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Project Decision Analysis and Risk Management
Project management is the art of making the right decisions. To become an effective project manager, one must be conversant on the following questions:
In most cases, the answers to these questions are not trivial. In managing projects, we deal with multiple objectives, multiple risks and uncertainties, and multiple stakeholders. And the underlying framework of project management problems can be very complex.
In recent years, decision analysis has become a practical tool in many disciplines. Companies routinely base their major investment strategies on the results of decision analysis and, in industries such as energy or pharmaceuticals, companies never proceed with major projects without a comprehensive structured decision analysis. Decision analysis is used to analyze mergers and acquisitions, capital investment, reorganization, and new product development. Governments apply decision analysis to their policy development, lawyers use it to assess complex litigation that has an uncertain outcome, and medical professionals use it to help them make correct diagnoses and prescribe the most effective treatments.
We came to project management from a decision science, background and believe that project management is a primary candidate for the application of decision analysis. We soon discovered, however, that most organizations use only a few components of the decision analysis process. In addition, many project managers are not familiar with the decision analysis approaches that are in wide use in other industries, or if they are aware of the processes, they do not believe that they are applicable to their own industry or organization. When we started to make presentations about the psychology of judgment and decision-making in project management, it was an eye-opening experience for many project managers. At that point, we decided that the best way to get our message out to the widest audience would be to publish a book that would provide a short and practical introduction to decision analysis.
We hope that the book will be useful and entertaining for everybody involved in the project management process: managers, members of project teams, and project sponsors. As part of this effort, we have tried to map our discussion of the decision analysis process to the project management process described in PMI’s A Guide to the Project Management Body of Knowledge (PMBOK®
Guide). Finally, technical books are a lot like exercise machines. You can make a resolution to get in shape or lose weight and buy an exercise machine, which you then use religiously for a couple of weeks. When you see a few results – when you look down your toes are visible for the first time in years – your interest flags, tedium sets in, and eventually the treadmill is collecting dust in the basement. The same thing happens with most technical books. You use it for a few weeks and are able to get a few small improvements, but the reading is so tedious and boring that you would rather poke yourself in the eye than read the next chapter. We really hope that it is not an issue with our book, and we have tried to make it as interesting as possible.
Calgary, Canada, 2007
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