Decision-Making In Project Management.ppt

2012 Intaver Institute Decision-Making In Project Management Introduction to project decision analysis Intaver Institute Inc. 303, 6707, Elbow Drive S.W, Calgary, AB, Canada Tel: +1(403)692-2252 Fax: +1(403)459-4533 Example: San Francisco Bay Bridge 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 Burden of Poor Decisions Cost of poor decisions in pharmaceutical industry is passed to consumers Dry hole cost in oil and gas industry is passed to motorists Wrong policy decisions by government will be passed to taxpayers You paint your deck without properly removing old paint. You have to do it again next year. Why is decision-making so complicated ? Most problems in project management involve multiple objectives Project managers are always dealing with uncertainties Project management problems may be very complex Most projects include multiple stakeholders How are decisions made? Advocacy-based approach Decision Analysis Process Two decision-making approaches: No uncertainties – No alternatives No alternatives – No decisions Do We Have a Solution? Theory of Probability and Statistics Decision Analysis Process Decision Science Psychology of Judgment and Decision Making 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% Other factors related to human error – 5% A 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. Blink or Think? Intuitive Thinking Vulcans as Mr. Spock make logical choices, but not necessarily the best When you think automatica