project management for business and technology

1.3 Project Management: The Need 71.4 Response to a Changing Environment 9 1.5 Systems Approach to Management 9 1.6 Project Goals 10 1.7 Project Management: The Person, the Team, the Sys

John M Nicholas 8,'e I U ~ I' ~,., ~ •

Projec~ Management for

business and tec~~ology: prine

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69

DUE DATE

Project Management for Business

and Technology

Principles and Practice

John ~I Nicholas

Prentice Hall of India [fu~ llikiI)~ New Delhi - 110 001

2004

This Indian Reprint-Rs 375.00

(Original U.S Edition-Rs 3472.00)

PROJECT MANAGEMENT FOR BUSINESS AND TECHNOLOGY-Principles and Practice 2nd Ed (with CD-ROM)

by John M Nicholas

mimeograph or any other means wiT,out permission in writing frcm t1:e publisher.

ISBN-81-203-2134-0

Extension, Noida-201305 (N.C.R De-1hi).

To Sharry, Julia, Joshua, and Abigail

1.3 Project Management: The Need 7

1.4 Response to a Changing Environment 9

1.5 Systems Approach to Management 9

1.6 Project Goals 10

1.7 Project Management: The Person, the Team, the System 11

1.8 About This Book 12

Study Project Assignment 15

MS Project 15Review Questions 15Endnotes 16

CHAPTER 2 What Is Proj ect Management? 19

2.1 Functions and Viewpoints of Management 19

2.2 Project Viewpoint versus Traditional Management 21

2.3 Evolution of Project Management 24

2.4 Where Is Project Management Appropriate? 27

2.5 Project Management: A Common Approach in Everyday Business 29

2.6 Different Forms of Project Management 31

2.7 Project Environments 35

2.8 Project Management in Industrial Settings 36

2.9 Project Management in the Service Sector 40

2.10 Project and Program ManagementinGovernment 42

2.11 Summary 45

Review Questions 46Questions About the Study Project 47Case 2-1 47

Case 2-2 49Endnotes 50

rii

CHAPTER 3 Systems, Organizations, and System Methodologies 51

Endnotes 82

CHAPTER-1 Systems Development Cycle: Early Stages 87

4.1 Systems Life Cycles 88

4.2 Systems Development Cycle 89

-1.3 Systems Development Cycle, Systems Engineering, and Project Management 93

4.4 ConstraintsinSystems Development 94

4.5 PhaseA.:Conception 95

4.6 The Project Proposal 106

-1.7 Project Contracting 111

-1.8 Summary 115

Review Questions 116Questions About the Study Project 117Case-1-1 117

Case 4-2 118Endnotes 118CHAPTER 5 Systems Development Cycle: Middle and Later Stages 120

Review Questions 152Questions About the Study Project 153Case 5-1 153

Case 5-2 154Case 5-3 155Endnotes 156

173

193193

Network Scheduling and PDMLogic Diagrams and NetworksThe Critical Path 205Calendar Scheduling and TIme-Based NetworksManagement Schedule Reserve 217

PD~1 Networks 217

Planning Fundamentals 159Planning Steps 160

The Project Master Plan 161Scope and vVork Definition 164Project Organization Structure and ResponsibilitiesProject Management System 177

Scheduling 177Planning and Scheduling Charts 179Summary 184

Review Questions 188Questions About the Study Project 189Case 6-1 190

Case 6-2 191Endnotes 191

8.2

7.6 Summary 222

Review Questions and Problems ")")4Questions Abou t the Study Project 228Endnotes 228

PERT, CPM, Resource Allocation, and G ERT 229Program Evaluation and Review Technique (PERTI 230Critical Path Method (CPN!) 238

Schedulingvvith Resource Constraints 244GERT 233

8.3 Discussion and Summary 258

Review Questions and ProblemsQuestions About the Study ProjectCase 8-1 263

Endnotes 266Chapter 9 Cost Estimating and Budgeting

9.1 Cost Estimating 269

9.2 Cost Escalation 269

260262

268

Cost Summaries 288Cost Schedules and ForecastsSummary 300

Review Questions and ProblemsQuestions About the Study ProjectCase 9-1 304

9.89.99.10

365Forecasting "To Complete" and "At Completion"

Performance Index Monitoring 369

\ 'ariance Lirnits 3:-0Controlling Changes 3:-1

10.4 Risk Response Planning 319

10.5 Project ManagementIsRisk Management 323

10.6 Summary 326

10.7 Supplement: Risk Analysis Methods 327

Review Questions and Problems 333Questions About the Study Project 336Case 10-1 336

Case 10-2 337Endnotes 338Proj eet Control 340The Control Process 3.JO

Information :\lonitoring 341Internal and External Project Control 342Traditional Cost Control 342

Cost Accounting Systems for Project Control 343Project Control Process 3-15

Project Control Emphasis 349Performance Analvsis 356

11.1-1 Control Problems 376

11.15 Summary 377

380

Review Questions and ProblemsQuestions About the Study ProjectCase 11-1 381

Endnotes 382Chapter 12 Project Management Information Systems 384

12.1 Functions of thep~ns 385

12.2 Computer-Based Tools 385

12.3 Computer-Basedp~nSystems 386

12.4 Representative Computer-Based PMISs 389

12.5 Web-Based Project Management 405

12.6 Applying Computer-Based Project Management Systems 40712.7 Summary 411

Review Questions 411Questions About the Study Project 412Endnotes 412

Chapter 13 Project Evaluation, Reporting, and Termination 413

Chapter 14 Project Organization Structure and Integration 433

14.1 Formal Organization Structure 434

14.2 Organization Design by Differentiation and Integration 43414.3 Requirements of Project Organizations 438

14.4 Integration of Subunits in Projects 438

1-!.3 Liaison Roles, Task Forces, and Teams 439

14.6 Project Expediters and Coordinators -l-l0

14.7 Pure Project Organizations 442

1·t8 Matrix Organization 44~

14.9 Selecting a Project Form 447

14.10 Project Office 430

Contents

14.11 The Informal Organization 451

14.12 Integration in Large-Scale Projects 452

14.13 Integration in Systems Development Projects 456

14.14 Concurrent Engineering 458

14.15 Quality Function Deployment 463

14.16 Summary 470

Review Questions 471Questions about the Study Project 472Case 14-1 473

Case 14-2 474Endnotes 475Chapter 15

Review Questions 498Questions About the Study Project 499Case 15-1 500

Case 15-2 500Endnotes 501Managing Participation, Teamwork, and ConflictLeadershipinProject Management 504

Participative Management 506Teams in Project Management 507The Team Building Approach 510Improving Ongoing \Vork Teams 512Building ~e\\·Teams 513

Intergroup Problem Solving 515Origins of Contlict 518

Consequences of Conflict 520:\lanaging Contlict 521Team Methods for Resolving Conflict 523Emotional Stress 523

Stress Management

496

503

xii Contents

17.-1 Project Management Causes of Project Success 5-l3

17.5 A Model and Procedure for Analyzing Project Performance 5-!S17.6 Epilogue 550

Review Questions 551Questions About the Study Project 553Endnotes 553

Appendix A Systems Engineering Process 555

Stage 0: Indentification of Need 555

Stage 1: System Concept 557

Stage 2: System Definition and Preliminary Design

Stage 3: Detailed Design and System Development

Stage-1:System Construction and/ or Production

Stage 5: System Operation and Support 560

Throughout: System Evaluation 561

Endnotes 562

Appendix B Types of Contracts 563

Fixed Price Contracts 56-1

Cost-Plus Contracts 565

Incentive Contracts 566

Endnotes 569

557559560

Appendix C Logistical On-Line System Project Master Plan 570

Author Index 591

Subject Index 59-1

When people see something impressive a bridge arching high over a canyon, aspace probe touching down on a distant planet, a graceful curlicue ramp on a free-

\vay, a motion picture such as Titanic (so real you think you're there!), or a nifty

computer the size of your hand-they wonder, "how did they do that?" By they of

course, they are referring to the creators, designers, and builders, the people whothought up and actually made those things Rarely do they mean the m,1 1 wgers, thepeople who organized and lead the effort that brought those wondrous things from aconcept or idea into reality

This book is about the managers-project managers-and what they do and howthey do it Project managers are the mostly unsung heroes of business and technology,people who, in most cases, stand outside the public eye but without whose talent,skills, and hard work most neat ideas would never amount to anything Certainlyfit:

project manager is but one of the many people who help shape the products, systems,and artifacts of modem life, those things we take for granted as well as those ~ emarvel at Nonetheless, the project manager is the one who gets all of the others in-volved, and then organizes and directs them so their combined efforts will corneout right (Sometimes, though rarely, the manager and the creator happen to be thesame vvoody Allen, Kelly Johnson, and Gutzon Borglum are examples Their lifework-s-in motion pictures, supersonic airplanes, and Mount Rushmore resF€c-tively-represent not only creative or technological genius, but leadership and m an-agerial talent as well.)

The pace of change in business and technology is accelerating The last fe'N

decades have seen business be transformed from domestic, nationalistic enterprisesand markets into multinational enterprises and a single global market As a result nomatter what your perspective there is more of everything to contend with-e-n-oreideas, competitors, resources constraints, and, certainly, more F€ople doing andwanting things The accelerated rate of changeintechnology means that products orprocesses are evolving at a more rapid pace, and as a result the life cyclesofthe thir.gs

im-pact on the frequency and conduct of projects-s-whether projects to developproducts,systems, or processes that compete in local, domestic, and internationalmarkets:Froj-ects to create and implement new \\"ays of meeting demand for energy recreation,housing, communication, transportation, and food; or projects to answer basic q·.1es-tions in science or to resolve problems such as hunger, disease, and pollution All ofthis project activity has spurred a gro\':ing interestin \\'ays to plar end control F:-oj-ects, and to organize and lead people and groups to meet the needs o; custorr.ers.markets, and society within the bounds of limited time and resources

Associated \vith the growing interest in project management is the g:"(,\\"ing r.eed

to train project managers In the past and still today, project managers · vere larcely

xv

persons who had demonstrated some exceptional capability, though not necessarily

as a manager.Ifyou were a good engineer, programmer, systems analyst, architect, oraccountant, eventually you would become aproject manager Then, presumably, youwould pick up the necessary management skills somewhere along the way Theflaw

in this approach is that project management encompasses a broad range of managerial, leadership, interpersonal-that are much different than the skills associ-ated with the technology of the particular project There is no compelling reason topresume that the project environment alone will provide the opportunity for some-one to "pick up" the skills necessary for project management

skills-As a text and handbook, this book is about the "right" way to manage projects.It

is intended for advanced undergraduate and graduate university students, and forpracticing managers in business and technology As the title says, it is a book aboutprinciplesandpractice, meaning that the topicsinit are meant to be applied.Itcoversthe big picture of project management-origins, applications, and philosophy, aswell as the nitty-gritty, how-to steps.Itdescribes the usual project management top-ics of networks, schedules, budgets, and controls as well as the human side of projectmanagement

Why a book on businessandtechnology? In my experience, technical specialistssuch as engineers, programmers, architects, chemists, and so on, often have little

or no management training This book, which includes many technology project amples, provides somewhat broad exposure to relevant business concepts and man-agement specifics to help them get started as project managers

ex-What about those people involved in product-development, marketing, improvement, and related projects commonly thought of as "business projects"? Just

process-as students of technology seldom get management training process-as part of their formaleducation, students of business seldom get training about the conduct of projects in'technology For students of business this book reveals not only how "business0'proj-ects are conducted, but what happensina wide variety of engineering, construction,and other kinds of "technical" projects

Of course, technical projects arealso business projects because they involve

busi-ness issues such as customer satisfaction, resource utilization, cost, profits, and so on.Although engineering and development projects may aprear different fromnonengineering projects, both types are similar in the way they are managed Thisbook conceptualizes all projects using a single framework called the Systems Devel-opment Cycle This framework serves as a general scheme for illustrating common-alities and differences among projects

This book is an outgrowth of more than a decade of teaching project management

at Loyola Lniversity Chicago, preceded by several years of practical experience inbusiness and technology projects, including design andflight test workinthe aircraftindustry, and software applications development and process improvement projects

in banking From this practical experience I developed an appreciation not only for thebusiness-management side of project management-systems and procedures forplanning, scheduling, budgeting, and control-but for the human and organiza rionalside as well Isaw the benefits of good communication, trust, and teamwork on proj-ect outcomes, as 'sell as the costs of emotional stress and group conflict.Iobserved thatthe most successful projects usually were those where trust, good communications,and teamwork flourished, regardless of the formal planning and control systems inplace This book largely reflects these personal experiences and learnings Of course,the book reflects much more than myownpersonal experience To cover Froject man-agement in a more general, comprehensive sense, I had to rely on the published T.·.·orks

ofmany other authors, and on the suggestions of colleagues and reviewers

Preface

In this second edition I have revised and added substantial new material to

in-corporate current examples and reviewers' suggestions, and to take advantage ofthegrowing body of literature in project management Every chapter has been revisedand updated The most significant changes are as follows: Chapters 1 and 2 havemany new examples and case studies of projects and project managers: Chapters-I

and 5 have increased coverage of important front-end topics such as preparation ofRFPs and proposals, and definition of user needs, project objectives, requirements,and specifications Chapter 7 has been revised to cover activity-oriented (ratherthan event-oriented) scheduling Chapter 8 has expanded coverage of constrained-resource scheduling and multiple-project scheduling Chapter 9 includes a new sec-tion on the various methods of cost estimating Chapter 10 is a new chapter thataddresses models and practices for assessing and managing project risk Chapter 11

is expanded to address multiple aspects of project control: scope, quality, schedule,performance, and change control Chapter 12 is completely revised and covers cur- rent software applications and Web-based project management Chapter 14 is ex-panded and discusses not only project organization, but mechanisms for projectintegration including integrated product development teams, concurrent engineer-ing, and quality function deployment To every chapter I have added new examplesand end-of-chapter case studies

My goal inwriting this book has been to provide students and practicing agers of projects the most practical, current, and interesting text possible I appreciatehearing your comments and suggestions Please send them to jnicholfcluc.edu

man-Acknowledgments

Writing a book is a project and, like most projects, reflects the contributions of manypeople Here I want to acknowledge and give special thanks to those who contributedthe most First, thanks to my research assistants In general, research assistants do alot of work-s-academic research as well as gofer work, and without their toiling effortsmost professors would accomplish far less I have been fortunate to have had the as-sistance of two such bright and capable people, Elisa Denney, who reviewed much ofthe book, helped draft most of Chapter 12, and served as a constant source of energy:and Hollyce James, who helped with revisions and provided editorial competency.Also thanks to Cary Morgan and Louis Schwartzman, my research assistants for thefirst edi non

I want to express appreciation to Dr Enrique Venta for reviews and assistanceinportions of this and the first edition Others who deserve special mention and thanksare Dr Harold Dvck Dr Samuel Ramenofsky, Dr Donald Meyer, Elaine Strnad, PaulFlugel, John Edison, Sharon Tylus, and Debbie Gillespie I also want to acknowledgethe influence of three of my professors, Charles Thompson and Gustave Rath a:Northwestern University, and Dick Evans at the University of Illinois, whose philos-ophy and teachings helped shaped this book

My appreciation to the following who served as reviewers and provided dozens

of helpful suggestions: Thomas B Clark of Georgia State University; FrankDerornedi

of Golden Gate Uruversirv: Bruce Hartman of the University of Arizona; Joseph L,Orsini of California State University, Sacramento; Peter Papantos of DeVry Institute:and Thomas Tice of California State Polytechnic Lniversity, Pomona

My wife Sharry also gets special thanks She read the draft for the first edition,provided numerous suggestions, and helped reduce the amount of "techno-jargon"

in the book She also managed the home front, allowed me the time to pursue andcomplete this project, and was a steadfast source of support

Thanks also to the folks at Prentice Hall and BookMasters, especially to TomTucker for his encouragement and support forthis second edition.

There are other colleagues, students, and friends, some mentioned in endnoteselsewhere throughout the book, who provided support, encouragement, and refer-ence materials; to them I say thank you Despite the assistance of so many people and

I accept responsibility for them

John M Nicholas

xviii Preface

ABOUT THE AUTHOR

leader on aircraft development projects at Lockheed-Martin Corporation, businesssystems analyst on bank operations at BankAmerica, and research associate onenergy-environmental research projects at Argonne National Laboratory He has aB.s in aeronautical and astronautical engineering and an :\LB.A in operations re-search from the University of Illinois, Urbana-Champaign, and a Ph.D in industrialengineering and applied behavioral science from Northwestern University

:~~/\ofs0111el-hjnB1-0be done; plan;

f.c'·Ml~£ecif, a) a special uni« of

> 1(Jho~akJ"YJ etc., b) an extensive

Cl:JJfSenlalion, construction, etc.

Jack of sophisticated machinery, they were able to raise and fit some 2,300,000

stone blocks, weighing 2 to 70 tons apiece, into a structure the height of a modem-iO-story building Each facing stone was set against the next with an accuracy of.O-i inch, and the base, which covers 13 acres, deviates less than 1 inch from level(Figure1-1).1

Equally as staggering was the number of workers involved To quarry thestones and transport them down the Nile, about 100,000 laborers were levied Inaddition, -iO,OOO skilled masons and attendants were employed in preparing andlaying the blocks and erecting or dismantling the ramps Public \ vorks were es-sential to keep the working population employed and fed, and it is estimated that

no less than 150,000 women and children also had to be housed and fed.i

1

Figure 1-1The Great Pyramid of Cheops, an early (circa 2500 B.C.)large-scale project.

[Photo courtesy of Arab Information Center.]

But just as mind-boggling was the managerial ability of the Egyptians-the ning organizing, and controlling that were exercised throughout the 20-year duration

plan-of the pyramid construction Francis Barber, a nineteenth century Americannavaltache and pvrarnid scholar, concluded that:

at-itmust have taken the organizational capacity of a genius to plan all thework to lay it out, to provide for emergencies and accidents to see that themen in the quarries, on the boats and sleds, and in the mason's and

smithies shops 'were all continuously and usefully employee, that themeans oftransportation was ample, that the water supplv wasample/ and that the sick reliefs were on hand.:'

Building the Great Pyramid is what we today would call a large-scale project.It

stands as evidence of numerous such projects from early recorded history that requiredmassive human works and managerial competency The Bible provides many accounts

of projects that required orchestration of thousands of people and tnetransportand lization of enormous quantities of materials Worthy of note are the managerial and leader-ship accomF lishments of \loses The scriptural account of the exodus of theHebrewsfrom the bondage of the Egyptians gives some perspective on the ;-reparation, orzani-zation and execution of this tremendous undertaking Supposedly Moses did a ::nag-nificent job of personnel selection, training, organization, and delegation of authority;"The famed ruler Solomon, among other accomplishments, was the "manager" ornu-rnerous grea: construction projects He transformed the batteredn ::.insof many ancientcities and crude sr.antv towns into powerful fortifications With his · ·ealth and the help

uti-of Phoenician artisans.Solomon built the TempleinJerusalem Seven years went intothe construction ci the Temple, and after that Solomon built a palace for himselfwhichtook13more year3 to complete He employed a \· orkforce of 30,000 Israelites to fell rreesand importti.•.rnber from the forests ofLebanon."That was almost3 JOOyears ago

With later civilizations, most notably the Greeks and Romans, the number of tivities requiring extensive planning and organizing escalated These societies under-took extensive municipal and government works programs such as street paving,water supply, and sewers To facilitate their military campaigns and commercial in-terests, the Romans constructed networks of highways and roads throughout Europe,Asia Minor, Palestine, and northern Africa so that all roads would "lead to Rome."The civilizations of renaissance Europe and the Far East undertook river engineering,construction of canals, dams, locks, and port and harbor facilities, With the spread ofmodern religions, construction of churches, temples, monasteries, mosques, and mas-sive urban cathedrals was added to the list of projects The remains of aqueducts,bridges, temples, palaces, fortifications, and other large structures throughout theMediterranean and China testify to the ancients' occupation with large-scale projects.With the advent of industrialization and electricity, the projects of humankindtook on increasing complexity, Projects for the construction of railroads, electrical and.hydroelectrical po\-\Ter facilities and infrastructures, subways, and factories becamecommonplace.In recent times, research and installation of large systems for commu-nications, defense, transportation, and information technology have spurred differ-ent, more complex kinds of project activity,

ac-As long as humankind does things, there will be projects M any projects of ture will be similar to those in the past Otherswill be vastly different either in terms

thefu-of increased scale thefu-of effort or more advanced technologv, Representative thefu-of the latterare two recent projects, the English Channel tunnel (Chunnel) and the internationalspace station The Chunnel required tremendous resources and took a decade to corn-plete The international space station (Figure 1-2) will require new technologies, SOInethat have yet to be developed

Figure 1-2

The 'international space station, a modern large-scale project.

[Photo courtesy of NASA/Johnson Space Center.}

ac-What is a project? This is a question we will cover in much detail later As an

in-troduction though, some characteristics will be listed that warrant classifying an tivity as a project They center on the purpose, complexity, uniqueness, unfamiliarity,stake, impermanence, and life cycle of the activity:"

ac-1 A project involves a single, definable purpose, end-item, or result, usually

speci-fied in terms of cost, schedule, and performance requirements

2 Every projectis uniquein that it requires doing something different than wasdone previously Even in "routine" projects such as home construction, vari- ables such as terrain, access, zoning laws, labor market, public services, andlocal utilities make each project different A project is a one-time activity,never to be exactly repeated again

3 Projects are temporary activities An ad hoc organization of personnel, material,

and facilities is assembled to accomplish a goal, usually within a scheduledtime frame; once the goal is achieved, the organization is disbanded or recon-figured to begin work on a new goal

4 Projects cut across organizational lines because they need the skills and talents

from multiple professions and organizations Project complexity often arisesfrom the complexity of advanced technology, which creates task interdependen-cies that may introducenew and unique problems

5 Given that a project differs from what was previously done, it also involves

un-familiarity. Itmay encompass new technology and, for the organization taking the project, possess significant elements ofuncertainty and risk.

under-6 The organization usually has something at stake when doing a project The

ac-tivitymay call for special scrutiny or effort because failure would jeopardize theorganization or its goals

7 Finally, a projectis the process of working to achieve a goal; during the process, projects pass through several distinct phases, called the project life cycle The

tasks, people, organizations, and other resources change as the project movesfrom one phase to the next The organization structure and resource expendi-tures slowly buildwitheach succeeding phase; peak; and then decline as L~e

project nears completion

The examples described earlier are for familiar kinds of projects such as struction (pyramids), development (transportation and information technology), or acombination of both (space station) In general, the list of activities that qualify as proj-ectsislong and includes many that are commonplace \Veddings, remodeling a home,and moving to another house are certainly projects for the families involved Com-pany audits, major litigations, corporate relocations, and mergers are also projects, asare nev · product development and system implementation efforts Military cam-paigns also meet the criteria of projects; they are temporary, unique efforts directedtoward a specific goal The Normandy Invasion during V\"\-VII on June 6, 19+4, is agood (perhaps the ultimate) example:

con-Chapter 1 Introduction

The technical ingenuity and organizational skill that made the landingspossible was staggering The invasion armada included nearly 5,000 ships

of all descriptions protected by another 900 warships The plan called for

landing 150,000 troops and 1500 tanks on the Normandy coast in the first 48 hours There were large-scale air operations with bombers, gliders, para-

troopers, and fighter support There was PLUTO, the Pipe Line Under theOcean, to bring the flood of petroleum that the armies would need Andthere was Mulberry Harbor Since the French ports were not large enough

to handle the traffic anticipated to follow the invasion (12,000 tons of storesand 2,500 vehiclesper day),the idea evolved to tow two monstrous break-waters and floating quays (Mulberries) across the English Channel, eachmaking a complete port the size of Dover?

Most artistic endeavors are projects Composing a song or symphony, writing anovel, or making a sculpture are one-person projects The unusual (and somewhatcontroversial) works of the artist Christo-draping portions of the Grand Canyon,several islands in Biscayne Bay, and 1,000,000 square feet of Australian coastline withcolored plastic-are projects also, but on a larger scale So is the making of motion pic-tures, whether they are home movies or the releases of major production studios.Some large artistic projects have also involved the skills of many engineers andbuilders: The Eiffel Tower, and Mount Rushmore, and the Statue of Liberty (both dis-cussed later) are examples

Many efforts at saving human life and recovering from man-made or natural asters become projects Examples are the massive cleanup following the Soviet nu-clear accident at Chernobyl, and the rescue and salvage operations followingdisastrous earthquakes in Mexico City; Turkey; Armenia; and Kobe, Japan

dis-Figure 1-3 shows generalized project endeavors and some examples of known projects Notice the diversity in the kinds of efforts The figure shows approxi-mately where projects fall with respect to the degree of complexity and uncertaintyinvolved Complexity is roughly measured by magnitude of the effort, number ofgroups and organizations that need to be coordinated, and diversity inskills or ex-pertise needed to accomplish the work Time and resource corrunitments tend to in-crease with complexity

well-Uncertainty is measured roughly by the difficulty in predicting the final outcome

in terms of the dimensions oftime, cost,andtechnical performance.Inmost projects there

is some uncertaintyinone or two dimensions, at least in the initial stages of planning(e.g., weddings and world fairs) The most complex projects have uncertainty in allthree dimensions (e.g., the space station)

Generally, the more often something is done, the less uncertainty there is to ing it This is simply because people learn by doing and so improve their efforts-the

do-"learning curve" concept Projects that are very similar to previous ones and aboutwhich there is abundant knowledge have lower uncertainty These are found in theloswer portion of Figure 1-3 (e.g., weddings, highways, dams, system implementa-tion) As manned missions to Mars become frequent, they too 'sillmove down the un-certainty scale

The cost curve indicates that the expense of projects increases roughly in tion to both complexity and uncertainty Cost, represented in terms of time or eco-nomic value, is at the level of tens or hundreds of labor hours for projects with 10\';

propor-complexity and uncertainty, but increases to millions and billions of hours for projectswiththe greatest complexity and uncertainty

c o

Space Station/

Millions

APPLIED RESEARCH Exploration

Expeditions (Antarctica, Mt Everest)

Cornpluxlly Thousands

Cost-Time (Labor Hours) Hundreds

Terrn - :arnily remodeling Market campaigns Skyscrapers highways games

When the uncertainty of a project drops to nearly zero, and when the project fort is repeated a large number of times, then the workis usually no longer consid-ered a project For example, building a skyscraper is definitely a project, but massconstruction of prefabricated homes more closely resembles a scheduled, repetitivetask than a project Admiral Byrd's exploratory flight to the South Pole was a project,but modem daily supply flights to Antarctic bases are not When (in the future)tourists begin taking chartered excursions to Mars, trips therewill no longer be con-sidered projects either They will just be ordinary scheduled operations.

ef-In all cases, projects are conducted by organizations that, after accomplishment

of the project, go on to do something else (construction companies) or are disbanded(Admiral Byrd's crew, the Mars ex-ploration team) In contrast, repetitive, high-certainty activities (prefabricated housing, supply flights, and tourist trips to Antarc-tica or Mars) are performed by permanent organizations that do the same thing overand over, with little change in operations other than rescheduling That projects dif-fer greatly from repetitive efforts is the reason they must be managed differently

Although humankind has been involved in projects since the beginning of recordedhistory, obviously the nature of projects and the environment have changed Manymodem projects involve great technical complexity and require much diversity ofskills Managers are faced with the problem of putting together and directing largetemporary organizations while being subjected to constrained resources, limited timeschedules, and environmental uncertainty To cope with complex kinds of activitiesand great uncertainty, new forms of project organization and new practices of man-agement have evolved

Two examples of activities that required project organization and managementpractice are the Manhattan Project (to develop the first atomic bomb) and thePathfinder Mission (to land and operate a rover vehicle on the surface of Mars) Proi-ects such as these are not only unparalleled in terms of technical difficulty and orga-nizational complexity, but also in terms of the requirements circumscribing them hi.ancient times, project "requirements" were more flexible.Ifthe Pharaohs needed moreworkers then more slaves or more of the general population was conscripted.df fund-ing ran out during construction of a Renaissance cathedral, the work was stopped un-til more money could be raised from the congregation (indeed, this is one reason manycathedrals took decades to complete) If a king ran out of money while building

a palace, he simply raised taxes In other cases where additional money could not

be raised, more workers could not be found, or the project could not be delayed, thenthe scale of effort or the qualitv of workmanship was simply reduced to accommodatethe constraints There are many early projects of which nothing remains simply be-cause the work was shoddy and could not withstand the rigors of time

In projects like Manhattan and Pathfinder, requirements are not so flexible First,both projects were subject to severe time constraints Manhattan, undertaken during

\Vorld vvar II, required that the atomic bomb be developed in the shortest time sible, preferably ahead of the Nazis For Pathfinder, the mission team was challengedwith developing and landing a vehicle on Marsinless than three years time and on aS130 million budget This-was less than half the time and one-twentieth the cost of thelast probe 0:ASAhad landed on Mars For the sake of secrecy, the Manhattan Project

restricted the info~edpersonnel to a relative few Both projects involved advancedresearch and development and explored new areas of science and engineering.Innei-ther case could technical performance requirements be compromised to compensatefor limitations in time, funding, or other resources; to do so would increase the risk toundertakings that were already very risky However, constraints and uncertainty inproject work are not restricted to large-scale government science programs They arecommon, everyday experiences in business and technology where organizations con-tinually strive to develop and implement new products, processes, and systems, and

to adapt themselves to meet changing requirements in a changing world .Consider, for instance, Company Alpha's development of "Product X", 3J."1 ex-a:mple representative of new product development efforts that companies every-where must do to remain competitive, indeed, to survive.Inthe past Company Alphahad relied upon trial and error to come up with new products:inessence, whateverworked was used again; whatever failed was discarded.Inrecent years, Company Al-pha had begun to lose market share to competitors Even though the company hadhad several innovative concepts on the drawing board,ithad lost out because it wastoo slow to move them into the marketplace Alpha was now considering develop-meritof Product X, a promising, but radically new idea To move the idea from con-cept to product would require the involvement of engineers and technicians fromseveral Alpha divisions Extensive marketing analysis would be needed to establishhow best to introduce it As is typical in product development projects, time was ofthe essence Before approving the budget, Company Alpha management wanted as-surances that Product X could be introduced early enough to put it well ahead of thecompetition.It \ ·as apparent that the division would need a more efficient means ton:1anage development and marketing of the product

Another example is Beta Hospital's installation of a new employee benefits plan.The new planv ·ould better suit employee needs, add flexibility and value to the bene-fits package, and keep costs dO\\TI Not only was the new plan dramatically differentfrom the old one, but its installationv ould require active participation from personnel

in human resources, financial service, and information systems, as 'vell as experts fromtwo consulting firms The project would involve developing new policies, upgrading thetraining of staff workers and familiarizing 10,000 employeeswiththe plan, and installing

a new computer network and database Hospital management had to apFrove t "-le sources and capital funding, select the vendors and choose representatives rrom r.artic-ipating departments as well as a manager to conduct the project Although this projectwas different from anything- the hospital had experienced before, it was typical of

re-"change" projects everywhere: The project was initiated in respoIL.'-e to changing r-eeds,with the goal of transforming an organization from one way of doing things to ar.other,

As a final example, look at the boom in e-cornmerce Every company now rias orsoon will have a web site Dot-com addresses appear everywhere on printed andbroadcasted advertising as companies scramble to inform customers they are rart ofthe e-business revolution Behind every dot-com address, however, are multiple proj-ects To develop or significantly enhance a web site is a project, and to ta~,emeasures

to integrate the concepts of electronic business technologv into a cornr anv's stream marketing and supply-chain operations is also a p~oject These ~:-eexamples

main-of projects spurred by the necessity to "change," in this case, to keep pace with thee-comrnercerevolution,

Efforts such as these defy traditional management approaches for piannir.g, ganization, and control They are representative of activities ~~at requirerr.odernmethods of project management and organization to fulfill difficult technolog.cal ormarket-related performance goals in spite of severe limitations on time and resources.Chapter 1 Introduction

or-As a distinct area of management practice, project management isstilla new idea,and its methods are still unknown to many experienced managers.Only40 years ago,its usage was restricted largely to the defense, aerospace, and construction industries.Today, however, project management is being appliedina wide variety of industriesand organizations Originally developed and appliedinlarge-scale, complex techno-logical projects such as the Apollo Space Program to put a man on the moon, projectmanagement techniques are applicable toanyproject-type activities, regardless of size

or technology Modern project management would have been as useful to earlyEgyptian and Renaissance builders as it is to present day contractors, engineers, sys-tems specialists, and managers

1.4

1 5

RESPONSE TO A CHANGING ENVIRONMENT

Project management arose in response to the need for a managerial approach whichcould deal with the problems and take advantage of the opportunities of modern so-ciety Three salient characteristics distinguish modern society from earlier periods ofhistory: interdependency, complexity, and rapid, radical change The challenges andproblems of modern society involve risk and uncertainty arising from numerousinteracting forces and variables, rapidly changing technology, rising costs, increasingcompetition, frequent resource shortages, and numerous interest groups and their op-posing views about the best course ofaction."

Project management is a departure from the management of simpler ongoing, peated operations where the market and technology tend to be predictable, wherethereis certainty about anticipated outcomes, and where fewer parties or organiza-tions are involved Situations which are more predictable, less risky, and more stablecan be efficiently handled by "mechanistic" organizational forms and managementprocedures These forms tend to rely on centralized decision making and adherence

re-to hierarchical authority When adaptability and rapid response re-to change are calledfor, such as in volatile technological or market environments, more I Iorganic" forms

of organization and management are required These forms accommodate the needfor diversified technical and managerial competency, and expand the latitude and de-gre€ of decentralization in decision making

Solutions to problems imposed by frequent change and technological complexitymust themselves accommodate complexity and be adaptive to change.iIn response tothese demands, new management approaches under the umbrella of the "systems ap-proach" have come into use They apply the concepts of systems theory and systemsanalysis to the task of management More will be said about this in Chapter 3 The sys-tems approach to management recognizes that organizations exist iI1 a universe offorces and are comprised of interrelated units, the goals and effects of which must Co2coordinated and integrated for the benefit of the organization Project managementis

a systems-oriented approach to management because it considers the project as a tem of interrelated tasks and work units operating in a changing environment.It seeks

tounifythe planning and work efforts of numerous organizational units workinginaproject to efficiently accomplish, with minimal tradeoff, the multiple goals of a pro;ect.

Virfually every project has three overriding goals: to accomplish work for a client orend-user in accordancewith budget, schedule, and performance requirements. The bud-get is the specified or allowable cost for the project; it is the target cost of the work to

be done The schedule includes the time period over which the work will be done andthe target date for when it will be completed The performance requirementsspecify

what is to be done to reach the end-item or final result They include required features

of the final product or service, technological specifications, and quality and quantitymeasures, whatever is important to the client or end-user As shown in Figure 1-4, thegoals can be conceptualized as the axes of a three-dimensional space, and the purpose

of project management is to direct the project to a target that satisfiesall threegoals.'?

Taken together, the three goals represent a contract to deliver a certain something, by

a certain date, for a certain cost

Unfortunately, technological complexity, changing markets, and uncontrollableenvironmental forces complicate what can be 'considered as "certain." The three goalsare interrelated and must be addressed simultaneously; exclusive emphasis on anyone goal is likely to detract from the others.Intrying to meet time schedules and per-formance requirements, costs may be forced to increase; conversely, in trying to con-tain costs, work quality may erode, schedules may slip, and performance maydegrade.Inearlier times, one or two of the goals were simply allowed to \-ary so thatthe "most fixed" goal could be met Most projects, as the Manhattan, Pathfinder, Al-pha Company, and Beta Hospital examples show, do not have this luxury; time, cost,and performance have to be given equal emphasis Project management has evolved

as an efficient "vay to maintain focus on all three project goals and to control the

I

III

Figure 1-4

Three dimensions of project goals [Adapted from Milton Rosenau,

Successful Project

~1anagemenr {Belmont, CA: Lifetime Learning Publications, 1981), 16.]

essary tradeoffs among them As a systems approach, project management integratesresources and puts emphasis on the "wholeness" of project goals .

1.7 PROJECT MANAGEMENT: THE PERSON,

THE TEAM, THE SYSTEM

Three key features distinguish project management from earlier, traditional forms ofmanagement: the project manager, the project team, and the project managementsystem

The Project Manager

The most important element of project management is the project manager, a person

whose single, overriding responsibility is to plan, direct, and integrate the work efforts

of participants to achieve project goals.In fast-changing environmentsitisbecomingincreasingly difficult for organizations like Company Alpha to relate facts about tech-nology, production methods, costs, and markets, and the number of crucial issues anddecisions to be processed is too large for traditional hierarchical organizations to ef-fectively handle.In most organizations, work proceeds along functional lines and theresponse to change is exceedingly slow In the role of project manager, the organiza-tion has one person who is accountable for the project and is totally dedicated toachieving its goals The project manager coordinates efforts across the various in-volved functional areas and integrates the planning and control of costs, schedules,and work tasks."

The Project Team

Project management is the bringing together of individuals and groups to form asingle, cohesive team 'working toward a common goal Perhaps more than any otherhuman endeavor, project work is teamwork Project work is accomplished by a group

of people, often from different functional areas and organizations, who participatewherever and whenever they are needed Depending on resource requirements of theproject, the size and composition of the team may fluctuate, and the team may dis-band after the projectis completed

The Project Management System

The project manager and the project team must have available and utilize a "projectmanagement system." The project management system is composed of organizationstructure, information processing, and practices and procedures that permit integra-tion of the "vertical" and "horizontal" elements of project organizations As shown inFigure 1-5, vertical elements include the breakdown of all tasks in the project; hori-zontal elements include the functional units and departments involved in the project

The project management system provides for integrative planning and control

Ac-cording to Archibald, integrative planning and control refers tothe pulling together of all important elements of information related to (1)the products or results 'of the project, (2) the time, and (3) the cost, in funds,manpower, or other key resources Further, this information must be pulled

Vertical and horizontal elements of project organization.

together for all (or as many as practical) phases of the project Finally, grated planning and control requires continual revision of future plans,comparison of actual results with plans, and projection of total time and cost

inte-at completion through interrelated evaluation of all elements ofinformation.F

As projects move from one phase to the next, resource requirements (labor, ties, capital, etc.) and organizational responsibilities shift The project managementsystem provides the means for (1) identification of tasks, (2) identification of resourcerequirements and costs, (3) establishing priorities, (4) planning and updati '1.g sched-ules, (5) monitoring and controlling end-item quality and performance, and (6) me a-suring project performance.i '

facili-1 8

12

ABOUT THIS BOOK

Philosophy and Objectives

Although it has at its foundation traditional management theory and practice, :.:1

many 1,vays project management represents a significant departure A history of tr.e

theory and practice of project management would show that its roots touch ciplines, including management science, systems theory, accounting, operations man-agement, organizational design, law,~and applied behavioral science \\hat h3.5evolved, and will continue to evolve, is a philosophy, approach, and set of ?racticE"5,thesum total of which comprise project management

:::l.anydis-As a philosophy and an approach, project management is bro-ader arid moresophisticated than traditional management of repetitive activities Many ::1anage:-3fail to understand this, believing that application of techniques alone, such as

"PERT/cp~r' or "matrix management" (both explained later) make for successfulChapter 1 Introduction

project management (and successful projects) Thereissome support for thisbeliefin

the literature, much of which focuses rather narrowly on certain methods and dures of project management

proce-C P Snow wrote an essay entitled "Two Cultures" about the cultural gap thatseparates scientists from the rest of society He wrote of the conflict of ideas, the prob-lems of communication, and the lack of understanding between scientists and otherintellectuals.!' Managers and management scholars also tend to see the world fromeither of two perspectives: some see the world in "hard," quantitative terms; others

in "soft," or behavioral terms The management scientists tend to view projects interms of economic variables; their approach is to structure problems mathematicallyand to follow some prescribed set of procedures to arrive at a solution The behavior-ists view problems in terms of human behavior, skills, attitudes, and systems of or-ganization; their solutions are to be found by modifying individual attitudes andbehavior, and by altering the processes and structure of groups and organizations.Much of the literature on project management is weighted in favor of one or the other

of these perspectives, most often that of the management scientists

The intent of this book is to give a comprehensive, balanced view that emphasizesboth the behavioral and quantitative sides of project management The philosophy ofthis book is that for managers to "do" project management, they must gain familiaritywith four aspects of it: system methodology; systems development process; manage-ment methods, procedures, and systems; and organization and human behavior, Allfour aspects are essential to project management, and neglect or unbalanced attention

to some may render the others ineffective Correspondingly, the objectives of thisbook are to

1 Discuss the system principles and philosophy which guide project managementtheory and practice

2 Describe the logical sequence of stages in the life of a project

3 Describe the methods, procedures, and systems for defining" planning, ing, controlling, and organizing project activities

schedul-4 Describe the organizational, managerial, and human behavioral issues relevant

to project management

The techniques of management science are important tools in project ment, but individual and group skills, the right attitudes, and teamwork are just asessential Within the four objectives, both the quantitative and behavioral sides ofproject management are addressed

manage-This book is intended for I Igeneral" project managers It is comprehensive in

the sense that it provides an understanding of project management concepts andtechniques widely recognized and of application to virtually any industry or projectsituation It is not the intent of this book to dwell on particular methodologies andtechniques used onlyinspecific industries or organizations This would be a difficulttask because many industries eonstruction, defense, computer, product develop-ment, social work, and so on-have modified "traditional" project management prac-tices or adopted other approaches to satisfy their unique project needs Many of thesemethodologies and techniques are described in texts devoted to construction, prod-uct management, software development, research management, and so on

Just as many of the project management practices described in this book were veloped in certain industries to be later recognized and adopted for general use,there are probably many valuable practices currently in use that most of us are ig-norant of These practices remain to be I Iexposed " and to appear in textbooks like this

de-in the future

The Study Project

A good \\"ay to learn about project management is to actually participate in it or, ing that, to witness it Atthe end of every chapter in this book are two kinds of ques-tions: the first kind are the usual chapter review questions, the second are called

fail-"Questions About the Study Project." The latter are intended to be applied to a ticular project of the reader's choosing This will be called the "study project." The

par-purpose of these questions is to help the reader relate concepts from each chaptertoreal-life situations

The study project questions should be used in the following ways:

For readers who are currently working in projects as either managers or projectteam members the questions can be related to their current work The questions serveboth to increase readers' awareness of key issues surrounding the project as well as toguide nlanagers in the organization and conduct of project management

For readers who are currently full- or part-time students, the questions can be plied either to (1) student projects in which they are currently involved (e.g., groupresearch projects) or (2) outside projects which they are permitted to observe Manybusiness firms and government agencies are willing to let student groups interviewthem and collect information about projects Though secondhand, thisisnonetheless

ap-an excellent 'say to learn about project map-anagement practice (ap-and malpractice)

Organization of This Book

Beyond this introductory chapter, the book is divided into four main sections Thefirs t section is devoted to the basic concepts of project management This section de-scribes project management principles, systems methodologies, and the systemsapproach-the philosophy that underlies project management Also covered are theorigins and concepts of project management, situations where it is needed, and ex-amples of applications The second section describes the logical process in the creation

and life of a system Called the Systems Development Cycle, it is the sequence of

phases through which all human-made systems move from birth to death The cycle

is described in terms of its relation to projects and project management The thirdsection is devoted to methods and procedures for planning, scheduling, cost estimat-ing/ budgen.1.t.g, resource allocation, controlling, and terminating a project The topics

of resource planning, computer and web-based project mar.agement, and project

ev ?.>_ta::,-l:-~ :iT"-2 also covered Throughout this section, reference is made to tne

man-age":1e:-,~a:-:i information svsterns needed to integrate planning and work activities.

The fourth section is devoted to project organizations, teams, and the people in

pro·-~ects. It ,:o'.-ers structural aspects of project organizations, roles and responsir ilitieso:

rTla:' agers, "": :-:6 rr.ethods for managingteamwork,conflict, and emotional stress.Th~s:tr.e Z::'lfstated objectivesof this book are roughlydividedamong L"1e chap-

1 Bas: : c:::-::~?~s and :::ys:~r::sphilosophy: Chapters2and 3

2 Sys:eIT,S d~·.-e~or~·e:lt a:td projectlife cycle: Chapters 4ar.d 3

3 \:re:~C'~5 f=-cce·::h.:r-2~, c::L': s:;ste:-:"',s for planning and control: Charters6tl'.rOLi~_-. L,

4 Org,:t:-,:za:::>:L,mar.a ;er:le:-,:, arrd human behavior: Chapters14through 16.

Chapter 17" discusses pro;~ctsuccess and failure, and ties together the tenets ofthe book

The Appendices expand upon three subjects mentioned throughout the book:

systems engineering (Appendix A), contracts (Appendix B), and the project plan pendix C) All readers should look at Appendices B and C after they have read Chap-ter 4 and refer to them again whenever they are mentionedinthe book Readers whoare, or expect to be, involved in the engineering of large-scale, system integration proj-ects should study Appendix A after they have read Chapter 3

(Ap-STUDY PROJECT ASSIGNMENT

Select a project to investigate You should select a "real" project; that is, a project thathas a real purpose and is not contrived just so you can investigate it.Itcan be a cur-rent project or one already completed.Itcan be a project on which you are currentlyworking However, it must be a project for which you can readily get information

Ifyou are not currently involved in a project as a team member, then you mustfind one that you have permission to study (collect data and interview people, etc.)

as an "outsider." The project should include a project team (a minimum of five people)with a project leader and have at least a two or three month duration The projectshould also have specific goals in terms of, for example, a target completion date and

a budget limit, as well as a specified end-item result or product

Itis also a good idea, ifyou decide to study a project as an outsider, to do it 41ateam with three to six people and a project leader (i.e., use a team to perform the study)

This, in essence, becomes your project teanz-a team organized for the purpose of

studying a project You can then readily apply many of the planning, organizing, teambuilding, and other procedures discussed throughout the book to see how they work,This "hands-on" experience with your own team, combined with what you learn fromthe project you are studying, will give you a fairly accurate picture about problems en-countered and management techniques used in real-life project management

MS PROJECTThe Microsoft Project disk included with the book will help familiarize you withmany of the project management techniques ~ISProject has self helps and tutorialsthat will enable you to learn and use the software on your own You might want touse~1SProject for creating a work-breakdown structure, responsibility matrix Ganttchart, network, and other planning aids for the study project or other class project as-signments, which will enable you to better understand the actual development andapplication of project planning and scheduling techniques These and other tech-niques, topics of chapters 7 and 8, are readily covered by YfS Project

Chapter 12 includes brief descriptions of ~IS Project and other popular projectmanagement software packages

REVIEW QUESTIONS

Look at newspapers, magazines, or television for examples of items that pertain

to projects Surprisingly, a great number of newsworthy topics relate to the tus of current or future projects, or to the outcome of past projects Prepare a lis:

sta-of these topics

Prepare a list of activities that are not projects \\nat distinguishes them fromproject activities? \Vhich activities are difficult to classify one \\'ay or the other?

3 Becausethis isan introductory chapter, not very much has been said about

whyprojects must be managed differently, and what constitutes projectmanagement-the subject of this book Now is a good time to speculateabout these: Why do you think that projects need to be managed differentlythan nonprojects? What do you think are some additional or special considera-tions~ecessaryfor managing projects?

ENDNOTES

1. Peter Tompkins,Secrets of the Great Pyramids

(New York: Harper&Row, 1976):23~234;

Rene Poirier,The Fifteen Wonders of the World

(New York: Random House, 1961): 54-67

2 Ibid., 227-228

3 Francis Barber,The \1echanical Triumphs of the

described by Tompkins, ibid., 233

4 Claude S George,The History of Management

1968): 11

5 Chaim Potok,~r inderings(Xew York: Fawcett

Crest, 1978): 154-162

6 See Russell D Archibald,hfanaging

19; JackR.Meredith and Samuel Mantel,

3rd ed (New York:\\~ilev, 1993): 8-9; Daniel D

Roman,JMana~~ngProjects: A Systems Approach

(New York: Elsevier, 1986): 2-10; John M

Stewart, "Making Project Management

\-Vork,"Business Horizcns8, no 3 (Fall 'l.96S):

~8.

7 See John Terraine,The \fighty Continen:

(Lon-don: BBC, 1974):241-~42.

8 D.I.Cleland and W.R.King,Systems !_nalysis

~IcGraw-Hill,1983):5-6

9 Ibid., 4

10 See Meredith and Mantel,Project Man,;gement,

3; and Milton D Rosenau,Successful Prciec!

1981): 13-19

11 Harold Kerzner,Projec: .\fanagemcnt: A Systems Approach to Planning, Organizing and Crntrolling

(Xew York: Van Nostrand Reinhold, 1c'79): 6

12 Archibald,Managing High-Technology F oiecie,

6-7.

13 Kerzner,Project Management, 7.

14 C P Snow,The Ttco Cu.iures and a Secord Look

(Cambridge, England: CambridgeUniversity

Press, 1969)

Philosophy and Concepts

concepts that differentiate project management from traditional,

vvh at has been called the systems approach to planning and ing organizations This section introduces features associated vvith project management and describes the principles, terminology, and

book and sets the stage for more detailed coverage :n later sections.