Throwing Bad Money After Bad

We know the importance of social networking. Networking in fact has always been important to finding a good job or in seeking out information and expertise. But those in hiring positions might do well to consider someone at the periphery or outside of their social network, when seeking help. Especially if the new hire is in a decision-making position.

After all our efforts in building social networks, why on Earth would we enlist an outsider for expertise?

In research reported recently from the Kellogg School of Management, Northwestern University, we learn that sometimes bad decisions follow other bad decisions. Kellogg Professor Adam Galinsky found this to be true particularly when the decision-makers have some connection (1).

We might intuitively agree that someone who has no self-interest in the project might be the most objective source of advice…the best help in making a decision, particularly after we’ve made a poor decision.

But can we be certain that this outsider isn’t susceptible to the same mindset that allowed the bad decision in the first place?

A social psychologist, Galinsky set out to determine if people unrelated to a decision-maker could still be influenced by that person. Galinsky’s experiment involved fictious subjects and two groups of college students. One group was given a reason to identify with a subject (e.g., they were told they had birthdays in the same month), while the other group had no connection to the subject.

Galinsky hired college students to watch, via text on a computer screen, as one subject tried to outbid another person in a mock auction. When the subject bid over a certain amount, the students began to lose the money paid to them for participating in the study.

As the subject neared this bidding limit, the students were asked to take over the bidding. At this point the group of student participants that was given a reason to identify with the subject was more likely to continue bidding, while the group with no connection to the bidder stopped bidding.

Similar results were found with big companies in dire financial straits. In work reported by Galinsky earlier this year, decision-makers who share a ‘psychological connection’ with their predecessors, whether they work together or travel in the same social circle, are subconsciously motivated to continue past policies and investments, rather than making big changes (2).

Galinsky pointed to the now well-known reshuffling that happened at General Motors (GM) in March of this year. CEO Rick Wagoner was replaced with his protégé Fritz Henderson. GM later sought bankruptcy protection and accepted federal bailout money.

On the other hand, American automaker, Ford, hired outsider Alan Mulally from Boeing in 2006, to turn the company around. Ford did not need or accept federal bailout dollars in 2009.

But we shouldn’t be too hard on ourselves. Galinsky reminds that humans are “intensely social beings” and points out that “psychological connections develop unconsciously”.

As for a prescription for avoiding a repeat of a bad decision? How about getting a second opinion, maybe from a second contractor or someone you met at lunch? Or how about a retired professional that worked in teaching or business in the area in which you’re considering your options.

Have you gotten any outside help lately in making decisions? Let us know how you’ve avoided repeating a bad decision.

  1. Torrice, M. 10 Nov 2009. Bad Decisions May Be Contagious. ScienceNOW Daily News. Accessed online 13-Nov-09. http://www.sciencenow.sciencemag.org/cgi/content/full/2009/1110/2
  2. Immen, W. 10 Oct 2009. When a complete stranger’s better suited than the boss.
    http://www.theglobeandmail.com/report-on-business/managing/when-a-complete-strangers-better-suited-than-the-boss/article1318025
    Accessed 13-Nov-09.
  3. The following two tabs change content below.

    Kari Kenefick

    Kari has been a science writer/editor for Promega since 1996. Prior to that she enjoyed working in veterinary microbiology/immunology, and has an M.S. in Bacteriology, U of WI-Madison. Favorite topics include infectious disease, inflammation, aging, exercise, nutrition and personality traits. When not writing, she enjoys training her dogs in agility and obedience. About the practice of writing, as we say in DNA purification, spin, rinse and repeat.

Leave a Reply