Managing Project Uncertainty

Planning for the Unknown

Managing Project Uncertainty - Planning for the Unknown

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Some projects are full of uncertainties.

Most projects have an element of uncertainty to them.

In many cases, you can use well-established risk management practices to deal with this. However, for cutting-edge projects, or for ones that must adapt to constantly changing conditions, you may not be able to foresee all risks when you start out. In these situations, you can manage uncertainty instead of trying to manage risk.

In this article, we'll outline four common types of uncertainty that you can face as a project manager, and we'll explore strategies that you can use to deal with them.

The Four Types of Uncertainty

Professors Arnoud De Meyer, Christoph Loch, and Michael Pich analyzed projects across a wide range of industries, and, from their research, identified four major types of uncertainty. They set out their findings in the MIT Sloan Management Review in 2002.

Their four types of uncertainty are:

  • Variation.
  • Foreseen uncertainty.
  • Unforeseen uncertainty.
  • Chaos.

Managing the Four Types of Uncertainty

We look at each type of uncertainty in more detail below. We'll also suggest strategies that you can use to manage each one.

1. Variation

Variation refers to a small degree of change in a project schedule. For example, you may need to manage short delays if team members are sick, or if you need to prepare additional documents for stakeholders.

Individually, these issues have a minimal impact on the overall project. However, if there are many of them, they can lead to longer delays and added costs.

Managing Variation

You don't need to anticipate every kind of variation that might affect your project. Instead, plan for small amounts of it when you create project schedules.

Divide your project into phases, and then build contingency buffers into each phase. Only use these buffers if you really need to, and don't bargain them away.

Make sure that you've established procedures to monitor progress, and that your people know that they can discuss the impact of small changes with you. (If there are many changes, and these start to affect the project schedule, you'll need a formal scope control process to manage the impact on the project schedule.)

Finally, determine the point at which you'll take corrective action. For example, are you comfortable if the project falls two days behind schedule? What about a week or a month behind schedule?

2. Foreseen Uncertainty

Foreseen uncertainties are those that you can identify and prepare for.

Unlike the small changes brought about by variation, foreseen uncertainties are larger events that may need risk management and contingency planning.

Managing Foreseen Uncertainty

First, conduct a risk analysis to get an idea of the uncertainties that you could face. Next, prioritize these risks with a risk impact/probability chart, and develop contingency plans to deal with them.

Set aside time to monitor your foreseen uncertainties regularly, and to communicate how you'll handle them with your team and key stakeholders.

Tip:

As with variation, if scope creep is a foreseen uncertainty in your project, practice careful scope control. This will help you keep your project's timeline and budget within the bounds that you agreed with your project sponsor.

3. Unforeseen Uncertainty

Unforeseen uncertainties are events that you can't anticipate, or that you consider to be so unlikely that you don't need to create a contingency plan to address them. These kinds of uncertainties are common in technology projects, or in those that focus on uncertain markets.

Unknown uncertainties – also called "unknown unknowns" – are also often caused by the knock-on effects of known risks. This "risk-layered-upon-risk" can be very hard to predict.

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Managing Unforeseen Uncertainty

Instead of trying to anticipate unknown uncertainties, view them as problems to solve as they arise.

Open communication is essential in this situation. Meet with your team members regularly to discuss the changes, threats, or opportunities that they've noticed. Encourage everyone to be open about any problems they've spotted, and to come up with solutions.

Stakeholder management is also important in these situations, because you will have to convince key stakeholders to accept unanticipated project changes. So, work on building trust with everyone involved in the project – this will make it easier for you to work together when unanticipated changes arise.

4. Chaos

Sometimes, you can't clarify plans at the outset of a project, perhaps because the market is changing rapidly. In fact, you may find that the expectations you had at the start of the project change completely as work progresses.

De Meyer, Loch, and Pich described this kind of situation as "chaos." This term has negative connotations, but, in this context, it simply means that you can't make reliable plans up-front. This shouldn't stop you going ahead, however – it just means that you should adjust your approach appropriately.

Managing Chaos

The constant change of chaos-prone projects means that your team must stay flexible, as a fearful, over-rigid approach could stall the project. Make sure that your team understands this from the start.

Agile project management is well suited to this kind of project. It allows team members to respond to market changes or evolving technological situations, and to factor them into ongoing development.

Your team must be willing to try different approaches as your understanding develops. Encourage them to come up with new ideas, and build opportunities to discuss these into the schedule.

Learn how to make confident go/no-go decisions at the end of each stage or sprint. If the project will no longer deliver appropriate benefits, you may need to discuss whether you should cancel it.

Above all, focus on what you and your team can learn as the project develops: this will be a powerful motivator.

Key Points

Every project comes with a certain amount of risk. However, it can be difficult – or even impossible – to anticipate and plan for all types of risk, especially when projects are fast-paced or complex. In these situations, it may be more practical to identify and plan for specific types of uncertainty.

Researchers Arnoud De Meyer, Christoph Loch, and Michael Pich identified four types of uncertainty. These are:

  • Variation.
  • Foreseen uncertainty.
  • Unforeseen uncertainty.
  • Chaos.

You'll need to respond to each type of uncertainty differently depending on the costs involved, and the extent to which you can predict the event happening.

Adopt an appropriate management approach, and encourage your people to be flexible, to share solutions to problems, and to see uncertainty as an opportunity for development.