In writing this article, I found myself asking whether I actually wanted to ‘tackle’ optimism bias. Isn’t optimism an inherently good trait? Aren’t optimistic people more fun to be around? Haven’t some of humanity’s most incredible achievements been borne out of optimism and determination? Why would we want to check optimism?
It comes down to the second word in the phrase: bias. Any reputable dictionary will tell you that bias involves the distortion of statistical results, and it is in this distortion that lies the imperative to tackle optimism bias. Fundamentally, optimism bias in project management pertains to the systemic tendency of project professionals to expect better results than an objective, empirical assessment would suggest they’re likely to achieve.
This commonly manifests in the form of cost and schedule overruns and the erosion of benefits realised versus planned. Although it can be challenging to identify when or how optimism bias has emerged, there are some simple actions you can deploy to help combat its impact.
1. Invest time in developing a robust business case
The effects of optimism bias have been demonstrated with such frequency that HM Treasury’s Green Book recommends that standard civil engineering projects at the outline business case stage should apply up to a +44% adjustment to their capex estimate and up to +20% to their works schedule duration. (You can dial this up to +66% and +25%, respectively, for non-standard civil engineering projects)
Given that business cases represent the foundation upon which projects are established and serve as a touchstone for measuring success throughout, it’s crucial that proper attention is afforded to developing them.
It’s easy to fall into the trap of churning out a business case with the benefits statements, schedules and cost estimates that experience tells you the investment panel will approve. However, approaching their preparation with an inquisitive, yet methodical, mindset and adopting an evidence-based approach is important. It may feel more onerous but will likely make your passage through the remainder of the project less challenging. It may even save you the dreaded return to the investment panel for budgetary uplift.
2. Conduct quantitative risk analyses early
Two caveats with this one: (1) ideally at each business case stage; and (2) if possible (I appreciate that this is not common practice in some industries and may not be considered worthwhile for smaller-scale projects).
Disclaimers aside, having competent risk management professionals conduct quantitative cost and schedule risk assessments on informed cost estimates and schedules (themselves developed using empirical evidence from analogous past projects) can be hugely beneficial in establishing more realistic outputs. Moreover, it can help inform related aspects such as the contingency budget required or any performance tolerance thresholds to be established.
3. Maintain an assumptions register
Assumptions hold far more power in the success of projects than they ought to. Too many projects develop an entire business case based upon flawed assumptions. Some assumptions are so woven into the fabric of an industry or business that it can be difficult to distinguish whether they are indeed assumptions or simply inalienable facts.
It’s not surprising, then, that assumptions can contribute significantly to the impact of optimism bias. With this in mind, using a simple register to document anything that influences project strategy or decision-making and feels suspiciously like an assumption — ideally alongside its source — can prove invaluable further down the line. At the very least you’ll have a defensible audit trail if questioned; at best you may even be encouraged to challenge that assumption and prove it to be false.
4. Proactively seek advice and input
Whenever making any significant decision in the life cycle of a project — whether it be on the outline business case budget and schedule, which procurement strategy to deploy, the best method of resolving a disagreement with a stakeholder, or something else completely — take a moment to test your planned approach with others.
Some decisions afford the time needed to engage with a number of people, while others require swift action. But wherever possible, drawing upon the experience and expertise of colleagues or peers is likely to help you make a better decision. And a better decision is one that keeps optimism bias in check.
Neuroscientist Tali Sharot (of optimism bias TED Talk fame) concluded that it is possible that the mind has evolved learning mechanisms to mis-predict future occurrences, as in some cases they lead to better outcomes than do unbiased beliefs. In applying this logic to an archetypal project life cycle (if such a thing exists), I’m minded to see a case of short-sightedness.
Optimism bias may get you through the investment panel and allow you to launch the project, but chances are it’ll come back to haunt you somewhere down the line.
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