Public Projects and the Optimism Trap

Rosy, unrealistic scenarios just cause trouble down the road. It’s far better for managers not to deceive their leaders — or themselves.

On Dec. 31, 2007, the “Big Dig” in Boston was officially completed. The largest single highway project in the country’s history, it was nine years late and had cost more than $14.6 billion, a stunning $12 billion over budget. And if that wasn’t bad enough, the project was plagued by corruption, scheduling overruns, leaks, design flaws and the death of one motorist.

It’s not that the project itself was unnecessary. On the contrary, for decades traffic to and from Boston’s Logan Airport was terrible, and it was difficult for the most experienced Boston drivers to negotiate the tangled streets and constant congestion downtown. The project greatly reduced congestion, air pollution and confusion. But because of its well publicized problems, the Big Dig has become a symbol of big government at its worst — unethical politicians, contractors who cheat, costly projects, shoddy quality. Whether it’s highway projects, weapons systems for the Pentagon, or NASA’s two shuttle disasters, the stories of botched government projects seem unending. Why is that?

One answer, of course, is that good news doesn’t sell. When did you last read a front-page headline proclaiming, “New Government Office Building Opens on Time, Under Budget”? Many government projects are well designed and executed; we just don’t hear about them. We can’t change media that seem obsessed with bad news. But there is another factor involved with government projects gone wrong, a factor we can control. It has to do with unrealistic projections.

Let’s go back to the Big Dig. Roger Warburton, associate professor of administrative sciences at Boston University, found that engineers knew that the original projections of $2 billion were far too low. In the late 1980s the engineers “already knew it was a $12 to $14 billion project,” Warburton wrote. “They told everybody who would listen — including the politicians — and those people kept it quiet.” Politicians worried that realistic estimates of the project’s costs would have outraged the public and that the project would have been dropped. So the politicians essentially lied to the public.

In other cases, it’s civil servants who mislead the politicos about their proposed projects. Competing with other program managers for scarce dollars, they exaggerate their project’s likely benefits and guarantee that it will come in at a lowball cost. Sadly, many managers decide that they must play the same game.

And sometimes program managers deceive themselves. They’re not lying; they’re overly optimistic. They base their projections of costs and benefits on a best-case scenario — if everything goes according to plan, if all of the contractors produce on time and on budget, if the early proof of concept proves successful and we’re confident that our model will work … and so on. I call this the “optimism trap.” As the plaque in my mom’s apartment used to read: “Man plans, and God laughs.”

Fortunately, we can counteract the downsides of excessive optimism. Here are several ways to do so. Some of these ideas come from a 2003 Harvard Business Review article by Dan Lovallo and Daniel Kahneman, “Delusions of Success: How Optimism Undermines Executives’ Decisions.”

Take “the outside view.” As Lovallo and Kahneman explain, the outside view requires a look at similar projects performed by other organizations. What were the initial projections? How long did it actually take? What was the final cost? What were the lessons learned? Taking the outside view helps us avoid the human tendency to see ourselves as better than others. It is especially helpful when starting an initiative that the agency has never tried before.

Bring in an expert who has no skin in the game. This is another way to take the outside view. A well respected expert who has knowledge of the kind of project you’re planning can study your plans through a neutral lens. She has no incentive to make overly optimistic forecasts. She also can spot potential errors in your reasoning and assumptions you’ve made that aren’t based on solid evidence.

Include various scenarios in your planning. Smart planners often develop best-case, worst-case and most-likely-case scenarios for their projects. They attach probabilities to each, based on current knowledge of the economy and interest rates, political trends, reputations of the contractors they rely on and the like. This kind of analysis can bolster a manager’s chances of getting funding, and it demonstrates the manager’s professionalism.

Develop a reputation for accuracy in making forecasts. Sadly, there’s a risk to avoiding the optimism trap and providing accurate projections of cost, timeliness and benefits: You could lose out in the funding game to other program managers whose overly rosy estimates are convincing to decision-makers. What to do? One answer is to talk with decision-makers about your track record — your projects that came in on budget, your programs that achieved their objectives. The message: Senior managers can have confidence in your proposals. And doing this can implicitly remind your leaders that others’ proposals fell far short of their promises.

To be clear: Optimism is not a bad thing. It is sorely needed in today’s political climate. Optimism helps us remain resilient during the inevitable ups and downs of life in the public fishbowl. But optimism, like all qualities, can be overdone. When planning and pitching a project, avoid the optimism trap and play for the long run. Your leaders will learn to trust you. And that trust is invaluable.

When the Best Intentions Lead to Disaster

The VA scandal has its roots in two related management failures. Government leaders everywhere should keep them in mind.

As the Department of Veterans Affairs begins the long, difficult and expensive process of addressing the problems that led to its scandal over falsified wait times for veterans seeking medical appointments, government managers who want to keep their own enterprises out of the same kind trouble would do well to look at the elements that brought the VA down.

At the heart of the VA scandal is the falsification of records in the face of a huge surge in veterans needing care and insufficient resources to serve them. One study by federal auditors found that, while official VA reports claimed that some vets waited 24 days for an appointment, the average wait time was actually 115 days. And there is another, equally troubling aspect to the scandal: the harsh reprisals to which VA workers who tried to report wrongdoing were subjected.

At the core, I think the VA’s problems were driven by two factors: the misuse of performance measures and an agency culture that didn’t respect candor.

On the performance measures problem, VA leaders made an understandable and common mistake. To get employees’ attention, they put a huge emphasis on a single measure: All vets will have an appointment at a health clinic within 14 days of their request. Given the mismatch of demand and resources, there was no way the staff could achieve that laudable goal. Nor did the goal make sense: Vets with serious problems should be seen immediately, while it’s reasonable for those seeking an annual checkup to wait several weeks or more. Further, many supervisors’ bonuses depended on the performance numbers. Put these factors together — one all-important but unreachable goal, with one’s pay riding on the outcome — and it was a disaster waiting to happen.

To some, the candor issue might have been surprising. After all, former Veterans Affairs secretary Eric Shinseki spent three weeks in the field each year holding dozens of meetings with employees and supervisors at which he insisted on candor. But the bad news never got to him. It’s not hard to see why. A VA scheduler had to decide whether to listen to the supervisor sitting down the hall who said to game the system or to the department’s top leader who meant well but was thousands of miles removed. Tragically, all too many followed their supervisors’ orders, and those who didn’t were often punished.

So how do you turn this situation around? Provide mandatory ethics training? Fire the supervisors who told staff to cook the books? Bring in a whole new team of leaders and managers?

Management consultants often say that “what gets measured gets managed.” But when you have a single, impossible-to-achieve, high stakes measure, nobody should be surprised when some people game the system. A far smarter approach is to use a version of “the balanced scorecard,” which captures data on four key performance areas: financials, customer satisfaction, internal operations and employee learning/growth. Many public and private organizations have used versions of the scorecard with good results. There is no one meaningful metric that captures all that matters in an agency. Adopting a few (emphasize few) measures is far more realistic and effective.

In addition to using a balanced set of measures, managers need to involve employees and supervisors in devising those measures. The measures need to be ambitious but not impossible; they need to focus on things that staff has the power to control. They need to give managers and supervisors (as well as external stakeholders) data that they find useful. The VA’s all-important metric — a health-care appointment within 14 days — failed each of these tests.

As for the second issue, the VA story demonstrates that candor is vital to achieving the mission. Shinseki, a public servant of great integrity, was sincerely interested in getting honest feedback from front-line staff, but staff didn’t feel it was safe to speak up. What can agency leaders and managers do to create an open, candid environment? Here’s a starter list:

• Model candor at the top. When leaders acknowledge mistakes that they or their agency have made, it sets the right tone.

• Talk about the reasons that candor is so critical. The point isn’t candor for its own sake (although that’s a good thing). It’s to continually spot problems and opportunities for improvement.

• Craft a simple narrative that highlights the cost of stifling candor. NASA’s Challenger tragedy wouldn’t have happened had NASA’s managers been open to the engineers who tried to warn them that it was too cold to launch the spacecraft. If you say, “We can’t have another Challenger disaster” at the space agency today, people quickly understand the message.

• Work closely with your middle managers; they are the key. When senior managers frequently meet with those in the middle, they should ask them what’s going well and what isn’t, and make it safe and rewarding to talk openly about problems. When middle managers experience the power of operating in an open environment, they let their guards down and realize that candor improves agency performance (as well as their own careers).

The Department of Veterans Affairs is in serious trouble. So are other public agencies that relentlessly track one high-stakes measure and that allow retaliation to replace candor. We should all take a lesson from the VA.

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