How escalations of commitment can impact entrepreneurs
Escalation of commitment – the tendency to increase commitment to a failing course of action – is a real danger for entrepreneurs. At its heart, entrepreneurship is inherently risky and often involves some degree of pursuing an un-tested path. Entrepreneurs may pursue their direction despite others warning them against it – the fact is that a high proportion of startups fail.
With entrepreneurs often pursuing their goals despite facing warnings from others not to, it is not unsurprising that they are also prone to ignore failures – chalking it up to initial missteps or requiring additional effort to succeed. While determination is important, and there will inevitably be missteps, this mentality of continuing no matter what can lead to a commitment to a failing cause of action escalating.
Different forms of escalating commitment
- Escalating financial commitments: A classic form of escalating commitment is associated with finances – throwing good money after bad.
- Escalating time commitments: A slightly less obvious form of escalation of commitment is associated with putting additional time and effort into a failing course of action. Time is often easier to justify – especially when running your own firm – but it can have the same result as money – increasing commitment to a path that is not yielding results.
- Escalating development commitment: Another type of escalation of commitment – that straddles both increased financial and time commitment – is the continued development of a product that is not getting a positive response from customers. Additional features and advancements are made in the hope that customers will change their minds about the product.
Signs that you are escalating commitments
Limited success - things are not transpiring as you expected
One of the biggest indicators of escalation of commitment is that a project is being continued with, despite it not yielding success (or potentially requiring substantially greater commitments of resources than was intended). If benchmarks for whether the project is likely to be profitable start to be simply ignored, then it is possible that the firm is continuing with a failing course of action.
Limited success is used to justify extra effort
Another example of escalating commitment is if prior failures are used to justify additional commitment. Rather than seeing failure as a warning sign that the particular path may not be a fruitful one, it is used to justify additional investments – the existing commitments are not sufficient.
While there may be times where this does hold – potentially the initial commitments of resources were not able to achieve the desired awareness level of your product or service – using failure as a justification for greater resource allocation may also be a classic case of escalating your commitment. Ask yourself what would happen if this level of commitment does not achieve the desired performance – to increase it again?
Justifications for why all the effort is worth it
Part of the danger of escalation of commitment is that it is possible to rationalize all of the effort and resources put into the area. Rather than recognizing the failures of a particular path to achieve results, instead “hidden benefits” are created to make it seem as though the path is successful, and in turn justify continuation.
For example, rather than evaluating the project on whether it is brining in new customers, the evaluation may be instead made on the technological advancements made in the progress – dimensions that you are able to claim success on. Looking for new ways to justify why a particular direction is worth continuing with (especially if the intended goals are not being met), is one way of rationalizing why it makes sense to continue with a particular course of action.
How can you avoid overcommitting to a failing course of action
Systematic performance reviews – with defined expectations – is one approach to identify and catch escalating commitment. While it is always possible to change the goalposts and justify a ‘failure’ as a success so as to continue development, this becomes more difficult to the extent that the failures are widely apparent. Escalation of commitment can often happen without conscious realization – the gradual increase without anyone being aware – and while having to make a conscious decision to continue with a project does not prevent escalation of commitment, it at least puts in place a check-point to flag up the escalation.
This article considers the benefits of annual strategy reviews – how they are an important part of setting firm direction.
Entrepreneur personality traits: Determination and its importance for getting through difficult times
This article explores some of the reasons why determination may help with your entrepreneurial success.
Nobody enjoys failures – anyone who says to ‘celebrate’ them will still have experienced disappointments of their own. However, there are significant reasons to at least get comfortable with the idea of failure.
This article explores the primary reasons for engaging your employees in shaping the strategy of your startup.
This article explores the need for making tradeoffs, and how to avoid the danger of putting off the tough decisions.
Strategic buy-in is important to successful implementation, but what do you do if employees are skeptical? This article considers ways of convincing skeptical employees.
This article explores different approaches to upselling – from adding features after initial commitment, steering the customer towards more premium offerings, and bundling of services together.
Getting to know other entrepreneurs is important when starting a business – this article explores approaches for meeting other founders.
This article explores some of the ways that setting goals can drive organizational success – from increased focus to driving additional employee effort.