Any project or programme depends on a vast array of individual and group judgements and decisions. For example, planning how long an activity will take, the interdependencies between a set of activities, the likelihood and impact of risks, the size and longevity of the benefits to be delivered. Our education and training tells us how to undertake such tasks and ultimately optimise the net present value of such activity. Yet this ignores the vast array of barriers that prevent us achieving such optimisation, through a number of heuristics and biases. We need to identify, understand and compensate for them at all stages through the programme lifecycle. In aggregate, these represent a far more critical success factor than optimising methodology or finessing toolset.

The Anchoring Trap

Problem: The tendency to rely too heavily, or "anchor," on a past reference or on one trait or piece of information when making decisions. This is often demonstrated by giving disproportionate weight to the first information received. For example, consider asking a group “Was Ghandi older than X when he died?” and then asking “How old was Ghandi when he died?”. Many studies show, randomly changing X will greatly impact the estimation of his age. I have done this myself with groups, even where they are aware of the trap. When considering a decision the mind gives disproportionate weight to the first information it receives. These initial impressions, estimates or data anchor subsequent thoughts, judgement.

In a more relevant situation, consider a major company turnaround programme. The Ops Director, on day one, stated to everyone the fundamental issue is warehouse productivity.

This hunch based, evidence lacking statement, set the focus and direction of the company cost reduction programme for many months before eventually the evidence to the contrary became overwhelming. A short up-front piece of analysis to review the cost figures and performance metrics, whilst slightly delaying the “doing” phase, would have greatly aided the programme definition and focus, and avoided the anchoring trap.

This is a very real trap in setting plans, budgets or negotiating with suppliers.

Mitigations

Think for yourself. Always think of your own thoughts and solution before reading and listening to others
Undertake high-level, data based analysis where possible
Always view a problem from different perspectives, with different starting points.
Be open minded (see confirming evidence trap)

The Status Quo Trap

Decision makers show a strong bias towards decisions that maintain the status quo, or look backwards (eg call early cars “horseless carriages”, “Cordless phones”, “electronic mail”).

Sticking with the status quo normally means less psychological risk. Action means taking responsibility and opening ourselves up to criticism and regret. This is particularly noticeable in mergers and acquisitions, and a desire not to “rock the boat” too early and not seizing the opportunity for change.

In the programme world, this trap is a fundamental barrier to effective risk management. A risk can be ignored – it might not happen – an issue demands attention.

Mitigation

Always remind yourselves of the objectives
Always identify other options to compare with the status quo
Ask, would you choose the status quo option if it wasn't the status quo
Don't exaggerate the effort involved in switching

The Sunk Cost Trap

A bias to make decisions that justify past choices, even when the past choices no longer seem valid. We are very unwilling to admit a mistake, particularly in business when decisions are so public. So the answer is to take no subsequent action; eg continuing to focus effort on an employee who never should have been hired.

This bias can be exacerbated by poor corporate cultures, where the penalties for explicit “failure” are high, or the culture is very risk adverse. This clearly limits the willingness to state high probabilities against risks – to do so is often explicitly or implicitly challenging the validity of previous assumptions and decisions – or meaningfully mitigate and avoid risks.

Mitigation

Set aside financial and emotional sunk costs
Seek out those not involved in the original decision
Change responsibilities to allow more dispassionate decision making
Cultivate a culture that supports intelligent decision making that recognises mistakes can be made and outcomes can be bad, and has an explicit risk appetite

The Confirming Evidence Trap

This trap seeks out and accepts information supporting our view and avoids and discounts opposing information. This is difficult in a hierarchical organisation, or where people careers and pay packet depend on agreement, or where here is too much emphasis on friendship and collaboration. This traps prevents people discussing their programme with other programmes or reviewing lessons learnt (identified) documentation.

Mitigation

Confirm you are equally rigorous with confirming and opposing data
Obtain independent advice
Get someone on the programme team explicitly to play devil's advocate
Be honest on motives: making
Don't ask leading questions
Don't surround yourself with yes-men
Look for the nonobvious – Seek out disconfirming evidence for pet theories. Think, “What event would refute this theory?”
Revise your beliefs when confronted with contrary evidence. Dare to say, “I don't know,” “I was wrong” or “It didn't work.”

The Framing Trap

The first step in making a decision is framing the question, and this can have a significant impact on the answer, and is consequently one of the most dangerous. The impact of framing a conversation in terms of opting in or out; a gain versus a loss; a percentage versus an absolute amount can all make a fundamental difference to the outcome. This impacts everything from the fundamental programme business case, delivery options analysis, through to choices made in every statement and graph.

Don't blindly accept initial framing. Restate the problem is different ways simultaneously
Pose in a neutral fashion with various reference points.
Refer back to initial framing near end of decision.
Overconfidence & Prudence Trap (aka The Estimating & Forecasting Trap)

This is perhaps the most fundamental and impactful trap in the delivery of major cost reduction programmes. We tend to be overconfident in the accuracy of our estimates, including over-estimating the likelihood of positive events and under-estimating the likelihood of negative events, and will rewrite history when events are not as predicted. This is so prevalent in the project planning world it has its own descriptor: Planning fallacy — the tendency to underestimate task-completion times. People set too narrow a range of possible outcomes (big impact on programme risk management). Alternatively prudence can lead to adding contingency “just to be safe” at each level of the organisation. This has a critical impact on cost prediction for example.

This is often exacerbated by organisational and individual incentives. For example, the Gray report on MoD project performance makes the point that the culture and incentives inevitably lead to initial understatement of cost, consequently followed by being over budget. Given a project is never cancelled, the key is to get it started. The best way to get it started is to understate the costs and overstate the benefits. Couple this cultural incentive with the fundamental human bias and you have a recipe for disaster.

The Green Book Optimism Bias is one attempt to rectify this as early stages in the project lifecycle, and it often works well. However, to be clear, it is not a substitute for appropriate risk and contingency based estimating. It is a factor to rectify the normal fundamental human nature to underestimate.

Mitigation

A disciplined approach to making estimates, forecasts and probabilities.
Build in an explicit optimism bias
Build a centrally held contingency fund
Always start with considering extremes, or avoid anchoring trap of central estimate
Always states estimates honestly. Undertake sensitivity analysis
As a forecasting period lengthens, prediction errors grow exponentially. “Fuzzy” thinking can be more useful. Often you should focus only on consequences, not overly precise probabilities
Use real data not impression where possible
There are many other traps, of which a select number are highlighted below. (The titles are linked to Wikipedia)

Ambiguity effect — the avoidance of options for which missing information makes the probability seem "unknown".

Availability cascade — a self-reinforcing process in which a collective belief gains more and more plausibility through its increasing repetition in public discourse (or "repeat something long enough and it will become true").

Availability heuristic — estimating what is more likely by what is more available in memory, which is biased toward vivid, unusual, or emotionally charged examples.

Bandwagon effect — the tendency to do (or believe) things because many other people do (or believe) the same. Related to groupthink and herd behaviour.

Choice-supportive bias — the tendency to remember one's choices as better than they actually were.

Conjunction fallacy — the tendency to assume that specific conditions are more probable than general ones.

Déformation professionnelle — the tendency to look at things according to the conventions of one's own profession, forgetting any broader point of view. A clear bias in the PPM community.

Hindsight bias — sometimes called the "I-knew-it-all-along" effect, the inclination to see past events as being predictable.

Illusion of control — the tendency for human beings to believe they can control or at least influence outcomes that they clearly cannot.

Information bias — the tendency to seek information even when it cannot affect action.

Not Invented Here — the tendency to ignore that a product or solution already exists, because its source is seen as an "enemy" or as "inferior".

Texas sharpshooter fallacy — the fallacy of selecting or adjusting a hypothesis after the data is collected, making it impossible to test the hypothesis fairly. Refers to the concept of firing shots at a barn door, drawing a circle around the best group, and declaring that to be the target.

Zero-risk bias — preference for reducing a small risk to zero over a greater reduction in a larger risk. Prevalent in risk management.

The diagram below show an approximate distribution of some of the key traps against the typical project lifecycle.

Finally, it seems appropriate to wrap up with a view on randomness and the above human traps as so superbly articulated by Nassim Taleb in the books “Fooled by Randomness” and “Black Swan”. As the previous article discusses, the world is complex, but most people don't pay enough attention to randomness. They underestimate the effects of randomness and have little understanding of how probability affects events. In Taleb's view, people's misconceptions can be summarized in a Table of Confusion, which distinguishes between what many people believe is the reason for the success and reality.

The real reality	What people think
Luck	Skills
Randomness	Determinism
Probability	Certainty
Belief, conjecture	Knowledge, Certitude
Theory	Reality
Anecdote, coincidence	Causality, law
Forecast	Prophecy

The result is massive optimism, and a confusion between luck and skill. This project is successful – therefore we must be skilful, and the next project will be successful.

Conclusion

The human mind is subject to numerous blind spots, biases and confusion. The key is to attempt to distinguish, and accept the important role that randomness and biases plays in our lives including in our projects and programmes. You can retrain yourself to overcome your cognitive biases and to appreciate randomness. But it's not easy.

The best line of defence is simply to apply business and PPM best practice, ie set bold strategy, think creatively, define SMART goals and then plan, decide and deliver in an intelligent, straightforward way. But do so in full appreciation of the opportunities and risks, countering the obvious decision making and management traps:

recognise the typical points of failure and causes of loss
have independent assurance
deploy critical thinking and clear graphical and quantitative descriptions
ensure you review all points of view, and avoid the typical biases and traps
genuinely apply honest risk management
recognise and embrace the inherent uncertainty

We hope you have found the series of articles of interest over the last few months. The subject is clearly central to the public sector agenda at this time, but it has to be said, the agenda has a relatively low probability of successful delivery without a major improvement in the following three organisational capabilities:

Organisational culture and individual mindset aligned to cost reduction
PPM and cost reduction tools and techniques, process, data and governance structure (the easy bit)
A constant focus on high quality and timely decision making