MANAGERS want to predict what revenue will be like in three months, or how long a specific project will take. But any prediction will be as good as predicting the weather in three months time: At best we will know what season it will be.
Even experienced project managers can’t get dates right. Take the Sydney Opera House which was initially estimated for completion in 1963 but was finished in 1972.
Now of course in the case of the Opera house, it may well have been caused by government failure. But it was almost certainly due to the planning fallacy.
Planning fallacy can be summed up by Hofstadter’s law – a cognitive scientist Douglas Hofstadter – which goes like this: It [a task or project] always takes longer than you expect, even when you take into account Hofstadter’s Law.
This is a cognitive bias problem of optimism which has been validated by researchers (this from Less Wrong):
Buehler et. al. (1995) asked their students for estimates of when they (the students) thought they would complete their personal academic projects. Specifically, the researchers asked for estimated times by which the students thought it was 50%, 75%, and 99% probable their personal projects would be done. Would you care to guess how many students finished on or before their estimated 50%, 75%, and 99% probability levels?
- 13% of subjects finished their project by the time they had assigned a 50% probability level;
- 19% finished by the time assigned a 75% probability level;
- and only 45% (less than half!) finished by the time of their 99% probability level.
In almost all cases of these students, the estimates they gave of which they felt they would almost certainly achieve; in other words a highly conservative forecast, they rarely completed the task inside that time frame.
This is the planning (or forecasting) fallacy. People can’t plan.
Another study by Newby-Clark et. al. (2000), showed that there was no difference between asking the students for a realistic ‘best guess’ or ‘best case.’
The problem being that, when asked for a realistic scenario, people leave out all the things that could go wrong.
The way around this problem is to use a different perspective. Instead of looking at the task and making a personal judgement, look at what other similar projects, and find out how long the task took them.
This gets around the problem of people not imagining enough things going wrong. Remember Murphy’s law: if it can go wrong it will.
To add insult to injury, these studies showed that the more detailed people became in their planning, the likely they were to be very wrong. They became more optimistic by being more detailed. This detail orientation causes people to be over optimistic.
From Less wrong:
Likewise, Buehler et. al. (2002), reporting on a cross-cultural study, found that Japanese students expected to finish their essays 10 days before deadline. They actually finished 1 day before deadline. Asked when they had previously completed similar tasks, they responded, “1 day before deadline.” This is the power of the outside view over the inside view.
Take an outside view, instead of inside
So, the way to fix this problem is to look at a project that was broadly similar to the project or task to be undertaken as find out how long that actually took. This will give you an insight into how long to actually expect these projects to take to actually complete. Don’t consider the details of the project.
In the case of the students mentioned above, they were better off by looking at how long previous assignments took and using that as their estimates.
No doubt the executives will be disappointed with the proposed schedule and ask you to shorten it, which you will by considering the detail of the project, but it will take that amount of time anyway, so psychologically you should at prepare yourself for this.
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