There is a massive list of soft management biases that afflict the human brain and our consequential decision making and behavior, but we are going to explain a couple of the most important biases, especially when it comes to strategic planning, which we have experienced ourselves, and show you how to deal with them in practice

FOMO @ C-level

This sounds like a prescription on a doctor’s recipe and it is indeed a bit like a disease, a typical one at senior business levels. When performing the portfolio selection, we are confronted with the Fear of Missing Out (FOMO). It is one of the root causes of Long-Term capacity planning in which people are often completely overbooked.

We may already have heard this term FOMO in social behavior of people, resulting in an increasing addiction to social media. FOMO perpetuates the fear of having made the wrong decision on how to spend your limited time, since one "can imagine how things could be different".

In business environments, FOMO works just the same. We prefer to add more projects to our portfolio, because this way we have the feeling that we run less risk of missing out on opportunities. Another term, related to the concept is Fear of Missed Opportunities, explained by the prospect theory of Daniel Kahneman** and Amos Tversky. When people have to make a decision, they take more risk when faced with a choice which may lead to losses, compared to making decisions, faced with an opportunity. Apparently, the older parts of our brain do not "see" the difference between a thought about a situation (the plan) and the situation itself. Especially when the thought is negative, (like a missed opportunity) our brain goes into the alarm phase and gives alarming emotions (fighting, freezing) and a high stress level as messages.

Thinking about what we all need, want, and might not get, causes our brain to create stress hormones, which puts our emotional state in danger and hunting mode and therefore Fast thinking. “Get going! Do, do, do! Action!” While knowing that ‘Slow Thinking’ is needed when creating a strategic portfolio plan, this reflective thinking switches off and our intuitive Fast Thinking mode kicks in. The result? Let’s add that project!

Learn more about the Fast & Slow Thinking concepts in our previous blog

How to handle this behavioristic bias?

Ensuring enough capacity availability, needs to be managed at this moment, because it’s the main factor impacting our chances for success. So, think slow! If you want to increase the chance of realizing your strategic portfolio plan, you need to practice the ‘Art of saying no’. Only pick the projects that you definitely must realize to obtain our strategic goals as an organization. A highly restricted strategic portfolio plan reinforces focus, AND it significantly increases your chance for faster and successful project delivery.

“It is only human to consistently overestimate our chances of success”

If people Think Fast, they show a consistent behavior of overconfidence when assessing their chances to successfully realize opportunities. How so? They cannot take the uncertain or ‘unknown’ risks into account during the selection process. But portfolio selection is all about risks (next to opportunities of course), most of which we cannot even be aware of yet at that moment in time.

Some organizations overreach and take on too many quests at once. They overestimate their leadership capabilities in various areas, as well as underestimate the additional effort it takes to make a change and learn new ways of working to such extend that it’s a routine and therefore can be managed again in the RUN organization. The result? “Yeah, that added project is feasible, no doubt!”

How to handle this behavioristic bias?

A way for preventing underestimation of effort is by consistently comparing our initial estimation at the start of strategic initiatives and comparing this with the actuals. This can give us a trustworthy indication about the level of ‘known unknown’ in these initiatives and the associated capacity needed for that, which can be planned as contingency. Also, a conscious complexity assessment at the start of each initiative will help, to define how much contingency will likely be needed.

“When uncertain? Let us add more details!”

In uncertain situations, the typical (Fast Thinking) response that people show, is to clutch at straws to regain their certainty, because the feeling of uncertainty leads to anxiety. However, John F. Kennedy already said, ‘There is nothing as certain and unchanging as uncertainty and change.’ Especially at the level of strategic planning we need to let go of our need for control and certainty, because it will never be found.

How to handle this behavioristic bias?

By first acknowledging that there is uncertainty and that it is OK. Adding more details to gain control, will result in growing complexity and leading our attention span forced away from strategic goal-oriented decision making. Maintaining a certain level of simplicity is therefore key, with an accepted level of uncertainty. This we you prevent yourself getting lost in details!

Win or lose? The repeated prisoner’s dilemma

Strategic decision making needs to put the organization’s strategic objectives first. However, it occurs that participants in these debates see it more as a game which only has winners and losers. In the end, they often look at it from the perspective of their own (departmental) interests with a high risk of creating an atmosphere of ‘Winning is not everything, it is the only thing”.

How to handle this behavioristic bias?

The prisoner’s dilemma helps us understand why the ‘We’-perspective is so important. Instead of making it a winning or losing game, it is key to cooperate and communicate with each other, instead of going for a quick win. Especially because you should anticipate on the fact that these situations will occur more often with the same parties (= repeated prisoner’s dilemma).

The strategic leadership team must set an example here for the organization, by demonstrating the importance of teamwork, trust, commitment to others, respect and learning to play by the rules. If winning is everything, people will cheat, and this behavior will be copied on all organizational levels, and the value of the integrated resource management exercise will evaporate.

On the other hand, we should not deny the negative aspects when defining a Long-Term capacity planning. Strategic decisions will have a negative impact on certain components and their representatives: departments may lose people, budgets, power, … So, don’t deny its existence and clearly communicate about this and the consequences. This will reduce anxiety associated with these negative outcomes (=> Fast Thinking again), prevents erroneous admission of guilt or culpability, and allows for a more rational approach (= Slow thinking) based on mutual trust in a respectful relationship.

What did we learn?

  • When planning the portfolio, ‘FOMO’ is a key threat, resulting in an already overloaded portfolio capacity plan from day one.
  • Overestimating the organization’s capabilities leads to underestimating the real effort, thus capacity, necessary for realizing change.

  • Getting experts aligned with this approach often means a change in their mindset: in general experts like getting the details right and creating the perfect model while the essence of this exercise is working with high-level estimates for at least identifying the structural and big issues.
  • Capacity planning decisions lead to two winners: the overall organization’s performance, plus some organizational components. However, there are also organizational components which lose (budget, people, power, …). These should be managed.

What is next?

Our following blog will discuss resource management in Agile environments. Stay tuned!


Sources

* 2004 – Patrick McGinnis; The Harbus; FOMO
** 2011 – Daniel Kahneman; Thinking, Fast and Slow

Anton Zandhuis

Anton Zandhuis
Sr. Consultant NL & PM trainer

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