Glossary

3C Principles of Project Decision Analysis Three most important rules of decision analysis process: continuity, comprehensiveness, and consistency.

Adaptive Management A systematic process for continually improving decisions, management policies, and practices by learning from the outcomes of decisions previously taken.

Agile Process A conceptual framework for the undertaking of different projects. Originally conceived for the software development projects, agile approaches are a family of methods used in different industries.

Anchoring and Adjustment Heuristic A heuristic according to which people rely on one trait or piece of information (“anchor”) when making decisions.

Attribution Theory A theory concerned with how people explain (or attribute) the behavior of others, or themselves (self-attribution).

Availability Heuristic A heuristic according to which people judge the probability of the occurrence of the events by how easily these events are brought to mind.

Bayes Theorem A formula that revises probabilities based on new information.

Behavioral Trap A psychological phenomenon that occurs when rational activity later becomes undesirable and difficult to escape from.

Best Fit A process of identification of statistical distribution that would better approximate a given empirical distribution.

Beta Distribution A bounded statistical distribution that uses a mathematical formula that includes two coefficients. By changing these coefficients, beta distribution can take variety of shapes; it can be symmetrical or non-symmetrical.

Bias The discrepancy between somebody’s judgment and reality.

Bounded Rationality A behavior that is rational within the parameters of a simplified model that captures essential features of a problem.

Brainstorming A problem-solving technique that involves creating a list that includes a wide variety of related ideas.

Change Control A process of controlling changes to the original project plans. The process involves identification, analysis, documenting, and approving or rejecting changes during the course of a project.

Cognitive Bias A bias that is introduced by the way the expert processes the information. In other words, it is a distortion in the way humans perceive reality.

Contract Administration A process of managing contracts as well as relationship between buyers and sellers.

Controllable Input See Deterministic Input.

Corporate Culture Company View A company’s values, beliefs, business principles, traditions, ways of operating, and internal work environment. Corporate culture significantly affects decision-making in the company.

Corporate Culture Employee view The basic assumptions and beliefs held by employees about the enterprise they work for. Corporate culture refers to a company’s values, beliefs, business principles, traditions, ways of operating, and internal work environment.

Cost-Benefit Analysis A technique used to compare the various costs associated with a project with the benefits that it proposes to return.

Cost of Decision Reversal A cost associated with paying for all expenses associated with a wrong decision. Can be between zero and infinity of irrevocable decisions.

Creativity Block A factor that prevents decision-making from finding creative solutions to problems.

Creativity Theories A set of psychological theories that try to explain the phenomenon of creativity.

Critical Chain Method A schedule network analysis technique that modifies the project schedule to account for limited resources.

Critical Events or Critical Event Chains In Event chain methodology, the single events or the event chains that have the most potential to affect the projects. Critical events or critical event chains can be identified using sensitivity analysis.

Critical Path A sequence of activities that determines the completion time for the project.

Critical Path Method A schedule network analysis technique that determines the amount of float on different network paths. Critical path method is also used to determine project duration.

Crucial Task (crucial activity) A task (activity) that affects uncertainty in a main project parameter, such as cost and duration, at most. Crucial tasks can be determined as a result of sensitivity analysis.

Decision A conscious allocation of resources for the purpose of achieving desirable objectives.

Decision Analysis A structured way of thinking about how the action taken in a current decision would lead to a project result.

Decision Analysis Manifesto Basic principles why decision analysis should be adopted in the organization.

Decision Analysis Process An integrated set of procedures and tools that help project managers to make a rational choice.

Decision Board See Decision Committee.

Decision Committee A panel of experts that coordinates the decision analysis process in the organization for the particular project. Also called Review Board, Decision Board.

Decision Conferencing A face-to-face 1- to 3-day meeting of experts moderated by a decision analyst. Decision analyst acts as a neutral observer, who applies decision analysis methods and techniques during this meeting. Decision analyst creates a computer-based model that incorporates judgment of the experts.

Decision Criteria Indicators that are used to determine which alternative should be taken.

Decision Framing A step of the decision analysis process which helps decision-makers identify potential problems or opportunities, assess business situations, determine success criteria, and identify uncertainties.

Decision Policy A set of principles or preferences used for selection alternatives. Risk policy is a component of decision policy.

Decision Theory Theory of decision making under uncertainties.

Decision Tree A graph that represents a decision problem. Includes chance, decision, and end (terminal) nodes.

Delphi Technique A group discussion technique, according to which group members don’t meet with each other face-to-face. Instead they provided their opinions anonymously in a series of rounds until consensus is reached.

Descriptive Decision Theory A branch of decision theory that describes how people actually make decisions. See also Normative Decision Theory.

Deterministic Input (Controllable Input) Input to a simulation model that was selected by the decision-maker.

Discounted Cash Flow Techniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project.

Elimination by Aspect Heuristic A heuristic in which people eliminate a potential choice from a plurality of choices if it does not satisfy certain conditions.

Emotion A mental state that arises automatically in the nervous system rather than through conscious effort. It can evoke either a positive or a negative psychological response.

Enterprise Project Management See Project Portfolio Management.

Enterprise Resource Management (ERM) A methodology and software program that manages a company’s assets and resources, including accounts payable and receivable, as well as manufacturing, inventory, and human resources.

Event An instantaneous occurrence that changes the state of the system in the simulation model.

Event Chain In Event chain methodology, a series of single events linked to each other.

Event Chain Diagram A diagram that shows the relationships between events and tasks and indicates how the events affect each other.

Event Chain Methodology An uncertainty modeling and schedule network analysis technique that is focused on identifying and managing both events and event chains that affect project schedules.

Expected Utility Theory The family of theories of rational behavior. Expected utility theory is intended to describe how people should behave if they make rational choices.

Expected Value Expected value is probability-weighted average of all outcomes. It is calculated by multiplying each possible outcome by the probability of occurring and then adding the result.

Filter In creative decision-making, it is a set of conditions used to test a proposed solution. If the solution does satisfy these conditions, it does not pass through the filter and will not be considered in later stages of the analysis.

Filter Diagram A diagram that can be used for selection project alternatives through applying filters.

Fluctuation In Event chain methodology, a small deviation in activity’s cost or duration that cannot be attributed to any specific risk events.

Framing A psychological effect according to which decision-makers respond differently to the problem because of different norms, habits, preferences, and characteristics of the decision-maker as well as different formulations of the problem.

Free Float (Slack) An amount of time the activity can be delayed without delaying any other immediately following activity.

Frustrated Employee Syndrome (FES) A “disease” that can afflict a corporate culture, particularly aspects such as decision-making, efficiency, and productivity. FES is a problem because frustrated project team members will not produce good projects.

Frequency Chart (Frequency Histogram) A histogram that shows the number of samples or probability versus the value of the variable. Frequency charts allow you to analyze the risk associated with a variable.

Fundamental Objectives Primary project objectives or goals that need to be accomplished during the course of a project.

Game Theory A mathematical theory of human behavior in competitive situations. Game theory studies situations where players choose different actions in an attempt to maximize their returns.

Gantt Chart A bar chart that depicts activities as blocks over time. The beginning and end of the block correspond to the beginning and end dates of the activity. The chart was developed as a production control tool in 1917 by Henry L. Gantt, an American engineer and social scientist.

Global Event In Event chain methodology, an event affecting all tasks or all resources in the project.

Heuristics (in psychology of judgment and decision-making) Simplified mental strategies or rules of thumb that people rely on to come up with judgments. In many cases, heuristics lead to rational solutions. However, heuristics can often cause inconsistencies and predictable biases.

Impact See Risk Impact.

Influence Diagram A graphical tool that shows the relationship among decisions, chance events, and consequences for a decision problem.

Intuitive Thinking A direct perception of meaning or truth, without conscious reasoning. Intuitive thinking is a mental activity that is validated by the thinker’s belief systems.

Irrevocable Decision A decision that can be reversed. See also Cost of Decision Reversal.

ISO 9000 A family of ISO (the International Organization for Standardization) standards for quality management systems.

Lag A delay between a predecessor and successor activity. For example, in a finish-start logical relationship, a five-day lag means the successor will start five days after the predecessor is finished.

Lens Model In psychology, a conceptual framework to deal with our judgment and expectations concerning events and outcomes of possible courses of actions. The framework was developed by Egon Brunswik.

Lessons Learned A learning obtained from performing a project. The learning may be gained at any stage of the project.

Lessons Learned Knowledge Base A depository of lessons learned and historical project information.

Local Event In Event chain methodology, an event affecting a particular task or resource.

Lognormal Distribution A statistical distribution of a random variable whose natural logarithm is normally distributed. The lognormal distribution is often used to model data that is positively skewed.

Mean A statistical parameter. Mean is calculated as the sum of variable values on each simulation divided by the number of simulations.

Means Objectives Project objectives that help to achieve fundamental objectives.

Method of Relative Heights A method of eliciting judgment about continuous statistical distribution using a frequency histogram.

Milestone A reference point indicating a major event in the project. Milestones are used to monitor the project’s progress.

Mind Map A diagram used to represent ideas, activities, risks, or other items linked to a central theme. In a mind map, the ideas related to the main theme radiate from that central image as “branches.”

Mitigation Plan See Risk Mitigation Plan.

Model See Valuation Model.

Moment of Event In Event chain methodology, the moment when a particular event occurs during the course of an activity.

Monte Carlo The mathematical method used in risk analysis. Monte Carlo simulations are used to approximate the distribution of potential results based on probabilistic inputs. Each trial is generated by randomly pulling a sample value for each input variable from its defined probability distribution. These input sample values are then used to calculate the results. This procedure is repeated until the probability distributions are sufficiently well represented to achieve the desired level of accuracy.

Motivational Bias A bias that is caused by the personal interest of the expert expressing the judgment.

Multi-Criteria Decision-Making The study of methods and procedures by which concerns about multiple conflicting criteria can be formally incorporated into the decision-making process.

Nash Equilibrium In game theory, a solution to a game in which no player has anything to gain by unilaterally changing only his or her own strategy.

Net Present Value (NPV) The present value of a series of future net cash flows that will result from an investment, minus the amount of the original investment.

Normal Distribution A statistical distribution that describes situations where values are distributed symmetrically around the mean.

Normative Decision Theory A branch of decision theory that describes how people should make a decision. See also Descriptive Decision Theory.

Objective Probability A probability that is based of comprehensive assessment of the evidence, including understanding of all random properties of the system. See also Subjective Probability.

Opportunity A favorable situation that will have a positive impact on project objectives if it occurs. The opposite situation is a threat.

Overconfidence A psychological bias according to which people tend to overestimate the accuracy of their predictions. Overconfidence is one of the most common biases in project management.

Parameters Numerical values that appear in the mathematical relationship of a model.

Percentile A value on a scale of 0 to 100 that indicates what percent of a distribution is equal to or below it. A value in the 95th percentile is a value equal to or better than 95% of other values.

PERT See Program Evaluation and Review Technique.

Precondition of Event In Event chain methodology, a precondition is a state of an activity or environmental factor. Some events can occur only if there is a certain precondition.

Probability The relative frequency of the event based on some evidence. The word “probability” derives from the Latin probare (to prove, or to test). Synonyms: likelihood, odds, chance.

Probability and Impact Matrix A tool to prioritize risk based on probability and impact. The probability and impact matrix is presented as a two-dimensional table with distinct areas associated with high, medium, and low risks.

Probability Method A method of eliciting expert judgment about continuous statistical distributions.

Probability Wheel A graphic tool used to elicit expert judgment related to discrete probabilities.

Program Evaluation and Review Technique (PERT) A network-based project scheduling procedure. Developed between 1956 and 1958 by consulting firm Booz Allen Hamilton for the U.S. Navy’s Special Project Office.

Project Life Circle A collection of sequential project phases.

Project Objective PMBOK Guide describes project objective as “something towards which work is to be directed, a strategic position to be attained, or purpose to be achieved, a result to be obtained, a product to be produced, or a service to be performed” (Project Management Institute 2018).

Project Portfolio Management (Enterprise Project Management) A methodology and tool that organizes a series of projects into a single portfolio consisting of reports that capture project objectives, costs, timelines, accomplishments, resources, risks, and other critical factors. Executives can then regularly review entire portfolios, spread resources appropriately, and adjust projects to produce the highest departmental returns.

Project Schedule A detailed plan of major project phases, milestones, activities, tasks, and resources allocated to each task. The most common representation of the project schedule is in a Gantt Chart.

Project Success Rate A chance that a project will be successfully completed

Prospect Theory A theory of behavior developed by D. Kahneman and A. Tversky as an alternative to expected utility theory.

Qualitative Risk Analysis A process that determines the probability and impact of the risks on the project. Qualitative risk analysis includes ranking of risk according to their impact on the project schedule.

Quantitative Risk Analysis A process of assigning numerical probabilities to the risks and uncertainties and then applying quantitative methods to determine the impact of those risks on the project schedule.

Radar Chart A chart used to visualize different strategies against multiple objectives.

Rate of Return (ROR) A measure of profitability of an investment. It is an increase in the value of the investment, expressed as a percentage.

Rational Choice An alternative that leads to maximum value for the decision-maker.

The Rational Unified Process (RUP) An iterative software development process created by the Rational Software Corporation, now a division of IBM.

Reality Check A method of assessing results of analysis by comparing it with results, obtained from different analyses or from subjective assessments.

Regression Analysis A statistical technique for investigating and modeling the relationship between variables.

Repeated Activity A previous activity that needs to be executed again due to an event. Repeated activities can be modeled using Event chain methodology.

Representativeness Heuristic A heuristic according to which people estimate probability by judging how representative the object, person, or event is of its category, group, or process.

Reserve Analysis A technique to establish reserves for schedule duration, budget, estimated cost, or funds for a project.

Resource Leveling A schedule network analysis technique in which project schedule is calculated, given resource constraints such as resource availability.

Review Board See Decision Committee.

Risk A stochastic event that can be applied to tasks or resources and that affects project schedules. The effect can be positive (opportunity) and/or negative (threat). Risks in Event chain methodology are defined by name, chance of occurrence, outcome, and moment of occurrence. Risks can be global (for all tasks or resources in project) and local (for a particular task or resource in the project).

Risk Audit A technique that helps to control efficiency of risk responses as well as efficiency of risk-management process.

Risk Breakdown Structure (RBS) A hierarchical structure of risks created during risk identification. Event chain methodology uses Risk Breakdown Structure and project schedule together to perform quantitative risk analysis.

Risk Identification A process of determining and identifying properties of potential threats and opportunities.

Risk Impact Consequences (outcome) of risk event on the activity and project. In Event chain methodology, impact is one of the properties of the event.

Risk Mitigation Plan A proactive risk-response strategy that reduces the probability of a risk event and its impact.

Risk Monitoring and Control A process of tracking identified risks, monitoring residual risks, identifying new risks, and executing risk-response plans during the course of a project.

Risk Policy Individual’s or organization’s risk preferences. Individuals or organizations can be risk averse or risk-taking. Risk policy can be expressed using utility function.

Risk Register A document that includes information about risks: risk name, description, category, cause, probability, impact on project objectives, responses, owner, current status, and other related information.

Risk-Response Planning A formalized process of planning options and activities to reduce threats and enhance opportunities to project objectives.

Risk Tolerance A level of risk that an organization or individual is willing to accept.

Rule of Pi A bias that affects estimations: actual duration (cost) of an activity will be pi (3.1415 . . .) bigger than the original estimate, even if the estimator was aware of this rule.

Sampling In Monte Carlo simulations, a process of retrieval of the value from the statistical distribution.

Scenario Analysis See What If Scenario Analysis.

Schedule Consolidation An algorithm that is used to reduce the number of activities presented on a decision tree as a result of schedule-to-decision-tree conversion.

Schedule Control A process of monitoring changes to the project schedule.

Schedule Model A model used to perform schedule network analysis and to generate the project schedule.

Schedule Network Analysis A technique used to identify start and finish times for the uncompleted activities of a project schedule.

Schedule-to-Decision-Tree Conversion An algorithm used to convert a project schedule with multiple alternatives for the decision tree.

Scope Control One of the project scope management processes related to controlling of changes in project scope.

Scope Verification A process of formalizing acceptance of the completed project deliverables (Project Management Institute 2018).

Scoring Model An approach to multi-criteria decision-making that requires the user to assign weights to each criterion that describes the criterion’s relative importance. The user also assigns a rating that shows how well each decision alternative satisfies each criterion. The output of the model is a score for each decision alternative.

Selective Perception A psychological term that describes either the conscious or unconscious increase in attention to stimuli and information consistent with a person’s attitudes or interests, or a conscious or unconscious discounting of inconsistent stimuli (“What you see is what you want to see”).

Self-Actualization A psychological term to describe the motivation to fulfill somebody’s potential. The notion of self-actualization is used in theories of creativity.

Sensitivity Analysis A type of probabilistic analysis that determines how sensitive results of the analysis are to uncertainties in input variables. Sensitivity analysis determines which uncertainty has the greatest potential for the impact.

Simulation A method of learning about a real system by experimenting with a model that represents the system.

Six Sigma A rigorous and disciplined methodology that utilizes data and statistical analysis to measure and improve a company’s operational performance, practices, and systems. Six Sigma identifies and prevents defects in manufacturing and service-related processes.

Slack See Free Float.

Spearman Rank Order Correlation Coefficient A nonparametric (distribution-free) rank statistic proposed by Spearman in 1904 as a measure of the strength of the associations between two variables.

St. Petersburg Paradox A game that leads to a random variable with infinite expected payoff, which is considered to be worth only a small amount of money. The St. Petersburg paradox is a classical situation where expected value approach would recommend a course of action that no rational person would be willing to take.

Standard Deviation A statistical parameter: a measure of how widely dispersed the values are in a distribution. Equals the square root of the variance.

Statistical Distribution An arrangement of values or variables showing their observed or theoretical frequency of occurrence.

Student Syndrome A psychological bias related to project scheduling: many people will start to fully apply themselves to a task just in the wake of a deadline.

Subjective Probability A probability that is based on a person’s judgment of the likelihood of an event. See also Objective Probability.

Success Rate The chance that a task or project will be completed. A task success rate of 56% means that there is a 56% chance that this task will be completed and a 44% chance that the task will be canceled.

SWOT Analysis A technique (noting strength, weaknesses, opportunities, and threats) used for risk identification and strategic planning.

Theory of Constraints A management approach that focuses on identifying and relaxing the constraints that limit an organization’s ability to reach a higher level of goal attainment. Theory of constraints was developed by Eliyahu Goldratt.

Threat An unfavorable situation that will have negative impact of project objectives if it occurs. The opposite situation is opportunity.

Tornado Diagram A diagram presenting results of sensitivity analysis. Input parameters, which affect output parameters at most, are shown at the top of the diagram.

Trial In Monte Carlo simulations, a single run of the calculation.

Triangular Distribution A statistical distribution in which the parameter is estimated using minimum, maximum, and most likely estimates.

Uncertainty Any event or group of events with an uncertain outcome.

Uniform Distribution A statistical distribution that represents an equal probability that the parameter will be within certain range.

Util Arbitrary units used to measure utility scale.

Utility A measure of total worth of the particular outcome. It reflects decision-maker’s attitude toward a collection of factors, such as profit, lost, and risk.

Utility Function A chart of mathematical equations that represent the relationship between objective measures, such as money and utility. Utility function is used in quantitative analysis.

Valuation Model An approximation of the problem or project. Valuation consists of input and output variables as well as mathematical formulas.

Value Measure An outcome measure used for decision analysis. Examples of value measures are NPV, ROI, project duration, and cost.

Variable Parameter in a model that has a value. Examples of variables can be task cost or duration.

Verbal Expressions of Uncertainty Words used in the decision analysis report such as “possible,” “probable,” “may,” and “unlikely” that are intended to express uncertainties.

What If Scenario Analysis A schedule network analysis technique that includes generating and assessing multiple project scenarios under different conditions.

WITI Test A way to separate means and fundamental objectives by answering a question: Why Is That Important?

Work Breakdown Structure A hierarchical set of project activities. Each Work Breakdown Structure level has more detailed information than the previous level.