Greetings!Welcome to our October newsletter - we hope you will find this informative and useful. If there is anything else you would like to see or there are comments you would like to make, then please don't hesitate to get in touch. In this series of newsletters we don't want to talk about ourselves and our achievements, but would rather try to help and inform you. We will, therefore, be looking at new ideas, or old ideas that have gained new importance (or perhaps even just caught our attention). Also, if you found this useful you might enjoy keeping an eye on our new blog where ideas and information will be posted more regularly. You can also find previous newsletters in our archive. If there is anything you don't like please tell us. If you enjoy it then do please forward on to anyone who might find this useful too. Good ideas are for spreading. |
Monte Carlo - Don't Gamble with your Projects
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 With Casino Banking so much in the news these days it seemed a good time to think more about casino project management.......
Okay, we're not really suggesting you gamble with your project outcomes or risk registers but, rather, that you use this approach to help manage uncertainty.
There is a good range of tools around that support this approach. The idea is, when dealing with areas of uncertainty, to generate a lot of random scenarios and investigate probabilities and impacts.
We have previously talked about 3 point estimation where you provide an optimistic, pessimistic and most likely duration to each task. While this works fine at the task level how do you test the impact on the whole project? Using a Monte Carlo approach you could run 1,000 simulations on the project where each task has a random duration between the maximum and minimum. Each of these would produce a project duration.
From there you could start looking at the distribution of the different durations and find out which is more likely to occur, or apply a level of confidence to a particular duration. I have seen some very clever implementations of this which also use constraints (e.g. a project to tow oil rig out of Fjord with the prospect of it freezing over, some delays could see your project completion delayed until the following spring by an overrun of a few days).
If you are doing quantitative risk management (i.e. attaching costs to your risks) you can use the same approach to assess possible impacts and costs.
If you would like to know more about using a Monte Carlo based approach in your business contact us to find out more.
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6 Thinking Hats - Stop it Getting Personal |
One problem with quality reviews and similar "critical" activities, is getting the balance right between criticising negatively and being politely positive. Too critical and people start taking offence. Be too constructive or even supportive and the necessary rigour is lost. Edward de Bono's ideas around Thinking Hats are invaluable in getting a good balance. Essentially groups are encouraged to wear (sometimes physically, but a least metaphorically) a range of hats and to think accordingly: White Hat:
You focus on the data available and the information you have. Look for gaps (or information needs) in your knowledge and either try
to fill them or take account of them.
Red Hat:
You look at things using intuition,
gut reaction, and emotion. Also try to think how other people
will react emotionally, and try to understand the intuitive responses
of people who do not fully know your reasoning.
Black Hat:
You look at things pessimistically, cautiously and defensively. Look for barriers, risks and approaches that might not work. This is important because it highlights
the weak points in a plan or course of action. Beware don't accidentally put on your Green Hat and start creating solutions, just think Black! A further bonus is this stops things getting too heated as the criticism becomes part of the role-playing rather than a personal attack.
Yellow Hat:
You look at things positively. It is the optimistic
viewpoint that helps you to see all the benefits of the decision
and the value in it, and spot the opportunities that arise from it. Yellow Hat thinking helps you to keep
going when everything looks gloomy and difficult.
Green Hat:
With this hat you think creatively and develop new ideas and solutions to a problem. It is a free-wheeling
way of thinking. Beware, don't accidentally put on your Black Hat and start looking for obstacles, just think Green!
Blue Hat:
The Blue Hat stands for the big picture and process control. This is the hat worn
by people chairing or facilitating meetings. When running into difficulties
because ideas are running dry, they may direct activity into
Green Hat thinking. When contingency plans are needed, they
will ask for Black Hat thinking, and so on.
If you would like to discuss this idea or other ways of applying effective thinking and problem solving in your organisation don't hesitate to contact us.
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Why is PRINCE2 like Alcohol?
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Time and again we are asked for opinions on PRINCE2 as a methodology. In the end we were able to distill (sic) the many words into a simple statement. Many of you might know the old saying about alcohol, we like to paraphrase it:
"PRINCE2 is like alcohol - a great servant, but a terrible master"
While far from perfect, PRINCE2 is the methodology we most commonly conform to and it is powerful and effective. Just as you can't blame the bottle of whiskey when you fail to put the lid back on after the first or second glass and wake up with a terrible hangover; you can't blame the text book if you allow yourself to be driven into documentation hell.
We also stop people when they talk of "PRINCE Lite". Why "Lite"? PRINCE is designed to flex and adapt to all types and sizes of project. You don't call it "Whiskey Lite" when you just pour a couple of glasses!! Call it PRINCE and apply it properly.
If your staff appear in fear of PRINCE it is usually they don't understand it or they have had bad experiences of being a PRINCE servant at some point. Make sure the right training is in place to turn them into PRINCE masters........
If you would like to find out more or discuss ways of effectively applying PRINCE2 or other methodologies then don't hesitate to contact us.
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Thanks for your time and we hope you have enjoyed reading this edition. If you have found it useful please tell your friends, if you have not, or would like to see anything else discussed then please tell us. Please keep an eye on our blog and get involved in the discussions!! Until the next time....... Yours Sincerely, 
Peter Stansbury
Managing Director
Stansburys Ltd
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Loss Aversion - Pushes Us to Greater Risks
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Time and again we hear talk of "risk aversion" and "risk appetite" but how often do we hear of "loss aversion"?
Hardly ever it seems, at least to me. This is tragic since the concept contributed to a Nobel prize in economics for psychologists Daniel Kahnemann and Amos Tversky in 2002. No, that's not a typo: psychologists did win the economics prize, but that's a story for another day.
Prospect theory as the wider work is called seems to explain very well why people appear to act irrationally in situations of uncertainty and risk. This is demonstrated very clearly in the housing market.
Kahnemann and Tversky found that people are loss averse. When one option is perceived as resulting in a loss, the person will go to great lengths to avoid this option (often pursuing highly risky alternatives in the process).
Take the situation of vendors who receive a valuation on their house of £350,000. Although this is much more than they paid this becomes distilled as the "value" of the house and accepting anything else feels like "making a loss".
These people often hold out for the price, turn down offers and / or reduce their price in very small increments. This might work in a rising market, but the same behaviour is often exhibited in a falling market. There is a term "chasing the market down" which refers to repeatedly dropping in increments small enough to always leave the house overpriced in a falling market.
These people often land up pulling out of the market (research has shown before, and will show again that volumes drop far more quickly than prices in a falling property market) or doing something risky. Risky options include, Taking a higher offer in a complex chain from an unqualified buyer rather than a lower cash offer; taking on a new mortgage and trying to let and sell the old property.
There is also research to show that where people appear to be facing a loss they put the house on the market at an even higher price to mitigate this loss (leaving a margin for offers), resulting in reduced probability of sale and increased time on market.
This is a huge theory we cannot fully cover here (and is definitely not just about houses). There are related theories, such as the endowment effect whereby people attach greater value to goods they own (e.g. will refuse an offer on their own house but curse the next person in the chain who doesn't accept their offer). Expect us to return to these ideas again in our blog.
However, bear in mind the simple fact - if you present your clients with an option that sounds like a loss - you are likely to drive them away from this. If they perceive one option as being a loss, regardless of what you say, they will still be driven away from this.
You can use this both ways, if you want a free choice express the options carefully, if you want to avoid on option, present this as the loss-making option.
To find out more about the impact of loss aversion in your business don't hesitate to contact us.
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