Revision as of 19:45, 29 April 2023

new title?: Understanding, identifying and handling optimism bias

(Page is in progress... there has been some changes to the structure, which is why I am a little behind)

Optimism bias is important to tackle as it can lead individuals and/or teams to unrealistic expectations, which can have a negative impact on team dynamics and coordination. Optimistic bias can also have positive effects, such as increasing morale and motivation. As people doesn't come with instructions the idea of this paper is to look at project management in a cognitive manner, regarding different behavioural patterns and tendencies, with a focus on optimism biases, as well as other biases which has a tendency to lead to optimism biases. Optimism biases are examined in regard to teams, and are usually found in smaller teams.

Project managers can use several methods to effectively manage optimistic bias in teams. These methods include 1) fostering a culture of transparency and open communication, 2) using data to help uncover overly optimistic assumptions and goals, 3) encouraging a culture of continuously improving, 4) developing a risk management plan, 5) setting realistic expectations, and 6) seeking external opinions. There are also other factors and important steps when creating a team that can help to reduce optimism bias and moral hazards in teams. By using these methods, project managers can help ensure that their team takes realistic approaches to the project and remains focused on achievable goals. Furthermore, it is important to know the difference between optimistic bias and strategic misinterpretation.

To recap, effective team management enables project managers to harness the strengths and talents of individuals, foster trust and collaboration, and create an environment where everyone is motivated to work towards a shared goal. By understanding and addressing optimism bias, while valuing employees and promoting a supportive and trusting environment, project managers can enhance team performance, productivity, and ultimately, the success of the project, without being overly optimistic.

Generel biases in regard to teams and projects

People doesn't come with instructions, so to help project managers (PM) it can be helpful to understand their teams' behaviours and to be more aware of these "soft skills" to identify and treat these tendencies. ^[1] When looking at optimism in teams it is important to look at human behaviours, both from the individuals' side as well as the organisations' mentalities. The following will establish base knowledge about these behaviours. In general biases and optimism is different ways that people are manipulated/influenced, either by themselves or others. With a lot of factors in play. When a bias influences individuals it is referenced as a cognitive bias, which unbeknownst to the individual doesn't reflect reality. Meanwhile, on the other end, there is Strategic misrepresentation, a tool used for the users' benefit.

The general optimism has effects on (look into; different markets, teams, investors, individuals, etc?)(a small intro for the construction etc. but here we are looking at the team, (teams "developing new technology or products?"))

Cognitive bias is as a broad term, which entails different kinds of biases.

Strategic misrepresentation

Strategic misrepresentation is when someone deliberately presents false information for their own benefit and strategic purposes. This mostly relates to the funding or acceptance of projects, where projects are presented to have lower costs and/or higher benefits than what is actually forecast, to look more appealing on paper. There are a lot of different reasons for the tendencies to make use of such a method and is dignified with the mindset of ‘ends justify the means. Here firms use strategic misrepresentation to get a job/project which can lead to profits. Strategic misrepresentation is seen frequently and at higher altitudes where political organizations are involved, as they have a tendency to participate in big and expensive projects. Where there is a lot of pressure from political organizations, as they tend to put more pressure and attention on the projects. As it is important for political organizations to have their project accepted, as it can have an impact on political purposes. ^[2]

Tendencies for strategic misrepresentation

• Large projects with a lot of attention, and a high strategic importance usually have a large misrepresentation or bias, e.g. political bias, where there is to an extent a cognitive bias.

• For Smaller projects, with low attention and/or strategic implications, the biases are more likely to be cognitive biases, e.g. optimism bias.

Cognitive biases

Cognitive bias is as a broad term, which entails different kinds of biases. Cognitive bias isn't when someone else is trying to manipulate an individual for their own gain, but when the individual themselves contaminates their rationality, hindering them from making rational choices. This doesn't mean that it leads to unpredictable behaviours, but quite the contrary.

"Cognitive bias refers to a systematic (that is, non-random and, thus, predictable) deviation from rationality in judgment or decision-making." ^[3]

There are some different suspected causes, with can lead to Cognitive biases, 1) one could be that we as humans have limited cognitive resources and is therefore in need to sort out information because of our limited capabilities, 2) emotion and motivation also play a huge role when in need to make decisions, 3) social influence, can also influence our decision making as opinions of others can affect decision making & 4) mental shortcuts, as taking everything into account isn’t always possible it can lead to taking what seems to be the best option ^[3]

In the table below the 9 different biases, which can influence the mentioned factors.

• insert table *

• Uniqueness bias

Uniqueness bias in project management is when individuels in the project sees the project or management of the project to be more unique than what is actually is. Instead of looking broth project managers sees their projects as being singular and unique. This uniqueness bias comprehends learning form other projects as project managers sees their own projects as being unique and is therefore different form other projects. Managers who sees their projects as special and unique has a tendency to do worse than project managers who doesn't see their projects as unique. Projects with new technologies has a tendency to increase the illusion of uniqueness in projects, as there is still opportunity draw parallels form other projects. Uniqueness bias can lead to being narrow-minded and optimism, which can leave the project team with wrong estimates of risks, and therefore they might end up taking risky choices. Looking at individuals, individuals can also have a tendency to see themselfs as unique, especially good looking, healthy, smart etc. ^[2]

• Base rate bias / base rate neglect

Is a tendency to not look at ones data objectively. As well as putting more emphasis on one's knowledge without looking objectively at new or different knowledge, as well as thinking that one's knowledge is more important than it actually is. ^[2]

• Anchoring

Anchoring bias is when people tends to anchor on a certain piece of information. This type of bias can have significant effects on decision-making processes within teams, as individuals may focus too heavily on a specific piece of information without considering other relevant factors. This can lead to poor decision-making and suboptimal outcomes for the team. Additionally, the lack of transparency within teams can contribute to anchoring bias, as individuals may not have access to all the relevant information needed to make informed decisions. Therefore, it's important for project managers to promote transparency and open communication within teams to mitigate the effects of anchoring bias. ^[2]

Social influence

Biases can also be formed or modified by social influence, ^[4] confronting this tendency of people to be more influenced by others' earlier expressions and opinions. Therefore it could be important to have a transparent mindset. As well there being observed that people's biases tend to fade or have less effect on behaviours when overlooked by their peers. ^[5] As concluded by Blanco, Fernando. (2017).^[3]

Managing teams

As mentioned, managing and handling teams effectively is of utmost importance when leading a project. Understanding the concept of optimism bias equips project managers with the knowledge to effectively navigate and mitigate its impact on team dynamics. By recognizing the tendency for individuals to be overly optimistic, managers can guide their teams towards a more realistic approach. This enables the setting of achievable goals, better decision-making, and proactive risk management

A team is defined as; “A teams puts their efforts towards reaching a common goal.” ^[6]

Team management plays a vital role in project leadership as it ensures coordination, collaboration, and the efficient execution of tasks. Effective team management fosters a cohesive working environment, encourages open communication, and maximizes overall productivity. By establishing clear roles and responsibilities, providing necessary support, and addressing any conflicts or challenges that arise, managers create an environment where teams can thrive and perform at their best. This is important as well as being able to build trust among team members and establishing trust in the project leader is crucial for effective team management. Trust enhances collaboration, encourages open dialogue, and creates a supportive atmosphere where individuals feel comfortable expressing their opinions and contributing their expertise. This fosters a sense of psychological safety within the team, leading to improved communication, innovation, and a higher likelihood of achieving project goals. which is why leaders need both technical skills and non-technical skills. ^[7]

There are different types of teams, depending on which teams and what kind of leader you are, also needs to be taken into consideration. ^[7] Here you might need to look into different management and leadership styles. Which refers to the specific approach that managers adopt to achieve their objectives, encompassing decision-making processes, work planning and organization, and the exercise of authority ^[8]. These styles can vary across companies, levels of management, and individuals. A skilled manager has the ability to adapt their management style to different environments and employees. Various factors, such as internal and external business environments, as well as personal perspectives on the role of work in employees' lives, contribute to shaping an individual's management style ^[9]. For more information about this topic about management and different leadership styles you can read the wiki-article; http://wiki.doing-projects.org/index.php/The_Difference_Between_Leadership_and_Management.

Matching leadership styles with the team, you can read more about situational leaders ship, which goes into depth about why PM needs to be flexible to be able to keep up with the continuous change in their teams. http://wiki.doing-projects.org/index.php/Situational_leadership_-_Hersey_and_Blanchard.

Lobby formation, (mention Belbin)

Risk Assessment in project teams

When project leaders develop or review their project plan, they need to look at risk and know where these risks can occur. One of these areas of risk is staffing, as project managers usually overestimate and can be too optimistic about their staff's capabilities which can lead to understaffing in regard to their project. It is also important to understand the skill level and role each team member has, as well as to establish a chain of communication. Where in smaller teams, all may report to the project leader, but in larger teams or projects that might not be the case. As well as to make an estimate of progress, and react to problems regarding deliverables in contrary to the end date. In estimating how much harm a problem can have on the project there are 3 factors which can help determine the impact. 1) The first one is budgetary impact, which looks at the increase in cost or reduction in funding, 2) Time impact, how will the problem affect the timeline and 3) Quality impact, will it affect the quality or performance. ^[10]

Optimism specifically in teams

Optimism bias is a cognitive bias, which is a human misinterpretation and tends to lead individuals to being way optimistic or casual regarding timelines and planned actions. Not to mistake it for Strategic misrepresentation, as also mentioned earlier is when others they to influence agents for statigic purposes. Here there is talk about the team, experts and/or management themselves having a mis-interpretation of the situation and are themselves not aware of being optimistic.

Mention; example or in depth

It is rare for forecasters to mention optimism bias to be stated as the cause of project delays, going over budget, change of scope etc. Here it is more terms like strategic misrepresentation, scope changes, weather conditions, fluctuating prices etc. which are mentioned. Meanwhile from a psychological point of view, it might be a different story.

Optimism bias can be a double edged sword (both good and bad), as it can be a driver for projects and can breed a positive and active attitude.

The Planning Fallacy (Writ Large)

When optimistic teams, are planing they have a tendency to plan extremely close to the timeline being optimal, not taking many repercussions and estimating their proces to be close to best-chase scenarios and not making room for failures or delay. (more details later) ^[2]

How to identify/ recognise optimism bias in teams and how to handle it

But what are some more concrete ways to identify, handle or prevent the optimism biases in our teams?

Prevention methods:

transparency if you don't have transparency or don't know how to change or have authority over your team, then practice your people skills ^[11],

How to Identify:

General management, Moral hazards and optimism bias

Free-ride ^[12] A sign of ones team being overly optimistic can be for some of them to "slack off". This behaviour lead others to be effected, as they scale back on effort when some agent is optimistic in team.

"some agent’s optimism bias makes the whole team inefficient to some extent, and that teams staffed with some optimistic agents tend to underperform those without"

Handle:

Appoint a leader ^[12] - Appoint an optimistic leader An important aspect to consider is appointing a leader who can influence by example and guide the efforts of their followers. In a study conducted by Jian Wang, involving both rational and optimistic agents, it was found that both types of agents tend to be more productive when led by an optimistic leader rather than a rational one. Additionally, introducing leadership into teams helps mitigate the free-rider problem and enhances team welfare. However, it is crucial to select the right kind of leader, as choosing E.g a rational agent as a group leader can negatively impact the productivity of optimistic agents. Conversely, when an optimistic agent assumes the leadership role, it results in increased team welfare and productivity

Seeing scenarios from an outsider’s perspective The inside and outside view as Kahneman describes, where the inside view is to understand the details of the problem and the outside view is to reference other sources to compare and predict the outcome based on others' experiences. ^[13]

"

• “Identify an appropriate reference class” – Look for a general category to put your task in and use it as a reflection and comparison point.

• “Obtain statistics for this reference class” – Look for statistics on how long it takes to complete the type of task on average. These are your “base rates”.

• “Use specific information about the case to adjust the baseline prediction” – If there are certain concrete things that you think are worth changing your predictions for, use your judgment to make prediction adjustments. "

Annotated bibliography

Bent

Jian

Kahneman

References

1. ↑ Jason Dolfi, Edwin J. Andrews, The subliminal characteristics of project managers: An exploratory study of optimism overcoming challenge in the project management work environment, International Journal of Project Management, Volume 25, Issue 7, 2007, Pages 674-682,ISSN 0263-7863,https://doi.org/10.1016/j.ijproman.2007.02.002.
2. ↑ ^{2.0 2.1 2.2 2.3 2.4} Bent Flyvbjerg, Project Management Institute (2021) Top Ten Behavioral Biases in Project Management: An Overview, DOI: 10.1177/87569728211049046
3. ↑ ^{3.0 3.1 3.2} Blanco, Fernando. (2017). Cognitive bias. 10.1007/978-3-319-47829-6_1244-1.
4. ↑ Obermaier, M., Koch, T., & Baden, C. (2015). Everybody follows the crowd? Effects of opinion polls and past election results on electoral preferences. Journal of Media Psychology, 1–12. doi:10.1027/1864-1105/a000160.
5. ↑ Yechiam, E., Druyan, M., & Ert, E. (2008). Observing others’ behavior and risk taking in decisions from experience. Judgment and Decision making, 3(7), 493–500.
6. ↑ DS/ISO 21502 (2020) Project, programme and portfolio mangement - guide on project management
7. ↑ ^{7.0 7.1} (INSERT MORE****) https://emeritus.org/in/learn/team-management-meaning-and-importance/ (INSERT MORE****)
8. ↑ "Understanding Management and Leadership Styles". Chartered Management Institute. Retrieved March 7, 2018.
9. ↑ "Management Styles Explained". Films on Demand. Films Media Group. Retrieved March 7, 2018.
10. ↑ Leading Project Teams: The Basics of Project Management and Team Leadership, Cobb, A.T., p. 89-119, SN:9781544302737, https://books.google.dk/books?id=KX9ZDwAAQBAJ,(2011), SAGE Publications
11. ↑ James P. Lewis, Team-Based Project Management, Beard Books, 1998, ISBN; 1587982293, 9781587982293
12. ↑ ^{12.0 12.1} Jian Wang, Xintian Zhuang, Jun Yang & Jiliang Sheng (2014) The effects of optimism bias in teams, Applied Economics, 46:32, 3980-3994, DOI: 10.1080/00036846.2014.948678
13. ↑ Daniel Kahneman, Dan Lovallo, (1993) Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking. Management Science 39(1):17-31.

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