Why Good Project Managers Make Bad Choices: An Introduction to Project Decision-Making Lev Virine, Ph.D. Intaver Institute Inc.

How Decisions Are Made?

Example: San Francisco Bay Bridge Construction Beginning 2005 – Decision to stop construction Later 2005 – Decision of continue construction based on original project Result: $81M cost overrun. Will be paid by California taxpayers and toll payers

Human Judgment Is Always to Blame Insufficient Knowledge – 36% Underestimation of influence – 16% Ignorance, carelessness, neglect – 14% Forgetfulness – 13% Relying upon others without sufficient control – 9% Objectively unknown situation – 7% This study by Swiss Federal Institute of Technology in Zurich analyzed 800 cases of structural failures where engineers were at fault. In these incidents 504 people were killed, 592 injured and millions of dollars of damage incurred.

Who Intentionally Sabotages a Project?

What is it?

Blink or Think?

Gut Feel Is Good But Not Always Good If we don’t need to learn how to breathe, why do we need to learn how to make better decisions?

Power Of Illusions

Test: Are You a Rational Thinker?

Test Your Memory

Quality Control, Project Execution, Risk Management, Project Time Control, Procurement Management, Project Scope, Meeting with Stakeholders, Project Sponsor, Gantt Chart, Project Cost Analysis, Agile Method, Human Resources Management, Critical Chain. Test Your Memory

What Words Are Missing? Project Sponsor, Project Management, Bank Robbery, Project Cost Analysis

Power of Illusions

Bellagio Las Vegas: How Many Floors Are There?

Who Is Happier?

Illusion Of Happiness

Test Your Memory

Vulcans Are Doing Better If somebody claims that he or she always making good decisions: check ears.

Heuristics and Biases The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2002 Daniel Kahneman for having integrated insights from psychological research into economic science, especially concerning human judgment and decision- making under uncertainty Decision makers use “heuristics”, or general rule of thumb, to arrive to their judgments. In certain instances they lead to systemic biases.

Predicable Mental Mistakes: Regardless who we are: Nationality Profession Position Gender Language …. We are making similar mental mistakes. Solution: Decision Analysis

Availability Heuristic Welcome to Regina Casino This year 168,368 people lost $560M here. 5% of our guests divorced, 1% became alcoholics, and 0.4% committed suicide.

Are You Afraid of Asteroids?

Anchoring: Compare Bellagio with Paris

Anchoring: Burkin Bag

Representativiness: Where Is It?

Why Did it Happen?

Emotions affect our decision-making.

Some Illusions in Project Management Illusion of Control Illusion of Consistency Illusion of Time (“There is always time available) Illusion of Simplicity (“Devil Is in Details”) Illusion of Short Term Reward

Illusion of Consistency – Sunk Cost Trap People tend to resist any inconsistencies for themselves and others The ability to change direction based on external input is an important skill for project managers.

Illusion of Time Rule of Pi: The actual duration (cost) of an activity will be about pi (3.1415…) bigger than the original estimate, even if the estimator was aware of this rule.

Simple Remedy Quantitative Decision Analysis:  Sensitivity Analysis  Scenario Analysis  Decision Tree Analysis  Analysis of Value of Information  etc. Estimate of expected value of the choices Something more advanced:

Expected Value

Expected Value of The Lottery Ticket Price:$1 Tickets Sold:100,000 Profit and Taxes:$50,000 Total Prices:$50,000 Expected Lost for One Ticket: 50c

Expected Value in Project Management Always have an alternative Always calculate expected time, cost, duration, efforts, etc when making decision It may be not very accurate, but at least your decisions will be consistent

Decision –Making Training

Project Decisions

Contact Information Lev Virine Phone: 1(403)