Exposing the mirrors

So I lecture quite a lot about different aspects of Project Management from requirements gathering, pre-studies, business case development to certification preparations. And I have found myself telling the students about all sorts of things a PM has up the sleeves . These are not things that would be found in ant text book, in any higher moral ground theory or academic paper. The number crunchers and process addicts would probably like to take my head off but, it’s now on the internet so it will not go away.

These are tools based on experience and spending a lot of time getting dirty hands. The idea is that they will extend the life expectancy of the PM’s mental health and probably take some of the stress off the mind of the PM. So am I giving away the illusionist’s tricks? Am I showing the mirrors and pointing out the strings that make the lady appear to fly? Sure, I am. But it’s not like no one else know them… Every experienced PM knows them, they are just not telling the new guy on the subject.

Since I already tell people in class, why not let the NOC-list into the open? Don’t know what the NOC-list is? Have a look at the first Mission Impossible film.

I’ll start with PERT-estimates, or Three-point-estimates. Let’s start with the basics.

When we need Estimates, we reach out to the subject matter experts (SME’s) and ask them for estimates on different task. We do know that most people hesitate to actually give a number. For self-preservation if nothing else. They have been around before and they know that this number pretty easy turn into gospel and they don’t like that. The three-point-estimate is where we let them say what they think but also tell us the best and worst case scenario. So we cut them a bit of slack and say that we will crunch out the numbers afterwards.

I’m not going to go through the whole theory here since that is common stuff and if anyone need to check  it out it’s on Wikipedia http://en.wikipedia.org/wiki/Three-point_estimation.

So according to this we calculate Max + Min + 4 x Expected and divide that with 6. So where does 4 and 6 come from? Well it is based on mathematical theory for bell curves and standard deviation. What happens if we, shame on us if we do, would actually change these numbers? Let’s say 3 and 5 so we have Max + Min + 3 x Expected divided with 5? What happens then and why would we do that?

So we start with what happens. Let’s look at some figures for example. We have an imaginary project where we came up with Min = 70 days, Max = 242 days and Expected = 125 days.

Using the official numbers we get a PERT-calculated value of 136 days (70 + 242 + (4 * 125))/6.

We also get a Standard deviation of 29 days. (242 – 70)/6=29.

And we get a error percentage of 4%. (Standard Deviation / (Max + Min + 4 x Expected))

Let’s now change to 3 and 5. What numbers do we get then?

Calculated value = 144 = (70 + 242 + (4 * 125))/5
Standard deviation = 34
Error percentage = 5%   

So what does this mean? Basically it means that one let the deltas for the extremes reflect more in the end calculated result.  We can see that the calculated value increased from 136 to 144.

The million dollar question, when would you do this?

Ever get the request from a customer “We like a fixed price project”? When doing a fixed price project we have to carry the risk. So we like to know if this is a high risk project or not. If the 4/6 calculation is not very far off from the 3/5, well we are pretty sure in our estimates. If they are far off, we probably need to break things down further and analyze more. We probably are going to use the 3/5-calculation instead when writing the proposal and we probably are going to find the tasks with large deltas and use them as inputs for a risk resolution budget post.

Can we increase the numbers? Say 5/7. Yes, we can and that would mean giving more leverage to the expected. So we might work with these numbers depending on the level of how certain people are in their estimates. Large deltas, probably want to reflect them more.