Complex Decision Making Explained

Complex decision making is a vital project management skill; required not only by the project manager but also by the project’s sponsor and client / customer among others.

Some of the key areas involving complex decisions include risk management, many aspects of planning (particularly optimising choices) and dealing effectively with issues and problems in a range of areas from scope and quality to cost and performance.

There is an underlaying assumption in project management (derived from traditional scientific management) that decisions will be based on a rational assessment of the situation to optimise outcomes. Unfortunately this is not true! As complexity increases assuming a ‘rational decision making paradigm’ becomes increasingly unrealistic. Human decision makers become ‘predictably irrational’.

Understanding the built in biases and ‘predictable irrational’ decision making processes used by people confronted with complex decisions can help managers requiring optimised decisions to craft strategies to minimise suboptimal outcomes. But where can busy project managers access this information?

I have just finished reading the most amazing paper on the subject that canvases the whole spectrum from risk aversion to behavioural economics in a practical, easy to read format; and it is free!

Behavioural economics and complex decision making: implications for the Australian tax and transfer system has been written by Andrew Reeson and Simon Dunsttall of the Australian national science agency, CSIRO. The report was commissioned by the ‘Henry Review’ into the Australian taxation system and is published on their web site. Whilst you can safely skip the last section which focuses on applying the knowledge to our tax system. The preceding 7 sections are focused on how people make complex decisions in any sphere and are just as relevant to complex project decisions as to complex investment and taxation decisions.

You can download this free resource from the review panel’s website: download the paper (a copy is also on the Mosaic web site on the assumption the Government site is temporary and will close once the Henry Review has reported: download from Mosaic).

If you find the report useful and you don’t live in Australia, you can buy the next Australian you meet a beer; it was his or her taxes that paid for this amazingly useful report. I know I will be keeping my copy handy for a very long time to come.