CHAPTER 17

Project Management

1. Discuss the behavioural aspects of projects in terms of

project personnel and the project manager
Projects
Unique, one-time operations
designed to accomplish a specific
set of objectives in a limited time
frame
Examples:
The Olympic Games
Producing a movie
Software development
Product development
ERP implementation

 Project Management differs from management of more

traditional activities mainly because of its limited time
framework and the unique set of activities involved, which
gives rise to a host of unique problems.

Projects
JAN

FEB

MAR

APR

MAY

JUN

Build A
A Done
Build B
B Done
Build C
C Done
Build D

On time!

Ship

Unique, one-time operations designed to

accomplish a specific set of objectives in a
limited time frame.

17-4

Project Management
How is it different?

Limited time frame

Narrow focus, specific objectives
Less bureaucratic
Why is it used?
Special needs
Pressures for new or improves products or services

17-5

Project Management
What are the Key Metrics

Time
Cost
Performance objectives
What are the Key Success Factors?
Top-down commitment
Having a capable project manager
Having time to plan
Careful tracking and control
Good communications
17-6

Project Management
What are the Major Administrative Issues?
Executive responsibilities
Project selection
Project manager selection
Organizational structure
Organizational alternatives
Manage within functional unit
Assign a coordinator
Use a matrix organization with a project leader

17-7

Project Management

What are the tools?

Work breakdown structure

Network diagram
Gantt charts
Risk management

17-8

Planning and Scheduling

Gantt Chart

MAR APR MAY JUN

JUL AUG SEP OCT NOV DEC

Locate new
facilities
Interview staf
Hire and train
staf
Select and order
furniture
Remodel and
install phones
Move in/startup
17-9

Key Decisions

Deciding which projects to implement

Selecting a project manager
Selecting a project team
Planning and designing the project
Managing and controlling project resources
Deciding if and when a project should be
terminated

1710

Project Manager
Responsible for:

Work
Human Resources
Communications

Quality
Time
Costs

1711

Ethical Issues

Temptation to understate costs

Withhold information
Misleading status reports
Falsifying records
Comprising workers safety
Approving substandard work

1712

Project Life Cycle

Concept

Planning
Execution

Management

Feasibility

Termination

1713

2. Discuss the nature and importance of a work

breakdown structure in project management.
Work Breakdown Structure
A hierarchical listing of what must be done
during a project
Establishes a logical framework for identifying
the required activities for the project
1. Identify the major elements of the
project
2. Identify the major supporting activities
for each of the major elements
3. Break down each major supporting
activity into a list of the activities that
will be needed to accomplish it

Work Breakdown Structure

Figure 17.2

Project
Project X
X

Level 1
Level 2
Level 3
Level 4

1715

 Developing a good work breakdown structure can require substantial time and
effort due to the uncertainties associated with a project and/or the size of the
project. Typically the portion of time spent on developing the work breakdown
structure greatly exceeds the time spent on actually developing a project schedule.
The importance of a work breakdown structure is underscored by the fact that the
activity list that results serves as the focal point for planning and doing the project.
Moreover, the work breakdown structure is the basis for developing time and cost
estimates.

3. Give a general description of PERT/CPM techniques.

PERT:
Program Evaluation and
Review Technique
CPM: Critical Path Method

Graphically displays project activities

Estimates how long the project will take
Indicates most critical activities
Show where delays will not affect project

 Although PERT AND CPM were developed independently,

they have a great deal in common. Moreover, many of the
initial differences between them have disappeared as
users borrowed certain features from one technique for
use with the other. For practical purposes, the two
techniques are now the same; the comments and
procedures described will apply to CPM analysis as well
as to PERT analysis of projects.

 Network (precedence) diagram diagram of project activities that

shows sequential relationships by the use of arrows and nodes.

Activity-on-arrow (AOA) a network diagram convention in which

arrows designate activities.

Activity-on-node (AON) a network diagram convention in which

nodes designate activities.

Activities steps in the project that consume resources and/or time.

Events the starting and finishing of activities, designated by nodes in
the AOA convention.

The Network Diagram (contd)

Path

Sequence of activities that leads from the starting node to

the finishing node

Critical path
The longest path; determines expected project duration
Critical activities
Activities on the critical path
Slack
Allowable slippage for path; the difference the length of
path and the length of critical path

Project Network Activity on

Arrow
Order
furniture

AOA
Locate
facilities

4
Furniture
setup

2
Remodel

Interview

Move in

Hire and
train

1721

Project Network Activity on Node

Order
furniture

AON

Locate
facilities

Furniture
setup

Move in

Remodel

S
Interview

Hire and
train

4
1722

1. In the AOA diagram, the arrows represent activities and they

show the sequence in which certain activities must be performed.
2. In the AON diagram, the arrows show only the sequence in which
certain activities must be performed while the nodes represent the
activities.
3. Activities in AOA networks can be referred to in either two ways.
One is by their endpoints and the other is by a letter assigned to an
arrow.
4. Activities in AON networks are referred to by a letter or number
assigned to a node. Although these two approaches are slightly
different, they both show sequential relationships something Gantt
charts
dont.
5. Note that the AON diagram has a starting node, S, which is
actually not an activity but is added in order to have a single
starting node.

5. List the kinds of information that a PERT or CPM

analysis can provide.

The main determinant of the way of PERT and CPM

networks are analyzed and interpreted is whether
activity
time
estimates
are
probabilistic
and
deterministric.
Advantages of PERT

Forces managers to organize

Provides graphic display of activities
Identifies

Critical activities

Slack activities

Limitations of PERT
Important activities may be omitted
4
Precedence relationships may not be correct
2
Estimates may include
a fudge factor

May focus solely

on critical path

142 weeks
3
17-25

Goldratts Critical Chain

Goldratts insight on project
management
Time estimates are often pessimistic
Activities finished ahead of schedule often
go unreported
With multiple projects, resources needed for
one project may be in use on another
17-26

6. Analyze networks with deterministic times.

Deterministic
Time estimates that are fairly certain
Computing Algorithm
Network activities Used to determine

ES: early start

EF: early finish
LS: late start
LF: late finish

Expected project duration

Slack time

Critical path

Figure 17.5
Deterministic
time estimates
8 weeks

Example 1
6 weeks

4
3 weeks

Move in

11 weeks

4 weeks

1 week

9 weeks

3
17-28

Example 1 Solution
Critical Path

P a th

L e n g th

S la c k

(w e e k s )

1 -2 -3 -4 -5 -6
1 -2 -5 -6
1 -3 -5 -6

18
20
14

2
0
6

17-29

7. Analyze networks with probabilistic times.

Probabilistic
Estimates of times that allow for variation

Probabilistic Time Estimates

Optimistic time
Time required under optimal conditions
Pessimistic time
Time required under worst conditions
Most likely time
Most probable length of time that will be required

Probabilistic Estimates
Figure 17.8
Beta Distribution

to
Activity
start

Optimistic
time

tm

te

Most likely
time (mode)

tp
Pessimistic
time
17-31

Expected Time
te

to + 4tm +tp
6

te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time
17-32

Variance

(tp to)2
36

= variance
to = optimistic time
tp = pessimistic time
17-33

Example 5
Optimistic
time

Most likely
time

Pessimistic
time

2-4-6
b
3-4-5
d

3-5-7
e

5-7-9
f

4-6-8
h
17-34

Example 5 Time Estimates

Tabc = 10.0
Tdef = 16.0
Tghi = 13.50

4.00
b
4.00
d

5.0
e

7.0
f

6.0
h
17-35

Path Probabilities
Specified time Path mean
Z =
Path standard deviation
Z indicates how many standard deviations
of the path distribution the specified tine
is beyond the expected path duration.

17-36

Example 6
17
Weeks
1.00
a-b-c
Weeks

10.0

d-e-f
Weeks

16.0
1.00
g-h-i

Weeks

13.5
17-37

8. Describe activity crashing and solve typical

problems.

Time-cost Trade-offs: Crashing

Crash shortening activity duration
Procedure for crashing
Crash the project one period at a time
Only an activity on the critical path
Crash the least expensive activity
Multiple critical paths: find the sum of crashing
the least expensive activity on each critical path

Time-Cost Trade-Offs: Crashing

Figure 17.11

Total
cost
Expected indirect costs

Shorten

CRASH

Cumulative
cost of crashing

Shorten
Optimum
17-39

Example 7

17-40