Project Management in Contemporary Organizations

Project Management in Contemporary Organizations

• Project management has emerged due to the requirements of today's society for new management methods.
• Forces have driven the emergence and expansion of project management.

Forces of Project Management

• Project Management is driven by 3 Paramount Forces:
  • Exponential expansion of human knowledge.
  • Growing demand for complex, sophisticated, and customized goods and services.
  • Evolution of worldwide competitive markets for production and consumption.
• The forces combine to mandate teams for complex problem-solving instead of individuals.

Objective of a Project

• Project objectives include:
  • Performance
  • Time
  • Cost

The Project Manager

• Project managers face complex problems.
• There is growth in the number of project-oriented organizations.

Project Management Institute (PMI)

• The Project Management Institute (PMI) was established in 1969.
• In 1990, PMI had 7,500 members, 17,000 members in 1995 and over 44,000 members in 1998.
• Growth indicates the rapid increase in project use.
• Growth reflects the importance of project management and PMI as a profession.

Nonnumeric Models

• Sacred Cow Project: Suggested by a senior and powerful official in the organization.
• Operating Necessity Project: Required to keep the system running.
• Competitive Necessity Project: Necessary to sustain a competitive position.
• Product Line Extension Project: Judged on fit with the current product line, gap-filling, link strengthening, or line extension.
• Comparative Benefit Model: Considered and selected as the one with the most benefit to the firm.

Numeric Models

• Profit/Profitability: Focuses on profit or profitability metrics.
• Average Rate of Return: calculated as average annual profit divided by average investment.
• Payback Period: determined by dividing the initial fixed investment by estimated annual cash inflows.
• Discounted Cash Flow: uses a present value method.
• Internal Rate of Return: finds the rate of return that equates the present value of inflows and outflows.
• Profitability Index: NPV of all future expected cash flows divided by the initial cash investment.

Choosing a Project Selection Model

• Selecting a project selection model depends on the management's philosophy and wishes.

Risk versus Uncertainty

• Analysis of risk and uncertainty involves managing risk by understanding their differences.
• Risk: The decision-maker knows the probability of each state of nature and outcome, allowing determination of expected value.
• Uncertainty: The decision-maker lacks complete information and cannot determine the expected value of each alternative.

Risk Analysis

• Risk analysis focuses on understanding the nature and extent of uncertainty in decision-making.
• Probability distributions of variables are determined or subjectively estimated.
• Probability distribution for the rate of return (or net present value) is found via simulation.
• Expectation and variability are important project evaluation criteria.

Information Base for Selections

• Selections are based on:
  • Accounting Data
  • Measurements (Subjective vs. Objective, Quantitative vs. Qualitative, Reliable vs. Unreliable, Valid vs. Invalid)
  • Technological Shock

Project Portfolio Process (PPP)

• Project Portfolio Process (PPP) aligns with the organization's goals and strategies.
• Ensuring that the organization has already identified its mission, goals, and strategies using some formal analytic method such as SWOT analysis.

Dealing with Obstacles

• Project uniqueness leads to a series of crises.
• Inception Phase: "Fires" are resource-related.
• Near Completion: Obstacles cluster around last-minute schedule/technical changes and team uncertainty.

Making Project Goal Trade-Offs

• Project managers must make trade-offs between cost, time, and performance goals.

Failure and the Risk of Fear and Failure

• Projects can be divided into two general categories to understand the nature and timing of perceived difficulties.

Two General Types of Projects

• Type 1 Projects: Well-understood, routine construction projects.

  • Rarely fail due to budget or schedule.
  • Fail because they do not handle unexpected crises.
  • Simple at the beginning
  • Often lack the appropriate technical expertise to handle such crises

• Type 2 Projects: Not well understood with uncertainty about specifics.

  • Face difficulties early in the project.
  • Considered planning problems.
  • Result from failure to define the mission carefully or gain client acceptance.

Breadth of Communication

• Project managers spend significant time communicating with interested groups.
• Communication involves selling, reselling, and explaining the project.
• Interested parties include top management, functional departments, clients, and team members.

Essential Project Manager Understandings

• Project managers need to understand why the project exists.
• Top management support is critical.
• Build and maintain information solid
• Flexible in many ways

Negotiation

• Project managers must be highly skilled negotiators.
• Almost every aspect of the PM's job relies on this skill.

Selecting the Project Manager

• Sought-after manager attributes:
  • Technical background
  • Experienced manager
  • Mature
  • Available
  • Good relations with executives
  • Can keep team members happy
  • Work experience in different departments
  • Highly adaptable

Chapter 4: Conflict and Negotiation

• Conflict and negotiation is "the process which begins when one party perceives frustration or potential frustration of its concerns".
• Conflict can play a creative role in planning.

The Nature of Negotiation

• Negotiation involves two or more parties seeking an acceptable exchange rate for items they own or control.

Facilitating the Integration of Activities

• Lateral Relations allow horizontal decision-making across authority lines.

Negotiating a Resolution

• Be aware each unit has its own goals.
• Project managers negotiate with stakeholders.
• Optimize outcomes in terms of organization goals.

Partnering, Chartering, and Change

• High-level negotiation skills are needed in 3 situations:
  • Use of subcontractors.
  • Multi-department input.
  • Managing deliverable/priority changes after the project starts.

Partnering

• Reasons include:
  • Avoiding litigation.
  • Diversifying technical/political risks.
  • Shortening project duration.
  • Pooling knowledge

Process for Building Partnered Projects

• Commitment to partnering is essential.
• Both parties must implement partnering with agreement.

Chartering

• A project charter is a written agreement between the project manager, senior management, and functional managers.

Scope Change

• Basic causes for change:
  • Initial planning errors
  • New project/user information
  • Mandated environment change

Priorities

• Project priorities:
  • High Priority: Project being supported.
  • Low Priority: Project done with available time and money.
  • Urgent Projects/Mandates: Immediate projects.

Conflict and Project Life Cycle

• Patterns of conflict relate to different project stages.

Settling Conflicts About Priorities

• To settle conflicts:
  • Open communication
  • List priorities
  • Compromise
  • Collaborative decision-making
  • Set clear deadlines

Conflict During Project Formation

• Arises from differing opinions/goals on how a project should start.

Conflict During Project Planning

• Technical conflicts build as plans become detailed.

Conflict During Project Implementation (Main Program)

• Schedules are a major conflict source.

Conflict During Project Phase-Out (Termination)

• Conflict sources during termination: schedules, technical problems, personality conflicts, and pressure to complete.

Some Requirements and Principles of Negotiation

• Principled negotiation: Separates people from the problem, focuses on interests, invents mutual gain options, insists on objective criteria.

Chapter 5: Project Organization

• The project team should have senior members with long-term project relationships.
• Close team communication and managers with rare skills are necessary.

Human Factors and The Project Team

• Meeting schedule and cost goals without compromising performance involves both technical and human dimensions.
• It is imperative that project manager's motivate and develop team members

Motivating Project Team Members

• Employees are motivated by
  • Recognition
  • Achievement
  • Work itself
  • Responsibility
  • Advancement
  • Chance to learn new skills
• Empowerment of teams is also a motivational factor.

Advantages of Empowerment

• Team Interaction
• Team feedback
• Enhanced project manager evaluation tools

Interpersonal Conflict

• Conflict focus relates to the project life cycle stage.
• Conflict involves the project manager.

Chapter 6: Project Planning

• Project planning establishes directions in detail to facilitate later accomplishment.

Initial Project Coordination

• The project launch meeting visibly symbolizes management commitment.

Project Launch Meeting

• Establishes:
  • Technical Scope
  • Responsibilities
  • Tentative budgets/schedules

Composite Plan

• Each unit agrees to deliver a preliminary plan outlining responsibility.
• Determine required tasks and estimates of budget and schedules.
• Group scrutinization integrates plans into a composite project plan.

Project Plan

• The approved result is the project plan, also the Master or Baseline Plan.

Project Plan Elements

• Project Plan Elements include:
  • Overview
  • Objectives
  • General Approach
  • Contractual Aspects
  • Schedules
  • Resources
  • Personnel
  • Evaluation Methods
  • Potential Problems

Project Planning in Action

• Software/hardware developers use a lifecycle-oriented planning process:
  • Concept evaluation
  • Requirements identification
  • Design
  • Implementation
  • Test

Software and Hardware Development Planning Process

• Planning process:
  • Integration
  • Validation
  • Customer test and evaluation
  • Operations and maintenance

System Integration

• An integration management aspect playing a crucial role in the project.
• Its 3 Objectives are:
  • Performance
  • Effectiveness
  • Cost Systems

Heirarchical Planning System

• Its planning identifies and sorts activities appropriately.

Sorting Out of the Project

• Careful planning importance needs emphasizing.
• Pinto and Slevin: identified factors for project implementation success.

Strategic Success Factors

• Strategic Factors Include:
  • Project Mission
  • Top Management Support
  • Project's Action Plan

The Work Breakdown Structure (WBS)

• WBS takes different forms for different purposes.
• WBS is an outline with Level I task on the left and successive levels appropriately indented

Interface Coordination Through Integration Management

• Coordination and integration are difficult tasks.
• Timing and coordination are essential parts of integration management.
• "Interface coordination" manages work across multiple groups.

Approaches to Interface Management

• Employs multifunctional teams
• Defines and maps inter-dependencies between project team members.

Chapter 7: Budgeting and Cost Estimation

• Serves as a standard for comparison.
• Budgeting is a baseline for measuring differences between planned and actual resource use.
• Simplifies the project plan in another form.

Two Fundamentally Different Strategies of for Data Gathering

• Top-Down: Collects judgments and experiences of top and middle managers, assigns cost estimates to lower-level managers continuing to lowest level.

Advantages of Top-Down method

• Accurate budgets

• Stable budgets

• Stable statistical distribution

• The executive's experience accounts for even the small and important tasks

• Bottom-Up: Follows WBS or project action plan where team members are consulted to ensure accuracy and estimates are based on resources like labor and material.

Advantages of Bottom-Up method

• More detailed tasking
• Good for managerial training practices

Advantages of Bottom-Up method

• More accurate idea of resource requirements
• Direct involvement of low-level managers
• Good managerial training technique, where it gives junior managers valuable experience

Budgeting

• Top-Down Budgeting: Very common process.
• Bottom-Up Budgeting: Often viewed as risky by senior managers.

Work Element Costing

• The actual budget-building process tends to be straightforward but tedious.

An Iterative Budgeting Process

• Resource estimates and actual requirements rarely align for several reasons:
  • Estimates become easier the higher you move on organizational chart
  • Wishful thinking leads to underestimates of cost and time.
  • Subordinates build in protection against failure ("Murphy's Law”).

CATEGORY/ACTIVITY BUDGETING vs. PROGRAM BUDGETING

• Program Budgeting: Aggregates income/expenditures across programs (projects). Formatted like a spreadsheet, with dis-aggregated standard operations.

Improving the Process of Cost Estimation

• Two ways to manage risks associated with chance events on every project
  • Allowances for contingencies (5-10%)
  • Estimate a range of outcomes (most likely, optimistic, pessimistic).

Funding Non-Profitable Projects

• Funding Reasons:
  • Develop knowledge of technology.
  • Get organization "foot in the door”.
  • Obtain service portions of the work.
  • Achieve good positioning.
  • Improve competitive position.
  • Broaden a business line.

Learning Curves

• Studies show human performance improves with repetition.
• Performance improves with a fixed percentage each time production doubles.
• Work hours per unit decrease, depending on the learning rate.

Other Factors

• About three-fifths to five-sixths of projects fail to fulfill their set objectives concerning time, cost, and/or specifications.
• Several Common causes:
  • Goals that are Arbitrary and impossible
  • Scope creep
  • Wildly optimistic estimates
  • Failure to include allowances -Bad luck

Type of Estimation Error

• 2 generic types of estimation error:
  • Random Error: over/under estimation are likely to be equal.
  • Bias: systematic errors. A change of over/under estimation are not likely to be equal.