Overcoming Behavioral Anomalies of Project Estimation

Estimation is a critical part of the budgeting process. Companies decide on their annual department budgets based on estimations of the projects they plan to complete in that year. Most organizations rely on subject matter experts and historical data and deploy various other methods to arrive at accurate estimations.

A rational person should see the significance of estimation and be expected to provide a sound evaluation of task duration. In reality, he or she either regularly overestimates or underestimates this estimation. In some cases, the error in estimation happens because of the employee’s lack of experience and maturity. We expect experienced and mature professionals to give accurate estimates, but they too sometimes join the “club” of incorrect estimators by including inflated safety margins and buffers in their estimates. Project managers must understand the psychological reasons for a faulty estimate and develop a solution for fixing it. It is important to understand how the human mind makes a decision. Dan Ariely provides an interesting insight into the decision-making process (Ariely, 2008). Ariely states that not only do human beings need to compare things before making a decision but we also need to concentrate on trying to compare objects that are alike, because we tend to analyze things in relation to others. This phenomenon was …