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School of Business | Department of Management and International Business | International Business | 2011
Thesis number: 12853
Optimistic bias in temporal prediction at a MNC: The case of internal development projects at KONE Corporation
Author: Rowell, Chris
Title: Optimistic bias in temporal prediction at a MNC: The case of internal development projects at KONE Corporation
Year: 2011  Language: eng
Department: Department of Management and International Business
Academic subject: International Business
Index terms: kansainväliset yhtiöt; international companies; projektit; projects; johtaminen; management; kehitys; development; suunnittelu; planning; koneteollisuus; engineering industry; hissit; elevators
Pages: 192
Full text:
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Key terms: optimistic bias; planning fallacy; temporal prediction; multinational project planning; project management
This research seeks to examine optimistic prediction bias in the empirical world. Interest in this area stemmed from the observation that while the prevailing project planning methodologies typically encourage careful, comprehensive and rational schedule generation, the strict adherence to such methodologies may be insufficient to optimise prediction accuracy if the individual making the prediction deviates from objectivity. Temporal underestimation and schedule overruns are still a familiar fact of life in organisations, and existing research suggests that the tendency to be overly optimistic when predicting future outcomes could be responsible for a significant part of this. This tendency for excessive optimism in prediction is a manifestation of normal human cognition, and is exacerbated by motivational and various other contextual factors that can exist within organisations. Thus, implementing measures that account for and moderate this phenomena could be simple and cost effective, and yet yield substantial benefits for the organisation.

Drawing predominantly on literature based upon the planning fallacy concept, this work applies a rich theoretical framework from psychology and business literature to the case study of KONE Corporation’s Global Development (GD) division. The focus of the case study was the identification of the causes and manifestations of optimistic bias in the MNC planning context. This enabled practical recommendations to be generated for moderating the systematic underestimation of project durations by debiasing temporal predictions in the organisational setting.

Qualitative interviews were conducted with GD employees, aimed at identifying the common thought processes that predominate during project schedule generation, along with the prominent planning fallacy variables identified by the literature. This was accompanied by an analysis of archived project planning data to establish patterns in the deviation between past (actual), ongoing (actual/predicted) and future (predicted) durations. Since prior studies on optimistic bias have primarily been conducted under laboratory conditions, a key contribution of this research is the development of some basic methodological guidance for examining prediction optimism in the empirical world.

The research found general support for the existence of optimistic bias and the planning fallacy in the organisational context. The comparative quantitative analysis also revealed that project managers routinely perceived the future as inherently easier than the past. Key research findings included: 1. The best-case scenario is a default manifestation of human cognition in organisational project planning. 2. While project managers universally emphasised the importance of considering their own past experiences when making present predictions, they acknowledged that they typically drew upon the experiences of their colleagues significantly less. 3. The tendency to underestimate duration due to heightened motivation for quick completion and oversimplification of the task is correlated with hierarchical position (evidence of power biases) 4. Expert biases can induce individuals to underestimate training durations in internal development projects. 5. The social context in which predictions are generated can influence the extent of optimism in these predictions. 6. The trilateral relationship between establishing highly ambitious deadlines, task completion behaviour, and project worker stress is a conditional and contentious issue, and consequently one that needs to be carefully considered in planning.
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