Strategic Role of Project Management

Strategic Role of Project Management in EPC BusinessContentsExecutive SummaryA. Project, Programme and Porfolio ManagementB. Strategic Role of Programme and Project ManagementC. Role of Project Management Office

D. Project Management Processes

E. Conclusion

F. References

AppendixExecutive SummaryA. Project, Programme and Porfolio ManagementDifference between operations and projects

Projects are a part of overall business strategies of an organization. Projects can be taken by anyone in an organization. However the common objectives in all projects undertaken across an enterprise are its alignment with the strategic objectives of an enterprise. In order to manage projects we need to evolve dynamic set of rules and regulations which is called Project Management.

Project is an endeavour in which human, financial and material resources are organized in a novel way to undertake a unique scope of work of a given specification, within constraints of cost and time, so as to achieve beneficial change defined by quantitative and qualitative objectives. A project is a temporary endeavor, having a defined beginning and end (usually constrained by date, but can be by funding or deliverables), undertaken to meet particular goals and objectives, usually to bring about beneficial change or added value. The temporary nature of projects stands in contrast to business as usual (or operations), which are repetitive, permanent or semi-permanent functional work to produce products or services. In practice, the management of these two systems is often found to be quite different, and as such requires the development of distinct technical skills and the adoption of separate management.

Project Life Cycle

Project management is the discipline of planning, organizing, and managing resources to bring about the successful completion of specific project goals and objectives. The primary challenge of project management is to achieve all of the project goals and objectives while honoring the preconceived project constraints. Typical constraints are scope, time, and budget.

The above five functions form the basis of any project management activity. The scope and the organization are the essential functions of project management. The remaining three - time, quality and cost are the constraints under which the project is to be executed and managed.Project management provides the 'single point of integrative responsibility' needed to ensure that everything on the project is managed effectively to ensure successful project completion and delivery.Program Management

A programme is a set of related projects and organisational changes put in place to achieve a strategic goal. A programme is a series of specific, interrelated projects and additional tasks which together achieve a number of objectives within overall strategy or strategic goal. It articulates the organizations business strategy, which is required to be implemented through projects.Programme Management provides the framework for implementing strategies and initiatives. It requires means and resources such as : Central Programme Controller Change Manager Programme Director Programme Management Methodology Techniques, Tools and Procedures Programme Manager Programme office Programme steering committeeBenefits of Program Management - The elimination of risk arising from interfaces between the projects

- The successful completion of individual projects through coherent prioritization and optimization of resources.

A reduction in management effort

Portfolio Management:

A Portfolio is a set of projects and/or programmes which are not necessarily related to each other, but are brought together for the sake of control, co ordination and optimisation. Portfolio Management of projects and/or programmes cover the prioritisation of projects and/or programmes within an organization.

B. Strategic Role of Programme and Project Management

The Evolution of Strategic Project Management

Project management began as a tactical tool to facilitate the execution of individual projects and programs, such as building a new facility, installing new hardware or implementing a new software initiative.

Organizations now use project management as a tactical tool to execute projects. Projects are essential to the growth and survival of organizations today. They create value in the form of improved business processes, are indispensable in the development of new products and services and make it easier for companies to respond to changes in the environment, competition and the marketplace. Often changing business needs can be satisfied only through IT solutions, which require projects to implement.

Strategic Role of Programme and Project Management

Project management has emerged as a strong discipline practiced by highly trained, certified professionals as organizations have come to realize they cannot stay in business if they cannot manage their projects. However, many companies even in EPC are still limiting the application of project management to the tactical level. It is vital to the very survival of the enterprise to ensure products are designed, created and delivered to internal and external customers efficiently and effectively. In addition, organizations recognize project management is a critical strategic tool. They practice project portfolio management to select, manage and support a portfolio of projects that have the best chance of moving the enterprise forward, keeping it vibrant in the marketplace and returning maximum shareholder value. As departments and divisions compete for scarce financial and human resources, strategic project portfolio management provides the rational decision framework necessary to make the right project investment decisions that enable organizations to compete and win in the global economy.

This panoply of competitive advantage, strategic capabilities, and tacit knowledge management constitute the new lens through which organization like L&T should envisage Strategic Project Management. Many organizations that have transformed their project management capability into a strategic asset. For those organizations Project Management has become a source of superior performance, the knowledge management process diverges from the

rule bound approach typical of much project management. In such organizations, two features as key: the first is having senior project leaders who display a willingness to bend the rules and on occasion take maverick action to get things done. They are particularly good at managing relationships across organizational functions and boundaries to break through organization inertia and bureaucracy.

Basics of Project Portfolio Management

Portfolio management is the centralized management of one or more portfolios, an approach to achieving strategic goals by selecting, prioritizing, assessing, and managing projects, programs, and other related work based upon their alignment and contribution to the organizations strategies and objectives. Portfolio management combines

(a) the organizations focus of ensuring that projects selected for investment meet the portfolio strategy with

(b) the project management focus of delivering projects effectively and within their planned contribution to the portfolio.

The steps of portfolio project management are applicable to any enterprise: Assess the merits of the organizations various proposed projects, weigh them against each other and select and support those projects whose execution will deliver the greatest value to the bottom line. The drivers of a portfolio of projects are:

1. Where the company wants to go and what it needs to do to achieve the goal (e.g., improve its return on investment, increase shareholder value or gain market share).

2. Tactical concerns, such as improvement projects individual departments need to undertake in order to become more efficient or effective; e.g., cost reduction, staff reduction, getting to market faster.

3. Problems whose correction requires a project or program; e.g., lost data to support decisions, poor customer service, slow time to market.

4. The need for organizational change management initiatives that prepare people to move in the desired direction along with the organization.

The application of portfolio management permits the sharing of goals and the allocation of resources among these drivers so that projects and programs can achieve their strategic intent. PMIs Standard for Portfolio Management defines the following flow of control:

1. Strategic intent and prioritization provide direction for determining the financial resources that should be allocated to the portfolio.

2. The strategic intent is mapped onto a set of portfolio components (i.e., projects and programs) including their resource allocations. These components are managed according to the portfolio management principles outlined in this standard.

3. Each program corresponds to the delegated subset of the overall strategic intent, which it will deliver by means of the allocated resources.

4. Each project is defined by its contribution to the portfolios strategic intent, and can then be managed according to principles published by PMI.

Here is the basic process:

(a) Define the organizations overall strategic goals and objectives at the executive level;

(b) pass these goals to the portfolio management function;

(c) the portfolio manager selects, prioritizes and approves proposed portfolio components, ensuring that they are aligned to achieve the organizations goals; and

(d) the portfolio manager reviews the portfolio to ensure it is balanced (short-term versus long-term return, risk to benefit) and negotiates the contributions of relevant strategic stakeholders (e.g., executive management, operations, program management).

Once the portfolio manager authorizes a component, program or project, management takes control of the component and applies the correct management processes to make certain the work is performed effectively and efficiently. The responsible project or program managers monitor planned-to actual performance relating to time, budget, resources, quality and scope, and communicate consolidated information to portfolio management. To remain effective and aligned with organizational goals, the portfolio management function depends on updates from the strategic planning process regarding any strategic changes. This ensures any components no longer related to current goals can be discontinued rather than wasting resources. In return, the portfolio manager reports portfolio performance to the strategic planning process as it relates to achieving the organizations planned strategy.

Challenges and Solutions in Project Management

Economic pressures, such as cost-constraints or inability to raise prices without losing customers, often force organizations to focus on the tactical and leave little time to think strategically. Those new to the process of strategic project management may encounter challenges in the following areas.

1) Executive championship. Without buy-in from high-level decision-makers and their ability to give guidance and support to the portfolio manager, strategic project management will fail. Even in a strategic environment, portfolio managers sometimes succumb to the politics and temptations of selecting projects that are the pet projects of mid-level and lower-level managers. Even organizations that have established a formal Project Management Office need an executive champion, particularly when the office is understaffed.

2) Business acumen. A portfolio manager needs much more business acumen than a traditional project manager because he or she has to decide which projects are necessary in order to meet the organizations strategic objectives.

3) A solid project management process. Leadership may do an excellent job of creating a strategic portfolio of projects and setting goals and ground rules. But if the actual practitioners the project managers and their teams are in a just-do-it mode or are inefficient or ineffective in managing their projects, all the strategic work is for naught. Thats why strategy at the highest levels has to be paired with a consistent, repeatable process that ensures that practitioners at the project level are consistent and efficient. A repeatable approach is the strong foundation that ensures that each project is contributing to the value that was anticipated on time and on budget within certain permissible variances. Training and certification of project management staff may be a wise investment. A well-respected mid-tier consulting company, for example, has not learned how to transfer its strategic focus into tactical projects. As a result it is always in reactionary mode, changing direction and reshuffling project teams. The organization is still operating in the old strategic planning mode rather than using project management as a strategic tool.

4) Timeframes and budgets. Executing projects efficiently and effectively across the board depends on honest and realistic timeframes and budgets, so that projects are not set up for failure from the start.

5) Requirements analysis. Portfolio managers need skill in gathering accurate requirements, analyzing them and managing them properly throughout a projects implementation to ensure a value added outcome that improves an organizations bottom line. As a project proceeds, someone must keep an eye on value and scrutinize costs in comparison with benefits to ensure the project remains sound. Again, training in business analysis for portfolio and project managers may be necessary.

6) Stay the course. One of the most common mistakes leading to project failure is not staying the course. Even organizations that get off to the right start by establishing a strategic portfolio of projects and giving marching orders to management, often toss the entire strategy out the window as soon as anything goes wrong. They simply return to a reactive, just-do-it mode. It takes a great deal of business acumen and persistence to stay the course. Set the vision and strategy, and then leave it up to the portfolio manager to manage the projects for the best business value.

However, while being reactive can throw off the entire portfolio, the portfolio manager and executive champion also need to be flexible to adjust the portfolio as project risk becomes too high, new opportunities arise, change occurs in the marketplace or when a serious problem arises whose correction

depends on a new project not previously represented in the portfolio. For example, when two Midwest banks merged about four years ago, the strategic portfolio to implement the merger consisted of 50 high profile projects. Not only were these projects competing for resources, they had to be carefully prioritized to satisfy the needs of stockholders, regulators and customers. Wall Street expected the merger to produce financial gain, cost reduction and elimination of duplication and would have downgraded the banks stock had the merger not gone smoothly. The process also had to be seamless for the sake of the customers of 300 branches. As these projects evolved and new issues arose, it became necessary to redesign the portfolio and reprioritize it to keep projects aligned with the tactical and strategic needs of all the stakeholders. A powerful tool to get started with project portfolio management is a facilitated planning session. A trained external facilitator meets with key individuals to facilitate and outline the process. They layout goals, risks and issues on the table, assemble the portfolio and establish the strategic project management process. It is best when the facilitator comes from outside the company in order to avoid bias and politics in leading the team through the process.

C. Role of Project Management Office (PMO)

The Project Management Office in a business or professional enterprise is the department or group that defines and maintains the standards of process, generally related to project management, within the organization. The PMO strives to standardize and introduce economies of repetition in the execution of projects. The PMO is the source of documentation, guidance and metrics on the practice of project management and execution.

A good PMO will base project management principles on accepted, industry standard methodologies .Increasingly influential industry certification programs such as ISO9000 and the Malcolm Baldrige National Quality Award (MBNQA) as well as government regulatory requirements such as Sarbanes-Oxley have propelled organizations to standardize processes. Organizations like L&T need to define, borrow and collect best practices in process and project management and need to increase assigning the PMO to exert overall influence and evolution of thought to continual organizational improvement.

90% of projects do not meet time/cost/quality targets. Only 9% of large, 16% of medium and 28% of small company projects were completed on time, within budget and delivered measurable business and stakeholder benefits. [Standish Group Chaos Report, 1995] There are many reasons for such failures. As per a KPMG survey of 252 organizations, technology is not the most critical factor. Inadequate project management implementation constitutes 32% of project failures, lack of communication constitutes 20% and unfamiliarity with scope and complexity constitutes 17%. Accordingly 69% of project failures are due to lack and/or improper implementation of project management methodologies.

PMO can be one of three types from an organizational exposure perspective:

Enterprise PMO

Organizational (departmental) PMO

Specialpurpose PMO.

The renowned Project Management Institute (PMI) Program Management Office Significant Interest Working Group (PMOSIG), views the PMO as a strategic driver for organizational excellence and seeks to enhance the practices of execution management, organizational governance, and strategic change leadership.Key Functions of the PMO

Project Portfolio Management Support

Prioritization and operations planning/forecasting

Project Information Integrity

Project Management Training and Mentoring

Resource Management Gaps, Recruiting, & Skills Competency

Leadership - Key Projects

Project Management Processes & Methodology

PM Metrics/Reporting

Project Management Tools

PMI or Company Specific PM Certification

Just-in-time support to project needs

Project Startup Assistance

Proposal Support

Risk Assessments

Project Change Management Support

Project Recoveries/Rescues

Project Assessments

The Benefits of the PMO for the Organization

Providing the Management Team with current project information to measure to strategic initiatives.

Identifying Bottlenecks for immediate corrective action.

Identifying excess project capital budget that can be reapplied to other critical projects.

Enhancing confidence and skill level of among fellow project managers throughout the organization.

D. Project Management ProcessesFor successful project management implementation, there are some key project management processes. Each project process describes the procedures one would apply as a Project Manager, to manage key elements of the project, e.g. Risk Management Process will tell you how to identify, review, mitigate and monitor project risks more effectively. It also describes the roles and responsibilities of each team member, when taking part in project risk management.

The project management processes interrelated with the Project Management phases during the entire project management cycle. Processes can be divided into two types :1. Enabling processes2. Facilitating Processes

Enabling processes are : 1. Scope Management

2. Schedule Management

3. Budget Management

4. Quality Management

Depending on the scope, large, complex projects will require a more rigorous application of project management processes than small, noncomplex projects. The Project Manager assesses the project characteristics to determine how to customize the processes for a specific project and determine which project management processes will be required. The effort to customize the project is reflected in the Project Management Plan.

Project Management Processes are overlapping activities that occur at varying levels of intensity throughout each phase of the project. A process is defined as a set of activities that must be performed to achieve a goal, in this case the project goalThe detail description of Project Processes are as below:1. Scope Management

Includes the processes involved in defining and controlling what is or is not included in the project; required to complete the project successfully. Scope is the way to describe the boundaries of the project. It defines what the project will deliver and what it will not deliver. This process ensures that the project has identified the goals and objectives and those have been documented and that each objective has a well defined set of indicators to monitor their progress.2. Schedule ManagementThis process includes the actions required to ensure the timely completion of the project. Schedule management is the development of a project schedule that contains all project activities, the project schedule is a communication tool that informs project stakeholders the status of the project and gives project team members information, in the form of graphs and charts, as to when each activity must begin and end.

3. Budget Management

Budget management processes are required to ensure the project is completed within the approved budget. This is the area that receives a lot of scrutiny during and after the project is completed. The projects ability to manage the financial resources obtained by the organization will be a measure of the organizations probity, not only in compliance with donors requirements but also a measure of its efficiency. Risks in this area have the highest impact to the project, the organization and to the beneficiaries; inadequate budget management can lead to misappropriations of funds, improper assignment of expenses and losses that the organization may have to cover using its limited funds.

4. Quality managementQuality management is the process to ensure that the project will satisfy the needs of the beneficiaries. Quality is defined as a commitment to deliver the project outputs and meet the expectations of the beneficiaries, which means that quality is ultimately defined by the beneficiary.

5. Team Management

During the definition of the project activities a list is created that identifies the skills needed by the project. These range from highly technical to administrative and support functions. The project team is after all the team responsible for the project and the project needs to be clear in acquiring the skills it needs.

Team management includes the processes required to make the most effective use of the people involved in the project. The first step is identifying the roles, responsibilities and reporting relationships. The second step is getting the people that will be assigned to the project. These can come from within the organization or hired through the Human Resource function of the organizational. This is where the project manager needs to be heavily involved and participate in all interviews with possible candidates; the success of the project will depend on the quality and commitment of the team.

6. Stakeholder Management

Stakeholder management is one of the areas that receive the least amount of thought and planning in development projects, this is due to the limited understanding and agreement on who are the stakeholders and their role in the project.

Stakeholders are all the people who have an interest in the project and they are the most critical element for the success of the project. They include donors, beneficiaries, local government, partner organizations and anyone who will be impacted by the project. Each project has a different list of stakeholders, a range that can include the local press, local organizations, institutions and even watchdog organizations

Managing stakeholders is not an easy task; the projects objective is to improve the way the relationships between the project and the stakeholders are managed, this is achieved by taking a proactive approach that builds trust.

7. Information Management

Includes the processes required to ensure timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information. 80% of a project managers time is spent communicating via reports, email, telephone, meetings and presentations. The first step of the plan is to define the informations needs of the stakeholders, determine when they need it, how the information will be distributed and how to evaluate the relevance and effectiveness of the information.

8. Risk ManagementRisk Management includes the processes concerned with identifying, analyzing, and responding to project risk. Risk in projects is defined as something that may happen and if it does, will have an adverse impact on the project. There are four stages to risk management planning, they are: risk identification, risk analysis and quantification, risk response, risk monitoring and control.

Risk identification deals with finding all possible risks that may impact the project, it involves identifying potential risks and documenting their characteristics. The project team members identify the potential risks using their own knowledge of the project, its environment, similar projects done in the past. Risk identification results in a deliverable, the project risk list

9. Contract ManagementContract Management includes the processes required to acquire goods and services needed by the project from third parties, for most projects the procurement process is usually managed by a support or administrative function of the organizations. The role of the project is to supply, as detailed as possible, all the procurement requirements including all the technical specifications, quantity and the date when they will be needed; this is created in a project procurement plan.

Contract management consists of four steps; develop the resource plan, implement the plan, review and update the plan. The resource plan identifies the what, when and how many of the goods and services needed within the budgeted limits. It also identifies potential sources and the strategies that the project will use to procure; this is done in conjunction with the organizations procurement function

Work Processes identified for the Project Management Processes to be executed are: a. Role of Project and Program Management

b. Project Life Cycle

c. Project Organization

d. Project Initiation

e. Project Planning, Scheduling, Monitoring, Reporting and Control

f. Project Cost Monitoring and Control

g. Contract Management

h. Risk Management

i. Project Engineering Management

j. Supply Chain Management

k. Project Quality Management

l. Project Construction Management

m. Logistics and Transportation Management (LTM)

n. Human Resource Management

o. Project Communication

p. Project Financial Analysis

q. Taxation and Legal Aspects of Projects

r. Project Documentation

s. Project Close-out and Post-Project reviews

t. Project Learning and sharing

u. Managing Large Complex Projects

E. ConclusionProject Management has experienced an extraordinary growth in the last decade. The growth of the profession can be attributed to globalization and the unprecedented rate of change making transition complex and non-linear.

Modern project management is emerging as a separate discipline and is crucial today for enterprises to maintain a competitive edge specially in EPC business which is very competitive.

Project Management standards, processes, training and software are overwhelmingly rational and analytic. They seek to reduce uncertainty and risk and diminish the importance of the human factor. They do this by subjecting people to rules, procedures and systems which contain and stifle non-conformist, individualistic tendencies and which encourage systematic, standardised, human behaviour in pursuit of the execution of a common goal (project completion on time, within cost and to the quality laid down in the initial specification). Painting by numbers does not create great artists and when decisions can be based on a book of knowledge which is essentially a toolkit of procedures and rules, then there is no need for high level management, just a need for everyone to follow orders. Some organizations however, are prepared or fortunate enough to go further. They do not merely see project management as a tool or technique for executing pre-determined strategies or aligning organizational processes to strategic objectives. They create sustainable competitive advantage via project management through developing the scarce, firm specific resource of star project leaders and the tacit knowledge they help to create. These companies leverage their skills widely, and appreciate the value that these people bring through their judgement, experience, political and diplomacy as much as through their technical competence and assiduous following of procedures. They value highly the tacit knowledge gained from the management of complexity, and dealing with problems across functions and organization boundaries. Building a factory, installing a new manufacturing process, launching a new product, entering a new market, opening up an overseas site, implementing a joint venture, some of the typical areas where project management excels, involve a myriad of tasks and the coordination of a diverse range of activities, skills, people, organizations and resources.

The two great functions of management, differentiation whereby tasks are divided into bite sized chunks and integration whereby these tasks are then integrated - is the very stuff of project management. It provides a systematic methodology for differentiation and integration, ensuring that nothing is forgotten, that the whole picture is considered and serves as a guide to action. It allows managers to manage horizontally across the silos, thereby countering the negative impact of hierarchy and vertical information flows. Effective management of differentiation and integration is critical to trategic success because the core competence and competitive advantage of the corporation reside not products or services but in the management of the diverse technologies or knowledge and learning that underpin products and services. And these diverse technology and knowledge streams are no respecter of organizational boundaries. Where project management becomes strategic is in recognizing that the capabilities required to manage the network, the virtual organization and the frequently multi-functional, multi-locational, multi-cultural and multi-organizational activities involved in executing projects, are dependent on the personalcharacteristics and management experience of people, on the tacit knowledge gained through managing diverse projects as much as on formal structures, systems and procedures. SPM recognizes these general management and leadership skills as scarce, firm specific, and highly valuable. Hence it promotes them and the tacit knowledge which they engender and encapsulate as key drivers of sustainable competitive advantage That, combined with a landscape which privileges the potential competitive contribution of projects over the easier to calculate financial ones, constitute the defining features of a truly, Strategic `Project Management.F. ReferencesConstraints:

Time, Cost, Quality, Technical, Legal, environment etc

Inputs- Business need and requirement

Output: Project Deliverables, Products and /or services

Management of Projects

Mechanism People, techniques, tools, equipment, organisation

Scope

Time

Cost

Quality

Organisation

Facilitating processes are :

1. Team Management

2. Stakeholder Management

3. Information Management

4. Risk management

5. Contract Management