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Journal ArticleDOI

Performers, trackers, lemmings and the lost: sustained false optimism in forecasting project outcomes—evidence from a quasi-experiment

27 Nov 2014-IEEE Engineering Management Review (IEEE)-Vol. 42, Iss: 3, pp 80-95
TL;DR: In this article, the authors investigate whether optimism bias persists beyond the planning phase and into the execution phase, and if so, explore the reasons why, and demonstrate on-going or sustained false optimism.
Abstract: The consistently successful delivery of projects remains an ambition that many organisations do not achieve. Whilst the reasons behind project failure are many, one recognised factor is the ‘planning fallacy’ – over-optimism in the planning phase of a project. Whilst the planning phase of a project may be a battle for acceptance and resource allocation, the execution phase is a battle for delivery. Based on both qualitative and quantitative data gathered from a project management simulation, this study set out to establish whether optimism bias persists beyond the planning phase and into the execution phase, and, if so, to explore the reasons why. The results confirm the extent and impact of optimism bias in initial project planning. More importantly, the contribution of this study is to demonstrate on-going or sustained false optimism.

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Citations
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Journal ArticleDOI
TL;DR: The paper attempts to address the risk response factors that lead to successful achievement of project scope & quality, schedule and cost targets, by using a series of regressions followed with Seemingly Unrelated Regression Equations (SURE) modelling.
Abstract: Risk management and success in projects are highly intertwined – better approaches to project risk management tend to increase chances of project success in terms of achieving scope & quality, schedule and cost targets. The process of responding to risk factors during a project’s life cycle is a crucial aspect of risk management referred to as risk response strategies, in this paper. The current research explores the status of risk response strategies applied in the software development projects in India. India provides a young IT-savvy English-speaking population, which is also cost effective. Other than the workforce, the environment for implementation of software projects in India is different from the matured economies. Risk management process is a commonly discussed theme, though its implementation in practice has a huge scope for improvement in India. The paper talks about four fundamental treatments to risk response – Avoidance, Transference, Mitigation and Acceptance (ATMA). From a primary data of 302 project managers, the paper attempts to address the risk response factors that lead to successful achievement of project scope & quality, schedule and cost targets, by using a series of regressions followed with Seemingly Unrelated Regression Equations (SURE) modelling. Mitigation emerged as the most significant risk response strategy to achieve project targets. Acceptance, transference, and avoidance of risk were mostly manifested in the forms of transparency in communication across stakeholders, careful study of the nature of risks and close coordination between project team, customers/end-users and top management.

16 citations

Journal ArticleDOI
TL;DR: This article analyzed the usage of such framing in 20 business cases for large information systems (IS) projects of the Dutch government and found that newly proposed systems are systematically framed using positive adjectives, whereas the existing systems are framed using negative adjectives.

1 citations

Journal ArticleDOI
TL;DR: In this article , the authors tried to answer whether bidders exhibit optimism bias-like behavior when bidding for construction projects and whether financial ramifications would follow, and they found that optimistic bias is one of the undisputed factors or reasons affecting cost underestimation and cost overrun.
Abstract: In the construction management literature, it is not an ultimately settled matter that optimism bias is one of the undisputed factors or reasons affecting cost underestimation and cost overrun. This study tried to answer whether bidders—usually legal entities, not natural persons—would exhibit optimism bias-like behavior when bidding for construction projects and whether financial ramifications would follow. Two hundred eighty-six projects delivered to the Ohio Department of Transportation between 2011 and 2020 were analyzed to test the proposed hypothesis. It was observed that bidders were more optimistically biased when bidding for long-duration projects than short-duration projects. The observation strengthens the causal nature between optimism bias and cost underestimation and encourages stakeholders to develop internal or external monitoring systems that call out optimism bias at the organizational level.
Journal ArticleDOI
TL;DR: A review of literature on optimism bias and transport infrastructure project cost overruns can be found in this paper , where the authors identify significant gaps and unanswered questions about the relationship between optimism bias in project cost appraisal and cases of transport infrastructure cost overrun.
Abstract: There is a growing face-value acceptance of optimism bias as the primary cause of transport cost overruns. This article provides a timely review of literature on optimism bias and transport infrastructure project cost overruns. The article identifies significant gaps and unanswered questions about the relationship between optimism bias in project cost appraisal and cases of transport infrastructure cost overruns. The presence and nature of optimism bias in the complex institutional environment of project cost appraisal are largely understudied and not well understood. Consequently, this has significant implications for the development of effective mitigation strategies for improving transport project cost performance.
Journal ArticleDOI
TL;DR: In this paper , the authors synthesize management science concepts such as strategic alignment with enterprise architecture concepts and artificial intelligence (AI)-driven business process optimization to increase innovation productivity and master the increasing rate of business dynamics at the same time.
Abstract: New business opportunities, driven by smart digitalization technology and initiatives such as Industry 4.0, significantly change business models and their innovation rate. The complexity of methodologies developed in recent decades for balancing exploration and exploitation activities of digital transformation has risen. Still, the desired integration levels across organizational levels were often not reached. Systems thinking promises to holistically consider interdisciplinary relationships and objectives of various stakeholders across supply chain ecosystems. Systems theory-based concepts can simultaneously improve value identification and aligned transformation among supply networks’ organizational and technical domains. Hence, the study proposes synthesizing management science concepts such as strategic alignment with enterprise architecture concepts and artificial intelligence (AI)-driven business process optimization to increase innovation productivity and master the increasing rate of business dynamics at the same time. Based on a critical review, the study explores concepts for innovation, transformation, and alignment in the context of Industry 4.0. The essence has been compiled into a systems engineering-driven framework for agile value generation on operational processes and high-order capability levels. The approach improves visibility for orchestrating sustainable value flows and transformation activities by considering the ambidexterity of exploring and exploiting activities and the viability of supply chain systems and sub-systems. Finally, the study demonstrates the need to harmonize these concepts into a concise methodology and taxonomy for digital supply chain engineering.
References
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Book ChapterDOI
TL;DR: In this paper, the authors present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.
Abstract: This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are inconsistent with the basic tenets of utility theory. In particular, people underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty. This tendency, called the certainty effect, contributes to risk aversion in choices involving sure gains and to risk seeking in choices involving sure losses. In addition, people generally discard components that are shared by all prospects under consideration. This tendency, called the isolation effect, leads to inconsistent preferences when the same choice is presented in different forms. An alternative theory of choice is developed, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights. The value function is normally concave for gains, commonly convex for losses, and is generally steeper for losses than for gains. Decision weights are generally lower than the corresponding probabilities, except in the range of low prob- abilities. Overweighting of low probabilities may contribute to the attractiveness of both insurance and gambling. EXPECTED UTILITY THEORY has dominated the analysis of decision making under risk. It has been generally accepted as a normative model of rational choice (24), and widely applied as a descriptive model of economic behavior, e.g. (15, 4). Thus, it is assumed that all reasonable people would wish to obey the axioms of the theory (47, 36), and that most people actually do, most of the time. The present paper describes several classes of choice problems in which preferences systematically violate the axioms of expected utility theory. In the light of these observations we argue that utility theory, as it is commonly interpreted and applied, is not an adequate descriptive model and we propose an alternative account of choice under risk. 2. CRITIQUE

35,067 citations

Journal ArticleDOI
17 Apr 1987-Science
TL;DR: This research aims to aid risk analysis and policy-making by providing a basis for understanding and anticipating public responses to hazards and improving the communication of risk information among lay people, technical experts, and decision-makers.
Abstract: Studies of risk perception examine the judgements people make when they are asked to characterize and evaluate hazardous activities and technologies. This research aims to aid risk analysis and policy-making by providing a basis for understanding and anticipating public responses to hazards and improving the communication of risk information among lay people, technical experts, and decision-makers. This work assumes that those who promote and regulate health and safety need to understand how people think about and respond to risk. Without such understanding, well-intended policies may be ineffective.

10,068 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigated the tendency of people to be unrealistically optimistic about future life events and found that degree of desirability, perceived probability, personal experience, perceived controllability, and stereotype saliency would influence the amount of optimistic bias evoked by different events.
Abstract: Two studies investigated the tendency of people to be unrealistically optimistic about future life events. In Study 1, 258 college students estimated how much their own chances of experiencing 42 events differed from the chances of their classmates. Overall, they rated their own chances to be above average for positive events and below average for negative events, ps<.001. Cognitive and motivational considerations led to predictions that degree of desirability, perceived probability, personal experience, perceived controllability, and stereotype salience would influence the amount of optimistic bias evoked by different events. All predictions were supported, although the pattern of effects differed for positive and negative events. Study 2 tested the idea that people are unrealistically optimistic because they focus on factors that improve their own chances of achieving desirable outcomes and fail to realize that others may have just as many factors in their favor. Students listed the factors that they thought influenced their own chances of experiencing eight future events. When such lists were read by a second group of students, the amount of unrealistic optimism shown by this second group for the same eight events decreased significantly, although it was not eliminated.

4,650 citations


"Performers, trackers, lemmings and ..." refers background in this paper

  • ...12 phenomenon has been described as unrealistic optimism (Royer, 2000) or comparative optimism (Weinstein, 1980)....

    [...]

Journal Article
01 Jan 1974-Science

4,413 citations