The Psychology of Forecasting Uncertainty | LiquidPlanner

The blog for passionate planners

Tips, stories, and insights to better manage work, improve productivity and enhance collaboration.

The Psychology of Forecasting Uncertainty

Planning for Failure can Produce Success

Have you heard the project management saying that failing to plan is planning to fail? Thinking about that a little more deeply, do you think we might be better off if we plan for failure? The need for resiliency should not be discounted. For much of the last century, business plans, strategies, and economic theories were predicated upon the behavior of rational actors. In recent years though, behavioral science has helped highlight that people are “predictably irrational”1. Consequently, project professionals need dynamic systems and tools. Project delivery systems must be adaptive in the face of change.

Many decades before Daniel Kahneman won the Nobel prize in economics, he served in the Israeli Army as an infantry officer assigned to the army’s Psychology Branch. One of his duties was to help evaluate candidates for officer training. It was during this time that he discovered his first cognitive illusion.

A cognitive illusion is much like an optical illusion. With an optical illusion, we say our eyes deceive us, despite knowing that what we are looking at is an impossibility. Think of the water ripples we see in the middle of the desert or on scorching pavement, which is just the refraction of light rays passing through the air hotter at the surface than it is above. With a cognitive illusion, our mind’s eye will tell us to be confident in our convictions, despite being presented with evidence that should prompt us to rethink, update and revise our beliefs.  

START FREE TRIAL

In the 1950s, the Israeli Defense Force evaluated officer candidates using methods developed by the British Army in World War II. One test, called the leaderless group challenge, requires a team (who had met for the first time) to problem-solve using trial and error. Kahneman would note who took charge, who tried to lead but was rebuffed, and how others contributed to the group effort. He would review his observations with his colleagues, and they were all very confident that they understood each candidate’s character and leadership skills. They assumed that their observations would hold true during future training exercises or combat. 

When they observed how candidates were actually performing in officer-training school, it was overwhelmingly apparent that their ability to predict future performance was “better than blind guesses, but not by much.”2 

Kahneman described what happened next as remarkable. Despite discouraging news, which should have shaken their confidence and prompted them to moderate their predictions, they continued to feel and act as if their forecasts were valid. For this experience, he coined the term: the illusion of validity.

When delivering projects, change and uncertainty are inevitable. You might assess a project and the team working on it and have a good mental map of how the phases will proceed, but chances are it may not be much more than a blind guess. It is simply human nature to create that mental map, and the inevitable unknowns and change that happens constantly is just a reality of the modern workplace. This not only makes forecasting difficult but also means that project professionals will require tools that help manage uncertainty amidst shifting priorities to revise their original forecasts

Systems that provide comprehensive, structured, and consistent record-keeping provide the best way to help identify meaningful performance trends. Good records help us identify performance trends, and they can also help us discern between random patterns and those that can be assigned “obvious cause”. Ultimately, a solid audit trail provides a good rationale to justify change and revise forecasts of remaining effort. 

Sophisticated and dedicated project management tools automatically simplify these best practices, providing more time for teams to analyze, reflect, problem-solve, and take the necessary action to  deliver on their commitments successfully. LiquidPlanner can help take the guesswork out of forecasting, seamlessly processing the knock-on effects of revised estimates, resource-leveling across related dependent tasks, and mitigating the impact of uncertainty in the most efficient way possible. 

 

About the Author

james arrow

With more than 20 years’ professional experience, James Arrow has played a key role in successfully delivering critical capital assets, in a variety of locations, around the world. Having had the opportunity to work with diverse teams across the globe, James is well-versed on project best practices and applies exceptional communication skills to lead multi-disciplinary teams. An effective hands-on team-player, James is also an acclaimed writer and speaker on topics concerning project risk management, data analytics, data science, including digital disruption in the engineering and construction sector. In recent years, on several occasions, James has been formally recognized by his peers for his contributions to the profession.

 

 

 

Footnotes

  1. Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions, New York, NY: Harper Perennial, 2009.
  2. Kahneman, Thinking, Fast and Slow, New York: Farrar, Straus and Giroux, 2011. 

REQUEST DEMO

Get a live walktrough with a Product Advisor

FREE TRIAL

Experience all the features for 14 days

More Articles