Escalation of commitment amongst collective decision makers: Learnings for company boards from New Zealand's Covid-19 panic

Abstract

New Zealand's 2020 response to SARS-Cov-2 has received worldwide acclaim. In particular the nation's Prime Minister, Jacinda Ardern has been heralded across much of the Anglosphere for her leadership throughout the supposed crisis. Yet, the persistent non-alignment between New Zealand's Covid-19 data and the government's ensuing decision making ought to have given rise to deep concern. What appears to have emerged through the duration of the saga is an escalation of commitment (Staw, 1976, 1981; Brockner, 1992), which in itself is not unusual. However, the table-stakes of escalation were, in this case enormous - the economy was deliberately plunged into recession. And, the tools of the state used to achieve that outcome hitherto unseen in Westminster democracies1. The public behaviour of the Prime Minister and her advisors provides an opportunity to reflect on the comparatively private behaviours of corporate boards, particularly when expected outcomes are, at first, not achieved. At what point, if at all, ought decision makers recant to a new course of action? And, what triggers, if any emerge to precipitate a change in direction before corporate failure occurs? The aim of the paper is to extend Staw's (1981) model of the commitment process, and to then explore corporate decision making by way of two renown failure cases using the emergent model. Following a brief literature review the model is revisited and modified as a result of the New Zealand government's 'public' management of Covid-19. The advanced model is then applied to corporate decision making - the decisions attributed to each of the respective boards involved. Like Staw, behaviours perceptually associated with parts of a single course of action are observed to produce victims. In the case of the New Zealand government those victims are identified as being foremost business owners, employers, and investors and secondly employees (i.e., the economy). In the case of the two corporates examined in this study the victims, while numerable are identifiable including the companies themselves, their boards, their shareholders, their employees, their sub-contractors, and broader groups of stakeholders including the various contracting parties. The real victims being shareholders and employees: the former of whose investment and expected returns were destroyed, and the latter whose jobs were lost. The contribution to knowledge emerging from this study, arguably an adumbration (Merton, 1956), is that awareness of an escalation of commitment ought to be at the forefront of decision making, especially in a collective decision making environment: one where the lead decision maker (i.e., board chair) is assigned responsibility and in the case of New Zealand's Prime Minister idolised - the cost of which has been conveniently ignored.