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Managing Relationship Risk on Projects

Managing Relationship Risk on Projects


“We are dangerously biased towards optimism in plans, projects and estimates” says Dr Andrzej Grossman from CEDR. He believes we often underestimating time, costs and risks involved in a project. To avoid conflict when obstacles arise we need to invest more into relationship management rather than simply fall back on the contract.

Why do people managing projects still fall into the trap of relying on the contract as the only mechanism to regulate relationships which will almost inevitably cause friction?

There are three reasons.

Reason 1 – Dangerously Biased Towards Optimism 

We are dangerously biased towards optimism in plans, projects and estimates and underestimating the time, costs and risks of future actions.

This tendency to believe your own project will proceed as planned, even if similar projects have run late, is called planning fallacy, a term first coined by psychologist and Nobel Prize winner Daniel Kahneman.

Reason 2 – Outdated Views on the Role of Contracts and Management 

Many managers continue to be heavily influenced by the confluence of an outdated view of the role of contracts and an outdated approach in management.

The traditional (Western) view of the purpose of a contract is that it clarifies the rules of engagement and position under the law, it allocates risk and facilitates either party to enforce the contract. Among other things, the requirement of the contract is that there is certainty of object.

Generally, Western culture prefers very detailed contracts that attempt to anticipate all possible circumstances and eventualities, no matter how unlikely.

Why? Because the deal is the contract itself, and one must refer to the contract to handle new situations that may arise.

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