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Agile and the PMO Working Together
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Estimating and Forecasting Biases in Projects - Part IV - Lack of Feedback
November 12, 2008 | Author: PM Hut | Filed under: Project Management Best Practices, Scheduling
Estimating and Forecasting Biases in Projects - Part IV - Lack of Feedback (#5 in the series Choosing the Wrong Portfolio of Projects)
By Miley W. Merkhofer
Forecasting errors are often attributed to the fact that most people don’t get good feedback about the accuracy of their forecasts. We are all fairly good at estimating physical characteristics like volume, distance, and weight because we frequently make such estimates and get feedback about our accuracy. We are less experienced (and get less verification) when making forecasts for things that are more uncertain. Weather forecasters and bookmakers have opportunities and incentives to maintain records of their judgments and see when they have been inaccurate. Studies show that they do well in estimating the accuracy of their predictions.
Advice for improving forecasts and estimates includes:
- Think about the problem on your own before consulting others and getting anchored to their biases.
- Be open-minded and receptive. Seek opinions from multiple and diverse sources. Tell them as little as possible about your own ideas beforehand.
- Tell people you want “realistic” estimates. Ask about implicit assumptions.
- Encourage the estimation of a range of possibilities instead of just a point estimate. Ask for low and high values first (rather than for a middle or best-guess value) so as to create extreme-valued anchors that counteract the tendency toward overconfidence around a middle value.
- Require project proponents to identify reasons why what they propose might fail.
- Give people who provide you with estimates knowledge of results as quickly as possible.
- Use network diagrams, scenario building, and similar techniques to identify and define the sequencing of component activities. A major value of such techniques is that they help reduce the likelihood that some necessary, but less visible, activities, such as procurement and training, aren’t overlooked.
- Routinely use logic to check estimates. As a simple example, if you have 2 months to complete a project estimated to require 2000 hours, verify that you have a sufficient number of FTE’s available.
Miley W. (Lee) Merkhofer, Ph.D., is an author and practitioner in the field of decision analysis who specializes in assisting organizations in implementing project portfolio management. He has served on advisory panels for several government agencies and has received grants and research awards for work in the area. Lee is an editor of the journal Decision Analysis.
Prior to becoming an independent consultant, Lee was a Partner of PriceWaterhouseCoopers, where he founded that organization’s capital allocation and project prioritization business practice. Lee is a founding partner of Folio Technologies LLC, a provider of web-based, project portfolio management software.
Lee received his Ph.D. in engineering economic systems from Stanford University. He is the author of the book Decision Science and Social Risk Management and co-author of the book Risk Assessment Methods..
Additional papers on project portfolio management can be found on Lee’s website, www.prioritysystem.com. E-mail: lmerkhofer@prioritysystem.com.
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