Testing Risk Management Decision Making Competency of Project Managers in a Crisis

Summary

What question does this paper answer?

How much do cognitive bias and other individual factors (age, gender, education, experience, certification and competency) affect a project manager's risk management decision to cancel a failing project during a crisis?

What did the study find?

In a repeated-measures controlled experiment with 24 experienced U.S.-based project managers, bias (a 400% bonus offered to keep a failing project going) significantly lowered the quality of decisions, while certification and competency were the only individual factors significantly related to good decisions (e.g., certification rho = 0.549 and 0.712; competency rho = 0.680 and 0.681). Competent and certified PMs made the best decisions in both the basic (M = 4.8) and biased (M = 4.2) conditions, whereas a certified but incompetent PM failed to cancel under bias (M = 1.7).

Why does it matter?

The authors argue that bias such as money and ego can override ethical risk management judgment even among certified project managers, which could be a problem for recruiters who rank certification highly without seeking evidence of competency. They suggest certified PMs receive additional risk management training, that certification courses include experiential exercises on quantifying and mitigating risks, and that employers offer short ethics or organizational refresher courses.

Study at a glance

Abstract

The objective of the current study was to use a rigorous controlled experiment simulating a project failure to measure how cognitive bias and competency impact a PM’s risk management decision making in a crisis while controlling for other project and firm level variables including lying or faking responses. The MANOVA, repeated measures ANOVA controlled experiment and post-hoc analysis techniques were rigorous because the study took place in approximately the same point in time and each participant received all treatments. The 24 respondents in these repeated measures experiment outperforms most psychology factorial research design, which would require a 4 x 24 = 96 sample size to accommodate 3 treatments and a control group. We found bias significantly impacted PM risk management decision making in a crisis, but certification and competency resulted in the best decisions. Generalizations are cautioned due to the exploratory nature of this study. However, the literature review and methods were articulated well enough to encourage replications and extensions by other researchers.

Abstract as published in The Journal of Modern Project Management.

Keywords: Project management; risk management; project manager; decision making; crisis; project failure; repeated measures ANOVA; experiment; MANOVA

Key terms

Risk management decision making

The emotional or thinking processes a project manager uses to solve complex problems in a project beyond business-as-usual activities, such as deciding whether to escalate or cancel a failing project after a severe risk event.

Prospect theory

A model of decision making under risk in which choices are made between value prospects or gambles, shaped by loss aversion, reference points and decision weights.

Repeated measures design

An experimental design in which every participant receives all treatments, so individual differences remain the only varying factors.

Limitations

• Generalizations must be cautioned because this was a controlled experiment with only 24 participants based in the U.S.
• Certification was self-reported and competency was judged solely by the score on one open-book PERT risk calculation test question.
• All organization-level factors were controlled, so the experimental context may not be equivalent to real-world conditions, reducing generalizability.
• The bias condition combined money and implied ego; other bias constructs were not tested.
• Competency scores were transformed into a binary pass/fail field (60% pass) to allow ANOVA and MANOVA; MANCOVA with continuous covariates is recommended.
• The study was a quasi-experiment conducted asynchronously online, participants self-selected, and lingering sentiments from the first treatment may have affected the second.

How to cite

Strang, K. D., & Vajjhala, N. R. (2022). Testing Risk Management Decision Making Competency of Project Managers in a Crisis. The Journal of Modern Project Management, 10(1), 52–71. https://doi.org/10.19255/JMPM02904

@article{strang2022project,
  title = {Testing Risk Management Decision Making Competency of Project Managers in a Crisis},
  author = {Strang, Kenneth David and Vajjhala, Narasimha Rao},
  journal = {The Journal of Modern Project Management},
  volume = {10},
  number = {1},
  pages = {52--71},
  year = {2022},
  doi = {10.19255/JMPM02904},
  url = {https://doi.org/10.19255/JMPM02904}
}