5 things project managers could learn from Behavioural Economics

Planning and process are great, but so often digital projects fall behind or go over scope or over budget.  It doesn’t matter how experienced team members are, how well project managers plan, things can always slip behind.

At The Crocodile our Project and Account Managers use wash ups and evidence-based planning to work out scales and timings plans, but bias (or optimism) tempers previous evidence: “we can do it better this time”.

By nature quite rational characters, PMs and AMs often don’t account for the irrationality of team members, and the ever-present “unforeseen circumstances”.

Illusion of validity

We consistently overestimate our ability to interpret and predict outcomes based on our previous experience – essentially, we’re overconfident. If this happens at every level of a project – planning/scoping/design/build/QA etc – it accumulates a potentially huge amount of error in time/cost estimates.

At The Crocodile we try to remember that each team member will most likely be underestimating the time and cost needs of their area, and factor that into each project step.

Planning fallacy

Daniel Kahneman, the godfather of behavioural economics, says, “the existence of a plan tends to induce overconfidence”.  When planning the steps that are required to complete a project, we tend to foresee that they will all run typically, and therefore structures times and costs accordingly.

But what if one step behaves atypically? Or two?

The longer and more involved the process, the greater the probability that something will behave atypically. And that probability increases at a greater rate than our intuition would predict.

So plan in contingency time, and then double it. We try to make this explicit to our clients, as well as the additional budget that may be needed – they are just as susceptible to the “but we have a plan” mind set as we are.

Confirmation bias

You’ve made your project plan; you think you’ve factored in the planning fallacy; you look back at the evidence of past projects to support your projections – but you will likely be working with with evidence that mostly supports your already finely tuned scope and estimate and will minimise the importance of evidence to the contrary.

We encourage team members with different perspectives and from different disciplines to look at our timings and scope of work. We want to have a wider range of views from people who will be better placed to challenge our biases.


Generally Project Managers assume that we are rational beings, and our team members will act accordingly. But that doesn’t take into account procrastination, making tea, creative blocks, sick children, toasters setting off the office fire alarm, and of emergency change requests late in the day…

All of these things happen in some shape or form through the project lifecycle, and we try to take that into account when planning project timings. At every step/project phase we plan in some buffer time accordingly – and likely twice as much overflow as we think we might need.

Process/positive reinforcement

Positive reinforcement about abilities increases performance, so it’s better to plan for short bursts of activity with regular reviews. We respond better to outcomes today than those we know are coming tomorrow. This could be one of the reasons behind the success of Agile development methodology.

At The Crocodile our Project Managers lay out regular, often daily, milestones and reviews at the start of the project, making sure they are clearly communicated to the team so they know what to expect and what to work towards.

But even armed with this awareness of behavioural tendencies we’re still likely to fall prey to them.

Communication and constantly challenging assertions are the best way to allow for bias. Most of all we should keep process flexible to fit the team and the circumstances rather than trying to change the team to fit the process.

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