The Planning Fallacy and Self-Interest

Project plans usually include estimates of costs and schedules in addition to plans for work to be done, and the order of doing that work. Sometimes we fail to complete all the work we had in mind; sometimes we find we cannot do some work we wanted to do; sometimes we discover additional work we needed to do. But overall, the work actually done in a project does roughly approximate the work that was planned. Not so for cost and schedule. Cost and schedule can differ from projections by double, triple, and more, even when we make allowances for differences between work planned and work actually done.

In a 1977 report, Daniel Kahneman and Amos Tversky identify a particular cognitive bias, the planning fallacy, which afflicts planners [Kahneman 1977]. They discuss two types of information used by planners. Singular information is specific to the project at hand; distributional information is drawn from similar past efforts. The planning fallacy is the tendency of planners to pay too little attention to distributional information and too much attention to singular information, even when the singular information is scanty or questionable. Planners tend to underestimate cost and schedule by failing to harvest lessons from the distributional information, which is inherently more diverse and reliable than singular information.

But even when planners attend to distributional information, two forms of self-serving considerations can lead planners to make estimates that cannot be met. Here's how.

Self-serving bias

Choosing local experts is a common pattern for designating people to make estimates of cost and schedule. Usually the experts designated tend to be people who've done similar work in the past, and sometimes they must assess their own past work. When estimators must evaluate their own work, they have a conflict of interest that can compromise objectivity as a result of a cognitive bias known as self-serving bias [Campbell 1999]. Self-serving bias causes us to perceive ourselves more positively than objective judgment warrants. We tend to attribute successes to our own talents and decisions, and attribute failures to external factors.

When the The work actually done in a
project does roughly approximate
the work that was planned.
Not so for cost and schedule.estimators designated for a project were themselves involved in the past efforts they're evaluating for estimation purposes — what Kahneman and Tversky call distributional information — self-serving bias tends to lead them to biased conclusions, which they then use to make projections for the project whose cost and schedule they're estimating.

Organizational politics

From the perspective of objective estimation based on balanced assessment of distributional and singular information, organizational politics can make a bad situation even worse. Estimators who are evaluating past efforts in which they played roles can use their evaluations as tools of what psychologists call impression management — to make themselves look good. They can thus enhance their own prospects for advancement [Drory 2006]. In this way, politics can limit the willingness of estimators to faithfully represent sources of successes and failures in past efforts. In effect, to gain political advantage, estimators tend to attribute too much of the reason for past successes to their own actions, and too much of the reason for past failures to external factors or to the actions of others, especially political rivals.

The distortions that result from the planning fallacy, from self-serving bias, and from organizational politics can reduce the chances that estimators will produce reliable results. When that happens, cost overruns and schedule delays become more likely.  Top    Next Issue

Is every other day a tense, anxious, angry misery as you watch people around you, who couldn't even think their way through a game of Jacks, win at workplace politics and steal the credit and glory for just about everyone's best work including yours? Read 303 Secrets of Workplace Politics, filled with tips and techniques for succeeding in workplace politics. More info

Footnotes

Your comments are welcome

About Point Lookout

Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

Related articles

More articles on Project Management:

Nine Positive Indicators of Negative Progress

Project status reports rarely acknowledge negative progress until after it becomes undeniable. But projects do sometimes move backwards, outside of our awareness. What are the warning signs that negative progress might be underway?

TINOs: Teams in Name Only

Perhaps the most significant difference between face-to-face teams and virtual or distributed teams is their potential to develop from workgroups into true teams — an area in which virtual or distributed teams are at a decided disadvantage. Often, virtual and distributed teams are teams in name only.

Managing Risk Revision

Prudent risk management begins by accepting the possibility that unpleasant events might actually happen. But when organizations try to achieve goals that are a bit out of reach, they're often tempted to stretch resources by revising or denying risks. Here's a tactic for managing risk revision.

Why Scope Expands: II

The scope of an effort underway tends to expand over time. Why do scopes not contract just as often? One cause might be cognitive biases that make us more receptive to expansion than contraction.

Down in the Weeds: II

To be "down in the weeds," in one of its senses, is to be lost in discussion at a level of detail inappropriate to the current situation. Here's Part II of our exploration of methods for dealing with this frustrating pattern so common in group discussions.

See also Project Management and Cognitive Biases at Work for more related articles.

Forthcoming issues of Point Lookout

Coming September 30: Seven More Planning Pitfalls: II

Planning teams, like all teams, are susceptible to several patterns of interaction that can lead to counter-productive results. Three of these most relevant to planners are False Consensus, Groupthink, and Shared Information Bias. Available here and by RSS on September 30.

And on October 7: Seven More Planning Pitfalls: III

Planning teams, like all teams, are vulnerable to several patterns of interaction that can lead to counter-productive results. Two of these relevant to planners are a cognitive bias called the IKEA Effect, and a systemic bias against realistic estimates of cost and schedule. Available here and by RSS on October 7.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenmhXARWRMUvVyOdHlner@ChacxgDmtwOKrxnripPCoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

• Get 2001-2 in Geese Don't Land on Twigs (PDF, )
• Get 2003-4 in Why Dogs Wag (PDF, )
• Get 2005-6 in Loopy Things We Do (PDF, )
• Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, )
• Get 2009-10 in The Questions Not Asked (PDF, )
• Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, )

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

The Power Affect: How We Express Our Personal Power

Many people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.

• A recording of a program presented June 29, 2017, Monthly Webinar, sponsored by Technobility Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
   
• A recording of a program presented June 29, 2017, Monthly Webinar, sponsored by Technobility Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
   

Bullet Points: Mastery or Madness?

Decision-makers in modern organizations commonly demand briefings in the form of bullet points or a series of series of bullet points. But this form of presentation has limited value for complex decisions. We need something more. We actually need to think. Briefers who combine the bullet-point format with a variety of persuasion techniques can mislead decision-makers, guiding them into making poor decisions. Read more about this program.

• A recording of a program presented June 24, Monthly Webinar, sponsored by Technobility Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
   
• A recording of a program presented June 24, Monthly Webinar, sponsored by Technobility Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.