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Avoiding the Planning Fallacy: Improving Your Project Estimates

Why are project estimates so frequently incorrect? According to the planning fallacy, it’s simply second nature to misjudge your organization’s capabilities and resources.

On an individual level, most people will simply assume they will have more time later than they truly will. On an organizational level, an organization will often err on the side of underestimating the resources that are needed rather than overestimating. Optimistic, to be sure, but also potentially disastrous. To be successful, businesses need to avoid the planning fallacy and find a path towards accurate estimation.

When a Rough Estimate Isn’t “Good Enough”

Project estimates are intended to give an organization an idea of the resources and the time necessary for a project to be completed. Not only are these estimates used for internal team planning, but they are also used for costing and delivery schedules that are offered to clients. Poor estimates can lead to a cascade of negative effects:

  • Missed deadlines.
  • Inaccurate costing.
  • Unhappy clients.
  • Stressed employees.

When your organization doesn’t know how much time or energy a project will truly take, your organization may under bid on projects or be forced to under deliver.

The Problem of Planning

When planning work, businesses and individuals alike tend to plan based on the best possible scenario. It isn’t just optimistic; it makes sense on a logical level. Businesses are going to be planning assuming that nothing is going to go wrong. There won’t be delays or roadblocks, every employee will perform their best, and the resources that are required will be available.

In real life, systems go down, equipment needs to be repaired, employees fall behind on their work, and clarification has to be pursued from clients. In the real world, a project can rarely be completed perfectly, and that lack of perfection introduces complications and delays.

Time can also make it difficult to remember exactly how long a project took or what it took to complete it. Though you may have completed similar projects in the past, you may only be remembering what went right with the project rather than what went wrong. It’s likewise possible to start comparing apples to oranges; to compare a fairly complex, new project with a simpler, older project that your organization was already familiar with.

Throughout the planning phases, these fallacies are going to get in the way. You may not be aware of them, but they’re going to embed themselves at all levels of planning and projection. In order to defeat these misconceptions, you need to be mindful.

Improving Upon Your Project Estimation

Project estimation is a highly detailed discipline. From estimating how long it will take to fulfill supply requests to trying to determine the working speed of your employees, there are going to be a lot of things to consider. With that in mind, here are some of the most important project estimation best practices.

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  • Understand your workflow. Which of your tasks depends on other tasks? Are there areas in which you could encounter roadblocks? Understanding how each task is going to impact the timeliness of your project is the first step towards giving accurate estimates.
  • Base your estimates around your team. How long has it taken your team to complete these projects in the past? Who do you have working for you and what are their processes? Every team has both strengths and weaknesses; being realistic about your team’s capabilities is important in estimating realistic results.
  • Use the data you have. Look at data from prior, similar projects, in order to estimate how long this project will take. However, be careful: you can’t compare apples to oranges. Don’t look at the last project you completed in a given area, look at the first one. When dealing with new clients and new requests, you’re going to have longer learning and adaptation periods.
  • Start with the right information. You need as much information from the client as possible before you get started on your estimates; otherwise, both you and your client aren’t going to be on the same page. Collect information about exactly what your client’s specifications are and what their workflow is. How will the product be delivered? How will it be reviewed and approved?
  • Always add buffers. Always add some amount of time for there to be issues, roadblocks, and missed deadlines. If you come in earlier than the deadline, it’s even better; you want to under-promise and over-deliver. Of course, you also don’t want to have a timeline that is so lengthy that your client may be dissuaded.
  • Don’t forget acclimation time. Your team members may not be able to just jump into the project. They may also need to research, develop, and brainstorm. Don’t just factor in the labor involved in completing the project; keep in mind the fact that the project is likely to require some level of preparation.
  • Create additional contingencies. If there are areas of the project that could potentially be more complex or lengthier than they first seem, create contingency plans early on. Let your clients know that it is possible that the project could go on x days longer for the reasons of y. Your client will be more forgiving if they are aware.
  • Keep any third-party requirements in mind. If your project is requiring on third-party vendors, solutions, or materials, make sure you keep in mind the fact that these deliverables could be delayed. There should be plans for being able to move forward with project workflow independently.
  • Loop in your team. Your team is going to have a solid idea of what they can or can’t do, in addition to having advice for how long the project will take in their experience. Listen to your team: they often have significant combined experience in projects and key insights into estimation.

As you can see, there’s no singular way to improve your project estimates. Instead, you need to create a complete project estimation process that is data-focused and team-focused. By paring down to the most relevant data (and your own team’s unique experience and skills), you can better estimate your projects and reduce your overall project risk.

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