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Why Your Estimates Are Always Wrong

        posted by , February 16, 2013

If your estimates are as accurate as a baby throwing darts, you're not alone.

Project and task estimates tend to be off. In fact, bad estimates are one of the most persistent and destructive problems facing managers everywhere.

Bad estimates can destroy your plans, schedules, budget and credibility. Many managers try to get around the problem by padding estimates. However, a bad estimate that's been padded is still a bad estimate. High estimates can lead to low productivity and low stakeholder confidence. Low estimates lead to cost and schedule overruns.

So why do estimates tend to be so inaccurate?

The answer lies in social psychology. The following 22 behavioral factors contribute to bad estimates.

One of the important differences between a mediocre manager and a great manager is a working knowledge of behavioral psychology and how it applies to business scenarios.

By understanding the behavioral basis for bad estimates, you can dramatically improve your accuracy.

1. Planning fallacy

The tendency to underestimate tasks.

2. Suggestibility

People change their answers based on how a question is asked. Managers can inadvertently influence estimates with questions such as "this is an easy task right?".

3. Reactance

The tendency to do the opposite of what someone wants you to do if they are trying to restrict your freedom. If you push a team to provide a low estimate it may backfire.

4. Bandwagon Effect

If the entire team is providing low estimates, an individual who is estimating a massive task may feel compelled to do the same.

5. Illusory Superiority

Individuals tend to overestimate their own abilities and underestimate the abilities of others.

6. Worse-than-average Effect

Individuals tend to underestimate their own abilities in areas that society ranks as important (e.g. leadership, diplomacy).

7. Dunning–Kruger Effect

Incompetent individuals tend to be overconfident, competent individuals tend to be under-confident.

8. Zero-risk Bias

A desire to completely eliminate risk no matter what the cost.

9. Well Traveled Road Effect

Underestimating tasks you've done before and overestimating tasks that are new to you.

10. Hard-easy Effect

Underestimating easy tasks, overestimating hard tasks.

11. Time-saving Bias

Teams that are working slowly and conservatively tend to underestimate the impact of going faster. Teams that are moving fast tend to overestimate the impact of going faster.

12. Risk Compensation

Individuals take more risks when they feel safe.

13. Pseudocertainty Effect

The tendency to be willing to take on high risk to win something (e.g. gambling) but to accept low risks of something bad happening (insuring your home).

14. Pro-innovation Bias

The tendency to under-estimate innovative approaches out of optimism.

15. Ostrich Effect

The ability to ignore negative information even when it should be obvious. For example, a manager may ignore the fact that an estimate is obviously flawed.

16. Wishful Thinking

A tendency to believe that things that you intensely desire are easier to achieve than they really are.

17. Nonsense Math Effect

The tendency to trust complex math even if it's nonsense. People will trust estimates based on a complex mathematical model. Even if that model is nonsense.

18. Illusory Correlation

A tendency to see dependencies that don't exist.

19. Illusion of Control

Believing you can influence things that are out of your control.

20. Hasty Generalizations

Estimating tasks based on generalizations while ignoring significant differences.

21. Unit Bias

The tendency to want to finish one thing before beginning the next. Individuals may identify task dependencies out of a preference to finish one thing at a time.

22. Illusion of Transparency

A tendency to overestimate how well people understand you (e.g. you may believe the requirements are clear when they aren't).

So What?

If you accept that psychological factors play a big role in estimates — how do you manage these factors?

These 7 techniques are designed to manage the psychological factors in estimating tasks.

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