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Computerworld - IT projects fail because managers kid themselves from the start about their chances of success. That's the message Dan Lovallo and Daniel Kahneman deliver in the July issue of Harvard Business Review. When forecasting the outcome of a risky project, they say, decision-makers become swept up by a "delusional optimism." Rather than rationally weighing pluses and minuses, they "spin scenarios of success" while overlooking risks, according to Lovallo and Kahneman.
Lovallo, a senior lecturer at the Australian Graduate School of Management at the University of New South Wales, told Kathleen Melymuka how IT leaders can curb their enthusiasm and inject realism into project forecasting.

What makes IT leaders overly optimistic about a project's chance of success? People's natural inclination is to be optimistic. One of the most ubiquitous findings in social psychology is the above-average effect. When people are asked how they compare to peers in all kinds of areas, almost nobody thinks they're below the mean, which, of course, is logically not possible.

Dan Lovallo of the Australian Graduate School of Management

What is "anchoring," and how might it lead to overoptimism in an IT project? In an IT project, typically the initial plans are really realistic best-case scenarios. If you remain anchored to those, any adjustment away from that is unlikely to get far enough away to get to realism.
In today's economic environment, does the organizational pressure for ROI magnify the tendency to be overly optimistic? Optimism is pretty consistent, but the greater the organizational pressure, the more likely you are to get skewed forecasts. When an organization puts a lot of pressure on people to come up with some sort of very optimistic ROI number, they'll get the number because they're engineering optimism.

You say managers are also prone to the "illusion that they are in control." Can you explain? Managers don't see themselves as gambling or taking risks. They're very proactive in trying to remove all risk in the environment. Frequently they won't even acknowledge that a large degree of risk is still left. When a manager has a plan, he almost always overestimates his degree of control.

Many IT project managers use scenario planning to mitigate risk. Isn't that effective? It could be, and it's good that they do it. The problem is that it's hard to think of all the things that might go wrong. It's easy to think about how you could complete the plan, and that may even be the most likely scenario, but it still doesn't mean it's very likely. So