Double Whammy - How ICT Projects are Fooled by Randomness and Screwed by Political Intent

The cost-benefit analysis formulates the holy trinity of objectives of project management - cost, schedule, and benefits. As our previous research has shown, ICT projects deviate from their initial cost estimate by more than 10% in 8 out of 10 cases. Academic research has argued that Optimism Bias and Black Swan Blindness cause forecasts to fall short of actual costs. Firstly, optimism bias has been linked to effects of deception and delusion, which is caused by taking the inside-view and ignoring distributional information when making decisions. Secondly, we argued before that Black Swan Blindness makes decision-makers ignore outlying events even if decisions and judgements are based on the outside view. Using a sample of 1,471 ICT projects with a total value of USD 241 billion - we answer the question: Can we show the different effects of Normal Performance, Delusion, and Deception? We calculated the cumulative distribution function (CDF) of (actual-forecast)/forecast. Our results show that the CDF changes at two tipping points - the first one transforms an exponential function into a Gaussian bell curve. The second tipping point transforms the bell curve into a power law distribution with the power of 2. We argue that these results show that project performance up to the first tipping point is politically motivated and project performance above the second tipping point indicates that project managers and decision-makers are fooled by random outliers, because they are blind to thick tails. We then show that Black Swan ICT projects are a significant source of uncertainty to an organisation and that management needs to be aware of

An Investigation of the Relationships between Goals and Software Project Escalation: Insights from Goal Setting and Goal Orientation Theories

Escalation of commitment is manifested as a behavior in which an individual resists withdrawing from a failing course of action despite negative feedback, and it is an enduring problem that occurs in a variety of situations, including R&D investment decisions and software project overruns. To date, a variety of theoretical explanations have been offered as to what causes escalation of commitment, including personal responsibility, the sunk cost effect, and the completion effect. Nonetheless, what is missing in our understanding is the role that goals can play in escalation situations. This represents a significant gap in escalation research, as goals are a fundamental element driving many human behaviors. Further, escalation researchers recently suggested that escalation behavior can be understood as an activity that is directed by goals. Therefore, this dissertation aims to generate insights regarding the impact of goals on escalation of commitment by drawing on goal setting and goal orientation theories. This dissertation consists of four essays each of which involves one or more studies

Why Software Projects Escalate: An Empirical Analysis and Test of Four Theoretical Models

Software projects can often spiral out of control to become runaway systems that far exceed original budget and schedule projections. The behavior that underlies many runaway systems can best be characterized as escalation of commitment to a failing course of action. The objectives of this study were to: (1) understand the extent to which IS projects are prone to escalate, (2) compare the outcomes of projects that escalate with those that do not, and (3) test whether constructs associated with different theories of escalation can be used to discriminate between projects that escalate and those that do not. A survey was administered to IS audit and control professionals and, to establish a baseline for comparison, the survey was designed to gather data on projects that did not escalate as well as those that did escalate. The results of our research suggest that between 30% and 40% of all IS projects exhibit some degree of escalation. Projects that escalated had project outcomes that were significantly worse in terms of perceived implementation performance and perceived budget/schedule performance, as compared to projects that did not escalate. Using constructs from theories that have been used to explain the escalation phenomenon, we were able to test various logistic regression models for their ability to discriminate between projects that escalate and those that do not. To construct our models, we explored constructs derived from self justification theory, prospect theory, agency theory, and approach avoidance theory. While constructs derived from all four theories were significant in logistic regression models, the completion effect construct derived from approach avoidance theory provided the best classification of projects, correctly classifying over 70% of both escalated and non-escalated projects

The Influence Of Commitment To Project Objectives In Information Technology (IT) Projects

Managing successful Information Technology (IT) projects remains a challenging and perplexing ambition in today’s complex IT environment where project deliverables continue to be brought in behind schedule, over budget, and with less functionality than originally planned.  This study delves into goal commitment theory to investigate the potential role of commitment to project objectives in improving the performance of IT projects.  The following two questions are considered in this research:  (1) How does commitment influence perceptions of project performance, and (2) What key factors predict commitment?  Survey responses were collected from professionals currently involved in IT projects and data was analyzed using structural equation modeling.  Results indicate that commitment to project objectives has a positive influence on perceptions of project performance both directly and indirectly through individuals’ propensity to report project status information.  Time pressure in the project was found to have a negative influence on commitment to project objectives, while perceptions of personal investment had a positive effect on commitment to project objectives.  Time pressure also had a positive influence on perceptions of personal investment and a negative influence on perceptions of project performance.  Implications for research and practice are discussed

Escalation of Commiement in Software Projects: An Examination of Two Theories

Escalation of commitment is common in many software projects. It stands for the situation where managers decide to continue investing in or supporting a prior decision despite new evidence suggesting the original outcome expectation will be missed. Escalation of commitment is generally considered to be irrational. Past literature has proposed several theories to explain the behaviour. Two commonly used interpretations are self-justification and the framing effect. While both theories have been found effective in causing the escalation of commitment, their relative effect is less studied. The purpose of this study is to further investigate the primary factor that causes the escalation of commitment in software project related decisions. An experiment was designed to examine whether the escalation of commitment exists in different decision contingencies and which theories play a more important role in the escalation. One hundred and sixty two subjects participated in the experiment. The results indicate that both self-justification and problem framing have effects on commitment escalation in software projects but the effect of self-justification is stronger. Significant interaction effect is also found. A commitment is more likely to escalate if the problem is framed positively

Realizing value from project implementation under uncertainty : an exploratory study using system dynamics

Project Implementation is not a trivial task even after careful planning and scheduling. One of the reasons is the existence of unexpected events at strategic and operational levels during the project execution process. This paper presents a system dynamics model of a project monitoring and control system. Embedded with both strategic and tactical uncertainties, the model experiments with typical remedial actions to disturbances during the implementation of a project under a behavioral paradigm. Simple proportional adjustment seems to work well under low levels of unexpected disturbances but prospect theory-based behavior works better under extreme situations. Our findings indicate over-reacting behavior, which is influenced by biases and reporting errors, can generate project escalation. Thus, thresholds for remedial actions should be implemented in project control and monitoring systems to avoid over-reacting behavior leading to escalation and waste of resources

VETSNET: A Case Study of Escalation and De-Escalation

Information systems development projects are more likely to fail than to succeed. One reason for this failure is a manager’s tendency to maintain commitment to projects despite receiving negative feedback. This phenomenon is known as escalation of commitment to a failing course of action, or simply escalation. This paper examines the case of escalation and de-escalation of commitment in the development of the Veteran’s Service Network (VETSNET) system for the United States Veteran’s Administration (VA). An exploratory content analysis of secondary data sources is performed to identify factors promoting escalation. Consistent with prior literature, support was found for project, organizational, and contextual determinants of escalation. The three relevant project factors were a perceived lock-in effect due to few alternatives, the long-term nature of the project, and ambiguity in the project’s requirements and schedule. Three organizational factors that contributed to escalation were poor software capability of VA, lack of dedicated leadership, and pervasiveness of an institutionalized “One VA” vision. Contextual factors in the form of congressional laws and oversight also impacted the VETSNET case. De-escalation was triggered by publicly committing to a deadline and changing top leadership