Project management the management process

The Importance of Project Management 7Snapshot from Practice: Project Management at Snapshotfrom Practice: The SAS Turnaround 27 The Need for an Effective Project Portfolio Management Sy

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Our motivation for writing this text wasto provide students with a holistic, integrative view of projectmanagement A holisitic view focuses on how projects contribute to the strategic goals of the organiza-tion The linkages for integration include the process of selecting projects that best support the strategy

of a particular organization and that inturn can be supported by the technical and managerial processesmade available by the organization to bring projects to completion The goals for prospective projectmanagers are to understand the role of a project in their organizations and to master the project man-agement tools, techniques, and interpersonal skills necessary to orchestrate projects from start to finish.The role of projects in organizations is receiving increasing attention Projects are becoming the ma-jor tool for implementing and achieving the strategic goals of the organization In the face of intense,worldwide competition, many organizations have reorganized around a philosophy of innovation, re-newal, and organizational learning to survive This philosophy suggests an organization that is flexibleand project driven Project management has developed to the point where it is a professional disciplinehaving its own body of knowledge and skills Today it is nearly impossible to imagine anyone at anylevel in the organization who would not benefit from some degree of expertise in the process of manag-ing projects

Audience

This text is written for a wide audience.Itcovers concepts and skills that are used by managers to propose,plan, secure resources, budget, and lead project teams to successful completions of their projects The textshould prove useful to students and prospective project managers in helping them understand why organi-zations have developed a formal project management processto gain a competitive advantage Readers willfind the concepts and techniques discussed in enough detail to be immediately useful in new-project situ-ations Practicing project managers will find the text to be a valuable guide and reference when dealingwith typical problems that arise in the course of a project Managers will also find-the text useful in un-derstanding the role of projects in the missions of their organizations Analysts will find the text useful inhelping to explain the data needed for project implementation as well as the operations of inherited or pur-chased software Members ofthe Project Management Institute will find the text is well structured to meetthe needs of those wishing to prepare for PMP (Project Management Professional) certification The texthas in-depth coverage of the most critical topics found in PMI'sProject Management Body ofKnowledge

(PIMBOK) People at all levels in the organization assigned to work on projects will find the text usefulnot only in providing them with a rationale for the use ofproject management tools and techniques but alsobecause of the insights they will gain on how to enhance their contributions to project success

Ouremphasis is not only on how the management process works, but, more importantly, on why itworks The concepts, principles, and techniques are universally applicable That is, the text does not spe-cialize by industry type or project scope Instead, the text is written for the individual who will be required

to manage a variety of projects in a variety of different organizational settings In the case of some smallprojects, a few of the steps of the techniques can be omitted, but the conceptual framework applies to allorganizations in which projects are important to survival The approach can be used in pure project

vii

viii Preface

organizations such as construction, research organizations, and engineering consultancy firms At the sametime, this approach will benefit organizations that carry out many small projects while the daily effort ofdelivering products or services continues

Content

In this latest edition of the book, we have responded to feedback received from both students and ers, which is deeply appreciated As a result of the this feedback, the following changes have been made

teach-to the Third Edition:

• Expanded discussions of change management, managing conflict, communication plans, request forproposals (RFP), and project maturity models

• Revised chapters on organizations (Chapter 3) and monitoring project performance (Chapter 13) tomake their terminology consistent with the Project Management Body of Knowledge (PMBOK)

• The discussion of earned value has been completely revised to make it easier for students to stand

under-• New student exercises have been added to several chapters Several computer exercises have been vised

re-• Examples and screenshots from MS Project are now embedded in the text

• The "Snapshot from Practice" boxes feature a number ofnew examples of project management in tion as well as new research highlights that continue to promote practical application of project man-agement

ac-Overall the text addresses the major questions and issues the authors have encountered over their 50combined years of teaching project management and consulting with practicing project managers in do-mestic and foreign environments The following questions represent the issues and problems practicingproject managers find consuming most of their effort: What is the strategic role of projects in contem-porary organizations? How are projects prioritized? What organizational and managerial styles will im-prove chances of project success? How do project managers orchestrate the complex network ofrelationships involving vendors, subcontractors, project team members, senior management, functionalmanagers, and customers that affect project success? What factors contribute to the development of ahigh-performance project team? What project management system can be set up to gain some measure

of control? How do managers prepare for a new international project in a foreign culture? How does onepursue a career in project management?

Project managers must deal with all these concerns to be effective All of these issues and problemsrepresent linkages to an integrative project management view The chapter content of the text has beenplaced within an overall framework that integrates these topics in a holistic manner Cases and snapshotsare included from the experiences of practicing managers The future for project managers appears to bepromising Careers will be determined by success in managing projects

The l20-day trial version of Microsoft Project software is included on its own CD-ROM free with thetext

Acknowledgments

We want first to acknowledge with special thanks and appreciation the contribution of Diane Parente,Pennsylvania State University-Erie, who prepared the SimProject extended case in the appendix This

Preface ix

case consists of a series of exercises tied to the chapters of this book that coordinate with and make use

of SimProject, a project management simulation developed by Diane and her colleague at Penn Erie, Jeff Pinto SimProject adds a hands-on, experiential dimension to this course

State-In addition, we would like to thank Ed Blevins, DeVry University-Irving, for updating the TestBank; Charlie Cook, University of West Alabama, for creating PowerPoint slides; and Julie Mehra foraccuracy checking the text and Instructor's Resource Manual content

Next, it is important to note that the text includes contributions from numerous students, colleagues,friends, and managers gleaned from professional conversations We want them to know we sincerely ap-preciate their counsel and suggestions Almost every exercise, case, and example in the text is drawnfrom a real-world project Special thanks to managers who graciously shared their current project asideas for exercises, subjects for cases, and examples for the text Shlomo Cohen, Pat Taylor, and JohnWold, whose work is printed, are gratefully acknowledged Special gratitude is due Robert Breitbarth ofInteract Management, who shared invaluable insights on prioritizing projects University students andmanagers deserve special accolades for identifying problems with earlierdraftsofthe text and exercises

We are indebted to the reviewers of the first and second edition who shared our commitment to vating the instruction of project management We thank all of them for their many thoughtful sugges-tions and for making our book better Of course we accept responsibility for the final version of the text

ele-We would also like to thank our colleagues in the College of Business at Oregon State University fortheir support and help in completing this project In particular, we recognize Mark Pagell, Jimmy Yang,Prem Matheu, Jack Drexler, and Roger Graham for their helpful comments and suggestions Specialthanks go to Lori Emmons, Sharon Carlson,AnnLeen, and Cheryl Hoflich who helped prepare the man-uscript We also wish to thank the many students who helped us at different stages of this project, mostnotably Carrie Doran, Neil Young, Rebecca Keepers, Katie McAlexander, Katherine Knox, and AmandaBosworth Mary Gray deserves special credit for editing and working under tight deadlines

Finally, we want to extend our thanks to all the people at McGraw-HilllIrwin for their efforts and port First, we'd like to thank Scott Isenberg for continuing to champion and provide editorial directionand guidance through all three editions of the book, and Wanda Zeman, whose superb management ofthe book's development has continued to add value to the book with each new edition of it And wewould also like to thank Jim Labeots, Rose Hepburn, Jeremy Cheshareck, Adam Rooke, Cathy Tepper,Elizabeth Mavetz, and Gina DeMartino for managing the final production, design, supplement, and me-dia phases of the Third Edition

sup-Clifford E Gray Erik W Larson

Note to Student

You will find the content of this text highly practical, relevant, and current The concepts discussed arerelatively simple and intuitive As you study each chapterwesuggest youtryto grasp not only how thingswork, but why things work You are encouraged to use the text as a handbook as you move through thethree levels of competency:

I know

I cando

I can adapt to new situations

Project management is both people and technical oriented Project management involves standing the cause-effect relationships and interactions among the sociotechnical dimensions ofprojects.Improved competency in these dimensions will greatly enhance your competitive edge as a project man-ager

under-The field ofproject management is growing in importance and at an exponential rate It is nearly possible to imagine a future management career that does not include management of projects Resumesofmanagers will soon be primarily a description of the individual's participation in projects and their re-spective contributions

im-Good luck on your journey through the text and on your future projects

xi

Brief Contents

Preface vii

1 Modem Project Management 3

2 Organization Strategy and Project

Selection 21

3. Organization: Structure and Culture 55

4 Defining the Project 99

5. Estimating Project Times and Costs 125

6 Developing a Project Plan 153

7 Managing Risk 207

8 Scheduling Resources 241

9 Reducing Project Duration 281

10. Leadership: Being an Effective Project

11 Managing Project Teams 343

12 Partnering: Managing Interorganizational

The Importance of Project Management 7

Snapshot from Practice: Project Management at

Snapshotfrom Practice: The SAS Turnaround 27

The Need for an Effective Project Portfolio

Management System 28

A Portfolio Management System 31

Snapshotfrom Practice: A Derailed Vision 36

Applying a Selection Model 36

Case: Hector Gaming Company 46

Case: Film Prioritization 48

Appendix 2.1Request for Proposal (RFP) 51

Chapter 3 Organization: Structure and Culture 55Project Management Strucfures 55

Snapshot from Practice: Skunk Works at Lockheed Martin 60

Snapshotfrom Practice: Projectitis: The Dark Side to Project Teams 62

Choosing the Appropriate Project ManagementStructure 69

Research Highlight: Relative Effectiveness of Different Project Management Structures 70 Snapshot from Practice: The Project Management Program Office 71

Snapshotfrom Practice: Culture Change at H.P.: From the H-P Wayto the Rules ofthe Garage 96

Chapter 4 Defining the Project 99

xiii

xiv Contents

Step 1: Defining the Project Scope 100

Snapshot from Practice: Big Bertha II versus USGAs

COR Requirements 102

Step 2: Establishing Project Priorities 103

Snapshot from Practice: Scope Statement 104

Step 3: Creating the Work Breakdown Structure

105

Snapshot from Practice: Year 2004 Olympic

Games-Athens, Greece 106

Snapshot from Practice: Creating a WBS 110

Step 4: Integrating the WBS with the

Estimating Project Times and Costs 125

Factors Influencing the Quality of Estimates 125

Estimating Guidelines for Times, Costs, and

Resources 127

Macro versus Micro Estimating 129

Methods for Estimating Project Times and Costs

130

Snapshot from Practice: The Delphi Method 131

Snapshot from Practice: Estimate Accuracy 136

Snapshot from Practice: Level ofDetail-Rule of

Thumb 137

Level of Detail 137

Developing Budgets 138

Types of Costs 139

Refining Estimates and Contingency Funds 140

Snapshot from Practice: How Do YouEstimate the

Cost ofa Nuclear Power Plant? 141

Creating a Database for Estimating 143

Chapter 6

Developing a Project Plan 153

Developing the Project Network 153From Work Package to Network 154Constructing a Project Network 155Activity-on-Node (AON) Fundamentals 157Network Computation Process 160

Snapshot from Practice: The YellowSticky Approach (for Constructing a Project Network) 161 Snapshot from Practice: The Critical Path 167

Using the Forward and Backward PassInformation 167

Level of Detail for Activities 168Practical Considerations 168Extended Network Techniques to Come Closer toReality 172

Snapshot from Practice: Concurrent Engineering

175

Snapshotfrom Practice: HammockActivities 178

Summary 179Key Terms 179Review Questions 180Exercises 180

Case: Nightingale Project-A 189 Case: Nightingale Project-B 191 Case: Pilots Stadium Case 192

Appendix6.1Activity-on-Arrow Method 194

Chapter 7

Managing Risk 207

Risk Management Process 207Step 1: Risk Identification 209Step 2: Risk Assessment 211

Snapshotfrom Practice: Semiquantitative Risk Approach 214

Step 3: Risk Response Development 215

Snapshotfrom Practice: From Dome to Dust 216 Snapshotfrom Practice: WAPor JAVJ4? 217

Contingency Planning 218

Snapshot from Practice: Risk Management at the Top ofthe World 220

Contingency Funding and Time Buffers 223

Step 4: Risk Response Control 225

Change Control Management 226

Case: Alaska Fly-Fishing Expedition 231

Case: Silver Fiddle Construction 232

Case: Javacom LAN Project 234

Appendix 7.1

PERT and PERT Simulation 235

Case: International Capital, Inc.-PartA 239

Chapter 8

Scheduling Resources 241

The Problem 241

'Iypes of Project Constraints 242

Classification of a Scheduling Problem 244

Resource Allocation Methods 245

Computer Demonstration of Resource-Constrained

Scheduling 251

Snapshot from Practice: Assessing Resource

Allocation 257

SplittinglMultitasking

25'7-Benefits of Scheduling Resources 258

Snapshot from Practice: US Forest Service

Resource Shortage 259

Assigning Project Work 259

Snapshot from Practice: Managing Geeks 260

Multiproject Resource Schedules 260

Snapshot from Practice: Multiple Project Resource

Reducing Project Duration 281

Rationale for Reducing Project Duration 281

Snapshot from Practice: Responding to the

Contents xv

Northridge Earthquake 282

Options for Accelerating Project Completion 283

Snapshot from Practice: Outsourcing in Bio-Tech Picks Up Speed 284

Snapshot from Practice: The Fastest House in the World 286

Project Cost-Duration Graph 287Constructing a Project Cost-DurationGraph 289

Practical Considerations 293

Snapshot from Practice: I'll Bet You 295

What if Cost, Not Time, Is the Issue? 296Summary 298

Key Terms 298Review Questions 298Exercises 299

Case: International Capital, Inc.-Part B 304

Snapshot from Practice: Managing Expectations

322

Research Highlight: Improving the Performance of New-Product Teams 323

Snapshot from Practice: Leading at the Edge 325

Ethics and Project Management 327

Snapshot from Practice: The Collapse ofArthur Andersen 328

Building Trust: The KeytoExercising Influence328

Qualities of an Effective Project Manager 330

Research Highlight: Managing Product Development Tensions 331

Summary 333Key Terms 334Review Questions 334

Managing Project Teams 342

The Five-Stage Team Development Model 344

Research Highlight: The Punctuated Equilibrium

Model ofGroup Development 346

Situational Factors Affecting Team

Development 347

Building High-Performance Project Teams 347

Snapshotfrom Practice: Managing Martians 351

Snapshot from Practice: MatteisProject Platypus

353

Snapshotfrom Practice: "Rat Fax" Galvanizes

ELITE Team at Newspaper 355

Snapshot from Practice: A Good Man in

aStorm 357

Snapshot from Practice: Managing Low-Priority

Projects 362

Managing Virtual Project Teams 367

Snapshotfrom Practice: Managing Virtual Global

Teams 368

Project Team Pitfalls 369

Snapshot from Practice: Nominal Group

Case: Kerzner Office Equipment 374

Case: Franklin Equipment, Ltd 377

Chapter 12

Partnering: Managing

Interorganizational Relations 381

Introduction to Project Partnering 382

Preproject Activities-Setting the Stage for

Project Completion-Celebrating Success 389

Why Project Partnering Efforts Fail 389

Snapshotfrom Practice: Incentive System for a Partnering Project 390

Snapshot from Practice: Competing against the Giants 391

Snapshot from Practice: U.S Department of DefensesValueEngineering Awards 392

TheArtof Negotiating 393

A Note on Managing Customer Relations 397

Research Highlight: IT Project Managers Doubling

as Client Account Executives 399

Summary 400Key Terms 400Review Questions 401Exercises 401

Snapshot from Practice: Can Partnering Work in the Public Sector? 407

Chapter 13 Progress and Performance Measurement and Evaluation 411

Structure of a Project Monitoring InformationSystem 411

The Project Control Process 413Monitoring Time Performance 414The Need forAn Integrated Information System416

Snapshotfrom Practice: Status Reports at Microsoft

Snapshot from Practice: Trojan Decommissioning Project 434

Snapshotfrom Practice: A Pseudo-Earned Value Percent Complete Approach 438

Summary 439Key Terms 439

The Project Audit Process 462

Project Audits: The Bigger Picture 466

Snapshot from Practice: Operation Eagle Claw

467

Snapshot from Practice: Acer Attacks Costly

Delays 470

Project Closure 471

Snapshot from Practice: Project Cancelled 473

Research Highlight: Chaos: Software Projects 475

Research Highlight: Measures ofTeam

Project Closeout Checklist 484

Case: Maximum Megahertz Project 486

Snapshotfrom Practice: Dealing with Customs 506

Selection and Training for InternationalProjects 509

Key Terms 511Review Questions 511Exercises 512

Appendix 1: Computer Project Exercises 531

Glossary 543

Project Management Equations 550

j j j j j j j j j j j j j j j j j j j

Tom Peters, author, consultant

This is a good time to be reading a book about project management Business leaders and experts haveproclaimed that project management is the wave of the future Project management provides people with

a powerful set of tools that improves their ability to plan, implement, and manage activities to plish specific organizational objectives But project management is more than just a set of tools; it is aresults-oriented management style that places a premium on building collaborative relationships among

accom-a diverse caccom-ast of chaccom-araccom-acters Exciting opportunities accom-awaccom-ait people skilled in project maccom-anaccom-agement

The project approach has long been the style of doing business in the construction industry,u.s.partment of Defense contracts, and Hollywood as well as at big consulting firms Now project manage-ment is spreading to all avenues of work Today,project teams carry out everything from port expansions

De-to hospital restructuring De-to upgrading information systems The "Big Three" auDe-tomakers credit theirability to recapture a significant share of the auto market to the use of project management teams, whichquickly develop new cars that incorporate the latest automotive technology The impact of project man-agement is most profound in the area of information technology, where the new folk heroes are youngprofessionals whose Herculean efforts lead to the constant flow of new hardware and software products.Project management is not limited to the private sector Project management is also a vehicle for do-ing good deeds and solving social problems Endeavors such as providing emergency aid to a regiondevastated by a hurricane, devising a strategy for reducing crime and drug abuse within a city, or orga-nizing a community effort to renovate a public playground would and do benefit from the application ofmodem project management skills and techniques

Perhaps the best indicator of the growth and interest in project management can be seen in the rapidexpansion of the Project Management Institute (PMI), a professional organization for project manage-ment specialists Between 1993 and 1997, membership quadrupled to more than 24,000 Current mem-bership is now over 139,000 with members in 125 countries Since projects cover such a wide variety ofindustries, PM! has created Specific Interest Groups (SIGs) so people in different industries can shareideas about managing projects in their areas of interest, such as aerospace, automotive, construction, en-gineering, financial services, information technology, pharmaceuticals, and telecommunications

3

4 Chapter 1 Modern Project Management

Project management is not restricted to specialists Managing projects are often a vital part of one's job For example, Brian Vannoni, formerly of General Electric Plastics states:

every-We have very few dedicated project managers Our project managers might be process engineers, they might be scientists, they might be process control technicians, maintenance mechanics, degreed and nondegreed people A short answer for GE Plastics is that anyone, any level, any function could be a project manager.*

Companies recognize that their entire organizational staff can benefit from being trained in project agement, not just project management wannabes

man-The growth of project management can also be seen in the classroom Ten years ago major ties offered one or two classes in project management,primarily for engineers Today, many universitiesoffer multiple sections of project management classes, with the core group of engineers being supple-mented by business students majoring in marketing, management information systems (MIS), and fi-nance, as well as students from other disciplines such as oceanography, health sciences, computersciences, and liberal arts These students are finding that their exposure to project management is pro-viding them with distinct advantages when it comes time to look for jobs More and more employers arelooking for graduates with project management skills The logical starting point for developing theseskills is understanding the uniqueness of a project and of project managers

universi-What Is a Project?

What do the following headlines have in common?

Next generation of high definition TVs enter the market

Star Trek movie nears completion

FARM AID concert raises millions for family farmers

New football stadium breaks ground

Portable fuel cells to replace conventional batteries

All these events resulted from the management of projects A project can be defined as follows:

A project is a complex, nonroutine, one-time effort limited by time, budget, resources, and mance specifications designed to meet customer needs

perfor- Like most organizational effort, the major goal ofaproject is to satisfy a customer's need Beyond thisfundamental similarity, the characteristics of a project help differentiate it from other endeavors of theorganization The major characteristics of a project are as follows:

I Anestablished objective

2 A defined life span with a beginning and an end

3 Usually, the involvement of several departments and professionals

4 Typically, doing something that has never been done before

5 Specific time, cost, and performance requirements

First, projects have a defined objective-whether it is constructing a 12-story apartment complex byJanuary 1 or releasing version 2.0 of a specific software package as quickly as possible This singular

* Harold Kerzner Applied Project Management (New York: John Wiley & Sons.lOOOI p, 221.

The fourth characteristic of a project is that it is nonroutine andhassome unique elements This is not

an either/or issue but a matter of degree Obviously, accomplishing something thathasnever been done

be-fore, such as building a hybrid (electric/gas) automobile or landing two mechanical rovers on Mars, quires solving previously unsolved problems and breakthrough technology On the other hand, even basicconstruction projects that involve established sets of routines and procedures require some degree of cus-tomization that makes them unique

re-Finally, specific time, cost, and performance requirements bind projects Projects are evaluated ing to accomplishment, cost, and time spent These triple constraints impose a higher degree of account-ability than you typically find in most jobs Thesethreealso highlight one ofthe primary functions ofprojectmanagement, which is balancing the trade-offs between time, cost, and performance while ultimately satis-fying the customer

accord-What a Project Is Not Projects should not be confused with everyday work A project is not routine,repetitive work! Ordinary daily work typically requires doing the same or similar work over and over,while a project is done only once; a new product or service exists when the project is completed Exam-ine the list in Table 1.1 that compares routine, repetitive work and projects Recognizing the difference

is important because too often resources can be used up on daily operations which may not contribute tolonger range organization strategies that require innovative new products

The termsprogram and projectare often used interchangeably in practice, which sometimes causes

confusion Programs and projects are similar in the sense that they both are directed toward goals and quire plans and resources to reach their goals Both use similar tools, methods, and policies The differ-ences lie primarily in scope and time horizon.A program is a series of coordinated, related, multiple projects that continue aver extended time intended to achieve a goal A program is a higher level group of

re-projects targeted at a common goal The classic example is the U.S space program to place a space tion on the moon to serve as a springboard to other space explorations

sta-TABLE1.1

Comparison of

Routine Work

with Projects

6 Chapter1

The Project Life Cycle

Another way of illustrating the unique nature of project work is in terms of the project life cycle Someproject managers find it useful to use the project life cycle as the cornerstone for managing projects Thelife cycle recognizes that projects have a limited life span and that there are predictable changes in level

of effort and focus over the life of the project There are a number of different life-cycle models in ject management literature Many are unique to a specific industry or type of project For example, anew software development project may consist of five phases: definition, design, code, integration/test,and maintenance A generic cycle is depicted in Figure 1.1

pro-The project life cycle typically passes sequentially through four stages: defining, planning, executing,and delivering The starting point begins the moment the project is given the go-ahead Project effortstarts slowly, builds to a peak, and then declines to delivery of the project to the customer

I Defining stage: Specifications of the project are defined; project objectives are established; teamsare formed; major responsibilities are assigned

2 Planning stage: The level of effort increases, and plans are developed to determine what the projectwill entail, when it will be scheduled, whom it will benefit, what quality level should be maintained,and what the budget will be

3 Executing stage: A major portion of the project work takes place-both physical and mental Thephysical product is produced (a bridge, a report, a software program) Time, cost, and specificationmeasures are used for control Is the project on schedule, on budget, and meeting specifications?What are the forecasts of each of these measures? What revisions/changes are necessary?

4 DeUvering stage: Includes the two activities: delivering the project product to the customer and deploying project resources Delivery ofthe project might include customer training and transferringdocuments Redeployment usually involves releasing project equipment/materials to other projectsand finding new assignments for team members

re-FIGURE 1.1

Project Life

Cycle

Chapter 1 Modern Project Management 7

In practice, the project life cycle is used by some project groups to depict the timing of major tasksover the life ofthe project For example, the design team might plan a major commitment of resources

in the defining stage, while the quality team would expect their major effort to increase in the latterstages of the project life cycle Because most organizations have a portfolio of projects going on con-currently, each at a different stage of each project's life cycle, careful planning and management at theorganization and project levels are imperative

The Project Manager

Management decides and implements the ways and means to effectively and efficiently utilize humanand nonhuman resources to reach predetermined objectives In a small sense project managers performthe same functions as other managers That is, they plan, schedule, motivate, and control Various types

of managers exist because they fill special needs For example, the marketing manager specializes indistributing a product or service; the production manager specializes in conversion of resource inputs tooutputs; the financial manager ensures adequate funds are available to keep the organization viable Theproject manager is unique because shelhe manages temporary, nonrepetitive activities and frequentlyacts independently of the formal organization

Project managers are expected to marshal resources to complete a fixed-life project on time, on get, and within specifications Project managers are the direct link to the customer and must manage theinterface between customer expectations and what is feasible and reasonable They provide direction, co-ordination, and integration to the project team, which is often made up of part-time participants loyal totheir functional departments Project managers are responsible for performance (frequently with too lit-tle authority) They must ensure that appropriate trade-offs are made between the time, cost, and perfor-mance requirements of the project At the same time, unlike their functional counterparts, projectmanagers generally possess only rudimentary technical knowledge to make such decisions Instead, theymust orchestrate the completion of the project by inducing the right people, at the right time, to addressthe right issues and make the right decisions Clearly, project management is a unique and challengingprofession This text is intended to provide the necessary knowledge, perspective, and tools to enablestudents to accept the challenge

bud-The Importance of Project Management

Project management is no longer a special-need management.Itis rapidly becoming a standard way ofdoing business See Snapshot from Practice: Project Management at Work.Anincreasing percentage ofthe typical firm's effort is being devoted to projects The future promises an increase in the importanceand the role of projects in contributing to the strategic direction of organizations Several reasons whythis is the case are briefly discussed below

Compression ofthe Product Life Cycle

One of the most significant driving forces behind the demand for project management is the shortening

of the product life cycle For example, today in high-tech industries the product life cycle is averaging I

to 3 years Only 30 years ago, life cycles of 10 to 15 years were not uncommon Time to marketfor newproducts with short life cycles has become increasingly important A common rule of thumb in the world

of high-tech product development is that a six-month project delay can result in a 33 percent loss inproduct revenue share Speed, therefore, becomes a competitive advantage; more and more organizations

are relying on cross-functional project teams to get new products and services to the market as quickly aspossible.

Global Competition

Today's open market demands not only cheaper products and services but also better products and

ser-vices This has led to the emergence of the quality movement across the world with ISO 9000 tion a requirement for doing business ISO 9000 is a family of international standards for qualitymanagement and assurance These standards cover design, procurement, quality assurance, and deliveryprocesses for everything from banking to manufacturing Quality management and improvement invari-ably involve project management For many, their first exposure to project management techniques hasbeen in quality workshops

certifica-Increased pressures to reduce costs have not only led to the migration of U.S manufacturing tions to Mexico and Asia, which by itself is a significant project, but also a transformation in how orga-nizations try to achieve results See e.Schwab Snapshot from Practice More and more work is beingclassified as projects Individuals are being assigned responsibility to achieve a specific objective within

opera-8

a given budget and by a specified deadline Project management, with its triple focus on time, cost, andperformance, is proving to be an efficient, flexible way to get things done.

Knowledge Explosion

The growth in new knowledge has increased the complexity of projects because projects encompass thelatest advances For example, building a road 30 years ago was a somewhat simple process Today, eacharea has increased in complexity, including materials, specifications, codes, aesthetics, equipment, andrequired specialists Similarly, in today's digital, electronic age it is becoming hard to find a new productthat does not contain at least one microchip Product complexity has increased the need to integrate di-vergent technologies Project management has emerged as an important discipline for achieving this task

Corporate Downsizing

The last decade has seen a dramatic restructuring of organizational life Downsizing (or rightsizing if youare still employed) and sticking to core competencies have become necessary for survival for many firms.Middle management is a mere skeleton of the past In today's flatter and leaner organizations, where

9

change is a constant, project management is replacing middle management as a way of ensuring that thingsget done Corporate downsizing has also led to a change in the way organizations approach projects Com-panies outsource significant segments ofproject work, and project managers have to manage not only theirown people but also their counterparts in different organizations.

Increased Customer Focus

Increased competition has placed a premium on customer satisfaction Customers no longer simply tle for generic products and services They want customized products and services that cater to their spe-cific needs This mandate requires a much closer working relationship between the provider and thereceiver Account executives and sales representatives are assuming more of a project manager's role asthey work with their organization to satisfy the unique needs and requests of clients

set-Increased customer attention has also prompted the development of customized products and services.For example, 10 years ago buying a set of golf clubs was a relatively simple process: You picked out a set

10

Chapter1 Modern Project Management 11

based on price and feel Today, there are golf clubs for tall players and short players, clubs for players whotend to slice the ball and clubs for those who hook the ball, high-tech clubs with the latest metallurgic dis-covery guaranteed to add distance, and so forth Project management is critical both to development of cus-tomized products and services and to sustaining lucrative relationships with customers

Rapid Development ofThird World and Closed Economies

The collapse of the Soviet Empire and the gradual opening ofAsian Communist countries have created anexplosion of pent-up demand within these societies for all manner of consumer goods and infrastructuredevelopment Western firms are scrambling to introduce their products and services to these new markets,and many firms are using project management techniques to establish distribution channels and foreignbases of operations These historical changes have created a tremendous market for core project work inthe areas of heavy construction and telecommunications as eastern European and Asian countries strive torevitalize their inefficient industries and decrepit infrastructures

Small Projects Represent Big Problems

The velocity of change required to remain competitive or simply keep up has created an organizational mate in which hundreds of projects are implemented concurrently This climate has created a multiprojectenvironment and a plethora of new problems Sharing and prioritizing resources across a portfolio of pro-jects is a major challenge for senior management Many firms have no idea of the problems involved withinefficient management of small projects Small projects typically carry the same or more risk as do largeprojects Small projects are perceived as having little impact on the bottom line because they do not de-mand large amounts of scarce resources and/or money Because so many small projects are going on con-currently and because the perception of the inefficiency impact is small, measuring inefficiency is usuallynonexistent Unfortunately, many small projects soon add up to large sums ofmoney Many customers andmillions of dollars are lost each year on small projects in product and service organizations

cli-Many small projects can eat up the people resources of a firm and represent hidden costs not sured in the accounting system Organizations with many small projects going on concurrently face themost difficult project management problems A key question becomes one of how to create an organi-zational environment that supports multiproject management A process is needed to prioritize and de-velop a portfolio of small projects that supports the mission of the organization

mea-In summary, there are a variety of environmental forces interacting in today's business world that tribute to the increased demand for good project management across all industries and sectors Projectmanagement appears to be ideally suited for a business environment requiring accountability, flexibility,innovation, speed, and continuous improvement

con-Project Management Today-An Integrative Approach

Some project managers have used pieces of systems that are useful for managing projects For ple, networks, bar charts, job costing, task forces, partnering, and scheduling all have been used-sometimes very successfully and other times with poor results As the world becomes morecompetitive, the importance of managing the process of project management and "getting it right thefirst time" takes on new meaning Piecemeal systems fail to tie to the overall strategies of the firm.Piecemeal project priority systems fail to connect the selected projects to resources Piecemeal tools

exam-12 Chapter 1

and techniques fail to be integrated throughout the project life cycle Piecemeal approaches fail to ance the application of project planning and control methods with appropriate adjustments in the orga-nization's culture to support project endeavors

bal-Today, emphasis is on development of an integrated project management process that focuses all ject effort toward the strategic plan ofthe organization and reinforces mastery ofboth the project manage-ment tools/techniques and the interpersonal skills necessary to orchestrate successful project completion.Forsome organizations, integrating projects with strategy will require reengineering the entire businessmanagement process For others, integration will mean carefully establishing linkages among the piece-meal systems already in place and altering the focus to one of a total system At the individual level, forsome professionals to become effective project managers will require augmenting their leadership andteam-building skills with modem project planning and control methods For others it will require comple-menting their administrative skills with the capacity to inspire and lead a divergent cast ofprofessionals toproject completion

pro-Integration in project management directs attention to two key areas The first area is integration ofprojects with the strategic plan of the organization The second area is integration within the process ofmanaging actual projects Each of these areas is examined next

Integration of Projects with the Strategic Plan

In some organizations, selection and management of projects often fail to support the strategic plan ofthe organization Strategic plans are written by one group of managers, projects selected by anothergroup, and projects implemented by another These independent decisions by different groups of man-agers create a set of conditions leading to conflict, confusion, and-frequently-an unsatisfied cus-tomer Under these conditions, resources of the organization are wasted in non-value-addedactivities/projects

An integrated project management system is one in which all of the parts are interrelated A change

in anyone of the parts will influence the whole Every organization has a customer it is seeking to isfy The customer sets the raison d'etre for the organization Mission, objectives, and strategies are set

sat-to meet the needs of cussat-tomer(s) Development of a mission, objectives, and organization strategies pend on the external and internal environmental factors External environmental factors are usuallyclassified as political, social, economic, and technological; they signal opportunities or threats in set-ting the direction for the organization Internal environmental factors are frequently classified asstrengths and weaknesses such as management, facilities, core competencies, and financial condition.The outcome of the analysis of all these environmental factors is a set of strategies designed to bestmeet the needs of customers But this is only the first step (see Figure 1.2)

de-Implementing strategies is the most difficult step Strategies are typically implemented through jects Creative minds always propose more projects than there are resources The key is selecting fromthe many proposals those projects that make the largest and most balanced contribution to the objectivesand strategies (and thus, customers) of the organization This means prioritizing projects so that scarceresources are allocated to the right projects Once a project has been selected for implementation, the fo-cus switches to the project management process that sets the stage for how the project will be imple-mented or delivered

pro-Integration within the Process of Managing Actual Projects

There are two dimensions within the project management process (see Figure 1.3) The first dimension

is the technical side of the management process, which consists of the formal, disciplined, pure logicparts of the process The technical side relies on the formal information system available This dimen-

sion includes planning, scheduling, and controlling projects Clear project scope statements are written

to link the project and customer and to facilitate planning and control Creation of the deliverables andwork breakdown structures facilitate planning and monitoring the progress of the project The workbreakdown structure serves as a database that links all levels in the organization, major deliverables, andall work-right down to the tasks in a work package Effects of project changes are documented andtraceable Thus, any change in one part of the project is traceable to the source by the integrated linkages

of the system This integrated information approach can provide all project managers and the customerwith decision information appropriate to their level and needs A successful project manager will be welltrained in the technical side of managing projects

The second dimension is the sociocultural side ofthe project management process Incontrast with theorderly world of project planning, this dimension involves the much messier, often contradictory andparadoxical world of implementation.Itcenters on creating a temporary social system within a larger or-ganizational environment that combines the talents of a divergent set of professionals working to com-plete the project See Research Highlight: Works Well with Others Project managers must shape a projectculture that stimulates teamwork and high levels of personal motivation as well as a capacity to quicklyidentify and resolve problems that threaten project work This dimension also involves managing the in-terface between the project and external environment Project managers have to assuage and shape ex-pectations of customers, sustain the political support of top management, negotiate with their functionalcounterparts, monitor subcontractors, and so on Overall, the manager must build a cooperative socialnetwork among a divergent set of allies with different standards, commitments, and perspectives

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Chapter 1 Modern Project Management 15

Some suggest that the technical dimension represents the "science" of project management whilethe sociocultural dimension represents the "art" of managing a project To be successful, a managermust be a master of both Unfortunately, some project managers become preoccupied with the plan-ning and technical dimension of project management Often their first real exposure to project man-agement is through project management software, and they become infatuated with network charts,Gantt diagrams, and performance variances and attempt to manage a project from a distance Con-versely, there are other managers who manage projects by the "seat of their pants," relying heavily onteam dynamics and organizational politics to complete a project Good project managers balance theirattention to both the technical and sociocultural dimensions of project management

Summary

There are powerful environmental forces contributing to the rapid expansion ofproject management proaches to business problems and opportunities A project is defined as a nonroutine, one-time effortlimited by time, resources, and performance specifications designed to meet customer needs One ofthedistinguishing characteristics of project management is that it has both a beginning and an end andtyp-ically consists of four phases: defining, planning, executing, and delivering Effective project manage-ment begins with selecting and prioritizing projects that support the firm's mission and strategy.Successful implementation requires both technical and social skills Project managers have to plan andbudget projects as well as orchestrate the contributions of others

ap This text is written to provide the reader with a comprehensive, integrative understanding of the projectmanagement process The text focuses both on the science of project management and the art of man-aging projects Following this introductory chapter, Chapter 2 focuses on how organizations go aboutevaluating and selecting projects Special attention is devoted to the importance of linking project se-lection to the mission and strategy of the firm The organizational environment in which projects are im-plemented is the focus of Chapter 3 The traditional discussion of matrix management and otherorganizational forms is augmented by a discussion of the role the culture of an organization plays in theimplementation of projects

The next six chapters focus on developing a plan for the project; after all, project success begins with

a good plan Chapter 4 deals with defining the scope of the project and developing a work breakdownstructure (WBS) The challenge of formulating cost and time estimates is the subject of Chapter 5.Chapter 6 focuses on utilizing the information from the WBS to create a project plan in the form of atimed and sequenced network of activities

Risks are a potential threat to project management, and Chapter 7 examines how organizations andmanagers identify and manage risks associated with project work Resource allocation is added to theplan in Chapter 8 with special attention devoted to how resource limitations impact the project schedule.Finally, Chapter 9 examines strategies for reducing ("crashing") project time either prior to the initiation

of the project or in response to problems or new demands placed on the project

Chapters 10 through 12 focus on project implementation and the sociocultural side of project agement, beginning with Chapter 10, which focuses on the role of the project manager as a leader andstresses the importance of managing project stakeholders within the organization Chapter 11 focuses

man-on the core project team; it combines the latest informatiman-on man-on team dynamics with leadership

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skills/techniques for developing a high-performance project team Chapter 12 continues the theme ofmanaging project stakeholders by discussing how to manage external relations such as those with con-tractors, customers, and suppliers

Chapter 13 focuses on the kinds of information managers use to monitor project progress, withspecial attention devoted to the key concept of earned value Issues surrounding the termination orcompletion of the project are dealt with in Chapter 14 Implementation of project management in mul-ticultural, international environments is the subject of Chapter 15 Finally, Chapter 16 looks brieflytoward the future of project management and includes a special segment on pursuing a career in pro-ject management

Throughout this text you will be exposed to the major aspects of the project management system.However, a true understanding ofproject management comes not from knowing what a scope statement

is, or the critical path, or partnering with contractors, but from comprehending how the different ments of the project management system interact to determine the fate of a project The key to success,then, becomes managing conflicting demands and the interaction among different elements of a project,not the elements themselves For example, project managers must manage the interactions among scope,cost, schedule, team, and customer expectations They must manage the interactions between the projectmanagement information system and the people who provide the data and use it They must manage theinteractions between the core project team and the outsiders they depend on If, by the end of this text,you come to appreciate these key points of balancing your skills in the technical and sociocultural di-mensions and managing the interactions among them, you should have a distinct competitive advantageover others aspiring to work in the field of project management

ele-Chapte~J"ModernProject Management 17

Case

Rachel, the project manager of a large information systems project, arrives at her office early to getcaught up with work before her co-workers and project team arrive However, as she enters the office.shemeets Neil, one of her fellow project managers, who also wants to get an early start on the day Neil hasjust completed a project overseas They spend 10 minutes socializing and catching up on personal news

Ittakes Rachel 10 minutes to get.to her office and settle in She then checks her voice mail andturns

on her computer She was at her client's site the day before until 7:30P.M. and has not checked her mail or voice mail since 3:30P.M.the previous day There are 7 phone messages, 16 e-mails, and 4 notesleft on her desk She spends 15 minutes reviewing her schedule and "to do", lists for the day before re-sponding to messages that require immediate attention

e-Rachel spends the n ext 25 minutes going over project reports and preparing for the weekly statusmeeting Her boss, who just arrived at the office, interrupts her They spend 20 minutes discussing theproject He shares a rumor that a team member is using stimulants on the job She tellshimthat she hasnot seen anything suspicious but will keep an eye on the team member

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The 9:00A.M.project status meeting starts 15 minutes late because two of the team members have tofinish a job for a client Several people go to the cafeteria to get coffee and doughnuts while others dis-cuss last night's baseball game The team members arrive,and the remaining 45 minutes of the progressreview meeting surface project issues that have to be addressed and assigned for action

After the meeting Rachel goes down the hallway to meet with Victoria, another IS project manager.They spend 30 minutes reviewing project assignments since the two of them share personnel Victoria'sproject is behind schedule and iri need of help They broker a deal that should get Victoria's project back

on track

She returns to her office and makes several phone calls and returns several e-mails before walkingdownstairs to visit with members of her project team Her intent is to follow up on an issue that had sur-faced in the status report meeting However, her simple, "Hi guys, how are things going?" elicits astream of disgruntled responses from the "troops." After listening patiently for over 20 minutes, she re-alizes that among other things several of the client's managers are beginning to request features that werenot in the original project scope statement She tells her people that she will get on this right away.Returning to her office she tries to call her counterpart John at the clientfirmbut is told that he is notexpected back from lunch for another hour At this time, Eddie drops by and says, "How about lunch?"Eddie works in the finance office and they spend the next half hour in the company cafeteria gossipingabout internal politics She is surprisedtohear that Jonah Johnson, the director of systems projects, mayjoin another firm Jonah has always been a powerful ally

She returns to her office, answers a few more e-mails, and finally gets through to John They spend

30 minutes going over the problem The conversation ends with John promising to do some ing and to get back to her as soon as possible

investigat-Rachel puts a."Do not disturb" sign on her door, and lies down in her office She listens to the thirdand fourth movement of Ravel's string quartet in F on headphones

Rachel then takes the elevator down to the third floor and talks to the purchasing agent assigned to herproject They spend the next 30 minutes exploring ways of getting necessary equipment to the project siteearlier than planned She finally authorizes express delivery

When she returns to her office, her calendar reminds her that she is scheduled to participate in a ference call at 2:30 Ittakes 15 minutes for everyone to get online During this time, Rachel catches up

con-on some e-mail The next hour is spent exchanging informaticon-on about the technical requirements ciated with a new version of a software package they are using on systems projects like hers

asso-Rachel decides to stretch her legs and goes on a walk down the hallway where she engages in briefconversations with various co-workers She goes out of her way to thank Chandra for his thoughtfulanalysis at the status report meeting She returns to fmd that John has left a message for her to call himback ASAP She contacts John, who informs her that, according to his people, herfirm'smarketing rephad made certain promises about specific features her system would provide He doesn't know how thiscommunication breakdown occurred, but his people are pretty upset over tlW situation Rachel thanksJohn for the information and immediately takes the stairs to where the marketing group resides.She asks to see Mary, a senior marketing manager She waits 10 minutes before being invited into heroffice After a heated discussion, she leaves 40 minutes later with Mary agreeing to talk to her peopleabout what was promised and what was not promised

Chapter 1 Modern Project Management 19

She goes downstairs to her people to give them an update on what is happening They spend 30 utes reviewing the impact the client's requests could have on the project schedule She also shares withthem the schedule changes she and Victoria had agreed to After she says good night to her team, sheheads upstairs to her boss's office and spends 20 minutes updating him on key events of the day Shereturns to her office and spends 30 minutes reviewing e-mails and project documents She logs on tothe MS project schedule of her project and spends the next 30 minutes working with "what-if" scenar-ios She reviews tomorrow's schedule and writes some personal reminders before starting off on her30-minute commute home

min-1 How effectively do you think Rachel spent her day?

2 What does the case tell you about what it is like to be a project manager?

fol-• Where did this project come from?

• Should I stop working on this project and start on the new one?

• Why are we doing this project?

• How can all these projects be first priority?

• Where are we going to get the resources to do this project?

There are too many organizations in which many managers cannot identify a project's priority andlink it with the strategic plan This is not good management! Every project should contribute value

to the organization's strategic plan, which is designed to meet the future needs of its customers suring a strong linkage between the strategic plan and projects is a difficult task that demands con-stant attention from top and middle management The larger and more diverse an organization, themore difficult it is to create and maintain this strong link Ample evidence still suggests that manyorganizations have not developed a process that clearly aligns project selection to the strategic plan.The result is poor utilization of the organization's resources-people, money, equipment, and corecompetencies Conversely, organizations that have a coherent link of projects to strategy have morecooperation across the organization, perform better on projects, and have fewer projects

En-How can an organization ensure this link and alignment? The answer requires integration of projectswith the strategic plan Integration assumes the existence of a strategic plan and a process for prioritizingprojects by their contribution to the plan A crucial factor to ensure the success of integrating the planwith projects lies in the creation of a process that is open and published for all participants to review.This chapter presents an overview of the importance of strategic planning and the process for developing

a strategic plan Typical problems encountered when strategy and projects are not linked are noted Ageneric methodology that ensures integration by creating very strong linkages of project selection andpriority to the strategic plan is then discussed The intended outcomes are clear organization focus, bestuse of scarce organization resources (people, equipment, capital), and improved communication acrossprojects and departments

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