^{Project Decisions} 

Project Decision Analysis and Risk Management

Table of Contents

Preface

Test Your Judgment

Answers to Test Your Judgment Quiz

Part 1: Introduction to Project Decision Analysis

Chapter 1 Project Decision Analysis: What Is It?

The “Burden of Wrong Decisions”

Why do we make wrong decisions?

Approaches to Decision-Makings

Decision Analysis as a Process

Normative and Descriptive Decision Theory

Driving Forces Behind Project Decision Analysis

A Little Bit of History

Decision Analysis Today

Chapter 2 “Gut Feel” vs. Decision Analysis: Introduction to Psychology of Project Decision-Making

Human Judgment Is Always to Blame

Blink or Think?

Cognitive and Motivational Biases

Perception

Bounded Rationality

Heuristics and Biases

Behavioral Traps

Frames and Accounts

Training Project Decision-Making Skills

Chapter 3 Understanding Decision Analysis Process

Decision Analysis Manifesto

3C Principle of Project Management

Decision Analysis Process versus PMBOK® Guide’s Project Risk Management

Decision analysis and other business processes

Phases of Decision Analysis Process

Big and Small Decisions

The value of project decision analysis

Chapter 4 What is Rational Choice or a Brief Introduction to Decision Theory

Decision Policy

Which choice is rational?

Expected Value

The St. Petersburg Paradox

Risk Taker versus Risk Avoider

Expected Utility

Expected Utility Theory

Expected Utility Theory Extensions

How to Use Expected Utility Theory

Descriptive Models of Decision-Making

Chapter 5 Creativity in Project Management

Creativity and Decision-Making

Psychology of Creativity

Creativity Blocks

Chapter 6 Group Judgment and Decisions

Psychology of Group Decision-Making

Aggregating Judgment

Group Interaction Techniques

Brainstorming

Tools for facilitation discussions

A Few Words About Game Theory

Chapter 7 Are You Allowed to Make a Decision or the Frustrated Developer’s Syndrome (FDS)

What is FDS?

Why FDS is a problem

How does FDS Spread?

A few common myths about FDS

The fundamental roots of FDS

Treating FDS

The Second Russian Revolution

Part 2: Decision Framing

Chapter 8 Identifying Problems and Assessing Situations

Who Are the Players?

Identifying problems and opportunities

Assessing Business Situations

Some Tools and Techniques

Chapter 9 Defining Project Objectives

Different Objectives and Different Criteria for Decision Making

Aligning Project Objectives

Decision Analysis as an Art of Trade-Offs

Project Objectives Hierarchy

Chapter 10 Generating Alternatives and Identifying Risks

Identifying Risks and Uncertainties

Generating alternatives

Risk Breakdown Structures

Risk Templates

Risk Response Planning

Risk Registers

Part 3: Modeling the Situation

Chapter 11 The Psychology and Politics of Estimating

How do people make estimates?

How we think when we make estimates?

Politics and Motivational Biases

Psychological Problems with Estimation and Rule of PI

Other Cognitive Biases in Estimates

Other Explanations of Problems with Estimation

Where Is The Problem: Psychology or Politics?

Many mental errors and one wrong estimate

Simple remedies

Chapter 12 Project Valuation Models

Model of the Project

Critical Path Method

Critical Chain Method

Event Chain Methodology

Modeling Using Influence Diagrams

Project Model and Agile Approach

Chapter 13 Estimating Probabilities

Subjective Probabilities

How people assess probability and risk

Methods of Eliciting Judgment in Project Management

What If Decision Is Very Sensitive to Probability 

Qualitative Risk Analysis

Part 4: Quantitative Analysis

Chapter 14 What Is Most Important or Sensitivity Analysis and Correlations

What Are Correlations And Why Do We Need to Analyze Them?

Sources of Correlation in Projects

Psychology of Correlation and Causation

How to Improve Your Judgment

Sensitivity Analysis

Quantitative Analysis of Correlations

Crucial Tasks

Correlations between Tasks

Chapter 15 Decision Trees and the Value of New Information

What is Decision Tree?

Why project managers avoid decision trees (and why they shouldn’t)

Converting project schedules into decision trees

Value of Perfect Information

Value of Imperfect Information

Chapter 16 What Is Project Risk? or PERT and Monte Carlo

How much will it really cost?

PERT

Statistical Distributions

Monte Carlo Technique: How it Works

Which Distribution Should Be Used?

How many trials are required

Analysis of Monte Carlo Results

Conclusion: Is Monte Carlo the Ultimate Solution?

Chapter 17 Series of Unfortunate Events or Event Chain Methodology

How events can affect a project

Basic Principles of Event Chain Methodology

Event Chain Methodology Phenomena

How to Use Event Chain Methodology

Event Chain Methodology Example

Event Chain Methodology and Mitigation of Psychological Biases

WBS + RBS + Analysis = Event Chain Methodology

Chapter 18 The Art of Decision Analysis Reporting

How to Communicate Results of Decision Analysis

Motivational Biases and Reporting Decision Analysis Results

Put it into perspective

Presentations must be meaningful

Expression of uncertainty

The power of fear

Chapter 19 Making a Choice with Multiple Objectives

What is Multi-Criteria Decision Making?

Psychology of Balancing Multiple Objectives

Two approaches to multi-criteria decision making

Ranking criteria with the Scoring Model

Advanced methods of multi-criteria decision making

Part 5: Implementation, Monitoring and Reviews

Chapter 20 Adaptive Project Management

Adaptive Management as a part of project decision analysis

Principle 1: Using actual project data in combination with original assumptions

Principle 2: Minimizing the cost of decision reversions (“Trying not to kill the cow”)

Principle 3: Making small sequential decisions

Principle 4: Supporting creative business environments

Principle 5: Early identification and fixing of issues (Avoiding Behavioral Traps)

PMBOK® Guide approach to project executing, monitoring, and controlling

Chapter 21 Did You Make the Right Choice or Reviewing Project Decisions

Why Do We Need Post-Project Reviews?

How could we not to foresee it?

I knew it all along

Overestimating the Accuracy of Past Judgments

Peak-End Rule

Process of reviewing decisions

Corporate Knowledge Base

Conclusion: Does Decision Analysis Provide a Solution?

Common Misconceptions about Decision Analysis

Why do we believe that the decision analysis process is so important?

Appendixes

Appendix A. Risk and Decision Analysis Software

Quantitative Project Risk Analysis Software

Enterprise Level Risk Management Software

Brainstorming Software Used in Project Management

Other Decision and Risk Analysis Software Used in Project Management

Appendix B. Heuristics and Biases in Project Management

Why we included this list

Behavioral Biases and Biases Related to Perception

Biases in Estimation of Probability and Belief

Social and Group Biases

Memory Biases and Effects

Appendix C. Risk Templates

Generic Risk Template #1

Generic Risk Template #2

Risk Template for Software Development Project

Appendix D. Multi-Criteria Decision-Making Methodologies

Glossary

Future Reading

References

Index