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Modern Project Management

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What Is a Project?

Project DefinedA complex, nonroutine, one-time effort

limited by time, budget, resources, and performance specifications designed to meet customer needs.

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Major Characteristics of a Project?

Has an established objective. e.g. Unitech/TCS/NTPC

Has a defined life span with a beginning and an end.

Typically requires across-the-organizational

participation. e.g. Specialists (Eng-FA-Marketing etc)

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Major Characteristics of a Project?

Involves doing something never been done before.

e.g. nonroutine/ Chandrayan –DLF Customization

Has specific time, cost, and performance requirements.

Faster-Cheaper-Quality (???)

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Project Management in Action-UPS

Moving the goods Project: Expand the delivering packages to helping net companies with everything from managing inventory to Tracking Shipment.

Payoff: About 500,000 companies worldwide use the full package of UPS online logistics services, generating $ 1.4B in revenue.

Action: UPS developed online system for e-tailers for everything from product delivery and tracking, managing inventories, and dealing with suppliers, to handling billings and payments. Cost are slashed for all stake holders in the supply chain to the final chain to the final customer. The UPS system leaves the competitors in a catch-up mode

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Project Management in Action-Others

• PACCAR: Marketing Project:Make the truck industry technically savvy by shifting parts purchasing online, building web-powered engine monitoring equipment in each truck

• CISCO: Streamlining ProjectSales & inventory tracking system linking Cisco with suppliers, manufacturers and customers

• SW Airlines: Customer Service ProjectTo make buying online irresistible by emphasizing simplicity and speed over whizzy features.

• Nortel Networks: Management ProjectSpeed up product development –key tactics: have development teams share ideas and documents.

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Project Life Cycle

FIGURE 1.2

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The Challenge of Project Management: The Project Manager

Manages temporary, non-repetitive activities and frequently acts independently of the formal organization.

o Marshals resources for the projecto Provides direction, coordination, and

integration to the project teamo Manages a diverse set of project stakeholderso Dependent upon others for technical answerso Is responsible for performance and success of

the projecto Must induce the right people at the right time to

address the right issues and make the right decisions.

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The Importance/Age of Project Management

Factors Leading to the Increased Use of Project Management:Compression of the product life cycle-

(Competitive Advantage)Global competition Knowledge explosionCorporate downsizing Increased customer focus (Need)Small projects that represent big problems

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Growth in PMP Certification

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Integrated Management of Projects

FIGURE 1.3

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Project Management Process The Technical and Socio-cultural Dimensions

FIGURE 1.4

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PM Today: Integrated Project Management Systems

Problems Resulting from the Use of Piecemeal Project Management Systems:

Do not tie together the overall strategies of the firm.

Fail to prioritize selection of projects by their importance of their contribution to the firm.

Are not integrated throughout the project life cycle.

Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors.

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Evolution of Project Driven Organization CMM Level 1: Ad Hoc- Unpredictable Processes (TCP)

CMM Level 2: Repeatable Basic Processes

CMM Level 3: Repeatable Well Defined Processes

CMM Level 4: Seamless/Integrated Managed Processes

CMM Level 5: Optimizing-Continuously Improving Process

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Organization Strategy and Project Selection

“If you don’t know where you are going, any road will take you there”…

Confucius

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Integrated Management of Projects

FIGURE 1.3

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Why Project Managers Need to Understand the Strategic Management Process?

Involvement –Organization focus- Decision

Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects.

Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission.

Insight – Organizational capabilities and resource constraints

Project contribution- Organization focus - Direction

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Strategic Management

Process

FIGURE 2.1

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The Strategic Management Process: An Overview

Strategic ManagementProvides the theme and focus of the future

direction for the firm. (Airlines – BA/ SAS/ Virgin)

o Responding to changes in the external environment—environmental scanning

o Allocating scarce resources of the firm to improve its competitive position—internal responses to new action programs

Requires strong links among mission, goals, objectives, strategy, and implementation.

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Strategic Management Process (cont’d)

Four of Activities of the Strategic Management Process

1. Review and define the organizational mission. (Focus)

2. Set long-range goals and objectives. (SMART)

3. Analyze and formulate strategies to reach objectives. (Customer-Needs –SWOT)

4. Implement strategies through projects. (How? i.e. Management-POSDC)

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Characteristics of Objectives

EXHIBIT 2.1

S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress

A Assignable Make the objective assignable to one person forcompletion

R Realistic State what can realistically be done with availableresources

T Time related State when the objective can be achieved, that

is, its duration.

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Checklist Selection Model Strategy alignment: What specific organization does this

project align with? Driver: What business problem does the project solve? Success metrics: How will we measure success? Sponsorship: Who is the project sponsor? Risk: What is the impact of not doing this project? Risk: What is the project risk to our organization? Benefits: What is the value of the project to this

organization? Organization culture: Is our organization culture right for this

type of project? Approach: Will we build or buy? Training/resources: Will staff training be required? Finance: What is estimated cost of the project? Portfolio: How does the project interact with current projects?

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Project Screening Matrix

FIGURE 2.3

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Applying a Selection Model Project Classification

Deciding how well a strategic or operations project fits the organization’s strategy.

Selecting a Model Applying a weighted scoring model to bring projects to

closer with the organization’s strategic goals.

o Reduces the number of wasteful projects

o Helps identify proper goals for projects

o Helps everyone involved understand how and why a project is selected

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Project Proposals Sources and Solicitation of Project Proposals

Within the organization Request for proposal (RFP) from external sources

(contractors and vendors)

Ranking Proposals and Selection of Projects Prioritizing requires discipline, accountability,

responsibility, constraints, reduced flexibility, and loss of power

Managing the Portfolio Senior management input The priority team (project office) responsibilities

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Major Project

Proposal

FIGURE 2.4A

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Risk Analysis

FIGURE 2.4B

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Project Screening Process

FIGURE 2.5

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Priority Analysis

FIGURE 2.6

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OrganizationStructure and Culture

“Successful project management can flourish within any structure, but the culture within the organization must support the four basic values of project management:

Cooperation, Teamwork,

Trust & Effective Communication”

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Project Management Structures Challenges to Organizing Projects

The uniqueness and short duration of projects relative to ongoing longer-term organizational activities

The multidisciplinary and cross-functional nature of projects creates authority and responsibility dilemmas.

Choosing an Appropriate Project Management Structure The best system balances

the needs of the project with the needs of the organization.

Functional – Dedicated Team - Matrix

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Project Management Structures Organizing Projects: Functional

Organization

Different segments of the project are delegated to respective functional units.

Coordination is maintained through normal management channels.

Used when the interest of one functional area dominates the project or one functional area has a dominant interest in the project’s success.

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Functional Organizations

FIGURE 3.1

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Functional Organization of Projects

Advantages

No Structural Change

Flexibility

In-Depth Expertise

Easy Post-Project Transition

Disadvantages

Lack of Focus

Poor Integration

Slow

Lack of Ownership

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Project Management Structures (cont’d)

Organizing Projects: Dedicated Teams

Teams operate as separate units under the leadership of a full-time project manager.

In a projectized organization where projects are the dominant form of business, functional departments are responsible for providing support for its teams.

e.g. Apple – Macintosh, iPod, iApple etc

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Dedicated Project Team

FIGURE 3.2

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Project Organization: Dedicated Team

Advantages

Simple

Fast

Cohesive

Cross-Functional Integration

Disadvantages

Expensive

Internal Strife

Limited Technological Expertise

Difficult Post-Project Transition

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Project Organizational Structure

FIGURE 3.3

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Project Management Structures (cont’d)

Organizing Projects: Matrix Structure Hybrid organizational structure (matrix) is overlaid

on the normal functional structure.o Two chains of command (functional and project)o Project participants report simultaneously to both

functional and project managers. Matrix structure optimizes the use of resources.

o Allows for participation on multiple projects while performing normal functional duties

o Achieves a greater integration of expertise and project requirements

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Matrix Organization Structure

FIGURE 3.4

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Different Matrix Forms Functional (also Weak or Lightweight) Form

Matrices in which the authority of the functional manager predominates and the project manager has indirect authority

Balance (or Middleweight) Form The traditional matrix form in which the project

manager sets the overall plan and the functional manager determines how work to be done

Strong (Heavyweight) Form Resembles a project team in which the project

manager has broader control and functional departments act as subcontractors to the project

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Project Organization: Matrix Form

Advantages

Efficient

Strong Project Focus

Easier Post-Project Transition

Flexible

Disadvantages

Conflict

Infighting

Stressful

Slow

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Choosing the Appropriate Project Management Structure

Organization (Form) ConsiderationsHow important is the project to the firm’s

success?What percentage of core work involves

projects?What level of resources

(human and physical) are available?

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Choosing the Appropriate Project Management Structure (cont’d)

Project Considerations Size of project Strategic importance Novelty and need for innovation Need for integration (number of departments

involved) Environmental complexity (number of external

interfaces) Budget and time constraints Stability of resource requirements

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Organizational Culture Organizational Culture Defined

A system of shared norms, beliefs, values, and assumptions which bind people together, thereby creating shared meanings

The “personality” of the organization that sets it apart from other organizations.

o Provides a sense of identify to its members

o Helps legitimize the management system of the organization

o Clarifies and reinforces standards of behavior

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Key Dimensions Defining an Organization’s Culture

FIGURE 3.6

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Defining the Project

“ Select a dream

Use your dream to set a goal

Create a plan

Consider resources

Enhance skills and abilities

Spend time wisely

Start! Get organized and go…….”

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Defining the Project

Step 1: Defining the Project Scope

Step 2: Establishing Project Priorities

Step 3: Creating the Work Breakdown Structure

Step 4: Integrating the WBS with the Organization

Step 5: Coding the WBS for the Information System

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Step 1: Defining the Project Scope

Project Scope A definition of the end result or mission of the

project—a product or service for the client/customer—in specific, tangible, and measurable terms.

Purpose of the Scope Statement To clearly define the deliverable(s) for the end user. To focus the project on successful completion of its

goals. To be used by the project owner and participants as a

planning tool and for measuring project success.

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Project Scope Checklist

1. Project objective-t/c/p

2. Deliverables-plc

3. Milestones-event

4. Technical requirements-

e.g. Free Willy-C17-US $ 2M

1. Limits and exclusions-

2. Reviews with customer-i/e

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Project Scope: Terms and Definitions Scope Statements

Also called statements of work (SOW) Project Charter

Can contain an expanded version of scope statement

A document authorizing the project manager to initiate and lead the project.

Scope Creep The tendency for the project scope to expand

over time due to changing requirements, specifications, and priorities.

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Project Scope: Example LAN Project Scope statementObjective: To design and install LAN with in one month with

a budget not to exceed $60,000 for the Teleatlas.

Deliverables: 200 workstations Server with duo core Pentium processor 2HP Laser printer Window NT Server OS 4 Hrs training -WS user) 16 Hrs training-Admn Fully operational LAN system

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Project Scope: ExampleMilestones: HW 2nd Jan’09 Setting users priority & authorization 25th Jan’09 In-house whole network test completed 2nd Feb’09 Training completed 1st March’09

Technical Requirement: WS- 19” Monitor…… System support –Window NT platform PCI 64 ethernet LAN interface cards and connection

Limit & Exclusion: System maintenance/repair-one month Warranties transferred to client

Customer Review Director –Technical Teleatlas

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Step 2: Establishing Project Priorities

Causes of Project Trade-offsShifts in the relative importance of

criterions related to cost, time, and performance parameters

oBudget–Cost

oSchedule–Time

oPerformance–Scope

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Project Management Trade-offs

FIGURE 4.1

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Step 2: Establishing Project Priorities

Managing the Priorities of Project Trade-offsConstrain: a parameter is a fixed

requirement.Enhance: optimizing a parameter over

others.Accept: reducing (or not meeting) a

parameter requirement.

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Step 3: Creating the Work Breakdown Structure

Work Breakdown Structure (WBS)

An hierarchical outline (map) that identifies the products and work elements involved in a project

Defines the relationship of the final deliverable (the project) to its subdeliverables, and in turn, their relationships to work packages

Best suited for design and build projects that have tangible outcomes rather than process-oriented projects

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Hierarchical Breakdown of the WBS

FIGURE 4.3

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Work Breakdown Structure

FIGURE 4.4

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Work Packages A Work Package Is the Lowest Level of

the WBS. It is output-oriented in that it:

o Defines work (what)

o Identifies time to complete a work package (how long)

o Identifies a time-phased budget to complete a work package (cost)

o Identifies resources needed to complete a work package (how much)

o Identifies a single person responsible for units of work (who)

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Step 4: Integrating the WBS with the Organization

Organizational Breakdown Structure (OBS) Depicts how the firm is organized to discharge its

work responsibility for a project

o Provides a framework to summarize organization work unit performance

o Identifies organization units responsible for work packages

o Ties the organizational units to cost control accounts

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Step 5: Coding the WBS for the Information System

WBS Coding SystemDefines:

o Levels and elements of the WBSo Organization elementso Work packageso Budget and cost information

Allows reports to beconsolidated at any level in the organization structure

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WBS Coding

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Estimating Project Time and Costs

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Estimating Projects

Estimating The process of forecasting or approximating the

time and cost of completing project deliverables

The task of balancing the expectations of stakeholders and the need for control while the project is implemented

Types of Estimates Top-down (macro) estimates: analogy, group

consensus, or mathematical relationships Bottom-up (micro) estimates: estimates of

elements of the work breakdown structure (WBS)

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Factors Influencing the Quality of Estimates

Quality of Quality of EstimatesEstimates

Quality of Quality of EstimatesEstimates

ProjectProjectDurationDuration

ProjectProjectDurationDuration

PeoplePeoplePeoplePeople

Project Structure Project Structure and Organizationand Organization

Project Structure Project Structure and Organizationand Organization

OrganizationOrganizationCultureCulture

OrganizationOrganizationCultureCulture

Planning Planning HorizonHorizon

Planning Planning HorizonHorizon

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Estimating Guidelines for Times, Costs, and Resources

1. Have people familiar with the tasks make the estimate.

2. Use several people to make estimates.

3. Base estimates on normal conditions, efficient methods, and a normal level of resources.

4. Use consistent time units in estimating task times.

5. Treat each task as independent, don’t aggregate.

6. Don’t make allowances for contingencies.

7. Adding a risk assessment helps avoid surprises to stakeholders.

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Macro versus Micro Estimating

TABLE 5.1

Conditions for Preferring Top-Down or Bottom-Up Time and Cost Estimates

Condition Macro Estimates Micro Estimates

Strategic decision making X

Cost and time important X

High uncertainty X

Internal, small project X

Fixed-price contract X

Customer wants details X

Unstable scope X

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Estimating Projects:Preferred Approach

Make top-down estimates

Develop the WBS

Make bottom-up estimates

Develop schedules and budgets

Reconcile differences between top-down and bottom-up estimates

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Methods for Estimating Project Times and Costs

Macro (Top-Down) Approaches Ratio methods/Parametric

Apportion method

Function point methodsfor software and system projects

Learning curves

Project EstimateTimesCosts

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Apportion Method of Allocating Project Costs Using the Work

Breakdown Structure

FIGURE 5.1

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Simplified Basic Function Point Count Process for a Prospective Project or

Deliverable

TABLE 5.2

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Example:Function Point Count Method

TABLE 5.3

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Methods for Estimating Project Times and Costs (cont’d)

Micro (Bottom-Up) Approaches Template method (Past Project)

Parametric procedures appliedto specific tasks (Ratio Method)

Detailed estimates for the WBS work packages (People-Three Time)

Phase estimating: A Hybrid

(Aero/IT/New Technology)

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Level of Detail Level of detail is different for different levels of

management. (Strategic- e.g. “Build oil platform in the Narmada basin”-HEG Ltd)

Level of detail in the WBS varies with the complexity of the project.

Excessive detail is costly. Fosters a focus on departmental outcomes Creates unproductive paperwork

Insufficient detail is costly. Lack of focus on goals Wasted effort on nonessential activities

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Three Views of Cost

FIGURE 5.6

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Types of Costs Direct Costs

Costs that are clearly chargeable to a specific work package.

o Labor, materials, equipment, and other

Direct (Project) Overhead Costs Costs incurred that are directly tied to an

identifiable project deliverable or work package.o Salary, rents, supplies, specialized machinery

General and Administrative Overhead Costs Organization costs indirectly linked to a specific

package that are apportioned to the project

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Contract Bid Summary Costs

FIGURE 5.5

Direct costs $80,000

Direct overhead $20,000

G&A overhead (20%) $20,000

Profit (20%) $24,000

Total bid $144,000

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Refining Estimates

Reasons for Adjusting Estimates Interaction costs are hidden in estimates. Normal conditions do not apply. Things go wrong on projects. Changes in project scope and plans.

Adjusting Estimates Time and cost estimates of specific activities are

adjusted as the risks, resources, and situation particulars become more clearly defined.

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Refining Estimates (cont’d)

Contingency Funds and Time Buffers Are created independently to offset uncertainty Reduce the likelihood of cost and completion time

overruns for a project Can be added to the overall project or to specific

activities or work packages Can be determined from previous similar projects

Changing Baseline Schedule and Budget Unforeseen events may dictate a reformulation of

the budget and schedule.

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Creating a Database for Estimating

FIGURE 5.7

Estimating Database Templates

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Developing a Project Plan

“I had six honest serving men who taught me all I know: their names were-

What?How?Why?

When?Where?Who?

…….. Rudyard Kipling

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Developing the Project Plan The Project Network

A flow chart that graphically depicts the sequence, interdependencies, and start and finish times of the project job plan of activities that is the critical path through the network

o Provides the basis for scheduling labor and equipment

o Provides an estimate of the project’s duration (T)

o Provides a basis for budgeting cash flow (C)

o Highlights activities that are “critical” and should not be delayed

o Help managers get and stay on plan

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From Work Package to Network

FIGURE 6.1

WBS/Work Packages to Network

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From Work Package to Network (cont’d)

FIGURE 6.1 (cont’d)

WBS/Work Packages to Network (cont’d)

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Constructing a Project Network Terminology

Activity: an element of theproject that requires time.

Merge activity: an activity that has two or more preceding activities on which it depends.

Parallel (concurrent) activities: Activities that can occur independently and, if desired, not at the same time.

A

C

B D

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Constructing a Project Network (cont’d)

Terminology

Path: a sequence of connected, dependent activities.

Critical path: the longest path through the activity network that allows for the completion of all project-related activities. Delays on the critical path will delay completion of the entire project.

D

C

A B

(Assumes that minimum of A + B > minimum of C in length of times to complete activities.)

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Terminology Event: a point in time when an activity is started

or completed. It does not consume time. Burst activity: an activity that has more than one

activity immediately following it (more than one dependency arrow flowing from it).

Two Approaches Activity-on-Node (AON)

o Uses a node to depict an activity Activity-on-Arrow (AOA)

o Uses an arrow to depict an activity

B

D

A C

Constructing a Project Network (cont’d)

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Basic Rules to Follow in Developing Project Networks

Networks typically flow from left to right. An activity cannot begin until all of its activities are

complete. Arrows indicate precedence and flow and can cross

over each other. Identify each activity with a unique number; this

number must be greater than its predecessors. Looping is not allowed. Conditional statements are not allowed. Use common start and stop nodes.

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Activity-on-Node Fundamentals

FIGURE 6.2

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Activity-on-Node Fundamentals (cont’d)

FIGURE 6.2 (cont’d)

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Network Computation Process Forward Pass—Earliest Times

How soon can the activity start? (early start—ES) How soon can the activity finish? (early finish—EF) How soon can the project finish? (expected time—

ET) Backward Pass—Latest Times

How late can the activity start? (late start—LS) How late can the activity finish? (late finish—LF) Which activities represent the critical path? How long can it be delayed? (slack or float—SL)

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Activity-on-Node Network

FIGURE 6.5

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Activity-on-Node Network Forward Pass

FIGURE 6.6

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Activity-on-Node Network Backward Pass

FIGURE 6.7

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Determining Slack (or Float)

Free Slack (or Float)The amount of time an activity can be delayed

without delaying connected successor activities

Total SlackThe amount of time an activity can be delayed

without delaying the entire project

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Activity-on-Node Network with Slack

FIGURE 6.8

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Activity-on-Arrow NetworkBuilding Blocks

FIGURE A6.1

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Activity-on-Arrow Network Fundamentals

FIGURE A6.2

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Activity-on-Arrow Network Fundamentals

FIGURE A6.2 (cont’d)

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Managing Risk

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Risk Management Process Risk

An uncertain event that, if it occurs, has a negative effect on project objectives

Risk Management A proactive attempt to recognize and manage

internal events and external threats that affect the likelihood of a project’s success

o What can go wrong (risk event)

o How to minimize the risk event’s impact (consequences)

o What can be done before an event occurs (anticipation)

o What to do when an event occurs (contingency plans)

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The Risk Event Graph

FIGURE 7.1

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Risk Management’s Benefits A proactive rather than reactive approach

Reduces surprises and negative consequences

Prepares the project manager to take advantage of appropriate risks

Provides better control over the future

Improves chances of reaching project performance objectives within budget and on time

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The Risk Management

Process

FIGURE 7.2

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Managing Risk Step 1: Risk Identification

Generate a list of possible risks through brainstorming, problem identification and risk profiling.oMacro risks first, then specific events

Step 2: Risk AssessmentRisk assessment matrix

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Step 1: Partial Risk Profile for Product Development Project

FIGURE 7.4

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Step 1: Risk Breakdown Structure

FIGURE 7.3

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Step 2: Risk Assessment Form

FIGURE 7.6

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Impact Scales

FIGURE 7.5

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Risk Severity Matrix

FIGURE 7.7

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Managing Risk (cont’d) Step 3: Risk Response Development

Mitigating Risko Reducing the likelihood an adverse event will occur

o Reducing impact of adverse event

Transferring Risko Paying a premium to pass the risk to another party

Avoiding Risko Changing the project plan to eliminate the risk or condition

Sharing Risko Allocating risk to different parties-Insurance/Sub-contactor

Retaining Risko Making a conscious decision to accept the risk

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Contingency Planning

Contingency Plan An alternative plan that will be used if a possible

foreseen risk event actually occurs

A plan of actions that will reduce or mitigate the negative impact (consequences) of a risk event

Risks of Not Having a Contingency Plan

Having no plan may slow managerial response

Decisions made under pressure can be potentially dangerous and costly

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Risk Response Matrix

FIGURE 7.8

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Risk and Contingency Planning Technical Risks

Backup strategies if chosen technology fails Assessing whether technical uncertainties can be

resolved Schedule Risks

Use of slack increases the risk of a late project finish

Imposed duration dates (absolute project finish date)

Compression of project schedules due to a shortened project duration date

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Risk and Contingency Planning (cont’d)

Costs Risks Time/cost dependency links: costs increase when

problems take longer to solve than expected. Deciding to use the schedule to solve cash flow

problems should be avoided. Price protection risks (a rise in input costs) increase

if the duration of a project is increased. Funding Risks

Changes in the supply of funds for the project can dramatically affect the likelihood of implementation or successful completion of a project.

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Contingency Funding and Time Buffers Contingency Funds

Funds to cover project risks—identified and unknown

o Size of funds reflects overall risk of a project

Budget reserveso Are linked to the identified risks of specific work packages

Management reserveso Are large funds to be used to cover major unforeseen

risks (e.g., change in project scope) of the total project

Time Buffers Amounts of time used to compensate for unplanned

delays in the project schedule

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Contingency Fund Estimate (000s)

TABLE 7.1

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Managing Risk (cont’d) Step 4: Risk Response Control

Risk controlo Execution of the risk response strategy

o Monitoring of triggering events

o Initiating contingency plans

o Watching for new risks

Establishing a Change Management Systemo Monitoring, tracking, and reporting risk

o Fostering an open organization environment

o Repeating risk identification/assessment exercises

o Assigning and documenting responsibility for managing risk