Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 19, Issue 38;   September 18, 2019: The Planning Fallacy and Self-Interest

The Planning Fallacy and Self-Interest

by

A well-known cognitive bias, the planning fallacy, accounts for many unrealistic estimates of project cost and schedule. Overruns are common. But another cognitive bias, and organizational politics, combine with the planning fallacy to make a bad situation even worse.
An unfinished building, known as Szkieletor

An unfinished building, known as Szkieletor. Construction began in 1975, but stopped permanently in 1981 because of economic constraints and political unrest. Sometimes budgets aren't overrun. Sometimes they just run out. Image (cc) pl:Wikipedysta:Macieias courtesy Wikipedia.

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. Go to top Top  Next issue: Planning Disappointments  Next Issue

303 Secrets of Workplace PoliticsIs 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

[Kahneman 1977]
Daniel Kahneman and Amos Tversky. "Intuitive Prediction: Biases and Corrective Procedures," Technical Report PTR-1042-7746, Defense Advanced Research Projects Agency, June 1977. Available here. Retrieved: September 19, 2017. Also Daniel Kahneman and Amos Tversky, "Intuitive Prediction: Biases and Corrective Procedures," Management Science 12, (1979) 313-327. Back
[Campbell 1999]
W. Keith Campbell and Constantine Sedikides. "Self-threat magnifies the self-serving bias: A meta-analytic integration," Review of General Psychology 3:1 (1999), 23-43. Available here. Retrieved: September 2, 2019 Back
[Drory 2006]
Amos Drory and Nurit Zaidman. "The politics of impression management in organizations: contextual effects," in Handbook of Organizational Politics, Eran Vigoda-Gadot and Amos Drory, eds., Cheltenham, UK and Northampton, MA, USA: Edward Elgar (2006): 75-85. Back

Your comments are welcome

Would you like to see your comments posted here? rbrenmhXARWRMUvVyOdHlner@ChacxgDmtwOKrxnripPCoCanyon.comSend me your comments by email, or by Web form.

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:

Mess line, noon, Manzanar Relocation Center, California, 1943Remote Facilitation in Synchronous Contexts: II
Facilitators of synchronous distributed meetings — meetings that occur in real time, via telephone or video — encounter problems that facilitators of face-to-face meetings do not. Here's Part II of a little catalog of those problems, and some suggestions for addressing them.
USS Indianapolis' last Commanding Officer, Captain Charles B. McVay, IIIThe Politics of Lessons Learned
Many organizations gather lessons learned — or at least, they believe they do. Mastering the political subtleties of lessons learned efforts enhances results.
Ross Marshall and Don Pugh at the kickoff meeting for the Expeditionary Combat Support System (ECSS) at Tinker Air Force BaseDeep Trouble and Getting Deeper
Here's a catalog of actions people take when the projects they're leading are in deep trouble, and they're pretty sure there's no way out.
Platform supply vessels battle the fire that was consuming remnants of the Deepwater Horizon oilrig in April 2010Wishful Interpretation: I
Wishful thinking comes from more than mere imagination. It can enter when we interpret our own observations or what others tell us. Here's Part I of a little catalog of ways our wishes affect how we interpret the world.
Magic Lantern Slide of a dog jumping through a hoopJust-In-Time Hoop-Jumping
Securing approvals for projects, proposals, or other efforts is often called "jumping through hoops." Hoop-jumping can be time-consuming and frustrating. Here are some suggestions for jumping through hoops efficiently.

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

Forthcoming issues of Point Lookout

An excavator loads spoil into rail cars in the Culebra Cut, Panama, 1904Coming October 23: Power Distance and Teams
One of the attributes of team cultures is something called power distance, which is a measure of the overall comfort people have with inequality in the distribution of power. Power distance can determine how well a team performs when executing high-risk projects. Available here and by RSS on October 23.
John Frank Stevens, who conceived the design and method of construction of the Panama CanalAnd on October 30: Power Distance and Risk
Managing or responding to project risks is much easier when team culture encourages people to report problems and question any plans they have reason to doubt. Here are five examples that show how such encouragement helps to manage risk. Available here and by RSS on October 30.

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:

Reprinting this article

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 Race to the South Pole: Lessons in Leadership

On 14The Race to the South Pole: Lessons in Leadership December 1911, four men led by Roald Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished. As historical drama, why this happened is interesting enough. But to organizational leaders, business analysts, project sponsors, and project managers, the story is fascinating. We'll use the history of this event to explore lessons in leadership and its application to organizational efforts. A fascinating and refreshing look at leadership from the vantage point of history. Read more about this program.

Here's a date for this program:

The Power Affect: How We Express Our Personal Power

Many The
Power Affect: How We Express Personal Powerpeople 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.

Follow Rick

Send email or subscribe to one of my newsletters Follow me at LinkedIn Follow me at Twitter, or share a tweet Subscribe to RSS feeds Subscribe to RSS feeds
The message of Point Lookout is unique. Help get the message out. Please donate to help keep Point Lookout available for free to everyone.
Technical Debt for Policymakers BlogMy blog, Technical Debt for Policymakers, offers resources, insights, and conversations of interest to policymakers who are concerned with managing technical debt within their organizations. Get the millstone of technical debt off the neck of your organization!
Go For It: Sometimes It's Easier If You RunBad boss, long commute, troubling ethical questions, hateful colleague? Learn what we can do when we love the work but not the job.
303 Tips for Virtual and Global TeamsLearn how to make your virtual global team sing.
101 Tips for Managing ChangeAre you managing a change effort that faces rampant cynicism, passive non-cooperation, or maybe even outright revolt?
101 Tips for Effective MeetingsLearn how to make meetings more productive — and more rare.
Exchange your "personal trade secrets" — the tips, tricks and techniques that make you an ace — with other aces, anonymously. Visit the Library of Personal Trade Secrets.
If your teams don't yet consistently achieve state-of-the-art teamwork, check out this catalog. Help is just a few clicks/taps away!
Ebooks, booklets and tip books on project management, conflict, writing email, effective meetings and more.