RESEARCH PROVIDES NEW INSIGHTS INTO MANAGERS' UNWILLINGNESS TO CANCEL UNSUCCESSFUL PROJECTS
22 December 2006 - Duke University

Researchers found that a manager’s resistance to change often may stem from his or her failure to accurately absorb and process negative feedback about a project. The manager may not be aware that he or she is processing the new information in a way that confirms a prior point of view, according to Fuqua professors Bill Boulding and Rick Staelin and co-author Eyal Biyalogorsky of the University of California, Davis. Their research was published in the April issue of the Journal of Marketing.

The research findings are in contrast to the currently accepted thought that leaders are unwilling to discontinue a project when they have invested time, effort and reputation in making the initial decision to move forward because they may suffer loss of face, or social, psychological or monetary costs.

The researchers asked 142 MBA and executive MBA students to review a case study about a proposed product introduction and provided them with either positive or very positive market research regarding the product’s prospects. Some of the participants were asked to decide whether to proceed with the product launch, while others were not asked to make any public commitment or decide whether to move forward.

Those participants who chose to launch the product, as well as those who were not asked to make any recommendations, were provided with negative feedback about the product’s performance during its first two years on the market. Fifty-two percent decided to continue with the unsuccessful product even after receiving the negative information. Interestingly, the researchers found, many of those not asked to make an initial recommendation were among the group that decided to stay the course.

While previous theories would predict that participants who choose to launch the product would want to continue with it, these theories do not account for why participants who had not been involved with launching the product would choose to continue selling it.

In their paper, the researchers show that the decision to continue with the failing product is not caused by the participants’ public commitment to the initial decision. Instead, they say, the participants formed positive impressions of the product before receiving negative reviews of its performance, and that caused the managers to distort and give less weight to the new, negative information.

“What we found is that people interpret negative feedback based on their prior beliefs about the worthiness of a product or project whether or not they are personally invested in that project’s success,” Boulding said. “People fall into the trap of not acknowledging the veracity of new, negative information when it goes against their previously held positive beliefs about that project.”

Although the research was conducted within a business setting, Staelin said, the findings also could be applied to a range of situations in which leaders are provided negative feedback about a previously selected alternative. Much of the prior research in this area concerned government initiatives, such as Operation Desert Storm, the Vietnam War and the Apollo moon mission.

“We believe our findings will hold in a large number of situations and will help explain why managers and government leaders stick with actions even after most uninvolved observers have come to the conclusion that the selected course of action should be discontinued,” Staelin said.

The researchers suggest several steps organizations can take to reduce the likelihood that decision makers will be swayed by prior beliefs and misinterpret feedback. Those include changing organizational structures so that decisions to continue or stop projects are made by someone without prior beliefs about a project and establishing rules at the outset of a project that use new objective data to decide whether to continue a project.

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