Downscoping Under Pressure: II

In the previous post I briefly explored the use of downscoping in the project context, both as a tool for controlling budgets and schedules, and as a means of inflicting damage on one's political rivals. Although downscoping can be effectively abused for political purposes, there are still other reasons to question its effectiveness in controlling projects.

The fundamental limitations of downscoping as a project control measure arise from the difficulty of managing the decision-making processes used to determine which objectives to cut or defer and how to do so. Below are two examples of the effect of cognitive biases on downscoping decision-making.

The sunk cost effect

To investors, The fundamental limitations of downscoping
arise from the difficulty of managing the
decision-making processes used to
determine which objectives to cut
or defer and how to do sothe term sunk cost denotes costs already incurred and not recoverable. The sunk cost effect [Staw 1976] is a cognitive bias that tends to make us unwilling to terminate an effort. Our unwillingness arises largely from the difficulty of accepting failure, even when continuing the effort would only lead to greater losses. The sunk cost effect thus makes us unwilling to downscope our projects. We then continue to pursue unattainable objectives. But the sunk cost effect is even more insidious than that.

When we do decide to downscope, the sunk cost effect also compels us to make unwise choices of project elements to cut. Suppose a project is in trouble, and suppose we decide to downscope to address that trouble. The sunk cost effect can lead us to designate for cancellation those parts of the project in which we have the least invested. Instead, we would often do better to focus cuts on those parts of the project that are least justified in terms of business objectives.

At and above the scale of entire projects, portfolios, and programs, the situation is even more troubling. At these scales, downscoping amounts to project cancellation. The sunk cost effect causes us to prefer to cancel those projects in which we have invested least, all other things being equal, instead of cancelling the projects that have the least compelling business purpose. In this way, the sunk cost effect distorts business objectives when downscoping occurs under pressure.

Biased cost estimation

When we decide to abandon a project objective, there is a risk that the project elements so far constructed might include "anticipatory artifacts" whose sole purpose was support for the objective we've now decided to abandon. To the extent that the downscoping decision is based on budget or schedule considerations, we must consider the cost of two options. The "As-Is" option leaves these anticipatory artifacts largely in place, making adjustments only as necessary for supporting the surviving project objectives. The second option, "Cleaned-Up," removes all traces of anticipatory artifacts intended solely to support the soon-to-be-abandoned objectives.

For example, let's suppose that one of the objectives to be abandoned is an ability to support languages that use the Cyrillic alphabet, and that once this goal is removed, all supported languages will use only the Roman alphabet. In the As-Is option, the machinery for supporting multiple alphabets remains in place. The machinery is in place, but it is never invoked. We might even have a copy of the Cyrillic alphabet in the product. In the Cleaned-Up option, by contrast, we remove all evidence that we ever intended to support the Cyrillic alphabet.

But if we downscoped to save money and time, we must consider costs and schedule burdens associated with both options. To compare As-Is and Cleaned-Up we must estimate the costs of both. The two options differ, of course. As-Is has a higher future burden because of the technical debt associated with leaving in place the anticipatory artifacts that support the abandoned objective. Cleaned-Up has a higher immediate burden because of the costs and time associated with removing the anticipatory artifacts that support the abandoned objective.

Nearly all cases of downscoping that I'm aware of use a mix of both approaches — both As-Is and Cleaned-Up — but they clearly skew toward the As-Is option. One reason for the skew is the need to estimate As-Is and Cleaned-Up costs and schedules. And those estimates are subject to confirmation bias, which favors As-Is over Cleaned-Up. The result is that downscoping under pressure generally increases the burden of technical debt, which leaves the product with a higher maintenance cost profile for the indefinite future.

The role of project governance

Perhaps the most important factor limiting the effectiveness of downscoping under pressure is inadequate governance. Governance bodies that approve downscoped plans must ensure that the plans were devised using processes that mitigate the risk of decision distortion from political agendas and from cognitive biases such as the sunk cost effect and confirmation bias.

The urge to approve downscoping plans can be overpowering for everyone concerned. Governance teams are the last defense against unrealistic downscoping cost and schedule estimates. They would do a great service by requiring development of independent, "blind," estimates of cost and schedule for all options, including those rejected during the decision process.

Last words

These two posts have focused on the process of downscoping in project management. But the process is also used in other contexts. For example, one can view compromise in negotiation as a form of downscoping, in which the negotiation partners agree to limit their objectives as a technique for reaching mutual agreement. Much of the discussion in these two posts could carry over analogously in that context. Indeed, whenever we decide to alter the objectives of any kind of effort, especially under pressure, the observations contained in these two posts could prove applicable. First in this series   Top    Next Issue

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Footnotes

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