New Research Shows Commission Errors Treated Harsher Than Omission Errors

New research by Matt Dixon and Ted McKenna in their book “The JOLT Effect” shows why prospects often choose to make no decision during sales situations even when the salesperson makes a compelling case and the prospect recognizes the value of the solution. To understand why many prospects, choose inaction over making a buying decision, we need to look at the consequences of two types of decision-making errors. One is the error of Omission, and the other is an error of Commission. Let’s break down these two types of decision-making errors to see why prospects often choose the status quo.

An error of omission is when you lose out on something when you do nothing. They are losses that result from inaction when presented with a golden opportunity.

A good example of an error of omission is the story of Blockbuster and Netflix.

In 2000, Netflix offered to sell itself to Blockbuster for $50 million. However, Blockbuster declined the offer. Blockbuster was the dominant player in the movie rental industry at that time, with over 9,000 stores worldwide. However, the rise of digital technology was changing the way people consumed movies. Netflix saw an opportunity to disrupt the industry by offering DVD rentals by mail and later streaming.

Blockbuster failed to see the potential of this new business model and passed on the opportunity to acquire Netflix. As a result, Netflix went on to become one of the most successful companies of the digital age, while Blockbuster filed for bankruptcy ten years later, in 2010.

An error of commission is quite different than an error of omission. Errors of commission are the result of a failure based on taking action. A good example of an error of commission is the Challenger space shuttle disaster.

On January 28, 1986, the Challenger space shuttle launched from Cape Canaveral, Florida. The shuttle broke apart 73 seconds after liftoff, killing all seven crew members on board. An investigation later revealed that the cause of the disaster was a faulty O-ring seal on one of the solid rocket boosters, which allowed hot gases to escape and damage the shuttle’s external fuel tank.

The decision to launch the Challenger was made despite concerns about the O-ring seals raised by engineers at NASA contractor Morton Thiokol. The engineers recommended that the launch be postponed due to the cold weather conditions, which increased the risk of O-ring failure. However, NASA managers overruled their concerns and decided to proceed with the launch anyway.

NASA’s decision to launch was an error of commission because decision-makers took action that directly caused harm. The decision to launch the Challenger was made despite clear warning signs and concerns raised by experts, leading to a tragic loss of life. The disaster led to re-evaluating NASA’s safety procedures and decision-making processes.

What is interesting is how a failure as the result of omission is much more preferred over failures of commission. Put simply, prospects are okay with missing out on an opportunity but not okay with messing up.

Errors of omission are easily deflected away from the decision-maker. The decision-maker can claim a myriad of external factors that kept them from making a timely decision. However, an error of commission reflects directly on the decision-maker themself. Few excuses other than outright deception from others can deflect the blame away from a decision-maker when they make an error of commission.

Nobody wants to feel personally accountable or culpable for a loss due to an action they took. They regret and experience a loss of face when they make a decision and later discover that they made the wrong decision. As a result, many decision-makers choose inaction.

Most modern-day sales processes are based on prospect theory as defined by Amos Tversky and Daniel Kahneman in their book Thinking Fast and Slow. In a nutshell, prospect theory says that prospects are more sensitive to loss aversion than to potential gains. So, salespeople lean heavily on Fear of Missing Out (FoMO) sales tactics. However, what is often overlooked from that same research is the Certainty Effect that Tversky and Kahneman discuss as it relates to prospect Theory. Kahneman and Tversky discovered that prospects are predisposed to take more guaranteed gains even if they are of lesser value because they are more motivated by the fear of disappointment or loss aversion associated with greater risk-taking. Therefore, many decision-makers would rather err on the side of making no gains by avoiding the decision altogether along with any risk vs. the potential of making a bad decision.

Unfortunately, in many sales situations, when the prospect is struggling with making a decision, most salespeople resort to what they have been taught, and that is to dial up the FoMO. In many cases, what the salesperson needs is a way to dial down the Fear of Messing Up (FoMU). So, when a prospect is faced with losing out on a disappearing 10% discount vs. perhaps losing their job because they made a bad decision to buy from you, they will choose inaction over losing their job every time.

Is your prospect’s indecisiveness based on the fear of making an error of commission?