Improve project decision making by overcoming optimism bias

 

Optimism bias is the tendency for us to believe that we are less likely to experience negative events than others and to act on that optimistic belief – the classic “It won’t happen to me!” assumption.

A thought-provoking research paper in the August/September 2014 issue of Project Management Journal covered a very specific impact related to this bias, namely our reluctance towards or rejection of decisions to terminate failing projects.

The article states that we (human beings) are physiologically predisposed towards having an optimism bias. On a positive note, this was a contributing factor towards our long term survival and growth as a species. Many of the advances we’ve made in science and space exploration might never have occurred if we didn’t occasionally leap before we looked.

However impacts from optimism bias are more likely to put our projects into harm’s way.

Don’t get me wrong, there are times when we want our team members or stakeholders to feel optimistic when faced with uncertainty – a project kickoff meeting, when team morale is low, or when trying to brainstorm opportunities during a risk identification workshop are all examples of this.

Unfortunately, beyond deciding how to proceed with a failing project, there are a number of other common project situations where optimism bias can blind us.

• Selection & prioritization of projects: Even when objective criteria, scoring models and balanced governance committees are used to overcome biases and the potential for pet projects, it can be very difficult to thoroughly validate that a project’s benefits, costs and risks are truly valid. The subject matter experts who have the best knowledge to refute forecasts and underlying assumptions are usually the ones who were engaged in the development of the business cases and rarely do most organizations possess the bench strength required to conduct thorough independent analysis.
• Risk analysis & response: While our team might do a good job of identifying risks, even if we have realized a risk in the past, most sponsors are likely to downgrade the probability of realization which in turn reduces the likelihood of effective responses being developed or executed.
• Contingency planning: When it comes to putting some money aside for a rainy day, many sponsors are likely to feel pretty good that the storm clouds will miss them. In organizations with a low tolerance for open discussions of risk, requests for reasonable levels of contingency funding are more likely to result in teams being chastised for being too negative or not believing in the project.
• Change management: Those who have already drunk the Kool-Aid are more likely to marginalize or ignore the risks of change resistance. Of course everyone will embrace the changes – change is good, right?
• Making significant changes late in a project’s life: Just as rose-coloured glasses are often worn when preparing business cases, sponsors and other stakeholders often exhibit optimism bias when introducing project changes, especially those that are requested late in a project’s life. Risks to cost, quality and schedule may not get the fulsome analysis and presentation needed to ensure that there is a balanced evaluation of the change.
• Health reporting: One of the symptoms of lower organizational project maturity is the dilution of health status as it is shared from the project team up to the highest executive levels. Often this is due to a low tolerance towards bad news or a tendency to shoot the messenger, but it may also be caused by optimism bias on the part of sponsors and delivery executives.

Recognizing that a penchant for optimism bias is hard-wired in our DNA, how do we sidestep it to avoid putting our projects at jeopardy?

• Be mindful – recognize it for what it is and call it out when we see it in action
• Use “designated drivers” – optimism bias could be considered a type of impaired judgment so to overcome it, involve those who won’t either benefit or lose from the decision to review your assessment of the situation before finalizing a decision.
• Exploit diversity – diversity in governance committees creates strength when it is well leveraged. This is not an invitation to get stuck in analysis-paralysis or to indulge constant questioning and reversing of decisions, but it can help to overcome bias so long as the committee doesn’t fall into the seductive trap of the Abilene Paradox.
• Establish control limits and obey them – earned value metrics are just one type of useful “instrument” that will help us to overcome bias as long as we can trust that the underlying data is sound.

While optimism bias has helped the human race survive, it has also been instrumental in a large number of Darwin Awards so don’t let your project become another cautionary tale!

(Note: this article was originally written and published by me in September 2014 on Projecttimes.com)