Perminova, O., Gustafsson, M. y Wikström, K. (2008).

Defining uncertainty in projects : a

new perspective . International Journal of Project Management (26) pp. 73-79. (AR64376)

Available online at [Link]

International Journal of Project Management 26 (2008) 73–79

[Link]/locate/ijproman

Defining uncertainty in projects – a new perspective

a,b,* a,b a,b
Olga Perminova , Magnus Gustafsson , Kim Wikström
a
Åbo Akademi University, Laboratory of Industrial Management, Faculty of Technology, Biskopsgatan 8, FIN-20500 Åbo, Finland
b
PBI – Research Institute for Project-Based Industry, Slottsgatan 10, FIN-20100 Åbo, Finland

Received 30 July 2007; accepted 2 August 2007

Abstract

The aim of this paper is to discuss the phenomenon of uncertainty in projects and attempt to integrate it as part of project manage-
ment. Despite the fact that project risk management discipline has gained a lot of attention in the past decade from both academia and
practitioners, there is still considerable potential for development in this field. Recent trends in project management stress the need to
readdress the issue of uncertainty. Though one can come across the notion of uncertainty in traditional project risk and uncertainty man-
agement literature rather often, there is no common understanding between the scholars as to what this term means. Based on the review
of the existing research, we present our own definition of uncertainty as a crucial element in managing projects. We argue that key ele-
ments in managing uncertainty are reflective learning and sensemaking as enablers of flexibility and rapidness in decision-making regard-
ing the choice of alternative actions in response to the situation. This approach is suggested in order to facilitate and maximize the
outcome of project risk management practices.
Ó 2007 Elsevier Ltd and IPMA. All rights reserved.

Keywords: Uncertainty; Risk; Project management; Reflective processes

1. Introduction and background or replaced by project management in the future gains

more and more support of researchers in this field [4].
A variety of recent studies in the field confirms contin- The study performed by Crawford et al. [10] during the
uing changes in project management both as profession period of 1994–2003 reveals that the relationship manage-
and research area [10,40]. This discipline is being applied ment, resource management, time management, cost man-
in new industries, countries and spheres. Project manage- agement and risk management all displayed consistent
ment has become a core business process for many firms significance. It confirms the fact that project management
both on a strategic and operational level. In fact, any activ- puts a lot of emphasis on assuring conformance to time,
ity that is perceived as significant and necessary from the budget and scope constraints. Adding to that, traditional
customer perspective could be termed a project, and each operations management literature suggests that projects
big project can be seen as a series of sub-projects [3]. are mostly considered as a pre-phase to production [20].
Consequently, such developments change the way project Taking in consideration these facts, the criticism suggesting
management is perceived. The hypothesis stating that tra- that the management of projects is still too rigid and
ditional general management will have been merged into emphasizes the coordination-oriented project management
seem to be fair. Project management needs to be regarded
as an ongoing process rather than a planning tool, stressing
*
Corresponding author. Address: Åbo Akademi University, Depart- on real performance instead of conformance to timing,
ment of Industrial Management, Faculty of Technology, Axelia, Bis- scope, quality and budget.
kopsgatan 8, 20500 Åbo, Finland.
E-mail addresses: [Link]@abo.fi (O. Perminova), Magnus.
Increased customer orientation is one of the most signif-
gustafsson@[Link] (M. Gustafsson), [Link]@abo.fi icant trends in project management. It leads to the fact that
(K. Wikström). many companies concentrate their operations to the provi-

0263-7863/$30.00 Ó 2007 Elsevier Ltd and IPMA. All rights reserved.

doi:10.1016/[Link].2007.08.005
74 O. Perminova et al. / International Journal of Project Management 26 (2008) 73–79

sion of high-value integrated solutions instead of stand- managers are often expecting a number of risks to occur,
alone products and services [14,20]. It is argued that these which will be similar from project to project. According
innovative combinations of products and services consti- to Davies et al. [12], project managers can employ experi-
tute organization’s competitive advantage [11,17]. All pro- ences gained through the course of one project to the next
jects are to a certain degree unique complex undertakings. one in the form of standardized successful processes and
However, there are few significant similarities. First of all, procedures. In our opinion, repetitiveness of these proce-
most projects have restrictions in time, costs and scope as dures not only from one undertaking to another one, but
well as certain demands for quality. Secondly, there is a also at different stages of the project is the core element
high level of uncertainty with both positive and negative in success of project risk management practices. At the
effects in any project. The traditional approach to project same time, these measures aimed at accumulating knowl-
management still puts a lot of emphasis on assuring confor- edge facilitate management of uncertainty by providing
mance to time, budget and scope constraints. Consider- basis for reflective processes which in turn help to reduce
ations, such as continuous improvement, customer-centric uncertainty by transferring it into known risks and oppor-
thinking, reflective learning are often left behind. This leads tunities. The main danger in this respect is that the
to the fact that project companies become less flexible, acquired knowledge will be lost after the project has fin-
unable to accumulate knowledge and experience necessary ished. By standardizing and modularizing processes and
for coping with uncertainty. Moreover, in project risk man- procedures, making the gained experiences easily accessible
agement literature, there is no common understanding as within project team there is a greater preparedness to be
to what uncertainty is. The aim of this paper is to discuss more flexible in accordance to the various situations occur-
and define the phenomenon of uncertainty inherited in pro- ring. Adding to that the fact that the project and its envi-
jects and attempt to integrate it as part of project ronment are in continuous process of change, there is
management. obvious importance of reflecting in order to foresee poten-
tial dangers and opportunities to the possible extent [38].
2. Project risk management and management of uncertainty Thus, projects are better described as journeys of explora-
tion in given direction, rather than strict plan-following
There have been a number of distinctive approaches to endeavors. Projects are very complex and uncertain, which
project risk management since the discipline emerged in emphasizes the need for greater flexibility and reflection as
1950s. The methodology of systematic project management a new way of generating knowledge and functioning [42].
and organization with special emphasis on effective plan-
ning, communication and evaluation to achieve desired 3. Distinguishing risk from uncertainty
outcomes is still dominant today [1,29,42]. As a result,
the traditional view on project risk management (as well Project risks originate from the uncertainty that is pres-
as project management in the whole), stresses the impor- ent to a different extent in all projects. For example, the
tance of planning as one of the major routines, supporting recent edition of PMBOK [36, p. 238], which presents a tra-
other activities such as risk identification, analysis, moni- ditional view on project risk management, defines project
toring and control. Risk itself is traditionally described as risk as ‘‘an uncertain event or condition that, if occurs,
an uncertain event [35,36], which gives some scholars has a positive or a negative effect on at least one project
ground to argue that project risk management should be objective, such as time, cost, scope, or quality’’. Causes
referred to as project uncertainty management [7,18,21]. or conditions of risk, according to the same source, arise
The new trend challenging traditional view on project from the project’s or organization’s environment, such as
risk and uncertainty management originally emerged from on-going multiple projects, poor management practices,
strategic management literature [30] and represents a criti- dependency on external participants, etc. PMBOK
cal insight into the role and influence of strategic planning describes risk through the notion of uncertainty, however
on the performance of a project company [2,13]. The main it does not specify what ‘‘uncertainty’’ is. Uncertainty is
assumption is that planning of project activities at an early not a self-explanatory term, and we consider it of impor-
stage is necessary, but not a sufficient criterion for project tance to distinguish it from the term ‘‘risk’’. According to
success. Taking into consideration that projects are com- the description of risk presented above, one can make a
plex endeavors with restrictions in time, costs, resources conclusion that risk is uncertainty. However, these two phe-
and precise specifications of the product to be delivered, nomena are not synonymous; they are better described as
planning seems to be a difficult task. However, there are cause and consequences. Making a distinction between
constraints and unclear areas, that neither customer nor uncertainty and risk is necessary in order to be able to
the project company is able to recognize at an early stage. explain the influence of these on project performance.
The real difficulty project managers meet is making an opti- From managerial perspective, defining uncertainty is an
mal choice among the alternative actions, which requires important element of performance-oriented project risk
knowledge about outcomes of preceding activities [2]. management.
In support of the latter ‘‘strategic’’ trend, it must be said A significant amount of work has been done to concep-
that projects are unique only to a certain extent. Project tualize and measure uncertainty [8,9,23,24,27]. The domi-
 O. Perminova et al. / International Journal of Project Management 26 (2008) 73–79 75

nant theme in organization theory has been internal uncer- thoughts are somewhat similar to the distinction that is
tainty reduction strategies. Most research in this field has used in decision theory, which denotes by uncertainty ‘‘a
focused on identifying and prescribing ways managers condition of the environment of the decision maker such
can either reduce or absorb the negative consequences of that he finds it impossible to assign any probabilities what-
environmental uncertainty, which has been recognized as ever to possible outcomes of an event’’ [19, p. 206]. In other
an important variable in the explanation of organizational words, uncertainty is referred to all situations where a sin-
stability and performance. Adepts of organization theory gle action may lead to alternate consequences. Hence risk is
often depict uncertainty as ‘‘emanating from some set of assumed as a condition in the environment in which the
objective (but largely unmeasured) environmental charac- decision-maker presumes him- or herself able to give prob-
teristics’’ [22, p. 778]. Some authors regard uncertainty as abilities to outcomes of events, each probability being
negative for the firm because it withdraws organizational greater than zero. For the purpose of our study, another
equilibrium, and thus managers attempt to eliminate it description derived from the same work by Knight [23] is
[26]. Others came to the conclusion that managers can of relevance. According to it ‘‘the word ‘‘risk’’ is ordinarily
not control it [15], and they ignore it [28]. However, firms used in a loose way to refer to any sort of uncertainty
do not necessarily get negative impact from uncertainty viewed from the standpoint of the unfavorable contin-
and risks; they can create opportunities out of it. An gency, and the term ‘‘uncertainty’’ similarly with reference
important insight into understanding uncertainty in this to the favorable outcome; we speak of the risk of a loss, the
respect is provided by Karl Weick, whose research showed uncertainty of the gain. . .’’ Knight’s explanation of profit
examples of organizations ‘‘proactive toward their environ- as a reward for bearing uncertainty stresses the understand-
ments rather than reactive to them’’ Karl Weick [41, p. ing of uncertainty not only as risk or danger, but also as
271]. Furthermore, he argues that understanding and opportunity. However, this view seems to be limited as
sensemaking affect strategic decisions, and consequently, well.
performance of the firm. Keynes made a distinction between risk and uncertainty
In the similar vein, project risk management scholars in the similar vein. ‘‘For him, uncertainty was a state in
describe uncertainty from the point of view of not only which individual actors find it impossible to attribute a rea-
negative impact on the project outcomes and danger of sonably definite probability to the expected outcome of
not meeting project’s objectives, but also as changes that their choice’’ (in [32, p. 31]). Keynes perceived uncertainty
might bring new opportunities into the project [6]. Thus, as inherent in economic life - like a rule of the game. If the
risks are understood as one of the implications of uncer- rules are known, we are able to calculate possible outcomes
tainty, in contrast to traditional risk management and risks associated with that. If rules are not known, we
approach, assuming risk is uncertainty. Such interpretation are in the situation of uncertainty. Hence, uncertainty is
has given ground to a new trend in project risk manage- the situation when it is not possible to calculate risk. Con-
ment science referred to as project uncertainty management sequently, risk is seen as less threatening as compared to
[7,18,21]. However, this approach can not be considered as uncertainty.
‘‘strategic’’ as the one we discussed in the previous chapter. According to the work of Keynes, one can say that risks
For the most part, project uncertainty is described by pro- as opposed to uncertainty were assumed calculable within
ject uncertainty management school as probability that the the premises of probability theory, and thus, controllable.
objective function will not reach its planned target value, or However, as noted by Nowotny et al. [32, p. 32], in modern
as an unknown probability of occurrence of an event [21, p. science the word ‘‘risk’’ is increasingly used to denote incal-
89,101]. From this perspective, uncertainty is closely culability and, as a result, uncontrollability. This statement
related to project performance measures: time, budget, emphasizes the tendency to mix these two concepts
scope and quality. This approach has certain similarity together, even though they are not the same. Risk as a fact
with traditional project management in sharing the view or at least imaginable situation implies certain knowledge,
that the planning procedures are crucial for the project suc- and thus calculability and controllability, whereas uncer-
cess. However, project planning and documentation is seen tainty by definition implies that there is no certainty about
not only as an administration and statutory requirements, the state of things.
but as means of information collection, integration, evalu- Another principal definition of uncertainty comes from
ation and proactive decision-making. psychology: it is described as a state of mind characterized
Describing uncertainty in terms of probability is not new by a conscious lack of knowledge about the outcomes of an
to project uncertainty management scholars. The classic event. This description, in contrast with the Knight’s defi-
distinction between risk and uncertainty comes from eco- nition presented above, allows us to assume that the exter-
nomics, particularly from the seminal work of Frank nal environment is not the only source of uncertainty; the
Knight Risk, Uncertainty and Profit [23]. Knight states that latter can take a form of mental reaction of a human to
risks are events subject to known or knowable probability, the external environment, and thus, is closer to the
whereas uncertainty refers to events for which it is impos- thoughts of Keynes. In this sense, uncertainty exists
sible to specify numerical probabilities. Some scholars ‘‘in the mind of the person who doubts’’ [19, p. 206].
argue that this definition is not valid [16,25]. Knight’s Similar thoughts have also been presented by several
76 O. Perminova et al. / International Journal of Project Management 26 (2008) 73–79

authors distancing themselves from a deterministic and ently by different actors involved in project or even not rec-
rationalistic view in favor of a more relativistic view. ognized as such.
Wittgenstein [44] discusses the concept of certainty and We define uncertaintyas a context for risks as events hav-
its relationship to uncertainty and note that uncertainty ing a negative impact on the project’s outcomes, or opportu-
presupposes certainty. To be uncertain of a situation, to nities, as events that have beneficial impact on project
be in a state of doubt requires that one takes certain things performance. This definition stresses dual nature of uncer-
for granted. Arguing that since we cannot be 100 percent tainty in potentially having both positive and negative
certain we therefore have a constant state of uncertainty influence on the project’s outcomes. Uncertainty can arise
become meaningless as it can be countered with the ques- from sources both internal and external to the project. As
tion: how can we be certain that we are not completely cer- an example of internal uncertainty we can take certain type
tain? However, this does not mean that uncertainty would of projects where risks at least partly originate from the
not exist. Uncertainty can rather be seen as a state of affairs system complexity – systematic uncertainty. In such pro-
that arises. Putnam [37] argues for adhering to the pragma- jects structured approach for information creation or a
tist principles fallibilism and anti-scepticism meaning that structured product itself becomes a key factor in better pro-
on the one hand all beliefs (facts) are fallible, but that ques- ject conformance [5]. From this perspective, risk manage-
tioning them requires a counter argument, i.e. another fact. ment is seen as the creation of previously unknown
Thus one could argue that whereas risk concerns itself with information.
the calculation of probabilities based on certain facts, Both research and practice show that traditional project
uncertainty concerns itself with epistemology, i.e. are we management tools are project planning, and project moni-
certain of the facts. toring and control [31,36]. Let us consider an example.
Table 1 summarizes the views on uncertainty and risk Many project companies in such industries as offshore oil
derived from different disciplines. and gas production and energy systems use cost estima-
tions and schedules as an essential part of performance
3.1. Conceptualizing uncertainty for project management measurement. As a matter of fact, most of these documents
discipline are detailed actions plans, which are to be followed in order
to achieve the goal of the project - that is deliver results
The views on risk and uncertainty in different disciplines according to customer’s expectations within fixed costs,
have their merits and drawbacks, however all of them have time period and quality. The same logic applies to risk
a standpoint assuming that there exists some sort of com- management procedures: risk identification and analysis,
mon truth, which is relevant for any situation and any risk response plan, monitoring and control are considered
party involved in it. We consider this presumption too before the project starts. Planning of risk response proce-
deterministic. In our definition of uncertainty we have dures is an important part of securing that there will be
adapted a relativistic view as defined by Popper [34] and no negative impact on the project outcome. It depends
Putnam [37]. Various propensities impact on our decisions mostly on the project managers’ ability to foresee potential
regarding how to meet and handle uncertainty. These pro- dangers, which in turn, depends on the ability of the person
pensities have been formed through individual experiences to utilize previously learned knowledge and experience in
and beliefs. Consequently, uncertainty is regarded differ- dealing with uncertain situations. However, not all the

Table 1
Risk and uncertainty as defined in different disciplines
Risk Uncertainty
Economics Risk refers to events subject to known or knowable probability Uncertainty is a situation for which it is not possible to
distribution [23] specify numerical probabilities [23]
Uncertainty is a state in which individual actors find it
impossible to attribute a reasonably definite probability to
the expected outcome of their choice (Keynes, 1937)

Psychology Risk is the fact that the decision is made under conditions of Uncertainty is a state of mind characterized by a conscious
known probabilities [39] lack of knowledge about the outcomes of an event [19]
Philosophy Doubt presupposes certainty [44]
Org. theory Uncertainty emanates from a set of objective but largely
unmeasured environmental characteristics [22]

Dictionary The possibility of something bad happening at some time in the Uncertainty is the state of being uncertain; something you
future; the situation that could be dangerous or have a bad can not be sure about (Oxford Dictionary of Current
result (Oxford Dictionary of Current English, 2005) English, 2005)

Project management Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on at least one project objective, such
as time, cost, scope or quality [36]
 O. Perminova et al. / International Journal of Project Management 26 (2008) 73–79 77

risks can be thought of in advance. That is why we think the situation as of any relevance to the ongoing project.
that planning can be considered necessary, but not a suffi- Managers’ attitudes and understanding of uncertainty do
cient tool in managing risks. Another argument against not create or eliminate it. But this understanding affects
over exaggerated importance of planning is that one can the way managers ‘‘make sense’’ of the situation and decide
plan only what one knows for certain. In this sense, we on alternative actions. As stated by Weick [41], under-
can state that risks are certain or known: project manager standing and sensemaking affect strategic decisions, and
can think of potential hazardous events and establish pre- consequently, performance of the firm. For manager A
ventive measures. there are two options for the decision: to engage into busi-
Uncertainty, in contrast, is an event or a situation, which ness with new subcontractor, assuming it is more risky and
was not expected to happen, regardless of whether it could thus more rewarding, or not. Admittedly, manager B does
have been possible to consider it in advance. In other words, not see any uncertainty in the situation. This can be a result
uncertainty is when the established facts are questioned of lack of project management skills. Or on the contrary,
and thereby the basis for calculating risks (known negative manager B has sufficient experience of managing projects
events) or opportunities (known positive events) is in such context and that is why he or she does not recognize
questioned. it as uncertain. Hereby, we can conclude that development
of project management skills is an essential part of under-
4. Managing uncertainty in projects standing and managing uncertainty.
Obviously, not all the elements in project environment
In our opinion, uncertainty in projects can not be man- or organization are critical to the project success and rep-
aged by similar means as risks – or certainties. Indeed, tra- resent sources of uncertainty. That is why identifying rele-
ditional project risk management tools such as planning, vant ones from the contextual uncertainty by means of
monitoring and control are effective for avoiding risks. environmental scanning or other analytical models is an
However, such measures are not enough for managing important part of project management [31,45]. Judging
uncertainty in the meaning we have ascribed to it: implying the source and relevance of information that comes from
both risks and opportunities. Many project management the outer project environment and, thus, represent contex-
scholars point out that there is a gap between traditional tual uncertainty is an intuitive process rather than a
project risk management tools such as planning and risk rational one, since the rational processes are isolated from
analysis, which aim to grasp the future, and monitoring the surrounding world [43]. Therefore, intuitive processes
and control, which reflects the history [31]. Even though are goal-oriented and reflective. As a result, understanding
project risk management is often seen as a life cycle process objectives and purposes of key actors, on whom project
[21,35,36], its practical application shows that procedures success is dependent, as well as developing communication
related to forecasting the future are not repeated at each and coordination between the parties involved is of crucial
and every stage of the project. Control as a source of his- importance [33]. Such actions can be considered as part of
torical data confirms that the problem has already taken project company’s strategy implementation and organiza-
place and can not be any longer removed with the help tion’s competitive advantage supporting customer – cen-
of precautionary methods because the project is a time- tered thinking and facilitating the ability to provide
bound process [31]. This leads to the fact that project high-value integrated solutions. This is a way of establish-
companies loose their flexibility in responding to different ing certainty for the project team. Uncertainty becomes
situations. Project and its environment are in continuous either risk or opportunity, which are certain by our defini-
process of change, which emphasizes the importance of tion. It must be mentioned, that uncertainty can not be
reflecting as means of identifying potential dangers and eliminated completely. Still, continuous reflective learning
opportunities, so that the choice between alternative activ- and information sharing make it manageable by reducing
ities can be made as fast as possible. Our case study of solu- it significantly. We consider these tools as organization’s
tion providers within offshore industry, during which flexibility enhancers needed in order to faster react to
several project managers at different organization levels changes by making choice between alternative actions in
were interviewed, showed that repetitiveness of risk man- the situation of uncertainty.
agement procedures at different stages of the project is seen
as an important aspect of the company’s strategy. Risk 5. Conclusion
management procedures are perceived by managers as
not only as creation of previously unknown information, The newly emerging trends in strategy, such as customer
but also as information sharing, learning, knowledge and orientation and continuous improvement, growing number
competence creation. and complexity of projects, internationalization - just to
The way uncertainty is perceived by project managers mention a few - are the today’s challenges project compa-
depends on personal skills, intuition and judgment. Let nies have to face. It does not necessarily mean that the
us consider an example. One manager A might see poten- number of risks companies meet is increasing or uncer-
tial danger or opportunity arising from doing business with tainty is higher. The changes are qualitative rather than
new subcontractor; whereas manager B will not consider quantitative. Uncertainty can be regarded as one of the
78 O. Perminova et al. / International Journal of Project Management 26 (2008) 73–79

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