Managing Expectations

Great article by WSJ's Jared Sandberg in today's edition i.e. why over-estimating deliverable schedules can make you look like a star..But there are caveats to this strategy, and managing expectations is a tight rope to walk on.. Here's an excerpt--the link brings you to WSJ online and you need to be a subscriber to access the entire article...

Why Preparing Others
For an Effort's Failure
Can Bring You Success
January 16, 2007;

To understand how Tony Sharpe approaches managing expectations, consider what happened in "Star Trek": Captain Kirk's grumbling engineer, Montgomery Scott, admitted that in order to be viewed as a "miracle worker," he had padded his time estimates for finishing jobs so he could handily beat them.

"That's pretty much how I manage my clients' expectations," says Mr. Sharpe, an advertising executive. He might tell clients that certain work may involve extra time or money, or that he might not be able to do it at all. "Then I come back with it done," he says.

Asked why he does this, Mr. Sharpe responds that the tactic helps him ensure that there will be only good surprises, which can help "keep clients from getting mad at us." As long as the results are positive, he says, "they won't even notice you're crying wolf."

In January, the clock starts ticking for all kinds of company measures, from budgets to performance reviews. The next 11 months are spent trying hard to manage expectations about how these things will turn out. In a system where the facts don't govern opinions nearly as much as expectations do, failure to manage those expectations properly can turn success into failure or a well done deed into a disappointment.

That's why, for example, a company that has just reported a 4% gain in net income compared with a year earlier might still suffer a drop in share price. And it's why rain-making employees can lose their luster compared with laggards who surprise everybody by showing some small evidence of a pulse.

When Joe Glavin managed a software development group, a project manager who was developing record-keeping software for him kept reporting that everything was "Going great!" But a week before the scheduled rollout, the project manager "behaved as if he was being chased by a loan shark," says Mr. Glavin, and then finally admitted that the whole system was unusable. Mr. Glavin ended up getting burned, and the project manager "never got a management assignment again," Mr. Glavin says.

You would think the tactic of managing expectations downward would be so obvious that it wouldn't work. But, as Wendy Wood, a professor of psychology at Duke University, notes: "You can be a physicist and study gravity and still fall down."

One explanation for why managing expectations downward works so well may be the psychological phenomenon of "anchoring," or the tendency to overvalue an early piece of information, such as an expectation set by an employee. Even as new information surfaces, notes Max Bazerman, a professor of business administration at Harvard Business School, "We adjust insufficiently. Wherever we start from has a significant influence on our final estimate."

Research also suggests that the penalty for missing expectations can be greater than the benefit for beating them. In his research on promises, Nicholas Epley, assistant professor of behavioral science at the University of Chicago's Graduate School of Business, concluded that while breaking a promise is bad, "exceeding a promise is often not worth the effort." In other words, he says, people sometimes value beating expectations little more than meeting them.

That's why managing expectations downward is so widespread. "The chips are stacked against us," says Prof. Epley. First, employees, investors and bosses don't normally expect failure, so expectations are generally high. Second, "the loss from that already high expectation is going to be that much more painful."

Melissa Marsh, an IT project manager who works on deploying new software systems, concurs. "You project the worst-case scenario publicly, when you fully anticipate that you will be able to bring the system up earlier," she says. After all, she says, to deliver 99% of what you promised only leads people to sorely miss the remaining one percent.

"There are a lot of opportunities to disappoint people," she says, "and it can be really difficult to impress them."

• Email Jared Sandberg at jared.sandberg@wsj.com