Reduce risk by enhancing estimation

From the Easy in theory, difficult in practice Blog
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My musings on project management, project portfolio management and change management. I'm a firm believer that a pragmatic approach to organizational change that addresses process & technology, but primarily, people will maximize chances for success. This blog contains articles which I've previously written and published as well as new content.

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I’ve frequently said that project management is about bringing predictability to uncertainty and while a lot of my writing focuses on managing the impacts of uncertainty through effective risk management, estimation is another area where uncertainty needs to be addressed.

If you are fortunate enough to be managing projects where sufficient historical data exists to account for nearly all sources of variation then I envy you.

For the rest of us, here are some estimation principles which should be applicable regardless of the project’s domain or specific context.

  • Use more than one estimation method: Consider this a form of hedging your bets. If you derive close to the same estimated value using different techniques, the likelihood that your estimates are significantly incorrect drops. Consider combining bottom-up and top-down methods.
  • Document and share assumptions related to the estimates: It’s always a good idea to have a second pair of eyes review estimates, but without understanding the underlying assumptions which those estimates were based on, it can be very difficult to provide quality feedback. If the assumptions are not documented, it eliminates your ability to identify proactively when internal or external changes might invalidate the assumptions & their associated estimates.
  • An estimate should never be provided as a single value: Without some understanding of the variation in the stated estimate, it’s impossible to manage the uncertainty resulting from it. This variation could be stated as a range or a confidence level.
  • Discourage multitasking during estimation: Estimation takes significant mental effort and if the subject matter experts involved are distracted, the quality of your estimates will suffer.  Consider breaking up the estimation process into more short meetings as one way to overcome this.  Also, avoid estimation right after lunch time or at the end of the working day as your team might be less focused.
  • Evaluate estimates across multiple dimensions: Just as it is helpful to use more than one estimation technique, it’s also valuable to analyze estimates in different ways to try to identify flaws. For example bottom-up activity estimation will give us detailed effort data at the work package level. But aggregating these estimates by resource role or by project phase will enable us to evaluate whether the ratio between roles or phases is logical.
  • Remove the person from the evaluation: It helps to have peer-level reviews of estimates without knowing who produced them. This sounds wrong, but no subject matter expert is omniscient and our positive biases about them might cause us to unconsciously miss estimation flaws.

Improving estimation is not a silver bullet to slay all sources of project schedule or cost variation but elevating project management capability is about evolution, not revolution!

(Note: this article was originally accurately estimated and risk reduced in July 2014 on kbondale.wordpress.com)

Posted on: October 11, 2018 06:59 AM | Permalink

Comments (20)

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Nice approach Kiron. All the way with you on bringing predictability to uncertainty. I would also ad benchmarking when possible to your list of estimation principles.

Very interesting, thanks for sharing

Thanks for sharing your estimation principles, Kiron.

I like that addition of benchmarking, John - thanks!

Thanks Eduin & Anish!

Excellent points for enhancing estimation, Kiron!

Good advice. I will add engage experts (i.e. FP counters) and training. On the training note I have to say that good training courses are hard to find

Good points on estimation. Thanks for sharing

Great points for reference. Thanks for the share.

I don't think we are using multiple estimation methods in the industry. We are just using what suits us, and many a times use our experience from previous projects. This is across companies.

Nice article thanks for sharing Kiron..

When accuracy increases, the risk will reduce!!!

Good addition Stelian!

Thanks Rajesh, Andrew, Maria, Vijay & Tamer!

Great contribution Kiron

Great, Thank you for sharing!

I would add to the two suggestions Benchmarking and experts, get the estimation team on the project from time to time.

Good stuff Kiron :-)

As a rule of thumb, always account for hidden costs.

Most estimates go wrong due to uncertainity. With these estimation principles, we can improve project estimates and manage uncertainity.

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