I’ve been trying to learn more about good decision-making and recently read Daniel Kahneman’s famous Thinking Fast and Slow. It’s very surprising to see the number of fallacies and biases that cloud our decision-making, with some impacting us more than others. Here are three of the most common fallacies that we encounter in project and program management, along with a few “smartcuts” (smarter way of doing things) to mitigate them.
1. Planning fallacy: the tendency to underestimate the time, costs and risks of future actions, while overestimating the benefits of the same actions
• Conduct a pre-mortem: Think of what could go wrong, work backwards and plan for those scenarios.
• Use chunking: Break down the project into as small tasks as you and the team can.
• Try consensus-based estimation: This method uses conversation and convergence to reduce individual cognitive biases—but it’s time-consuming. To strike a balance, I’d recommend using it only for complex features or projects in which there’s not much leeway in delivery time.
• Add buffer: This decision depends on a lot of factors: type of project, whether there’s a need to have a definite deadline, complexity, dependencies etc. At a basic level, if you’ve been working with the team and have a history of how much the estimates are off by, you can plan to add that much buffer. If it’s a new team, and you don’t have any idea, look for similar projects use that data to gauge the buffer.
2. Sunk cost fallacy: an increased propensity to continue an endeavor once an investment in money, effort or time has been made
• Don’t just think about the time/money already spent. Instead, think of how much additional time/money is needed and if continuing the project will be a worthwhile investment.
• Companies can help employees overcome loss aversion by putting greater values on gains and less penalties for losses. While this is something that happens at the enterprise level and might not be in our sphere of influence, you can influence it at a program and project level when framing wins and losses. For example, instead of saying, “We were over budget by 10 percent,” try framing it as, “We were within +10 percent of our initial estimates.”
• Avoid perpetuating the stigma that stopping a project is a failure. Instead frame it as a lesson learned and incentivize people to make such decisions in the projects and programs they manage.
• Consider opportunity costs. By sticking to the original plan, think of all the projects you’re giving up.
3. Status quo bias: sticking with the option you’re given even though the alternatives might be better
• When you propose any change, be very clear and intentional about why you’re proposing it. Explain the problem statement you’re trying to solve and then detail the pros and cons of status quo versus the change.
• Evaluate the opportunity cost of making the change versus sticking with the status quo.
While it’s not possible to eliminate all biases and fallacies, being cognizant of them and recognizing them will guide us in making better decisions.
What are some of the fallacies and biases you’ve held onto and how have you overcome them?
Here is a link to the unabridged version of this post.