Confidence Level – The Painless Way to Better Estimates

Have you ever had trouble pinning someone down to an estimate? Maybe a relatively minor risk was blown out of proportion. Or maybe actual hours spent on something turned out to be vastly different from the original estimate causing ROI to be, well, messy.

The Problem:

When faced with any level of uncertainty people will often reach for the answer that will get them in the least trouble. That’s human nature – but there’s a way to make the vague unease pay off in accuracy and information. It’s called Confidence Level.

The Solution:

When you ask for an estimate (or a risk assessment), ask for the estimator’s level of confidence in their estimate. Use percentages: 100% means they have total confidence in their estimating (or they really don’t know what they’re doing – you’ll rarely get a 100% level). 1% means they don’t have any confidence at all in the estimate. You can zero in on any issues based on the confidence level.

How to Use Confidence Level:

If the confidence level is low, find out why. Often there is information missing and the estimator is assuming the worst to be sure everything is covered. In this case you have two choices – track down the missing information, or inform your client (or manager or spouse, whoever needs to make a decision based on the estimate) that the estimate is necessarily high, but if the missing information identified is provided a more accurate estimate will be possible. Another primary cause of low confidence level is that the estimator does not feel familiar enough with the subject matter to trust her estimate – in this case, often getting an expert to review the estimate will garner more confidence in the estimate (and will sometimes get you a better estimate overall).

Ask the questions a little differently for risk assessments. How likely does the assessor think a certain risk is to be realized (100% means there’s no avoiding it)? Follow up by asking for the reasons behind that number. If it’s based on ‘gut feel’ you probably don’t want to dismiss it out of hand, but take a look at your assessor’s track record. If they’re usually right on the numbers you probably want to trust that gut feeling. If it’s based on conjecture rather than real information, maybe a little more research is needed to provide incomplete information. Once you have this likelihood of occurrence and have assessed its validity, you can determine whether an intervention is needed or whether the situation can be monitored before any action is taken.

Armed with confidence level you can zero in on good estimates, identify potential problem areas or hazards, and get the folks giving estimates and assessments comfortable with that part of their job.

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