Over-Confidence: 4 Reasons Why Your Strategy or Project may be at Risk

Why Your Spectacles are Probably Rose-Tinted!

If you believe the statistics, most projects and strategies are running either behind time, over budget or otherwise failing to deliver what is expected. The result is a widespread pattern of disappointment and frustration – a systematic failure to deliver to plan.

Naturally, the focus turns to poor project management as the cause, but what if that is just a symptom rather than the real cause? What if the real cause goes much deeper than the Gantt Chart or the project planning tools used? What if the flaw is with how we, as humans, engage with, or plan, for the future? The challenge is linear thinking in a non-linear world.

Much has been written about the vagrancies of human decision-making, including best-selling books by Nobel Prize Winning economists. Here we explore just a few of the reasons why you may be prone to over-confidence with respect to your strategic initiatives and critical projects.

These 4 factors suggest that your projections and plans may be rose-tinted. There is good news, however. Because bias happens in such predictable ways, the effects can be managed, perhaps even prevented.

The Perils of Groupthink – Group think often manifests itself as overconfidence.  That is where people stop thinking for themselves and conform to the opinions and behaviours of the group and its most dominant / powerful members.  This can result in an artificial consensus and a project team ‘living in its own bubble’ – immune to external information that challenges its own beliefs. Ironically, experts can be particularly prone to this form of bias. The good news however is that the conversation about confidence can illuminate and tackle the risk of groupthink. This is what we call the moment of truth for a project or initiative.

Planning Fallacy – Psychologists tell us that there is an innate tendency to over-estimate how much can be achieved and how quickly. This is called the ‘planning fallacy’, and it happens when we are closely involved in any strategic initiative¹. It helps to explain why so many projects are behind schedule and over-budget. Pause for a moment to consider: Is there a history of forecast accuracy in respect of projects and initiatives? Has a sensitivity analysis been done on projections? Are assumptions and hypotheses made clear?

A Bias towards Optimism Scientists tell us that up to 80% of the population have an in-built optimism bias². The prevalence of optimism suggests that it must serve some evolutionary purpose, however in the world of business we are warned that ‘hope is not a strategy’³. Excessive optimism may indeed be dangerous. Pause to consider: Does your organization Is there a tendency towards ‘glass half-full’ thinking, where hyping-up projects is encouraged and ‘negative talk’ discouraged?

Over-simplification – Our innate tendency to over-simplify complex problems leaves us vulnerable to over-confidence. Complexity is often hidden, the result is misplaced certainty.

Knowing the difference between complicated and complex is important. Take for example implementing a CRM system. From an IT point of view that may be a technically demanding and even complicated project. However, if the objective of the initiative is to deliver a world-class customer experience that is complex – its success will:

• Require many parts of the organization working together (e.g. sales, service, marketing, compliance, finance, etc.)
• Require not just changes in process, but in organizational behaviour and culture too.

If there are high levels of confidence ask: Could we be oversimplifying things?  Before you answer pause to reflect on the factors that make a strategic initiative complex and therefore more difficult to manage.

Our data suggests that these 4 risks of overconfidence are at their most when there are high levels of pressure or urgency surrounding an initiative.  That is no surprise, as it follows a pattern highlighted by psychologists and behavioural economists.  Deliberate steps are required to minimize the risk of bias and error.  That includes slowing down, employing more project management rigor and engaging more diverse viewpoints in the process. Another key factor is what we call ‘Project Safety‘ – those conditions that ensure people can openly discuss obstacles and risks facing a project.

The danger is that complexity is often hidden. This results in misplaced certainty. That explains why so many projects are overly optimistic regarding timelines, budgets and so on. The hypotheses and assumptions that characterize projects at the start, when often repeated enough start to be treated as fact.

Managers want certainty in their plans and forecasts. Moreover, they need to display an unshakable confidence if they are to enlist the support of others. Yet, as we cannot know the future, delivering ambitious and innovative initiatives requires imagination or even a crystal ball.

Regardless of the detail of the spreadsheet or the confidence of the promoter, project goals are only forecasts. They rarely come with a guarantee.  While it may be possible to exercise a high level of control over the inputs and activities of a project, and to predict project outputs with a reasonable level of confidence, it is much more difficult to forecast the business outcomes and business impact that will derive from a project’s success.  Forecasting downstream impact is, at best, educated guess work reliant on assumptions, scenarios and hypotheses.

However, when it comes to projections nuance tends to get stripped away fast, with scenario and assumptions quickly getting ‘locked-in’.  For example, while the presentation to the board of a global corporation included a total of 30 slides and showed 3 scenarios regarding results for an important strategic initiative, the one that the Chairperson took away was the $250 million within 5 years figure. Although labelled as the best case scenario, it has become the Chair’s only yardstick for success.

High levels of complexity demand a tolerance of uncertainty, even ambiguity. It also requires a willingness to act inspire of uncertainty, to experiment and to innovate. It also requires an acceptance of mistakes and setbacks, even failure.

Cover art: Image by Arek Socha from Pixabay