998 words: 6-minute read
I often hear people say client behaviour will be the main driver of change in the Architecture, Engineering and Construction Sector. Some clients however, may want their advisors to ..well.. advise them on new ways forward. Especially when it comes to budget overruns and delays.
The draft letter below may prompt your own thoughts about the conversations clients, investors, planners and project managers could be having but aren’t at the moment.
We’ve been studying a growing body of research led by Said Business School. It suggests how those of us who plan and manage large projects can reduce the problem of schemes coming in “over budget, over time, over and over again” with your, and your investors help.
A warning – the research doesn’t pull its punches!
This letter sets out the root causes of this persistent problem, and suggests the kind of conversations we could have but don’t typically.
If asked to explain the causes of under-performance, conventionally we point to project complexity, scope changes, technological uncertainty, demand uncertainty, a plethora of opposing stakeholder voices, random so-called “black swan” events, and unexpected archaeological and geological features. These obviously cause cost overruns and benefit shortfalls. However, they’re not the root causes.
According to the data there are just two root causes of under-performance: the optimistic way we view complexity, scope change etc., alongside strategic misrepresentation of a project.
Optimism in this context refers to the fact you and we know about the conventional causes listed above but either ignore or systematically underestimate them. We do this at both financing and business case stages during a project’s development. Apparently, we suffer from a biased, “delusional optimism” that diverts our attention away from a rational weighting of gains, losses, and probabilities.
This is compounded by our “inside view” of planning: we think problems are unique so focus only on the particulars of the project before us when generating solutions. We don’t learn lessons from projects elsewhere, past or present.
We’re also prone to what psychology calls “The Planning Fallacy” and “Anchoring.”
The former means we underestimate task completion times and costs, despite knowing similar tasks have run late or gone over budget.
Anchoring concerns the first financing number we come up with. Even when we subsequently discover it’s too low or high, our adjustments away from it are almost always insufficient. A reluctance to swing too far away from our original assumptions means delivery increasingly relies on everything going according to plan. We develop an it’ll-be-alright-in-the-end mindset.
If optimism is a psychological issue, this one is political.
In a nutshell it concerns the way you and we increase the likelihood our project, and no one else’s, gains approval and funding. We know “misrepresenting” – or lying about costs, benefits and risks – is a bit strong. Yet we can all point to occasions when we’ve either done it, been asked to do it or in other ways been economical with the truth. All in the name of persuading others to release funds and safeguarding vested interests, potentially at the expense of the wider good.
We recognise this research-led feedback is hard to hear. If you’re tempted to lambaste the messenger and query their evidence base you wouldn’t be alone!
However, the approach we’ve taken is to take it on the chin and ask tough questions of ourselves. We do so for two reasons.
First, we intuitively know the research is right. We may not talk about or quantify the two root causes in our formal discussions, but if we’re honest, we know they exist, feel their affects and get quite animated about them privately.
Second, no doubt like yourselves, we want to be rid of the poor reputation Project Planning and Management has gained over many years now. We don’t want to be the subject of ridicule and mistrust anymore and need a rethink.
It’s for these reasons we propose having a new conversation about how we work together.
Let’s recognise that the best insurance we’ve got against insufficient budgets, fuzzy delivery plans and operating assets that fail to deliver intended outcomes – so make investment decisions look poor in retrospect – is transparency, shared responsibility and confidence.
Here’s a starter for ten on what we mean by each of these.
Transparency – imagine if we put everything on the table and you felt comfortable enough to do the same. We’d no longer need to second guess each other. We’d build meaningful best and worst cases and knowledgeably describe all stages in between. We could have open and robust discussions about costs and benefits but not from a blame or mistrusting standpoint. We could be frank about the risks inherent in any big project, anticipate their twists and turns and stop seeing them as elephants in the room.
Shared responsibility – we think the principal of collective cabinet responsibility is a good analogy here. Envisage us all owning the collective conclusions we reach. The idea of pushing responsibility onto someone else when the going gets rough becomes anathema. What if our new normal enabled us to really hear concerns, challenge each other’s optimism (and pessimism when needed), and have healthy disagreements that produce innovative solutions rather than divisions. Imagine all this in the name of giving stakeholders a range of realistic numbers that informs their risk appetite, not one headline figure, designed to win a funding pitch, but which hangs around our necks thereafter.
Confidence – let’s avoid the problems associated with only using an inside view of planning by bench-marking our projects against others completed elsewhere. Imagine being confident enough to subject our thinking to peer review. By fusing our “inside view” with an “outside view” we’d be able to present a much more rounded case when a project is subjected to wider stakeholder scrutiny.
Are you up for conversations about how we can address these issues? We very much hope so.
The [Imaginary] Realistic Planners and Project Managers Collective