Before joining Forrester, I ran my own consulting firm. No matter how ridiculous the problem or how complicated the solution, when a client would ask if I could help, I would say yes. Some people might say I was helpful, but I was in an overconfidence trap. There was always this voice in the back of my mind that would say, “How hard could it be?” Think of the havoc that kind of trap can have on a risk management program. If any part of the risk program is qualitative, and you are an overconfident person, your risk assessments will be skewed. If you are in an overconfidence trap, force yourself to estimate the extremes and imagine the scenarios where those extremes can happen. This will help you understand when you are being overconfident and allow you to find the happy medium.
Have you ever padded the budget of a project “just to be safe”? I hate to tell you this, but you are in the prudence trap. By padding the project budget, you are anticipating an unknown. Many other managers in your company may be using the same “strategy.” But the next time you do a project like this, you will pad the budget again, because the inherent uncertainty is still there. The easiest way to keep your risk management program out of the prudence trap is to never adjust your risk assessments to be “on the safe side,” There is nothing safe about using a psychological trap to predict risk.
Getting back to my consulting days. I hated tracking billable hours. I hated it so much that I would estimate the project and flat bill my clients. Problem solved, right? Wrong! I was not taking into account other variables and if the project ran over, I lost money. I had past data that could tell me how long a type of project would take, so it seemed reasonable to use that information. This is called the recallability trap and I fall into it so often that they should name it after me, the Renee-ability trap. To protect your risk management process, don’t let past impressions influence your current one. Each risk has different variables and deserves scrutiny.
Let us recap (or re-trap). A client would ask me for help. I would say yes because – how hard could it be? Then, I would decide to pad the hours, so I could deal with the uncertainty. Then I would recall that I had done this before and I knew how long it took, so I would take the padding out. I was in the overconfidence trap, then the prudence trap set in. To get out of the prudence trap, I would step into the recallability trap. I finally used the overconfidence trap to get back out. It is like a dog chasing its tail!
Now, go and take a look at your risk management process, pay attention during your risk assessment reviews, and see if you or your colleagues are in any of these traps. Then, get out of them! Your risk management program will be better for it.