22 December 2011

Probability Management for Projects

Probability Management improves our odds of success with realistic estimates and attainable targets.

How much will it cost?
How long will it take?

This kind of question doesn't have just one answer; it has a whole bunch of answers, each with its own probability of turning out to be right.

When we pluck one number out of the bunch to use as a target, we're also choosing our probability of success - the probability that we can meet or beat that target.

Bullseye with five scattered hits

Looking at the pattern of hits on this target, we wouldn't bet the next shot will be dead center. Yet, that's what we do when we use an expected value as an estimate.

Calculating with one number instead of the full range of possibilities gives us results that are not just wrong but also incomplete.

What is Probability Management?

Plot probability of success against target

Probability Management is calculating with the uncertainty in our inputs and outputs preserved. It quantifies the uncertainties in our estimates. It allows us to make informed decisions about resourcing and risk management with a clear picture of the full range of possible outcomes.

Why is that important?

Out of Resources

The way we estimate cost and duration is fatally flawed. It runs headlong into the Flaw of Averages and gives us wrong and incomplete data. Worse, the errors are persistently one-sided. They give us hopelessly optimistic estimates and projects with poor odds of making their targets – no matter how well they're executed. In other words, we launch projects without the resources they need to meet their objectives.

So?

Enough Resources

Probability Management has the potion to end this curse. It provides us with the tools to manage uncertainty throughout our calculations. It helps us make realistic time and resource decisions, and improves our odds of success.

For more detail and some examples, see smpro.ca/ProbMan

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