Managing Project Uncertainty: From Variation to Chaos
Managing Project Uncertainty:
From Variation to Chaos
Uncertainty is an inevitable aspect of most projects, but even the most proficient managers have difficulty handling it. They use decision milestones to anticipate outcomes, risk management to prevent disasters and sequential iteration to make sure everyone is making the desired product, yet the project still ends up with an overrun schedule, overflowing budget and compromised specifications. Or it just dies. To find out why, we studied 16 projects in areas including personal-computer development, telecommunications, Internet startups, pharmaceutical development, iron-ore processing, airship development and building construction. Interviews with team members and scrutiny of project documentation over five years showed managers consistently failing to recognize that there are different types of uncertainty, each of which requires a different management approach. The lack of awareness is understandable, given that the commonly accepted definition of a project (“a unique interrelated set of tasks with a beginning, an end and a welldefined outcome”) assumes that everyone can identify the tasks at the outset, provide contingency alternatives and keep to the same overall project vision throughout.1 Those are fair assumptions for routine or well-understood projects, but not for novel or breakthrough initiatives, which require companies to rethink the traditional definition of a project — and the ways to manage it. (See “Beyond Risk Management.”) A more forward-thinking approach is uncertainty-based management, which derives planning, monitoring and management style from an uncertainty profile comprising four uncertainty types — variation,
Project managers can’t predict the future, but accurately gauging the degree of uncertainty inherent in their projects can help them quickly adapt to it.
Arnoud De Meyer, Christoph H. Loch and Michael T. Pich
Arnoud De Meyer is dean and professor of technology management at
From Variation to Chaos
Uncertainty is an inevitable aspect of most projects, but even the most proficient managers have difficulty handling it. They use decision milestones to anticipate outcomes, risk management to prevent disasters and sequential iteration to make sure everyone is making the desired product, yet the project still ends up with an overrun schedule, overflowing budget and compromised specifications. Or it just dies. To find out why, we studied 16 projects in areas including personal-computer development, telecommunications, Internet startups, pharmaceutical development, iron-ore processing, airship development and building construction. Interviews with team members and scrutiny of project documentation over five years showed managers consistently failing to recognize that there are different types of uncertainty, each of which requires a different management approach. The lack of awareness is understandable, given that the commonly accepted definition of a project (“a unique interrelated set of tasks with a beginning, an end and a welldefined outcome”) assumes that everyone can identify the tasks at the outset, provide contingency alternatives and keep to the same overall project vision throughout.1 Those are fair assumptions for routine or well-understood projects, but not for novel or breakthrough initiatives, which require companies to rethink the traditional definition of a project — and the ways to manage it. (See “Beyond Risk Management.”) A more forward-thinking approach is uncertainty-based management, which derives planning, monitoring and management style from an uncertainty profile comprising four uncertainty types — variation,
Project managers can’t predict the future, but accurately gauging the degree of uncertainty inherent in their projects can help them quickly adapt to it.
Arnoud De Meyer, Christoph H. Loch and Michael T. Pich
Arnoud De Meyer is dean and professor of technology management at
References: 1. J.R. Meredith and S.J. Mantel, “Project Management — A Managerial Approach” (New York: John Wiley & Sons, 1995); C. Chapman and S. Ward, “Project Risk Management” (Chichester, United Kingdom: Wiley, 1997), 7; and R.L. Kliem and I.S. Ludin, “Reducing Project Risk” (Hampshire, United Kingdom: Gower, 1997), 10-25. 2. C.B. Chapman, “A Risk Engineering Approach to Project Risk Management,” International Journal of Project Management 8 (1990): 5-16. 3. For more examples of projects with variation, see A. De Meyer and C.-C. Hwee, “Banyan Tree Resorts and Hotels: Building the WINTER 2002 MIT SLOAN MANAGEMENT REVIEW 67 AD