Why your 2021 plans will (probably) fail and what you can do about it.
By Dan Monheit, Originally published on Inside Retail 9.12.20
New Year always brings with it big new plans. Post lockdown and post-2020, the pressure is on for 2021. Dan Monheit says that having a little insight into what we’ve learned about planning from Behavioural Science will go a long way towards making — and sticking to — your best plans yet.
The saying goes that if we fail to plan, we plan to fail, and so it’s not surprising that planning has become such a deeply embedded, universally respected part of most retail businesses.
We plan a lot. Store roll out plans, supplier plans, unit plans, merchandising plans, marketing plans, promotional plans, planogram plans, Covid-safe plans. And then there are the HR plans, the training plans, the strategic plans, the demand forecasting plans, the spacing plans, the seasonal plans, the IT plans, the operational plans, the planning plans. And do you know what the one thing they all have in common is?
They exist in a reality where nothing ever actually goes to plan.
In Behavioural Science, this is known as the Planning Fallacy. It refers to our inherent belief that our projects will proceed perfectly, even though we’re acutely aware that nobody else’s ever do.
The two sides of the poor planning equation: people and projects
A big part of the problem is us. As human beings, most of us tend to suffer from unrealistic optimism. A study by Beulah, Gryphon and Ross in 1994 highlighted just how optimistic our ‘unrealistic optimism’ is when it comes to planning.
The research team asked PHD students in their final semester for a best case (where everything goes perfectly) and a worst case (where everything goes catastrophically wrong) estimation of how long it would take them to complete their thesis. On average, the best-case scenario was estimated at 34 days and the worst-case at 48.
When it came to actually completing their thesis however, the average was a whopping 55 days, which was 15% longer than their ‘worst-case scenario’ and more than 60% longer than their best case estimate (it’s also worth noting that the 55 day average did not include a number of students whose final numbers couldn’t be included because they hadn’t even finished by the time the data collection for the research was finalised!).
Despite life experience teaching us that projected completion dates are all but a fallacy, they still seem to be motivating. It helps to feel like we’ll be able to beat the odds, no matter how ‘unrealistically optimistic’ that makes us. In fact, if we weren’t programmed this way, we’d probably never start anything worthwhile.
You just need to look at the completion date on any bridge, train station, road, apartment building, even your bathroom renovation, to see most projects come in over budget and over time. The Sydney Opera House is a classic example of the Planning Fallacy in action. While the original budget was seven million dollars, the project ended up coming in at $102 million and was completed ten years late!
Our own egos and biases undoubtedly play a major role in the failure of many plans, but it’s not entirely our fault. There are also a number of attributes that seem to be inherent within large scale projects that cant help but get in the way.
The first is a natural asymmetry of information, in terms of the new things you learn once you dive into a project. Unfortunately, most new information tends to be of the ‘bad news for the project’ (rather than the ‘this will make things way easier’) variety.
We’ve all been there and know the list too well; relying on previously uncompleted work that we thought had been done, trickier IT integrations than we’d realised, difficult vendors, key staff resigning or going on leave, new hires not shaping up as expected, other business priorities crashing in, global pandemics shutting down the country, and on and on it goes. Occasionally, you may be fortunate enough to hire somebody who by coincidence, has just implemented the exact same project somewhere else. Maybe they’re even a really good cultural fit too. But these windfalls, unfortunately, are the exceptions that prove the rule.
Another issue is our tendency to try to correct the course of an unwieldy, drastically late project, by throwing more people at it. Yes, this makes sense in theory, but Brooks’s Law suggests that adding extra people will actually have the exact opposite effect and blow the project out even further. In the early 1970’s, Brooks examined the impact of adding additional team members to already-late software projects. He observed that new people brought additional complexity, extra communication requirements, more risk and needed dedicated time for on-boarding, all of which slowed down and reduced the productivity of the rest of the team.
Plan to lose to win
As Daryl Kernaghan from The Castle, sagely put it, “Tell him he’s dreaming!’, and he was right. When it comes to assessing other people’s chances of success or picking holes in their plans, we’re much more likely to be realistic.
To hack yourself out of complacency and therefore out of the Planning Fallacy, it’s essential to critically appraise your own project as if it’s somebody else’s. Or even better, find a devil’s advocate dedicated to expressly finding flaws in your plan. Like any other human being on the planet, there is often a natural tendency to be defensive. However, this external check will give you a clearer understanding of the challenges ahead.
Similarly, a simple thought experiment can help. Conduct a pre-mortem before physically starting a project by imagining your project has just died a horrible death after doubling its budget and blowing out its completion date. Then play an insightful game of guessing just what went wrong.
Finally, it’s a no brainer to plan for the inevitable uncertainty by always carving off at least 10% of the total budget ‘contingency’, because as sure as night follows day, the future of your project will unfold in unexpected ways.
To find out more about Planning Fallacy, listen to episode 14 of Dan Monheit and Dr Mel Weinberg’s Bad Decisions Podcast.