Judgment in Managerial Decision Making

Judgment in Managerial Decision Making Building and Flying the Concorde During the 1960s, both Britain and France decided they would build a supersonic transport that would come to be called the Concorde. This was a joint effort between the two countries which started off well but became problematic because of sunk costs and an escalation of commitment (Beniada, 2006). The first problem that was created was that the plane cost much more than it was expected to.

Most large ventures end up doing so, but at some point the entity creating the project determines that it is no longer cost effective to continue. This was not the case with the Concorde, as both France and Britain pressed on even though there were a number of concerns with the budget and other factors (Beniada, 2006). Sunk costs became a very important issue.

These kinds of costs refer to what has already been sunk into a project, and how much more will have to be used in order to finish the project -- at which point some of the costs may be able to be recovered (Beniada, 2006). Unfortunately, it is not always possible to recover these costs even if one continues on with the project and works to keep it as financially viable as possible.

The sunk costs will definitely be lost if the project is scrapped, though, because there will be no completed project which can be used to recoup at least some of the money that has been spent. This was the case with the Concorde, as both countries realized that they had gotten far enough into the project that they would not be able to back out, because the sunk cost would be too great (Beniada, 2006).

At that point they were better off focusing on how to make the project viable, which they actually did because the Concorde was completed and took flight (Beniada, 2006). Over the years, the plane made a number of transatlantic flights before it was finally retired, but the cost of maintaining it was very high (Beniada, 2006). It would have been better for the budgets of both France and Britain to avoid the build altogether.

Since this was not realized early enough in the process, both countries simply determined that they were going to finish what they had started. Some of that came from the sunk costs, but much of it also came from the escalation of commitment between the countries, as well (Beniada, 2006).

In other words, if there are two entities working on a project and one of them says it will not back down and will finish the project, the other entity will often do the same to save face and to keep its commitment.

That is an important way that companies and individuals continue with the commitments they have made to one another, but it can also be problematic when it leads to an overzealous belief that a project must be completed no matter what, and that both entities working on the project have to focus their entire beings on the project at hand.

The Concorde was very expensive, took longer to build than expected, and cost both Britain and France much more than the countries would have assumed it would, in financial and other ways (Beniada, 2006). While the end result was a supersonic transport like nothing that had been seen before, one has to consider the cost to create that and whether there was a true level of.