How often have you been disappointed when hearing for the first time the bad news that an IT project is over budget and will miss deadlines? How about when you see the quarter end numbers and recognise that the sales results are significantly below what you were expecting? In each case, did you say to yourself: “If we would have known about this two or three months ago, something could have been done to adjust? Now it is too late, why didn’t anyone tell me this was coming?”

If you were able to identify with either of the examples above for more than one occasion, then the remainder of this article may be helpful to you. Be prepared, however, as you and the other executives in your company may be part of the root cause.

We all know that companies who somehow manage to avoid surprises and deliver predictable performance are rewarded by the markets. This predictability is dependent on good decision-making, which in turn relies on strong analysis. Unfortunately, in most companies, there is a propensity for the fundamental analysis to be overly optimistic because the key leaders, who define the culture and influence others, value optimism. So in turn, IT proposals, sales forecasts and project timelines often reflect a heightened sense of optimism. Think for a moment, in your experience, what percentage of original proposals sales, costs or temporal forecasts improve versus those that deteriorate as time goes on? In our experience, volume of sales decrease, project costs go up, and delivery timelines expand much more often than the opposite. Why does this happen time and time again? We believe it has to do with organisational cultures that provide short term reinforcement for optimism over realism. While optimism is an important and necessary cultural characteristic, it can play an adverse role in decision making when the characteristic is dominant.

Jul-Sep 2016 Issue

Orange Star Consulting