Food for thought!

A couple of days ago, I had the most exhilarating, ride to the southern suburb of Koramanagala, here in Bangalore, on the pillion of a friends bike.After transacting, the business, that we were there for, feeling ravenously hungry, I scouted around for a bite, and not finding anything appropriate, settled for a packet of Haldiram's Moong Dal.

Post quenching the fires in my belly, while attempting to dispose, the wrapper, the name Haldiram struck a chord.Why? Read on & you shall comprehend!

Haldiram Bhujiawala proprietor Prabhu Shankar Agarwal was sentenced to life imprisonment along with four others by a fast track court for conspiring to kill a tea stall owner, whose shop came in the way of a food plaza he was building, a few days ago.

Agarwal, owner of the multi-crore food and confectionery chain, which has outlets in many cities and also in London and elsewhere, had failed to persuade tea stall owner Satyanarayan Sharma in Burrabazar area of Kolkata to move out as the shop would spoil the facade of the food plaza he was constructing.

His hired goons who threatened the tea stall owner & had then raided the shop looking for Satyanarayan, but not finding him, shot his nephew Pramod Sharma, injuring him seriously on March 30, 2005. These acts followed attempts to reason with Sharma and as this cut no ice, Agarwal tried to buy him off.Sharma would not budge.
The rather bizarre behavior displayed by Agarwal, is not uncommon & in Psychological parlance termed as 'Escalation of Commitment'.

An example.......After a heated and aggressive bidding war, Robert Campeau ended up buying Bloomingdale's for an estimated 600 million dollars more than it was worth. The Wall Street Journal noted that "we're not dealing in price anymore but egos". Campeau was forced to declare bankruptcy soon afterwards.

Escalation of commitment, is a phenomenon where decision making turns seemingly irrational piggybacking on rational decisions, because you do not want to cut your losses & admit that you were wrong in the first place.The phenomenon of escalation can be described in the following fashion. First, a decision-maker performs a choice under conditions of uncertainty. Later, the decision-maker learns that another course of action is more advantageous (this different course may be as simple as the termination of the original project). At this stage the decision-maker has an option of altering the original decision. Having received the negative feedback, however, the decision-maker escalates the original commitment, thus becoming "locked in the losing course of action" (Staw, 1981).

As I finally managed to dispose the 'Moong Dal' wrapper, I wistfully thought- What if our friend Agarwal, had heard about escalation of commitment? In the managers world, it is imperative that we understand, EOC.