ProjectManagementProcessGroups

Initiating 4.Integration
4.1Develop ProjectCharter j Ch

Planning
4.2DevelopProject Management Plan l

Executing
4.3Direct&Manage Project Execution i

Monitoring&Control.
4.4Monitor&ControlProject Work W k 4.5 PerformIntegrated ChangeControl 5.4VerifyScope 5.5ControlScope 6.6ControlSchedule

Closing
4.6CloseProject or Phase h

5.Scope 6.Time

5.1CollectRequirements 5.2DefineScope 5.3CreateWBS 6.1DefineActivities 6.2 SequenceActivities 6.3EstimateActivity Resources 6.4EstimateActivity Durations 6.5 DevelopSchedule 7.1EstimateCosts 7.2Determine Budget 8.1PlanQuality 9.1DevelopHuman ResourcesPlan Resources Plan 10.1 Identify Stakeholders 10.2PlanCommunications 8.2Perform QualityAssurance 9.2 AcquireProjectTeam 9.3DevelopProjectTeam 9 3 Develop Project Team 9.4ManageProjectTeam 10.3DistributeInformation 10.4ManageStakeholders Expectations

Knowle edgeAreas

7.Cost 8.Quality 9.Human Resources 10.Communication 11.Risk

7.3ControlCosts 8.3Perform QualityControl

3 3 4

10.5ReportPerformance

5
11.6 Monitor&ControlRisks

11.1 PlanRisk Management 11.2IdentifyRisks 11.3PerformQualitative RiskAnalysis 11.4PerformQuantitative RiskAnalysis 11.5PlanRiskResponses 12.1PlanProcurements 12.2ConductProcurements

12. Procurement

12.3Administer Procurements

12.4Close Procurements

20

10

42

MaslowsHierarchyofNeeds& HerzbergsMotivationHygieneTheory

ExpectancyTheory Theexpectationofa positiveoutcomedrivesmotivation AchievementTheory Peopleare motivatedbytheneedofthreethings: i db h d f h hi Achievement Power Affiliation

TheoryX: Managerswhoarethe proponentsofTheoryXwillALWAYS assumetheirworkersarelazyand arereluctanttowardsworking.Thus managersneedtocontinuously enforce,monitorandcracktheir whipontheseworkers. Inthemiddle:ContingencyTheory TheoryY: managersarethe completeopposite.Theywillalways assumethebestoutoftheir employees,seeingthesepeopleas independent,reliableandself drivenemployees.Encouragement andmotivationisthewaytogo.

PowerofLeaders: Power of Leaders: PunishmentPower ExpertPower LegitimatePower Referent Power ReferentPower

Project Management Institute Code of Ethics and Professional Conduct

CHAPTER 1. VISION AND APPLICABILITY 1.1 Vision and Purpose As practitioners of project management, we are committed to doing what is right and honorable. We set high standards for ourselves and we aspire to meet these standards in all aspects of our lives at work, at home and in service to our profession livesat work home, profession. This Code of Ethics and Professional Conduct describes the expectations that we have of ourselves and our fellow practitioners in the global project management community. It articulates the ideals to which we aspire as well as the behaviors that are mandatory in our professional and volunteer roles. The purpose of this Code is to instill confidence in the project management profession and to help an individual become a better practitioner. We do j g this by establishing a profession-wide understanding of appropriate behavior. We believe that the credibility and reputation of the project management profession is shaped by the collective conduct of individual practitioners. We believe that we can advance our profession, both individually and collectively, by embracing this Code of Ethics and Professional Conduct. We also believe that this Code will assist us in making wise decisions, particularly when faced with difficult situations where we may be asked to compromise our integrity or our values. Our hope that this Code of Ethics and Professional Conduct will serve as a catalyst for others to study, deliberate, and write about ethics and values. Further, we hope that this Code will ultimately be used to build upon and evolve our profession. 1.2 Persons to Whom the Code Applies The Code of Ethics and Professional Conduct applies to: 1.2.1 1 2 1 All PMI members b 1.2.2 Individuals who are not members of PMI but meet one or more of the following criteria: .1 Non-members who hold a PMI certification .2 Non-members who apply to commence a PMI certification process .3 Non-members who serve PMI in a volunteer capacity.
Comment: Those holding a Project Management Institute (PMI) credential (whether members or not) were previously held accountable to the Project Management Professional (PMP) or Certified Associate in Project Management (CAPM) Code of Professional Conduct and continue to be held accountable to the PMI Code of Ethics and Professional Conduct. In the past, PMI also had separate ethics standards for members and for credentialed individuals. Stakeholders who contributed input to develop this Code concluded that having multiple codes was undesirable and that everyone should be held to one high standard. Therefore, this Code is applicable to both PMI members and individuals who have applied for or received a credential from PMI, regardless of their membership in PMI.

1.3 Structure of the Code The Code of Ethics and Professional Conduct is divided into sections that contain standards of conduct which are aligned with the four values that were identified as most important to the project management community. Some sections of this Code include comments. Comments are not mandatory parts of the Code, but provide examples and other clarification. Finally, a glossary can be found at the end of the standard. The glossary defines words and phrases used in the Code. For convenience, those terms defined in the glossary are underlined in the text of the Code. 1.4 Values that Support this Code Practitioners from the global project management community were asked to identify the values that formed the basis of their decision making and guided their actions. The values that the global project management community defined as most important were: responsibility, respect, fairness, and honesty. This Code affirms these four values as its foundation. 1.5 Aspirational and Mandatory Conduct Each section of the Code of Ethics and Professional Conduct includes both aspirational standards and mandatory standards. The aspirational standards describe the conduct that we strive to uphold as practitioners. Although adherence to the aspirational standards is not easily measured, conducting ourselves in accordance with these is an expectation that we have of ourselves as professionalsit is not optional. The mandatory standards establish firm requirements, and in some cases, limit or prohibit practitioner behavior. Practitioners who do not conduct themselves in accordance with these standards will be subject to disciplinary procedures before PMIs Ethics Review Committee. Comment: The conduct covered under the aspirational standards and conduct covered under the mandatory standards are not mutually exclusive; that is, one specific act or omission could violate both aspirational and mandatory standards.

CHAPTER2.RESPONSIBILITY 2.1DescriptionofResponsibility Responsibilityisourdutytotakeownershipforthedecisionswemakeorfailtomake,theactionswetakeorfailtotake,and theconsequencesthatresult. 2.2Responsibility:Aspirational Standards Aspractitioners intheglobalprojectmanagementcommunity: 2.2.1Wemakedecisionsandtakeactionsbasedonthebestinterestsofsociety,publicsafety,andtheenvironment. 2.2.2Weacceptonlythoseassignmentsthatareconsistentwithourbackground,experience,skills,andqualifications. 2 2 2 We accept only those assignments that are consistent with our background experience skills and qualifications Comment:Wheredevelopmentalorstretchassignmentsarebeingconsidered,weensurethatkeystakeholdersreceivetimelyandcompleteinformation regardingthegapsinourqualificationssothattheymaymakeinformeddecisionsregardingoursuitabilityforaparticularassignment. Inthecaseofacontractingarrangement,weonlybidonworkthatourorganizationisqualifiedtoperformandweassignonlyqualifiedindividualstoperform thework. 2.2.3Wefulfillthecommitmentsthatweundertake wedowhatwesaywewilldo. 2.2.4Whenwemakeerrorsoromissions,wetakeownershipandmakecorrectionspromptly.Whenwediscovererrorsoromissions causedbyothers,we communicatethemtotheappropriatebodyassoontheyarediscovered.Weacceptaccountabilityforanyissuesresultingfromour errorsoromissionsandany resultingconsequences. 2.2.5Weprotectproprietaryorconfidentialinformationthathasbeenentrustedtous. 2.2.6WeupholdthisCodeandholdeachotheraccountabletoit. 2.3Responsibility:MandatoryStandards Aspractitioners intheglobalprojectmanagementcommunity,werequirethefollowingofourselvesandourfellowpractitioners: RegulationsandLegalRequirements 2.3.1Weinformourselvesandupholdthepolicies,rules,regulationsandlawsthatgovernourwork,professional,andvolunteeractivities. 2.3.1 We inform ourselves and uphold the policies, rules, regulations and laws that govern our work, professional, and volunteer activities. 2.3.2Wereportunethicalorillegalconducttoappropriatemanagementand,ifnecessary,tothoseaffectedbytheconduct. Comment:Theseprovisionshaveseveralimplications.Specifically,wedonotengageinanyillegalbehavior,includingbutnotlimited to:theft,fraud,corruption, embezzlement,orbribery.Further,wedonottakeorabusethepropertyofothers,includingintellectualproperty,nordowe engageinslanderorlibel.Infocus groupsconductedwithpractitionersaroundtheglobe,thesetypesofillegalbehaviorswerementionedasbeingproblematic. Aspractitionersandrepresentativesofourprofession,wedonotcondoneorassistothersinengaginginillegalbehavior.Wereportanyillegalorunethical conduct.Reportingisnoteasyandwerecognizethatitmayhavenegativeconsequences.Sincerecentcorporatescandals,many organizationshaveadopted policiestoprotectemployeeswhorevealthetruthaboutillegalorunethicalactivities.Somegovernmentshavealsoadoptedlegislationtoprotectemployees whocomeforwardwiththetruth.

EthicsComplaints 2.3.3WebringviolationsofthisCodetotheattentionoftheappropriatebodyforresolution. 2.3.4Weonlyfileethicscomplaintswhentheyaresubstantiatedbyfacts. Comment:Theseprovisionshaveseveralimplications.WecooperatewithPMIconcerningethicsviolationsandthecollectionofrelatedinformationwhetherwe areacomplainantorarespondent.Wealsoabstainfromaccusingothersofethicalmisconductwhenwedonothaveallthefacts. Further,wepursuedisciplinary actionagainstindividualswhoknowinglymakefalseallegationsagainstothers. 2.3.5Wepursuedisciplinaryactionagainstanindividualwhoretaliatesagainstapersonraisingethicsconcerns.

CHAPTER3.RESPECT 3.1DescriptionofRespect Respectisourdutytoshowahighregardforourselves,others,andtheresourcesentrustedtous.Resourcesentrustedtous mayinclude people,money, reputation,thesafetyofothers,andnaturalorenvironmentalresources. p , y , Anenvironmentofrespectengenderstrust,confidence,andperformanceexcellencebyfosteringmutualcooperation anenvironmentwherediverse perspectivesandviewsareencouragedandvalued. 3.2Respect:Aspirational Standards Aspractitioners i h l b l A ii intheglobalprojectmanagementcommunity: j i 3.2.1Weinformourselvesaboutthenormsandcustomsofothersandavoidengaginginbehaviorstheymightconsiderdisrespectful. 3.2.2Welistentootherspointsofview,seekingtounderstandthem. 3.2.3Weapproachdirectlythosepersonswithwhomwehaveaconflictordisagreement. 3.2.4Weconductourselvesinaprofessionalmanner,evenwhenitisnotreciprocated. Comment: Animplicationoftheseprovisionsisthat weavoidengagingingossipandavoidmakingnegativeremarkstoundermineanotherpersonsreputation. WealsohaveadutyunderthisCodetoconfrontotherswhoengageinthesetypesofbehaviors. We also have a duty under this Code to confront others who engage in these types of behaviors. 3.3Respect:MandatoryStandards Aspractitioners intheglobalprojectmanagementcommunity,werequirethefollowingofourselvesandourfellowpractitioners: 3.3.1Wenegotiateingoodfaith. 3.3.2Wedonotexercisethepowerofourexpertiseorpositiontoinfluencethedecisionsoractionsofothersinordertobenefitpersonallyattheirexpense. 3.3.3Wedonotactinanabusivemanner towardothers. 3.3.4Werespectthepropertyrightsofothers.

CHAPTER4.FAIRNESS 4.1DescriptionofFairness Fairnessisourdutytomakedecisionsandactimpartiallyandobjectively.Ourconductmustbefreefromcompetingselfinterest,prejudice,andfavoritism. 4.2Fairness:Aspirational Standards Aspractitioners intheglobalprojectmanagementcommunity: 4.2.1Wedemonstratetransparencyinourdecisionmakingprocess. 4.2.2Weconstantlyreexamineourimpartialityandobjectivity,takingcorrectiveactionasappropriate. Comment: Researchwithpractitionersindicatedthatthesubjectofconflictsofinterestisoneofthemostchallengingfacedbyourprofession.Oneofthebiggest problemspractitionersreportisnotrecognizingwhenwehaveconflictedloyaltiesandrecognizingwhenweareinadvertentlyplacingourselvesorothersina conflictofinterestsituation.Weaspractitionersmustproactivelysearchforpotentialconflictsandhelpeachotherbyhighlightingeachotherspotential conflictsofinterestandinsistingthattheyberesolved. fli t f i t t d i i ti th t th b l d 4.2.3Weprovideequalaccesstoinformationtothosewhoareauthorizedtohavethatinformation. 4.2.4Wemakeopportunitiesequallyavailabletoqualifiedcandidates. Comment: Animplicationoftheseprovisionsis,inthecaseofacontractingarrangement,weprovideequalaccesstoinformationduringthebiddingprocess. 4.3Fairness:MandatoryStandards 4.3 Fairness: Mandatory Standards Aspractitionersintheglobalprojectmanagementcommunity,werequirethefollowingofourselvesandourfellowpractitioners: ConflictofInterest Situations 4.3.1Weproactivelyandfullydiscloseanyrealorpotentialconflictsofinteresttotheappropriatestakeholders. 4.3.2Whenwerealizethatwehavearealorpotentialconflictofinterest,werefrainfromengaginginthedecisionmakingprocessorotherwiseattemptingto influenceoutcomes,unlessoruntil:wehavemadefulldisclosuretotheaffectedstakeholders;wehaveanapprovedmitigationplan;andwehaveobtainedthe consentofthestakeholderstoproceed. Comment: Aconflictofinterest occurswhenweareinapositiontoinfluencedecisionsorotheroutcomesonbehalfofonepartywhensuchdecisionsor outcomescouldaffectoneormoreotherpartieswithwhichwehavecompetingloyalties.Forexample,whenweareactingasan employee,wehaveadutyof loyalty toouremployer.WhenweareactingasaPMIvolunteer,wehaveadutyofloyalty totheProjectManagementInstitute.Wemustrecognizethese divergentinterestsandrefrainfrominfluencingdecisionswhenwehaveaconflictofinterest. Further,evenifwebelievethatwecansetasideourdividedloyaltiesandmakedecisionsimpartially,wetreattheappearanceofaconflictofinterest asaconflict Further even if we believe that we can set aside our divided loyalties and make decisions impartially we treat the appearance of a conflict of interest as a conflict ofinterest andfollowtheprovisionsdescribedintheCode.

FavoritismandDiscrimination 4.3.3Wedonothireorfire,rewardorpunish,orawardordenycontractsbasedonpersonalconsiderations,includingbutnotlimitedto,favoritism,nepotism, 4 3 3 We do not hire or fire reward or punish or award or deny contracts based on personal considerations including but not limited to favoritism nepotism orbribery. 4.3.4Wedonotdiscriminateagainstothersbasedon,butnotlimitedto,gender,race,age,religion,disability,nationality,orsexualorientation. 4.3.5Weapplytherulesoftheorganization(employer,ProjectManagementInstitute,orothergroup)withoutfavoritismorprejudice.

CHAPTER5.HONESTY 5.1DescriptionofHonesty Honestyisourdutytounderstandthetruthandactinatruthfulmannerbothinourcommunicationsandinourconduct. 5.2Honesty:Aspirational Standards Aspractitioners intheglobalprojectmanagementcommunity: 5.2.1Weearnestlyseektounderstandthetruth. 5.2.2Wearetruthfulinourcommunicationsandinourconduct. 5.2.3Weprovideaccurateinformationinatimelymanner. Comment: An implication of these provisions is that we take appropriate steps to ensure that the information we are basing our decisions upon or providing to Animplicationoftheseprovisionsisthatwetakeappropriatestepstoensurethattheinformationwearebasingourdecisionsuponorprovidingto othersisaccurate,reliable,andtimely. Thisincludeshavingthecouragetosharebadnewsevenwhenitmaybepoorlyreceived.Also,whenoutcomesarenegative,weavoidburyinginformationor shiftingblametoothers.Whenoutcomesarepositive,weavoidtakingcreditfortheachievementsofothers.Theseprovisions reinforceourcommitmenttobe bothhonestandresponsible. 5.2.4Wemakecommitmentsandpromises,impliedorexplicit,ingoodfaith. 5.2.5Westrivetocreateanenvironmentinwhichothersfeelsafetotellthetruth. 5.3Honesty:MandatoryStandards Aspractitionersintheglobalprojectmanagementcommunity,werequirethefollowingofourselvesandourfellowpractitioners: 5.3.1Wedonotengageinorcondonebehaviorthatisdesignedtodeceiveothers,includingbutnotlimitedto,makingmisleadingorfalsestatements,stating halftruths,providinginformationoutofcontextorwithholdinginformationthat,ifknown,wouldrenderourstatementsasmisleadingorincomplete. 5.3.2Wedonotengageindishonestbehaviorwiththeintentionofpersonalgainorattheexpenseofanother. Comment:Theaspirational standardsexhortustobetruthful.Half truthsandnon disclosuresintendedtomisleadstakeholdersareasunprofessionalas Comment: The aspirational standards exhort us to be truthful Halftruths and nondisclosures intended to mislead stakeholders are as unprofessional as affirmativelymakingmisrepresentations.Wedevelopcredibilitybyprovidingcompleteandaccurateinformation.

APPENDIXB B.1Glossary B 1 Glossary AbusiveManner.Conductthatresultsinphysicalharmorcreatesintensefeelingsoffear,humiliation,manipulation,orexploitationinanotherperson. ConflictofInterest. Asituationthatariseswhenapractitionerofprojectmanagementisfacedwithmakingadecisionordoingsomeactthatwill benefitthe practitioneroranotherpersonororganizationtowhichthepractitionerowesadutyofloyalty andatthesametimewillharmanotherpersonororganizationto whichthepractitionerowesasimilardutyofloyalty.Theonlywaypractitionerscanresolveconflictingdutiesistodisclosetheconflicttothoseaffectedand p y y y y yp g allowthemtomakethedecisionabouthowthepractitionershouldproceed. DutyofLoyalty. Apersonsresponsibility,legalormoral,topromotethebestinterestofanorganizationorotherpersonwithwhomtheyare affiliated. ProjectManagementInstitute[PMI]. ThetotalityoftheProjectManagementInstitute,includingitscommittees,groups,andcharteredcomponentssuchas chapters,colleges,andspecificinterestgroups. PMIMember. ApersonwhohasjoinedtheProjectManagementInstituteasamember. PMISponsoredActivities. Activitiesthatinclude,butarenotlimitedto,participationonaPMIMemberAdvisoryGroup,PMIstandarddevelopmentteam, or anotherPMIworkinggrouporcommittee.ThisalsoincludesactivitiesengagedinundertheauspicesofacharteredPMIcomponent organizationwhetheritis inaleadershiproleinthecomponentoranothertypeofcomponenteducationalactivityorevent. Practitioner. Apersonengagedinanactivitythatcontributestothemanagementofaproject,portfolio,orprogram,aspartoftheprojectmanagement profession. PMIVolunteer. ApersonwhoparticipatesinPMIsponsoredactivities,whetheramemberoftheProjectManagementInstitute ornot.

PhaseEndingReviews:PhaseExits,PhaseGates,KillPoints ProjectPhasesnotequaltoProjectManagementProcessGroups Tailoring:PM&ProjectTeamareresponsiblefordeterminingwhichprocesseswithineachprocessgroupareappropriateforthe Tailoring: PM & Project Team are responsible for determining which processes within each process group are appropriate for the projectyouareworkingon. IterativeProcess:Goingbackthroughtheprocessgroups. Tool&Techniques Usuallyrequireactionofsomesort. Outputs Usuallyintheformofadeliverable,measured,tangibleorprovable. ThePlanDoCheckActcycleisanunderlyingconceptthatshowstheintegrativenatureoftheprocessgroups. SteeringCommittee:Groupoffolkscomprisingseniormanagersandsometimesmiddlemanagerswhorepresenteachofthe functionalareasoftheorganization. MathematicalModels=ConstrainedOptimizationMethods Uselinear,dynamic,integer,nonlinear,and/ormultiobjective programmingintheformofalgorithms. DevelopProjectManagementPlan: Objectives: S Specific M Measureable A Accurate R Realistic&Tangible T Timebound PurposeofPMPlan:Howtheprojectisexecuted,monitored&controlandclosed DesignofExperiments(DOE) Statisticaltechniquethatidentifiestheelementsorvariablesthatwillhavethegreatesteffect on overallprojectoutcomes.Itgivesyoureastatisticalframeworkthatallowsyoutochangealltheimportantvariablesatonce insteadofchangingoneatthetime. Crosby=Zerodefects&preventionorreworkresults.Doitrightthefirsttime. Juran =Fitnessforuse,conformance.Stakeholders&customersexpectationsaremetorexceeded. Deming=Qualityisamanagementproblem. TQM=Qualitymustbemanagedinandmustbeacontinuousprocess. SixSigma=Measurementbasedonstrategy;nomorethan3.4defectsperMillion. Keizen =Continuousimprovement,improvequalityofpeoplefirst. ContinuousImprovement=Watchcontinuouslyforwaystoimprovequality. Continuous Improvement = Watch continuously for ways to improve quality QualityMetrics=Describeswhat&how isbeingmeasuredbythePQC(PerformQualityControl)process. ProgressiveElaboration=Projectdevelopedonsteps.

PMO=Dependingofthecompany,providesconsolidatedreportingacrossthecompany. PMSystem=Setoftools,methodology,techniques,resourcesandprocedurestomanagetheproject. OrganizationalTheory=Attempttoexplainwhatmakespeople,teams&workunitsperformthewaytheydo. Organizational Theory = Attempt to explain what makes people teams & work units perform the way they do ReserveAnalysis.Reservetime=buffer=contingencytime

1StandardDeviation=68.26% 2StandardDeviation=95.44% 3StandardDeviation=99.73% 6StandardDeviation=99.99%

CPM manages the total float of schedule, networks paths, whereas critical chain manages buffer activity durations & resources. managesthetotalfloatofschedule,networkspaths,whereascriticalchain managesbufferactivitydurations&resources.
Projectcalendars concernalltheresourcesinvolvedintheproject&specifytheworkingperiodfortheseresources.Theylookata particularresourceorgroupsofresourcesandtheiravailability. ScheduleModel Usetocreateprojectschedulemodel. CostAggregation Theprocessoftallyingthescheduleactivitycostestimatesattheworkpackagelevel&thentotalingthework packagelevelstohigherlevelWBScomponentlevels. FundingLimitReconciliation Involvesreconciliationoftheamountoffundsspentwiththeamountoffundsbudgetedforthe project. CostBaseline Theexpectedcostoftheprojectanditisusedtomeasureperformance. Resolvingconflict: Forcing winlosesituation Doitmyway Compromise nowinnolose findmiddleground loselose Compromise no win no lose find middle ground lose lose Confrontation winwinsituation lookatthefacts,analyzethemandfindsolution Withdrawal/Avoidance loselosesituation Smoothing Emphasizetheagreements loselose FaitAccompli anirreversibleaccomplishment ForceMajeure Apowerful&unexpectedevent,suchashurricaneorotherdisaster Force Majeure A powerful & unexpected event, such as hurricane or other disaster Depreciation: Straightlinedepreciation Double decliningbalance Sumofyeardepreciation WBS nolessthan8,nomorethan80 PerformQualityAssurance Qualitymanagementprocessyouusetomakecertaintheprojectsatisfiesthequalitystandardslaidout intheprojectmanagementplan. ProcessAnalysis Looksatprocessimprovementfromanorganizational&technicalperspective. ConfigurationManagement Involvesidentifyingthephysicalcharacteristicsoftheproductoftheproject,controllingchangesto thesecharacteristics,&documentingchangestoverifythatrequirementsaremet. Thechangecontrolsystem&configurationmanagementsystemtogetheridentify,document&controlthechangestothe The change control system & configuration management system together identify document & control the changes to the performancebaseline.

FinancialCalculations Fi i l C l l ti Futurevalue
Futurevalue(FV)referstotheamountofmoneythataninitialamount(PV)willgrowtooversomeperiodoftime(n)atagiven interestrate(i). Therearetwoalternativemethodsofcalculatinginterestontheinitialamount.Thesearesimpleinterestandcompoundinterest. g p p

Simpleinterest
Theborrowerpaysthelenderinterestatregularperiodswithinthetermoftheloanplustheprincipalandasingleinterest period paymentattheendoftheterm.Inthiscaseinterestaccruesonlyontheoriginalprincipalsumanddoesnotcompound. Thesimpleinterestformulacanbeexpressedas:

FV=PVxi xt FV = PV x i x t
wherePVistheamountofthepresentorcurrentvalue i istheinterestrate tisthenumberofperiods

Compoundinterest
Theborrowerpaysthelenderasinglesumattheendoftheloanterm.Thissumincludestheoriginalprincipalplusinterest on accumulatedinterestfrompreviousperiods. Itshouldbenotedthatcompoundinterestissimplyarepeatedapplicationofsimpleinteresttothenewprincipalamount.In orderto makeacompoundinterestcalculationreasonablyquicklyitisnecessarytousethefollowingformulawhichconsiderablyreducesthe calculationsinvolvedintheprecedingexample: FV=PV(1+i) FV PV(1 i)t WhereFVisthefuturevalue PVisthepresent/currentvalue i =interestrate t=numberofperiods

Presentvalue PV=FV/(1+i)t

Netpresentvalue (NPV)isastandardmethodforfinancialevaluationoflongtermprojects.Usedforcapitalbudgeting,andwidely throughouteconomics,itmeasurestheexcessorshortfallofcashflows,inpresentvalue (PV)terms,oncefinancingchargesaremet.By throughout economics it measures the excess or shortfall of cash flows in present value (PV) terms once financing charges are met By definition: NPV=Presentvalueofcashinflows Presentvalueofcashoutflows(orminusinitialinvestmentinmostofthecases AlternativeCapitalBudgetingMethods paybackperiodwhichmeasuresthetimerequiredforthecashinflowstoequaltheoriginaloutlay.Itmeasuresrisk,notreturn. costbenefitanalysiswhichtriestoincludeissuesotherthancash. realoptionmethodwhichattemptstovaluemanagerialflexibilitythatisassumedawayinNPV. InternalRateofReturn (IRR):whichcalculatestherateofreturnofaprojectwithoutmakingassumptionsaboutthereinvestmentofthe cashflows(henceinternal) ModifiedInternalRateofReturn similartoInternalRateofReturn,butitmakesexplicitassumptionsaboutthereinvestmentofthecash flows.SometimescalledGrowthRateofReturn Formula Eachcashinflow/outflowisdiscountedbacktoitsPV.Thentheyaresummed.Therefore

Where t thetimeofthecashflow n thetotaltimeoftheproject r the discount rate thediscountrate Ct thenetcashflow(theamountofcash)atthatpointintime. C0 thecapitaloutlayatthebeginningoftheinvestmenttime(t =0)

InternalRateofReturn Theinternalrateofreturn (IRR)isacapitalbudgetingmethodusedbyfirmstodecidewhethertheyshouldmakelongterminvestments. TheIRRisthereturnratewhichcanbeearnedontheinvestedcapital,i.e.theyieldontheinvestment. The IRR is the return rate which can be earned on the invested capital i e the yield on the investment AprojectisagoodinvestmentpropositionifitsIRRisgreaterthantherateofinterestthatcouldbeearnedbyalternativeinvestments (investinginotherprojects,buyingbonds,evenputtingthemoneyinabankaccount).TheIRRshouldincludeanappropriaterisk premium. MathematicallytheIRRisdefinedasanydiscountratethatresultsinanetpresentvalueofzeroofaseriesofcashflows. Ingeneral,iftheIRRisgreaterthantheproject scostofcapital,orhurdlerate, theprojectwilladdvalueforthecompany. In general, if the IRR is greater than the projects cost of capital, or hurdle rate, the project will add value for the company. Methodology Tofindtheinternalrateofreturn,findtheIRRthatsatisfiesthefollowingequation:

Example: YearCashflow 0100 1+120 CalculationofNPV: Calculation of NPV: i =interestrateinpercent NPV=100+120/[(1+i)^1] CalculationofIRR: NPV=0 100+120/[(1+IRR)^1]=0 IRR=20%

Workaround=Unplannedresponsetoanegativeriskevent. ConfigurationManagementSystems=Documentedproceduresthatdescribetheprocessforsubmittingchangerequests,the processesfortrackingchanges&theirdisposition&processesfordefiningtheapprovallevelsforaccepting&denyingchanges. processes for tracking changes & their disposition & processes for defining the approval levels for accepting & denying changes CCB=ConfigurationControlBoard RunCharts=ShowVariations Threetypesofvariations:Random,Knownorpredictable&alwayspresent. Whenaprocessisincontrol,itshouldnotbeadjusted.Itisoktochangetheprocesstobringaboutimprovement,butitshould notbeadjusted. not be adjusted. ScopeVerification:Formalizestheacceptanceoftheprojectscope&itisprimarilyconcernedwiththeacceptanceofworkresults. ScopeVerification=Acceptingworkresults PerformQualityControl=Checkingforcorrectworkresults. Warranty notpartoftheproject WBSdeliverableoftheScopeDevelopmentPhase ProjectCharterdeliverableoftheConceptPhase RollingWavePlanning=Progressivedetailing PM&PMteamresponsiblefortheProjectPlan. TheProjectPlanisnotaPerformancemeasurementbaseline Constrains=Factorsthatmaylimittheprojectoptionsorimpactotheraspectsoftheprojectperformance. Assumptions=Factorsconsideredtobetruewhendevelopingtheplan. Assumptions = Factors considered to be true when developing the plan Execution mostofthebudgetandtimespentthere. WorkAuthorizationSystem Authorizestheworkandisformal. TherecanbemorethanoneScopeChangeControlBoard. OpportunityCost=Thecostofgivingsomethingtogainanother. g p j pp y , ( y y p ) WhenevaluatinganewprojectincludeOpportunityCost,notincludeSunkcost(moneyalreadyspent). ProductAnalysis=Productbreakdownanalysisengineering(breakdownintocomponentparts). ValueEngineering=Findlessexpensiveways. ValueAnalysis=focusoncostperformance ContractualWBS(CWBS)=Usedtodefinethelevelofreportingthatthesellerwillprovidetothebuyer.Includelessdetail

OrganizationalBreakdownStructure(OBS)=Usedtoshowwhichworkcomponenthavebeenassignedtowhichorganizationalunits. ResourceBreakdownStructure(RBS)=Workcomponentsareassignedtoindividuals. BillofMaterials(BOM)=Hierarchicalviewofthephysicalassemble,subassemblyandcomponentsneededtofabricateaproduct. Bill of Materials (BOM) = Hierarchical view of the physical assemble subassembly and components needed to fabricate a product CostAccount=Onelevelabovetheworkpackage. ScopeVerification=Everybodyagreesanditshouldbedonecontinuously. EVthebesttoverifytheprojectstatus. Asleveloftechnologyincreasesalsoriskincreases. Verification=customeracceptance Quality=conformancetospecs. p y p Outputofscopeverification=Formalacceptance. Criticalpathcanhaveslack. Negativeslack youarebehindschedule. Dummyactivity=interdependencywithzeroduration,butitcanchangethecriticalpath. Slackorfloat=Amountoftimebeforeprojectisdelayed. Lag=mandatorywaittime. d i i LeadTime=howcanweaccelerateasuccessortask. DiminishingReturns=Asyouaddresourcesyougetlessofreturns. ResourceLevelingtypicallyincreasesscheduleduration. UsuallyResourceLevelingaddstime,reverseresourceallocation. CriticalChain=Thesequenceinwhichscarceresourcesareprocessed.Accountsforlimitedresources.Incorporatebufferstoreduce Critical Chain = The sequence in which scarce resources are processed Accounts for limited resources Incorporate buffers to reduce schedulerisk.Addactivitybuffersforrandomrisk. Networks: PERT,CPM,PDM IDcriticalpath,projectduration,activitysequences,etc.showhowtoprotectactivities&howevents relate. Barchart weakplanningtool,goodforprojectprogressreporting,nologicalrelationships,easytoread. Milestonechart showsignificantevents,zeroduration,communicatesstatus. Heuristicscheduling(RuleofThumb) Investigativetechnique,i.e.neverput3peopleinajob.

ResourceGanttChart Wheneachresourceisscheduledpertask LearningCurveisaparametrictool. EstimatingAccuracy: Estimating Accuracy: OrderofMagnitude:+50%to50% BudgetEstimate:+25%to10% DefinitiveEstimate:+10%to10% LawofDiminishingReturns Extracostvs.extrarevenue moreresourceslessresults ContingencyReserves Reduceriskofoverrunsinmeetingobjectives. g y g j ManagementReserves Forunknowns Depreciationofcapital awayofspreadingthecostofanassetoverthetimeisbeingused. CostManagement Howwearegoingtomanagevariances(scopechanges). EarnedValue Measurescostvs.scheduleperformancewithmoney.Awaytomeasurethestatusoftheproject. EarnedValue Usedwhenahighdegreeofaccuracyisrequired.Whenmilestonesaretooinfrequenttousescheduleevaluation.On projectswithoverlappingprojectphaseswheretherearefewconvenientplaceswheremilestonescanbeplaced. j ih l i j h h h f i l h il b l d TheScurvetellsyouatglancethestatusoftheproject. GoldPlating Givingthecustomermorethantheywant. QualityControl Somebodyislookingoverourshoulders. QualityAssurance Weareresponsible Selfcontrol Takeresponsibilityforourownwork. Grade it is the category of the quality i e beef: prime regular smoked etc itisthecategoryofthequality.i.e.beef:prime,regular,smoked,etc. Standard Aguidelinethathastheauthorityofsanctionbody. Benchmarking Ithastwostepprocess 1.Identifywhatotherpeopleisdoing.2.Wecopiedthem&implemented. Workflowdiagram howphysicalmaterialflow. QualityAudits Formalevaluationhowqualityisdoing. Everyoneperformingtheworkisresponsibleforquality. Sampling Lessexpensive,smallerstaff,quickdecisions.Maybewrong,Itcouldbedestructive. StandardDeviation Itgetssmallerassamplesizeincreases.

SixSigma Zerodefects Thetemporarynatureofprojects thepersonalandorganizationalrelationshipsaretemporaryandnew. WarRoom Aroomsetasideanddedicatedentirelytoasingleproject. War Room A room set aside and dedicated entirely to a single project Deadlinesandtechnicalissuescauseconflicts. Thestrongestmotivationitsrecognition. CommunicationsBarriers Unclearcomm.Channels,Physicaldistance,technicallanguage.Badattitudes,blockers. Contractclosurecomesbeforetheadministrationclosure. Thesponsorowntheprojectrisk. p p j ThePMmanage&informabouttherisk. Wedonotmitigateallrisk.Riskishighestatthebeginningoftheproject. Specification Theprecisedescriptionoftheproductorservice. Projectteamcreatesthespecs. Unilateralcontract purchaseorder Bilateralcontract Ithasbids,quotes,RFP. il l h bid Statementofwork Describesthework. Astatementthatletscontractorsknowiftheycansatisfythebid. ThebenefitsofmultipleiterationsinthePMare:Revalidationofproject,replantheproject,introduceimprovements. QualitativeAnalysis Focusontherightrisks QuantitativeAnalysis Reservedforhighrisks.Usesnumericrating.i.e.MonteCarloSimulation,DecisionTree. ProjectCharter: Project Charter: Introduction Businessobjective Preliminarycost/benefit Getformalapproval PreliminaryScopeStatement: Currentsituation Projectrequirements Projectschedule Assumptions/constrains

Assumption Availabilityofakeyproduct ThemostdifficultofDirect&manageexecution coordinateandintegrateallprojectelements. FailAccompli Nolongeranissue itcannotbechanged Fail Accompli No longer an issue it cannot be changed Topdownestimate=analogousestimate Reserveanalysis=considersschedulerisk. Attributes measurementsthatdetermineiftheresultsareeitherconformingornonconforming. Decisionmodels=mathematicalmodels. Mandatorydependency Hardlogic y p y g Discretionarydependency usuallybaseonbestpractices&aredefinedbytheprojectteam. PerformQualityAssurance Provideafoundationforbringingaboutcontinuousimprovements. PERTusesweightedaveragedurations CPMusesmostlikelyduration. ContractAdministrationProcess monitorthevendor&ensureallrequirementsaremet. TrendAnalysis Mathematicaltechniqueusedtoforecasttheprojectsoutcomebasedonhistoricalinfo. Qualitymetrics=anoperationaldefinitionthatdescribeswhatisbeingmeasured&howitwillbemeasuredbythePerformQuality Q li i i l d fi i i h d ib h i b i d&h i ill b db h f Q li controlprocess. ConstrainsintheHRPlanningProcess OrganizationalStructures,CollectiveBargainsAgreements&economicconditions Readerfiltermessagesusingculture,knowledge,language,geographicallocation,emotion&attitudes. Objectives arequantifiablecriteriausedtomeasureprojectsuccess.

DesignofExperiments(DOE)itequipsyouwithastatisticalframeworkthatallowsyoutochangealltheimportant variablesatonceinsteadofchangingonevariableatatime.

ProjectManagementistheapplicationofknowledge,skills,tools,andtechniquestoprojectactivitiestomeetheproject requirements. ProgressiveElaborationinvolvescontinuouslyimprovinganddetailingaplanasmore detailedandspecificinformationandmore Progressive Elaboration involves continuously improving and detailing a plan as moredetailed and specific information and more accurateestimatesbecomeavailable.Itallowsaprojectmanagementteamtomanagetoagreatlevelofdetailastheproject evolves. Portfolioisacollectionofprojectsorprogramsandotherworkthataregroupedtogethertofacilitateeffectivemanagementof thatworktomeetstrategicbusinessobjectives. PortfolioManagementisthecentralizedmanagementofonemoreportfolios,whichincludesidentifying,prioritizing, authorizing,managing,andcontrollingprojects,programs,andotherrelatedworktoachievespecificstrategicbusiness objectives. objectives Programisdefinedasagroupofrelatedprojectsmanagedinacoordinatedwaytoobtainbenefitsandcontrolnotavailableform managingthemindividually. ProgramManagementisdefinedasthecentralizedcoordinatedmanagementofaprogramtoachievetheprogramsstrategic objectivesandbenefits. Projectsaretypicallyauthorizedasresultof: MarketDemand StrategicOpportunity/BusinessNeed CustomerRequest TechnologicalAdvance LegalRequirements BusinessCase(inputto4.1DevelopProjectCharter): Marketdemand Organizationalneed Customerrequest Technologicaladvance Legalrequirements Ecologicalimpacts Socialneed

AProjectManagementOffice(PMO)isanorganizationbodyorentityassignedvariousresponsibilitiesrelatedtothecentralized andcoordinatedmanagementofthoseprojectsunderitsdomain. Operationsareanorganizationalfunctionperformingtheongoingexecutionofactivitiesthatproducethesameproductofprovide arepetitiveservice. ProjectManagercharacteristics:Knowledge,PerformanceandPersonal AProjectLifeCycleisacollectionofgenerallysequentialandsometimesoverlappingprojectsphaseswhosenameandnumberare determinedbythemanagementandcontrolneedsoftheorganizationororganizationsinvolvedintheproject.Itprovidesthe basicframeworkformanagingtheproject. basic framework for managing the project

ImpactofVariableBasedonProjectTime

AProductLifeCycleconsistsofgenerallysequential,nonoverlappingproductphasesdeterminedbythemanufacturingand controlneedoftheorganization. ProjectPhasesaredivisionswithinaprojectwhereextracontrolisneededtoeffectivelymanagethecompletionofamajor deliverable.Aprojectphaseisnot aProjectManagementProcessgroup. Tailoring Determiningwhichprocesswithineachprocessgroupareappropriatefortheprojectyouareworkingon. ProjectGovernanceprovidesacomprehensive,consistentmethodofcontrollingtheprojectandensuringitssuccess. PhasetoPhaseRelationships: p

SequentialRelationship OverlappingRelationship IterativeRelationship Usefulinlargely,undefined,uncertain,orrapidlychangingenvironmentssuchresearch.

Organizational Organizational Influenceson Projects

AProcessisasetofinterrelatedactionsandactivitiesperformedtoachieveaprespecifiedproduct,result,or service. ProjectProcesses:ProjectManagementProcesses&ProductOrientedProcesses.

ProjectManagementProcessGroups
StatementofWork(SOW)isanarrativedescriptionofproductsorservicestobedeliveredbytheproject. TheSOWreferences: BusinessNeed B i N d ProductScopeDescription StrategicPlan