Estimation and risky behaviour: How the act of estimation will cause your project to become riskier that you ever intended it to be.
Everybody understands that most projects estimates are wrong. However, do we understand all of the factors that contribute to this error? More importantly, are we aware of how this error affects subsequent behaviour on that project?
In this session, I demonstrate how the anchoring effect is not only a major contributing factor to that underestimate, but also how it causes the estimate to be given a far greater precision than is actually warranted.
However, things become considerably worse once the project is underway. This underestimate causes the project team to perceive that they are in a loss situation (rather than one of gains). This perception drives the project team’s behaviour accordingly, causing them to unconsciously engage in far riskier behaviour than either they intend to or that their parent organisation has an appetite for.
Combining concepts from the anchoring effect heuristic and also from the Nobel Prize winning prospect theory, I get users to experience for themselves how on most projects their own decision making behaviour becomes skewed towards additional and sub-optimal risk taking.
If you have ever looked back at a project and wondered how the estimate got so wrong and just why ended up taking so many risks, this is the talk for you.