On the other hand, there is another finding which states that human action without goal orientation rarely leads to a desired result. In this context, planning appears to be an appropriate way to achieve a goal, at least if one understands it to mean that one is aware of the consequences of certain actions and checks whether they bring you closer to the desired goal. So far, so logical.

Unfortunately, people – including businesspeople – rarely act logically, but psychologically. This means that even if they do not question the sense of medium-term integrated P&L, balance sheet and cash flow planning, they often make cognitive mistakes in formulating their planning premises. These can essentially be empirically subsumed under six psychological behaviour patterns:

1st planning error:

Faith in the past

In view of the growing structural dynamics due to networking, globalisation and the increasing digitalisation of the economy, a projection of the past into the future is dangerous.
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>> You can never plan the future according to the past.<<
(Edmund Burke)

01

2nd planning error:

Overconfidence in oneself

Self-overestimation (or distortion of reality or "overconfidence bias") is particularly common among formerly particularly successful managers or businesspeople. First of all, there is the overestimation of one's own abilities and possibilities. As a result, decisions are made that cannot be mastered with the existing competence profile.
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>> Overestimation of oneself nips success in the bud.<<
(Otto von Bismark)

02

3rd planning error:

Misconceptions in planning

The cognitive trap of the planning error leads to an underestimation of the time and/or resources required. We have all probably come across this phenomenon in the context of various professional or public projects. However, this behaviour pattern is particularly dangerous in the case of critical planning assumptions.
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>> Be critical and conservative in your assessment of the target variables relevant to success.<<
(Georgiy Michailov, Struktur Management Partner)

03

4th planning error:

Unrealistic reference points

It is hard to believe how much so-called "anchor values" or reference points, once embedded in consciousness, can influence the assessment of future premises and distort evaluations.
> Read whole article

>> Past anchor values distort future target values.<<
(Georgiy Michailov, Struktur Management Partner)

04

5th planning error:

Wrongly understood need for consistency

The fifth psychological trap is based on the human and widespread need for consistency. People are reluctant to question or even reverse a decision once it has been made, as this could be interpreted as a sign of incompetence or weakness.
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>> Who wants to be unfaithful to themselves?<<
(Georgiy Michailov, Struktur Management Partner)

05

6th planning error:

Irrationality in dealing with losses
(„Sunk Cost Effect“)

Psychologically particularly powerful and economically particularly dangerous is the so-called sunk cost effect.
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>> So much has already been invested and success is surely just around the corner.<<
(an entrepreneur)

06

Conclusion:

In annual planning situations it is best to work with an emotionally unburdened sparring partner. Then the "strategic" segments, in which values have been destroyed over the years, are more realistic to evaluate and more profitable to handle.

Your personal contact:

Georgiy Michailov
Managing Partner
Dipl.-Volkswirt, B.M. (TSUoE)
Email to Georgiy Michailov
T +49 (0)221 91 27 30 - 15

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