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Accurate Project Estimates Balancing Optimism and Pessimism in Project Management

University of the People

MBA

BUS 5611-01 Managing Projects and Programs

Dr. Shivani Mahajan

05/07/2024
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Accurate Project Estimates Balancing Optimism and Pessimism in Project Management

Project estimation is an essential aspect of project management, often determining the

success or failure of a project. It involves predicting the duration, effort, and cost required to

complete project tasks. Accurate estimates are crucial for project planning, resource allocation,

and client satisfaction (Schwartz, 2023). However, the process is often fraught with biases that

skew these estimates towards unwarranted optimism or undue pessimism.

This article examines the nuances of project estimation biases as discussed in the article

"The Art of Creating Accurate Estimates" by G. Scott Perry, exploring the implications of

overestimating versus underestimating and evaluating various approaches to mitigating

estimation inaccuracies. Drawing on the article and personal experience, this discussion will

explore these topics, offering practical insights for managing projects more effectively and

discussing strategies to enhance the accuracy of project estimates.

The Consequences of Overestimation and Underestimation

Overestimating project timelines and resources often stems from previous negative

experiences. When project managers have faced unexpected hurdles or have been reprimanded

for delays, they tend to build buffer times into future estimates to avoid such issues. This has

consequences, including (West, 2001):

Wasted Resources. Overestimating time and resources can lead to inefficiencies and

higher costs as resources may be allocated unnecessarily.

Lost Opportunities. Projects might be delayed due to overestimated timelines, causing

potential opportunities to be missed.

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Decreased Morale. Team members may become demotivated if they feel their time

could be more used, leading to reduced productivity.

Underestimating is usually driven by optimism and a desire to impress stakeholders with

aggressive timelines and lower costs. This often happens when project managers fail to account

for unknown variables and complexities due to a lack of experience or a conscious decision to

overlook potential risks. This has consequences, including:

Project Delays. Underestimating project timelines can result in missed deadlines,

affecting the overall project schedule.

Budget Overruns. Insufficient estimation of costs can lead to budget overruns,

significantly impacting the project's financial stability and the stakeholders' investment.

Quality Issues. Rushing to meet underestimated deadlines may compromise the quality

of the project deliverables, resulting in poor performance and client dissatisfaction.

Personal Perspective

In my experience, underestimating is more detrimental than overestimating. The fallout

from missed deadlines and budgetary constraints can damage client trust and tarnish a project's

reputation, whereas the issues arising from overestimating, while problematic, are generally

easier to manage internally. However, the ideal approach is to avoid extremes and strive for

realistic estimates that balance optimism with a healthy awareness of potential risks.

Combating Bias in Project Estimations

Biases in estimation stem from past experiences and inherent optimism or pessimism

(Griffin, 2015). Addressing these biases requires a multi-faceted approach:

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Historical Data Analysis. Reviewing historical data from similar projects can provide a

realistic baseline for estimates. This helps identify patterns and potential pitfalls. Analyzing

previous estimation errors can help understand the causes of inaccuracies and improve future

estimates.

Collaborative Estimation. Involving the entire project team in the estimation process is

an inclusive approach that values each member's perspective and reduces individual biases.

Consulting with experts with experience with similar projects can enhance the accuracy of

estimates, making you an integral part of the process.

Structured Estimation Techniques. Three-Point Estimation; this technique involves

creating three estimates – optimistic, pessimistic, and – to arrive at a more balanced and realistic

estimate. Delphi Method; a structured communication technique that relies on a panel of experts

who provide estimates anonymously, which are then aggregated to form a consensus.

Evaluating the Author’s Proposed Approaches

A practical approach is Bottom-Up Estimation. Bottom-up estimation involves

breaking the project into smaller tasks and estimating the time and resources required for each

task. This method is effective because it provides a detailed understanding of each component,

allowing for more accurate estimates. Input from the entire project team can enhance the

accuracy of estimates. Each team member brings a unique perspective and knowledge about

specific aspects of the project. By involving team members responsible for particular tasks in the

estimation process and pooling this collective expertise, project managers can better understand

potential challenges and resource requirements (Simplilearn, 2024). This understanding equips

the team with the knowledge to be prepared and proactive, leading to more precise estimates. In
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a software development project, estimating the time required for individual coding tasks, testing,

and integration separately can result in a more accurate overall project estimate.

The ineffective Approach is Single-Point Estimation. Single-point estimation involves

providing a single estimate for a task or project without considering variability or uncertainty.

This ineffective approach fails to account for potential risks and uncertainties, leading to

inaccurate estimates. Single-point estimates are often based on best-case scenarios or gut

feelings, making them highly susceptible to optimism bias. They do not provide a realistic range

of possible outcomes, which can lead to significant deviations from actual results. Estimating the

time required to complete a new marketing campaign as a single figure without considering

potential delays in content creation, approval processes, or external dependencies can result in an

unrealistic project timeline.

Conclusion

Project estimation is a critical skill in project management, and achieving accuracy

requires addressing inherent biases and leveraging effective estimation techniques.

Overestimation and underestimation have significant consequences that can impact the success

of a project. By analyzing historical data, involving the project team, and using structured

estimation methods such as bottom-up estimation, project managers can enhance the accuracy of

their estimates. Project managers can create more accurate estimates by implementing these

strategies, leading to better resource allocation, improved project outcomes, and higher overall

project success.
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References

Griffin, M. (2015, June 18). The art of creating accurate estimates. A List Apart.
https://alistapart.com/column/creating-accurate-estimates/

Schwartz, B. (2023, April 25). Project Cost Estimation: How to Estimate Project Cost. Project
Manager. https://www.projectmanager.com/blog/cost-estimation-for-projects

Simplilearn. (2024, June 4). Bottom-up estimating – definition, example, Pros & Cons:
Simplilearn. Simplilearn.com. https://www.simplilearn.com/tutorials/project-
management-tutorial/bottom-up-estimating

West, K. (2001, April). Estimating to minimize loss by utilizing bayesian theory. Project
Management Institute. https://www.pmi.org/learning/library/estimating-minimize-loss-
bayesian-theory-4868