Cognitive Bias

Latest revision as of 14:55, 21 April 2019

[edit] Abstract

Biggest impact on large infrastructure projects, especially when dealing with estimation of costs and benefits.

This topic is related to Complexity, Stakeholder Management, Heuristics, Front-end management (?)

[edit] Description & Purpose

To deliver a project on time and on budget it must be expertly managed. As humans are not rational beings, such management is always susceptible to cognitive bias

Cognitive Bias vs. Heurestics

[edit] Overview of Different Types of Cognitive Bias

The following list of cognitive biases and heuristics is not exhaustive, in reality, there are hundreds of different kinds. The list includes the most commonly encountered instances when dealing with projects as listed by PMI.^[1]

• Optimism Bias - Being overly optimistic, overestimating favorable outcomes and having excessive confidence in the individual's beliefs, knowledge, and capability.
  • Planning Fallacy - Unconsciously underestimating time, cost, and risk.
  • Wishful Thinking - Believing something is true due to a desire or wish.
  • Confirmation Bias - Focussing on information that confirms what you already believe or assume to be true.
  • Overconfidence - Being overly optimistic about an initial assessment and therefore making fast and intuitive decisions rather than deliberate.

• Loss Aversion - Being more afraid of losses than wanting to acquire gains.
  • Status Quo Bias - Preference for keeping things as they are, change considered as a loss.
  • Anchoring - Sticking with the initial reference point, adjusting it to reach estimate rather than realizing it has become irrelevant.
  • Ostrich Effect - Avoiding risk, failure or difficult situations missing out on important lesson leading to repetition of mistakes.

• Framing Effect - Using an approach or description that is too narrow.

• Hindsight Bias - Misremembering predictions, seeing past events as more predictable than they were before they were executed.

• Confirmation Bias - Tendency to favour information that confirm existing beliefs.

• Strategic Misrepresentation - Planned, systematic distortion of facts e.g. benefits or costs, to increase chances of project approval.

• Groupthink - A groups desire to achieve coherence and harmony will cause inadequate decision making, has severe consequences, especially for environments of frequent change.

[edit] Optimism Bias

[edit] Strategic Misrepresentation

[edit] Application

To reduce the impact of cognitive bias in a program or project it is of paramount importance to be aware of their existence. Kahneman suggests asking the following three questions to help recognize and manage biases and their effect:^[2]

Preliminary: Challenge: Evaluation:

He further suggests asking the following three questions throughout the project duration ^[3]

1. Is there any suspicion that biases based on self-interest, overconfidence, or attachment to past experiences exist? If such biases exist, it is almost impossible for people to not have these three influence their decisions.
2. Does groupthink exist? Assess, recognize, and try to expose the biases' effects.
3. Are there any recognizable perceptions about people's positive or negative attitudes towards the proposed action / change / result?

The process it iterative and must be carried out before, during and after the project.

SLOW:

• S
• L
• O
• W

[edit] Limitations

[edit] References

1. ↑ Chatzipanos, P. and Giotis, T. (2014). Cognitive biases as project & program complexity enhancers. [online] Pmi.org. Available at: https://www.pmi.org/learning/library/cognitive-biases-complexity-enhancers-projects-1454 [Accessed 21 Apr. 2019].
2. ↑ Kahneman, D., Lovallo, D., & Sibony, O., (2011) The big idea: Before you make that big decision…, Harvard Business Review, June 2011, Harvard Business Publishing.
3. ↑ Kahneman, D. (2011). Thinking, fast and slow. New York: Farrar, Straus and Giroux

Chatzipanos, P. A. & Giotis, T. (2014). Cognitive biases as project & program complexity enhancers: the Astypalea project. Paper presented at PMI® Global Congress 2014—EMEA, Dubai, United Arab Emirates. Newtown Square, PA: Project Management Institute. --> Overview of cognitive biases, their effects and how to anticipate. Example of implementation.

Flyvbjerg, 2013; (Hofstede, 2010; and Lovallo & Kahneman, 2003

Kahneman 2011