People generally stink at cutting their losses. You can see this when you keep waiting for that bus after 20 minutes even though you could have just walked to your destination in the time you’ve been twiddling your thumbs. And you can see it in the many expressions we’ve developed for the phenomenon from 'sunk costs' to 'throwing good money after bad.'

A recent post by Wharton professor Adam Grant (who is a bit of a biz school rock star, meriting a lengthy profile in the New York Times Magazine recently) highlights another name for the problem -- “escalation of commitment.” No doubt you’ve experienced this already in your career as an entrepreneur. "Escalation occurs whenever we invest our time, energy, or resources in a choice that falls short of the desired return, and we succumb to the temptation to invest more," writes Grant.

It’s a familiar problem but thankfully also an avoidable one. In the long post Grant delves into what causes us to be so stubborn in the face of failure and offers four suggestions as to how to make sure you don’t let your previous investment of time, money or both blind you to the fact it’s time to accept a mistake has been made and change course. Among them is a counter-intuitive bit of psychology that you should probably be aware of before you next praise your team. It turns out that complementing an employee on their decision-making skills is actually liking to lead to poorer decisions. Grant explains:

In one experiment, when people were praised for their decision-making skills and then made a choice about whether to keep investing in a bad hire, they were 40 percent more likely to escalate their commitment than people who received no praise at all. They were great decision-makers, so how could they have chosen the wrong candidate?

On the other hand, when people were praised for their creativity, they were 40 percent less likely to escalate commitment than those who received no praise. Since they felt good about another skill, the failure didn't sting as much. A rich body of research shows that when we get positive feedback in the same domain as the failure, we're at risk for becoming overconfident. If you're about to compliment someone who's at risk for escalation, target the compliment to a different skill set or a different sphere of life.

So in other words, if you’re worried that your employee may make a bad call (as we all do from time to time) and you want her to be open to a clear-eyed reassessment of her decisions, forget about highlighting her generally rock solid decision making skills. Offer up praise for another area in which she excels instead and she may feel safe enough to actually admit when an initial choice was far from ideal.

Interested in Grant’s other suggestions on how to bust our tendency to escalate commitments? Check out the complete post or his new book.

Are your well meant compliments likely to backfire?

Published on: Aug 2, 2013
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