Plans are nothing. Planning is everything.Business is full of uncertainty, volatility and complexity, planning fallacy is a business reality. The point is how to handle it when realizing the planning fallacy exists. Most of the time people become even more optimistic as they realized they are going off the plan. They believe they will turn the tides. They find reasons for getting off the plan and justify that these reasons are already resolved so it won’t affect the plan in future. Maybe it is same love for their plan or just a fear of getting the blame for planning failure. So, what are further reasons behind planning fallacy, and how to convey to the leaders or managers that they are on a wrong path and it is time to rethink and keep planning on track?
The reasons behind planning fallacy: Couple of common reasons about planning fallacy are planning made by the people who are not responsible for the execution (higher management), over-optimism, an unwillingness for the top of the hierarchy to delegate control. Human psychology is definitely a big reason. It is no doubt there are psychological factors as to why upper management choose to think this way so often: It is as widespread as human nature with the fear of failure and looking bad to one’s peers and leaders. It is human nature to make a plan, fall in love with it, and defend it vigorously despite clear indications that the wheels have clearly fallen off the cart at some point.
"Plans are nothing. Planning is everything" (Eisenhower): The problem is not that people create bad plans, we all do. It is that they stop planning at that point and building new learning in. The whole point of dynamic planning, not a static plan, is to keep iterating, learning and working on a rhythm of sustained delivery, that includes planning, but very few organizations seem to get it. Often, people prefer to make a few big decisions rather than many small ones. There needs to have a desire in that same place to make one big decision and be done with it, let the lower people track and deliver it. But there is a shortage of understanding in the whole culture, so from the management perspective, it is possible to run things as programmers rather than managers. If that's the case, they really need to delegate to someone (individual or group) who is prepared to take the time and effort to allocate work or resources in a more appropriate manner (both catching the big picture and understanding the significant details). Let the top management decide strategy and devolve the implementation of that strategy to others, so the implementation can be given due care and consideration.
The planning fallacy is common inside and outside of business strategic/operational/ project management: It's a human fallacy, not an institutional one. The fix/treatment for the planning fallacy is not an unknown. The technical name is "reference class forecasting." Kahneman refers to it as taking the "outside" view. In simple terms, the solution is to use a set (database) of similar projects to make your estimate. In other words, compile a list of historical projects that are similar to your own, including their relevant stats, and then use this data to generate your estimate. You can also ask anyone who provides you with an estimate what the basis of their estimate is. Ask them if they know of any similar projects, how long they took, and if there is a big difference between their estimate and history, ask them to justify their estimate. Note: your bias should be to favor history over someone's gut. If you pull out the most valuable part of each candidate project, you might get a viable and valuable program of work, that meets your budget or resource limitations. In cases where you are competing for resources, it pays to trim any projects down to a highly valuable core.
The mantra for planning success would be to apply the agile philosophy to a) Shape a mindset for planning (not plan) and practice management via iterative communication, incremental goal implementation, customer-centric viewpoint, and taking plan as shareware, not shelf-ware. b) Get the bigger picture to clear on what, who, when and how to achieve business goals based on the dollar value and available resources. c) Then plan a little and try implementing to see immediate results to verify against the expectations. Always keep the big picture, make dynamic planning, make a necessary delegation implement plan collaboratively and seamlessly.