Saturday, March 27, 2010

Beware the people model!

Models! No one would deny they aren't an important tool in project management. They are the backbone of what we call 'parametric estimating'. That is, models establish a functional relationship between activity and outcome, given the value of one or more parameters.

Y = A * X + B is the simplest linear model. Outcome Y is a function of independent variable X, but the outcome of Y depends on some parameters, specifically A and B. Given values for A and B, usually determined by observation and experimentation, sometimes observed over many projects and circumstances, Y is determined when X is determined.

Of course, it gets more complicated quickly, especially if there is a X-squared in the mix.

But here's the question: are parametric models suitable to predict behavior by team members in various situations? For years, the answer was more or less yes, and the state of the art was advanced by economists seeking predictions of behavior under various economic situations. The general idea was the individuals could always be counted upon to maximize the expected utility of a situation.

Expected Utility? Utility is the assignment of value--numeric value--to ordinal values, like high, medium, and low, and other events or qualities. Typically, project managers would use either a 1-2-4 binary scale or a 1-2-3-5 Fibonnaci scale.  Expected utility is just the risk-adjusted average of the utility assignments. Most people would rationally seek to maximize the utility--the value--of any situation.

Now, along comes the economic crises and so also comes a lot of sole searching about parametric models of human behavior. Naturally, project managers see some of their own experiences and problems here.

In an essay he wrote, David Brooks recently reviewed the bidding on all of this. He has noticed the cyclic nature of faith in models, wherein a short time ago the autonomous and rational decider was the model figure. Then practical results set in: some realization that the irrational impluses of all human behavior needed to be factored in, to the point we are now: back to John Maynard Keyes, a man of the early last century.

In a particularly fitting quote to which every project manager will find affinity, Brooks writes:

"....John Maynard Keynes “was not prepared to sacrifice realism to mathematics,” as the biographer Robert Skidelsky put it. Economics [and, read: also, project management] is [among other things]a “moral science,” Keynes wrote. It deals with “motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogenous.”"

Enough said!

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2 comments:

  1. Of late, cognitive psychology research is catching up with your observations. Classic economic theory assumes "rational actors" who seek to optimize their choices. Turns out, humans are not rational actors. You might enjoy the book "Predictably Irrational" by Dan Ariely which explores this in some detail.

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  2. Payson: thanks for the tip on Ariely's book. I'll give it a read. John

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