Unit 5 The World of Project Management and The Role of Project - - PDF document
Unit 5 The World of Project Management and The Role of Project Manager Source: Project Management in Practice, 5th Edition, Mantel, Meredith, Shafer, Sutton, Wiley, 2014. Project Management: A Systems Approach to Planning, Scheduling, and
Source: Project Management in Practice, 5th Edition, Mantel, Meredith, Shafer, Sutton, Wiley, 2014. Project Management: A Systems Approach to Planning, Scheduling, and Controlling, 10th Edition, Harold Kerzner, Wiley, 2009.
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A project is any task within an organization that does not fit neatly into ‘business-as-usual’. The “Big Dig” project in Boston and the “787 Dreamliner” project at Boeing are two examples of large scale projects. On smaller scale, an individual might self‐build a new house, a car manufacturer may want to develop a new engine or a company may want to set up a quality system. In the school context, students are given a design and make project which needs to be managed – although on a smaller scale – using many of the same principles as the larger projects. Example: Redesigning a shopping cart https://www.youtube.com/watch?v=M66ZU2PCIcM
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In industry, many projects are complex and may involve input from people with different kinds of knowledge and expertise. Projects usually involve a team who are managed by a project manager or project leader who may be appointed for the duration of the project. It is worth noting that project management is adopted as a career specialism by many engineers and is considered to be a mainstream engineering discipline.
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product or service. (PMI 2008)
frequently involving research or design, that is carefully planned to achieve a particular aim.
fixed period and within certain cost and other limitations.
aimed at meeting a specific need or purpose.
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Project management techniques originated in industry to address the need for managing increasingly complex activities such as civil and mechanical engineering projects. The techniques involved are something quite different in scope and purpose from the ‘Design Process’ that is familiar to the engineers. Project management concentrates on the management of resources and time
Project management involves applying a systematic approach to achieving the objectives of the project.
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Project Management Institute 2007
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– Definition of work requirements – Definition of quantity and quality of work – Definition of resources needed
– Tracking progress – Comparing actual outcome to predicted outcome – Analyzing impact – Making adjustments
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Project management techniques are increasingly used for: Achieving Strategic Goals – e.g. Boeing 787 dreamiliner Achieving Routine Goals – e.g. routine machine maintenance Improving Project Effectiveness – e.g. creation of project
management office
Organizing Virtual Projects – e.g. Microsoft Windows 10
development involves global teams whose members operate in different countries, time zones.
Handling Quasi‐Projects – e.g. a new drug development in a
pharmaceutical company without a clearly defined objective, a fixed deadline, and a determined budget.
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Project management differs from general management as “projects” differs from “nonprojects”
General management deals with “routine” work, project management deals with “unique” work. General manager “manage by exception”. Project manager only deals with the exceptions. General management success is dependent on good planning. Project success is absolutely dependent on carefully detailed planning. “Non‐project” budget follows standard budgeting procedures while project budget is prepared from scratch, delivered directly. “Non‐project” rarely crossing organization functional boundaries and the projects crossing them freely. Managerial hierarchy is well defined in general management while it is informal in project management.
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– The divisions, departments, sections, and similar subdivisions of the total unit
– The multidisciplinary character of projects
– Members of project teams may be spread across countries and speak different languages – Some project team members may never have a face‐to‐ face meeting
Unlike general managers, project managers have responsibility for accomplishing a project but little or no legitimate authority to command the required resources from other departments. The PM must be skilled at win‐win negotiation to obtain these resources.
Project management refers to the administration of the project, its supervision and organization. It means analyzing the objectives of the project, defining the tasks needed to achieve these objectives and controlling the execution. Projects have three interrelated goals, these are to:
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The performance of the project and PM is measured by the degree to which these goals are achieved.
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profit.
problem → terminate the project.
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During the early stages, the PM must make sure that the project reflects the wishes of the client as well as the abilities
During the implementation stage, the PM is focused of keeping the project on budget and schedule. Toward the end of the project, the PM’s attention is to assure that the project’s specifications are truly met.
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Project selection is the process of evaluating individual projects or groups of projects and then choosing to implement a set of them so that the objectives of the parent organization is achieved. Conditions considered in selection
Is it profitable? (meeting return on investment target?) Is it required by law? (a mandate?) Does the firm have the knowledge and skill to carry it out? Does the project involve building competencies, consistent with the firm’s strategy? Does the firm has the capacity to carry it out on schedule? If R&D project, could the technical success bring economic success?
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senior executive of the firm.
any project that is necessary for the continued
projects, selection could be made by individuals in the committee through rank‐ordering, such as the Q‐sort method.
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First, separate projects into “High”, and “Low” subsets. If there are more than 7 or 8 in a group, further separate each of them into, for example, “High” and “Medium”; or “Medium” and “Low”. If necessary, rank the projects in the “High” subset into “Very High” and “High”; and “Low” into “Low” and “Very Low”. Arrange the subsets in order of rank to
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The Payback Period represents the amount of time that it takes for a Capital Budgeting project to recover its initial cost. Example ‐ A project with an initial investment of $100,000 and an annual return of $25,000 each year, the payback period, n = $100,000/$25,000 = 4 years.
* Problem – not consider time value of money
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n t t t
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If considering inflation for period t, the discounting term (1+r)t becomes (1+r+p)t
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16 12 13 14 15 17 21 19 20 22
$125
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$100 $90 $50 $105 $115 $90 $97 $75 $82 $65 $35
NPW = ‐$125,000‐$100,000(1+0.13+.02)‐1‐$90,000((1+0.13+.02)‐2 +$50,000((1+0.13+.02)‐3 + ….+ ($65,000+$35,000)((1+0.13+.02)‐10 = $17,996.77 Since NPW >0, select the project
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A B C D E F G
Discount Factor
NPW Inflation Year Inflow Outflow Net Flow
1/(1 + r + p)t
D x E Rate (p) 2013* 0.00 125,000.00 -125,000.00 1.0000
0.02 2013 0.00 100,000.00 -100,000.00 0.8696
0.02 2014 0.00 90,000.00
0.7561
0.02 2015 50,000.00 0.00 50,000.00 0.6575 32,875.81 0.02 2016 120,000.00 15,000.00 105,000.00 0.5718 60,034.09 0.02 2017 115,000.00 0.00 115,000.00 0.4972 57,175.32 0.02 2018 105,000.00 15,000.00 90,000.00 0.4323 38,909.48 0.02 2019 97,000.00 0.00 97,000.00 0.3759 36,465.89 0.02 2020 90,000.00 15,000.00 75,000.00 0.3269 24,517.63 0.02 2021 82,000.00 82,000.00 0.2843 23,309.52 0.02 2022 65,000.00 65,000.00 0.2472 16,067.01 0.02 2022 35,000.00 35,000.00 0.2472 8,651.46 0.02 Total 759,000.00 360,000.00 399,000.00 17,996.77
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Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for. Opportunity cost analysis is an important part of a company's decision‐ making processes, but is not treated as an actual cost in any financial statement.
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Noel has just graduated from a medical college and has been offered a job at a prestigious hospital in town with $45,000 a year. His uncle, who runs a health care and fitness center, has also offered him a position for $35,000 a year. However, Noel chose to enroll for a medical research program at a local university, which would cost him $38,000 a year.
Solution: Number of Economic Alternatives = 3 ($45,000 job, $35,000 job and ‐
$38,000 research program) Desired Alternative = ‐ 38,000 Next Best Alternative = 45,000 Since, Opportunity Cost = Cost of Selected Alternative ‐ Cost of Next Best Alternative Therefore, Opportunity Cost = ‐38,000 ‐45,000 = ‐83,000 Hence, his opportunity cost not only includes the cost his Desired Alternative would incur but also the value of the Next Best Alternative which he gives up.
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Unweighted 0‐1 Scoring Model ‐ A set of relevant factors is selected by management & then listed in a printed form. One or more raters score the project on each factor, whether or not it qualifies for an individual criterion.
n j j ij i
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where Si = the total score of the ith project sij = the score of the ith project on the jth criterion wj = the weight or importance of the jth criterion
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A college student needs to purchase a car. There are two primary criteria, “cost” and “reliability”, and everything else a “nicety”. Three alternatives are identified. A 5‐point scale is used in each criterion.
Criteria Cost Reliability Niceties Weights 0.4 0.4 0.2 Alternative Total A 3 2 4 2.8 B 2 4 1 2.6 C 4 3 1 3.0
←
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– Projects are all about uncertainty
– People add to the uncertainty
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– Called risk analysis
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To load Crystal Ball within Microsoft Excel: 1.Click the Office button,
2.Click the Microsoft Excel Options button, and then click the Add-I ns link. 3.In the Manage list at the bottom of the Add-Ins dialog, select COM Add-I ns and click Go. 4.In the COM Add-I ns dialog, select Crystal Ball. 5.Click OK to close the dialog and open Crystal Ball within Microsoft Excel. To unload Crystal Ball from within Microsoft Excel, follow steps 1 through 3 and then clear Crystal Ball in step 4.
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Find the total cost of a project with 5 phases
Assumption Cells Define Assumption Distribution Gallery Forecast Cells
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Statistics Total Cost Trials 1000 Base Case $79,200 Mean $79,431 Median $79,784 Mode ‐‐‐ Standard Deviation $7,533 Variance $56,739,465 Skewness ‐0.0407 Kurtosis 3.18
0.0948 Minimum $57,827 Maximum $112,603 Range Width $54,777 Mean Std. Error $238
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An Example
PsychoCeramic Science, Inc. – Considering the installation of a new manufacturing line with the following cash flows –
End of Year Inflow Outflow Net Flow End of Year Inflow Outflow Net Flow 2013* 0.00 125,000.00 -125,000.00 2018 105,000.00 15,000.00 90,000.00 2013 0.00 100,000.00 -100,000.00 2019 97,000.00 0.00 97,000.00 2014 0.00 90,000.00
2020 90,000.00 15,000.00 75,000.00 2015 50,000.00 0.00 50,000.00 2021 82,000.00 0.00 82,000.00 2016 120,000.00 15,000.00 105,000.00 2022 65,000.00 0.00 65,000.00 2017 115,000.00 0.00 115,000.00 2022 35,000.00 0.00 35,000.00
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16 12 13 14 15 17 21 19 20 22
$125
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$100 $90 $50 $105 $115 $90 $97 $75 $82 $65 $35
NPW = ‐$125,000‐$100,000(1+0.13+.02)‐1‐$90,000((1+0.13+.02)‐2 +$50,000((1+0.13+.02)‐3 + ….+ ($65,000+$35,000)((1+0.13+.02)‐10 = $17,996.77 Since NPW >0, select the project
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PsychoCeramic Science, Inc. – Pessimistic, Most Likely, and Optimistic Estimates for Cash Inflows
0.02 and a std. dev. Of 0.0033
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End of Pessimistic Most Likely Optimistic End of Pessimistic Most Likely Optimistic Year Inflow Inflow Inflow Year Inflow Inflow Inflow 2015 35,000.00 50,000.00 60,000.00 2020 75,000.00 90,000.00 100,000.00 2016 95,000.00 120,000.00 136,000.00 2021 67,000.00 82,000.00 91,000.00 2017 100,000.00 115,000.00 125,000.00 2022 51,000.00 65,000.00 73,000.00 2018 88,000.00 105,000.00 116,000.00 2022 30,000.00 35,000.00 38,000.00 2019 80,000.00 97,000.00 108,000.00
PsychoCeramic Science, Inc. –
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PsychoCeramic Science, Inc. –
Statistics Net Present Value of Project Trials 1000 Base Case 17,996.77 Mean 14,423.78 Median 14,558.57 Mode
6,963.06 Variance 48,484,240.19 Skewness
Kurtosis 2.86
0.4827 Minimum
Maximum 35,540.09 Range Width 42,345.46 Mean Std. Error 220.19
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The PPP Attempts to link the organization’s projects directly to the goals and strategy of the organization … is also a means for monitoring and controlling the organization’s strategic projects. Steps are ‐
Establish a project council Identify project categories and criteria Collect project data Assess resource availability Reduce the project and criteria set Prioritize the projects within categories Select the projects to be funded and those to be held in reserve Implement the process
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Make sure that the project is properly planned, implemented, and completed. The hard parts ‐ Playing the many roles of PM. Negotiating with stubborn functional managers and clients. Keeping the peace among project team members. Dealing with senior managers. Being surrounded by the chaos of trying to run the project in the organization.
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how they fit together, how they interact, and how they affect and are affected by their environment.
to the client, and to any other stake holders.
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Solid line – the PM’s communication channels. Dotted line – other communication path bypassing PM.
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example, aircraft production, many parts are carried out by different organizations in different locations.
In order for virtual project to succeed, communication between PM and project team must be frequent, open , and two way.
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It’s the PM’s job to keep senior management up to date on the state of the project, and keep them informed about the problems affecting the project.
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– Cost, schedule, scope change – Cost of changes often exceed client’s expectations
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Three overriding responsibilities ‐ Acquiring resources
release them.
Fighting fires and obstacles
client problems.
Leadership and making trade‐offs
then cost.
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It is not possible for the PM to meet these responsibilities without being a skilled negotiator and a resolver of conflict.
Need ability to:
language and compelling evidence, and 4. connect with those they try to persuade. (Jay Conger, 1998)
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Hard worker is easy to find, what is needed is an individual who completes the tasks given. Among a set of such, select those who meet the following criteria at high levels.
Credibility – he/she is believable
project, its technical problems, and to interpret the wishes of the management and clients to project team.
timely and accurate.
Sensitivity ‐ politically astute and aware of interpersonal conflict Leadership, Style, Ethics – able to direct project in an ethical
project rather than its parts. The leadership style needs to be more flexible when more technical uncertainty is present, more formal when the project is more complex. The PM needs to have and to communicate a strong sense of ethics. (PMI’s Code of Ethics)
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President Project Manager Manager Project A Manager Project B VP Marketing VP Manufacturing VP R&D
Marketing Manufacturing R&D Human Resources Marketing Manufacturing R&D Human Resources 78
all the time.
if so, need to hire additional specialists.
specialties in the parent organization
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President Manufacturing Project Marketing R & D Human Resources Finance
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technology
symptom
can be slow
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President Program Manager PM1 PM2 PM3 Manufacturing 3 1 Marketing 1 ½ 4 1/2 Finance ½ ¼ 3 R&D 4 1 ½ 1/2 Human Resources ½ ¼ 1
Two distinct levels – vertical functional hierarchy and horizontal project structure overlay the functional hierarchy.
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Advantages
Drawbacks
there shall be one and only one superior. The individual specialist has two bosses, the project manager and the functional manager.
functional area rather than to the project. Same people is expected to be at different projects and functional area at the same time.
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President Project M Finance Engineering Project Z Manufacturing
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There is another way of solving the problems of choosing one
management office (PMO) … act as staff to some or all projects … shall never replace PM as officer in charge of the project … useful for small project with short lives. There can be several different types of PMOs in large firms … with different and sometimes overlapping areas of operations
Project management maturity could be measured by PMI’s OPM3 (Organizational Project Management Maturity Model)
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1. Ad‐hoc – disorganized, accidental success, and failures; 2. Abbreviated – some processes exist, inconsistent
management, unpredictable results;
3. Organized – standardized process, more predictable results; 4. Managed – controlled and measured processes, results
more in line with plans;
5. Adaptive – continuous improvement in processes, success
is normal, performance keeps improving.
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» PM may have no direct reports » his/her ability to communicate directly with team members will be critical » important to maintain good morale … since team loyalty may be limited » a PMO (a project’s war room) may be helpful
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– A.k.a. transdisciplinary teams
– Arduous and complicated
– Arduous and complicated
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conflicts were legendary.
from one that proceeded sequentially to one where the steps are carried out concurrently – parallel tasking.
beginning of the process – interdisciplinary approach
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