The Planning Fallacy: How to Avoid Becoming a Victim

By Joseph Krause

the-planning-fallacy-how-to-avoid-becoming-a-victim

The Planning Fallacy: How to Avoid Becoming a Victim

When I was putting together the content for the AchieveIt webinar I hosted last week, Are You Working on the Right Initiatives? (watch on demand), I got to thinking more about why most organizations only accomplish a percentage of their initiatives. Yes, the main culprit is lack of a culture with rigor around commitment to execution. But there’s another villain in this story – and that’s optimism.

In the presentation, we referenced the “The Eisenhower Box” to describe how employees lose time to tasks that don’t help accomplish initiatives that move strategic KPIs. This urgent/important matrix helps determine the difference between items that require immediate attention or long-term focus, and items that should be delegated or ignored. Coupled with the danger of white space risk, dedicating time to the non-important items can lead to oversight of necessary plan elements. e.g. A casino distracted with choosing bathroom countertop colors might arrive at opening week before realizing no one ever applied for a liquor license.

Both plan execution antagonists – attention-demanding, non-important tasks and white space risk – have their root in the same problematic soil: The Planning Fallacy. This third productivity hindrance is the downfall of rose-colored glasses. Those of you that see the glass as half full are why the planning fallacy is so deadly to your timelines.

It’s not just the optimists who are at fault. The planning fallacy is also born out of pride, ego, and a belief that your organization is extraordinary. While that may be true in certain circumstances, when it comes to planning, think of your company as just like everybody else.

What is the Planning Fallacy?

The planning fallacy was developed by Daniel Kahneman and Amos Tversky in 1979. They define the concept as, “a tendency to underestimate the time it will take to complete a project while knowing that similar projects have typically taken longer in the past. So it’s a combination of optimistic prediction about a particular case in the face of more general knowledge that would suggest otherwise.”

We’re all planning professionals. We pride ourselves in our ability to build plans. However, when it’s time to forecast timelines and allocate resources, we don’t use the data we have to make the best decisions.

Not one of us is exempt from the data of those who have project managed before us. No matter how hard we stare at the glass to make it half full, ignoring benchmarks will be the detriment to realistic plan execution.

What Does the Planning Fallacy Look Like in Day-to-Day Disguise?

How does the planning fallacy manifest itself in your current role?

Picture this:

You’re given a project. You start to develop your work breakdown structure. As you begin to put in your due dates, a wave of optimism washes over you. You think back to when you completed a similar project recently; it took you 12 weeks. You learned from your mistakes, you now have practice, and it will be quicker this time. You decide to commit to 10 weeks. No processes have changed since your last project roll out, yet somehow, you’re optimistic that things will be different this time.

It’s important to resist the urge played out above. The best, most reliable way to resource your upcoming project is to look at past projects. Let those projects be your guide and don’t be persuaded to move your timelines because “things will be different this time.”

The planning fallacy is out to derail your personal life, too. The Harvard Business Review wrote an article titled, “The Planning Fallacy and the Innovator’s Dilemma.” In the article, the author examines the planning fallacy as it applies to projects around the house. The typical homeowner budgets around $19,000 for a home improvement project, but the actual cost of those projects typically come in around $39,000.

How could this happen?

Most people like to think of the best-case scenario because it usually results in a lower cost outcome.

Here’s the thought process you may be all-too-familiar with:

From my research, I know that adding a deck to my house will likely cost $25,000…but I “know a guy,” and I could definitely shave off $7,500, no problem.

The allure of cost saving causes you to disregard readily available and relatable information.

To combat the planning fallacy, you need to be constantly vigilant in order to keep pesky optimism, ego, and the “but this time it will be different” mentality from creeping into your plan.

Three Tips to Help Avoid Becoming a Planning Fallacy Victim:

1. Use the data from past projects to predict your future project timelines.

Let history be your guide and realize that you typically have a solution to your scheduling problem right in front of you. If you haven’t conducted a project similar to the one you’re planning before, consult industry benchmarks. Find something that can set a precedent, even if the specific project isn’t directly comparable. (e.g. If you’re opening the first-ever Robot Cat Clothing Boutique, research the project timeline for the Hats for Fake House Plants store across the street.)

2. Be a pessimist.

Remember Murphy’s Law: what can go wrong, will go wrong. Your projects won’t run perfectly, even if you have the best intentions. Build your plan accordingly. It’s not to say that negativity will help you accomplish your goals, but approaching planning from a conservative, risk management standpoint will help curb enthusiasm.

3. Ask an unbiased party to gut-check your plan.

It can be difficult to distance yourself from a plan you’re working on. It’s easy to convince yourself that the ideal timeline you’ve created will work out perfectly. Pass your completed timeline off to a co-worker, and don’t campaign for your proposed timeline. Invite them to give open and honest feedback on whether or not they think the timeline is not just feasible, but realistic. Bonus points if you can get the office skeptic to take a pass at it.

Keep Your Plans in Check

A planning process that builds in accountability will help you realize quickly whether or not your plan timeline is realistic.

Remember, you’re not safe from the planning fallacy in your personal life, either. The next time you’re faced with a big life decision, don’t fall into the trap set by “it will be different this time.” Take precautions, do your research, and trust the data of those who have gone before you.