“I need this project done by date D and within cost budget C. Now calculate an estimate on the project.”
A friend of mine used this example to illustrate anchoring bias in estimation. Note, however, that he doesn’t make the question explicit. Further conversation revealed that he had in mind that the date and cost should be the output of the estimation. With that assumption, that statement preceding the request will definitely anchor the answer, and realizing that this bias is likely will call into question whatever estimate is given.
Given the stated need, however, I would reframe the call for an estimate from “When will this project be done and how much will it cost” to “What is the likelihood that the project can be done within these constraints?” When the time and money constraints are already known, it’s somewhat disingenuous to ask that these values be estimated. If the estimate exceeds the budget, then it’s likely that a negotiation will follow. Such a negotiation helps bring the estimate in line with the budget, but generally does little to bring the actual costs in line.
Reframing the question is much more helpful. It should provoke a response along the lines of “We feel 80% confident that we can meet the time and money budget based on these assumptions…. We have identified … as risks that would endanger meeting the budget and which should be monitored closely. Another possibility is that the response is of the form “There is a 10% chance that this project can be accomplished within the time and money constraints. If you’d like, we can explore finding a subset of the project that has a higher likelihood of completion but still have value.”
Either of these answers is more useful for the person with the budget who wants to decide whether to invest in the project or not. Sometimes the best outcome for a project is to kill it before starting when it’s unlikely to result in a happy conclusion. Other times we know to proceed cautiously, and can keep an eye on variables that will indicate whether we’re on a path to success or failure given the stated constraints. We should have alternate plans that we can turn to in the event that one or more of the risks materialize.
Such an estimate doesn’t guarantee success, but it does give us a feel for the merits of pursuing the endeavor. The associated assumptions and risks provide information to help us understand whether or not we’re still on track. This probabilistic estimate is much more helpful than is an estimate of the values.
Not all situations benefit from an estimate of the probabilities. We should think about what sort of answer would really help us, and ask the question that will produce an answer of that sort. Asking for “an estimate” without knowing and communicating the form of answer that will be useful is unlikely to give us appropriate information.