Have you ever wondered why so many projects fail to meet deadlines?
Meeting project deadlines is a constant challenge, both at a corporate and personal level. These delays not only cause frustration but also have financial and reputational consequences. According to the Project Management Institute, globally, 48% of projects finish late.
Delays can turn profitable projects into financial failures. For example, when a research company misses a contractual milestone, the client might delay payment, affecting cash flow. If a construction company fails to deliver a project on time, it might face penalties that impact profitability. Similarly, when a company delays product development, it not only incurs higher project costs but also misses the opportunity to hit the market as planned.
In our previous edition, we discussed some principles of Behavioral Economics, a field focused on understanding how our decisions often deviate from rational expectations. Behavioral Economics proposes that our brains take shortcuts that are usually helpful but sometimes lead us to systematic errors or cognitive biases. Some of these biases might explain why project delays are so common.
⏰ Why is it so hard to meet project deadlines?
Despite detailed planning, we often extend project timelines. This surprisingly predictable pattern affects even the most competent project managers and organized teams. What causes these recurrent delays? Behavioral Economics provides some intriguing explanations.
1. Planning Fallacy
This bias is the tendency to underestimate the time, cost, and risk of future actions while overestimating their benefits, even when past experiences suggest otherwise. People often fail to accurately predict the time a task will take and the likelihood of potential problems, especially when managing multiple projects simultaneously.
>> Example: A project manager responsible for renovating three corporate offices plans for each office to be completed in one month, expecting the entire project to last three months. However, they don't anticipate common issues like material delivery delays, staff illnesses, or the added complexity of managing three projects at once. Consequently, the renovation project faces multiple delays and extends to five months, increasing costs and impacting client satisfaction and the company's reputation.
2. Optimism Bias
This bias is our tendency to overestimate the likelihood of positive events and underestimate the likelihood of negative ones.
>> Example: An experienced architect needs to secure a permit to start building a house. Confident in past successes, they estimate the approval process will take four weeks. However, they fail to consider the possibility of stricter criteria due to the project's size. When the plans are submitted, authorities might require significant modifications, delaying the construction start.
3. Present Bias
This bias is our tendency to focus more on the present than the future when making decisions. This leads us to prioritize actions that generate immediate utility over those that will benefit us later.
Example: The leader of a project to develop a new predictive model for customer churn faces tasks that are not urgent but essential for proper handover and usage. Present bias suggests the leader will prioritize tasks that show immediate progress, like writing code to demonstrate advancements, over focusing on documentation. As the go-live date approaches, they realize the model lacks adequate documentation.
🏁 What can we do to improve our ability to meet deadlines?
Behavioral Economics not only offers explanations for our planning errors but also provides tools to mitigate their impact.
- Reference-class Forecasting: This methodology, inspired by Kahneman & Tversky, challenges the traditional internal projection approach, suggesting an external view instead. It involves: (i) defining a reference group with similar projects, (ii) establishing the probability distribution of the reference group's timelines, and (iii) comparing the planned project with this distribution.
- Evidence-based Planning: This involves predicting project timelines using data from past projects within the company. Though seemingly trivial, it is rarely used due to the constant need for project systematization. Examples include agile methodologies like SCRUM, where practices like sprint planning and retrospectives help better anticipate and evaluate plans.
- Optimism Price: To reduce optimism bias, assign a "price" to optimism. The UK government provides guidelines for adjusting for optimism bias in construction projects, suggesting correction percentages for time and capital estimates based on previous projects' data.
- Unpacking: This involves breaking a large activity into smaller components and planning for these parts. Our brains find it easier to estimate small items that add up to a big item rather than the large item itself. This exercise can also reveal overlooked potential issues. Kruger and Evans (2004) found that time estimates improve significantly when tasks are disaggregated, with macro task estimates differing by up to 43%.
🤝 Takeaway: The Rebel Conclusion
Planning a project is not about predicting the future, creating a Gantt chart, or using a specific methodology, but about making decisions that fulfill the project's promise in various possible futures. Given that decision-making often involves non-rational behaviors, we believe it is the project leader's role to manage the cognitive biases influencing their and their team's decisions.
Common sense suggests that project planning happens at the start, followed by execution. However, we observe that meeting deadlines depends more on how the project leader makes decisions during unexpected events and the challenge of replanning without affecting the final date.
In those moments, incorporating an external perspective, analyzing data from past projects, adjusting estimates for optimism bias, and breaking down large activities help create a more realistic replan. The greatest risk is when teams continuously replan, as it not only delays the project but also undermines confidence in the organization's ability to generate and meet plans. Planning loses its institutional value. No one believes the plans.
Taking the typical phrase "plans are living documents" seriously means understanding that the project leader must anticipate potential delays, accelerate when possible, simulate new scenarios, project fulfillment, and create the right conversational contexts to eliminate any obstacles threatening the original promise.
Because meeting a project's deadline hinges primarily on how we make decisions to manage the original promise.
Sebastián Balmaceda - Fernando Brierley - Lucía Rossel
💬 Question for reflection
How are we recording data from current projects to make better evidence-based predictions in the future?
📕 Recommendation
Book: "How Big Things Get Done" by Bent Flyvbjerg and Dan Gardner. The authors identify decision-making errors that cause both large and small projects to fail. Using principles and scientific evidence, they suggest mechanisms to reduce these errors.