Maintaining Trust When De-Escalating Commitment: Precommitment Alleviates Reputational Concerns

Abstract

Escalation of commitment costs businesses and taxpayers billions of dollars. Management research has consistently found that even in cases where future prospects look dire, decision makers routinely escalate commitment to failing courses of action. We draw on psychological research on self-presentation to argue that reputational considerations are a key driver of such escalation: leaders who de-escalate may fear, and in fact be, distrusted. In four pre-registered experiments with managers (N= 2,661), we demonstrate an effective way to de-escalate while maintaining trust: pre-specifying conditions for de-escalation (i.e., precommitment). In the presence of precommitment, third-party observers perceive de-escalators as having more integrity and are more likely to trust them in a behavioral economic game, compared to the absence of precommitment (Studies 1 and 2). Decision-makers themselves recognize how precommitment changes their reputational incentives: in the presence of this precommitment, managers are not only more likely to de-escalate (Study 3), but also anticipate that they will be perceived as being more trustworthy (Studies 3 and 4). This work contributes evidence to the underexplored idea that self-presentation motives influence escalation of commitment, and also provides a practical and costless solution leaders can implement. By harnessing precommitment, leaders can maintain trust when deciding to de-escalate.