Posted on

How to Avoid the Planning Fallacy

It’s easy to make the mistake of being too optimistic at times when it’s simply unwarranted. This fault is called the “planning fallacy” and it follows a natural human trait to project the best case, even when the evidence suggests something quite different.

We Caribbean people are well known in the rest of the world for our casual, laid-back and fun-seeking dispositions. It’s a major part of our culture – perhaps a release from centuries of slavery and indentureship. People pay thousands of dollars to enjoy this vibe in our carnivals, attractions and tourist resorts.

As distinct as this culture might be, it has a drawback: we are culturally prone to be over-optimistic. The “planning fallacy” is the embodiment of this tendency: we leave San Fernando for a meeting in Diego Martin, estimating that the trip can take as little as an hour. While it’s true that, under ideal circumstances, it’s possible for such a miracle to happen, it’s a mistake to believe that it will in fact do so. It’s a greater folly to lead someone else to expect us to be there “in an hour” especially when our timely attendance is critical.

It’s the planning fallacy at work and it undermines projects throughout the world and in our region. Here’s how we get past it.

1. Use Past Data

We fool ourselves into thinking that this particular trip to town is different than the three we made last month, and therefore will take less time. After all, we argue, the conditions are different; prior obstacles are unlikely to recur. Plus, we have learned a few lessons that will make things better this time around.

The research shows, however, that past data is the best predictor. At the very least, we must look for anecdotal facts as a starting point, before making projections we fall in love with that are, in fact, just plain crazy.

To prevent this from happening, seek independent verification for task estimates. Ask someone else how long it takes the average person to make the trip, or complete the task. If someone is making you a promise, ask them how long a similar task took in the recent past. Listen carefully to both the words given in the answer and the tone of their voice. Then, make your own determination.

2. Ask for Unbiased Estimates

An unbiased estimate is simply one that has an even, 50-50 chance of taking place. For example, the odds of getting 10 Heads in a row when flipping the average coin 10 times are extremely small. Most trips each day from San Fernando to Diego Martin during daytime hours take almost 2 hours – it’s the rare, one-off trip that may take only an hour. Perhaps 1 out of 50.

When you ask your colleagues to make estimates, never take the first one offered. Instead, test it. Ask them “I hear you say 10 days, but do you mean 10 days plus or minus 2 or 3 days on either side, late or early?” If they demur and tell you that there’s no way the deliverable can be early, then you know that they are committing the planning fallacy. They may not know how to correct the estimate, but you must do so if you hope to walk away from the conversation with a realistic idea of how long the task will take.

3. Accept Negativity

In business, we have a tendency to over-value the person with a can-do attitude. The employee we prefer to work with is the one who bring us both problems and solutions, never gets depressed and infuses a team with energy. However, we go a step further and accuse those who are pessimistic of having negative attitudes – they aren’t “team-players.”

To escape the planning fallacy, however, we need to listen to the voices on both sides and accept those we don’t want to hear.

It’s a big mistake to tear down the person who expresses doubts as they are likely to be the ones who will save the project from its own hubris, and failure.

Unfortunately, this happens all the time, especially on the part of executives who “want what they want, when they want it.” The sad, failed implementation of the Obamacare website is a prime example. Middle managers did their best to keep those who  knew it wouldn’t be ready on time as far away as possible from the executives who needed to know the facts. The failure speaks for itself.

Good project management is all about recognizing and mitigating risk, but our cultural habits actually increase risks. Trinidadian managers need to factor this tendency into their estimates to avoid making ruinous, unrealistic plans.

Published in the Trinidad Newsday

Posted on

How to Prevent Scaling Problems in Your Strategy Building

In this recent article for the Sunday Gleaner, I tackled a difficult problem to describe – scaling.

Or, in other words, why today’s solutions become tomorrow’s problems.

How to Detect and Avoid ‘Scaling’ Problems.

During hectic times, some executives argue against strategic planning activities, saying that they don’t have time to do anything more than firefight.

Mistakenly, they think that planning is only about dreaming up shiny new stuff that will happen only in the distant, imaginary future. They are wrong. Strategic planning is also about making sure that present-day success isn’t marred by future failure caused by scaling problems.

In the not-so-distant past, Blackberry and Nokia dominated the smartphone and mobile industries. Last week, Blackberry announced the layoff of 40 per cent of its workforce due to a loss of US$1 billion, causing its stock price to plummet by 17 per cent. Nokia was recently acquired by Microsoft after years of poor results.

In the last few years, both have lost huge market share and profits, but it’s not because they did anything wrong. Their failure comes because they didn’t do the right things: they simply didn’t see that their early success controlling their own, proprietary operating system would not scale.

WHAT IS ‘SCALE’?

Companies typically fix problems and implement strategies serially. The problem is that they cling to actions that work in the short term without thinking about the endgame: the conditions under which those successful tactics may eventually fail.

The ‘Mythical Man-Month’ is a typical example: putting more people on a project often reduces the time taken to complete it. However, there is a point after which the addition of more people – and the ‘man-months’ they add – actually makes things worse. Much worse.

The short-term solution – to add more people – doesn’t scale.

Blackberry and Nokia had tremendous early success that wouldn’t scale. Both should have switched over to non-proprietary operating systems, sharing in a much larger pool of apps and developers.

As important as it is, it’s hard to see destructive scaling problems happening in real time. Strategic planning teams struggle to see them for two reasons:

1. LACK OF COURAGE

Most executive teams include a few big egos, often in the roles of chairman, president or founder. They are proud of the company’s accomplishments, and look for opportunities to dwell on their successes. All this chest beating, however, makes it hard for their teams to discover that the very success being lauded is the seed of tomorrow’s failure.

‘Doubting Thomases’ are derided for not being team players or for being pessimists. Their inconvenient opinions are ignored because they require a level of confrontation that Jamaican executives find uncomfortable.

Those who think differently don’t bring up their doubts, preferring to sit silently. They go with the flow, especially when they have only a few hunches to rely on instead of the hard data they would need to present a convincing argument.

In this case, silence doesn’t mean consent; it only hides dissent.

It takes courage to speak up in these situations, but in most companies, people don’t get promoted for being renegades. They get to the executive suite by being agreeable, cooperative and ‘nice’.

When everyone wants to feel good, it’s hard to buck the trend by warning about bad things that are coming, like scaling problems. Who wants to be the one to make others feel scared about the very thing that’s making them feel good?

Most are unwilling to wander into this emotionally difficult territory, which is one reason skilful facilitation can make such a big difference.

2. AVOIDANCE OF HARD THINKING

When there’s no lack of courage, strategic planning teams can run smack into another problem – a dearth of smart thinking.

It takes some heavy lifting to imagine something that’s not currently happening, such as the rise of a new competitor that completely changes the game. For example, software giant Microsoft is wondering why it couldn’t foresee its rapid fall into irrelevance when it ignored mobile computing.

Cable & Wireless’ former Caribbean executives might also be wondering how its monopoly status, based on a century of experience, slipped through their fingers so quickly.

Martin Luther King Jr suggested why: rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think.”

Try this test in your company: Who is looking at the endgame of your current winning formula? In what ways are today’s strategies unable to scale? Who has discovered the equivalent of the ‘Mythical Man-Month’ in your business or industry? Are you sticking to strategies that future executives will laugh at because they work well only in today’s simple scenarios?

Don’t resist your annual strategic planning activity. It’s a must if your firm is going to prevent itself from sowing the seeds of tomorrow’s failure.

Francis Wade is president of Framework Consulting and author of ‘Bill’s Im-Perfect Time Management Adventure’. Email feedback to him at columns@fwconsulting.com.

 

How to Detect and Avoid ‘Scaling’ Problems.