Good morning!

This week's featured article is the same as last week.

👋🏻 For those who missed it, the article tackles a tangled network of cognitive mechanisms that drive the planning fallacy.

Last week we focused on how deadlines mitigate the fallacy and what it means for keeping your teams on the ball in their strategic planning.

This week, we will unpack the role of incentives and whether the carrot is worth it’s weight in gold to drive execution outcomes.

As a reminder, the author’s model predicts that:

An underestimation of probability of negative future events (optimism bias) + an overestimation of our ability (overconfidence)

= underestimating effort required to get a job done (planning fallacy)

= low perceived utility of doing the required tasks today and putting it off for tomorrow (present bias / future discounting)

The findings

🥕 Offering incentives for doing a job quickly inflates the fallacy. Excitement to get the goods boosts our overconfidence and blurs our estimation efforts.

🥕 Offering incentives for forecasting accuracy diminishes the fallacy. The promise of a pay out for performance keeps overconfidence in check.

Why it matters for you

• As leaders, managing milestones and monitoring progress is a big part of the job. Doing this well means keeping your people motivated and maximizing effort against planned activities is a must. The planning fallacy is a leading cause of derailment.

• Incentives are a tool for improving effort estimations, but being keenly attuned to the behaviour that matters most to your strategy will bare the best fruit and save you time, money, and stress.

What you can do about it

• Begin incentive planning with your value tree framework and associated business case for your program or product. Prioritize and design incentives based on driver importance, and when the trade-offs need to made (and they will be) make sure you’re keeping what matters most in the long run in mind.

• Engage your leadership team in a consequence scanning exercise to map the unintended impacts of incentive structures on adjacent metrics of success. Incentives can be fickle.

Explore the role of incentives in the planning fallacy deeper using these prompts on favourite generative AI platform

• Investigate how the planning fallacy can significantly influence strategic planning activities for [role], including detailed case studies and examples of successful incentives to mitigate the impact of the fallacy on strategic planning.

• How can incentives be structured to reduce the planning fallacy in project management? Discuss the potential benefits and pitfalls.

• From last week, examine the most successful strategies for mitigating the impact of the planning fallacy on strategic decision making and planning, considering various approaches and techniques used by industry leaders. Provide a critical analysis of their effectiveness, along with tops for overcoming common obstacles and pitfalls encountered in the process.

Have a great week!

M

👋🏻 for those of you who are new here, you can find our previous posts in the Behavioural Strategy Briefing Archive here.

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