Red pill, blue pill
decision making in projects
In everyday life decisions are omnipresent, and their importance may vary widely; the situation is very similar throughout the project life cycle. There are certain key points, such as choosing the project management approach, agreeing on the project plans that need to be developed, or selecting project team members that the project manager must decide upon. The paper focuses on these key points and the way they are perceived by the project manager, in its attempt to identify if there is any critical point in which the project manager's decision can significantly affect the evolution of the project.
Although knowing the decision – making points are important, the underlying decision – making process should not be neglected. Starting from the two main models of the decision – making process described in the literature – the rational and the intuitive model – the paper describes their application in the projects’ context. The weight of some relevant factors in decision making, such as reason, intuition, time, and experience, are discussed and the biases that may interfere in the decision-making process are presented.
Introduction: Building a Common Language
According to Anderson et al. (2012) there are several bodies of knowledge in which decision making is addressed. They mention Management Science, Operations Research, and Decision Science as working with the term Decision Making and their definition of the term describe it as “the process of defining the problem, identifying the alternatives, determining the criteria, evaluating the alternatives, and choosing an alternative” (Anderson et al., 2012, p. 19). A more detailed definition is given by Harris (2012): “Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker. Making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that (1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires, lifestyle, values, and so on.” This definition brings in the spotlights the decision maker, which – from the perspective of this paper – narrows our focus to the project management domain. As stated by Baker et al. (2002), decision making should start with the identification of the decision maker(s) and stakeholder(s) in the decision, reducing the possible disagreement about problem definition, requirements, goals and criteria. Obeying to this directive of Baker et al., we identify the decision maker as being the project manager (or, in some cases, a member of the project management team) and we continue to approach the topic of the decision making from the viewpoint of the project manager.
Nevertheless, we would like to maintain the correlation with the Management Science. One of the important aspects of the decision-making process is the immediate impact and the long-term effects of a decision. According to this specific aspect, Management Science uses three levels of decision (Harris, 1998): strategic decisions – concerning general direction, long term goals, philosophies and values; tactical decisions – medium range, medium significance decisions, supporting strategic decisions; and operational decisions – immediate, short-term decisions, used to support tactical decisions. Adapting these levels in the project management realms we get the same levels, visualized in Exhibit 1.
Key Decisions Points in Projects
The project manager and the project management team member are required to make decisions regarding both the project management processes and the project scope. In this paper we address the two most important decisions level: the strategic and the tactical ones. On one side we have the strategic decisions, positioned as the interface between the business objectives of the organization and the project designed to accomplish them. On the other side, we have the tactical decisions, mostly linked to the project management processes that are pursued to accomplish the project objectives. Further, in this paper, we call these levels as key decisions points in projects. Considering the project life cycle as described in Exhibit 2, we ask ourselves which are the key decision points and where are they placed in a project life cycle.
Although perhaps there are several key moments when it is necessary for the project manager to make a decision, we will focus on five key decision points chosen based on their importance and impact on long and medium term. These are as follows:
– Project selection
– Deciding upon the project management methodology or project management processes to be followed
– Choosing the project team
– Establishing the project control points
– Go/no-go decisions
“Project selection is the process of evaluating individual projects or groups of projects and then choosing to implement some of them so that the objectives of the parent organization will be achieved” (Meredith & Mantel, 2012, p. 42).
According to PMI (2012, p. 77), before selecting a project for implementation, the necessity of the project will be first documented and the feasibility of a new project will be determined through a process of evaluating alternatives. The project scope statement, deliverables, duration and a forecast of the resources for the organization's investment analysis will be documented.
Each project will have different costs, benefits, and risks and they are rarely known with certainty. Therefore, selecting a project from a set of many others may be a difficult task. Making the right choice of investing in a particular project is crucial to the life of each company and selecting a project is a big source of risk “one of the most difficult tasks being to predict whether the project will be successful or not” (Kerzner, 2009, p. 366). These decisions, although project related, are the organization management responsibility, project managers are not always involved.
Project Management Processes Selection
When an organization has a clear project management methodology in place, this decision is already made. The project manager has to comply with it and the options are limited. However, if there are no constraints in applying a specific methodology, it is the responsibility of the project manager to decide – based on the project context, the project complexity and his/her experience – which are the most suitable and required project management processes he/she is going to apply and which are the components of the project management plan that are going to be used. The project manager has the freedom to make this decision based on project scope and stakeholder requirements. Wysocki (2009, p. 32) says that for a project to be successfully managed, project plans are indispensable. They are not just a guide to assign project effort, but they are also a tool to contribute to decision making. We should understand that project plans are dynamic.
It is important to note that the selection of project management plans is a key decision as it gives us a benchmark against which we can compare current performance, costs, and time and any deviation from the initial plan can be determined and fixed by a corrective or preventive action, if needed.
Choosing the Project Team
Choosing the right players is the key to building a successful project team. Getting together the right people is both a challenge and a precursor to successfully achieve all subsequent stages of the project. Sacrificing the project team by accepting people who are available as opposed to people who are most suitable for the role is an initial mistake, which often will determine the fate of the project.
Knutson and Bitz (1991, p. 17) believe that the selection of the project team is the most critical task of a project manager. Project success is based on choosing the right members and obtaining their commitment. The project manager should look for people who have the required technical knowledge and expertise, the right attitude toward teamwork and commitment, but, of course, considering the limitations imposed by the organization.
Establishing Control Points
The purpose of the control points is to assess the project status and its progress compared to the project management plan. These are the moments in which the project can be re-planned, when the required corrective or preventive actions are assessed to determine whether the measures have solved the problems raised during project execution. The project manager prepares the progress reports in order to communicate with project stakeholders about the project evolution. Through the activities required by the control points, the project manager gets an early warning on deviations from initial plans and on other issues affecting the project (BIS, 2010, pp. 37-38).
Collecting information on project performance, in various control points, costs money. Corrective actions that could be taken to bring the project back on track costs money as well. On the other hand, penalties are assessed when, because of lack of monitoring, projects are delivered later than planned (Tareghian & Salari, 2009, p. 92). Therefore, the project manager has another key decision point in the project: determining the frequency of the control points and the right time to be used.
Go or No-Go Decisions
In addition to the key points previously described, throughout the project management literature, another key decision point is frequently mentioned: the decision to continue or terminate a project. Dalcher and Brodie (2007, p. 113) link this decision point with the control points in a project. Checking if the project is progressing according to plan can also include an assessment of the validity of the business objectives, if the project can proceed further on. DeCarlo (2004, p. 13) considers that each phase of the project should end with a key decision point. These key points include an evaluation of multiple variables: they include factors such as budget, timing, objectives, functionality, etc. and the final result gives a clear indication that the project can or cannot deliver the expected outcome and, therefore, can or cannot continue.
Greer (2001, p. 159) describes few circumstances in which a project manager can decide to terminate a project, asserting that there are some circumstances in which it simply does not make sense to continue with the implementation of a project. In other words, there are times when a project should be completely abandoned or stopped and rescheduled. Therefore, such a decision should be taken when a project has no strategic value whatsoever, when it is no longer feasible, when a project cannot be implemented with the available resources or in the current context.
Many project managers state that this is the hardest situation a project manager can go through, but it is vital to abandon a project as early as possible, before the impact grows and before absorbing even more resources.
Rational Versus Intuitive Decision-Making Model
Many of us think we are good decision makers; yet, sometimes we make wrong decisions that impact people around us. This is also the case of the decisions made by project managers, which, when related to large projects, may affect a significant number of stakeholders. The decision-making approaches can be very diverse, ranging from classical decision models, rational to less structured, intuitive models.
The Rational Decision-Making Model
There are different types of rational models and the number of steps involved, and even the steps themselves will differ in some models, but the most acknowledged one is Drucker's rational decision-making model. According to the Drucker (2006), there are six sequential steps for an effective decision to be adopted in an organization.
These sequential steps are as presented as:
1. Classifying the problem
Drucker believes that a rational decision maker begins the decision-making process by asking himself/herself if the decision relates to a generic problem, or it is the result of a unique event. Some events are generic and these require a rule, a policy or a principle; unique events are exceptional and should be addressed as such when they occur. In consequence, all events, except the truly exceptional ones, require generic solutions, like a principle. Once the principle will have been developed, all manifestations of the same generic situation can be handled pragmatically, by adapting that rule to concrete circumstances of a particular case. Unique events, however, must be treated individually (Drucker, 2006, pp. 36-39).
2. Defining the problem
Once the problem has been classified as generic or unique, defining the problem is fairly easy, provided that all the relevant factors are taken into consideration. A partial analysis is almost as dangerous as the complete absence of an analysis, since it gives legitimacy to the decision.
3. Specifying the answer to the problem
The next step is specifying what the decision has to accomplish. Each decision should have a minimum of objectives, rules to follow, an agenda and an execution method. Drucker refers to these as boundary conditions. In order to be effective, a decision has to satisfy certain boundaries. In contrast, a decision that does not satisfy these conditions is worse than a wrong definition of the problem, as the author states: “It is all but impossible to salvage the decision that starts with the right premises but stops short of the right conclusions” (Drucker, 2006, pp. 42).
4. The Decision
Decisions often involve compromises and as long as key objectives will still be achieved and there is nothing wrong in it as long as the impact of the compromise is known. The decision maker should always have a clear vision of the ideal decision, and then test it. If a compromise is necessary, he should ensure it is made in a positive way, with a clear purpose. A difference between the right and the wrong compromise should be set. What is noteworthy is that a manager has to identify what is “right,” that is to find, first of all, the optimal solution without taking into account the compromises, adjustments, and concessions necessary for a decision to become acceptable (Drucker, 2006, pp. 42-43).
5. The Action
While defining the decision is the most difficult part of the decision-making process, turning the decision into action is, according to Drucker, the step that requires more time. It involves planning how the decision will be implemented, assigning responsibilities for specific tasks, communicating with people, motivating, mobilizing, and rewarding all those involved in decision making, providing all the necessary resources, so the people who implement the decision have all the necessary equipment to carry through the task (Drucker, 2006, pp. 43-46).
6. The Feedback
There are two certainties in the decision-making process: people who make decisions and implement them are fallible, and the context in which decisions are implemented is subject to change. Thus, the implementation has to be monitored in order to ensure the validity and effectiveness of the decision, which constantly should be tested against the actual course of events. What Drucker recommends is that the decision maker should go out and see for himself whether the assumptions on which the decision has been made are still valid (Drucker, 2006, p. 46).
The Intuitive Decision Making Model
As presented previously, the rational decision-making model consists of a series of sequential steps built in such a way that they develop an optimal solution. Intuitive models are different, the decisions being based more on instinct and emotion, subjective and unconscious in nature.
One of the main assumptions of the rational model is that people make rational decisions. However, there are usually many factors involved when making a decision, many of which are not rational. Additionally, many situations require decisions to be made with insufficient information or even in its absence and it is a well-known fact that there are situations that require quick decisions, under pressure. This is the context that facilitates the development of an intuitive decision-making model. Everything, except the most mechanical and rational decisions, includes an element of subjective thinking. Our decisions are based on judgments that are affected by a variety of factors, including our experience, training in a particular field, values, attitudes, and emotions.
Welch (quoted by Kourdi, 2003, pp. 71-75) captures the essence of intuition in decision making. He asserts that in contrast to the rational model, intuitive decisions are less structured and involve personal feelings and perceptions rather than facts and analysis. Welch's approach rejoins certain “symptoms,” within the intuitive model, such as pattern recognition, similarities and the feeling of prominence.
In complex projects we encounter unfamiliar situations, “forces” that appear to defeat our control. One important technique to use in this environment, as recommended by Aucoin (2007, p. 108) is to follow our intuition. This is a form to guide our decisions without consciously thinking. When he finds himself in a new situation, an expert can intuitively know how to react, without any analytical thinking. The merit of intuition is also mentioned by Kurtzman: “The rational model is linear. You use it when you try to align the facts and you take a good look at them, weigh them and then make a decision based on the importance you confer to each of the facts. You look at a set of variables, when suddenly you realize there is a pattern, and the ability to recognize patterns is intuitive” (quoted by Ray & Myers, 1986, p. 177).
Sinclair and Askanasy (2005, pp. 353-354) define the intuitive model as being “a non-sequential information processing mode, which comprises both cognitive and affective elements and results in direct knowing without any use of conscious reasoning.” Consequently, we can say that the intuitive model can be linked to a “non-conscious scanning of internal (in memory) and external (in environment) resources, in a non-logical, non-temporal manner, in order to identify relevant pieces of information that are fitted into the solution picture in a seemingly haphazard way, similar to assembling a jigsaw puzzle” (Sinclair & Askanasy, 2005, p. 356).
Simon (1987, pp. 57-64) treats intuition as a form of expertise or experience based on knowledge gained from problems that have occurred continuously in a certain environment, knowledge gained through experience to solve these problems. Likewise, Agor (1989, p. 158) claims that many managers he surveyed declared that experience represents “accumulated memory of past impressions, actions and achievements.” It is presumable that, by having an extensive experience, a person will draw more on his/her intuition in the decisional process. In contrast, a beginner will tend to resort more to principles he learned from books, throughout his education period. All these considerations related to managers are applicable in the case of the project managers as well.
Roeder (2011, p. 112) considers that the more experience a project manager has, the more likely she is to use her intuition, provided the fact that she needs a verification system to validate it. If intuition tells us to lead the project in a certain direction, we should check whether the available data supports our intuition. Intuition works vice versa, too. We should spend more time studying the data, and then let our subconscious sort it.
Intuition is a tool that many project managers already use. Research shows that project managers use their intuition when there is too much information available or when this is insufficient. One can also draw an intuition under time pressure. The environment of a project is very dynamic and sometimes facts are insufficient to make a decision. This is the time when intuition can be the perfect decision tool.
In a stable environment, facts tend to be more reliable. There is no pressure to quickly collect data and it is feasible to collect it at a relatively low cost. In this case, data-driven decisions can achieve better performance than those based on intuition. In an unstable environment, however, there are three challenges: time constraints linked to data collection, the need to collect a large amount of information to deal with the unstable environment, and a lack of trust in the information in question. In fact, managers have another fundamental problem, namely, to know what data is relevant. So, given that information seems to be limited and doubtful, using an intuitive model might be more appropriate (Mintzberg, 1994, pp. 85-90).
To summarize, the intuitive model is not an irrational model. It is based on a deep understanding of a situation. Intuition is a complex phenomenon that derives from the knowledge stored in our subconscious and has its roots in our previous experience. It is important to note intuition should not mean the exclusion of rational analysis. On the contrary, such an analysis has an important role in decision making; it is one of the mechanisms that intuition uses to synthesize everything she knows about the problem being treated. Deciding what decision-making model to choose when making a decision is essential to adopt decisions in an efficient manner. However, knowing how and when to combine the rational approach with the intuitive approach is essential to successfully conduct the project.
Reason, Intuition, Time or Experience?
In order to identify which of the models prevails in the project decision-making process and what is the role of time and experience in this process, a study was conducted as part of a dissertation paper in 2012 (Beșliu, 2012). In this respect, 12 interviews have been conducted with highly experienced project managers (with more than 15 years of experience in leading projects of different levels of complexity).
According to the responses, each person makes a rational analysis when he or she needs to make a decision, which is based on several steps: an analysis of the situation, gathering information, analyzing the impact and possible consequences of any decision taken, creating alternatives and ultimately choosing the best solution. However, time was considered a very important factor in adopting a decision with a considerable influence on the decision model used, as some of the subjects stated: “It depends on the deadline you have. Sometimes you have to make decisions in just a few minutes and then you have no time to do an analysis. Then you make your decision based on intuition. You still make an analysis, but it will be more subjective than objective” (A.T. - interviewed project manager); “time is a criterion. Plus, to think you have all the information is an illusion” (C.D. - interviewed project manager).
Because of the traditional assumption that man is rational by nature, there is also the assumption that man makes rational decisions. Therefore, initially, the questions related to intuition were looked at with some degree of skepticism. In reviewing whether the theory matched the practice in the use of intuition, the following research question was asked: Are there any specific circumstances when you used other methods, than rational ones, in making a decision?
Put in a position to give examples, subjects gradually began to realize that they actually use their intuition quite a lot when it comes to decisions. It turned out that those decisions based on intuition were made in a new context or in a new situation where all the necessary data was not available or time pressure appeared. All of the 12 subjects went through such situations. A clear pattern emerged of how intuition is used in new situations. Initially, the decision maker takes into consideration the available information at that point, but in the absence of such information, the decision maker relies on experience, as stated by one of the subjects: “You rely on your intuition when you don't have some very specific data, and then there's nothing to measure, so reason is useless, you do not have anything else to resort to” (I.M. - interviewed project manager). This highlights the interdependence between intuition and rational analysis. The most logical decision makers, while detailing logical trends, recognized that they use their intuition, too. However others gave, as well, a great importance to rational analysis to ensure the accuracy of their intuitive impressions: “My opinion is that you cannot rely just on intuition. At first you have indeed the tendency to make a decision guided by your feelings but, subsequently, you must document it and explain it 360 degrees” (C.D. - interviewed project manager).
As resulted from the interviews, experience is very important for a project manager in making decisions. Since intuition was associated by most of the subjects with experience, we can draw the conclusion that intuitive and rational models are equally used and they complete each other. It should be mentioned that, in the opinion of some of the subjects, the more they gained experience in the field, the more they began to use their intuition in making decisions, but without forgetting the importance of rational arguments.
The study revealed that project managers tend to combine their intuition and reason when making a decision. They use their intuition when available data are not complete or sufficient to make a decision, but if they are given more time to decide, intuition is frequently followed by a logical analysis to confirm the intuitive impression. In addition to time, experience also plays an important role in this case.
Based on the findings of the study, the relationship between reason, intuition, time and experience can be described as seen in Exhibit 3. Therefore, the more available time to make a decision and the less experience in that field a project manager has, the more he will tend to use rational analysis (gathering information, identifying alternatives, analyzing their impact and selecting the best solution). The situation changes in the case of experienced project managers: when time available, they rely on rational analysis, but mainly to support their intuition; however, under time pressure, intuition becomes the single tool used when making project decisions. A particular case is that in which the project manager has neither time, nor previous experience to rely on when making a project decision, therefore having at his disposal only his “gut feeling.”
Traps in Decision Making
In the attempt to gather the most important and powerful (in terms of impact on the project) biases in project management, I have found an extremely comprehensive and explicit list of heuristics and biases in project management. In their book Project Decisions: The Art and Science, Virine and Trumper (2012) grouped in Appendix B the main mental pitfalls that could trap the project managers. Showing this list to project managers who are not familiar with cognitive biases will help them to avoid (at least some of) these dangers in making project decisions.
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©2013, Simona Bonghez
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana