders, managers, and project managers. She gives many “real world” examples such as BP oil drillers who went 3 meters beyond after being told to quit and hit “one of the world’s largest oil fields.” 

2.  The article underscores the importance of good leadership. Leaders with high responsibility in situations of high-perceived risks make the best economic decisions. Give the tough projects to the best leaders. Give them all the information available. Let them do their jobs. Let them make the decisions. And give them a copy of Drummond’s excellent article.

Drummond, H. (2014). Escalation of commitment: When to stay the course? The Academy of Management Perspectives, 28, 4, 430-446.

Image of Victoria Building, University of Liverpool, by Derek Harper. Obtained from http://commons.wikimedia.org/wiki/File:Victoria_Building,_University_of_Liverpool_-_geograph.org.uk_-_209212.jpg.  Use with permission http://creativecommons.org/licenses/by-sa/2.0/deed.en
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