The wisdom of the crowd: how to guarantee effective decision-making

The number of people who need to be involved in making a decision increases with its criticality. Here are some Rolls-Royce lessons in effective decision-making.

The human factor is unpredictable on any project – as much as you try, you can never fully prepare for how people will respond, or where errors might creep in.

But it is possible, with the right system, to minimise the chances that something might go wrong. And Andy Nolan, Rolls-Royce’s chief of estimation, knows just the system you need: ‘The Wisdom of the Crowd’

What is the Wisdom of the Crowd?

The ‘Wisdom of the Crowd’ as an estimation tool dates back to 1906 (though the phrase originates with Aristotle). The term was popularised in business by New Yorker columnist James Surowiecki’s The Wisdom of Crowds: Why the Many Are Smarter Than the Few. It works on the hypothesis that, if you get a group of people together, the median decision of the group tends to be more accurate than any decision by an individual or the majority of individuals. Nolan studied this estimation technique by getting large groups of people to make guesses and then artificially blending them into teams.

“Most project management is judgment-based,” he says. “It’s based on decision-making and risk analysis. My study shows that one person on their own isn’t enough – they will tend to make quite big errors.” 

If even small teams are created, the error rate in decision-making goes down, Nolan says. His research shows that, mathematically, it is possible to demonstrate the ideal team size. “In the early stages of a project, you only need to have a small team. But if you get to a critical decision, you need much larger teams.

“We all know many heads are better than one. What I’ve proved is that one head can actually be quite dangerous. The circumstances are very rare in which one person is good enough.”

Putting it into practice

Rolls-Royce has a number of decision points within the life cycle of a project. “I was able to map out at each gate how many people you need to make an effective decision,” explains Nolan.

Contract negotiation may require tens of people, as opposed to a team of two or three at the conceptual phase of a project, for example. The number of people who should be involved in making a decision increases with its criticality, Nolan explains.

Nailing estimation

At Rolls-Royce, estimation is very important in terms of guaranteeing commitments, scheduling and resourcing contracts effectively. “It’s important to our affordability and business benefit cases – and the better we understand those things, the more viable our business,” Nolan explains.

Estimation can be tricky to master; it requires a detailed knowledge of the strengths and weaknesses on your team, systems and processes, and your deliverables. But by understanding the ‘Wisdom of the Crowd’ you can keep better control of that human factor.

The full-length article on the Rolls-Royce model for effective decision-making was published in the winter 2018 edition of Project (available free to APM members). You can rewatch APM’s webinar from October 2018 on effective decision-making.