Probability plays a powerful role in project management

imageThe outcome of this week’s Brexit vote surprised many people who were not part of the Leave movement. From foreign dignitaries to the stock markets, the prevailing opinion leading up to June 23 was that while the final results would be close, the majority of voters would choose to keep Britain within the European Union.

A similar situation occurred in the United States with the Republican candidate selection process for the November 2016 elections. At the beginning of the race, very few mainstream reporters and pundits expected that Donald Trump would be the last person standing.

Both of these scenarios provide good examples of low probability, high impact risks. I purposely avoid using the term threat as the negative or positive nature of these risks is in the eye of the beholder!

There was a 100% certainty that there was some likelihood of these risks being realized, so why wasn’t more done by those who would have preferred a different outcome?

The answer lies in bias.

Lethal impact, very low probability risks often get dealt with. For example, many parents purchase life insurance for their young children. But high impact, low probability risks act like stealth missiles flying under our vigilance threshold until it’s too late to react to them.

But estimates for the duration of our projects are also based on probability.

While customers might assume the distribution to look like a very narrow spike centered around their desired duration, it is more likely to follow a lognormal curve with the right side skewing to infinity. It is our responsibility to make our sponsors aware of the three distinct areas within the distribution.

The impossible zone: Short of recruiting a Gallifreyan time lord or stumbling across a DeLorean with a flux capacitor, expectations below a certain threshold cannot be realized without drastically reducing scope. Nine pregnant women won’t have a healthy child in one month. Teams which commit to deliver within this zone have just signed up for a Death March.

The realistic zone: This provides a continuum of outcomes which are both feasible and would still meet business objectives. Our job is to negotiate for a date within this zone.

The economically unviable zone: Outcomes falling into this zone might be quite easy to achieve but will substantially or fully erode the business benefits of the project.

It’s how you use probability that determines whether it’s a source of peril or a powerful ally.

Categories: Project Management | Tags: , , , , | 1 Comment

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One thought on “Probability plays a powerful role in project management

  1. Pingback: Probability plays a powerful role in project management – Better Time Management

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