Lesson 1: The Nature of Project Management

Introduction

The concept of project management has been around from time immemorial.
Throughout recorded history, projects have been conceived, developed and
implemented without the aid of many of the sophisticated project management tools
and techniques that are prevalent today. The Pyramids of Egypt, the Great Wall of
China, the Amphitheatre at Rome are some examples of marvelous projects that have
been conceived and executed by the great civilizations of yesteryear. Although a
cognate discipline of "Project Management" has existed only since the 1960s, many of
the elements of effective project management must have been present from the earliest
times as the completion of so many outstanding works of architecture, construction,
engineering bear testimony. The common features in all of these great success stories
in project management are: extensive and meticulous planning, organization, control,
and effective use of resources. Hence, this entire course stresses the importance of
proper planning and control and the management of resources to achieve project
success. We will begin this course by first providing an overview of the field of project
management. Subsequent lessons will address the various aspects of planning, control,
and resource management.

Objectives

By the end of this lesson, you should be able to:

 Understand project management concepts and the nature of the discipline

called project management.
 Know the differences between project management and other business
processes.
 Explain the importance and features of project planning and control.
 Comprehend the importance of managing resources in projects.
 Know why projects need risk analysis and contingency planning.
 Identify the role of a project information system in project planning and
control.

Version 4 3.1.1
1.1 Key Features of Projects

We will begin this lesson by first discussing the key features of any project. Every
project:

 has a well-defined objective.

 is unique.
 is uncertain.
 spans organizational boundaries.
 has a life cycle.

Let's discuss each of these elements in some detail.

Every project has a well-defined objective.

In order to evaluate whether or not a project is a success, the objectives of the project
should be clearly defined. These objectives are usually stated in terms of the project
success criteria of cost, time or schedule and performance. For example, in the case of
event project management such as the Olympic Games, the predominant objectives are
time and performance.

Every project is unique.

Each project is unique in the sense that end results and requirements are different and
the project process itself cannot be completely standardized. Each project is a one-time
process that involves activities that are often temporary and unique to that project.

Every project is uncertain.

Every project is characterized by a certain degree of uncertainty due to the difficulty

involved in predicting the final project outcome. Resource constraints and availability,
new technology, and uniqueness of the project's product contribute to this uncertainty.

Every project spans organizational boundaries.

Accomplishing project goals requires multiple talents and skills from the various
functional areas of an organization. A project usually has a matrix organizational
structure that involves a collection of ad-hoc personnel, materials and facilities.

Every project has a life cycle.

The project process involves working through a series of phases or stages to

accomplish the project goal. The collection of these distinct phases of a project is
called the project life cycle.

Version 4 3.1.2
1.2 Project Environment

The environment in which the project is undertaken can be a primary determinant of

the project's final outcome. Projects, by their very existence, change the environment,
even if it is in a very small way. Projects aimed at inventive discovery or the
exploitation of new technology can have the most profound effect on our physical,
social, economic and political environment.

Projects to develop manufactured goods are influenced by the changing market for
those goods in an environment of increasing globalization and downward pressure on
prices. Management practices such as concurrent or simultaneous engineering have
been introduced as responses to those external pressures. The external environment is
not the only aspect to consider as all projects have an internal environment in which
they must exist. That internal environment encompasses all the factors of the
organization that impinge upon the project. These internal factors include the
organization's

 structure and procedures (the formal environment),

 culture and politics (the informal environment),
 corporate objectives,
 technological capabilities, and
 financial or economic strength.

All of these factors shape the project in terms of what is feasible in the organization
and how the project is conducted.

Reasons for the Evaluation of Project Management as a Discipline

The creation of the project as a distinct and separate process within an organization is
in response to the changes that have come about in current industrial undertakings, in
particular:

 increasing technical demands,

 increasing product complexity,
 increasing organizational complexity, and
 inter-company and the global nature of business activities.

The primary cause of these changes is the innovative nature of the project process.
This, in turn, has led to products with ever increasing technical demands and
increasingly complex organizations have been created to produce them. The fusion of
different strands of technology has allowed the creation of products that have
properties that were undreamed of a few decades ago, but product sophistication is not
the only factor in the increasing technical and organizational demands. In some cases,
the requirements for a successful product may be beyond those achievable with current

Version 4 3.1.3
 technology; hence, projects will have to be initiated in the future to develop newer
technology.

1.3 Differences between Project Processes and Other Business Processes

Project processes have some key characteristics that are different from other typical
business processes. First, projects are initiated to bring about change. When they are
implemented the change is often radical and alters the environment in some significant
way, e.g., a new factory is built, a new road is opened, or a new product is launched.
Where established business processes are involved, changes take place on a more
modest scale, slowly and in increments. When drastic changes are needed the natural
balance between objectives and resources will be disturbed. With established business
processes, the role of management is usually to maintain that balance between
objectives and resources and procedures.

Second, most projects are usually constrained by the dimensions of time, cost, and
performance--extremely critical factors. In the case of business processes, however,
these constraints may not be as critical.

Third, projects usually have one central objective for the principal sponsor but often
there are peripheral objectives held by other stakeholders in the project that can be in
conflict with that main objective. With established business processes, conflicting
issues are usually resolved by the time the process gets underway.

Fourth, like conflicting objectives, projects can also have conflicting constraints. For
example, the time of entry into a market with a new product may be a constraint on the
number of items expected to be sold but the level of expenditure demanded to achieve
a rapid development may be above the budgeted level. For the most part, this type of
conflict does not arise with an established business process as the capabilities and
constraints are well defined.

Fifth, projects are unique in the sense the resources are brought together for only as
long as the project demands them. This inevitably leads to a sense of impermanence
and hence the project team must always be focused on the project's completion.
Finally, project success is generally gauged by how effective the end result is with
respect to fulfilling the original objectives, rather than how efficiently the project
processes were executed. With established business processes the emphasis shifts to a
permanent organization. The demand for any process to perform as efficiently as
possible requires personnel to perform well in their allotted role to maintain a
successful operation, rather than being adaptable to changing situations.

Version 4 3.1.4
1.4 Importance and Elements of Project Planning

Project management is an extremely complex and multi-faceted discipline that is

continuing to evolve. Projects are initiated in response to rapid changes in technology,
the raising expectations in market-related performance goals, and the uncontrollable
environmental forces that we observe today. Traditional managerial approaches are
woefully inadequate to respond to these changes and the problems are further
aggravated by severe limitations on time and resources for which there are no easy
solutions. Therefore, a fundamental paradigm shift and a new way of thinking is
needed to meet these challenges. Modern project management methods are needed to
respond to these changes and to transform the organization. While there is no guarantee
of success, modern project management methods bring with them the discipline of
thought and an assortment of techniques that are needed to address these complex
issues.

Successful project management requires that the overall project goals are clearly
articulated. These goals then need to be translated into the short term objectives, plans,
schedules, and budgets needed to accomplish them. In short, meticulous planning is
needed to carry out every phase of the project life cycle. In order to ensure that plans
and schedules are carried out as intended and resources are managed properly,
adequate control mechanisms should be in place. As project success hinges on careful
planning, we will next examine the elements of project planning.

1.4.1 Project Objectives

The very first step in planning a project is defining an objective. All projects must have
a central objective; it is the fundamental reason for carrying out the project. It must be
clearly stated at the beginning and understood by all the participants. Ultimately it will
be how well that objective was fulfilled that determines the success or failure of the
project.

Version 4 3.1.5
 Figure 1.1 The Millennium Dome
Copyright ©2005 Volker Warncke, Germany

Project objectives vary widely and are dependent on what the project is and who is
initiating it. Commercial organizations usually look for some form of wealth creation
as the principal objective. This may be accomplished directly through the creation of
products or services that will return a profit or indirectly through the creation of
processes that will allow the business to perform more efficiently. Government
organizations are one of the largest instigators of some of the biggest and most
expensive projects, but the reasons are not usually for wealth creation but for the
benefit of the nation or society in general. Examples include major road construction
projects to improve transportation or defense equipment development for the nation's
security. The organizations that carry out the work on behalf of the government may,
however, regard a project's profits as their principal objective.

Where projects have been less than successful, one of the prime causes has been
unclear, conflicting, or frequently changing objectives. This has been true of projects in
the public sector, particularly where an implicit or explicit political objective exists.
The Millennium Dome in U.K. was a politically inspired project that was originally
intended to show off one thousand years of British achievement, while pointing to a
new and exciting future. However, sponsors, exhibitors, and politicians seemed unable
to agree on what exactly the objectives of the project were, and there were constant
changes in the direction. What no one seemed to understand was what the paying
public would be really interested in seeing.

Version 4 3.1.6
 Figure 1.2 An Image of the Nimrod AEW 3
© Crown Copyright/MOD. Reproduced with the permission of the Controller
of Her Majesty’s Stationery Office

Changes in objectives while the project is underway can have just as devastating an
effect. The BAe/GEC Nimrod AEW 3 project is a prime example. This project,
sponsored by the British government, was a joint venture between the British
Aerospace and Marconi Avionics and involved building and delivering 11 Nimrod
AEW 3 aircrafts. Having started as a program that employed British technology, the
program went through many changes, many of which were introduced by the customer,
the British government. After spending more than 900 million pounds sterling, it was
finally declared a failure.

Conflicting or incompatible objectives are an unfortunate but common feature of many

projects and can arise from a number of causes:

 Lack of proper understanding of the issues involved

 Unrealistic expectations
 A variety of stakeholders in the project with differing expectations

A failure to grasp and understand all the issues involved can lead to a situation where it
is not recognized that stated objectives are simply at odds with one another.

Version 4 3.1.7
 Figure 1.3 British Airways' London Eye
Copyright ©2003 Judi Workman. Used with Permission.

Project management, since its inception, has recognized that project success is defined
by the three prime elements of cost, time, and performance. Despite the existence of
budgetary processes, design modeling systems and project simulation tools, projects
are still started with unrealistic expectations in terms of what can be achieved, with
what resources, and in what time frame. The massive cost growth and time delays that
have occurred on some projects do not necessarily mean that projects were carried out
incompetently. The reason is that the project expectations were unrealistic from the
very beginning. It is a fundamental tenet of project management that if quality
(performance) is of paramount importance, the objectives of cost and time must be
subordinate. The simple fact is that it is impossible to carry out an innovative,
advanced technology project in a short time frame with a shoestring budget.

The Millennium Dome represents a project with many stakeholders, each with different
expectations. It is hardly surprising that their often conflicting objectives proved hard
to reconcile and the project was branded at its opening as a fiasco. The public seemed
unsure if it was an exhibition, an experience or a theme park and what its real purpose
was. Contrast this with the London Eye giant ferris wheel--a project simple in concept,
with daring but practical engineering, having a single sponsor (British Airways) and
guaranteed to give everyone a thrill. Despite its late opening and significant cost
overrun, it is sure to be a success and may be as much of a landmark as the Eiffel
Tower.

Version 4 3.1.8
1.4.2 Requirements or Scope Definition

Requirements definition is about identifying precisely what it is that the project should
be delivering, whether it be a physical facility, a new product, or a new service. As an
example, the requirement of a project may be to facilitate the conveyance of people
and goods between two geographically distant points. Additional requirements may be
that the people and goods should be protected from the elements, should enjoy the
experience, and that the conveyance should not be prohibitively expensive. One may
immediately come to the conclusion that the solution to these requirements is to build a
road or railway between the two points in question--but this solution is hardly likely to
satisfy all the requirements of all the stakeholders. Therefore all the requirements
should be identified and a process should be devised that balances all the requirements
to identify and define those that best reflect the needs of those receiving or using the
project deliverables. Hence clearly understanding the requirements of the project
deliverable is fundamental to providing a solution for which the project was initiated.
The requirements must therefore be defined and formalized as early as possible in the
project life cycle--certainly before the final design concept is agreed upon by the
people providing the money to carry out the project. It is also important to realize that
defining the requirements at the very early stages of a project is not the end of the
process. The requirements are likely to change during the life of the project,
particularly in projects involving high technology deliverables such as IT systems for
business improvement. The validity of the requirements as defined early on must be
checked at regular intervals throughout the project life cycle. This may be done at the
"stage gate" reviews, undertaken typically at the end of the concept design stage and
the end of the detailed design stage of the project (although this can vary significantly
from project to project). The management of the project requirements definition in this
way ensures that the deliverables are unambiguous and clearly understood by the
project team.

These elements of the project plan--namely, project objectives, requirements, and

scope definition--that were discussed in the preceding sections are dealt with in great
depth in Lesson 5.

Version 4 3.1.9
1.4.3 Work Breakdown Structure (WBS)

Once the project objectives, requirements, and scope have been defined, the next phase
of project planning is to disaggregate the overall project into manageable work
elements in a hierarchical manner. This process is called the development of the work
breakdown structure or WBS, a vital phase in the project life cycle. You will learn
about this critical element of the planning process in Lesson 5.

1.4.4 Project Network

The information provided by the WBS sets the stage for the next step in project
planning--developing the project network. The network shows the project activities and
the sequence in which they should be completed. It shows the interdependencies
among the project activities, the critical path--the longest path in the network, and is a
graphical flow chart of the project job plan. It provides an estimate of the project
duration time and a mechanism for allocating and scheduling resources. The network is
the framework on which the project information system is designed to gather
information on the project success criteria of cost, time, and performance. Lessons 4
and 6 are devoted to network analysis.

1.5 Project Control

As projects are unique, it is virtually impossible to anticipate or foresee all the

problems or changes in the project. In spite of this uncertainty, projects have to be
monitored and controlled to minimize deviations from plan, regulate the flow of work,
and to steer the project to meet the pre-established objectives of cost, time, and
performance. Even though the prerequisite for effective project control is a project
plan, the two are inextricably linked and are geared to achieve common goals
(Nicholas, 2001):

 Planning focuses on establishing goals and directions; control steers project

work towards those goals.
 Planning facilitates resource allocation; control ensures effective use of those
resources.
 Planning anticipates problems; control corrects them.
 Planning motivates project participants to achieve goals; control rewards
achievement of goals.

The project control process and the techniques for project control are discussed in
lessons 3, 9, and 10.

Version 4 3.1.10
1.6 Managing Resources in Projects

Resources such as labor, equipment, materials, working capital, and so on are required
to perform project activities. While some resources, such as air and water, are available
in abundance, most resources commonly needed in project work are finite and often
scarce. Due to this constraint of resource scarcity, project activities may not start on
time and may have to be rescheduled. Also, in cases where the same resources are
needed in multiple activities or for multiple projects, project schedules are largely
determined by when resources will be freed from the higher priority activities or higher
priority projects. The undesirable consequences of such resource constraints is the loss
of flexibility and, ultimately, delay in project completion time. Clearly, proper
allocation, scheduling, and management of resources are vital for achieving project
objectives. Lesson 8 is devoted to the topic of effective use and management of
resources.

1.7 Managing Risks in Projects

All projects are risky in the sense that things may not turn out as planned. There are a
number of reasons that projects are fraught with risks. First, the very uniqueness of a
project makes it difficult to anticipate problems or what can go wrong in achieving the
desired project outcomes. Second, there may be uncontrollable factors or events that
may derail a project for which project managers may not have an adequate or timely
response. The terrorist attack on the Twin Towers in New York on September 11,
2004, is an example of such an event. Project risk can be defined as the probability or
chance that an undesirable event will occur and the consequences of such an event on
project outcomes. Obviously, no amount prior planning can anticipate or completely
overcome such risky events and their negative impact. However, to the extent that a
project manager seriously considers what can go wrong in a project, in and of itself,
has the potential to minimize the negative impact of risky events. Therefore, every
project should have a formal framework and mechanism to manage the potential risks
that can during a project life cycle.

"Risk Management attempts to recognize and manage potential and unforeseen trouble
spots that may occur when the project is implemented. Risk management identifies as
many risk events as possible (what can go wrong), minimizes their impact (what can be
done about that event before the project begins, manages responses to those events that
do materialize (contingency plans), and provides contingency funds to cover risk
events that actually materialize" (Gray, C. F., and Larson, E. W. (2003). Project
Management: The Managerial Process. 2nd. Ed. Boston, MA: McGraw-Hill, p. 207).
Lesson 11 examines the topic of risk management in projects.

Version 4 3.1.11
1.8 Project Management Information Systems for Planning and Control

The viability of the formal methods of project planning and control that are discussed
in this course depends on how well they are implemented. While the formal methods of
planning and control may not require additional data or information, what they do
require is a framework or a system for collecting, organizing, storing, processing and
disseminating that information. Such a system is referred to as the project information
system. Given the availability of high speed computers and the myriad information
systems that accompany them, project managers need to be proficient in selecting and
implementing an information system that will best serve the needs of project planning
and control (Nicholas, 2001).

We have now reached the end of Lesson 1. By now, you should have a clearer
understanding of the topics and issues we will be covering in this course. You should
also have completed your reading assignment as specified on your syllabus. At this
time, return to your syllabus and complete any activities for this lesson. In the next
lesson, we will take a look at project strategy and examine how it fits in with larger,
corporate strategy.

References

Nicholas, J. M. (2001). Project Management for Business and Technology. 2nd ed.
Upper Saddle River, NJ: Prentice-Hall.

Version 4 3.1.12