Improving the Accuracy of Project Schedules

Abstract

How to avoid project failures driven by overoptimistic schedules? Managers often attempt to mitigate the duration underestimation and improve the accuracy of project schedules by providing their planners with excessively detailed project specifications. While this traditional approach may be intuitive, solely providing more detailed information has proven to have a limited effect on eliminating behavioral biases. We experimentally test the effectiveness of providing detailed specification and compare it to an alternative intervention of providing historical information about the average duration of similar projects in the past. We find that both interventions mitigate the underestimation bias. However, since providing detailed project specification results in high variance of estimation errors due to sizable over-and underestimates, only the provision of historical information leads to more accurate project duration estimates. We also test whether it is more effective to anchor planners by providing historical information simultaneously with the project specification or to provide the historical information only after beliefs regarding the project duration are formed, in which case planners can regress their initial estimates towards the historical average. We find that the timing of disclosing information does not play a role as the estimation bias is mitigated and the accuracy is improved in both conditions. Finally, we observe that the subjective confidence in the accuracy of duration estimates does not vary across the interventions, suggesting that the confidence is neither a function of the amount nor the detail of available information.

Hidden inefficiency: Strategic inflation of project schedules

“…The inefficiency represents a valid concern from the perspective of operational effectiveness of organizations, implying that managers should design incentives for their project planners carefully. In particular, managers should consider incentivizing fast project performance, possibly utilizing the historical information regarding similar projects in the past, (Lorko et al, 2020) to discourage wasting time and other resources only to deliver the project exactly "on time".…”

“…The benchmark to reward fast performance can be based on historical information, for example the average duration of completed similar projects in the past (Lorko, Servátka, & Zhang, 2020). This benchmark can effectively complement the proposed project schedule, alleviating the emergence of inflated estimates and deliberately slow project execution.…”

Capacity Investment under Bayesian Information Updates at Reporting Periods: Model and Application

“…Recent work aimed at the scheduling and selection decisions of projects has highlighted that it is essential for managers to quantify the risk associated with individual project tasks and use that information to schedule projects to maximize project value (Zhao et al 2020). We contribute to this stream of literature (Creemers 2019, Creemers et al 2015, Lorko et al 2020, Zhao et al 2020, which mainly focus on technical reasons for project timing by highlighting the impact of the project schedule and progress reporting on a manufacturer's capacity addition, and therefore expand the scope of factors that project managers should consider while scheduling projects. 2.…”

“…2015, Lorko et al. 2020, Zhao et al. 2020), which mainly focus on technical reasons for project timing by highlighting the impact of the project schedule and progress reporting on a manufacturer's capacity addition, and therefore expand the scope of factors that project managers should consider while scheduling projects. Careful choice of “safe bets,” that is, technologies with low profitability but a high probability of success, can increase expected manufacturer profit .…”