Conveniently Unburdened by Evidence - Kate Beckett to Richard Castle
When we hear a conjecture about a topic that skips over principles of business, the economics of decision making, or the mathematics of probabilistic and statistical modeling, listen to what Kate said to Richard.
Putting This Skepticism To Work
There are three concerns for every project manager and those funding the work of the project †
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Schedule - Will the project go over schedule? All projects are probabilistic endeavors. Uncertainty abounds. Both reducible uncertainty and irreducible uncertainty. Work can address the reducible uncertainty. Buying down the risk associated with this reducible uncertainty. Irreducible uncertainty can only be addressed with margin. Schedule margin, cost margin, technical margin.
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Cost - Will the project overrun its budget? Cost margin is needed to protect the project from an over budget condition. This is called Management Reserve. But MR can only do some much the estimate of the cost, the management of the work to that estimate is also needed. With a credible estimate, MR and Contingency are still needed to avoid going over budget.
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Performance - Will the deliverables satisfy the goal(s) of the project? The technical performance of the deliverables is founded on the Measures of Effectiveness and Measures of Performance of the capabilities provided by the projects. Capabilities Based Planning is the foundation of defining what DONE looks like in units of measure meaningful to the decision makers.
At the start and up until the end of a project, the answer to each of these questions is knowable to some degree of confidence - less in the beginning and more as the project progresses. A yes answer to any or all of the questions is taken to be an undesirable outcome. These are business questions as well as technical questions. But it is the business that is most interested in the answers and the confidence level of the answer - a simple Yes or No is not sufficient. Yes, we have an 80% confidence of completing on or before the need date.
In The End
To provide answers to these questions before arriving at the end of the project, we need estimates. So when we answer Yes to the question - which is unavoidable - we don't to proceed in the absence of corrective actions to increase the probability of a desirable outcome. At the beginning of the project that confidence is low, since project evolve. To provide credible answers about the confidence of arriving on time, on budget, with the needed capabilities, we must estimate not only the cost, schedule, and outcomes, but estimate the impact of our corrective actions.
If we fail to do this, if by lack of knowledge or experience or with intentional ignorance of the probabilistic process of all projects, we've set the foundation of failure. The approach of making decisions in the absence of estimating the cost or that decision and the resulting impact of that decision, ignore - with intent - the principles of Microeconomics of decision making. Ignoring the opportunity cost of the decision. This opportunity cost must be estimated, since it will occur in the future and is usually beyond our ability to measure directly.
Ignoring opportunity cost and ignoring estimating the future is called Open Loop Control. To increase the probability of project success we need to apply the principles of Closed Loop Control. And when we manage projects with Open Loop processes, those providing us the money to produce value will be disappointed.
† Quantitative Risk Analysis for Project Management A Critical Review, Lionel Galway, WR-112-RC, February 2004
