Uncertainty is a reflection of human’s ability to think about and then worry about the future.  The future, whether tomorrow or next week generates cognitive dissonance because we are afraid that what will happen will be at odds with our mental model of the future. Budgeting, estimation, and planning are tools to rationalize away uncertainty; however, they have a complicated relationship with uncertainty.  For example, in some scenarios some uncertainty helps to prove the veracity of an expert, and in other scenarios uncertainty can generate cognitive dissonance with the assumption of certainty built into budgeting, estimation, and planning tools organizations use.

In work entry processes (both at the portfolio and team levels), uncertainty is a double edge sword impacting which work items get done.  Having participated in many portfolio meetings, certainty is often used as a tool for persuasion. Revenue and cost projections are often portrayed as facts that just have not occurred yet.  When a product owner or stakeholder expresses the often express certainty to generate energy and emotional contagiousness.   The expression of certainty about the outcome and value of a piece of work is often useful to influence allocating scarce money, people, and resources.  A more effective approach generally is to express the uncertainty in the process breaking down the façade of certainty.  

 “Persuasion research reveals that in some situations people can make their own message more persuasive by explicitly noting that they are unsure about what they’re saying!”

Some degree of uncertainty, when delivered by an expert, is more believable than absolute certainty.  Most portfolio allocation discussions are more apt to follow the expert opinion in which uncertainty engages listeners to think more deeply about the work they are considering.  The use of uncertainty as a focusing tool only works if the uncertainty is being delivered by a perceived expert and in a scenario where participants trust each other.  However, trust and expertise do not always exist (nor are they always possible to generate), leading organizations to address uncertainty in a different manner.  Techniques are used to provide a framework for identifying and accounting for factors that generate uncertainty but they do not make it go away. One technique of this type is weighted shortest job first (WSJF).  WSJF boils several factors into a single number.  Uncertainty is addressed by breaking pieced work into smaller pieces and getting feedback quickly.  WSJF and other techniques such as cost-benefit analyses often generate a blindness toward uncertainty, leading to the need to build techniques for monitoring and mitigating uncertainty into the budgeting, estimation and planning process. 

  1. Add contingency.  Uncertainty drives the need for contingency.  The amount of contingency is a proxy for uncertainty.  The equation is: the more uncertainty, the more contingency is needed. Phil McKinney, of the Killer Innovations Podcast,  suggests dealing with the uncertainty of innovation by keeping some budget unallocated to generate feedback cycles.  Contingency is similar to avoiding planning people to be 100% utilized on specific tasks (stuff always happens).
  2. Break the work into smaller increments.  It is easier to be certain about the future if the future is tomorrow or next week and less easy to be certain if the future is a few months from now.  Smaller increments increase certainty by generating feedback which can be used to stay on course. The problem with small increment is that they tend not to follow budgeting cycles. Also, remember that while shorter time horizons increase certainty, they do make uncertainty go away.  A black swan can always appear and rewrite an organization’s basic assumptions.
  3. Leverage Monte Carlo simulations. Monte Carlo simulations use mathematical modeling techniques to account for uncertainty (risk) to derive the range of possible outcomes and the probability of each outcome.  This injects the idea of a range of possible outcomes into the conversation.  The range outcomes and the probability of each possible outcome is a great tool facilitate a conversation of uncertainty.
  4. Measure promised and expected outcomes and compare those outcomes to what actually happens. While this a retrospective technique, people involved with budgeting, estimation, and planning often are segregated from delivery personnel and need measured feedback to improve how they do work.

Uncertainty affects what gets done and how we budget, estimate, and plan.  Building uncertainty into how we work makes more sense than pretending uncertainty does not exist.

 

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