We generally recognize our inability to accurately estimate large projects in one chunk, so we break them up into smaller milestones that are easier to estimate. While the work breakdown process is good, the confidence it gives us in our estimates can lead to larger problems. We don’t ask ourselves often enough how accurate we think those estimates are before stringing them together to determine project due dates. If we did, the conversation might go like this:

“How accurate do you think these milestone estimates are?”

“Pretty accurate. We certainly spent a lot of time discussing them and comparing them to past projects.”

“OK. But if you had to put a number on it, would you say they are 100% accurate?”

“Well, let’s not get crazy. I can’t be sure they’re 100% accurate.”

“So put a number on it. How confident are you that they’re accurate?”

“I still feel pretty good about them. I’d say conservatively that I’m at least 90% sure.”

At this point, we’re about to discover some pretty major problems with our assumptions. We typically string together a number of these milestones, which are dependent on each other, and call them the critical path. The end of the critical path is the project due date.

But if we’re only 90% confident our estimates for each milestone are correct, the likelihood of missing our date is pretty high. Let’s say we have five major milestones in our critical path, and we’re 90% sure each is accurate. To determine the probability that all five will come in as expected, we have to multiply .90 x .90 x.90 x .90 x .90. Even with these high confidence rates, we’re now looking at about a 59% chance of hitting our due dates and a 41% chance of missing them. And that’s with only five milestones and really high (and probably unwarranted) confidence in our estimates. The numbers only get worse from here.

So we start missing deadlines and inevitably either pump more money into the effort or start cutting scope. Our original business case and ROI justification for the effort are now inaccurate because it’s going to cost more and produce less benefits. Sound familiar?

Monte Carlo simulations can help us get a better handle on the probabilities of actually delivering on our timeline and budget estimates. Just as I previously demonstrated using Monte Carlo simulations for sales forecasting, a simulation focused on project estimates can essentially become a “what if” model and sensitivity analysis on steroids for project planning. Basically, the model allows us to feed in a limited set of variables about which we have some general probability estimates and then, based on those inputs, generate a statistically valid set of data we can use to run probability calculations for the entire project.

Great. So now we know how likely we are to miss our timeline and budget. So what?

Once we have a more realistic view our our project timeline and budget, we can do far more effective planning. We can develop contingency planning with full knowledge of the likelihood of needing any particular contingency. Having a better sense of potential budget increases or scope decreases in advance of the project start date will help us make better decisions about starting the project to begin with.

We’ll also be able to better plan our needs from other groups in the corporation who might be involved with the final project but not directly involved in the project. For example, we might need to fit a new product launch campaign into an already packed marketing schedule. Will new site functionality require training for customer service? We’ll need to plan time to pull agents off the phones for their training. Setting expectations with these external groups will greatly enhance at least the internally perceived success of our effort. And that certainly counts for something.

Why go through all this complication? Let’s just take all the estimates we get from the team and double them. That should help get ensure we stay within the timeline.

The “double the estimates” approach is one I’ve seen used before. While it does help create timelines that won’t be exceeded, overestimation can also cause problems. Any coordination with external teams will still be a problem if we end up needing them before we originally planned. And over-allocating time, resources and budget can drive up opportunity costs and limit our ability to produce meaningful results over time.

Monte Carlo to the rescue

I created a free, sample Monte Carlo simulation you can download for use in project planning. It illustrates on a small scale some of the possibilities that can occur with even a minor project. We see that even a five milestone effort with 85% confidence in the estimate of each milestone is expected to be more that 20% overdue. But we can also get a sense of the probabilities of various timelines and use it to refine overall estimates.

By understanding the probability of various delivery dates and project budgets, we can better plan scope, business models and contingency plans. We can better coordinate with other teams who will play a part in the ultimate success of the project once it’s complete. In short, we can become realists and, as a result, deliver much better business results.

What do you think? Would this sort of tool help in your planning? What other methods have you used to set better expectations and plan more accurately?

But we’re certain about a lot more things than we should be.

A recent University of Michigan study by Brendan Nylan and Jason Reifler shows that the more certain we are about particular ideas or situations the more we become blind to facts that discredit our certainty. In fact, in many cases opposing facts are not just ignored but actually strengthen our prior beliefs.  A recent Boston Globe article provides an excellent summary of the research.

From the article:

Most of us like to believe that our opinions have been formed over time by careful, rational consideration of facts and ideas, and that the decisions based on those opinions, therefore, have the ring of soundness and intelligence. In reality, we often base our opinions on our beliefs, which can have an uneasy relationship with facts. And rather than facts driving beliefs, our beliefs can dictate the facts we chose to accept. They can cause us to twist facts so they fit better with our preconceived notions. Worst of all, they can lead us to uncritically accept bad information just because it reinforces our beliefs. This reinforcement makes us more confident we’re right, and even less likely to listen to any new information.

Both the research and the article focus primarily on our political viewpoints, but while reading I couldn’t help but think of people I’ve come across in the business world who were unbelievably certain about their viewpoints based on information or experiences that seemed less than obvious to me. I immediately thought of dozens of people, and I bet you’re thinking of many such people now.

In fact, it was so easy for me to think of other people that fit the bill that I couldn’t help but think the man in the mirror was not immune to this universal human fallacy.

In my experience in the business world, we often assume with undue certainty that past experiences will reflect future possibilities. We say things like, “We tried that before and it didn’t work” or “I know what our customers want.” While our past experiences are extremely valuable and are very important for informing future decisions, we simply don’t have enough of them to blindly ignore changes in circumstances, timing and other variables that could significantly alter results for a new effort.

So how do we overcome our natural instincts in order to make better business decisions?

1. Be aware of the problems with certainty
   You’ve read this far, so maybe you’re awareness is already active. I know that I am reassessing all the things I “know” to try to truly separate what is fact and what is assumption. I very much value all my experience, and I know I make better decisions because of what I’ve seen and heard along the way. But I want to make doubly sure that assumptions I make based on past experiences are tested and validated before I turn them into absolute fact.
2. Actively seek alternate points-of-view
   In my experience, the combination of multiple experiences provides a much more solid foundation for decision making than basing decisions on singular past experiences. Techniques I’ve used, like The Monkey Cage Sessions, are based on the incorporating viewpoints from people in different functional areas and levels of the organization. While it’s acceptable to discount data or opinions that are in opposition to a decision I might make, I want to be sure I’m not simply rationalizing opposing information or viewpoints solely because they are different from my biases.
3. Envision alternate scenarios
   I addressed this some in a previous post, “Obscure and pregnant with conflicting meanings”, where I discussed a technique I called “Scenario Imagination.” I’ve since read an excellent interview with Daniel Kahneman and Gary Klein where they detail a similar and better technique they call “pre-mortem” (which is also a better name than mine). Whenever we make decisions, we have a tendency to assume our decisions are going to produce the best possible results. These pre-mortem techniques have us imagine worst case scenarios to try to dissect potential problems before they occur.
4. Be flexible and plan for contingencies
   Once we admit we’re not 100% certain, we can move forward with plans that are flexible and able to react to changing conditions. To be clear, I’m not saying we should just be wishy-washy and not make clear decisions. What I’m saying is that we should be open to new facts and be sure we have created an environment that allows us to change course when warranted.

If we’re aware of our certainty biases and take active steps to address them, I believe we can significantly improve our decision-making in our businesses.

What do you think? Upon self-examination, have you turned beliefs into facts in your mind? How would you suggest addressing these biases? Or, do you think is all a load of hooey?

But they didn’t understand.

When shown an image of fans burning his jersey, James seemed temporarily startled before stating that he couldn’t “get involved in that.” His Sports Q rating, which determines an athlete’s popularity and advertisers use to determine whom to endorse , was the highest in the NBA pre-announcement, but it’s sure to take a hit now. In fact, this post calculates a drop in Q score could cost him as much as $150 million.

But what does this all have to do with retail?

I think there’s a lesson we can all learn about dangers of making business decisions without fully considering the effects of those decisions on our customers. After all, our businesses wouldn’t exist without our customers, and we continue operations at their pleasure.

We’ve probably all been in those meetings where a suggestion motivated by self-interest groupthinks its way into a spectacularly anti-customer business decision. I imagine that’s the type of meeting that occurred with LeBron and team when they hatched the national TV special idea.

A retailer colleague of mine recently told me a story of such a session at his company. The head of the call center was complaining about volume spikes that kept hitting the call center. Her call center operations were deemed a cost center, so the metrics she used to measure her operation were all cost related. These spikes in volume were jacking up her costs, and she was making a lot of noise about it. My colleague noted the spikes in volume were following promotional email blasts that were widely considered very popular because they drove a lot of sales. No one would even consider stopping those emails, so the group began to latch on to the idea that they simply close the call center on days when the promotional email went out. Seriously. Luckily, my colleague was able to pull the group back from the brink and save them from going LeBron. But it was close.

We have to be careful that we don’t get so caught up in our own perspectives that we lose sight of our customers’ perspectives. Because we have direct control over the experience we provide, it’s sometimes easy to let that control be dominated by our own needs without considering the needs of our customers. When that happens, we’re seriously in danger of going LeBron.

Consider a few potential scenarios:

Does your company’s loyalty program makes its rewards intentionally difficult to redeem in order to reduce costs? If so, you might be going LeBron.

If your return policies make your job easier while making your customers’ returns a lot more difficult, you might be going LeBron.

If you promote a sale of up to 70% discounts and bury only an item or two at 70% off within a sea of items that are less than 20% off, you might be going LeBron.

If you choose to leave in place an onerous process for customers to check the status of their orders because it saves you time and money, you might be going LeBron.

Whenever our needs get way out of line with our customers’ needs, we’ve got a business problem that could be deadly. We provide products, services and conveniences that our customers value enough to give us their hard earned cash in exchange. But the relationships we have with most of our customers are somewhat fragile. When we make business decisions that are primarily motivated by our own self interests (especially those motivated by some subsection of our businesses and driven by short sighted personal motivation), we risk potentially fatal damage to many of those relationships. We don’t want be caught startled that our customers are burning our jerseys. We don’t want to go LeBron.

Instead, we can best succeed by regularly considering our customers’ needs and desires when making business decisions. Such consideration will help us maximize the customer engagement cycle and lead us to solid and profitable growth.

What do you think? What examples have you seen of companies going LeBron?

Many times, the strategy or solution was the result of a brainstorming session filled with type A personalities (me included) ready to make things happen.

You may be familiar with the type of session I’m referencing. Usually, there’s a guru consultant leading the charge. He separates the group into teams and gives them Post-It notes and colored sticker dots. “Write down as many ideas as you can in the next 20 minutes. Don’t think too much. Be creative! No idea is dumb. Stick your ideas on the wall. Now go!” After 20 minutes, a leader from each group presents their best ideas to the rest of the room. Then each person in the room is allowed to vote for maybe six of his or her favorite ideas using the colored sticker dots. A few people are assigned the winning ideas and off we go.

Those types of session frustrate me. I’m concerned there’s too much action, too many unspoken assumptions, and not nearly enough serious thinking.

Over the years, I’ve developed a problem solving technique that I’ve found to work a lot better. I call it the Monkey Cage Sessions. The technique is all about thoroughly identifying the problems from all angles before developing carefully considered, thoughtful and collaborative solutions.

It’s got an intentionally silly name because the process should be fun.

Here’s how it works:

Step 1 – Define the problems.

We start by gathering a group of cross-functional people – ideally from different levels of the organization – together in a room to talk about the problem or problems we’re trying to solve. This could be as simple as enhancing a Careers page on the corporate website or as complicated as building a complete company strategic plan. It’s important to define the general scope of the problem, but it should be defined fairly loosely so as not to stifle the discussion.

The rules of the meeting are fairly simple. We only discuss problems. No solutions. This is a license to bitch. Let it be cathartic.

I usually stand at the whiteboard, marker in hand, and write down everything everyone says. There is no need to be overly structured here, and anything anyone says is legitimate. We throw it all at the wall and we’ll sort it out later.

Sometimes people want to debate whether or not something another person says is really a problem. If someone said it, it’s at least a perceived problem. It’s legitimate. Also, there is often an attempt to offer an explanation for why a problem exists. The explanation is covering for another problem, so that problem should be written down.

People are always tempted to offer solutions, even when they think they’re offering problems. For example, someone might say it’s a problem that we don’t have a content management system. Actually, a content management system might be the solution to a problem. What problem might a content management system solve? Beware of any problem statement that starts with “We need…” and be prepared to break down that need into the problems needing the solution.

Sometimes the problems offered up are very broad and vague. In those cases, it’s important to work with the group to dissect that broad problem into its component parts.

This first session generally uncovers a LOT of problems, but the problem is still usually not completely identified yet. Which leads to…

Step 2 – Categorize the problems

While the chaotic approach of the first session works well to get an initial set of problem descriptions, it’s important to create some order in order to prepare for the problem solving stage. So Step 2 involves writing down all of the problems and sorting them into logical categories. I don’t have any pre-determined set of categories. Instead, I prefer to the let the problems listed dictate the categorization.

Step 3 – Widen the circle

We probably have a pretty good description of the problems now, but we’ve also still likely missed some. For Step 3 we send the typed and categorized list of problems to the original group as well as a widened circle of people. The original group will likely have thought of a couple more issues since the day of the meeting, and the new group of people will almost definitely add new problems to the list. Since this is the final stage of problem description, we want to give this step at least a few days to allow the team to think this through as completely as possible.

Step 4 – Develop the solutions

Finally, we can start solving the problems. Woo hoo!

Now it’s time to gather a subset of the original meeting to start working towards solutions. There should be at least a few days between Step 3 and Step 4. We want to give people some time to think over the full problem set. The group should enter the Step 4 meeting with at least some basic solution ideas. There is no need to come into the room with comprehensive solutions that solve every problem on the list, but the solutions considered should certainly attempt to solve as many problems as possible (without causing too many new problems).

I usually find that by this point many of the solutions are fairly obvious. But there should be good discussion about the relative merits of each suggested solution, and the solutions should be measured up against the problem list to determine how comprehensive they are.

I like to end the meeting by assigning people to lead each of the proposed solutions. Obviously, any suggested solution from this session will need to be fleshed out in a lot more detail, and the leader from this meeting is responsible for determining the viability and solution and then potentially leading the development and ultimate execution to completion.

Subsequent progress is then handled via a separate execution process.

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I’ve had very good luck over the years using this technique. Some of the primary benefits I’ve found are:

1. Better understanding of the problems
   As the initial meeting wraps up, most people are inevitably feeling enlightened about the problem. They’ve outwardly expressed their own assumptions (which sometimes even they didn’t know they were making) and they’ve understood the perspectives and assumptions of others. They’ve seen the problem in an entirely new light.
2. More comprehensive solutions
   The heightened understanding of the problem and the critically important time between steps to allow the team to be more thoughtful in their ideas. Those ideas are usually pretty all-encompassing solutions to start with, but the discussions in Step 4 lead the team to collectively choose the best of the best of the solutions offered.
3. Better execution
   Solutions are nothing but fancy ideas until their executed. And poor execution can cause even the best ideas to fail. The process of fully defining the problems and sharing that work with wide circles of people is an incredibly important stage that sets the foundation for success in execution. When the execution team provides input in the process and understands the basis for the solution, they are far more supportive in the effort. They are also far more prepared to make the daily, detailed decisions that are often the difference between success and failure.

So, that’s the Monkey Cage Sessions. I hope you find it helpful. If you try implementing the process in your business, I’d love to hear how it goes.

What do you think? Would this process work in your organization? Have you ever used a similar process?

The reality is none of us can be successful completely on our own. We need the help of other people — be they peers, staff, managers, vendors or business partners — to successfully accomplish our tasks and goals.

Human relationships are more complicated than Wall Street financial schemes, but we often take interpersonal skills for granted. We rarely study them to the degree we study financial or technical skills. After all, we’ve been talking to people all our lives. We’re experienced. But I’ll argue there are subtleties that make all the difference, and they’re worth studying.

In my opinion, the best business book ever written is How to Win Friends and Influence People by Dale Carnegie — and it’s actually not even classified as a business book. I’ve never read a better guide to the basics of interacting effectively with people.

But I just finished a book that will take its place nicely alongside the Carnegie classic on my bookshelf.

Click: The Magic of Instant Connections by Ori and Rom Brafman (authors of Sway, one of my favorite books from last year) explores the factors or “accelerators” that exist when people “click” with each other. We’ve all had those instant connections with people in our lives, and those types of connections generally lead to powerful and productive relationships. While the Brafmans dig into both the personal and business nature of those connections, for purposes of this post I’ll focus on the business benefits of understanding and fostering such connections.

The book covers a wide range of connection accelerators, more than I could ever cover in this space, so I’ll just address a few that really stood out to me:

Proximity
Simple physical proximity can make a huge difference in our ability to connect with others. A study of a large number of military cadets found that 9 of 10 cadets formed close relationships with the cadets seated directly next to them in alphabetical seat assignments. Another study found that 40% of students living in randomly assigned dorms named their next-door neighbor as the person they most clicked with, but that percentage dropped in half when considering the student just two doors away. Maybe more startling, the students who lived in the middle of a hall were considerably more likely to be popular than those living at the end of a hall.

Why?

The authors explain that these connections are often driven by “spontaneous conversation…Over time, these seemingly casual interactions with people can have long-term consequences.”

I think many of us have instinctively understood the value of placing working teams in close proximity to each other. I’ve personally always attributed that value to the working conversations that are overheard and allow various member of the team to better understand and communicate issues about the work. But maybe that close proximity is also allowing people to better connect with each other. Maybe those connections allow us to better relate to each other and give each other the benefit of the doubt. Looking back at my career, I can think of many instances where office moves have coincided with strengthening or straining my working relationships with people.

Proximity is more important than I ever thought. We should carefully consider office layouts to foster the right types of connections. If close proximity is not possible for certain teams or people, we should understand the negative effects of separation and look for other ways to foster the connection.

Resonance
Resonance “results from an overwhelming sense of connection to our environment that deepens the quality of our interactions.” Huh? For example, the book reports that we’re 30 times more likely to laugh at a joke in the presence of others than if we hear it alone. My friend and colleague Jeff Dwoskin moonlights as a stand-up comedian, and he once explained to me that the difference between a good comedy club and a bad comedy club is the arrangement of audience seating. When tables are close together, people laugh more. When there are lots of booths that separate the audience into tiny groups, it’s much harder to get a laugh and keep the funny going.

Many companies swear by their open seating arrangements. Rich Sheridan, founder of Ann Arbor-based Menlo Innovations, seats his agile development teams on open tables together. No cubes. No walls. He says it’s a huge key to their success. Does that work for everyone working team in all situations? I doubt it. But certainly working environments have impact on working relationships and their resulting productivity, and resonance is a concept worth considering.

Similarity
“No matter what form it takes, similarity leads to greater likability…Once we accept people into our in-group, we start seeing them in a different light: we’re kinder to them, more generous.”

Kinder. More generous. Those sound like good bases for effective working relationships. It’s amazing how finding common ground can bring teams closer and help them work more effectively together. Sure, those of us working for the same company in the same industry all have industry and company in common, but it seems like the more personal similarities are more likely to bring people together. For that reason, we should encourage water cooler chats and other personal interactions in the work place. Everything in moderation, for sure, but a little personal time can actually end up improving productivity by reducing stress and misinterpretations that lead to unproductive miscommunications. The book reports that a “Finnish health survey conducted on thousands of employees between 2000 and 2003 revealed that those employees who had experienced a genuine sense of community at work were healthier psychologically.”

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“Common bonds and that sense of community don’t just foster instant connections — they help to make happier individuals.” The Brofmans provide numerous examples of teams that performed significantly better than others primarily due to the interpersonal dynamics of their members. We simply cannot succeed in life without the support of other people. It’s worth taking the time to understand how to improve those relationships for the betterment of all parties. And pick up Click, it’s well worth the read.

What do you think? Is this all hogwash? Do you have stories of how personal relationships have led to success in your life?