Is Everything Going According to Plan?

Quick Insight

Many people start the new year with resolutions. Some of these resolutions have already been rescheduled for the next year. For whatever reason, we gave up on our wishes.

Business leaders often make similar planning mistakes. We’re overconfident about the odds of success. We underestimate the costs and time required. We overestimate the benefits of our plan.

This is so common that it has a name: the planning fallacy. Ironically, it’s not caused by what we don’t know about the future but by what we ignore from the past.

We ignore how late and slow our past projects ran. We forget our initial estimates of past projects’ revenue and expenses. Those estimates were likely very wrong. And then there were those unexpected surprises.

Overcoming the planning fallacy requires taking a trip down memory lane. At the start of the budgeting and task planning for a project, remember past projects that were similar to the current project. Remind yourself of the delays, mistakes, and surprises. It's not usually fun, but it's very useful.

Your new project won't have all the same problems and outcomes as past ones. However, your project plan will be more realistic when you pause long enough to remember how many times things don’t go according to plan in the past.

I wish you the humility to plan for reality. I wish you will.

- Rob Stephens

Further Insight

CFO Perspective Resources

  • Video: How To Avoid Business Decision-Making Mistakes - I explain some common business decision-making mistakes and how to overcome them. Learn more about dozens of decision mistakes and how to avoid them in my behavioral finance program.
  • Course: ACE - Strategic Planning for Small Businesses - Small business strategic planning should quickly lead you from defining where you are going to deciding how to get there. Getting there takes a well-built strategy and implementation plan. Get planning and management tools with the basics of how to use them.
  • Course: Behavioral Finance - Overcome your destructive financial impulses by understanding common thinking mistakes. With my Behavioral Finance course, you can avoid these costly financial decision-making mistakes. The course will help you to learn science-backed ideas to make better financial decisions.

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