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by Michael Trumper, Lev Virine
Project Decisions, 2nd Edition, 2nd Edition
Cover
Title Page
Copyright Page
Contents
PREFACE
TEST YOUR JUDGMENT
ANSWERS TO JUDGMENT QUIZ
PART 1 Introduction to Project Decision Analysis
CHAPTER 1 Project Decision Analysis: What Is It?
The Burden of Poor Decision-Making
Why Do We Make Wrong Decisions?
Decision Analysis as a Process
Normative and Descriptive Decision Theory
Driving Forces behind Project Decision Analysis
A Little Bit of History
Decision Analysis Today
CHAPTER 2 “Gut Feel” vs. Decision Analysis: Introduction to the Psychology of Project Decision-Making
Human Judgment Is Almost Always to Blame
Blink or Think?
Cognitive and Motivational Biases
Cognitive Biases
Motivational Biases
Perception
Bounded Rationality
Heuristics and Biases
Availability Heuristic
Representativeness Heuristic
Anchoring Heuristic
Behavioral Traps
Time Delay Traps
Deterioration Traps
Frames and Accounts
Training for Project Decision-Making Skills
CHAPTER 3 Understanding the Decision Analysis Process
Example of Decision Analysis Process
When Decision Makers Go Bad
The Decision Analysis Manifesto
The “3C” Principle of Project Decision Analysis
Consistency
Comprehensiveness
Continuity
Decision Analysis Process versus the PMBOK® Guide’s Project Risk Management Process
Phases of the Decision Analysis Process
Phase 1: Decision-Framing
Phase 2: Modeling the Situation
Phase 3: Quantitative Analysis
Phase 4: Implementation, Monitoring, and Review
Big and Small Decisions
CHAPTER 4 What Is Rational Choice? A Brief Introduction to Decision Theory
Decision Policy
Which Choice Is Rational?
Expected Value
The St. Petersburg Paradox
Risk-Taker versus Risk-Avoider
Expected Utility
Expected Utility Theory
Extensions of Expected Utility Theory
How to Use Expected Utility Theory
Target Oriented Interpretation of Utility
Descriptive Models of Decision-Making
CHAPTER 5 Creativity in Project Management
Creativity and Decision-Making
Psychology of Creativity
Creativity Blocks
1. Framing and Perceptual Blocks
2. Value-Based Blocks
3. Cultural, Organizational, and Environmental Blocks
CHAPTER 6 Group Judgment and Decisions
Psychology of Group Decision-Making
Aggregating Judgment
Group Interaction Techniques
Brainstorming
Tools for Facilitating Discussions
A Few Words about Game Theory
CHAPTER 7 Are You Allowed to Make a Decision? Or, About Decision Analysis and Organizational Culture
What Is FES?
Why Is FES a Problem?
How Does FES Spread?
Three Common Myths about FES
The Roots of FES
Treating FES
The Second Russian Revolution
PART 2 Decision-Framing
CHAPTER 8 Identifying Problems and Assessing Situations
Who Are the Players?
Identifying Problems and Opportunities
Assessing Business Situations
Some Tools and Techniques
CHAPTER 9 Defining Project Objectives
Different Objectives and Different Criteria for Decision-Making
Aligning Project Objectives
Decision Analysis as an Art of Trade-Offs
Project Objectives Hierarchy
Maximizing the Probability of Meeting Project Objectives
CHAPTER 10 Generating Alternatives and Identifying Risks
Identifying Risks and Uncertainties
Generating Alternatives
Risk Breakdown Structures
Risk Templates
Risk-Response Planning
Risk Registers
PART 3 Modeling the Situation
CHAPTER 11 The Psychology and Politics of Estimating
How Do We Make Estimates?
How Do We Think When We Make Estimates?
Impact of Politics on Estimation
Impact of Psychology on Estimation and Rule of Pi
Student Syndrome
Other Cognitive Biases in Estimating
Further Explanations of Problems with Estimation
Where Does the Problem Lie—in Psychology or Politics?
Many Mental Errors and One Wrong Estimate
Simple Remedies
Never Make a Wild Guess
Collect Relevant Historical Data
Perform Reality Checks and Benchmarking
Conduct an Independent Assessment
CHAPTER 12 Project Valuation Models
Model of the Project
Schedule Model
Economic Model
Alternative Models
The Critical Path Method
The Critical Chain Method
Event Chain Methodology
Modeling with Influence Diagrams
The Agile Approach and Project Decision Analysis
CHAPTER 13 Estimating Probabilities
Approaches to Estimating Probabilities
Subjective Estimation of Probabilities
How We Subjectively Assess Probability and Risk
Methods of Eliciting Subjective Judgments in Project Management
What If a Decision Is Sensitive to Probability?
Qualitative Risk Analysis
PART 4 Quantitative Analysis
CHAPTER 14 Choosing What Is Most Important: Sensitivity Analysis and Correlations
What Are Correlations? Why Do We Need to Analyze Them?
Sources of Correlations in Projects
Psychology of Correlation and Causation
How to Improve Your Judgment
Sensitivity Analysis
Quantitative Analysis of Correlations
Crucial Tasks
Correlations between Tasks
CHAPTER 15 Decision Trees and the Value of New Information
What Is a Decision Tree?
Why Project Managers Avoid Decision Trees (and Why They Shouldn’t)
Converting Project Schedules into Decision Trees
The Value of Perfect Information
The Value of Imperfect Information
CHAPTER 16 What Is Project Risk? Monte Carlo Method
How Much Will It Really Cost?
PERT
Statistical Distributions
The Monte Carlo Technique
Which Distribution Should Be Used?
How Many Trials Are Required?
Analysis of Monte Carlo Results
Sensitivity and Correlations
Critical Indices
Probabilistic Calendars
Deadlines
Conditional Branching
Probabilistic Branching
Chance of Task Existence
Is Monte Carlo the Ultimate Solution?
CHAPTER 17 “A Series of Unfortunate Events,” Or, Event Chain Methodology
How Events Can Affect a Project
Basic Principles of Event Chain Methodology
Principle 1: Moment of Risk and State of an Activity
Principle 2: Event Chains
Principle 3: Event Chain Diagrams
Principle 4: Analysis Using Monte Carlo Simulations
Principle 5: Critical Event Chains
Principle 6: Project Control with Event and Event Chains
Event Chain Methodology Phenomena
Repeated Activities
Event Chains and Risk Response
Delays in Event Chains
Resource Allocation Based on Events
How to Use Event Chain Methodology
Example of Event Chain Methodology
Event Chain Methodology and Mitigation of Psychological Biases
Work Breakdown Structure + Risk Breakdown Structure + Analysis = Event Chain Methodology
CHAPTER 18 The Art of Decision Analysis Reporting
How to Communicate the Results of Decision Analysis
Motivational Biases in Reporting Decision Analysis Results
Put It into Perspective
Presentations Must Have Meaning
Expressing Uncertainty
The Power of Fear
CHAPTER 19 Making a Choice with Multiple Objectives
What Is Multi-Criteria Decision-Making?
The Psychology of Balancing Multiple Objectives
Two Approaches to Multi-Criteria Decision-Making
Ranking Criteria with the Scoring Model
Advanced Methods of Multi-Criteria Decision-Making
PART 5 Implementation, Monitoring, and Reviews
CHAPTER 20 Adaptive Project Management
Adaptive Management as Part of Project Decision Analysis
Principles of Adaptive Management
Principle 1: Use actual project data in combination with original assumptions
Principle 2: Minimize the cost of decision reversals
Principle 3: Make small, sequential decisions
Principle 4: Support creative business environments
Principle 5: Identify and fix problems early
The PMBOK Guide Approach to Project Executing, Monitoring, and Controlling
Adaptive Management and Changing Requirements
CHAPTER 21 Did You Make the Right Choice? Reviewing Project Decisions
Why Do We Need Post-Project Reviews?
How Could We Not Foresee It?
“I Knew It All Along”
Overestimating the Accuracy of Past Judgments
The Peak-End Rule
The Process of Reviewing Decisions
Corporate Knowledge Base
CONCLUSION Does Decision Analysis Provide a Solution?
Common Misconceptions about Decision Analysis
Misconception 1: The decision analysis process is not beneficial because it cannot ensure project success
Misconception 2: Decision analysis adds additional levels of bureaucracy
Misconception 3: Only organizations with mature project management processes can benefit from decision analysis
Why Do We Believe that the Decision Analysis Process Is So Important?
APPENDIX A Risk and Decision Analysis Software
APPENDIX B Heuristics and Biases in Project Management
APPENDIX C Risk Templates
APPENDIX D Multi-Criteria Decision-Making Methodologies
GLOSSARY
FUTURE READING
REFERENCES
ACKNOWLEDGMENTS
INDEX
ABOUT THE AUTHORS
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