Wednesday, 02 April 2014 00:00

What Every Leader Needs to Know about Delusional Optimism

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richardson Apr2Leadership is an ability constantly pursued at all organizational levels and by all generational cohorts. Generational cohort refers to the era with which each of us identifies, and it is usually determined by birth year. For example, Baby Boomers were typically born between 1946 and 1964, give or take a few years. Generation X was usually between 1964 and 1979. Millennials were born between 1980 and 2000 and so on…. I define leadership as authentic influence that creates value. In my coaching practice, where I work with a full spectrum of generational cohorts and organizational levels, there is one common, somewhat visible, and definitely debilitating leadership behavior—delusional optimism.

Let's unpack this phrase by first examining the meaning of delusional. It means maintaining fixed false beliefs even when confronted by facts. The second component, optimism, is the tendency to fixate on the best possible outcome or to dwell on the most hopeful aspects of a situation. When you put these two together, you have people with a fixed false belief that the optimistic or best possible outcome will be achieved despite facts to the contrary.

Our evolutionary transformation to the top of the animal food chain, endowed us all with an ingenious focusing system called the reticular activating system (RAS). This survival system is a portal through which nearly all information enters the brain. It responds to your name, anything threatening your survival, and information you might need immediately. It responds to novelty as well, which ties to this topic. As a leader, once you become aware of the natural human tendency for delusional optimism, your RAS will begin to point it out more regularly. You witness this experience when you buy a new white car. For the first few days of driving your new white car, your RAS dutifully notices and brings every white car in your path to your awareness.

Your RAS is a great leadership tool. It is your radar detector for important threats or opportunities that typically might now be in your field of awareness. Delusional optimism is rampant in business cases, especially on the benefits projections part of the ledger. It is the number one cause of project overruns in either time or cost. After reading this article, your RAS will start to pick up the delusional optimism often built into work estimates (both time and costs) for clients. Your RAS will also begin to pick up delusional optimism (sometimes innocent, but sometimes not) baked in client expectations.

As an effective leader, you authentically influence your team members and your clients to confront the reality of human nature that is heavily impacted, but cognitive biases and ways of thinking that, if left unexplored, have disastrous consequences on value creation and value delivery, the purposes of leadership.

A cognitive bias is a mistake in reasoning, evaluating, or remembering often occurring because of holding on to one’s preferences and beliefs despite contrary information. Biases conspire to breathe life into delusional optimism, despite your age, position, or level of expertise. While delusional optimism is fueled by many different biases, five are most relevant to this article.

The first is the optimism bias that causes a leader to believe that he or she is less at risk of experiencing a negative event than others are. For example, your new client has passionately described the criticality of delivering a new comprehensive report within three business days. Your desire to please the client and demonstrate you are worthy of their trust and confidence clouds your judgment about the risks inherent in such a tight deadline. You enthusiastically guarantee the report will be in their hands, as requested.

This bias is probably the purest form of delusional optimism, and its antidote is behavior-based, that is, develop the habit of confronting reality and acting on it. Although the habit part is straightforward, the implicit natural consequence will be the necessity of a crucial or courageous conversation either with you or with others. The book, Crucial Conversations: Tools for Talking When Stakes Are High by Patterson, Grenny, McMillan, and Switzler, will be very helpful in supporting the natural consequences of confronting reality.

The second is the confirmation or expectation bias that leads a manager to select evidence that confirms existing beliefs and assumptions and to discount or ignore evidence that conflicts with these beliefs. For example, benefits forecasted in a business case proposal for a key corporate initiative does not include contrary statistical industry evidence about realization potential. Instead, the benefits projections are validated by senior executive interviews and experience. Sometimes, this bias is also called the “illusion of validity,” and it kills a person’s personal brand. The antidote to this bias is the “ladder of inference” tool conceived by Chris Argyris, an organizational psychologist, as a disciplined approach to not jumping to conclusions.

The third is the availability bias that causes a financial analyst to consider the information most easily available as the most relevant and does not consider the information that might be more difficult to obtain. For example, the benefits forecast provided in a client business case is taken at face value, based on the client’s historical numbers and perspective. Because the idea is new to Canada and the appropriate numbers from the United States are not readily available in Canada, the benefits forecast was not tested further. As a result, the analyst did not realize that the Canadian base benefit projections were grossly exaggerated compared with the United States experience. The antidote to this bias is an evidence-based decision-making approach that places a high value on identifying the complete array of relevant information, despite ease of access.

The fourth is the group think bias, which is the tendency to confuse truth with assumptions. This tendency is reinforced when most of those involved share the same set of beliefs and values. This drives a team to be overly confident with their forecasts or expectations and ignore information to the contrary. For example, a group of senior executives unanimously agrees that the ACME project can be done by yearend despite the fact that this type of project has never been done this fast in the history of the company, and the program manager is new to the company. The antidote to this bias is to always appoint a “devil’s advocate” within a team so at least one person looks at more than one perspective.

The fifth is the anchoring and adjustment bias that influences a team to “anchor on” and give disproportionate weight to the first estimate and then insufficiently adjust to reflect the specific circumstances. For example, the project team presented an overly optimistic work plan to an Executive Steering Committee in support of the critical business case proposal. The executive team, having been burnt in the past with missed dates and budgets, arbitrarily agreed to add a 10% contingency to the presented estimates to mitigate any exposure. Unfortunately, they calculated 10 % of a woefully optimistic date and cost parameters, which in the end proved vastly underestimated. They deluded themselves by believing the presented estimate was a good place to start. Antidote to this bias is a simple ABCD approach to estimating: A = assumptions used; B = basis—guess, analogy, parameter, and so on; C = contingency required, considering risk factors; D = documented and shared.

You now know what the RAS is, how it works, and how it can be a great leadership tool in ferretting out the ever-challenging tendency to be delusionally optimistic when setting dates, estimating costs, and generally making commitments. You now know about five cognitive biases, including their antidotes that underpin the delusional optimism tendency.

Think of this article as planting the seed that delusional optimism is deadly for your career, your personal brand, and your organization. Whether this seed takes hold is up to you!

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Bill Richardson

Bill Richardson is an international management consultant and trainer specializing in helping individuals, teams, and organizations implement change as a process, not an event. This simple but powerful principle, which he calls Leading Change that Works, is the centerpiece for his consulting and training business. He can be counted on to candidly share his knowledge, global perspective, and objective insights about how to thrive in today’s fast-paced, turbulent, but opportunity-rich, environment.

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