Contract Design, Costs and Power Influence Time Planning in Projects: Experimental Evidence

Abstract

Time planning is a key process in project management that is usually carried out by individuals. While normative models of time planning are widely discussed, experimental evidence of actual time planning behavior is lacking. The current research addresses this gap by investigating factors of project conditions and an attribute of the decision maker in a controlled experiment. The results show that two specific situations systematically lead to longer planned project durations. First, projects with unit- independent contract penalties, due in case the project is behind schedule, lead to longer planned durations compared to projects with unit-dependent overtime costs. Second, high-power decision makers plan longer project durations compared to low-power decision makers. These effects hold in cost situations where planning too short is relatively expensive as well as in those where planning too short is relatively cheap. The results of the experiment contribute to the literature on project management by highlighting the importance of taking actual behavior into account, to the literature on contract design by investigating the effects of different contract parameters for projects behind schedule, and they inform the social psychological literature on power by demonstrating the effects of different penalties on power.