Deciding under uncertainty: improving risk management practice in engineering projects

PhD Student: Verena Stingl

Project Timeframe: 2015 - 2018

Project Partner: ABB

Abstract

A project is a vast collection of decisions. Yet, the fast paced, complex, and uncertain context of project decisions restricts or even prohibits the use of formally rational approaches for decision-making. Under pressure to remain decisive and continue to act, project practitioners will resolve to other modes of decision-making, which deviate from formal rationality. This thesis explores this actuality of project decision behaviour pragmatically as contextually embedded phenomena of adaptive human cognition, a relevant yet under studied angle of project decision making. The argument is developed through four self-contained, logically connected papers.

The first paper develops the field of ‘behavioural project decision-making’ through a systematic literature review that maps the different theoretical traditions of studying human behaviour in project decision-making. This review establishes project decision-making as a multifaceted phenomenon that requires a multi-paradigmatic research approach to capture the actuality of decision-making behaviour. The paper moreover points towards a gap regarding the study of project decision behaviour through the lens of adaptive cognition. This gap is explored through the second paper that, framed as a methodological piece, develops a research agenda for studying project decision-making within the paradigm of simple heuristics, as a specific aspect of adaptive cognition. This research paradigm from cognitive sciences conceptualizes human cognition as neither per se biased, irrational nor wrong, but as contextually adaptive. The paper discusses the resulting research opportunities for studying simple heuristics in the project decision-making context, following the prescriptive and descriptive traditions of simple heuristics, and explores methodological challenges in doing so.

Following the outlined research agenda for descriptive studies of simple heuristics, the last two papers present empirical studies on simple heuristics and broader notions of adaptive cognition in project decision-making. The first empirical paper is a multi-method study combining structured interviews with six executive decision-makers of an engineering firm, and an ethnography-type study of that organization. The article reveals the executives’ reliance on simple cognitive strategies, akin to simple heuristics, that use abstracted, riskoriented cues. Contextualization of these individual cognitive strategies in the organizational setting of the case company allows to explain these findings through the theories of adaptive cognitive strategy selection.

The second empirical paper reports on an abductive, experimental research with 42 participants on the cognition of project risk and opportunity identification in early stages of a project. The study uses a mixed-methods approach, investigating information search behaviour as a proxy for cognitive strategies of risk and opportunity identification. The paper reports findings on significant effects of the task-type – risk or opportunity identification – on the information search behaviour. Based on qualitative analysis of post-experimental interviews and observational data, the paper connects the explicit behaviour to differing underlying cognitive strategies and heuristics. This study highlights the role of heuristics as adaptive cognitive strategies through which people think about and imagine an uncertain future.

Overall, the thesis develops a broad conceptual understanding on the role of adaptive cognition for different stages of project decision-making under uncertainty. It provides insight on how practitioners simplify a fuzzy and uncertain informational environment through simple heuristics and other forms of adaptive cognition, and suggests how the organizational and task context may shape the development of these cognitive strategies. The conclusion provides an outlook how these insights can guide future research on the cognition of decision-making under uncertainty. It closes with practical implications regarding how a conscious discussion of the adaptive strategies that underlie expert judgement can benefit organizational and project decision-making under uncertainty.