Management Excellence Toolkit-Part 4: Improve Your Estimating and Forecasting Effectiveness
Filed under: "To Do" List, Decision-Making, Leadership, Performance, Project Management
Note from Art: Your decisions define you as a leader and a manager, yet we spend very little time in our busy lives finding ways to improve our abilities in this area. This Management Excellence Toolkit Series will help you recognize the challenges and pitfalls of individual and group decision-making and offer ideas on improving performance for you and your co-workers.
Part 1 of this series emphasized the importance of developing, updating and referencing a Decision Journal. Part 2, focused on understanding how we make decisions and how various traps and biases often derail us. In Part 3, we tackled the power and importance of framing situations properly to improve your odds of success. Part 4 focuses on improving estimating and forecasting accuracy by strengthening management and leadership practices.
Let’s kick this one off with the conclusion: poor management and leadership practices make a tough job tougher by introducing pressures and biases that directly impact estimating and forecasting activities.
If these environmentally imposed biases weren’t enough, human nature gets a vote as well. Studies in the field of decision-making have shown, “we are systematically over-confident in our own abilities.”
Consider the unscientific annual BusinessWeek poll results: “90% of managers believe they are in the top 10% of all performers in their firm.”
Another annual survey is taken for incoming freshmen at Harvard, where 75% of the students believe they will end up in the top 15% of their class.
I’m all for optimism. It’s most definitely a beneficial human characteristic and possibly a good defense mechanism for the trials and tribulations of survival. However, it can lead us astray, sometimes in life or death situations.
The Thin Air of Life or Death Decisions:
Professor Michael Roberto in his excellent material on critical decision making uses the Everest tragedies of 1996 to showcase a myriad of decision-making errors that started with an over-confidence bias and literally cascaded downhill into a disaster from there. (Roberto’s content in this segment is based on Jon Krakauer’s article/book, Into Thin Air.)
As a backdrop, several of the expedition leaders in 1996 had only experienced the relatively calm conditions of the past few years on Everest. The leaders had not experienced the worst of the worst on Everest, and we’re lulled into a false sense of security by these conditions and their own recent successes in reaching the summit (a recency effect bias!).
One of the expedition leaders, Scott Fischer, was quoted as saying, “We’ve got the Big E completely figured out, we’ve got it totally wired. These days, I’m telling you, we’ve built a yellow brick road to the summit.”
Another leader, Rob Hall, responding to a worried climber, offered: “It’s worked 39 times so far, pal, and a few of the blokes who summitted with me were nearly as pathetic as you.”
Both Fischer and Hall along with six of their expedition members perished under brutal conditions made worse by a nearly unbelievable string of bad decisions, not the least of which was over-confidence.
Our Own Mountains to Climb:
While most of us are not planning on climbing Everest anytime soon, we have our own metaphorical mountains to conquer in the form of projects, budgets, campaigns and business plans. And unfortunately, we’re every bit as susceptible to the many decision-making traps, including estimating and forecasting errors, that can lead to disaster in life or death circumstances.
Consider:
If the management culture is one that values strict adherence to schedules and reinforces this perspective by punishing those who miss schedules, people and teams naturally add significant padding to their estimates.
For complex projects involving multiple work groups, this padding practice across all of the teams adds up to significantly longer project estimates. And let’s face it, work expands to fill the time allocated for it. The cost, time-to-market (or implementation) implications are huge!
Alternatively, I’ve observed over-zealous executive teams declare a time-to-market mandate without consideration of the project complexities. The pressure on the project teams results in estimates executives “want to hear,” but that have no basis in the reality of the work. As time and cost estimates are missed, the environment tends to deteriorate into one of finger-pointing, excuse-making and general dysfunction
Fear Impacts Estimates:
While fear pushes project estimates out into the future, this same environment likely results in ultra-conservative sales forecasts on one hand and unrealistic cost estimates on the other.
For anyone accountable for revenue and/or expense numbers, you tend to take your cue on these numbers from environmental pressures. I’ve observed managers who felt pressure to inflate revenue forecasts out of fear of being viewed as naysayers and poor team players, while at the same time, deflate expense numbers out of fear of being viewed as not having control over costs.
Fear in the workplace creates estimating and forecasting gamesmanship.
Prior Performance May Be a Poor Predictor:
Much like the recency effect displayed by the Everest expedition leaders, we open additional trap doors for our estimating and forecasting approaches by relying too much on prior performance in spite of changing conditions. The past is interesting, but in times of significant change or distress, it is a lousy predictor of future performance.
Data, Bloody Data:
We live in data-filled world and it’s common to hear management talk about the importance of making data-driven decisions. I’m all for it. After all, that’s why your firm spent countless dollars and suffered through nearly endless schedule delays and cost over-runs to implement the latest business intelligence tools. However, even the best system and the cleanest data cannot compensate for our propensity as humans to seek out information that confirms our opinion and discount or discard information that doesn’t. This confirming evidence trap is a frequent contributor to estimating and forecasting errors.
Six Ideas for Minimizing Estimating and Forecasting Errors:
1. Commit to improving management practices that impact estimating. If you are struggling to gain reliable project or business estimates, chances are there are systemic problems created by poor management practices. To the extent possible, you need to cultivate an estimating and forecasting culture free from fear of reprisal and low in gamesmanship. This includes eliminating practices that encourage over-confidence or extreme prudence. It also includes minimizing fear as a factor that unduly influences estimate development. The best project managers and project sponsors work hard to create a safe environment for estimate development, often serving as buffers between their working teams and the pressures coming from top management.
2. Beware the group effect. Groups tend to be over-confident, and have been shown to take larger risks and offer more aggressive estimates than individuals working on their own.
3. Seek broader data sets and encourage the introduction of information that challenges existing confirming evidence.
4. Ask for objective, 3rd party review of estimates and the assumptions underlying the estimates. High performance project teams use this approach as a safety check against groupthink and over-confidence or over-prudence. A knowledgeable but uninvolved third party can ask tough questions, challenge assumptions and indicate when estimates just don’t make sense.
5. Build time for learning into estimating activities. Recognize the weakness of estimating new projects or programs based on prior results. And if you are doing something “new” and outside of the experience band of your firm, it’s critical to build learning time into the process.
6. Commit to monitoring estimating performance over a period of time. Build in the process of documenting estimate assumptions, reviewing results and identifying what worked and what failed. For many teams and firms, this is a distinct process change that requires a genuine interest in improving estimating performance.
The Bottom-Line for Now:
Just about every firm and team struggles somewhere with estimating and forecasting. The root causes of these problems are found both in human nature…our propensity towards over-confidence, and in our managerial practices and the impact of these practices on the decision-making environment. Forewarned is forearmed on the human nature issue. As for the management practices, these truly are controllable by you.
Management Excellence Toolkit-Part 3: How to Frame Your Decisions for Success
Filed under: Decision-Making, Leadership, Performance, Professional Growth
Note from Art: Your decisions define you as a leader and a manager, yet we spend very little time in our busy lives finding ways to improve our abilities in this area. This Management Excellence Toolkit Series will help you recognize the challenges and pitfalls of individual and group decision-making and offer ideas on improving performance for you and your co-workers.
Part 1 of this series emphasized the importance of developing, updating and referencing a Decision Journal as part of your program to improve your decision-making effectiveness. In Part 2, we focused on understanding how we make decisions and how various traps and biases often derail us. In Part 3, we tackle the power and importance of framing situations properly to improve your odds of success.
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We tend to view the world as individuals and organizations through frames, nicely described by Professor Michael Roberto, as:
“Mental models that we use to simplify our understanding of the complex world around us, to help us make sense of it. They involve our assumptions, often taken for granted about how things work.”
And
“How we frame a problem often shapes the solution at which we arrive.”
A Few Really Big Examples:
-The Cold War Overhang: Up until the moment of the terrorist attacks on that awful September day in 2001, the primary focus for defense planning purposes of the U.S. Government was the threat posed by other nation-states. This thinking was a carry over from the Cold War, which of course had ended more than a decade earlier.
-Can you say Myopic? Analysis of General Motors documentation from the early 1970’s indicated the following:
- The U.S. market is too isolated to be impacted by foreign automobile manufacturers.
- Fuel will be plentiful and inexpensive for years to come.
- Americans don’t care about quality. They want style and will upgrade every 18 months to 2 years.
- We must promote our managers from within to secure our culture.
- We’re in the business of making money, not cars.
And one of my famous quotes from GM: “We don’t need to make better cars, we need better customers.”
As the world changed, GM’s rigid view on the world made it nearly impossible for management to properly interpret much less respond to changing conditions.
And:
-3rd Place: Starbucks has consistently thought of itself as, The 3rd Place, right after home and work.
3rd Place thinking guided the development of the in-store experience where people felt welcomed and were encouraged to linger and relax. As the chain lost focus on this frame and flooded the stores with new programs and products at a rapid clip, the stores began to lose this atmosphere and customers voted with their wallets and their feet. A return to the original “3rd Place” formula was one part of the turnaround that Howard Schultz and team engineered upon Howard’s return to the CEO role a few years ago.
What the Studies Show:
Researchers have shown that our frame drives our decisions. A situation framed as a negative (a loss, a dire problem or a big risk) tends to evoke riskier responses than a situation framed as a positive.
A number of famous studies depict business or medical situations with identical outcomes (i.e. identical expected $ values or human outcomes) presented as both a negative and a positive. Our responses reinforce the perspective that we take more chances when faced with a negative frame and we’ll act more conservatively when faced with a positive frame.
Leaders & Teams: Your Frames Drive Decisions
We’re constantly constructing and acting upon the frames that define our view to the world, and of course, we’re making decisions based on these frames. And while framing is essential in our pursuit to understand and cope in the world, it also opens us up to host of potential decision-making pitfalls.
As a leader, your view to the world (your frame) has a powerful influence on your team members. To the extent they understand your frame, it becomes their frame, and they make decisions and priority calls accordingly. It works great if your frame is fairly neutral or, if your view is particularly accurate. However, paint a picture of an issue or situation as particularly positive or negative, or force your own potentially biased assumptions on a frame, and you create a cascading set of decision-making nightmares.
Groups form frames based on the individual views of the members and their ability to roll those views and assumptions into some form of “common view.” Of course, personal biases, politics, egos, power and other socialization issues, along with diversity of experience, access to data and many others all impact and potentially skew group frames.
5 Best Practices for Building Effective Decision-Making Frames:
1. Practice Awareness and Vigilance: There are no cures for Decision-Making traps, but as the saying goes, forewarned is forearmed. Be conscious of how you and your colleagues and groups are framing issues and be aware of how these frames may skew idea generation and decisions.
2. Create Multiple Frames for Vexing Problems: For example, a firm’s leaders viewing social networking as a waste of time might cultivate a highly restrictive policy, and minimize or eliminate any experimentation with these tools. It invites a “How can we restrict?” response.
An alternative frame of: “this is a big trend, how can we safely use social networking tools to better engage with our customers,” will invoke a completely different set of responses.
3. Frame issues as Neutral. Instead of introducing the biases observed in the studies towards risk-taking or risk-avoiding behavior based on whether a situation is framed as a negative or a positive, be careful to frame your situation as neutral. For example, “our competitor introduced a product at a brand new price and feature point,” versus a “We’re going to get hammered this quarter by our competitor’s new product.” The neutral wording will facilitate exploration of both opportunities (a rising tide and new market segment…along with a heavy learning curve for competitors), while the negative wording may invoke a crisis mentality and response.
4. Boss Hold Back: Your framing of a situation will guide everyone else. If you are looking for creative ideas, don’t communicate your frame in advance.
5. Always Understand How Others are Framing an Issue: Ask questions, clarify assumptions and if your co-workers or team members are falling into some of the framing traps described above, suggest neutral approaches, multiple frames and draw in outside perspectives.
The Bottom-Line for Now:
The world is tough enough without fighting our own human tendencies to interject noise into the environment. You’ve been forewarned, and now you are forearmed. Frame your situations like a management craftsperson. Measure twice, cut once.
Management Excellence Toolkit: Part 1-Create a Decision Journal
Filed under: "To Do" List, Career, Decision-Making, Leadership, Professional Growth
Note from Art: Your decisions define you as a leader and a manager, yet we spend very little time in our busy lives finding ways to improve our abilities in this area. This Management Excellence Toolkit Series will help you recognize the challenges and pitfalls of individual and group decision-making and offer ideas on improving performance for you and your co-workers.
Consider:
“Every decision is a risk-taking judgment.” –Peter Drucker
“Making decisions is the most important job of any executive. It’s also the toughest and the riskiest.” –Hammond, Keeney and Raifa in HBR, The Hidden Traps in Decision Making.
How many decisions do you make in a typical week? If you’re like most managers, the answer is: “a bunch.”
Many of our decisions are fairly straightforward. We have policies, procedures and precedent, and the decisions are effectively programmed. No sweat, limited risk and in fact, it’s easy to train others to make these decisions. It’s when we move outside of the programmed decisions that things get interesting.
The Sticky Decisions that Define Our Careers:
Consider the issue of choosing between multiple candidates for a job or, choosing which projects to invest in and which to place on the shelf.
Compared to the programmed decisions, the way forward for these key decisions is clouded by all sorts of factors: political and business risks, fuzzy information, evaluation errors, biases, opinions, agendas and good old-fashioned ambiguity.
To make matters worse, the effectiveness of the decision is often not visible for some time and even that may prove hard to measure based on the effectiveness of the actions taken to implement the decision.
You Must Develop as an Effective Decision Maker to Climb the Ladder:
As you climb the ladder, the decisions become more ambiguous, more complex and a whole heck of a lot riskier. Of course, you won’t reach the next rung on the ladder unless those who must decide to trust you, develop confidence in your ability to navigate those issues.
Given both the import of decision making on your career, your firm and even your life, it’s important to build decision-making muscle by scrutinizing your processes, your practices and your outcomes. A great place to start is to follow in the footsteps of Da Vinci, Franklin, Jefferson and Drucker (just to name a few) and start a Decision Journal.
Start the Process of Improving Your Decision Making Muscle by Creating a Decision Journal:
First, I’ll tackle the “this is corny” issue. Get over it. Our memories are ridiculously imperfect (a decision making trap!) and it’s critical to capture some key points at the time you make the decision, to be able to effectively scrutinize the effectiveness of the decision some time in the future. Oh, and the list of Hall of Fame Decision Journal Keepers above isn’t too shabby.
Note: this is useful for teams as well, and in project management circles, the use of a decision-log is a good practice.
At Least 12 Items to Capture in Your Decision Journal:
1. Decisions that are more strategic in nature, including hiring, promotions, project choices, investments, competitive moves and anything beyond the programmed level described above.
2. A clear statement of the issue and circumstances surrounding the issue. A common mistake for individuals and teams occurs in how the issue is framed, and we will want to revisit the statement and circumstances down the road when outcomes become clear.
3. The perceived risks you assessed as part of the decision making process.
4. The information you referenced to support the process.
5. The individuals (and your relationship to them) you called upon for input.
6. The individuals involved in directly making the decision and their opinions.
7. Emotional factors and other pressures (e.g. time) swirling around the issue.
8. The decision choices and how you evaluated them, including your assumptions.
9. A description of the planned process for moving from decision to implementation.
10 The expected outcome of the decision. What will determine success or failure?
11. How you will monitor the results of the decision.
12. When you expect to reasonably be able to assess the outcome.
And don’t forget to leave a big space for results.
The Bottom-Line for Now:
This might seem like hard work. Well, it is, and there’s some time involved in both recording the information above and importantly, looping back to describe outcomes and assess what you did right or wrong. However, if making good decisions is as important as I described it above (and it is!), how can you afford to not take the time?
How you record or capture is less important than the act of doing it, as long as the information is organized and accessible. We live in a world filled with productivity apps. From my favorite…a Moleskin notebook to various digital tools, including creating a document template to using voice recordings to tools like Evernote, there’s little excuse other than laziness for not doing this.
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Next Up in this Weekly Series: We’ll begin our exploration of common decision making pitfalls and traps and how to minimize or avoid them. Your assignment in the interim is to start your Decision Journal.
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About Art Petty: Art coaches high potential professionals and develops and delivers workshops and programs on leadership, professional development and building high performance teams. Contact Art to discuss your needs for a program or keynote.
And whether you are an experienced leader seeking to revitalize and develop as a professional, or, a new leader looking for guidance on starting up successfully, check out Art’s book with Rich Petro, Practical Lessons in Leadership at Amazon.com.
Leadership Lessons from the Road
Filed under: Career, Decision-Making, Leadership, Project Management
One of the great things about leading workshops with talented professionals is how much I learn about the very real challenges that people face in trying to get work done inside their organizations.
I had the great privilege of facilitating a workshop called Leader Mastery for Technical Professionals at The Data Warehouse Institute’s World Conference in Las Vegas this past week. Kudos to the team at TDWI for producing an outstanding educational conference and for their usual flawless arrangements.
A special thanks to the group of great professionals that had the courage at a technically focused conference to attend a day-long session on a topic that would have many heading in the opposite direction. This group was engaged, hungry for knowledge to improve their performance and excited about sharing ideas, challenges and best practices with each other. The pleasure was all mine!
After spending a day together helping this group develop a better context for what it means to lead and the principles and practices that will support their development as effective leaders, a number of themes about their challenges emerged from the discussions. These include:
- Gaining more context for their firm’s strategies as a means of better linking team goals and priorities to the organization’s priorities.
- Dealing with the very real challenges of building high performance teams across cultures, geographies and time-zones.
- Leading teams that increasingly include external contractors that don’t necessarily have the same level of commitment and share the same level of accountability.
- Improving mastery of soft skills that promote performance including: coaching and feedback, talent development and decision-making.
- Gaining better support from HR to facilitate talent development and team strengthening versus the still all-too-common policing that seems to emanate from this functional area.
- Breaking the vicious cycle of promoting the best technical contributors into a nightmare as they try and build bench strength.
- Finding ways to work effectively and collaboratively in matrix environments.
My message in these sessions is always that effective leadership and effective leadership development practices serve as the foundation of organizational performance excellence. What I hear consistently as I run these programs as well as when I engage with MBA students is an intense desire on the part of the individuals to contribute at a higher level.
I also hear significant frustration at the ridiculous cultural, managerial and procedural impediments that they face when trying to innovate and drive change. These people want to create and belong to high performance teams and organizations. Most confess that all too often, this is not the case.
My bottom-line for this quick post from the road is for senior leadership to focus on breaking down barriers that inhibit performance and seek ways to set your talent free.
Now more than ever, you and your organization require all hands to be contributing, innovating and seeking ways to create value. It’s time to get out of your executive meetings, clear your agendas, start asking questions, listen carefully and then do something. You are wasting remarkable opportunities to improve, and that’s not a winning approach in this market.
The Leader’s Mid-Week Survival Guide
Filed under: "To Do" List, Decision-Making, Leadership
It’s Wednesday. How are you doing on your leadership priorities this week?
If you are starting to feel the week slip away from you, here’s a blunt reminder and a few tips to focus on your true priorities. The week’s not over yet…and victory is still within your reach. It’s time to fight off the fires and push away from the urgent-unimportant.
Are you make one on one time for your associates?
Adjust the calendar to fit in some one on one and team coaching time. If there is no give in the middle, look to the beginning and end. Meet your team member for coffee (you buy) or order in lunch (you still buy) and provide the focused coaching and feedback that people need to perform at a high level.
Are you making the decisions that free your colleagues to move forward?
Every decision you don’t make or that you forestall has a ripple effect throughout your team. Try pushing decision-making downstream, or face up to the fact that for some issues, the buck stops with you. Make the call.
Is your concern over risk affecting the speed of your decision-making?
Check out the timeless advice that I received from a seminar participant in Decision-Making and the Three Rules of Risk Management.
Is fear crippling your team and keeping people from focusing on creating value and solving problems?
This is a common problem in this economy. As Herbert said, “Fear is the Mind Killer.” Spend 7 minutes and listen to my podcast on Dealing with Fear in the Workplace, and then put the suggestions into play.
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Here’s the blunt part. GET MOVING!
Oh, and have a great and productive rest of the week. -Art
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