The biggest mistake I see leaders make: the planning fallacy
If you've spent 2 minutes around me, you've probably heard me reference the fact I used to live in Bondi. And why wouldn't I? Sydney is a flawed city to live, but an evocative and inspiring place all the same.
When you think Sydney, you probably think of the Harbour Bridge and The Sydney Opera House, an iconic symbol of architectural and cultural brilliance. Sorry to ruin it for you...but after this article, I want you to think of a fundamental for all leaders to understand: the Planning Fallacy.
Behind those stylish curves, is the construction delay of 10 years and a cost overrun of $102 million, a staggering 1,357% increase from its original budget of $7 million. Read those numbers again...talk about 'iconic'.
I don't know about you, but I get stern looks from clients if I go even 1.35% over budget. But when I first read this, I was tempted to dismiss it; firstly, the lifetime ROI has surely made up for this bungled start...and secondly, this is sure a once off goof up?
Enter Professor Bent Flyvbjerg. As I previously wrote, this articulate Gentleman has spent his lifetime studying big project - "mega", even. Turns out...this phenomenon is not unique to the Sydney Opera House. In fact the original?study by Professor Flyvbjerg's?that caught my attention, was this one of 258 large transport infrastructure projects worth $90 billion USD. The outcomes? 9 out of 10 projects had significant cost and time overruns. Want a bigger data set? The 16,000 one in his latest book "How big things get done" ought to scratch that itch.
But what does this mean for you? Assuming you're not trying to build another Sydney Opera House...chances are, you are contributing to, leading or advising a project that's just as 'landmark' for your organisation. If that's the case, you (just like myself and all your colleagues) are fallable to the beguiles of bad planning.
The Planning Fallacy is a cognitive bias where individuals underestimate the cost, time, and risks involved in a project while simultaneously overestimating their previous experience and capabilities.?It's important to grasp the duality of this; we underestimate tangibles and "knowns" (cost, time and risks)...yet we overestimate the intangibles of 'experience' and capability. Take a quick moment to reflect, on how much of organisational life is skewed towards a trust in experience - sometimes for very good reason, but not without consequence.
Discovered by behavioural economics demi-gods Kahneman and Tversky, The Planning Fallacy plays out in the cognitive and emotional factors that affect decision-making in leadership. Moreover, the modern organisations we work in, unfortunately prime us to fall victim to the fallacy - both in our hearts and in our minds.
Limits of the Human Mind
My favourite AHRI article of the last 10+ years, laid out in plain speak what all leaders had been feeling and living for a long time; all our clever interventions are "adding"...when really, we need to be "subtracting". We slam our teams and their leaders with things to do...so they have very limited time and severely depleted methods for thinking. With this backdrop,?I've observed how (very normal, very human) cognitive limitations can significantly impact leaders' abilities to accurately estimate the tangibles - especially at scale, and when things are "busy".
The human mind has several cognitive limitations that can contribute to the Planning Fallacy:
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The most startling part of the Planning Fallacy: you'll probably ignore this article
Critically, leaders will tend to ignore new information that shows they are at risk. To paint this concerning picture very clearly: if you ask experienced business leaders to estimate and plan something relatively complex...and during their estimation and planning process, you make an effort to further highlight the flaws in their methods or underweight assumptions in their thinking AND present new information which shows their previous inaccuracy...they will be reluctant to change their work.
I particularly see this hesitation when facilitating strategic planning sessions with Executive teams, or transformation programs adopting their version of agile. Given my typical engagements last for more than 3 months through to a year, I'm involved in sifting through the debris of missed targets, unrealised expectations and damaged relationships.?
(Note: I obviously give my best efforts to help clients avoid these scenarios, but often plans have been set on longer cycles at Board level or by more unscrupulous external advisers...)
There's no definitive answer as to why the honed skillsets and rationale of decent leaders fall trap to this Planning Fallacy...but given organisations are made up of people, it's worth exploring the emotional side of leadership too.
Fear in Our Hearts
As a seasoned organisational development and change practitioner, you can quickly spot where emotional factors can be equally as powerful in driving the Planning Fallacy. Overlook them at your budgetary peril.
Emotional factors that play a significant role in the Planning Fallacy include:
Clearly I'm only just skimming the surface of the emotions and political motivations that lurk within organisations. We coach leaders to have the poise, to ask the right questions in the right way...but it all starts with a decision to do so.
To mitigate the Planning Fallacy, apply your own touches to the following guidance:
By understanding and addressing both cognitive and emotional factors that contribute to the Planning Fallacy, leaders can make better decisions, manage risks effectively, and ultimately lead in a way that can be scaled.?
Transforming Capability - Ops leaders to frontline teams. Warm, supportive and Systemic Coach, Facilitator, Teacher - expertise across ESG, HSE, Risk & Stakeholder engagement
1 年Good outline Mark. Fallacies, like turtles, all the way down. And though we invariably place them on our ‘Unconscious biases’ lists, with their own special labels - presumably so we can ‘account for’ and ‘manage’ them (oh, there’s another two!) we miss a couple of big points: 1) they rarely if ever exist in isolation 2) they tend to ‘cluster’ 3) if you look closely, those clusters are often aligned and even linked 4) and if you know how to ‘follow-the-chord’ and delve into that cavernous unconscious space between emotion and cognition, you can find the root emotional state driving them.
IT Services Delivery Leader
1 年Great read Mark Winter, thankyou. Harsh Mishra - must read
Project Professional | Problem Solver | Servant Leader | Speaker
1 年Love this Mark Winter - hopefully sharing this will remind more of us to re-validate at the start.
Business Development & Partnerships @ MQ Health, Young Adults Pastor @ Northridge Vineyard Church
1 年Love it Mark