Public Projects and the Optimism Trap
Rosy, unrealistic scenarios just cause trouble down the road. It's far better for managers not to deceive their leaders -- or themselves.
On Dec. 31, 2007, the "Big Dig" in Boston was officially completed. The largest single highway project in the country's history, it was nine years late and had cost more than $14.6 billion, a stunning $12 billion over budget. And if that wasn't bad enough, the project was plagued by corruption, scheduling overruns, leaks, design flaws and the death of one motorist.
It's not that the project itself was unnecessary. On the contrary, for decades traffic to and from Boston's Logan Airport was terrible, and it was difficult for the most experienced Boston drivers to negotiate the tangled streets and constant congestion downtown. The project greatly reduced congestion, air pollution and confusion. But because of its well publicized problems, the Big Dig has become a symbol of big government at its worst -- unethical politicians, contractors who cheat, costly projects, shoddy quality. Whether it's highway projects, weapons systems for the Pentagon, or NASA's two shuttle disasters, the stories of botched government projects seem unending. Why is that?
One answer, of course, is that good news doesn't sell. When did you last read a front-page headline proclaiming, "New Government Office Building Opens on Time, Under Budget"? Many government projects are well designed and executed; we just don't hear about them. We can't change media that seem obsessed with bad news. But there is another factor involved with government projects gone wrong, a factor we can control. It has to do with unrealistic projections.
Let's go back to the Big Dig. Roger Warburton, associate professor of administrative sciences at Boston University, found that engineers knew that the original projections of $2 billion were far too low. In the late 1980s the engineers "already knew it was a $12 to $14 billion project," Warburton wrote. "They told everybody who would listen -- including the politicians -- and those people kept it quiet." Politicians worried that realistic estimates of the project's costs would have outraged the public and that the project would have been dropped. So the politicians essentially lied to the public.
In other cases, it's civil servants who mislead the politicos about their proposed projects. Competing with other program managers for scarce dollars, they exaggerate their project's likely benefits and guarantee that it will come in at a lowball cost. Sadly, many managers decide that they must play the same game.
And sometimes program managers deceive themselves. They're not lying; they're overly optimistic. They base their projections of costs and benefits on a best-case scenario -- if everything goes according to plan, if all of the contractors produce on time and on budget, if the early proof of concept proves successful and we're confident that our model will work ... and so on. I call this the "optimism trap." As the plaque in my mom's apartment used to read: "Man plans, and God laughs."
Fortunately, we can counteract the downsides of excessive optimism. Here are several ways to do so. Some of these ideas come from a 2003 Harvard Business Review article by Dan Lovallo and Daniel Kahneman, "Delusions of Success: How Optimism Undermines Executives' Decisions."
Take "the outside view." As Lovallo and Kahneman explain, the outside view requires a look at similar projects performed by other organizations. What were the initial projections? How long did it actually take? What was the final cost? What were the lessons learned? Taking the outside view helps us avoid the human tendency to see ourselves as better than others. It is especially helpful when starting an initiative that the agency has never tried before.
Bring in an expert who has no skin in the game. This is another way to take the outside view. A well respected expert who has knowledge of the kind of project you're planning can study your plans through a neutral lens. She has no incentive to make overly optimistic forecasts. She also can spot potential errors in your reasoning and assumptions you've made that aren't based on solid evidence.
Include various scenarios in your planning. Smart planners often develop best-case, worst-case and most-likely-case scenarios for their projects. They attach probabilities to each, based on current knowledge of the economy and interest rates, political trends, reputations of the contractors they rely on and the like. This kind of analysis can bolster a manager's chances of getting funding, and it demonstrates the manager's professionalism.
Develop a reputation for accuracy in making forecasts. Sadly, there's a risk to avoiding the optimism trap and providing accurate projections of cost, timeliness and benefits: You could lose out in the funding game to other program managers whose overly rosy estimates are convincing to decision-makers. What to do? One answer is to talk with decision-makers about your track record -- your projects that came in on budget, your programs that achieved their objectives. The message: Senior managers can have confidence in your proposals. And doing this can implicitly remind your leaders that others' proposals fell far short of their promises.
To be clear: Optimism is not a bad thing. It is sorely needed in today's political climate. Optimism helps us remain resilient during the inevitable ups and downs of life in the public fishbowl. But optimism, like all qualities, can be overdone. When planning and pitching a project, avoid the optimism trap and play for the long run. Your leaders will learn to trust you. And that trust is invaluable.