Project Management Lecture Notes PDF

**Project management** Lecture 1: **Introduction** **Project** Def: a temporary endure, designed to produce a unique product/ service. Characteristics: A project is unique, clear goal, temporary, specified duration, quality, teamwork and creates change. A project goes through various of phases...

**Project management** Lecture 1: **Introduction** **Project** Def: a temporary endure, designed to produce a unique product/ service. Characteristics: A project is unique, clear goal, temporary, specified duration, quality, teamwork and creates change. A project goes through various of phases during the execution process. The stages are: defining, planning, executing and closure. All these stages have different stages within. Goals are smart in projects, but we must be realistic. Also, plans are not good except if you execute them. Control variables: There is a need for constant monitoring, during the project executions. Checking on control variables of the project which includes: A. **Quality:** features and performance B. **Cost:** resources C. **Scope of work:** boundaries of a project including its goals, deliverables and deadlines D. **Time:** period **Types of projects** Organisation level categorization Strategic, tactical and operational. **Type of project** **duration** **complexity** --------------------- ------------------ ---------------- Strategic 2-3 years high tactical 1-2 years medium Operative 1 year and below low **Project stakeholders** - Are not isolated from people - Various organizations and people are involved - These are called stakeholders - Categories of stakeholders are various The most important step is to figure out any possible risks/ events before it occurs. We can use pre-study and pre-project to see/ determine. Pre-study: feasibility analysis conducted to evaluate the idea. Done immediately after conceptualization of the idea. Pre-project: uses outcome of pre-study to justify profitability of a project - Also an opportunity to analyse costs as well as other financial implications associated with projects. Lecture 2: **Project selection** Project selection overview: A number of project you want to execute. Project selection is the process of evaluating and choosing which projects an organization should undertake from a pool of different options. **Sources of new projects:** - **New technology**: advancements in technology can inspire new technology - **Market demand:** changes in market demands and customer expectations - **Competitive pressure:** competitive dynamics in the industry can drive organizations to start new projects, to keep up with competitors or differentiate their offerings. - **Social, environmental and ethical consideration:** increasing focus on corporate social responsibility and sustainability drives projects aimed at reducing environmental impact, improving social outcomes, or enhancing corporate ethics. - **Laws and regulations:** new or changing government regulations, industry standards, or compliance requirements can necessitate the creation of projects to ensure that the organization adheres to legal and regulatory frameworks. - **Leadership vision:** leaders with a strong vision often initiate projects that align with their goals for the company, shaping the organization´s trajectory. **Project proposal** Def: is a document that outlines a planned project and seeks approval or support from stakeholders, such as management, clients, investors etc. It provides an overview of the projects objectives, scope, time, budget, resources, etc. Criteria for assessing project proposals 1. **Strategic assessment:** How well does the project align with the organization's strategic objectives and vision? Projects that directly support key goals should be prioritized (growth, innovation, cost reduction) 2. **Return on investment:** The financial turn or value that the project is expected to generate compared to its cost. 3. **Risk assessment**: Evaluating the risks associated with the project, including financial, operational, market and technical risks. **Methods/ techniques of ranking proposals** A. **Payback method:** Measure time it will take to recover the project investment. This is the simplest model. Payback emphasizes cash flows, a key factor in business. B. **Net present value**: Uses managements minimum desired rate-of-return to compute the present value of all net cash inflows. CAPM and WACC may be used to calculate. Net present value is the value of all future cash flows. C. **Scoring method:** Involves assigning scores to various projects based on predefined criteria (Return on investment (**ROI**), risk, strategic alignment). The project is ranked based on their total scores. D. **Project portfolio matrix**: Is a tool used in project management to help organizations prioritize and manage their portfolio of projects. **Lecture 3: Defining the project** Project definition is a part of the lifecycle process. What is the defining phase all about? - The early stages are all about developing the outline serve to ensure that all tasks are identified - Once the outline and detail are defined, an integrated information system can be developed to schedule work and allocate budgets. **Project defining tasks:** - Define needs - Requirements - Define design (conceptual and detailed) - Project prototype - Work break down structure - Produce project charter - Produce project priorization matrix **Project needs:** there is a reason behind the project, a need. There are reasons behind executing projects. Steps in clarifying needs: 1. Need creation: 2. Recognizing the need: need for buy-inn from decision makers 3. Need confirmation: confirmed by stakeholders Common pitfalls: 1. Unclear needs 2. Predefined solutions 3. Wrong needs **Defining and clarifying requirements** They are specific conditions or tasks that must be completed to achieve the needs for a project. These are specifications that a solution must meet, and they are detailed and actionable focusing on specific deliverables. Examples of requirements: **Functional requirements:** what specific functions and features should the project deliver? **Non -functional requirements**: what are the performance, security, usability and reliability requirements? **Technical requirements:** technological needs and constrains of a project to ensure it meets its functional and non- functional objectives **User requirements:** focus on the needs and expectations of the end-users or stakeholders who will interact with the system or project. **Regulatory requirements:** regulatory requirements are essential for ensuring that a project or product complies with laws, standards and regulations that govern its industry, location and use. Conceptual design - Provides a high-level overview of how a project will meet its requirements - It outlines the overall approach, key components, and interaction needed to achieve the projects goals. - Here we are producing it on paper, it is just a concept, and doesn't have a prototype - The solution is often provided early in the project lifecycle - Example: online store order process flow Detailed design - Provides a comprehensive and in-dept specification of the solutions architecture, components and functionalities. - Involves defining how each part of the system will work, interact and be implemented. - For a web-based e-commerce platform, the detailed design will cover aspects like the front-end and back-end architecture, database schema, security, APIs and integrations. Project prototype - An early model for the final product designed to test key features and functionalities before full-scale development - This allows stakeholders to provide feedback and to ensure that the design meets their expectations Work breakdown structure - To break down a project into smaller units- makes it easier to estimate, plan, execute and track - Usually structured into levels, with each descending level representing a finer level of detail. - It is a powerful tool for project planning management Importance of work break down structure **Improved project clarity**: A wbs breaks down complex projects into more understandable components **Better task assignment:** Becomes easier to assign specific tasks to individuals or teams, based on skills and expertise by breaking the project into smaller work packages **Enhanced estimation and budgeting:** Smaller, well-defined tasks allow for more accurate estimation of time, resources, costs all leading to better project planning and budgeting **Easier monitoring and control:** A wbs provides framework for tracking progress **Risk management:** Identifying and analyzing tasks at a granular level makes it easier to sport potential risk early on and develop mitigation strategies **Facilitates communications:** wbs improves communication among team members and stakeholders by providing a clear picture of the projects scope and responsibilities. **Foundation for scheduling:** The wbs forms the basis for developing the project schedule. **Lecture 4: Project leadership** Overview of leadership concept - In general leadership is the ability to guide, inspire and influence a group of people toward a common goal. - Involves setting a vision, motivating and empowering others, making strategic decisions and fostering an environment where individuals can succeed and contribute to the groups objectives. - Its not just about holding a position of authority, is about gaining trust, respect and commitment. - Project leadership is the art of guiding, motivating and managing a project team to achieve project objectives while balancing constraints like scope, time, cost and quality. - This involves inspiring people, navigating challenges and fostering a positive team environment. - Its crucial for ensuring that projects are completed successfully and that the team remains engaged and productive throughout the process. Functions of a project leader: 1. Planning and organization 2. Implementation and execution 3. Motivation 4. Inspiration 5. Monitoring and controlling 6. Conflict management 7. Evaluation **Qualities of an effective project leader** - **System thinker:** project managers must be able to take a holistic rather than a reductionist approach to project - **Personal integrity:** before you can lead and manage others, you have to be able to lead and manage yourself - **Proactive:** good project managers act before it is needed to prevent small concerns from escalating into major problems - **High emotional intelligence (EQ):** project management is not for the meek. Project managers must have command of their emotions and be able to respond constructively to others. - **General business perspective:** Because the primary role of a project manager is to integrate the contributions of different business and technical diciplines, it is important that a manager have a general grasp of business fundamentals - **Effective time management:** time is a managers scarcest resource. Project managers must be able to budget their time wisely and quickly adjust their priorities. - **Skillful politician**: must be able to deal effectively with a wide range of people and win their support and endorsement of their project. **Project manager pitfalls** - Unclear goals - Too ambitious - High turnover (talent) - Poor planning - Lack of resources - Unclear priorities **Goals must be SMART:** Specific Measurable Attainable Realistic Timebound Leadership models - Frameworks that describe the various approaches to leaderships. - Outlines how leaders can influence, motivate and manage their teams to achieve organized goals - Provide insights into different leadership styles, behaviors and strategics that can be applied in different situations. **Situational leadership model** - It suggests that there is no best style of leadership - Instead, effective leadership is contingent upon the situation, specifically the development level of the team members. - Presents four leadership styles that vary in the level of directive and supportive behavior provided by the leader (supporting, coaching, delegating and directing) **Benefits** - Customizable: allows leaders to tailor their approach to fit the individual needs of team members - Development-oriented: help their team members develop skills and confidence over time - Wide application: applicable in a variety of contexts, from corporate environments to education and healthcare. **Criticisms of the model** - Complexity: continuously adjusting leadership styles can be challenging, esp. in dynamic or large teams. - Over-simplification: the model assumes that all team members progress through development levels in a linear fashion, which may not always be the case. - Subjectivity: accurately assessing the development level of team members can be subjective, and different leaders may interpret the same situation differently. **Transformational leadership model** - Inspire and motivates their followers by creating a vision for the future - They lead by example. Key elements: - **Idealized influence:** leading by example and earning thrust - **Inspirational motivation**: communicating a compelling vision that inspires others - **Intellectual stimulation:** encouraging creativity and problem-solving - **Individualized consideration:** providing personalized support and mentorship. **Transactional leadership model** - Based on a system of rewards and punishments. - Leaders provide clear expectations and goals, and followers are rewarded for meeting these expectations or penalized for failing to do so. - This model is focused on short-term tasks, efficiency and maintaining order. **Project managers power** - The power of a project manager refers to the authority and influence they have within the project environment. - Comes from different sources, each with unique impacts on the project and the team. - Understanding these power sources helps a project manager navigate project challenges. Legitimate power - Formal authority power comes from the position or title the project manager holds. - A project manager is given authority by the organization to manage the project and make decisions. Expert power - Derived from the project managers knowledge, skills and expertise in project management or the specific industry - Team members are more likely to follow their guidance and trust their decisions when they respect the project managers knowledge. Reward power - Comes from the project managers ability to reward team members for their performance. - Rewards can be bonuses, promotions, recognition, additional responsibilities or others. Coercive power (DANGEROUS in the modern world) - Is the ability to enforce consequences or punishments for non-compliance, poor performance or failure to meet expectations. - This is the opposite of reward power. - Is in projects a critical skill for project managers, as conflict is a natural part of any team dynamic. - Success in this, can lead to better decisions, improved relationships and enhanced performance. - Poor conflict management can derail projects, reduce team morale and lead to missed deadlines or failed objectives. Common sources of conflicts - **Resource allocation**: competing for limited resources - **Schedule pressure**: tight deadlines and unrealistic timeframes - **Role ambiguity:** lack of clarity in roles and responsibilities - **Stakeholder expectations**: differing or conflicting expectations from stakeholders, clients or sponsors - **Personality clashes**: personal differences including values, attitudes and behavior. - **Technical disagreements:** conflicts can arise over technical approaches, design decisions or methodologies. Conflict management styles - Collaborating: focus on finding a solution that satisfies all parties. - Compromising: both parties give up something to reach a middle ground - Avoiding: involves sidestepping or postponing the conflict. - Competing: competing a high-assertiveness, low-cooperation approach where one party seeks to win at the expense of the other. **Lecture 5 Project planning** Project planning involves creating a road map for how to achieve the goals and objectives of a project. It is a critical phase in project management that includes defining tasks, setting timelines, allocating resources and identifying risks. The need for planning - Allowing for the creation of contingency plans in case things go wrong. - Planning defines the timeline for the project, including task durations and deadlines. - Allows for setting realistic schedules and prioritizing tasks effectively. - A detailed plan includes milestones and performance metrics, which allows for continuous tracking and assessment of progress. - Proper planning ensures that resources, such as personnel, equipment and finances are allocated appropriately. The planning process The process begins in the start of the project and continue throughout the project. In consists of: Inputs: resources and information Control mechanisms: regulations, budgets, standards, norms and procedures. Support and knowledge: tools, software, project office, tools and techniques. Output: project plans. Project planning tools Focus on the following tools: Critical path method, PERT and Gantt chart. Critical path method - The project network is a visual flow diagram of the sequence, interrelationships, and dependencies of all the activities that must be accomplished to complete the project. - Project networks are developed from the WBS (work breakdown structure). - The activities are placed in a sequence that provides for orderly completion of the project. - Networks are built using nodes (boxes) and arrows (lines). Rules for network diagrams 1. Networks flow from left to right 2. An activity cannot begin until all preceding connected activities are complete. 3. Arrows indicate precedence and flow and cannot cross over each other. 4. Each activity must have unique identity. 5. Conditional statements are not allowed. **Terms in critical path method** - **Node:** represents an individual activity or event in a project - **Activity:** schedule work to be performed e.g laying concrete in construction, drawing plans, etc. - **Critical path**: is the longest path in the projects network diagram, and any delay in critical path activities will delay the entire project, it has zero slack. - **Slack/float:** the amount of time an activity can be delayed without affecting the projects completion date. Slack = LS-ES or LF-EF - **Early start (ES):** earliest time that an activity can begin - **Early finish:** earliest time an activity can be completed - **Late start:** latest possible time an activity can start without delaying the projects completion date. - **Late finish:** latest possible time an activity can be completed without delaying the overall project. - **Critical activity:** an activity without slack or float. Determining critical path - It means the path(s) with the longest duration through the network - If an activity on the path is delayed, the project is delayed the same amount of time. - Critical activities cannot be delayed without delaying the completion of the project. - Activities with zero slack. **Forward pass computation** - Add activity times along each path in the network (ES+ duration = EF) - Carry the early finish (EF) to the next activity where it becomes its early start (ES), unless... - The next succeeding activity is a **merge** activity, in which case the largest EF of all preceding activities is selected. **Backward pass computation** - Subtract activity times along each path in the network (LF- duration =LS) - Carry the late start (LS) to the next activity where it becomes its late finish (LF), unless... - The next succeeding activity is a burst activity, in which case the smallest LF of all preceding activities is selected. **PERT** - A PERT diagram (program evaluation review technique) is a project management tool used to schedule, organize and coordinate tasks within a project. - PERT is similar to CPM although there is slight difference - PERT uses probabilistic time estimates (optimistic, pessimistic, and most likely time) because activities may have high uncertainty. Additional terms for PERT - Time (TE) is estimated using three different scenarios: - **Optimistic time (O):** best case, the shortest time in which the task can be completed. - **Pessimistic time (P):** worst case, the longest time the task might take - **Most likely time (M):** most realistic, the best estimate for task completion under normal conditions. Benefits of critical path method and PERT - It demonstrates the graphical view of any project - It helps to identify the most important tasks that you have to manage - It helps to save your time and reduce timelines - It helps to compare planed and actual progress - It helps to make dependencies visible and clear **Gantt chart** - Is a visual representation of all the tasks related to your project scheduled overtime. They are used to plan projects of all sizes and shapes. - Why? Because they are an incredible tool to show the work that is scheduled to be done on a project on a specific day. They also show the whole tenure of a particular project in one simple view. Features you can monitor using Gantt chart - The start and end dates of a project - What are the project tasks - Who are the team members involved in each project - Who is working on each individual task - What is the duration of each individual task - How all the tasks are linked or are they dependent on each other Benefits of using Gantt chart - Know what is going on in your projects - Improved communication and team cohesion - Avoid resource overload - Measure the progress of projects - See overlapping activities and task dependencies - Experience more clarity - Practice better time management **Reducing project duration** Reasons why: - Customer requirements and contract commitments - Time-to-market pressures - Incentive contracts (bonuses for early completion) - Unforeseen delays - Overhead and goodwill costs - Pressure to move resources to other projects. **Options when resources are not constrained** - Adding resources - Outsourcing project work - Scheduling overtime - Establishing a core-project team (eliminates drain of multitasking on other projects or ork) - Do it twice-fast (prototype, temporary) and correctly (final solution) **Options when resources are constrained** - **Fast tracking:** Sometimes it is possible to rearrange the logic of the project network so that critical activities are done in parallel rather than sequentially. - **Critical chain:** Critical chain project management is designed to accelerate project completion. - **Reducing project scope:** Probably the most common response for meeting unattainable deadlines is to reduce or scale back the scope of the project. This invariably leads to a reduction in the functionality of the project. - **Compromise quality:** Reducing quality is always an option but is rarely acceptable or used. If quality is sacrificed, it may be possible to reduce the time of an activity on the critical path. **Lecture 6: Project organization** Def: Project organization refers to the structure and system used to manage and coordinate the various aspects of a project. It involves defining roles, responsibilities and reporting relationships to ensure that the project is completed efficiently and effectively. A well-structured project organization helps ensure that resources are allocated appropriately, tasks are executed on time and goals are met. **Organizational structures** - The way which a company or org. arranges its internal hierarchy and roles to achieve its goals and objectives. - Defines how tasks are divided, coordinated and supervised. - An effective organizational structure facilitates communication, enhances operational efficiency, and ensures that all parts of the organization work towards common goals. **Key elements of organizational structure** - **Levels of authority** defines the layers of management and reporting relationships. - **Chain of command:** the line of authority within the organization, showing who reports whom. - **Departmentalization**: grouping of similar activities of functions into departments, such as marketing, finance and human resources. - **Integration mechanisms:** processes and systems that ensure different parts of the organization work together effectively **Type of organizational structures** - There are many variants of organizational structure. In terms of project management the following are commonly used 1. Functional structure 2. Matrix structure 3. Independent structure Functional structure - Departments or functions operate independently with each department handling its own project - Most commonly/traditionally used - The organization is divided into different departments or functions, each specializing in a specific area of expertise - This setup groups employees based on their roles, skills and task they perform, leading to a clear hierarchy and defined roles within each department. **Main features of functional structure** - Employees are grouped based on their skills/tasks such as marketing, sales, hrm etc. - Employees report to functional manager who oversees their specific function - The chain of command is clear within each department - Communication flows smoothly within each functional department due to the specialized nature of the work and clear reporting lines. The matrix structure - Is a hybrid organizational structure that combines elements of both the functional and projectized structures - It is designed to improve the flexibility and efficiency of the organization by allowing for more dynamic allocation of resources and better collaboration across different functional areas. - In this structure, employees typically report to two managers: one functional manager and one project or product manager. **Main features of matrix structure** - Employees have dual reporting relationships - Resources, including personnel, are shared across departments. This allows for more efficient use of resources. - Teams are composed of members from various functional department, which encourages collaboration across different areas of expertise. - The matrix structure is often used when organizations have multiple projects running concurrently. Pure project structure - Is an organizational structure in which the entire company is organized around projects - In this structure, the project manager has full authority over the project and its resources, including the team members, budget and schedule. - Team members are dedicated exclusively to the project, and they report directly to the project manager rather than to a functional manager. **Project team** - Is a group of individuals brought together to work collaboratively on a specific project. - The team typically consists of members from different departments or areas of expertise, each contributing their specialized knowledge and skills to the project. - The project team operates under the leadership of a project manager, who coordinates the efforts of the team to achieve the project objectives. **Factors to consider when selecting team** - **Credibility**: ethical and reputable - **Availability**: readily available when needed - **Technical expertise:** select skilled employees - **Problem solving availability** - **Dynamic and adaptable** **Team building** - Refers to the process of developing and strengthening the relationships, trust, collaboration and effectiveness of a group of individuals working together as a team - In the context of project management or organizational development, team building is crucial for creating high-performing team that works cohesively towards shared goals. - It involves activities, exercises, and strategies aimed at improving communication, boosting morale, fostering a sense of unity, and enhancing problem-solving skills within the team. **Team building process** - **Forming:** the project is assembled, roles and responsibilities are defined, and team members begin to get acquainted with each other and the project objectives. - **Storming**: as team members start working together, conflicts or differences of opinion may arise. This is a natural stage where the team is working out how to collaborate effectively. - **Norming:** the team begins to develop a stronger sense of unity and collaboration. Processes and workflows are established, and team members start to work more cohesively. - **Performing**: the team reaches peak productivity and efficiency. Members work collaboratively to achieve project milestones and objectives with minimal friction. - **Adjourning**: once the project is completed, the team is disbanded. This stage may involve transition team members back to their departments, reviewing project outcomes and celebrating success. **Responsibility matrix** - Also called RAM or RACI matrix, Is a tool used in project management to define and clarify the roles and responsibilities of team members and stakeholders in relation to specific tasks or deliverables. - It ensures that everyone involved in the project understands their duties, helping to avoid confusion, overlaps and gaps in responsibility. **Example of responsibility matrix** **R:** responsible: the person or people responsible for completing the task or deliverable. They do the work **A:** accountable: the person who is ultimately accountable for the task or deliverable. This person approves the work and ensures it meets the necessary standards. **C:** consulted: the person or people who need to be consulted before a decision or action is taken. They provide input based on their expertise. **I:** informed: the person or people who need to be kept informed about the progress or outcome of the task. They do not contribute directly to the work but need to stay updated. **Internal team structure** - Refers to how roles, responsibilities and relationships are organized to achieve the projects goals for a particular team. - The structure can vary based on the size, complexity and scope of the project, as well as the organizations culture and management style. - Several types are: - Traditional team structure - Isomorphic structure - Expert structure - Egoless - Autocratic Traditional team structure - Classic top-down structure where there is a clear chain of command. - A project manager oversees the entire project, and the team is organized into layers. - Team leaders report to the manager and individual contributors reporting to the team leader. - It is normally used for larger projects. Isomorphic structure - Refers to a team structure that closely mirrors or mimics the structure of the project - The structure allows the team to execute different areas of the project at once - A team is grouped into subunits of a project - There is challenge of coordinating the project. Expert structure - Is an organizational design in which authority, decision-making and leadership are concentrated around individuals or teams with the highest expertise or specialized knowledge in a particular field. - This type of structure is common in projects where specialized knowledge is critical to success, such as law, medicine, research and technology. Egoless - Is an organizational or team structure where hierarchy and formal authority are minimized in favor of collaboration, shared ownership and collective responsibility. - In this model, the emphasis is placed on the work, not on individual status or rank. - The goal is to create an environment where all members contribute equally, decisions are made collaboratively, and the focus is on problem-solving rather than personal recognition or power dynamics. Autocratic - Is an organizational design where one individual holds absolute control and decision-making authority. - In this structure power is centralized at the top, and the leader or manager makes all key decisions without input or consultation from subordinates. - This structure is characterized by strict oversight, rigid control and a clear chain of command. **Lecture 7**- **Cost management and budgeting** Project cost management - Is a core area of project management focused on planning, estimating, budgeting, funding, managing and controlling the costs of a project. - The main aim is to ensure it is completed within the approved budget Importance of project cost management - **Budget control:** Ensures that the project stays within approved budget - **Financial planning:** Helps in planning the allocation of resources and funds across different project phases - **Risk mitigation:** Identifies financial risks and manages proactively - **Stakeholder confidence:** Provides transparency and builds confidence with stakeholders by ensuring that costs are controlled - **Performance measurement**: Allows for tracking the financial health of the project and enables timely corrective actions. **Key components of cost management** Cost management are broken into four key processes: 1. Cost estimation 2. Resource estimation 3. Cost control 4. Cost monitoring and reporting 1. **Cost estimation** - Involves predicting the financial recourses required to complete a project - It is the process of quantifying the costs associated with all project activities, including materials, labor, equipment and overhead. **Types of costs** - Direct costs - Expences that can be directly attributed to a specific project, task or activity. These costs are directly associated with the production of goods and services within the project. - Indirect costs - Expences that are not directly traceable to a specific project or activity (administrational costs, office supplies, rent etc.) 2. **Resource estimation** - Apart from money, a project requires a lot of resources in place, and these include labor, equipment, technology, tools - Helps allocate resources effectively and ensures the project has the necessary financial backing **Importance of resource estimation** - **Efficient resource allocation**: Ensures that the right number of resources is allocated to each task, preventing both shortages and excesses. - **Cost control:** Helps in creating a more accurate project budget by estimating the costs associated with resources. - **Schedule accuracy:** Facilitates the development of a realistic project schedule by estimating the time required to complete tasks with the available resources - **Risk mitigation**: Identifies potential resource-related risks early, such as resource shortages or skill gaps, allowing for proactive management. - **Stakeholder confidence**: Builds confidence among stakeholders by demonstrating that the project is well-planned with adequate resources. **Risk reserves** - Are critical component of project management, providing a financial buffer to address unforeseen risks that could impact the projects scope, schedule or budget. - They are essential for ensuring that the project can withstand uncertainties without derailing its progress or exceeding its budget. There are two categories of risk reserves: contingent reserve and management reserve. **Contigent reserve** - Contingency reserves are funds set aside to cover identified risks that are known and have been analyzed - These risks are typically documented in the risk register and have quantifiable probability and impact. 2 types of contingent reserve A. Percentage added costs: bases on likely hood of a risk project manager can add buffer to the estimated costs. More suited for smaller projects. B. Expected monetary value: it is a quantitative risk analysis technique used in project management to assess the potential financial impact of risks on a project. It involve calculating the average outcome of a set of uncertain future events, weighted by their probabilities of occurrence. **Management reserve** - A management reserve is a specific amount of the project budget or time that is set aside to cover unforeseen work or unexpected risks that were not identified during the project planning phase. - This reserve is distinct from the contingency reserve, which is allocated for known risks with identified probabilities and impacts. - Provide a financial and time cushion for the project manager and are controlled at a higher level of the organization. **Budgeting estimates** - Are crucial in project management for determining the financial requirements needed to complete a project. - These estimates are used to develop a project budget, which serves a financial plan to manage and control costs throughout the project lifecycle. - Accurate budgeting estimates help ensure that the project is adequately funded and can be completed within the allocated resources. Methods of budget estimation - Top-down approach - Is a method of planning and estimating where the overall project objectives and deliverables are determined first, and then the project is broken down into smaller components and tasks. - This approach begins at "the top" level with a broad overview and works its way "down" into more detailed aspects of the project. - Bottom-up approach - Start by estimating the cost of individual activities and resources, then aggregate these costs. This method is detailed and can give you more precise control over budget. - **Parametric estimating**: Using statistical relationships between historical data and other variables. - Particularly used in research projects when you have reliable data from previous similar projects, and it helps create more accurate data-driven estimates. - **Analogous estimating:** Comparing the current project with past projects that are similar in scope and nature. - **Expert judgement estimating**: A qualitative technique where experienced professionals or subject matter experts provide insights and estimates based on their knowledge and experience. - This method is especially useful when there is limited historical data, or t-he project is unique and doesn't fit neatly into other estimation models. 3. **Cost control** - Involves monitoring, analyzing and regulating the costs associated with a project to ensure that the project stays within the approved budget. - Effective cost control helps project manager avoid budget overruns, identify cost variances early, and take corrective actions to bring the project back on track financially. Purpose of cost control - **Ensure budget adherence**: The primary goal of cost control is to ensure that the project is completed within the approved budget. - **Minimize cost overruns:** By monitoring costs closely, project managers can identify and address potential overruns before they become significant. - **Improve cost efficiency**: Cost control helps identify areas where cost savings can be achieved without compromising the quality or scope of the project. - **Facilitate decision making**: Accurate cost data allows project managers and stakeholders to make informed decisions about resource allocation, scope adjustments and project priorities. Best practices for cost control - Develop a detailed cost management plan - **Use contingency reserves wisely**: allocate contingency reserves for known risks and ensure they are used only when necessary. - **Engage in continuous monitoring**: regularly review cost data to identify potential issues early and take corrective action promptly. - **Communicate with stakeholders**: keep stakeholders informed about the project's financial status and any potential risks to the budget. **Cost structuring** Cost structuring is the process of organizing and categorizing the costs associated with a project in a systematic way. Cost structuring leads to a cost breakdown structure (CBS). Cost breakdown structure is to break the costs into tasks, and then break it into all the costs related to the tasks. **Lecure 8- Project monitoring and control** **Project control** - It is process on ensuring that a project is on track to meet its goals in terms of scope, time, cost and quality and other variables. - It involves measuring performance, comparing it against the project plan, and making necessary adjustments to correct deviations. - The goal of project controls to ensure successful project completion within the predefined constraints. - Project control ensures that projects are delivered in time, within budget and to the required quality. **Project control process** 1. Setting a baseline plan - Provides us with the elements for measuring performance - Is derived from the cost and duration information found in the work breakdown structure database and time-sequence data from the network and resource scheduling decisions. 2. Measuring progress and performance 3. Comparing plan against actual 4. Taking action **Control mechanisms** 4 types of control mechanisms 1. **Directing:** issuing orders on what to do 2. **Rules and procedures:** Rules guide how projects are executed. Most organizations have control manuals which enable them to control resources. 3. **Goal oriented**: setting targets and goals for employees. The expectations will serve as guiding tool for employees. 4. **Culture and norms:** These mechanisms use values and norms to guide decision making. Employees are expected to behave according to the culture. **Information access and control** - The need for an effective information management system which ensures that correct information is available to relevant users when needed. - The system ensure speed in terms of access, relevance and reliability - Information is accessed through meetings and written reports - Reports follows specific templates, and they are largely formal - Meetings enable members to contribute towards project success. **Control variables** - Are factors that are monitored, controlled or managed to ensure the project stays on track to achieve its objectives. - These variables can be used to measure progress, performance, and the effectiveness of project execution. - Common control variables include scope, cost, risk, benefits, time and quality. - Time can be found using a Gantt chart. **Earned value management (EVM)** - A technique that integrates scope, time and cost data to assess performance and progress. - It provides quantitative data to help project managers determine whether a project is on track, within budget and on schedule. - Is based on the S-curve Critical terms in EVM - **Planned cost or value (PC/PV):** The authorized budget assigned to scheduled work. It is the value of the work planned to be completed by a specific time. - **Actual costs (AC):** The total cost incurred for the actual work completed. Also known as actual cost of work performed. - **Earned value (EV):** The measure of work performed, expressed in terms of the budget authorized for that work. Calculated as % of work completed multiply by planned budget. - **Cost variance (CV):** performance metric measuring the difference between EV and AC. Formula: CV=EV-AC. Positive CV indicates the project is under budget; negative CV means it´s over budget. - **Budget variance (BV):** performance metric measuring the difference between PC/PV and AC. Formula: BV=PC or PV-AC. Positive BV means the project has used less money than budgeted. A negative BV mean that the project has used more money than budgeted. - **Schedule variance (SV):** performance metric measuring difference between EV and PC/PV. Formula: EV-PC or PV. Positive SV indicates the project is ahead of schedule; negative SV means it´s behind schedule. - **Cost performance index (CPI):** it is a measure of cost efficiency and project productivity. Formula: EV/AC. A CPI greater than 1 indicate the project is cost-efficient, while aCPI less than 1 indicates inefficiency. - **Schedule performance index(SPI)**: a measure of schedule efficiency. Formula: EV/PC. An SPI greater than 1 indicates the project is ahead of schedule, while an SPI less than 1 indicates a delay. - **Estimated cost at completion (ECAC**): the forecasted cost of the project at completion based on current performance. Formula: AC+(BAC-EV)/CPI) - **Estimated time at completion (ETAC**): forecast amount of time required to complete the project. Formula: Planned duration/SPI. **Lecture 9- Project environment** **Project environment** - Refers to elements existing outside the boundary of the organization - Refers to external factors that influence a project's success - **Task environment**: Specific external factors that directly affect the day-to-day operations of a project or organization. These elements are also called project stakeholders - **General environment**: Consists of broader, less immediate factors that indirectly influence a project or organization. These factors often operate on a larger scale and impact the organization in ways that are less specific or harder to control. **Project stakeholders/ task environments** - Stakeholders are a group of people who have interest in a project - Majority of the stakeholders do not have direct control over the project - If more people become interested in the project, it complicates the execution. - Before initiating a project, project managers need to identify stakeholders who have interests in a project and strive to meet their needs. - Some stakeholders may support the project while others oppose it. There is a need to balance the needs of stakeholders. - Examples of project stakeholders is project customers/clients, project sponsor, suppliers, project committee and the project owner. It can also be public authorities, financial institutions, end-users, consultants and the media. **Environmental factors** - Refers to broader, more indirect external forces that affect the organization or project but do so in a less immediate and direct way. - These are often macro-level factors that influence the entire industry or economy and can shift over time. - While organizations cannot directly control these factors, they must adapt to them. - **Technological factors**: Access to new technology is critical for projects. - **Physical factors**: Factors such as weather and geological conditions which can affect projects, (rain, snow, types of rocks) - **Economic factors**: These include interest rates, exchange rates, inflation, funding, etc. - **Labor related factors**: Availability of project personnel with required skills - **Political factors**: Government policies, regulations and laws - **Sustainability factors**: conditions that ensure the project personnel align with sustainable demand. - **Cultural factors**: values norms, traditions, and language which might affect the project. **Stakeholder management** - Is a critical aspect of project management that involves identifying, analyzing and managing the interests, expectations, and involvement of individuals or groups who have a stake in the project. - The goal is to ensure that stakeholders are engaged, their needs and concerns are addressed, and they are kept informed throughout the project lifecycle. - Effective stakeholder management helps in building positive relationships, minimizing resistance, and increasing the chances of project success. Stakeholder management process - **Stage 1:** **startup** - This is the initiation phase, obtain information which can be necessary in stakeholder mapping. - **Stage 2: identifying stakeholders** - Identify people or groups who have interests in the project - **Stage 3: analyzing the stakeholders** - Once stakeholders are identified, the next step is to analyze their interests, influence and potential impact on the project. - Includes understanding: - Level of influence - Level of interest - Savage two-dimensional model: classifies stakeholders into 4 categories. - SWOT-analysis can also be used to analyze the stakeholders. - **Stage 4: strategy and actions** - Based on the analysis, a tailored engagement strategy for each stakeholder group is developed - **Stage 5: follow up** - This is more a review process where the project manager evaluates the effectiveness of the stakeholder management strategy Types of stakeholder relationships - **Classic market:** this relationship focus on short term exchange. - **Third party:** the organization relates with stakeholders through a third party. This third party is usually called boundary spanner and can be a professional who can offer advice to the organization. - **Open and direct**: parties establish open and direct relationships. - **Integrated teams:** collaborative form of relationship between project and stakeholders. For example, a bank collabs with construction company. - **Partnering:** high degree of collaboration without any boundary between parties. **Lecture 10- Project risk management** **Concept of risk** - A risk is any uncertain event or condition that, if it occurs, can have a positive or negative impact on the project´s objectives, including its scope, schedule, cost or quality. - Risk arises from various sources and can affect different aspects of the project. - They are not always negative- some risks, known as opportunities, can potentially benefit the project. Risk categories - **Internal risk:** These are risks that originate from the organization itself/ or within the project. They are typically within the control of the project team and can be managed or mitigated more directly through good project management practices. - **External risks**: These risks are from outside the organization or project team and are typically beyond direct control. - They require proactive monitoring and contingency planning to manage their impact effectively. - **Extreme risk:** These are high-impact, low-probability risks that, if they occur, can have catastrophic consequences on the project and the organization. Risk development - Risk development in project management refers to the process by which risks evolve or change throughout the lifecycle of a project. - As a project progresses, risks can intensify, diminish, or transform based on various factors such as project stage, changes in the external environment, or project decisions. - Effective risk development management is essential for keeping the project on track, as risks that are not managed an escalate and significantly impact project success. Interpretation risks - Is the process of understanding and assessing the potential impact of the identified risks on a project´s goals, timeline, budget and quality. - This step is crucial for making informed decisions about which risks require immediate action, which can be monitored, and which can be accepted without significant impact. - Project managers have different perception of risks, and this may affect risk management process. **Factors affecting risk interpretation:** - Personal experience and biases - Risk tolerance levels - Stakeholder priorities - Cultural differences - Interests - Access to information **Risk management** - Is the process of identifying, analyzing and responding to potential risks that could negatively impact a project´s objectives, timeline or resources. - Effective risk management is essential to minimize uncertainties and enhance the likelihood of project success. - Risk management represent proactive way of dealing with risks before they affect the project. - Risk management is affected by several factors which can reduce effectiveness of risk response measures. - Factors affecting risk management: lack of awareness, resistance to change, lack of resources, lack of tools and methods and lack of knowledge. **Risk communication** - Is the process of sharing information about risks, their potential impacts, and response strategies with all relevant stakeholders. - This ensures that everyone involved in the project has a clear understanding of the risks, is aligned on how they´re being managed, and knows their roles in the mitigation process. - Effective risk communication builds trust, promotes transparency, and enables better-informed decision making. **Risk management method** **Stage 1: Planning stage**: Define the purpose and objectives of the risk management process. **Stage 2: Risk identification**: Use the following methods for risk identification - Brainstorming - Interviews - Checklists - Expert group - Sharing experience - Fishbone diagram **Stage 3: Risk analysis** - Determine the probability of occurrence as well as the impact of the event - Probability is the likelihood of occurrence - Impact is the consequence if the risk occurs - Probability X impact = risk contribution - If the result is negative, then the risk has negative effects - If the result is positive, then the risk has positive effects **Stage 4: Risk strategy** - The following are the strategies for managing risks - A\) **Risk avoidance** - Risk avoidance is changing the project plan to eliminate the risk or condition. - Although it is impossible to eliminate all risk events, some specific risks may be avoided before you launch the project. For example, adopting proven technology instead of experimental technology can eliminate technical failure. - B\) **risk transfer** - Passing risk to another party is common; this transfer does not change risk - Passing risk to another party almost always results in paying a premium for this exemption. For example Sub-contracting. - C\) **Accept risk** - In some cases, a conscious decision is made to accept the risk of an event occurring. - Some risks are so large it is not feasible to consider transferring or reducing the event (earthquake or flood). - D\) **investigate:** gather more information for informed decision - E\) **exploit:** take advantage of the opportunity - F\) **share**: joint venture with others **Stage 5: Follow up and control** - Keep documents of risks - Maintain risk register/ communicate effectively