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Cost Engineering Journal THE JOURNAL OF AACE® INTERNATIONAL - THE AUTHORITY FOR TOTAL COST MANAGEMENT® March/April 2016 ENGINEERINGENGINEERING COSCOSTT www.aacei.org REVIEWING RESOURCE LEVELED SCHEDULES USING P6TM THE PLANNING FALLACY AND ITS EFFECT ON REALISTIC PROJECT SCHEDULES FORENSIC SCHEDULE ANALYSIS AND DISCRETIONARY LOGIC TECHNICAL ARTICLE The Planning Fallacy and Its Effect on Realistic Project Schedules Jeffrey Valdahl and Shannon A. Katt performing similar tasks. Kahneman Abstract: “How long do you think that task will take?” It’s a question that is states that the planning fallacy asked frequently during the course of a project, but is often answered with describes plans and forecasts that: little or no factual basis. Project team members typically underestimate the time needed to complete a task they are responsible for. This tendency has been referred to as the “planning fallacy,” and it can have a dramatic effect • Are unrealistically close to best- on developing a realistic overall project schedule. This article examines var- case scenarios ious causes of the planning fallacy, including optimism bias, lack of task un- • Could be improved by consulting packing, and short memory. the statistics of similar cases [7]. As a project manager or planner, it is important to recognize when these psychological effects are impacting your project schedule. This article uses Kahneman also describes the examples from various projects to show where this challenging planning exercise that first led him to describe issue is likely to occur. Identifying where adjustments need to be made, at the concept. He was working with a both the task and overall project level, is essential in developing a project team of colleagues to write an schedule that is both achievable and reasonable. ★ academic textbook. After progressing for about a year, he asked each team ow long do you more on psychological research than member to independently write down think that task will on traditional project management how long they thought it would take to take?” Anyone who issues. As an experienced project finish a draft of the book. The “H has participated in a manager or planner, it is important to estimates generally centered around planning discussion to lay out a proj- recognize when this effect is occurring two more years, with a range of one ect’s schedule will recognize this fun- and make adjustments during the and a half to two and a half years. damental question asked to project development of the schedule. This He then asked one colleague who team members. It often initiates an un- article explores common reasons for had extensive experience with other settling pause while the person respon- the planning fallacy, provides insight academic textbooks how much longer sible for the task contemplates the on typical situations where it occurs, it had taken similar teams to finish a “correct” answer. Frequently, the an- and offers techniques to help develop draft, once they had reached the same swer is a gross underestimation of the more realistic project schedules. point in development. The actual duration needed to complete experienced colleague gave this the task. When these individual, short- The Planning Fallacy Defined question additional thought and ened task durations are linked to form The planning fallacy concept was delivered some bad news: it typically the full project schedule, the result is first used by Daniel Kahneman and took about seven more years to finish. often a misrepresentation of the time Amos Tversky to describe the Even worse — about 40 percent of the needed to complete the overall project. tendency to underestimate the time other teams never finished their books This tendency to underestimate needed to complete a given task. at all. task durations is commonly referred to More importantly, they found that this Kahneman’s textbook team was as the planning fallacy [2]. Theories on underestimation happens even when shocked to hear the actual timeframes why this effect occurs tend to focus people have previous experience in of similar projects. The team could not COST ENGINEERING MARCH/APRIL 2016 21 imagine what might take them that The Project • YYZ Project Manager: long, so they promptly noted the Planning Environment “Yeah, but those were caused by comparables but stuck with their When project schedules are our equipment vendors, not us. original duration estimate. Kahneman developed in a group environment, We will just source our equipment states that his team had committed a gathering project team members in a from another vendor” planning fallacy by relying on internal conference room to walk through estimates that, “were closer to a best- their assigned tasks in the context of This is an example of group case scenario than to a realistic the entire project is a common optimism bias. Both individuals and assessment.” The textbook ended up approach. Various tools are used to groups often attribute past successes taking eight more years to complete! plan the project, from sticky notes to to themselves but failures to outside Research on the planning fallacy specialized software that facilitates a factors [14]. Typical thinking is that has been conducted primarily in the group collaboration effort. A project problems that happened last time area of psychology, rather than in plan and schedule that the full project were one-offs and will not happen project management. The various team “buys into” are the measure of again. There is always a chance that research areas include the effects of success. the new project will have valid lessons deadlines, perceived durations of Unfortunately, research suggests learned from previous efforts, but similar previous tasks, level of that this group planning environment complications that happened before planning detail, anchored dates, often exacerbates planning fallacy must be recognized [8]. individual versus group planning, issues. Group predictions tend to be Projects planned backward from egos, team power structure, and bias. more optimistic than those set by an a desired end date can exhibit this From that research, some methods individual. Researchers have group bias. Activities frequently get have been developed that try and described this group accentuation shoe-horned into desired time frames offset potential effects of the planning effect as a result of dynamics between and have unrealistically short fallacy. team members during the planning durations. Even though schedules are process. Even though individual most often easier to develop “when Recognizing the Planning Fallacy members can act as observers to you know the answer first,” project A savvy project manager or other members’ tasks, any teams should be cautious when planner will recognize when their impartiality tends to be planning activities to meet interim project team is becoming aggressive overshadowed by being an active date benchmarks. Projects frequently in their activity duration estimates. participant and stakeholder to the have hard completion dates (e.g., the Often, recognition happens when entire group’s optimism [3]. Olympics), but their activities are activity sequences or project phases To examine various group always executed in the forward appear to be forced into time frames planning scenarios that lead to the direction from the start, regardless of established by top-down planning planning fallacy and overly optimistic how they were planned. Unrealistic, techniques. In other cases, an project schedules, we will visit a backward-planned durations can lead unrealistic project schedule is the planning meeting for the fictitious YYZ later on to sacrifices in scope, cost, or output of a collaborative planning Plant Expansion Project. quality to meet deadlines that may session driven by a few influential have been established without a solid team members. These situations need Project Team Optimism Bias basis. to be recognized during the planning The project environment also process and then offset with • YYZ Project Director: tends to produce an inherent bias by challenges to the basis of optimistic “Two years is more than enough team members. There is a strong durations. Frequently, the person time to design and construct the desire to keep the project moving questioning the validity of the expansion project.” forward at all times, with required planned schedule is not very popular • Construction Manager: approvals and funding. This bias can with the rest of the group [1]. “Absolutely. If you get me the lead to overly aggressive schedules for The following sections describe design and major deliveries by the the next phase of the project in order project schedule planning situations beginning of the year, we will to comply with economic and that often promote planning fallacy have it up and running by the operational targets established effects. Identifying when these occur holidays.” outside of the project [2]. No one who is a key to offsetting them and to • YYZ Operations Manager: works in the projects business enjoys developing a more realistic overall “Remember we ran into some the uncertain period between project schedule. problems when the previous unit assignments, especially after a project was started up. gets cancelled. Terminating a project before it is completed is often a correct decision, but schedule bias 22 COST ENGINEERING MARCH/APRIL 2016 from those directly involved in the Schedule Anchors modeling department eight project can cloud an impartial project weeks to complete the model evaluation. • YYZ Engineering
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