When a project starts heading south, you would think that the rats would start abandoning the ship and the sponsor would quickly pull the plug to minimize losses. But that’s not what happens. Sponsors’ commitment to projects going bad actually seems to grow. The literature is littered with examples of sponsors continuing to spend money on a project that is slipping (Denver International Airport’s baggage-handling) or has shown market failure (the Ford Edsel).
Why in the world would someone throw good money after bad?
At issue is escalation of commitment. Urban Nulden of the Department of Informatics at Goteborg University, Sweden, examined this in some interesting research. Nulden talked with several project managers about escalation of commitment on projects. One manager’s comments in particular caught my attention. Nulden reports the manager as saying, “I had decided to be tough at the meeting and suggest that [the failing project] should be abandoned, but I got cold feet at the meeting.”
What interests me is whether or not everyone knew that the project was failing but no one would raise the question, thinking that everyone else or a major stakeholder wanted it. Jerry Harvey calls this the “Abilene Paradox”: he and his relatives all drive an hour in the hot Texas summer in an non-air conditioned car to have dinner, only to realise later that none of them wanted to go in the first place. He calls it the problem of agreement, as opposed to conflict management.
It could also be what Art Kleiner identified as pleasing the in-crowd of your organization (“Are You In with the In Crowd?“, Harvard Business Review, Jul 2003; or Who Really Matters: The Core Group Theory of Power, Privilege, and Success). The “in-crowd” is the core group of your organization, the people whose wants and desires are taken into account, albeit unconsciously, in every decision within the organization. Comments made by the in-crowd carry great weight, and even small interactions with these people are analyzed and retold. Off-hand comments in meetings or even hallways can cause redirections as non-in crowd persons attempt to please the in-crowd. Projects can escalate because those inside the core group do not withdraw their desire for the project’s completion.
The London Stock Exchange this type of problem with its Taurus project, which has been chronicled in several places, including Mark Keil & Ramiro Montealegre’s article in the Sloan Management Review (“Cutting Your Losses: Extricating Your Organization When a Big Project Goes Awry“, Spring 2000). Taurus was to revolutionize the exchange but ended up spending more than £500B between them and their partners. The executive of the exchange wanted to kill the project but kept being assured that everything was fine. In the end, killing it cost him personally: he resigned the next day.
Perhaps the issue that Harvey addresses in the Abilene Paradox explains much of the escalation of commitment that we see. Everyone knows that the project is failing but no one wants to risk the ostracization of saying this.
Helga Drummond reviewed the infmaous Taurus project and the causes of the escalation of commitment leading to its massive failure (“Is Escalation Always Irrational?“, Organization Studies, Mid-Winter 1998). She believes that the “tragedy of the commons” causes much of the escalation:
The commons were stretches of land offering free grazing rights. Logic dictated that each peasant would graze one more beast. However, the collective impact of each peasant maximizing his/her utility was to ruin the land. In other words, failure was inherent in the policy itself. In the present study, the policy of preserving business interests led to a similarly destructive ‘free for all’.
Taurus had so many stakeholders demanding their own ease of solution that the project’s complexity grew beyond anyone’s ability to comprehend it all. Which seems to also argue for “There Can Be Only One Leader” and the concomitant reduction of main stakeholders.
Is escalation of commitment really the problem? Or is it simply a rejection of accountability for what you think is someone else’s problem? That in turn suggests a tragedy of the commons.
Escalation of commitment can only be prevented with a strong management culture that allows for information to go up the ladder, down the ladder, and sideways, in clear ways.
Image credit: Some escalation going on of some de-commitment. “Run on East Side Bank, N.Y. 1912 February 16”. Bain News Service, via Library of Congress.