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Gleb Tsipursky

Risk Management

Are You Falling for the Myth of ‘Failing to Plan is Planning to Fail?’

Three tips to help you avoid the planning fallacy

Published: Monday, June 14, 2021 - 12:03

Quality professionals are often told that “failing to plan is planning to fail.” You might be surprised to learn that this phrase is a misleading myth at best and actively dangerous at worst. Making plans is important, but our gut reaction is to plan for the best-case outcomes, ignoring the high likelihood that things will go wrong.

A much better phrase is “failing to plan for problems is planning to fail.” To address the high likelihood that problems will crop up, you must plan for contingencies.

When was the last time you saw a major planned project suffer from a cost overrun due to quality issues, whether faulty outputs or rushed designs that both result in costly do-overs? It’s not as common as you might think for a project with a clear plan to come in at or under budget.

For instance, a 2002 study of major construction projects found that 86 percent went over budget. In turn, a 2014 study of IT projects found that only 16.2 percent succeeded in meeting the original planned resource expenditure. Of the 83.8 percent of projects that did not, the average IT project suffered from a cost overrun of 189 percent.

Such cost overruns can seriously damage your bottom line. Imagine if a serious IT project such as implementing a new database at your organization goes even 50 percent over budget, which is much less than the average cost overrun. You might be facing many thousands or even millions of dollars in unplanned expenses, causing you to draw on funds assigned for other purposes and harming all of your plans going forward.

What explains cost overruns? They largely stem from the planning fallacy, our intuitive belief that everything will go according to plan, whether in IT projects or in other areas of business and life.

The planning fallacy is one of many dangerous judgment errors, which are mental blind spots resulting from how our brain is wired that scholars in cognitive neuroscience and behavioral economics call cognitive biases. Fortunately, recent research in these fields shows how you can use pragmatic strategies to address these dangerous judgment errors, whether in your professional life, your relationships, or other life areas

Solving the planning fallacy

Specifically for the planning fallacy, my coaching and consulting clients have found three specific research-based techniques effective.

First, break down each project into component parts. An IT firm struggled with a pattern of taking on projects that ended up losing money for the company. We evaluated the specific component parts of the projects that had cost overruns, and found that the biggest unanticipated money drain came from permitting the client to make too many changes at the final stages of the project. Doing so ended up compromising quality and resulted in more redos down the line. As a result, the IT firm changed their process to minimize any changes at the tail end of the project.

Second, use your past experience with similar projects to inform your estimates for future projects. A heavy equipment manufacturer had a systemic struggle with underestimating project costs. In one example, a project that was estimated to cost $2 million ended up costing $3 million. We suggested making it a requirement for project managers to use past project costs to inform future projections. Doing so resulted in much more accurate project cost estimates.

Third, for projects with which you have little past experience, use an external perspective from a trusted and objective source. A financial services firm whose CEO I coached wanted to move headquarters after the company outgrew its current building. I connected the CEO with a couple of other CEO clients who recently moved and expressed a willingness to share their experience. This experience helped the financial services CEO anticipate contingencies he didn’t previously consider, ranging from additional marketing expenses to lost employee productivity due to changing schedules as a result of a different commute.

If you take away one message from this article, remember that the key to addressing cost overruns is that “failing to plan for problems is planning to fail.” Use this phrase as your guide to prevent cost overruns and avoid falling prey to the dangerous judgment error of planning fallacy.

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About The Author

Gleb Tsipursky’s picture

Gleb Tsipursky

Gleb Tsipursky is on a mission to protect quality leaders from dangerous judgment errors known as cognitive biases by developing the most effective decision-making strategies. A best-selling author, he wrote Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (2019). His expertise comes from 20+ years of consulting, coaching, and speaking and training as the CEO of Disaster Avoidance Experts, and over 15 years in academia as a behavioral economist and cognitive neuroscientist. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, Twitter@gleb_tsipursky, Instagram@dr_gleb_tsipursky, LinkedIn, and register for his Wise Decision Maker Course.