Modern Project Management

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What Is a Project?
Project

Defined A complex, nonroutine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs.

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Major Characteristics of a Project?

Has

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

Has

a defined life span with a beginning and an end. requires across-the-organizational participation. e.g. Specialists (Eng-FA-Marketing etc)

Typically

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Major Characteristics of a Project?

Involves

doing something never been done

before. e.g. nonroutine/ Chandrayan DLF Customization

Has

specific time, cost, and performance requirements. Faster-Cheaper-Quality (???)

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Project Management in Action-UPS

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

Payoff: About 500,000 companies worldwide use the full package of UPS online logistics services, generating $ 1.4B in revenue.
Action: UPS developed online system for e-tailers for everything from product delivery and tracking, managing inventories, and dealing with suppliers, to handling billings and payments. Cost are slashed for all stake holders in the supply chain to the final chain to the final customer. The UPS system leaves the competitors in a catch-up mode

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Project Management in Action-Others

PACCAR: Marketing Project: Make the truck industry technically savvy by shifting parts purchasing online, building web-powered engine monitoring equipment in each truck CISCO: Streamlining Project Sales & inventory tracking system linking Cisco with suppliers, manufacturers and customers SW Airlines: Customer Service Project To make buying online irresistible by emphasizing simplicity and speed over whizzy features. Nortel Networks: Management Project Speed up product development key tactics: have development teams share ideas and documents.

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Project Life Cycle

FIGURE 1.2

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The Challenge of Project Management: The Project Manager

Manages temporary, non-repetitive activities and frequently acts independently of the formal organization. o Marshals resources for the project o Provides direction, coordination, and integration to the project team o Manages a diverse set of project stakeholders o Dependent upon others for technical answers o Is responsible for performance and success of the project o Must induce the right people at the right time to address the right issues and make the right decisions.
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The Importance/Age of Project Management

Factors

Leading to the Increased Use of Project Management:

Compression Global

of the product life cycle(Competitive Advantage) competition explosion downsizing

Knowledge Corporate Increased Small

customer focus (Need)

projects that represent big problems

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Growth in PMP Certification

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Integrated Management of Projects

FIGURE 1.3

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Project Management Process The Technical and Socio-cultural Dimensions

FIGURE 1.4

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PM Today: Integrated Project Management Systems

Problems Resulting from the Use of Piecemeal Project Management Systems:

Do not tie together the overall strategies of the firm. Fail to prioritize selection of projects by their importance of their contribution to the firm. Are not integrated throughout the project life cycle. Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors.

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Evolution of Project Driven Organization

CMM Level 1: Ad Hoc- Unpredictable Processes (TCP) CMM Level 2: Repeatable Basic Processes CMM Level 3: Repeatable Well Defined Processes CMM Level 4: Seamless/Integrated Managed Processes CMM Level 5: Optimizing-Continuously Improving Process

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Organization Strategy and Project Selection

If you dont know where you are going, any road will take you thereConfucius

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Integrated Management of Projects

FIGURE 1.3

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Why Project Managers Need to Understand the Strategic Management Process?

Involvement Organization focus- Decision Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects.

Project managers who understand their organizations strategy can become effective advocates of projects aligned with the firms mission.
Insight Organizational capabilities and resource constraints Project contribution- Organization focus - Direction
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Strategic Management Process

FIGURE 2.1

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The Strategic Management Process: An Overview

Strategic

Management Provides the theme and focus of the future direction for the firm. (Airlines BA/ SAS/ Virgin)
o Responding to changes in the external environmentenvironmental scanning o Allocating scarce resources of the firm to improve its competitive positioninternal responses to new action programs
Requires

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

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Strategic Management Process (contd)

Four

of Activities of the Strategic Management Process

1.

Review and define the organizational mission. (Focus) Set long-range goals and objectives. (SMART) Analyze and formulate strategies to reach objectives. (Customer-Needs SWOT) Implement strategies through projects. (How? i.e. Management-POSDC)

2. 3.

4.

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Characteristics of Objectives
S
Specific Be specific in targeting an objective

M
A R T

Measurable

Establish a measurable indicator(s) of progress

Assignable

Make the objective assignable to one person for completion State what can realistically be done with available resources State when the objective can be achieved, that is, its duration.

Realistic

Time related

EXHIBIT 2.1

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Checklist Selection Model

Strategy alignment: What specific organization does this project align with? Driver: What business problem does the project solve? Success metrics: How will we measure success? Sponsorship: Who is the project sponsor? Risk: What is the impact of not doing this project? Risk: What is the project risk to our organization? Benefits: What is the value of the project to this organization? Organization culture: Is our organization culture right for this type of project? Approach: Will we build or buy? Training/resources: Will staff training be required? Finance: What is estimated cost of the project? Portfolio: How does the project interact with current projects?
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Project Screening Matrix

FIGURE 2.3

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Applying a Selection Model

Project

Classification

Deciding how well a strategic or operations project fits the organizations strategy.

Selecting

a Model

Applying a weighted scoring model to bring projects to closer with the organizations strategic goals. o Reduces the number of wasteful projects o Helps identify proper goals for projects o Helps everyone involved understand how and why a project is selected
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Project Proposals
Sources

and Solicitation of Project Proposals

Within the organization Request for proposal (RFP) from external sources (contractors and vendors)
Ranking

Proposals and Selection of Projects

Prioritizing requires discipline, accountability, responsibility, constraints, reduced flexibility, and loss of power

Managing

the Portfolio

Senior management input The priority team (project office) responsibilities

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Major Project Proposal

FIGURE 2.4A

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Risk Analysis

FIGURE 2.4B

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Project Screening Process

FIGURE 2.5

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Priority Analysis

FIGURE 2.6

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Organization Structure and Culture

Successful project management can flourish within any structure, but the culture within the organization must support the four basic values of project management: Cooperation, Teamwork, Trust & Effective Communication

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Project Management Structures

Challenges

to Organizing Projects

The uniqueness and short duration of projects relative to ongoing longer-term organizational activities The multidisciplinary and cross-functional nature of projects creates authority and responsibility dilemmas.
Choosing

an Appropriate Project Management

Structure
The best system balances the needs of the project with the needs of the organization. Functional Dedicated Team - Matrix

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Project Management Structures

Organizing

Projects: Functional Organization

Different

segments of the project are delegated to respective functional units.

is maintained through normal management channels. when the interest of one functional area dominates the project or one functional area has a dominant interest in the projects success.

Coordination

Used

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Functional Organizations

FIGURE 3.1

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Functional Organization of Projects

Advantages
No

Disadvantages
Lack Poor Slow Lack

Structural Change

of Focus Integration

Flexibility

In-Depth

Expertise
Easy

of Ownership

Post-Project Transition

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Project Management Structures (contd)

Organizing
Teams

Projects: Dedicated Teams

operate as separate units under the leadership of a full-time project manager. a projectized organization where projects are the dominant form of business, functional departments are responsible for providing support for its teams. Apple Macintosh, iPod, iApple etc

In

e.g.

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Dedicated Project Team

FIGURE 3.2

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Project Organization: Dedicated Team

Advantages
Simple Fast Cohesive Cross-Functional

Disadvantages
Expensive Internal Limited

Strife

Integration

Technological Expertise
Difficult

PostProject Transition

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Project Organizational Structure

FIGURE 3.3

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Project Management Structures (contd)

Organizing
Hybrid

Projects: Matrix Structure

organizational structure (matrix) is overlaid on the normal functional structure.

o Two chains of command (functional and project) o Project participants report simultaneously to both functional and project managers.

Matrix

structure optimizes the use of resources.

o Allows for participation on multiple projects while performing normal functional duties o Achieves a greater integration of expertise and project requirements
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Matrix Organization Structure

FIGURE 3.4

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Different Matrix Forms

Functional

(also Weak or Lightweight) Form

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

Balance

(or Middleweight) Form

The traditional matrix form in which the project manager sets the overall plan and the functional manager determines how work to be done

Strong

(Heavyweight) Form

Resembles a project team in which the project manager has broader control and functional departments act as subcontractors to the project
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Project Organization: Matrix Form

Advantages
Efficient Strong

Disadvantages
Conflict Infighting Stressful Slow

Project

Focus
Easier

PostProject Transition

Flexible

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Choosing the Appropriate Project Management Structure

Organization
How

(Form) Considerations

important is the project to the firms success? What percentage of core work involves projects? What level of resources (human and physical) are available?

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Choosing the Appropriate Project Management Structure (contd)

Project
Size

Considerations

of project Strategic importance Novelty and need for innovation Need for integration (number of departments involved) Environmental complexity (number of external interfaces) Budget and time constraints Stability of resource requirements
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Organizational Culture
Organizational
A

Culture Defined

system of shared norms, beliefs, values, and assumptions which bind people together, thereby creating shared meanings personality of the organization that sets it apart from other organizations.
o Provides a sense of identify to its members

The

o Helps legitimize the management system of the organization

o Clarifies and reinforces standards of behavior
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Key Dimensions Defining an Organizations Culture

FIGURE 3.6

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Defining the Project

Select a dream Use your dream to set a goal Create a plan Consider resources Enhance skills and abilities Spend time wisely Start! Get organized and go.
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Defining the Project

Step 1: Defining the Project Scope

Step 2: Establishing Project Priorities

Step 3: Creating the Work Breakdown Structure Step 4: Integrating the WBS with the Organization

Step 5: Coding the WBS for the Information System

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Step 1: Defining the Project Scope

Project

Scope

A definition of the end result or mission of the projecta product or service for the client/customer in specific, tangible, and measurable terms.

Purpose

of the Scope Statement

To clearly define the deliverable(s) for the end user. To focus the project on successful completion of its goals. To be used by the project owner and participants as a planning tool and for measuring project success.

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Project Scope Checklist

1. 2. 3. 4.

Project objective-t/c/p Deliverables-plc Milestones-event Technical requirementse.g. Free Willy-C17-US $ 2M

1. 2.

Limits and exclusionsReviews with customer-i/e

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Project Scope: Terms and Definitions

Scope
Also

Statements
called statements of work (SOW)

Project
Can

Charter

contain an expanded version of scope statement A document authorizing the project manager to initiate and lead the project.
Scope
The

Creep

tendency for the project scope to expand over time due to changing requirements, specifications, and priorities.
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Project Scope: Example

LAN Project Scope statement Objective: To design and install LAN with in one month with a budget not to exceed $60,000 for the Teleatlas.

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

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Project Scope: Example

Milestones: HW 2nd Jan09 Setting users priority & authorization 25th Jan09 In-house whole network test completed 2nd Feb09 Training completed 1st March09 Technical Requirement: WS- 19 Monitor System support Window NT platform PCI 64 ethernet LAN interface cards and connection Limit & Exclusion: System maintenance/repair-one month Warranties transferred to client

Customer Review Director Technical Teleatlas

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Step 2: Establishing Project Priorities

Causes

of Project Trade-offs Shifts in the relative importance of criterions related to cost, time, and performance parameters oBudgetCost oScheduleTime oPerformanceScope

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Project Management Trade-offs

FIGURE 4.1

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Step 2: Establishing Project Priorities

Managing

the Priorities of Project Trade-

offs Constrain: a parameter is a fixed requirement. Enhance: optimizing a parameter over others. Accept: reducing (or not meeting) a parameter requirement.

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Step 3: Creating the Work Breakdown Structure

Work
An

Breakdown Structure (WBS)

hierarchical outline (map) that identifies the products and work elements involved in a project
the relationship of the final deliverable (the project) to its subdeliverables, and in turn, their relationships to work packages suited for design and build projects that have tangible outcomes rather than processoriented projects
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Defines

Best

Hierarchical Breakdown of the WBS

FIGURE 4.3

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Work Breakdown Structure

FIGURE 4.4

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Work Packages
A

Work Package Is the Lowest Level of the WBS.

It

is output-oriented in that it:

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

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

o Identifies resources needed to complete a work package (how much) o Identifies a single person responsible for units of work (who)
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Step 4: Integrating the WBS with the Organization

Organizational
Depicts

Breakdown Structure (OBS)

how the firm is organized to discharge its work responsibility for a project
o Provides a framework to summarize organization work unit performance o Identifies organization units responsible for work packages o Ties the organizational units to cost control accounts

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Step 5: Coding the WBS for the Information System

WBS

Coding System

Defines:

o Levels and elements of the WBS o Organization elements o Work packages o Budget and cost information
Allows

reports to be consolidated at any level in the organization structure

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WBS Coding

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Estimating Project Time and Costs

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Estimating Projects
Estimating
The

process of forecasting or approximating the time and cost of completing project deliverables The task of balancing the expectations of stakeholders and the need for control while the project is implemented
Types

of Estimates

Top-down

(macro) estimates: analogy, group consensus, or mathematical relationships Bottom-up (micro) estimates: estimates of elements of the work breakdown structure (WBS)
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Factors Influencing the Quality of Estimates

Planning Horizon

Organization Culture

Quality of Estimates

People

Project Duration

Project Structure and Organization

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Estimating Guidelines for Times, Costs, and Resources

1. 2. 3.

4. 5. 6. 7.

Have people familiar with the tasks make the estimate. Use several people to make estimates. Base estimates on normal conditions, efficient methods, and a normal level of resources. Use consistent time units in estimating task times. Treat each task as independent, dont aggregate. Dont make allowances for contingencies. Adding a risk assessment helps avoid surprises to stakeholders.

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Macro versus Micro Estimating

Conditions for Preferring Top-Down or Bottom-Up Time and Cost Estimates Condition Macro Estimates Micro Estimates Strategic decision making X Cost and time important X High uncertainty X Internal, small project X Fixed-price contract X Customer wants details X Unstable scope X
TABLE 5.1

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Estimating Projects: Preferred Approach

Make

top-down estimates
the WBS

Develop Make

bottom-up estimates schedules and budgets

Develop

Reconcile

differences between top-down and bottom-up estimates

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Methods for Estimating Project Times and Costs

Macro
Ratio

(Top-Down) Approaches
methods/Parametric

Apportion
Function

method

point methods for software and system projects curves

Project Estimate Times Costs

Learning

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Apportion Method of Allocating Project Costs Using the Work Breakdown Structure

FIGURE 5.1

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Simplified Basic Function Point Count Process for a Prospective Project or Deliverable

TABLE 5.2

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Example: Function Point Count Method

TABLE 5.3

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Methods for Estimating Project Times and Costs (contd)

Micro

(Bottom-Up) Approaches

Template method (Past Project) Parametric procedures applied to specific tasks (Ratio Method) Detailed estimates for the WBS work packages (People-Three Time) Phase estimating: A Hybrid

(Aero/IT/New Technology)

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Level of Detail

Level of detail is different for different levels of management. (Strategic- e.g. Build oil platform in the Narmada basin-HEG Ltd) Level of detail in the WBS varies with the complexity of the project. Excessive detail is costly. Fosters a focus on departmental outcomes Creates unproductive paperwork Insufficient detail is costly. Lack of focus on goals Wasted effort on nonessential activities
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Three Views of Cost

FIGURE 5.6

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Types of Costs
Direct

Costs

Costs

that are clearly chargeable to a specific work package.

o Labor, materials, equipment, and other

Direct

(Project) Overhead Costs

Costs

incurred that are directly tied to an identifiable project deliverable or work package.
o Salary, rents, supplies, specialized machinery

General

and Administrative Overhead Costs

Organization

costs indirectly linked to a specific package that are apportioned to the project
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Contract Bid Summary Costs

Direct costs Direct overhead G&A overhead (20%) Profit (20%) Total bid $80,000 $20,000 $20,000 $24,000 $144,000

FIGURE 5.5

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Refining Estimates
Reasons

for Adjusting Estimates

Interaction

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

Estimates

and cost estimates of specific activities are adjusted as the risks, resources, and situation particulars become more clearly defined.

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Refining Estimates (contd)

Contingency
Are

Funds and Time Buffers

created independently to offset uncertainty Reduce the likelihood of cost and completion time overruns for a project Can be added to the overall project or to specific activities or work packages Can be determined from previous similar projects
Changing

Baseline Schedule and Budget

Unforeseen

events may dictate a reformulation of the budget and schedule.

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Creating a Database for Estimating

Estimating Database Templates

FIGURE 5.7

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Developing a Project Plan

I had six honest serving men who taught me all I know: their names wereWhat? How? Why? When? Where? Who? .. Rudyard Kipling

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Developing the Project Plan

The
A

Project Network

flow chart that graphically depicts the sequence, interdependencies, and start and finish times of the project job plan of activities that is the critical path through the network
o Provides the basis for scheduling labor and equipment o Provides an estimate of the projects duration (T) o Provides a basis for budgeting cash flow (C)

o Highlights activities that are critical and should not be delayed

o Help managers get and stay on plan
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From Work Package to Network

WBS/Work Packages to Network

FIGURE 6.1

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From Work Package to Network (contd)

WBS/Work Packages to Network (contd)

FIGURE 6.1 (contd)

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Constructing a Project Network

Terminology
Activity:

an element of the project that requires time. activity: an activity that has two or more preceding activities on which it depends. (concurrent) activities: Activities that can occur independently and, if desired, not at the same time.

Merge

Parallel

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Constructing a Project Network (contd)

Terminology

Path: a sequence of connected, dependent activities. Critical path: the longest path through the activity network that allows for the completion of all projectrelated activities. Delays on the critical path will delay completion of the entire project.
C

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

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Constructing a Project Network (contd)

Terminology
Event:

a point in time when an activity is started or completed. It does not consume time. Burst activity: an activity that has more than one activity immediately following it (more than one dependency arrow flowing from it).
Two

Approaches
(AON)
A

Activity-on-Node

o Uses a node to depict an activity

Activity-on-Arrow

(AOA)
D
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o Uses an arrow to depict an activity

Basic Rules to Follow in Developing Project Networks

Networks typically flow from left to right. An activity cannot begin until all of its activities are complete. Arrows indicate precedence and flow and can cross over each other. Identify each activity with a unique number; this number must be greater than its predecessors. Looping is not allowed. Conditional statements are not allowed. Use common start and stop nodes.

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Activity-on-Node Fundamentals

FIGURE 6.2

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Activity-on-Node Fundamentals (contd)

FIGURE 6.2 (contd)

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Network Computation Process

Forward
How How How

PassEarliest Times

soon can the activity start? (early startES)

soon can the activity finish? (early finishEF)

soon can the project finish? (expected time

ET)

Backward PassLatest Times

How How

late can the activity start? (late startLS) late can the activity finish? (late finishLF)

Which How

activities represent the critical path?

long can it be delayed? (slack or floatSL)

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Activity-on-Node Network

FIGURE 6.5

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Activity-on-Node Network Forward Pass

FIGURE 6.6

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Activity-on-Node Network Backward Pass

FIGURE 6.7

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Determining Slack (or Float)

Free

Slack (or Float)

The

amount of time an activity can be delayed without delaying connected successor activities

Total
The

Slack

amount of time an activity can be delayed without delaying the entire project

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Activity-on-Node Network with Slack

FIGURE 6.8

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Activity-on-Arrow Network Building Blocks

FIGURE A6.1

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Activity-on-Arrow Network Fundamentals

FIGURE A6.2

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Activity-on-Arrow Network Fundamentals

FIGURE A6.2 (contd)

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Managing Risk

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Risk Management Process

Risk
An

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

Risk
A

Management

proactive attempt to recognize and manage internal events and external threats that affect the likelihood of a projects success
o What can go wrong (risk event) o How to minimize the risk events impact (consequences)

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

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

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The Risk Event Graph

FIGURE 7.1

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Risk Managements Benefits

A

proactive rather than reactive approach

Reduces

surprises and negative consequences the project manager to take advantage of appropriate risks better control over the future

Prepares

Provides Improves

chances of reaching project performance objectives within budget and on time

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The Risk Management Process

FIGURE 7.2

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Managing Risk
Step

1: Risk Identification

Generate

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

Step

2: Risk Assessment
assessment matrix

Risk

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Step 1: Partial Risk Profile for Product Development Project

FIGURE 7.4

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Step 1: Risk Breakdown Structure

FIGURE 7.3

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Step 2: Risk Assessment Form

FIGURE 7.6

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Impact Scales

FIGURE 7.5

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Risk Severity Matrix

FIGURE 7.7

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Managing Risk (contd)

Step

3: Risk Response Development

Risk

Mitigating

o Reducing the likelihood an adverse event will occur o Reducing impact of adverse event
Transferring

Risk

o Paying a premium to pass the risk to another party

Avoiding
Sharing

Risk

o Changing the project plan to eliminate the risk or condition

Risk Risk
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o Allocating risk to different parties-Insurance/Sub-contactor

Retaining

o Making a conscious decision to accept the risk

Contingency Planning
Contingency
An

Plan

alternative plan that will be used if a possible foreseen risk event actually occurs plan of actions that will reduce or mitigate the negative impact (consequences) of a risk event

Risks

of Not Having a Contingency Plan

no plan may slow managerial response

Having

Decisions

made under pressure can be potentially dangerous and costly

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Risk Response Matrix

FIGURE 7.8

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Risk and Contingency Planning

Technical
Backup

Risks

strategies if chosen technology fails Assessing whether technical uncertainties can be resolved
Schedule
Use

Risks

of slack increases the risk of a late project finish Imposed duration dates (absolute project finish date) Compression of project schedules due to a shortened project duration date
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Risk and Contingency Planning (contd)

Costs

Risks

Time/cost Deciding

dependency links: costs increase when problems take longer to solve than expected. to use the schedule to solve cash flow problems should be avoided.

Price

protection risks (a rise in input costs) increase if the duration of a project is increased.

Funding

Risks

Changes

in the supply of funds for the project can dramatically affect the likelihood of implementation or successful completion of a project.
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Contingency Funding and Time Buffers

Contingency
Funds

Funds

to cover project risksidentified and unknown reserves reserves

o Size of funds reflects overall risk of a project

Budget

o Are linked to the identified risks of specific work packages

Management

o Are large funds to be used to cover major unforeseen risks (e.g., change in project scope) of the total project
Time

Buffers

Amounts

of time used to compensate for unplanned delays in the project schedule

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Contingency Fund Estimate (000s)

TABLE 7.1

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Managing Risk (contd)

Step

4: Risk Response Control

control

Risk

o Execution of the risk response strategy

o Monitoring of triggering events o Initiating contingency plans

o Watching for new risks

Establishing

a Change Management System

o Monitoring, tracking, and reporting risk

o Fostering an open organization environment

o Repeating risk identification/assessment exercises o Assigning and documenting responsibility for managing risk
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