How to avoid over promising and under delivering on your project
What is the planning fallacy?
Despite the increase in knowledge, expertise, and use of project management tools and techniques, many projects still over promise and under deliver. This fact comes down to the planning fallacy. Put simply, this is our tendency to underestimate the time, costs and risks of a project, whilst also overestimating its benefits. This results in delays and budget blowouts. The benefits of the project can also fall short in delivery.
The concept has been made famous by Nobel award winner Daniel Kahneman who explains:
The planning fallacy is that you make a plan, which is usually best case scenario. Then you assume that the outcome will follow your plan, even when you should know better.
A classic real life example of the planning fallacy is the iconic Sydney Opera house – according to Wikipedia, it was expected to be finished in 1963 for a cost of $7 million. It was completed 10 years later at a total cost of $102 million. Definitely not ‘on time and on budget’. Though few would argue about the enormous benefits that have flowed from having such an iconic building grace the Sydney harbour. It may even be argued that it’s lucky that they didn’t know the full cost and timeframes when they started!
Planning fallacy in local government
It is not hard to see how the planning fallacy is alive and kicking in local government project delivery. A quick Google search for “council projects costs blow out” reveals a long list of projects.
A well known example in the local government context is the Glasshouse project in Port Macquarie. The dream of new cultural and entertainment facility was initiated by the council in the early 2000s. Over the life of the project, council’s costs blew out from $6 million to over $40 million. This ultimately resulted in the sacking of the council. It has also been a valuable lesson for other councils embarking on projects of this nature.
A more recent example is the Gawler Council civic centre redevelopment project. This project is reported as costing the council an extra $2.9 million. This was due to the council being overly optimistic in expecting a competitive tender process to bring savings to the project. Council had also not factored in the increase in costs as a result of the detailed design, and did not allow for a sufficient contingency despite independent advice.
Causes of the planning fallacy
So what is the cause of the planning fallacy? There are a few factors at play.
First, people tend to focus too much on the uniqueness of their project. They also tend to oversimplify what needs to be done. There is also a tendency to put on the blinkers and ignore or brush aside what could go wrong in the project. This is somewhat understandable – people set out to succeed, not fail. But this optimistic approach or positivity bias can be a trap.
Second, where the project involves a group or team (which is often the case in local government), there is a human tendency to not think about how hard it will be to to co-ordinate with each other to produce the end result. That is, we neglect how challenging it can be to combine all the elements of the project to make the whole.
In a local government context, people naturally want for a brighter future and election platforms are built on the promise of change for the better. It is common for political promises to be made and community expectations to be high. No-one wants to be the naysayer shooting down the ideas. To the contrary, where a project has political backing or strong community impetus, everyone tends to look for the reasons to make it happen even if the risks are high and pitfalls obvious. There may even be strategic misrepresentations of information to get a project off the ground.
How to avoid the planning fallacy
Fortunately, there are some strategies that you can adopt to help you from falling into the planning fallacy trap.
First, you need to benchmark the project against other similar completed projects – this is known as reference class forecasting. In theory, this means that you learn from the mistakes of other similar projects. In order to benchmark against similar projects, this also means that you need to track your past performance – that is, keep tally of the difference between your forecasts and actual results.
In addition to this approach or where you don’t have the data from past projects, you can also:
1. Plan to fail – work out what can go wrong before you start and plan for that.
2. Breakdown the project into smaller chunks – this can help you see the overall picture and that you may have woefully underestimated part of the project.
3. Have a clear implementation plan which breaks down how, when and what will happen in the project – again, this can help you see that your estimates for completion of the project are optimistic or that you haven’t factored in all the costs.
Seek an external review
Finally, you can seek an external opinion or review of the project. This can give you a good reality check about your assumptions on time and costs, and also an objective analysis of the benefits of the project.
If you are interested in learning more about this topic, tune into the Freakonomics Radio podcast Heres Why All Your Projects Are Always Late – and What to Do About it. This is a great listen.
Or get in contact with our team who can provide an external review of your project and help keep your planning fallacy in check:
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