We’ve all done it; looked at our to-do list and realised we have too much to do and not enough time.
First identified in 1979 by Nobel Prize winning behavioural economists Daniel Kahneman and Amos Tversky, the ‘planning fallacy’ is where our predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed.
According to Bri Williams, a behavioural specialist at People Patterns and author of Behavioural Economics for Business, this natural tendency to underestimate the time it will actually take to complete a project can be the result of not accounting for likely delays or obstacles. “This leads to overcommitting to too many projects based on unrealistic expectations.”
A clear example of the fallacy in action is the deadline dramas that inevitably occur in the TV home building program, Grand Designs. “It is a great consumer example of how people expect their project to be on time and budget when the deadlines were unrealistic and the planning was wrong in the first place,” she says.
Planning to fail?
When it comes to the workplace, most financial advisers are similarly unrealistic about how long it will take to complete a given project, whether it is filling in the necessary paperwork to rebalance an investment portfolio or developing a marketing plan for the practice.
“A key problem is customer-facing work is easier to account for, whereas administration – such as chasing up emails or reading reports – is harder to quantify and is usually not built into your time expectations,” Williams notes.
“You also tend not to imagine not feeling energetic or wanting to do something, so your time estimate is thrown off track.”
This cognitive bias is exacerbated by the propensity of knowledge workers have to view everything as urgent. “Having too many number one priorities shows the planning fallacy at work and makes the idea of a top priority meaningless.”
It usually results in project deadlines being missed or quality being compromised. “The planning fallacy leads to poor prioritisation of personal productivity. You end up making concessions to get the project completed – usually in the level of quality.”
Overcoming our own optimism
So what’s the solution?
According to Williams, avoiding this trap requires you to be a bit sneaky with yourself. “We need to design our work plan to overcome our own natural foibles.”
A simple solution is to ensure you add extra time to your estimate of what you can do in a day, or how long a particular project will take. “When thinking about a project, you need to add 30% or a significant factor like that to account for the extra time or money that is really required to get it completed,” she suggests.
Overcoming our bias also means being willing not to say ‘yes’ to every new project or extra client that comes along.
“We fear saying ‘no’, as it is easy to see what you are turning away and hard to see the value of the opportunity of the time that could be spent elsewhere – maybe for an even better return. It is a tangible versus an intangible thing,” Williams explains.
Conquering the planning fallacy
To help overcome the tricks your mind plays on you when it comes to planning, here are some useful tips:
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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. People Patterns is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by People Patterns and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties