Project management is the art of making the right decisions. To be effective as a project manager, you must know how to make rational choices in project management, what processes can help you to improve these choices, and what tools are available to help you through the decision-making process. Project Decisions: The Art and Science is an entertaining and easy-to-read guide to a structured project decision analysis process. This valuable text presents the basics of cognitive psychology and quantitative analysis methods to help project managers make better decisions. Examples that portray different projects, real-life stories, and popular culture will help readers acquire the essential knowledge and skills required for effective project decision-making.
Readers will be able to: •Understand psychological pitfalls related to project management •Establish a creative business environment in their organization •Identify project risks and uncertainties •Develop estimates of project time and cost based on an understanding of human psychology •Perform basic quantitative and qualitative risk and decision analysis •Use event chain methodology in managing projects •Communicate the results of decision analysis to decision-makers •Review project decisions and perform adaptive project management •Establish a project decision analysis process in their organization PLUS — Test your own judgment through a quiz that examines your intuition!
Table of Contents
About the Author
Table of Contents
TEST YOUR JUDGMENT
ANSWERS TO JUDGMENT QUIZ
PART 1: Introduction to Project Decision Analysis
CHAPTER 1: Project Decision Analysis: What Is It?
The Burden of Poor Decision-making
Why Do We Make Wrong Decisions?
Approaches to Decision-making
Decision Analysis as a Process
Normative and Descriptive Decision Theory
Driving Forces behind Project Decision Analysis
A Little Bit of History
Decision Analysis Today
CHAPTER 2: “Gut Feel” vs. Decision Analysis: Introduction to the Psychology of Project Decision-Making
Human Judgment Is Almost Always to Blame
Blink or Think?
Cognitive and Motivational Biases
Heuristics and Biases
Anchoring and Adjustment Heuristic
Time Delay Traps
Frames and Accounts
Training for Project Decision-Making Skills
CHAPTER 3: Understanding the Decision Analysis Process
When Decision-Makers Go Bad
The Decision Analysis Manifesto
The “3C” Principle of Project Management
Decision Analysis Process vs. the PMBOK® Guide’s Project Risk Management
Decision Analysis and Other Business Processes
Phases of the Decision Analysis Process
Phase 1. Decision-Framing
Phase 2. Modeling the Situation
Phase 3. Quantitative Analysis
Phase 4. Implementation, Monitoring, and Review
Big and Small Decisions
The Value of Project Decision Analysis
CHAPTER 4: What Is Rational Choice? A Brief Introduction to Decision Theory
Which Choice Is Rational?
The St. Petersburg Paradox
Risk-Taker vs. Risk-Avoider
Expected Utility Theory
Extensions of Expected Utility Theory
How to Use Expected Utility Theory
Descriptive Models of Decision-Making
CHAPTER 5: Creativity in Project Management
Creativity and Decision-Making
Psychology of Creativity
Framing and Perceptual Blocks
Cultural, Organizational, and Environmental Blocks
CHAPTER 6: Group Judgment and Decisions
Psychology of Group Decision-Making
Group Interaction Techniques
Tools for Facilitating Discussions
A Few Words about Game Theory
CHAPTER 7: Are You Allowed to Make a Decision? Or the “Frustrated Developer’s Syndrome”
What Is FDS?
Why FDS Is a Problem
How Does FDS Spread?
Three Common Myths about FDS
Myth 1: Our organization is not suitable for an FDS-free environment
Myth 2: When companies implement organizational processes, FDS results
Myth 3: An FDS-free corporate culture leads to anarchy
The Roots of FDS
The Second Russian Revolution
PART 2: Decision-Framing
CHAPTER 8: Identifying Problems and Assessing Situations
Who Are the Players?
Identifying Problems and Opportunities
Assessing Business Situations
Some Tools and Techniques
CHAPTER 9: Defining Project Objectives
Different Objectives and Different Criteria for Decision-Making
Aligning Project Objectives
Decision Analysis as an Art of Tradeoffs
Project Objectives Hierarchy
CHAPTER 10: Generating Alternatives and Identifying Risks
Identifying Risks and Uncertainties
Risk Breakdown Structures
PART 3: Modeling the Situation
CHAPTER 11: The Psychology and Politics of Estimating
How Do We Make Estimates?
How We Think When We Make Estimates
Impact of Politics on Estimation
Impact of Psychology on Estimation and the Rule of Pi
Other Cognitive Biases in Estimating
Other Explanations of Problems with Estimation
Where Does the Problem Lie—In Psychology or Politics?
Many Mental Errors and One Wrong Estimate
Never Make a Wild Guess
Collect Relevant Historical Data
Perform Reality Checks
Conduct an Independent Assessment
CHAPTER 12: Project Valuation Models
Model of the Project
The Critical Path Method
The Critical Chain Method
Event Chain Methodology
Modeling with Influence Diagrams
The Agile Approach to Project Modeling
CHAPTER 13: Estimating Probabilities
Approaches to Estimating Probabilities
Subjective Estimation of Probabilities
How We Subjectively Assess Probability and Risk
Methods of Eliciting Subjective Judgments in Project Management
What If a Decision Is Sensitive to Probability?
Qualitative Risk Analysis
PART 4: Quantitative Analysis
CHAPTER 14: Choosing What Is Most Important: Sensitivity Analysis and Correlations
What Are Correlations? Why Do We Need to Analyze Them?
Sources of Correlations in Projects
Psychology of Correlation and Causation
How to Improve Your Judgment
Quantitative Analysis of Correlations
Correlations between Tasks
CHAPTER 15: Decision Trees and the Value of New Information
What Is a Decision Tree?
Why Project Managers Avoid Decision Trees (and Why They Shouldn’t)
Converting Project Schedules into Decision Trees
The Value of Perfect Information
The Value of Imperfect Information
CHAPTER 16: What Is Project Risk? or PERT and Monte Carlo
How Much Will It Really Cost?
The Monte Carlo Technique
Which Distribution Should Be Used?
How Many Trials Are Required?
Analysis of Monte Carlo Results
Sensitivity and Correlations
Chance of Task Existence
Is Monte Carlo the Ultimate Solution?
CHAPTER 17: “A Series of Unfortunate Events,” or Event Chain Methodology
How Events Can Affect a Project
Basic Principles of Event Chain Methodology
Principle 1. Moment of risk and state of an activity
Principle 2: Event chains
Principle 3: Critical event chains
Principle 4: Analysis using Monte Carlo simulations
Principle 5: Performance-tracking with events and event chains
Principle 6: Event chain diagrams
Event Chain Methodology Phenomena
Event Chains and Risk Mitigation
Resource Leveling Based on Events
Delays in Event Chains
How to Use Event Chain Methodology
Example of Event Chain Methodology
Event Chain Methodology and Mitigation of Psychological Biases
Work Breakdown Structure + Risk Breakdown Structure + Analysis = Event Chain Methodology
CHAPTER 18: The Art of Decision Analysis Reporting
How to Communicate the Results of Decision Analysis
Motivational Biases in Reporting Decision Analysis Results
Put It in Perspective
Presentations Must Have Meaning
The Power of Fear
CHAPTER 19: Making a Choice with Multiple Objectives
What is Multi-Criteria Decision-Making?
The Psychology of Balancing Multiple Objectives
Two Approaches to Multi-Criteria Decision-Making
Ranking Criteria with the Scoring Model
Advanced Methods of Multi-Criteria Decision-Making
PART 5: Implementation, Monitoring, and Reviews
CHAPTER 20: Adaptive Project Management
Adaptive Management As Part of Project Decision Analysis
Principles of Adaptive Management
Principle 1: Use actual project data in combination with original assumptions
Principle 2: Minimize the cost of decision reversals. (“Try not to kill the cow.”)252
Principle 3: Make small, sequential decisions
Principle 4: Support creative business environments
Principle 5: Identify and fix problems early (avoiding behavioral traps)
The PMBOK® Guide Approach to Project Executing, Monitoring, and Controlling
CHAPTER 21: Did You Make the Right Choice? Reviewing Project Decisions
Why Do We Need Post-Project Reviews?
How Could We Not Foresee It?
“I Knew It All Along”
Overestimating the Accuracy of Past Judgments
The Peak-End Rule
The Process of Reviewing Decisions
Corporate Knowledge Base
CONCLUSION Does Decision Analysis Provide a Solution?
Common Misconceptions about Decision Analysis
Misconception #1: The decision analysis process is not beneficial because it does not ensure project success
Misconception #2: Decision analysis adds new levels of bureaucracy
Misconception #3: Only organizations with mature project management processes can benefit from decision analysis
Why Do We Believe that the Decision Analysis Process Is Important?
APPENDIX A Risk and Decision Analysis Software
APPENDIX B Heuristics and Biases in Project Management
APPENDIX C Risk Templates
APPENDIX D Multi-Criteria Decision-Making Methodologies