CQU Project Management education

Thinking at the margin for project managers

Adeline Teoh ed.
July 20, 2015

Thinking at the margin is economists’ way of describing what happens when people make decisions based on incremental cost-benefit analyses. It’s certainly a factor in agile project management—but there’s a downside.

Most people make decisions at the margin every day. A decision at the margin is not whether to go to a restaurant for your wedding anniversary but whether to have dessert. Your decision will be based on a number of factors that you don’t know prior to that decision point that contributes to your final call: how full you are, whether or not there are desirable items on the dessert menu, whether your spouse wants dessert, for example.

The theory of economics states that rational people thinking at the margin will proceed with a course of action if the marginal benefit outweighs the marginal cost. This sounds like your basic cost-benefit analysis, but it actually requires a sophisticated system of decision-making because when circumstances change, a whole new set of opportunities and threats arise that you may not have factored in at the start.

Take the dinner example above. Whether or not I’m full and whether or not there are desirable items on the dessert menu will likely be the only influences on my decision whether or not to have dessert*.

But I haven’t really thought about costs: will the pleasure of having dessert outweigh the financial cost? Will it outweigh the extra exercise I’ll feel compelled to do to burn the excess calories? What is the opportunity cost of having dessert at the restaurant versus going elsewhere that might have a better dessert menu?

I often think of agile project management this way; a project constructed with a goal in mind but following—or forging—a path that zigzags according to changes in the project environment. The benefit is clearly an ability to quickly adapt to dynamic circumstances but the downside is a lack of depth in what informs that decision.

When thinking at the margin we look only at the marginal benefit versus the marginal cost, we do not weigh up what that marginal cost or benefit may contribute to our overall goals. Too much decision-making at the margin is indicative of short-term thinking and for most projects, the benefits realisation pathway requires project managers to make decisions—at the margin or not—with the big picture context in mind.

*I do realise this is sample size of one and therefore not statistically valid.

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Adeline Teoh ed.
Adeline Teoh is the editor of ProjectManager.com.au. She has more than a decade of publishing experience in the fields of business and education, and has specialised in writing about project management since 2007.
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