Psychological Sleight of Hand – Part 2

In Part 1, “It’s All Your Fault”, we briefly explored current thinking on human biases and the role of optimism in human evolution. We declared that common biases, including our inherent optimism, are key contributors to our persistent inability to complete programs on time and within budget.

In this article, we identify some key actions that you can take to acknowledge, temper and compensate for common problematic human behaviours.

This is a long and detailed article – it is not a simple problem. If the contents ring true, we can help you self-assess and identify those strategies that best fit your reality.

Why should you get outside help? Because, apart from the fact that your circumstances are unique, as we noted in Part 1 you and your team carry a suitcase full of biases that impede your ability to act objectively.

Please read Part 1 before you proceed.

Part 2 – Overcoming Dysfunctional Human Behaviours

So, what does human bias and optimism have to do with project planning and overruns? Is there anything we can do to protect ourselves and our projects from … ourselves?

We contend that human behaviours and biases are at the root of many common project problems. While there certainly could be some “unknown unknowns” (see our article here) in a project, as professionals we are responsible for planning from experience and competently assessing and managing risk. We are leaders, charged with understanding how teams succeed and fail, and we have the power to drive them towards success. In a business environment that is all about people, we must be students of human behaviour and motivation.

What follows is a summary of methodologies and techniques for overcoming the persistent natural human failings described in Part 1. Some of this may smack of motherhood, but we have never seen or run an organization that truly puts all of this together – there is always room for improvement.

General Prescriptions – Understanding Human Biases

Communication and facilitation on human behaviour

Training, open discussion and facilitated sessions are key to overcoming common behavioural traps. However, no amount of training on this topic is going to fully eliminate our biases.  For example, the Optimism Bias is centered in two small regions of the brain and can’t just be turned off.  While we must live with these behaviours and the fact that they strongly influence our perceptions and actions, we can develop strategies to compensate.

Have an honest conversation about human behaviour with your team at the outset.

We recommend the following first steps:

  • Assess: Assess and train your team on personality types and profiles, as described below.
  • Facilitate: Your team needs awareness of how human behavioural mechanisms trip us up. Become a student of human psychology. Look for the biases in Part 1.  Have an honest team discussion about human behaviour.  Run a facilitated session on this topic. Introduce the topic and educate, then open up the floor using any of the many classic facilitation techniques to engage your team. Develop a common understanding of the issue.
  • Licence: Your team needs the license (unfettered authority with no repercussions) to respectfully call out biases as and when they see them. Encourage a non-confrontational environment where your team is free (in fact encouraged) to identify bias when they see it.
  • Manage: Take a look at the various suggestions in the sections that follow, and build program management and estimating processes that specifically work to counter and expose our natural tendencies.

In an educated and open program environment, with no repercussions for speaking truth-to-power, your probability of success will improve dramatically.

Personality Type Evaluation and Interaction Education

Train your crew on the power of diversity and give them tools for effective cross-profile interaction and communication.

People come in many flavours and there are proven tools that help to identify key personality traits. These tools enable your team members (individually and collectively) to develop self-awareness and skills for effective collaboration across personality types.

  • We strongly recommend that both you and your team are evaluated using the DISC method or Myers Brigs. Publish and discuss the results and put them on your ID badges – colored dots seem to work well. Make this an open process, one that celebrates diversity and that emphasises the value of the outliers in the group.
  • A critical and often missed element is training your team on the power of diversity. Give them the tools for effective cross-profile interaction and communication. This is achieved through a combination of personality profiling, facilitated discussion on personality types and the value of diversity, and specific training on cross-type interaction and associated role playing. This will help each team member to be more tolerant of other personality types and understand how they might be misunderstood or misinterpreted. Encourage cross-type interaction to guard against “group-think”.
  • Having an external facilitator drive these sessions is important, as this will break down a natural reluctance to engage.

Scheduling and Costing

Projects always seem to run long and over budget. Sometimes this is the by-product of poor scope management or inadequate engineering analyses. Often it is simply unbridled optimism that encourages poor estimating and pricing.

  • Our “Optimism Bias” results in a failure to see threats clearly or accept our vulnerabilities.
  • The “Planning Fallacy” allows us to set up schedules and plans that are clearly unrealistic, partially because of our latent optimism, partially because we want, or need, to fit our programs into somebody else’s unrealistic (optimistic) expectations. In this case somebody = client, executive, shareholders, etc.
  • In the end, we rely on our “Hindsight Bias” to tell us that we truly understood that the plan was unachievable all along, but that we had no choice or the program would not have gone ahead.

As noted in Part 1, an optimistic outlook is actually critical to your well-being, self-esteem and probability of success. Optimists are more likely to try, regardless of prior experience. Unbridled or uninformed and unreasonable optimism is, however, a recipe for failure.

The bad news is that the more optimistic you are, the less effective you are at learning from past negative experiences and data. When other biases are brought into the scenario, highly optimistic souls not only reinforce their latent optimism, they downplay their role in any previous negative outcomes.

Our failure to learn effectively from our mistakes is one of the reasons why “lessons learned” exercises seem to always fall flat.

There a many actions that you should take to bring program plans into line. Some key actions and recommendations are listed below;

Use Third Party Reviews

While a project may be novel for you or your organization, it is highly likely that there have been similar projects elsewhere.

  • Search for outside help.  Run a “black hat” review of your plan. Black hat reviews are not only for competitive analyses.
  • Subject your risk analyses to withering review – reject motherhood risks and dig for the real land mines.
  • Create a series of reviews and milestones that force objective analysis early and regularly.

In all of the above, bring in external experts whom you trust for their experience and confidentiality. Some of these might be in parallel industries to leverage the most diverse input and to reduce the possibility of group think.

Exploit Informed Outsiders

Compare insider and outsider estimates in detail and work towards a neutral estimate.

It is important to note that the optimism bias generally only affects predictions about one’s own tasks. When uninvolved, but informed, observers predict task completion times, they tend to show a pessimistic bias, frequently overestimating the time taken, probably to insulate themselves from outcomes that they can’t control.

  • Encourage additional cost and schedule estimates from Red Team members who have no stake in the project.  Compare insider and outsider estimates in detail and work towards a neutral estimate.
  • Another group that you should consider using is anonymous, but informed and experienced, estimators. These are people who cannot be held to account for their estimates, Accordingly, experiments show that they avoid both the curse of optimism and the desire to low ball to get the project approved (see “authorization imperative” below).

Dig for Objective Data

Sometimes, you end up playing a game with estimates. Approver’s worry that Estimator’s must have padded the budget. Estimator’s worry that the Approver’s will arbitrarily cut their budgets. The final approved plan often bears little resemblance to the original estimates. Everyone squirrels away some margin.

Have data collection and analysis executed by somebody skilled at data gathering and analysis and definitely not by anyone with a stake in the outcome.

There is no better place to use hard data. You can get good data, but initially it might not be easy.

  • It is critical that Executive level approvers set the tone here to develop mutual trust.
  • You must press for objective data and reward the brave and honest.
  • If your organization executes similar programs over time, insist on a common high level work breakdown structure and collect accurate detailed performance data: cost, hours, earned value, original plan, final outcome, risks anticipated and encountered, and any other metric that makes sense.
  • More data is better here because the correlations may not be immediately obvious.
  • Have this data collection and analysis executed by somebody skilled at data gathering, analysis, correlation and visualization – not a program insider and definitely nobody with a stake in the outcome.
  • Metrics are important. They get used to test future estimates. They feed actuals back into the process. They can stimulate a discussion about how this new project is different, which, in turn, starts a conversation about risks and process improvements.

Use Multi-Faceted Estimating

Beware of over detailed estimates that produce a Precisely Wrong Number.

Simplistic scheduling and cost estimating can hide the truth. Early highly detailed estimates, we call “counting washers”, simply produce a “Precisely Wrong Number”. A mix of techniques often produce a better estimate that is easier to understand and quicker and less expensive to develop. Here are some ideas:

  • Use a combination of cost and time estimation techniques – top down, bottom up, parametric, scaled, etc. as necessary for each element of your plan’s work breakdown structure.
  • Create a Work Breakdown Structure and develop basis-of-estimate (BOE) sheets at a logical level of decomposition of the work (not too high, not too low).
  • BOE sheets should be in a standard format that encourages a consistent approach to rates, risk, margins, overheads, etc.
  • Tie the WBS into the project schedule for timescale estimates.
  • Do event-based risk analyses. Identify risks associated with achieving key events or milestones – real risk with real implications rather than motherhood risks that are difficult to quantify.
  • Develop cost, schedule and man-loading for the risk mitigation strategies as key program elements. Make risk mitigation a fully exposed and costed activity.
  • Where there is substantial uncertainly, create best, nominal and worst case estimates.  Run a Monte Carlo analysis over the range of possibilities – this is easy to do and it will give you curves of probabilistic schedule and cost outcomes leading to a rational assignment of risk budgets.
  • Risk and margin need to be broken out and clearly accounted for. Individual work package estimators should not be building in margin. Executives should not feel the need to apply a large blanket margin. Risk should be quantified. Risk mitigation strategies should be separate costed work elements. This requires a high degree of trust on the part of all participants.
  • Build in time and cost buffers – but don’t hide them from your Executive. Authority for the use of these buffer accounts must be in the hands of the Executive sponsors and subject to careful review.
  • For major risks, develop fall back plans – for instance, determine in advance what partial outcome is likely to be acceptable on a difficult or highly risky future hard milestone date and what you will do to recover gracefully thereafter if necessary. Don’t allow yourself to be put in the unenviable position of developing recovery plans on the fly and under pressure.

Take an Holistic View

Step back and look at your project from a distance.

Most people have a tendency towards “focalism”. This can manifest itself as mental discounting of “off-project” risks. Additionally, they may discount multiple improbable high-impact risks because they perceive that each one is so unlikely to happen.

  • We recommend that you specifically target part of your risk management process to look at a broader category of risks. Step back and look at your project from a distance – what does the overall environment look like and what external players (eg: governments, suppliers, supply chains, economics, technological evolutions, etc.) could have a direct or indirect impact on you.
  • Look for risks that may occur outside the control of the project management team.
  • Take a hard look at seemingly improbable combinations of risks and ensure that there are mitigation techniques to offset these conditions.

Remember that the risks that tend to bite you are the ones that are less common, simply because they are not on your daily radar. Furthermore, major program failures almost always are the result of an accumulation of minor risks and decisions, rather than the result of one single issue. An holistic perspective, sometimes supported by outsiders with no skin in the game, becomes critical to arresting the creeping failure that finally causes the dam to burst.

Remember that those closest to the action are suffering from the various biases that blindside them to looming disaster.

 

Account for overheads

It sounds so basic, but this is a trap that many fall into. Estimators can easily underestimate time for sickness, vacation, meetings, and other “overhead” tasks. They also might account for these, but fail to break them out, resulting in double accounting. Both outcomes are unacceptable.

  • Develop specific metrics for overheads and ensure that they are applied.
  • Collect metrics and use them for future estimates – how much time is really spent on team coordination?
  • Ask lower level estimators to estimate only direct labour and capital costs.
  • Add overheads later in a predetermined and methodological manner.
  • Make this an element that is specifically assessed during pricing reviews.
  • Make this an element that is specifically reviewed and documented in after-project lessons learned activities.

What is in-scope and out-of-scope and do you know?

No end of projects overrun because of scope creep.

Proposals are not just about winning, they are about setting the stage for successful project execution.

Some reasons for scope creep include;

  • Often people simply don’t understand clearly what is in and what is out of scope.
  • Frequently, people add scope because they truly believe that it is necessary – a sort of personal or professional pride of work.
  • We have seen program managers accept additional scope early in programs in an effort to curry favour with the customer. This rarely works out well for a number of reasons including faulty memories, staff changes, pressures that accumulate thought the project, etc.
  • We also see scope growth without proper accounting, creating all sorts of confusion later on.
  • Customers who like to horse-trade often do this early when the relationships are fresh, but remember that you are likely to end up holding the bag.

Solutions include;

  • There must be measureable end states for the project and each of its sub components. The total scope must be defined in detail.
  • It is equally important to clearly state what is not in scope. This step is frequently missed.
  • The proposal team should very carefully define what is in and out of scope in more detail than in the actual proposal.  The transition team (from proposal to win to execute) must clearly convey what was bid and costed and specifically what was not included. Proposals are not just about winning, they are about setting the stage for successful project execution.
  • High level requirements must be decomposed down to a level where compliance and completion can be tested and verified.  It must be possible to objectively state that the project has been completed and it must be possible to assess any change as lying within our outside the contracted scope of work.
  • There will be changes – document them and cost them. Either get recompensed for them, or ensure that all stakeholders understand and agree with the value of any uncompensated adjustments.

It is easier to ask for forgiveness than it is to ask for permission

We have all heard this, or said this at some stage. It is often true, particularly in large organizations and organizations with strongly defined hierarchies. This is sometimes referred to as the “authorization imperative”.

Frequently, project planning takes place in a context where financial and or executive level approval is needed to proceed with the project and the planner/estimator often has a stake in getting the project approved. In this environment, there can be tendency on the part of the planner to deliberately underestimate the project effort required. It is easier to get forgiveness for overruns than permission to commence the project given realistic up front estimate.

Deliberate underestimation has also been called “strategic misrepresentation” and “strategic incompetence”.

  • This bias needs to be discussed up front and publically at the kickoff of any planning / pricing activity.
  • An initial “Should Cost” (high level estimate) should be prepared by a number of teams in isolation, all but one of whom have no stake in the project.
  • The results should be compared on a non-attributable basis.
  • The resulting composite Should Cost should be used to get preliminary executive approval.
  • The Should Cost high level estimate should also be used to test the detailed program plan.
  • Deviations should be subject to detailed review and discussion.

Competitor and Market Analysis

Clearly, knowing your competition is critical. This knowledge informs your bids, product and service features and evolution, and your pricing and the value propositions that you employ in advertising and sales activities. Unfortunately, we generally know much less about our competitors than we should or believe we do. Further, many marketers and executives carry substantial biases about the relative value of their products over others.

Markets are never static, and change can quickly appear in the form of a disruptor that causes rapid upheavals.

Objectively assessing market and culture shifts can be critical to survival. A number of our built in biases “protect” us from the cold hard realities of impending change.

As noted in Part 1, the Confirmation Bias is the tendency to search for or interpret information in a way that confirms one’s preconceptions. In addition, individuals may discredit information that does not support their views. This confirmation bias is related to the concept of cognitive dissonance, whereby, individuals may reduce inconsistency by searching for information which re-confirms their views.

This is a critical issue if it leads to wilful misunderstandings of the marketplace. At its worst, you can be blindsided by disruptive and unexpected changes.

The solution is multi-faceted, and include;

  • Use the concept of “Red Teams”, typically reserved for proposal reviews, for strategy, product development and other reviews – bring informed external experts in with the mandate of throwing rocks at your plans and challenging your preconceptions.
  • Dig for, and if necessary purchase, independent data. When you review this data, specifically set the ground rules so that intel that contradicts your current plan and understanding of the market is valued and explored with an open mind.
  • Establish a key data mining objective for trade shows and conferences – make your business development staff work to obtain and confirm data and to strike out and gather intel on evolving trends.
  • Resist the urge to discount small players, new entrants and off-side solutions. Specifically assign a creative thinker with the task of thinking like a disrupter and entrepreneur.
  • Consider creating your own small version of Lockheed’s “Skunk Works”. Make this a free environment designed to nurture new ideas, unfettered by bureaucracy, and cycle creative and engineering staff thru this group.
  • Expand your competitive intel to adjacent markets and technologies. Specifically look out for new technologies and new applications of technologies that could intersect with your current business or that could open up new tangents to your current business.
  • Don’t limit these reviews to technology, you should be tapping cultural change, demographic shifts, attitudes and political shifts in the same way. Do you have an executive position that is responsible for understanding these evolutionary forces?

You will recall from above that the more optimistic you are the less effective you are at learning from past negative experiences, while your ability to “learn” from positive experiences is exceptional.  This behaviour is likely to be occurring in your competition – they will tend to avoid past mistakes and repeat what ever worked for them in the past because they internalize positive experiences.

  • One thing we look for when doing competitive analysis is the biographies of the leaders of each competitor, specifically those responsible for the bid/project/product that we are competing with and those who are key decision makers or approvers.  They will leave a trail of past projects and successes and failures.
  • Similarly, read any brochures or publically available financial reports / SEC filings. These are a mine of value propositions and real window into the psychological state of the competitor’s executive team.

So Tell Me Something I Don’t Know

Isn’t it interesting how the core thesis of many books and articles seems obvious once you have finished reading them?

You are smart and experienced, or you wouldn’t be reading this stuff. But you now understand that your self-serving and hindsight biases are working furiously here. You are preconditioned to presume that you are uniquely qualified and that you already have everything under control. Remember that you are naturally biased to believe this to be the case.

When you achieve a high level of self-awareness, and pass these skills and techniques down to your team, you will become unbeatable.

We can help. With many years of accumulated experience across our extended team in government and business of all sizes, we have seen a lot that has worked, and unfortunately a lot that hasn’t. We can share our insights and develop a good sense of where you are fairly quickly as informed outsiders.

Please weigh in

The human dimension and classic human behaviors are a central and important program management issue. We are interested in engaging in a discussion about human behavior. We believe that programs are all about people. If you have insights and experiences, or supportive or contradictory positions and knowledge, please contact us – if for no other reason than to connect and collaborate – we would love to engage with you.

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