Project Decision and Risk Analysis


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Project Risk Management and Decision Analysis: Articles and White Papers 

Estimations in Project Management

Biases in Estimation

Let’s go back to our example. When the programmer is attempting to find an acceptable answer for the project manager (see the last item in the programmer’s thinking process), he gives a biased answer, in which he is motivated to come up with the comfortable timeline for himself. This is called motivational bias. 

In addition, estimates can be influenced by external factors, such as release dates that can be another source of motivational biases. We know what we want to achieve, and we make our estimates to make this goal achievable. In our example, the project manager has a project with five activities which must be completed in five weeks for a release date. When he first starts to build the project schedule, he sets a duration of one week for each activity, in this way he will be able to deliver the project on time. He knows that his estimates are probably not accurate, but he will adjust them after his discussion with his team. But due to the release date, he will be motivated to accept any estimates that will not upset his plan. 

So we see how the actual estimates are being skewed because of bias. Motivational biases are often easy to identify, but difficult to correct. They are like a disease: you know that you have flu, but cannot do very much about it rather than wait until it runs its course. In our example, the motivational biases of both of our actors can compound themselves. The programmer’s biased estimate meshes nicely with the project managers motivational bias of completing the project on time. As the programmers estimate won’t disturb the planned release date, it is placed in the schedule without and real scrutiny.

Another type of mental error is called a cognitive bias. In 2002, Daniel Kahneman was awarded the Nobel Prize in economics for “having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.” Interestingly, the Nobel Prize in economics was awarded to a psychologist rather than an economist. Kahneman’s research significantly changed our understanding of human behavior, not only in economics, but also in other areas including project management. 

According to the theory he developed together with Amos Tversky, people use heuristics or “rules of thumb” as a basis for their judgments. These heuristics are essentially certain simplification strategies or mental “shortcuts”. In many cases, these heuristics work reasonably well. However, in some cases they provide a predictable faulty judgment or cognitive bias. 

One of such “rule of thumb” is the anchoring heuristic. Again, let’s return to our original example of estimation. The programmer tries to recall his previous projects to help estimate the duration of the current activity. He instantly comes up with a number, for example five days. Then, he compares this estimate to the other projects to determine if five days are sufficient. He may start to think that the task duration can be between four and six days or between three and seven days, but his analysis will always remain close to his original estimate of five days. The problem is that five days might be completely wrong, but it will “anchor” all future analysis.

Another type of mental shortcut is the availability heuristic. To explain how the availability heuristic can affect our estimates, let’s do a very simple psychological exercise.

1. Take three seconds to try to recall all of the projects or large activities you were involved in the last year.
2. Now repeat step 1, but take 15 seconds
3. Repeat steps 1 and 2 taking 2 –3 minutes for each step and write down the results.



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