Cognitive biases as project & program complexity enhancers

the Astypalea project

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President, ECONTECH SA, President, PMI Greece Chapter, President, ASCE Hellenic Section

Theofanis C. Giotis, MSc, MCT, PMP, PhD C

President and CEO, 12PM Consulting, President and CEO, ITEC Consulting, Past President and Board member, PMI Greece Chapter

Abstract

The purpose of this paper is to illustrate the role of cognitive biases as complexity enhancers in programs and projects. Research has validated that these biases considerably affect individual and group behaviors. Such behaviors, may add considerable complexity during the life cycle of a program or project. A brief review of complexity in projects is presented, with an emphasis on cognitive biases as considerable root causes of complexity. Further, a case study where these biases were anticipated, recognized, dealt and in certain cases even mitigated before enhancing further the already present complexity of the whole project, is presented. The case study primarily illustrates stakeholder management and more specifically issues, risks, and problems encountered and navigated at the front end of a large, sustainable, unique, complex development project for an entire Greek island.

Complexity in Programs and Projects

Since the early 1980's, not only has the project management discipline catapulted but so has the complexity of projects. With projects increasing dramatically all over the world and taking centre stage as delivery vehicles for constructs, products, and services in most organizations, project management is a core business activity vital to the organizations' vision, mission, and business results. Project complexity has also dramatically increased due to globalization, new rapidly developing technologies and fragmented supply chains (PMI, 2014, p. 1). For this reason, PMI has undertaken considerable interest in project complexity and, for many years, has sponsored research work and study groups. Recent PMI publications include Navigating Complexity: A Practice Guide (PMI, 2014) and Pulse of the Profession™ In-Depth Report: Navigating Complexity (PMI, 2013a).

The key causes that yield a complex project environment have been identified (Antoniadis, Edum-Fotwe, & Thorpe, 2010; Cavanagh, 2012; Cooke-Davies, 2011; PMI, 2014; and Remington & Pollack, 2008) as the various social, political, and cultural influences and pressures; and the project system's environment, connectedness, and interactions between project components, unpredictability of emerging issues, uncertainty of future events as well as the level of organizational support provided. Even more important to identifying complexity is determining ways to assess, respond, and navigate it.

Complex systems have always existed; nature itself represents complexity alive, at work. Being unique, as vehicles of change devised by humans, projects are enveloped within complexity and therefore have inherent elements of uncertainty and ambiguity. Further, projects require strategic processes, human and other resources, investments, social and political actions, and projects are exposed to unpredictable changes that reflect power struggles and social resistance. Projects in a complex environment consist of interconnected elements or components, working together as parts of an interdependent web, forming a complex organized whole, set to perform a predetermined function (i.e., to create change). The words “components” and “elements” have the same meaning for the purposes of this paper. The word “agents” on the other hand, signifies a component of a project that seeks to maximize some measure of its properties (its own goals) or its “fitness” by evolving over time. Usually, agents in projects with complexity are people, management and knowledge structures, or issues.

The Greek word “systema,” from which the English word originates, means an organized whole. Projects in a complex environment are dynamic adaptive systems, parts of larger systems sometimes having individually simple components able to create complex behavior without central control. Many of their components exhibit behaviors that are recursive and disproportionate and change over time. Projects in a complex environment may extend over long periods during which, changes in technology, socioeconomic conditions, social awareness. and/or organizational value appreciation can occur. Under such conditions, the effects they produce usually define these projects and not strictly the solution they provide. In other words, an envelope of objectives and not specific deliverables determines project success.

Project size, project duration, technology issues, and human interaction and intervention enhance complexity. Complexity increases primarily by the number of active interconnected components, especially agents, which exhibit interconnectedness, recursiveness, uncertainty, and instability. Once the practitioner understands the various complexity components that could or are impacting the project or program, there are organizational structures that should be put in place to support the alignment of people and project or program objectives in order to foster its successful delivery (Maylor, Turner, & Murray-Webster, 2013; Morris, 2011; and Varanini & Ginevri, 2012).

According to PMI's latest publication, Navigating Complexity: A Practice Guide (PMI, 2014), from a project and/or program perspective, three categories (groups of causes) of complexity may be encountered:

  • Human Behaviour (individual behaviour, group behaviour [organizational/social/political], communication and control, and organizational design and development)
  • System Behavior (connectedness, dependency, and system dynamics)
  • Ambiguity (uncertainty and emergence)

Cognitive Biases

In this paper, the focus is on human behavior and more specifically on the cognitive biases and heuristics that determine such behavior. Social, political, and cultural human component relationships within the project boundaries (open to interaction with the project environment) as well as with components from other (usually neighbouring) systems constantly interact during the project life cycle. Projects need to coevolve effectively with their environment. In reality, the vast majority of projects are much more complex than originally envisioned. Most of the time, this is due to human behaviors, as a result of human biases, their interactions, and the resulting human interrelationships. The result is that most projects are much more unpredictable than technical project management models lead us to believe.

When humans act to achieve an endeavor, they do so both on their own behalf and on behalf of the groups and organizations of which they are a part. Individual and group behaviors have been studied extensively over the last 30 years. These studies demonstrate the paramount importance of the cognitive biases in decision making and actions taken towards that endeavor.

While clearly not an exhaustive list, (there are over a hundred cognitive biases studied and recorded—and the list is not final), the study of major cognitive biases and heuristics as encountered in projects, makes us understand how complexities arising from human behaviors can affect the project landscape.

A cognitive bias is a pattern of deviation in judgment that occurs in particular situations. This term is used to describe many effects in the human mind, some of which may lead to perceptual distortion, inaccurate judgment, or illogical interpretation (from: http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Cognitive bias.html).

These biases affect how individuals form their beliefs, make decisions, and behave in both normal and stressful environments. Thus an individual or a group can mentally construct a subjective social reality from their perception of the input and this will greatly influence their behavior as an individual or group.

Kahneman (1994), the winner of the 2002 Nobel Prize for economics, disproved that humans are always rational players and demonstrated that humans frequently make decisions and act irrationally. This irrationality is mainly due to cognitive biases. These biases manifest automatically and unconsciously over a wide range of human reasoning and frequently result in seeing things that are not really there, in being nonsensical, in just being wrong, and in unintelligently refusing to see the facts. When cognitive biases influence individuals, real—or problematic—complexity may arise. When these biases impact a group, an organization, or a business, the problems can be dramatically worse.

This paper will examine the biases that have a more immediate impact in the complex project environment as experienced by the authors. The cognitive biases that will be briefly reviewed are listed below with a brief explanation: The best-known bias, classified under the optimism bias, is wishful thinking.

  • Optimism Bias—Overly optimistic, overestimating favorable outcomes and underestimating unfavorable outcomes. Excessive confidence in the individual's beliefs, knowledge, and abilities.
    • Planning Fallacy—Underestimating the time and costs needed to complete a task.
    • Wishful Thinking—Believing something is true because of a desire or wish.
    • Confirmation Bias—Focusing on information that affirms the individual's beliefs and assumptions.
    • Overconfidence—Making fast and intuitive decisions when slow and deliberate decisions are necessary. It exists when individuals are overly optimistic in their initial assessment of a situation and then are slow to incorporate additional information about the situation into later assessments because of their initial overconfidence. This bias results in making fast and intuitive decisions when slow and deliberate decisions are necessary.
  • Loss Aversion—This occurs when people prefer to avoid losses than acquire gains. Some studies have indicated that losses are twice as powerful as gains.
    • Status Quo Bias—The human preference for the current state of affairs. Any change from this baseline is considered a loss. This bias interacts with loss aversion and the combination of both biases makes a very powerful resistance to change. One common result is that people often demand much more to give up an object than they would be willing to pay to acquire it.
    • Anchoring—In the process of making estimations, people start with an implicitly suggested reference point (anchor) and make adjustments to it in order to reach their estimate, even when the anchor proves along the way to be irrelevant.
    • Ostrich Effect—Avoiding risky or difficult situations or failed projects at the cost of learning. This bias, in most cases, makes certain that human mistakes will be repeated and leads to “the sunk cost fallacy” which leads to a strategic error called “escalation of commitment.” Facts and situations that people do not wish to discuss are usually the things people need to discuss most.
  • Framing Effect—Using an approach or description that is too narrow for the situation or issue. People see and interpret situations through the narrow lens of their own experiences, beliefs, and assumptions.
  • Hindsight Bias—Creeping determinism. The inclination to see past events that have already occurred as being more predictable that they were before they took place. The attitude of: I knew it all along. People tend to misremember their predictions in order to exaggerate in hindsight what they knew in foresight. The Hindsight bias deters from learning and critical thinking. If an individual is unable to acknowledge his predictions as wrong, he can never be right in similar situations.
  • Confirmation Bias—A tendency for people to favour information that confirms existing beliefs.
  • Strategic Misrepresentation—Strategic misrepresentation is the planned, systematic distortion or misstatement of facts in response to incentives in the budget process. Quite often planners, business and financial analysts, and other professionals deliberately and strategically overestimate benefits and underestimate costs in order to increase the chances of project approval yielding to pressures (e.g., competition for scarce funds, personal or organizational gains by project approval, etc.).

Flyvbjerg (2007, 2008, and 2013) has demonstrated that, for programs and projects, the most influential complexity enhancers are the optimism bias and strategic misrepresentation. Additionally, a major cognitive bias associated with group behavior is known as groupthink, which refers to the inadequate decision making that results from the group's desire to achieve conformity and harmony. In groupthink, while the decisions and beliefs are shared among the group, loyalty and conformity join to filter out effectively any information that runs contrary to those beliefs. The effects of groupthink in a project setting can be calamitous, particularly in an environment of frequent change (PMI, 2014).

ASTYPALEA PROJECT CASE STUDY

Back in 2005, a Greek entrepreneur discovered to his amazement, that given the time, initial funds, and establishment of excellent human relations with the local population and ensuring top-notch stakeholder and communications management, the real estate of the entire island could be acquired and managed. Henceforth, by securing all the land, the island could be developed in a holistic, controlled, and sustainable way. Such a project when organized, planned and implemented properly could create an enormous development potential for the investors, the developers, and the island community at large. Thus the Astypalea Project (AstyProject) was born.

This project was unique, at least in the Eastern Mediterranean, with regard to the control of the total real estate of an inhabited island. This is due to a historic land distribution decree, applicable only to this island, where very large parcels of land were controlled by seven landlords, two of whom were and still are local institutions. The decree, made by the Ottoman Sultan in 1823, has been respected and maintained also by the Italian (1912 to 1944) and Greek (1947 to present) Governments. The island's most interesting sites were secured for the project through land purchases and/or partnerships for the purpose of creating a land bank for the entire island.

Astypalea comprises two rock masses that are joined by an approximately 100-meter wide isthmus. It is one of the most beautiful islands in Greece. It spans just over the size of Mykonos with similar climate, coastline, landscape, and architecture. The island has the shape of a butterfly, with rocky terrain, low hills, dry climate, spectacular beaches and coves, and a remarkably picturesque urban settlement containing a unique medieval castle. The entire cluster of Astypalea islands and surrounding islets has been characterized by the European Union as a region of particular natural beauty and is protected by special legislation. Most of the island's areas are in a pristine, natural state.

The vision was to create an upper-scale vacation destination island of extraordinary aesthetic appeal, proficiently planned and managed and to develop simultaneously, in a sustainable way, the entire island's local economy (avoiding uncontrollable development from which Mykonos or Ibiza have suffered recently).

The mission has been (a) to plan, create, organize, and manage the enterprises and projects through which all set strategic goals will be reached; (b) to plan, communicate, adapt, create consensus, and partner the local institutions and island's permanent population towards the set strategy; (c) to plan, communicate, and create approvable programs and projects to be funded by regional, national, and E.U. cohesion and structural funds, and manage them to completion, maintaining the satisfaction of all stakeholders; and (d) communicate, convince, and obtain infrastructure funding and approvals from regional and central authorities toward the fulfillment of all strategic goal purposes.

The main characteristics of the island of Astypalea are:

  • Size: About the size of Mykonos, with 172 km of distinctive, unspoiled rocky coastline, with coves, caves, and sandy/pebble beaches. Total surface area: 102,000,000 square meters (25,205 acres) (including: the island and a number of nearby municipally owned islets)
  • Population: 1,200 permanent inhabitants in two urban settlements.
  • Tourism: Approximately 4,000 holiday visitors per year with an average one-week stay.

The island has been surveyed terrestrially in order to measure parcels and determine parcel boundaries. A Land Registry for the island has been created using private funding with the cooperation of the municipal authorities in accordance with Greek Cadastre regulations. Land ownership disputes have been identified, negotiated, and resolved.

An initial zoning plan was studied, developed, and agreed with the local authorities (municipality, institutions, and local professional organizations).

Major needed infrastructure projects have been identified planned, financed by the National and European Union 3rd cohesion plan funds, and executed; most are now at a delivery/closing phase. These included: sewage network and sewage treatment plant for the main urban settlement, solid waste sanitary landfill for the island, certain extensions of the island's primary road network (about 20 km), extension of the commercial harbour, and a small marina for yachts.

The initial master plan for the island's sustainable development included the development of:

  • 5,000 vacation and permanent homes totalling 600,000 square meters
  • 3 small luxury resort hotels (about 45,000 square meters)
  • A mega yacht marina with surrounding utility, commercial, and entertainment facilities
  • An 18-hole golf course
  • Four wind farms
  • Two photovoltaic farms
  • Construction of several small dams for storm water capture to be utilized mainly for the irrigation of the golf course
  • Construction of about 70 km of road network

In this paper, the key-stakeholders’ cognitive biases that were encountered/managed/mitigated and the resulting complexity they introduced to the whole project, are presented.

Once the initial project portfolio, programs, and projects were conceived and set for presentations to the local authorities, institutions, and community, we recognized that for the success of the whole enterprise, well-formulated policies, good quality communications, and achievement of consensus at all phases with all major stakeholders were of paramount importance for the successful delivery of the AstyProject.

Front-end management is crucial to successful project delivery (Morris, 2013). At this stage, we estimated expected outcomes using historical data from various similar projects in Greece and throughout the world and kept our partners—the island community—informed through various institutions, by giving access to all data, calculating procedures, and resulting estimates. Flyvbjerg, Holm, and Buhl (2002, 2005) demonstrated that estimates of costs and benefits, particularly those of large infrastructure and real estate projects, are very often highly inaccurate and biased. Numerous other researchers have validated these findings (Flyvbjerg, 2013). Furthermore previous experience from large infrastructure projects, from Olympic Game venues and capital facilities, which some of the core team members had, alerted us to scrutinize to our best abilities the entire project's front end. In order to establish estimate validity, due diligence towards data and processes became top priority.

From the onset, a further top priority during project conceptualization was that all project portfolio critical stakeholders were diligently managed:

  • The island Municipality,
  • The regional authorities,
  • The private-public local institution (being a substantial landowner),
  • The five landowners who owned 15% of the total island, and
  • The island's population.

These stakeholders initially created a very suspicious, if not hostile, external environment for the whole project. Based on historical data of previous, similar in nature but considerably smaller and less complex projects, we knew it was of critical importance to reach consensus with the local institutions and population-at-large; otherwise the project was doomed to fail. All historical data substantiated this basic but neglected fact. We were fully aware of the project complexity and of the absolute need for local community consensus resulting in the necessity for partnering with local institutions on certain projects of the AstyProject portfolio. Thus we delved into knowledge areas such as project complexity (Kerzner & Belack, 2010; Santa Fe Institute, 2012; and Snowden & Boone, 2007) project unpredictability (Kahneman, 2011; Mlodinow, 2011; and Taleb, 2012), and on the role that cognitive biases play in human decisions both for individuals and for groups. (Flyvbjerg, 2013; (Hofstede, 2010; and Lovallo & Kahneman, 2003). The same critical thinking, regarding cognitive biases, was applied towards our team. Our main concern at the time was the planning fallacy (Kahneman & Tversky, 1979). This is a systematic cognitive bias causing humans to unconsciously underestimate costs, completion times, and risks of planned actions and overestimate the benefits of such actions.

During our initial deliberations with the local population, a replicable pattern in perceptual distortion emerged, resulting in inaccurate judgement and illogical interpretation. These were the results of multiple confounded past perceptions, for example, personal experiences, word of mouth, distrust towards “outsiders,” Greeks or foreigners bearing gifts, etc. Our understanding was that most of the local inhabitants were thinking along the same lines, thus their common beliefs were both true and important to them. Further, under this line of thinking, they initially tended to make incorrect judgments about the probability that our suggestions and/or proposals were valid because of the ease of such rejective mental computations.

After initial residence on the island and after introductory presentations and discussions with the local population, we were able to recognize the existence of the following biases:

  • Hindsight
  • Anchoring
  • Status quo
  • Framing effect
  • Overconfidence
  • Representativeness
  • Groupthink
  • Strategic misrepresentation
  • Ostrich effect

The local community more than a year to be persuaded about the seriousness, validity, and mutual benefit of the project conceptualization proposals we were discussing with them. Agreements in principle for them to sell large parcels of private land and to lease institutional lands for 99 years were reached only when the AstyProject Master Plan was finally agreed upon. This master plan was jointly developed with local and regional authorities, local institutions, and the island population at large. It addressed job creation, sustainable development, and economic gains for the population, modern public services, the island's infrastructure development, and environmental benefits.

At that stage, many psychological factors were at work to maintain the momentum. A uniqueness bias—the project was a first for the Eastern Mediterranean—helped maintain positive attitudes, but also optimism. On the other hand, we were very careful to pursue extensively information about similar projects from all over the world. This information and consequent success and failure stories were analyzed jointly with key-personnel from the island's existing organizations, because awareness of the optimism bias was, at that later stage, common to all team members.

A coordination team with members from the AstyProject core team and appointed representatives from the island's existing organizations was created. By forming this team, common assumptions such as optimism applied to cost estimates would be balanced by pessimism to estimates of benefits—a common line of thought used in conjunction with strategic misrepresentation to get projects approved—were eliminated within the AstyProject coordination team. We considered it essential to carefully listen to the representatives opinions, involve them in the decision-making process at an early stage, and to take their specific situation and interests they represented into account when developing new strategy and policies and subsequent programs and projects aligned with these.

Our policy from start has been based on:

  • Involving and consulting relevant stakeholders at an early stage,
  • Employing a variety of consultation methods,
  • Conducting regulatory impact assessments and ensuring specific provisions for assessing the effects of new policies and subsequent programs and projects derived from these, on local stakeholders and particularly small local businesses,
  • Allowing sufficient time for consultation to reach its objectives,
  • Providing feedback after consultation, and
  • Making the results of these consultations public for the islanders.

The remaining key- stakeholders included:

  • AstyProject promoters and angel investors, and
  • Project portfolio management personnel, project managers, individual project team members, and subject matter experts (SMEs).

The cognitive biases of these two groups had to be identified and steered, because initially they also amplified the AstyProject complexity.

These were identified by us:

  • Optimism
  • Planning fallacy
  • Confirmation bias
  • Loss aversion/anchoring
  • Sunk cost fallacy
  • Framing effect
  • Strategic misrepresentations

For example, we did not account for our own optimism bias in the initial master schedule. It took us more than 1 year to develop and use procedures that curbed the optimism bias and strategic misrepresentation within our organization.

We created a decision quality checklist per Kahnemam, Lovallo and Sibony (2011) with three key-stakeholder assessment stages. Biases not mentioned previously in this document, are briefly explained within parentheses:

  • Preliminary Stage:

    • Checked for self-interest biases

    • Checked for the effect heuristic (in love or at war with the proposals and why)

    • Checked for groupthink

  • Challenge Stage:
    • Checked for availability bias
    • Checked for anchoring bias
    • Checked for halo effect bias (assumption that success will be transferable)
    • Checked for sunk-cost bias (overly attached to historical data/information)
  • Evaluation Stage:
    • Checked for optimism bias
    • Checked for disaster neglect bias (worst case scenario bad enough; no consideration of a “black swan” effect extreme events with massive negative outcomes)
    • Checked for loss aversion bias

We used a recorded plan-do-study-act cycle iteratively. We also recorded predictions prior to promised, set events and reviewed these predictions jointly with most of the stakeholders after the events. Thus we were able to prove to the stakeholders that their initial reaction of “I will believe it when I see it” was more like “I will see it when I believe it.” Common objectives were set using SMART criteria.

Kahneman (2011) recommends that we ask the following questions to reduce the impact of cognitive biases during a decision-making process.

  1. Is there any suspicion that biases based on self-interest, overconfidence, or attachment to past experiences exist? If such biases exist, it is almost impossible for people to not have these three influence their decisions.
  2. Does groupthink exist? Assess, recognize, and try to expose the biases' effects.
  3. Are there any recognizable perceptions about people's positive or negative attitudes towards the proposed action/change/result?

Cognitive bias awareness made the project core team take the following steps towards key stakeholder management. The following steps helped to mitigate these biases to a considerable extent:

  1. Awareness is of paramount importance in reducing the influence of cognitive biases on decision making by addressing them and their effects in the stakeholder management plan. Plan argumentative actions on all problems that may arise due to the presence of these biases.
  2. Communication and collaboration are quite effective tools for mitigating cognitive biases. It is more obvious to see biases in others than oneself and respond to them appropriately.
  3. Inquire and address the perceptions due to these biases. By using our awareness and knowledge of their existence, we were able to discuss and convince stakeholders about their presence and the usually erroneous effects these biases have.

Among the project core team biases, we became aware of the emergence of a uniqueness bias—all of us tended to see the project as a “great” first, a bias which for quite some time impeded us from diligently obtaining lessons learned from other similar projects around the world. Black swans (extreme events with massive negative outcomes) were overlooked (Taleb, 2007). We encountered our black swan during 2013. The project was halted due to the financial crisis in Greece. After these events we realized that for a considerable amount of time, we treated the entire project portfolio as if it existed in a deterministic world of cause, effect, and control.

Astypalea Project Portfolio Management Considerations

An integrated adaptive project delivery (IAPD) approach that integrated people, systems, business structures, and practices into a process that collaboratively harnessed the talents and insights of all participants to reduce waste and optimize efficiency was followed from the initiation of the AstyProject. Our approach was to encourage early contribution of knowledge and experience from all key participants as well as their proactive involvement. Complex problems usually demand contributions from members of our multidisciplinary core team of knowledgeable, experienced professionals, complemented by numerous external specialist subcontractors and a diverse collection of subject matter experts. In addition, the experience level of the manager or management team can contribute to complexity. Due to differing experience levels, what may be complex for one practitioner may not be as complex for another. We created the least hierarchical structure as possible in order to enhance communications having a flexible leadership style to promote team creativity and mingle with the local population. We were vigilant for new issues raised by stakeholders as well as unanticipated changes so we could address these at a very early stage. We continuously focused on changing relations among stakeholders to discuss and service emergent issues and problems. It was the effective interaction of the people in AstyProject that was the key to overall project success. Ineffective or destructive interactions among key stakeholders could doom the project at initiation. These relationships have been continuously monitored throughout the AstyProject life cycle.

As previously mentioned, major infrastructure projects owned by the Municipality have also been components of the AstyProject portfolio. The Municipality obtained financing for these projects after the required deliverables were prepared under the common effort of the Technical Department of the Municipality, AstyProject key personnel, and subject matter experts (SMEs). Technical files and budget estimates for these projects were submitted to the relevant authorities for approval and funding from National and E.U. funds. EPMO involvement and consulting for the Initiation, Planning, Monitoring and Controlling Process Groups for each of these projects as well as for the success of each project's approval by Regional Authorities, including financing, has been substantial. These projects have been effectively, though not officially, co-managed by the Municipality and the AstyProject organization and have been successfully completed.

Communications management at the portfolio level was mainly concentrated on key stakeholders. A communications plan was prepared based on the stakeholder register, stakeholder analysis, and stakeholder management strategy. The stakeholder management plan documented our approach to increase commitment and backing and minimize opposition and contests throughout the portfolio life cycle. This document was reviewed and enhanced by adaptive approximations continuously by the EPMO. It included all other stakeholder groups, the interest of each stakeholder towards the AstyProject, the assessment of stakeholders' impact on the entire project, and potential strategies for gaining support or reducing obstacles. The AstyProject portfolio had 52 critical (key) stakeholders, while portfolio stakeholders at-large were potentially thousands. For these 52 very important stakeholders, the total number of potential communications channels was n (n - 1) / 2, that is, 1326 potential communication channels. Therefore, it has been of paramount importance from AstyProject initiation, to plan clearly defined communication engagement rules that limit who will communicate with whom and who will receive that information. The AstyProject communication management plan included: stakeholder communication requirements; types and level of detail of information to be communicated to each of the 52 stakeholders; timeframe and frequency of distribution; persons responsible for communicating information (i.e., who communicates what to whom and when) as well as the persons responsible for release of confidential information.

When considering the impact of the dynamics set up through human behavior, the behavior of the system, and the inevitable ambiguity inherent in such projects, it is clear that unexpected and rapid changes will often occur. The hallmark of such an environment is the presence of potentially significant unknown unknowns. In a traditional project environment, these unforeseeable risks are usually covered by a small budget (typically 5 to 10% depending on the specific industry and application(s) involved) added on top of the project budget in the form of the management reserve. This small budget amount was thought to be insufficient for the Astyproject complex environment. Larger reserves were required to ensure project success and we increased our contingency fund to 17% for the first phase of the project, that is, until actual construction work was initiated.

If there is a singular attribute that differentiates managing projects in a complex environment from managing them in a traditional environment, aside from stakeholder management, it is the increased emphasis on the continuous and iterative management of project risk. One way of mitigating these risks is to have a holistic perspective of the project. Managing the project holistically requires a clear, effective implementation of the PMBOK® Guide's Project Integration Management Knowledge Area (PMI, 2013b). An understanding of the intent of these processes, which includes the Perform Integrated Change Control process, ensures a higher vantage point from which to consider the potential for unintended cascading changes throughout the project.

Concluding Remarks

All practitioners know that projects are constantly moving from the concept “for everything that is planned to happen there will be conditions such, that given those conditions, nothing else could happen" (linear models - determinism), to the concepts of “complexity and adaptability” (holistic view of projects as complex adaptive systems). Thus in a complex environment, projects will experience conditions of both stability and instability. Project managers are called to steer the project toward objectives that may change over time, choosing a path/solution among a number of alternatives, frequently under conditions in which stakeholders are not in agreement on project objectives and deliverables.

Projects in a complex environment are usually quite unpredictable. These projects exhibit various stages of behaviors through component interrelationships and interdependence with their external environment. They may also exhibit diverse, disproportionate, adapting and self-organizing behaviors. Hence, project complexity needs to be assessed prior to the project's selection and chartering in order to comprehend the extent of difficulty that may be experienced. This approach is largely empirical with a descriptive focus. Initial complexity appreciation for the project must be studied, planned, and executed. (PMI, 2014) Furthermore, because projects are temporary but on-going efforts in which the ever-present dynamics of change can create totally unforeseen issues and/or events, the project manager, project team, and key stakeholders must vigilantly monitor them.

Project work consists primarily of the combined efforts of many individuals to accomplish the project objectives. In project work, it's rare that one person's efforts are isolated from that of the project team members and other stakeholders. While a key component of project success is the effective interactions among project stakeholders, it is those same interactions that, coupled with the decisions of individual stakeholders, significantly contribute to the complexities we encounter in the project environment. Many of such, adverse to project success, interactions are due to cognitive biases of individuals, teams, and groups.

As proven, human behavior is very much dependent on cognitive biases. Cognitive biases make us believe we know when we don't, make us create short-sighted unwisely optimistic estimates of what we can achieve, and keep us aground in unacceptable relationships and poor decisions. Awareness of these biases and plans to address them by mitigating their effects are very important particularly in all processes involving stakeholder, risk, scope, and communication management.

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© 2014, Panos Chatzipanos and Theofanis Giotis
Originally published as a part of the 2014 PMI Global Congress Proceedings - Dubai, UAE

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