Mentors Magazine: Issue 3

46 | MENTORS MAGAZINE | EDITION 3

over budget, which is much less than the
average cost overrun. You might be facing
many thousands or even millions of dollars
in unplanned expenses, causing you to
draw on funds assigned for other purpos-
es.

Moreover, cost overruns often spiral out of
control, resulting in even bigger disasters.
Let’s say you draw the extra money from
your cybersecurity budget. As a result,
you’ve left yourself open to hackers, who
successfully stole customer data, resulting
in both bad PR and loss of customer trust.

What explains cost overruns? They largely
stem from the planning fallacy, our intui-
tive belief that everything will go according
to plan, whether in IT projects or in other
areas of business and life. The planning fal-
lacy is one of many dangerous judgment
errors, which are mental blind spots re-
sulting from how our brain is wired that
scholars in cognitive neuroscience and be-
havioral economics call cognitive biases.
We make these mistakes not only in work,
but also in other life areas, for example in
our shopping choices, as revealed by a se-
ries of studies done by a shopping compar-
ison website.

Fortunately, recent research in these fields
shows how you can use pragmatic strate-
gies to address these dangerous judgment
errors, whether in your professional life,
your relationships, your shopping choices,
or other life areas.

You need to evaluate where cognitive bias-

es are hurting you and others in your team

and organization. Then, you can use struc-

tured decision-making methods to make

“good enough” daily decisions quickly;

more thorough ones for moderately im-

portant choices; and an in-depth one for

truly major decisions.

Such techniques will also help you imple-

ment your decisions well, and formulate

truly effective long-term strategic plans. In

addition, you can develop mental habits

and skills to notice cognitive biases and

prevent yourself from slipping into them.

For instance, we can address the planning

fallacy by planning around it. Such planning

involves anticipating what problems might

come up and addressing them in advance

by using the research-based technique of

prospective hindsight, by envisioning your-

self in the future looking back at potential

challenges in the present. It also involves

recognizing that you can’t anticipate all

problems, and building in a buffer of at

least 40% of the project’s budget in addi-

tional funds. If things go better than antici-

pated, you can always use the money for a

different purpose later.

Besides this broad approach, my consulting

clients have found three specific research-

based techniques effective for addressing

the planning fallacy.

First, break down each project into compo-

nent parts. An IT firm struggled with a

pattern of taking on projects that ended up

losing money for the company. We evaluat-