Most projects are approved with a plan based on the Best Case Scenario. The one where everything runs smoothly without a single hiccup. Is that really a likely scenario though? Aren't Steering Committees launching projects based on unrealistic expectations or - as we would say - on false hope?
When setting out to define the budget of an upcoming project, a project manager would typically have to go through a meticulous process of estimating features, tasks, effort, time, and costs. An absolutely vital part of any budgeting process will be - “should be” is probably more appropriate - a proper risk analysis. Assessing the probability and impact of the various risks identified at the start, including how these and the related countermeasures impact the budget.
(On a side note, throughout this rant one can replace the word budget with timeline, and all will be just as frustratingly applicable)
At some point, the project manager will have all the estimates and all the risks adequately analyzed and would have subsequently adjusted the (contingency) budget accordingly. These steps lead to a Best Case and Worst Case Scenario. Best Case is defined as the project is successfully completed without a single risk materializing, and as the logical counterpart, the Worst Case is when all risks actually materialize, including risks identified later on.
Defining these two scenarios through a thorough risk assessment is an excellent thing to do. It gives all involved good insight into the challenges facing this project and the potential impact from one end of the spectrum to the other. In short, it provides all stakeholders a solid idea of the cost bandwidth required to successfully complete the project.
Now here comes the best part, or actually, the worst part. The moment the project manager presents the Worst Case Scenario to her Steering Committee, there will always be this one person in the room, probably the most senior one, that will roll his or her eyes and say something along the lines of:
“But that is the Worst Case Scenario! Everybody knows that we will never ever be THAT unlucky!”
The others in the room will mirror their fearless leader rolling their eyes as well, amazed at the doomsday picture painted by the project manager. They all smile smugly and nod in agreement. And with that one outburst, the Worst Case Scenario has been wiped off the face of the Earth. And rightfully so.
The executive dismissing the Worst Case Scenario is actually right. It is highly unlikely that all risks will materialize to their fullest extent, resulting in this Worst Case Scenario. When the US Olympic Team participates in the next Olympics, the Worst Case Scenario - being that Team USA returns home without a single medal - is unfathomable.
Should that not also apply to the other end of the spectrum, meaning the Best Case Scenario? Isn’t it as unlikely that Team USA will sweep all medals in every single discipline they compete in?
Yet, when the project manager - having recomposed herself after stumbling over all those rolling eyes - continues by presenting the Best Case scenario, there is never that senior Steering Committee member that says in an incredulous tone of voice:
“But that is the Best Case Scenario! Everybody knows we will never ever be THAT lucky!”
Rolling eyes, smug smiles, and nods all around would be very welcome at that point.
But instead of dismissing this unrealistic scenario, it is actually more common for Steering Committees to try and bring that Best Case number even further down instead of dismissing it for what it is: A highly unlikely scenario.
We have gone through these budget discussions quite often, and on nearly every occasion we have had to bite our tongue not to cynically ask: “Which part of Best Case do you not understand? Do you actually want to win more medals than there are available?”
There are many statements we make throughout this blog urging you to memorize the pitfalls of a crucial error even at times suggesting to tattoo these on your body. Hopefully, you have some bare skin left, because here comes another one:
The Best Case Scenario is as unlikely as the Worst Case Scenario!
This statistical fact is lost entirely on Steering Committee members. Best Case is typically the only number that will remain stuck in their heads as the desired and thus the only acceptable outcome. Now there is no going back.
Even before the end of the meeting, the committee has already applied this wishful-thinking amount to determine final P&L, next year's budget, and probably the positive impact on their own year-end bonuses. They have already bet on Team USA to win every available medal...and then some.