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

**Authors:** Kenneth David Strang (W3-Research, USA) — ORCID 0000-0002-4333-4399; Narasimha Rao Vajjhala (American University of Nigeria, Nigeria) — ORCID 0000-0002-8260-2392
**Type:** Journal article (open access)
**Source:** The Journal of Modern Project Management, 10(1), pp. 52–71
**Published:** 2022
**DOI:** https://doi.org/10.19255/JMPM02904
**Canonical page:** https://www.narasimharao.net/research/project-manager-risk-decision-bias-crisis-experiment/
**Indexing:** Scopus (at publication)
**Keywords:** Project management; risk management; project manager; decision making; crisis; project failure; repeated measures ANOVA; experiment; MANOVA

## Summary

**Question.** 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?

**Finding.** 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 it matters.** 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.

## Key findings

1. The experiment tested 24 U.S.-based project managers with at least 5 years of experience (mean age 42.5, 71% male, mean experience 11 years, 50% certified) on a simulated failing military software project hit by a COVID-19 risk event.
2. The 24 project managers averaged 55% (SD = 31%) on the PERT-based risk competency test, and slightly less than half passed with a score of 60% or higher.
3. Certification (rho = 0.549, p < .01 basic; rho = 0.712, p < .001 biased) and competency (rho = 0.680 and 0.681, p < .001) were significantly correlated with the decision to cancel the failing project, while gender, education and experience were not.
4. The MANOVA showed that certified versus uncertified project managers differed significantly across both decisions (F = 17.824, Pillai = 0.652, p < .001), as did competent versus not competent project managers (F = 3.723, Pillai = 0.282, p = .043).
5. Competent project managers scored significantly higher than non-competent ones in the basic decision (M = 4.71 vs 2.63) and in the biased decision with a 400% bonus incentive (M = 3.91 vs 1.81).
6. Certified project managers outscored uncertified ones in both the basic (M = 4.58 vs 2.76) and biased (M = 3.55 vs 2.17) conditions, but a certified yet incompetent project manager failed to cancel the failing project under bias (M = 1.7).
7. Project managers who were both competent and certified made the best decisions in both the basic (M = 4.8) and biased (M = 4.2) conditions, and all hypotheses H2a–H2d were supported.

## Study at a glance

| Item | Detail |
|---|---|
| Research question | How much do cognitive bias and other factors impact project manager risk management decision making in a crisis? |
| Design | Repeated-measures controlled (quasi-)experiment run asynchronously online over one week; every participant received a competency test, a basic (no-incentive) decision and a biased (incentive) decision |
| Sample | 24 U.S.-based project managers with at least 5 years of experience, recruited from a LinkedIn group of about 23,000 professional PMs; mean age 42.5, 71% male, mean experience 11 years, 50% certified |
| Methods | Spearman correlations, Shapiro-Wilk tests, MANOVA, repeated measures ANOVA, Friedman's test and post hoc pairwise t-tests |
| Main result | Bias significantly impacted decisions; only certification and competency were related to good decisions, and competent and certified PMs made the best decisions (M = 4.8 basic, M = 4.2 biased) |
| Implication | Certification alone does not protect against bias; competency testing, risk management training and ethics training are recommended |

## 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.

## 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

```bibtex
@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}
}
```