• Add a Comment
  • Edit
  • More Actions v
  • Quarantine this Entry

Comments (2)

1 JimDensmore commented Permalink

It occurred to me that I've seen managers (even my managers ... but not any I've had at IBM) try to mitigate the variance in the cost estimates by doubling them. I guess this is done simply because they realize the estimates are probably wrong and this is all they know to do to cover their behinds.

Unfortunately, as it goes up the management chain of approvals, I have seen the estimate get doubled again!! If the costs didn't fail a gut/sanity check before getting doubled twice, they almost always do after this - upper management now thinks someone is pulling the wool over their eyes, or trying to gold plate something. It is usually hilarious to watch the antics that ensue. I'm just glad I was never the manager trying to cover his butt.
Secondly, from Murray's discussion above, it's now obvious that doubling may not help at all - doubling might get you close to the real answer (how troubling that it does so just often enough to be used as a rule of thumb!) but usually it does not, and who knows which side you're on? (Probably the wrong side.)

2 mcantor@us.ibm.com commented Permalink

Good point, jdensmore. You point out a different hazard from working with averages. The practice of doubling the estimate is a crude way of ensuring that there is a high likelihood of delivering. Mathematically, this practice puts more of the distribution in the range of the committed cost or schedule. Doubling again puts even more, perhaps all of the non-zero values, of the distribution in the range making meeting commitment almost certain. The problem with this practice is that the organization does not assume any risk and misses opportunities to deliver innovation and create value. In the end, the return on investment for cost of the organization is lower than necessary.

So, by working with averages not only might one assume too much risk, but also one might overly avoid risk. Both cases result in less than optimal business results.

Add a Comment Add a Comment