Project management the managerial process with MS project, 6th edition

People at all levels in the organization assigned to work on projects will find the text useful not only in viding them with a rationale for the use of project management processes but

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Project Management

The Managerial Process

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The McGraw-Hill Series Operations and Decision Sciences

OPERATIONS MANAGEMENT

Beckman and Rosenfield,

Operations, Strategy: Competing in the

Bowersox, Closs, Cooper, and Bowersox,

Supply Chain Logistics Management,

Fourth Edition

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Managing Projects: A Team-Based

Cachon and Terwiesch,

Matching Supply with Demand: An

Introduction to Operations Management,

Third Edition

Cooper and Schindler,

Business Research Methods,

Twelfth Edition

Finch,

Interactive Models for Operations and

Supply Chain Management,

First Edition

Fitzsimmons, Fitzsimmons, and

Bordoloi,

Service Management: Operations,

Strategy, Information Technology,

Jacobs, Berry, Whybark, and Vollmann,

Manufacturing Planning & Control for Supply Chain Management,

Sixth Edition

Jacobs and Chase,

Operations and Supply Management:

The Core,

Third Edition

Jacobs and Chase,

Operations and Supply Management,

Fourteenth Edition

Jacobs and Whybark,

Why ERP?

First Edition

Larson and Gray,

Project Management: The Managerial Process,

Sixth Edition

Leenders, Johnson, and Flynn,

Purchasing and Supply Management,

Schroeder, Goldstein, Rungtusanatham,

Operations Management: Contemporary Concepts and Cases,

Sixth Edition

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A Modeling and Case Studies Approach with Spreadsheets,

Fifth Edition

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Introduction to Management Science with Spreadsheets,

First Edition

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Project Management

Erik W Larson

Oregon State University

Clifford F Gray

Oregon State University

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PROJECT MANAGEMENT: THE MANAGERIAL PROCESS, SIXTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121 Copyright © 2 014 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous Edition © 2011 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper

1 2 3 4 5 6 7 8 9 0 QV S/QVS 1 0 9 8 7 6 5 4 3 ISBN 978-0-07-809659-4

MHID 0-07-809659-6

Managing Director: Douglas Reiner Senior Brand Manager: Thomas Hayward Executive Director of Development: Ann Torbert Senior Development Editor: Wanda Zeman Digital Development Editor: Meg Maloney, Kevin Shanahan Dir of Digital Content Development: Doug Ruby

Senior Marketing Manager: Heather Kazakoff Content Production Manager: Faye Schilling Content Project Manager: Heather Ervolino Buyer: Nichole Birkenholz

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Typeface: 10.5/12 Times New Roman MT Std Printer: Quad/Graphics

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data

Gray, Clifford F.

Project management : the managerial process / Erik W Larson, Clifford F.

Gray.—Sixth edition.

pages cm Previous editions published as: Project management : the managerial process / Clifford F Gray, Erik W Larson.

ISBN 978-0-07-809659-4 (alk paper)

1 Project management 2 Time management 3 Risk management I Larson, Erik W., 1952-

II Title

HD69.P75G72 2014 658.4904—dc23

2013027472 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

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Busi-1995 he worked as a Fulbright scholar with faculty at the Krakow Academy of Economics on modernizing Polish business education He was a visiting professor

at Chulalongkorn University in Bangkok, Thailand, and at Baden-Wuerttemberg Cooperative State University in Bad Mergentheim, Germany He received a B.A

in psychology from Claremont McKenna College and a Ph.D in management from State University of New York at Buffalo He is a certified project manage-ment professional (PMP) and Scrum Master

Clifford F Gray

CLIFFORD F GRAY is professor emeritus of management at the College of Business, Oregon State University He continues to teach undergraduate and grad-uate project management courses overseas and in the United States; he has per-sonally taught more than 100 executive development seminars and workshops

His research and consulting interests have been divided equally between tions management and project management; he has published numerous articles

opera-in these areas, plus a text on project management He has also conducted research with colleagues in the International Project Management Association Cliff has been a member of the Project Management Institute since 1976 and was one of the founders of the Portland, Oregon, chapter He was a visiting professor at Kasetsart University in Bangkok, Thailand, in 2005 He was the president of Project Man-agement International, Inc (a training and consulting firm specializing in project management) 1977–2005 He received his B.A in economics and management from Millikin University, M.B.A from Indiana University, and doctorate in oper-ations management from the College of Business, University of Oregon He is certified Scrum Master

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“Man’s mind, once stretched by a new idea, never regains its original dimensions.”

Oliver Wendell Holmes, Jr.

To my family who have always encircled me with love and encouragement—my parents (Samuel and Charlotte), my wife (Mary), my sons and their wives (Kevin and Dawn, Robert and Sally) and their children (Ryan, Carly, Connor and Lauren).

C.F.G.

“We must not cease from exploration and the end of all exploring will be to arrive where we begin and to know the place for the first time.”

T S Eliot

To Ann whose love and support has brought out the best in me And, to our girls Mary, Rachel, and Tor-Tor for the joy and pride they give me Finally,

to my muse, Neil, for the faith and inspiration he instills.

E.W.L

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Preface

Our motivation in writing this text continues to be to provide a realistic, socio-technical view of project management In the past, textbooks on project management focused almost exclusively on the tools and processes used to man-age projects and not the human dimension This baffled us since people not tools complete projects! While we firmly believe that mastering tools and processes is essential to successful project management, we also believe that the effectiveness

of these tools and methods is shaped and determined by the prevailing culture of the organization and interpersonal dynamics of the people involved Thus, we try

to provide a holistic view that focuses on both of these dimensions and how they interact to determine the fate of projects

The role of projects in organizations is receiving increasing attention Projects are the major tool for implementing and achieving the strategic goals of the orga-nization In the face of intense, worldwide competition, many organizations have reorganized around a philosophy of innovation, renewal, and organizational learning to survive This philosophy suggests an organization that is flexible and project driven Project management has developed to the point where it is a pro-fessional discipline having its own body of knowledge and skills Today it is nearly impossible to imagine anyone at any level in the organization who would not ben-efit from some degree of expertise in the process of managing projects

Audience

This text is written for a wide audience It covers 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 text should prove useful to students and prospective project managers in helping them understand why organizations have developed a formal project management process to gain a competitive advan-tage Readers will find the concepts and techniques discussed in enough detail to

be immediately useful in new-project situations Practicing project managers will find the text to be a valuable guide and reference when dealing with typical prob-lems that arise in the course of a project Managers will also find the text useful in understanding the role of projects in the missions of their organizations Analysts will find the text useful in helping to explain the data needed for project imple-mentation as well as the operations of inherited or purchased software Members

of the Project Management Institute will find the text is well structured to meet the needs of those wishing to prepare for PMP (Project Management Profes-sional) or CAPM (Certified Associate in Project Management) certification exams The text has in-depth coverage of the most critical topics found in PMI’s

Project Management Body of Knowledge (PMBOK) People at all levels in the

organization assigned to work on projects will find the text useful not only in viding them with a rationale for the use of project management processes but also because of the insights they will gain on how to enhance their contributions to project success

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viii Preface

Our emphasis is not only on how the management process works, but more

importantly, on why it works The concepts, principles, and techniques are

univer-sally applicable That is, the text does not specialize by industry type or project scope Instead, the text is written for the individual who will be required to man-age a variety of projects in a variety of different organizational settings In the case of some small projects, a few of the steps of the techniques can be omitted, but the conceptual framework applies to all organizations in which projects are important to survival The approach can be used in pure project organizations such as construction, research organizations, and engineering consultancy firms

At the same time, this approach will benefit organizations that carry out many small projects while the daily effort of delivering products or services continues

Content

In this and other editions we continue to resist the forces that engender scope creep and focus only on essential tools and concepts that are being used in the real world We have been guided by feedback from practitioners, teachers, and stu-dents Some changes are minor and incremental, designed to clarify and reduce confusion Other changes are significant They represent new developments in the field or better ways of teaching project management principles Below are major changes to the sixth edition

• Computer exercises and MS Project examples have been updated to MS Project

2010, and 2013 including video tutorials to help students master the basics of

MS Project

• Terms and concepts have been updated to be consistent with the fifth edition of

the Project Management Body of Knowledge (2013).

• The chapters on Agile Project Management and Careers in Project ment have been expanded

Manage-• Chapter 6 utilizes a new example that clarifies the differences between free and total slack Chapters 1, 2, 4, 5 and 14 have been updated

• A description of the Activity on Arrow (AoA) method for calculating networks has been deleted from the text and is now available only in the Instructor’s Manual

• New student exercises and cases have been added to many chapters

• The Blue Zuma computer exercise in Appendix 2 has been replaced by the new Red Zuma exercise

• The Snapshot from Practice boxes feature a number of new examples of project management in action as well as new Research Highlights that continue to pro-mote practical application of project management

• The Instructor’s Manual contains a listing of current YouTube videos that respond to key concepts and Snapshots from Practice

cor-Overall the text addresses the major questions and issues the authors have tered over their 60 combined years of teaching project management and consult-ing with practicing project managers in domestic and foreign environments The following questions represent the issues and problems practicing project managers find consuming most of their effort: What is the strategic role of projects in con-temporary organizations? How are projects prioritized? What organizational and Lar96596_fm_i-xviii_1.indd Page viii 8/8/13 10:53 AM f-500 /204/MH01987/Lar96596_disk1of1/0078096596/Lar96596_pagefiles

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encoun-Preface ix

managerial styles will improve chances of project success? How do project ers orchestrate the complex network of relationships involving vendors, subcon-tractors, project team members, senior management, functional managers, and customers that affect project success? What factors contribute to the development

manag-of a high-performance project team? What project management system can be set

up to gain some measure of control? How do managers prepare for a new tional project in a foreign culture? How does one pursue a career in project management?

Project managers must deal with all these concerns to be effective All of these issues and problems represent linkages to an integrative project management view

The chapter content of the text has been placed within an overall framework that integrates these topics in a holistic manner Cases and snapshots are included from the experiences of practicing managers The future for project managers appears to be promising Careers will be determined by success in managing projects

Student Learning Aids

The text website (www.mhhe.com/larsongray6e) includes study outlines, online quizzes, PowerPoint slides, videos, Microsoft Project Video Tutorials and web links The trial version of Microsoft Project software is included on its own CD-ROM free with the text

Acknowledgments

We would like to thank Lacey McNeely for updating the Test Bank and Online Quizzes; Charlie Cook for revising the PowerPoint slides; Oliver F Lehmann for providing access to PMBOK study questions; and Pinyarat Sirisomboonsuk for accuracy checking the text and Instructor’s Resource Manual content

Next, it is important to note that the text includes contributions from ous students, colleagues, friends, and managers gleaned from professional conver-sations We want them to know we sincerely appreciate their counsel and suggestions Almost every exercise, case, and example in the text is drawn from a real-world project Special thanks to managers who graciously shared their cur-rent project as ideas for exercises, subjects for cases, and examples for the text

numer-Shlomo Cohen, John A Drexler, Jim Moran, John Sloan, Pat Taylor, and John Wold, whose work is printed, are gratefully acknowledged Special gratitude is due Robert Breitbarth of Interact Management, who shared invaluable insights on prioritizing projects University students and managers deserve special accolades for identifying problems with earlier drafts of the text and exercises

We are indebted to the reviewers of past editions who shared our commitment

to elevating the instruction of project management The reviewers include Paul S

Allen, Rice University; Denis F Cioffi, George Washington University; Joseph D

DeVoss, DeVry University; Edward J Glantz, Pennsylvania State University;

Michael Godfrey, University of Wisconsin–Oshkosh; Robert Key, University of Phoenix; Dennis Krumwiede, Idaho State University; Nicholas C Petruzzi, Uni-versity of Illinois–Urbana/Champaign; William R Sherrard, San Diego State University; S Narayan Bodapati, Southern Illinois University at Edwardsville;

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x Preface

Amoako-Gyampah, University of North Carolina–Greensboro; Owen P Hall, Pepperdine University; Bruce C Hartman, University of Arizona; Richard Irving, York University; Robert T Jones, DePaul University; Richard L Luebbe, Miami University of Ohio; William Moylan, Lawrence Technological College of Business; Edward Pascal, University of Ottawa; James H Patterson, Indiana Uni-versity; Art Rogers, City University; Christy Strbiak, U.S Air Force Academy;

David A Vaughan, City University; and Ronald W Witzel, Keller Graduate School of Management Nabil Bedewi, Georgetown University; Scott Bailey, Troy University; Michael Ensby, Clarkson University; Eldon Larsen, Marshall Univer-sity; Steve Machon, DeVry University–Tinley Park; William Matthews, William Patterson University; Erin Sims, DeVry University–Pomona; Kenneth Solheim, DeVry University–Federal Way; and Oya Tukel, Cleveland State University

Gregory Anderson, Weber State University; Dana Bachman, Colorado Christian University; Alan Cannon, University of Texas, Arlington; Susan Cholette, San Francisco State; Michael Ensby, Clarkson University; Charles Franz, University

of Missouri, Columbia; Raouf Ghattas, DeVry University; Robert Groff, wood College; Raffael Guidone, New York City College of Technology; George Kenyon, Lamar University; Elias Konwufine, Keiser University; Rafael Landaeta, Old Dominion University; Muhammad Obeidat, Southern Polytechnic State University; Linda Rose, Westwood College; Oya Tukel, Cleveland State Univer-sity; and Mahmoud Watad, William Paterson University

In the sixth edition we continue to commit to improving the text content and improving instruction of project management We are grateful to those reviewers who provided helpful critiques and insights on the fifth edition, which helped us prepare this revision The reviewers for the sixth edition include Victor Allen, Lawrence Technological University; Mark Angolia, East Carolina University; Alan Cannon, University of Texas at Arlington; Robert Cope, Southeastern Louisiana University; Kenneth DaRin, Clarkson University; Ron Darnell, Amberton Uni-versity; Jay Goldberg, Marquette University; Mark Huber, University of Georgia;

Marshall Issen, Clarkson University; Charles Lesko, East Carolina University;

Lacey McNeely, Oregon State University; Donald Smith, Texas A&M University;

Peter Sutanto, Prairie View A&M University; Jon Tomlinson, University of western Ohio We thank you for your many thoughtful suggestions and for making our book better Of course we accept responsibility for the final version of the text

In addition, we would like to thank our colleagues in the College of Business at Oregon State University for their support and help in completing this project In par-ticular, we recognize Prem Mathew and Ping-Hung Hsieh for their helpful advice and suggestions We also wish to thank the many students who helped us at different stages

of this project, most notably Neil Young, Saajan Patel, Katherine Knox, Dat Nguyen, Lacey McNeely and David Dempsey Mary Gray deserves special credit for editing and working under tight deadlines on earlier editions Special thanks go to Pinyarat (“Minkster”) Sirisomboonsuk for her help in preparing the last four editions

Finally, we want to extend our thanks to all the people at McGraw-Hill/Higher Education for their efforts and support First, we would like to thank Thomas Hayward and Wanda Zeman for providing editorial direction, guidance, and management of the book’s development for the sixth edition And we would also like to thank Jane Mohr, Heather Ervolino, Nichole Birkenholz, Arpana Kumari, and Janean Utley for managing the final production, design, supplement, and media phases of the sixth edition

Erik W Larson

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I can adapt to new situations.

Project management is both people and technical oriented Project ment involves understanding the cause-effect relationships and interactions among the sociotechnical dimensions of projects Improved competency in these dimensions will greatly enhance your competitive edge as a project manager

The field of project management is growing in importance and at an nential rate It is nearly impossible to imagine a future management career that does not include management of projects Résumés of managers will soon be primarily a description of the individual’s participation in and contributions to projects

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

Chapter-by-Chapter Revisions for the Sixth Edition

Chapter 1: Modern Project Management

• New Snapshot: Project Management in Action 2013.

• Makes stronger case for why project management is essential skill set for anyone’s career

• New Snapshot: A Dozen Examples of Projects Given to Recent College

Graduates.

Chapter 2: Organization Strategy and Project Selection

• New Snapshot: Does IBM’s Watson’s Jeopardy Project Represent a Change in

Strategy?

• New Snapshot: HP’s Strategy Revision.

• Expanded discussion on the importance of project sponsors

• Revamped description of how project risks are assessed during the proposal phase

• New case: Fund Raising Project Selection Case.

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xii Note to Student

Chapter 3: Organization: Structure and Culture

• New Snapshot: Google-y.

• New case: Horizon Consulting.

Chapter 4: Defining the Project

• A new central example of a Work Breakdown Structure (WBS)

• Discussion of Process Breakdown Structure (PBS)

• Inclusion of “power/interest” map for assessing stakeholders

Chapter 5: Estimating Project Times and Costs

• New Snapshot: Reducing Estimating Error.

• Introduction to Reference Class Forecasting methodology

• New case: Post Graduation Adventure.

Chapter 6: Developing a Project Schedule

• A new central example that clarifies the differences between free and total slack

• A description of the Activity on Arrow (AoA) method for calculating networks has been deleted from the text and is now available only in the Instructor’s Manual

Chapter 7: Managing Risk

• New Snapshot: Playing Soccer in the Desert.

• New case: Sustaining Project Risk Management during Implementation.

Chapter 8 Appendix 1: The Critical-Chain Approach

• New Snapshot: Critical Chain Applied to Airplane Part Arrivals.

Chapter 9: Reducing Project Duration

• New Snapshot: Smartphone Wars.

Chapter 10: Leadership: Being an Effective Project Manager

• New case: The Blue Sky Project.

• New ethical dilemmas mini-case: Old Princeton Landing.

Chapter 11: Managing Project Teams

• Expanded discussion on project vision

Chapter 12: Outsourcing: Managing Interorganizational Relations

• New Snapshot: The Boeing 787 Dreamliner.

• New Snapshot: U.S Department of Defense’s Value Engineering Awards 2013.

• New case: Shell Case Fabricators.

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Note to Student xiii

Chapter 15: International Projects

• More extensive discussion of financial risks associated with international projects

• New Snapshot: Project X–Namibia, Africa.

• New exercise assessing relative safety of different countries

Chapter 17: An Introduction to Agile Project Management

• Elaborates on the role of product owner in Scrum

• Includes all the principles of Agile Manifesto

• Introduces the use of Sprint and Release Burndown charts to monitor progress

on Agile projects

• Discusses the use of hybrid models that combine elements of Agile and Waterfall

Chapter 18: Project Management Career Paths

• New Snapshot: Ron Parker.

• Discussion on how to take advantage of opportunities at a university to velop project management skills

de-• Expanded discussion of the value of certification

• New Snapshot: Grooming the Next Generation at Intel.

Appendix 2: Computer Project Exercises

• The Blue Zuma computer exercise in Appendix 2 has been replaced by a new Red Zuma exercise

• A video tutorial that demonstrates step by step how to complete and answer the original Blue Zuma exercise is available online for students

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Brief Contents

Preface vii

1 Modern Project Management 2

2 Organization Strategy and Project

Selection 24

3 Organization: Structure and Culture 66

4 Defining the Project 100

5 Estimating Project Times and

Costs 128

6 Developing a Project Plan 160

7 Managing Risk 204

8 Scheduling Resources and Costs 250

9 Reducing Project Duration 304

10 Leadership: Being an Effective Project

One Solutions to Selected Exercises 627

Two Computer Project Exercises 641

GLOSSARY 658 ACRONYMS 667 PROJECT MANAGEMENT EQUATIONS 668

INDEX 669

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Current Drivers of Project Management 11Project Governance 15

Alignment of Projects with Organizational Strategy 16

Project Management Today: A Socio-Technical Approach 17

A Portfolio Management System 36

Classification of the Project 36

Selection Criteria 37

Financial Criteria 37 Nonfinancial Criteria 39

Applying a Selection Model 42

Sources and Solicitation of Project Proposals 43

Ranking Proposals and Selection of Projects 44

Managing the Portfolio System 46

Balancing the Portfolio for Risks and Types of Projects 48

Summary 49Appendix 2.1: Request for Proposal (RFP) 63

Chapter 3

Organization: Structure and Culture 66

Project Management Structures 67

Organizing Projects within the Functional Organization 68

Organizing Projects as Dedicated Teams 71 Organizing Projects within a Matrix Arrangement 74 Different Matrix Forms 75

What Is the Right Project Management Structure? 79

Organization Considerations 79 Project Considerations 79

Defining the Project 100

Step 1: Defining the Project Scope 102

Employing a Project Scope Checklist 102

Step 2: Establishing Project Priorities 106Step 3: Creating the Work Breakdown Structure 108

Major Groupings Found in a WBS 108 How WBS Helps the Project Manager 109

Chapter 5

Estimating Project Times and Costs 128

Factors Influencing the Quality of Estimates 130Estimating Guidelines for Times, Costs, and Resources 131

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Developing a Project Plan 160

Developing the Project Network 161

From Work Package to Network 162

Constructing a Project Network 164

Network Computation Process 169

Forward Pass—Earliest Times 169

Backward Pass—Latest Times 171

Determining Slack (or Float) 173

Using the Forward and Backward Pass

Multiple Starts and Multiple Projects 180

Extended Network Techniques to Come Closer to

Reality 180

Laddering 180

Use of Lags to Reduce Schedule Detail and Project

Duration 180

An Example Using Lag Relationships—The Forward

and Backward Pass 185

Probability Analysis 213

Step 3: Risk Response Development 214

Mitigating Risk 214 Avoiding Risk 215 Transferring Risk 216 Retaining Risk 216

Contingency Planning 216

Technical Risks 218 Schedule Risks 220 Cost Risks 220 Funding Risks 221

Opportunity Management 221Contingency Funding and Time Buffers 222

Budget Reserves 223 Management Reserves 223 Time Buffers 224

Step 4: Risk Response Control 224Change Control Management 225Summary 229

Appendix 7.1: PERT and PERT Simulation 239

Chapter 8

Scheduling Resources and Costs 250

Overview of the Resource Scheduling Problem 251Types of Resource Constraints 253

Classification of a Scheduling Problem 255Resource Allocation Methods 255

Assumptions 255 Time-Constrained Project: Smoothing Resource Demand 255

Multiproject Resource Schedules 271Using the Resource Schedule to Develop a Project Cost Baseline 273

Why a Time-Phased Budget Baseline Is Needed 273 Creating a Time-Phased Budget 274

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Contents xvii

Chapter 9

Reducing Project Duration 304

Rationale for Reducing Project Duration 305Options for Accelerating Project

Completion 307

Options When Resources Are Not Constrained 308 Options When Resources Are Constrained 310

Project Cost–Duration Graph 313

Explanation of Project Costs 313

Constructing a Project Cost–Duration Graph 314

Determining the Activities to Shorten 314

What if Cost, Not Time, Is the Issue? 321Summary 323

Task-Related Currencies 345 Position-Related Currencies 346 Inspiration-Related Currencies 346 Relationship-Related Currencies 346 Personal-Related Currencies 347

Social Network Building 347

Mapping Dependencies 347 Management by Wandering Around (MBWA) 349 Managing Upward Relations 350

Leading by Example 352

Ethics and Project Management 355Building Trust: The Key to Exercising Influence 357

Qualities of an Effective Project Manager 359Summary 362

Chapter 11

Managing Project Teams 374

The Five-Stage Team Development Model 377Situational Factors Affecting Team

Development 378

Building High-Performance Project Teams 380

Recruiting Project Members 380 Conducting Project Meetings 383 Establishing a Team Identity 387 Creating a Shared Vision 388 Managing Project Reward Systems 391 Orchestrating the Decision-Making Process 392

Managing Conflict within the Project 394 Rejuvenating the Project Team 398

Managing Virtual Project Teams 399Project Team Pitfalls 403

Groupthink 403 Bureaucratic Bypass Syndrome 404 Team Spirit Becomes Team Infatuation 404 Going Native 404

in Place 427 Frequent Review and Status Updates 427 Co-Location When Needed 429

Fair and Incentive-Laden Contracts 430 Long-Term Outsourcing Relationships 431

The Art of Negotiating 432

1 Separate the People from the Problem 433

2 Focus on Interests, Not Positions 434

3 Invent Options for Mutual Gain 435

4 When Possible, Use Objective Criteria 435 Dealing with Unreasonable People 436

A Note on Managing Customer Relations 437Summary 440

Appendix 12.1: Contract Management 449

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xviii Contents

Development of an Earned Value Cost/Schedule

System 462

What Costs Are Included in Baselines? 465

Methods of Variance Analysis 465

Developing a Status Report: A Hypothetical

Example 467

Assumptions 467

Baseline Development 467

Development of the Status Report 468

Indexes to Monitor Progress 473

Performance Indexes 473

Project Percent Complete Indexes 474

Technical Performance Measurement 475

Software for Project Cost/Schedule Systems 475

Additional Earned Value Rules 476

Forecasting Final Project Cost 476

Other Control Issues 479

Scope Creep 479

Baseline Changes 481

The Costs and Problems of Data Acquisition 482

Summary 483

Appendix 13.1: The Application of Additional

Earned Value Rules 499

Appendix 13.2: Obtaining Project Performance

Information from MS Project 2010 506

Chapter 14

Project Closure 510

Types of Project Closure 512

Wrap-up Closure Activities 513

Creating the Final Report 516

Initiating the Retrospective Review 523

Use of an Independent Facilitator 524

Appendix 14.1: Project Closeout Checklist 533

Appendix 14.2: Euro Conversion—Project Closure

Project Site Selection 547Cross-Cultural Considerations: A Closer Look 548

Adjustments 549 Working in Mexico 552 Working in France 553 Working in Saudi Arabia 555 Working in China 556 Working in the United States 557 Summary Comments about Working in Different Cultures 559

Culture Shock 560 Coping with Culture Shock 562

Selection and Training for International Projects 563

Organization Project Management in the Long Run 582

Organization Project Management Maturity 582 The Balanced Scorecard Model 586

Agile PM in Action: Scrum 596

Roles and Responsibilities 598 Scrum Meetings 598

Product and Sprint Backlogs 600 Sprint and Release Burndown Charts 601

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More on Certification 620

Gaining Visibility 621Mentors 622

Success in Key Projects 623Summary 624

Appendix 1: Solutions to Selected

Exercises 627

Exercises 641 Glossary 658

Acronyms 667 Project Management Equations 668 Index 669

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C H A P T E R O N E

Modern Project Management

Project networks 6

Managing risk 7

Monitoring progress 13

Teams 11

Outsourcing 12

Leadership 10

Strategy 2

Introduction

1

Organization 3

Schedule resources & costs 8

Internationalprojects 15

Estimate 5

Reducing duration 9

Define project 4

Modern Project Management

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All of mankind’s greatest accomplishments—from building the great mids to discovering a cure for polio to putting a man on the moon—began

pyra-as a project.

This is a good time to be reading a book about project management Business leaders and experts have proclaimed that project management is critical to sus-tainable economic growth New jobs and competitive advantage are achieved by constant innovation, developing new products and services, and improving both productivity and quality of work This is the world of project management Proj-ect management provides people with a powerful set of tools that improves their ability to plan, implement, and manage activities to accomplish specific organiza-tional objectives But project management is more than just a set of tools; it is a results-oriented management style that places a premium on building collabora-tive relationships among a diverse cast of characters Exciting opportunities await people skilled in project management

The project approach has long been the style of doing business in the tion industry, U.S Department of Defense contracts, and Hollywood as well as big consulting firms Now project management has spread to all avenues of work

construc-Today, project teams carry out everything from port expansions to hospital structuring to upgrading information systems They are creating next generation, fuel efficient vehicles, developing sustainable sources of energy, and exploring the farthest reaches of outer space The impact of project management is most pro-found in the electronics industry, where the new folk heroes are young profession-als 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 doing good deeds and solving social problems Endeavors such

as providing emergency aid to areas hit by natural disasters, devising a strategy for reducing crime and drug abuse within a city, or organizing a community effort

to renovate a public playground would and do benefit from the application of modern project management skills and techniques

Perhaps the best indicator of demand for project management can be seen

in the rapid expansion of the Project Management Institute (PMI), a sional organization for project managers PMI membership has grown from 93,000 in 2002 to more than 434,000 currently See the PMI Snapshot from Practice, for information regarding professional certification in project management

It’s nearly impossible to pick up a newspaper or business periodical and not find something about projects This is no surprise! Approximately $2.5 trillion (about 25 percent of the U.S gross national product) are spent on projects each year in the United States alone Other countries are increasingly spending more on projects Millions of people around the world consider project management the major task in their profession

3

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4 Chapter 1 Modern Project Management

Most of the people who excel at managing projects never have the title of ect manager They include accountants, lawyers, administrators, scientists, con-tractors, public health officials, teachers, and community advocates whose success depends upon being able to lead and manage project work For some, the very nature of their work is project driven Projects may be cases for lawyers, audits for accountants, events for artists, and renovations for contractors For others, proj-ects may be a small, but critical part of their work For example, a high school teacher who teaches four classes a day is responsible for coaching a group of stu-dents to compete in a national debate competition A store manager who oversees daily operations is charged with developing an employee retention program A sales account executive is given the additional assignment of team lead to launch daily deals into a new city A public health official who manages a clinic is also responsible for organizing a Homeless Youth Connect event For these and others, project management is not a title, but a critical job requirement It is hard to think

proj-of a prproj-ofession or a career path that would not benefit from being good at ing projects

Not only is project management critical to most careers, the skill set is able across most businesses and professions At its core, project management fun-damentals are universal The same project management methodology that is used

transfer-to develop a new product can be adapted transfer-to create new services, organize events, refurbish aging operations, and so forth In a world where it is estimated that each person is likely to experience three to four career changes, managing projects is a talent worthy of development

The Project Management Institute (PMI) was founded in 1969 as an international society for project managers Today PMI has members from more than 180 countries and more than 424,600 members PMI professionals come from virtually every

major industry, including aerospace, automotive, business

management, construction, engineering, financial services,

information technology, pharmaceuticals, health care, and

telecommunications.

PMI provides certification as a Project Management fessional (PMP)—someone who has documented sufficient

Pro-project experience, agreed to follow the PMI code of

profes-sional conduct, and demonstrated mastery of the field of

proj-ect management by passing a comprehensive examination

The number of people earning PMP status has grown

dramat-ically in recent years In 1996 there were fewer than 3,000

cer-tified project management professionals By June of 2013

there were more than 537,400 Professional credential

holders.

S N A P S H O T F R O M P R A C T I C E The Project Management Institute*

Just as the CPA exam is a standard for accountants, passing the PMP exam may become the standard for project managers Some companies are requiring that all their project managers be PMP certified Moreover, many job post- ings are restricted to PMPs Job seekers, in general, are finding that being PMP certified is an advantage in the marketplace.

PMI added a certification as a Certified Associate in

Project Management (CAPM) CAPM is designed for project

team members and entry-level project managers, as well as qualified undergraduate and graduate students who want a credential to recognize their mastery of the project management body of knowledge CAPM does not require the extensive project management experience associated with the PMP For more details on PMP and CAPM, “Google” PMI to find the current Web site for the Project Management Institute.

*PMI Today, June 2013, p 4

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Chapter 1 Modern Project Management 5

S N A P S H O T F R O M P R A C T I C E A Dozen Examples of Projects Given to Recent College Graduates

The significance of project management can also be seen in the classroom

Twenty years ago major universities offered one or two classes in project ment, primarily for engineers Today, most universities offer multiple sections of project management classes, with the core group of engineers being supplemented

manage-by business students majoring in marketing, management information systems

1 Business information: Join a project team charged with installing new data security system.

2 Physical education: Design and de velop

a new fitness program for senior citizens that bines principles of yoga and aerobics.

com-3 Marketing: Execute a sales program for new home air purifier.

4 Industrial engineering: Manage a team to create a value chain report for every aspect of key product from design to customer delivery.

5 Chemistry: Develop a quality control program for nization’s drug production facilities.

orga-6 Management: Implement a new store layout design.

7 Pre-med neurology student: Join project team linking mind mapping to an imbedded prosthetic that will allow blind people to function near normally.

8 Sports communication: Join Olympic project team that will promote women’s sport products for the 2016 Games

in Reo de Janeiro, Brazil.

9 Systems engineer: Become a project team member of

a project to develop data mining of medical papers and studies related to drug efficacy.

10 Accounting: Work on an audit of a major client.

11 Public health: Research and design a medical juana educational program.

mari-12 English: Create a web-based user manual for new electronics product.

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The Project Management Institute provides the following definition of a project:

A project is a temporary endeavor undertaken to create a unique product, service, or result.

Like most organizational effort, the major goal of a project is to satisfy a customer’s need Beyond this fundamental similarity, the characteristics of a project help

(MIS), and finance, as well as students from other disciplines such as oceanography, health sciences, computer sciences, and liberal arts These students are finding that their exposure to project management is providing them with distinct advantages when it comes time to look for jobs More and more employers are looking for graduates with project management skills See the nearby Snapshot from Practice for examples of projects given to recent college graduates The logical starting point for developing these skills is understanding the uniqueness of a project and

of project managers

What Is a Project?

What do the following headlines have in common?

Millions watch Olympic Opening CeremonyCitywide WiFi system set to go live

Hospitals respond to new Health Care ReformsApple’s new iPhone hits the market

City receives stimulus funds to expand light rail systemAll of these events represent projects

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differentiate it from other endeavors of the organization The major characteristics

of a project are as follows:

1 An established 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 by January 1 or releasing version 2.0 of a specific software package as quickly as possible This singular purpose is often lacking

in daily organizational life in which workers perform repetitive operations each day

Second, because there is a specified objective, projects have a defined endpoint, which is contrary to the ongoing duties and responsibilities of traditional jobs In many cases, individuals move from one project to the next as opposed to staying

in one job After helping to install a security system, an IT engineer may be assigned to develop a database for a different client

Third, unlike much organizational work that is segmented according to tional specialty, projects typically require the combined efforts of a variety of spe-cialists Instead of working in separate offices under separate managers, project participants, whether they be engineers, financial analysts, marketing profession-als, or quality control specialists, work closely together under the guidance of a project manager to complete a project

The fourth characteristic of a project is that it is nonroutine and has some

u nique elements This is not an either/or issue but a matter of degree Obviously, accomplishing something that has never been done before, such as building a electric automobile or landing two mechanical rovers on Mars, requires solving previously unsolved problems and breakthrough technology On the other hand, even basic construction projects that involve established sets of routines and procedures require some degree of customization that makes them unique

Finally, specific time, cost, and performance requirements bind projects ects are evaluated according to accomplishment, cost, and time spent These triple constraints impose a higher degree of accountability than you typically find in most jobs These three also highlight one of the primary functions of project man-agement, which is balancing the trade-offs between time, cost, and performance while ultimately satisfying the customer

Proj-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 ing 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 Examine 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 oper-ations which may not contribute to longer range organization strategies that require innovative new products

do-Program versus Project In practice the terms project and program cause sion They are often used synonymously A program is a group of related projects

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designed to accomplish a common goal over an extended period of time Each project

within a program has a project manager The major differences lie in scale and time span

Program management is the process of managing a group of ongoing, inter- dependent, related projects in a coordinated way to achieve strategic objectives

For example, a pharmaceutical organization could have a program for curing

cancer The cancer program includes and coordinates all cancer projects that

continue over an extended time horizon (Gray, 2011) Coordinating all cancer projects under the oversight of a cancer team provides benefits not available from managing them individually This cancer team also oversees the selection and prioritizing of cancer projects that are included in their special “Cancer” portfolio

Although each project retains its own goals and scope, the project manager and team are also motivated by the higher program goal Program goals are closely related to broad strategic organization goals

The Project Life Cycle

Another way of illustrating the unique nature of project work is in terms of the

project life cycle Some project managers find it useful to use the project life cycle

as the cornerstone for managing projects The life 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 project management literature Many are unique to a specific industry or type

of project For example, a new software development project may consist of five phases: definition, design, code, integration/test, and maintenance A generic cycle

is depicted in Figure 1.1

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 effort starts slowly, builds to a peak, and then declines to delivery of the project to the customer

1 Defining stage: Specifications of the project are defined; project objectives are

established; teams are formed; major responsibilities are assigned

2 Planning stage: The level of effort increases, and plans are developed to

determine what the project will entail, when it will be scheduled, whom it will benefit, what quality level should be maintained, and what the budget will be

TABLE 1.1

Comparison of

Routine Work with

Projects

Routine, Repetitive Work Projects

Taking class notes Writing a term paper Daily entering sales receipts into the Setting up a sales kiosk for a professional accounting ledger accounting meeting

Responding to a supply-chain request Developing a supply-chain information system Practicing scales on the piano Writing a new piano piece

Routine manufacture of an Apple iPod Designing an iPod that is approximately

stores 10,000 songs Attaching tags on a manufactured product Wire-tag projects for GE and Wal-Mart

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3 Executing stage: A major portion of the project work takes place—both

physical and mental The physical product is produced (a bridge, a report, a software program) Time, cost, and specification measures 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 Closing stage: Closing includes three activities: delivering the project product

to the customer, redeploying project resources, and post-project review

Delivery of the project might include customer training and transferring documents Redeployment usually involves releasing project equipment/

materials to other projects and finding new assignments for team members

Post-project reviews include not only assessing performance but also capturing lessons learned

In practice, the project life cycle is used by some project groups to depict the timing of major tasks over the life of the 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 latter stages of the project life cycle Because most organizations have a portfolio of projects going on concurrently, each at a different stage of each project’s life cycle, care-ful planning and management at the organization and project levels are imperative

The Project Manager

At first glance project managers perform the same functions as other managers

That is, they plan, schedule, motivate, and control However, what makes them

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unique is that they manage temporary, nonrepetitive activities, to complete a fixed life project Unlike functional managers, who take over existing operations, project managers create a project team and organization where none existed before They must decide what and how things should be done instead of simply managing set processes They must meet the challenges of each phase of the project life cycle, and even oversee the dissolution of their operation when the project is completed

Project managers must work with a diverse troupe of characters to complete projects They are typically the direct link to the customer and must manage the tension between customer expectations and what is feasible and reasonable

Project managers provide direction, coordination, and integration to the ect team, which is often made up of part-time participants loyal to their func-tional departments They often must work with a cadre of outsiders—vendors, suppliers, subcontractors—who do not necessarily share their project allegience

Project managers are ultimately responsible for performance (frequently with too little authority) They must ensure that appropriate trade-offs are made between the time, cost, and performance requirements of the project At the same time, unlike their functional counterparts, project managers generally possess only rudimentary technical knowledge to make such decisions Instead, they must or-chestrate the completion of the project by inducing the right people, at the right time, to address the right issues and make the right decisions

While project management is not for the timid, working on projects can be an extremely rewarding experience Life on projects is rarely boring; each day is dif-ferent from the last Since most projects are directed at solving some tangible problem or pursuing some useful opportunity, project managers find their work personally meaningful and satisfying They enjoy the act of creating something new and innovative Project managers and team members can feel immense pride

in their accomplishment, whether it is a new bridge, a new product, or needed service Project managers are often stars in their organization and well compensated

Good project managers are always in demand Every industry is looking for effective people who can get the right things done on time Clearly, project man-agement is a challenging and exciting profession This text is intended to provide the necessary knowledge, perspective, and tools to enable students to accept the challenge

Being Part of a Project Team

Most people’s first exposure to project management occurs while working as part

of a team assigned to complete a specific project Sometimes this work is full-time, but in most cases, people work part-time on one or more projects They must learn how to juggle their day-to-day commitments with additional project responsibili-ties They may join a team with a long history of working together, in which case roles and norms are firmly established Alternatively, their team may consist of strangers from different departments and organizations As such, they endure the growing pains of a group evolving into a team They need to be a positive force in helping the team coalesce into an effective project team

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or scope statement that defines the objectives and parameters of the project They work with others to create a project schedule and budget that will guide project exe-cution They need to understand project priorities so they can make independent decisions They must know how to monitor and report project progress Although much of this book is written from the perspective of a project manager, the tools, concepts, and methods are critical to everyone working on a project Project mem-bers need to know how to avoid the dangers of scope creep, manage the critical path, engage in timely risk management, negotiate, and utilize virtual tools to communicate

Current Drivers of Project Management

Project management is no longer a special-need management It is rapidly ing a standard way of doing business See Snapshot from Practice: Project Man-agement in Action: 2013 An increasing percentage of the typical firm’s effort is being devoted to projects The future promises an increase in the importance and the role of projects in contributing to the strategic direction of organizations Sev-eral reasons why this is the case are briefly discussed below

becom-Compression of the Product Life Cycle

One of the most significant driving forces behind the demand for project ment is the shortening of the product life cycle For example, today in high-tech industries the product life cycle is averaging 6 months to 3 years Only 30 years

manage-ago, life cycles of 10 to 15 years were not uncommon Time to market for new

products 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 ect delay can result in a 33 percent loss in product 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 as possible

proj-Knowledge Explosion

The growth in new knowledge has increased the complexity of projects because projects encompass the latest advances For example, building a road 30 years ago was a somewhat simple process Today, each area has increased in complexity, in-cluding materials, specifications, codes, aesthetics, equipment, and required spe-cialists Similarly, in today’s digital, electronic age it is becoming hard to find a new product that does not contain at least one microchip Product complexity has increased the need to integrate divergent technologies Project management has emerged as an important discipline for achieving this task

Triple Bottom Line (planet, people, profit)

The threat of global warming has brought sustainable business practices to the forefront Businesses can no longer simply focus on maximizing profit to the detriment of the environment and society Efforts to reduce carbon imprint and utilize renewable resources are realized through effective project management

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the objectives and techniques used to complete projects See Snapshot from Practice: Dell Children’s Becomes World’s First “Green” Hospital

Corporate Downsizing

The last decade has seen a dramatic restructuring of organizational life ing (or rightsizing if you are still employed) and sticking to core competencies

Downsiz-Businesses thrive and survive based on their ability to manage

projects that produce products and services that meet market

needs Below is a small sample of projects that are important

to their company’s future.

ORGANIZATION: PROCTER AND GAMBLE

Project: Global Ordering, Shipping, and Billing Project

The project goal is to improve customer service, processes,

and organization structure The global team relied on virtual

communication, while closely managing risk and milestone

dates The new system is designed to allow P&G to make

real-time decisions, enabling the company to collect and

respond to consumer/retailer feedback to create more

com-pelling promotions to increase sales The system should also

improve efficiencies in supply chains by, for example,

identify-ing the best warehouses to ship products to.

—PMI Today, 2012 PMI Project of the Year Finalists, December

2012, p 7

S N A P S H O T F R O M P R A C T I C E Project Management in Action: 2013

ORGANIZATION: OAKLAND A’S BASEBALL TEAM

Project: Cisco Stadium

In November 2006, the future of the Oakland A’s looked bright as the team announced plans to build a new ballpark

in Fremont, CA Upon announcing plans to build a ballpark, the Oakland A’s sold the naming rights to the ballpark to Cisco Systems for $4 million/year over 30 years The ballpark design mimicked classic ballparks of the past, while combining the most advanced technology in the world

Those plans have since been derailed as opposition creased from major retailers and homeowners near the stadium site The A’s have spent the past five years pursuing other options including building the ballpark in Oakland, near the coliseum, or possibly in San Jose, CA The A’s need the new stadium to turn around lagging attendance, which has been at or near the bottom among major league baseball clubs.

in-—Oakland Tribune, 8/1/12

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ORGANIZATION: CHINA SUNERGY CO., LTD

Project: Sanliurfa Solar Park, Turkey

The Chinese company, Sunergy, has entered into a joint agreement with Seul Energy, a leading solar developer, to develop a 500kw solar park in Sanliurfa, Turkey The plants will incorporate state of the art technology and new types of solar cells The project is the beginning of an ambitious program designed to meet the expected growth in demand for energy

in Central Asia.

—www.prnewswire.com/news-releases/china, accessed 1/5/13

ORGANIZATION: THE WALT DISNEY COMPANY

Project: Star Wars Episode 7

Disney spent over $4 billion to purchase Lucasfilm, which cluded exclusive past and future rights to the popular Star Wars franchise Preproduction work on the newest Star Wars feature is scheduled to begin in 2013 with a projected release date in 2015 The Star Wars investment is seen by industry experts as an effort by Disney to broaden its pop culture reach and re-establish Disney films in the sci-fi/fantasy genre after

in-the failure of space epic John Carter and Mars Needs Moms.

in which favorite shows and movies can be accessed from any device at any location Dish is counting on Hopper and related products to compete against DirecTV and deep-pocketed cable and telecom providers.

—Ces.cnet.com, 1/8/13

ORGANIZATION: BILL & MELINDA GATES FOUNDATION

Project: Drought-Tolerant Maize for Africa

The goal of the project is to help farmers in Sub-Saharan Africa living in drought-susceptible areas increase their maize (corn) productivity Getting the improved maize varieties into the hands of African farmers is the product of over two decades of research and involves a broad coalition of partners, from governments and NGOs to seed dealers and farmers More than 2 million smallholder farmers in Africa are already realizing the benefits of higher yields By 2016, the drought-tolerant maize project is expected to boost maize yields by as much as 30%, benefiting up to 40 million people in Africa.

Fiat needs to prove that it is a forward looking company and provide another reason to buy the 500 other than styling or the sales curve will plunge once the cuteness fails Success will depend upon overcoming customer range anxiety and the risk that governments will stop supporting electric vehicles with attractive subsidies.

—caranddriver.com, accessed 1/20/13

ORGANIZATION: SONY, JAPAN

Project: Sony PlayStation 4 (PS4)

It’s been seven years since Sony released the highly ful PlayStation 3, and the Internet is buzzing with rumors of a fourth-generation PlayStation The PS4 reportedly will feature

success-a tsuccess-ablet-style controller success-and stsuccess-ate of the success-art grsuccess-aphics At stsuccess-ake

is Sony’s position in the $10 billion-plus gaming industry.

—sonyps4.com, accessed 1/11/13

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 change is a constant, project management is replacing middle management as a way of ensur-ing that things get done Corporate downsizing has also led to a change in the way organizations approach projects Companies outsource significant segments of project work, and project managers have to manage not only their own people but also their counterparts in different organizations

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Increased Customer Focus

Increased competition has placed a premium on customer satisfaction Customers

no longer simply settle for generic products and services They want customized products and services that cater to their specific needs This mandate requires a much closer working relationship between the provider and the receiver Account execu-tives and sales representatives are assuming more of a project manager’s role as they work with their organization to satisfy the unique needs and requests of clients

Increased customer attention has also prompted the development of ized products and services For example, 15 years ago buying a set of golf clubs was a relatively simple process: You picked out a set based on price and feel

Today, there are golf clubs for tall players and short players, clubs for players who tend to slice the ball and clubs for those who hook the ball, high-tech clubs with the latest metallurgic discovery guaranteed to add distance, and so forth Project management is critical both to development of customized products and services and to sustaining lucrative relationships with customers

Dateline 1/7/2009, Austin Texas: Dell Children’s Medical Center becomes the first hospital in the world to receive platinum LEED (Leader- ship in Energy & Environmental Design) certification Platinum certification is the highest award granted by

the U.S Green Building Council.

Dell Children’s occupies nearly one-half million square feet

on 32 acres that were once part of Austin’s old Mueller Airport

Its environmentally sensitive design not only conserves water

and electricity, but positively impacts the hospital’s clinical

en-vironment by improving air quality, making natural sunlight

readily available, and reducing a wide range of pollutants.

In order to receive LEED certification, buildings are rated in five key areas: sustainable site development, water savings, energy

efficiency, materials selection, and environmental quality Listed

below are some of the accomplishments in each LEED category:

Sustainable Site

• 47,000 tons of Mueller Airport runway material was reused

on site.

• About 40 percent fly ash instead of Portland cement in

con-crete yields a drop in carbon dioxide emissions equivalent

to taking 450 cars off the road.

• 925 tons of construction waste was recycled on site.

Water Efficiency and Water Conservation

• Reclaimed water is used for irrigation; xeriscaped

land-scaping uses native plants, which require less water.

• Low-flow plumbing fixtures.

S N A P S H O T F R O M P R A C T I C E Dell Children’s Becomes World’s First “Green” Hospital*

Energy Efficiency and Energy Conservation

• An on-site natural gas turbine supplies all electricity, which is 75 percent more efficient than coal-fired plants.

• Converted steam energy from a heating/cooling plant plies all chilled water needs.

sup-Indoor Environment Quality and Lighting

• Most interior spaces are within 32 feet of a window.

• Motion and natural light sensors shut off unneeded lights.

Conservation of Materials and Resources

• Use of local and regional materials saves fuel for shipping.

• Special paints and flooring emit low levels of volatile ganic compounds (VOCs).

or-“Even before the first plans were drawn up, we set our sight

on creating a world-class children’s hospital, and becoming the first LEED Platinum hospital in the world was definitely part

of that,” said Robert Bonar, president and CEO, Dell Children’s Medical Center of Central Texas “Our motivation to pursue LEED Platinum was not just environmental Being a ‘green’

hospital has profound, measurable effect on healing What’s good for the environment and good for our neighbors is also good for our patients.”

* Austin Business Journal, 1-11-2009; www.dellchildrens.net/about_

us/news/2009/01/08.

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Small Projects Represent Big Problems

The velocity of change required to remain competitive or simply keep up has created an organizational climate in which hundreds of projects are implemented concurrently This climate has created a multiproject environment and a plethora

of new problems Sharing and prioritizing resources across a portfolio of projects is a major challenge for senior management Many firms have no idea

of the problems involved with inefficient management of small projects Small projects typically carry the same or more risk as do large projects Small projects are perceived as having little impact on the bottom line because they do not demand large amounts of scarce resources and/or money Because so many small projects are going on concurrently and because the perception of the inefficiency impact is small, measuring inefficiency is usually nonexistent Unfortunately, many small projects soon add up to large sums of money Many customers and millions of dollars are lost each year on small projects in product and service organizations Small projects can represent hidden costs not measured in the accounting system

Organizations with many small projects going on concurrently face the most difficult project management problems A key question becomes one of how to create an organizational environment that supports multiproject management A process is needed to prioritize and develop a portfolio of small projects that supports the mission of the organization

In summary, there are a variety of environmental forces interacting in today’s business world that contribute to the increased demand for good project management across all industries and sectors Project management appears to

be ideally suited for a business environment requiring accountability, flexibility, innovation, speed, and continuous improvement These environment and other factors have created the necessity for major oversight of all organization projects

Project Governance

Competing in a global market influenced by rapid change, innovation, and time to market means organizations manage more and more projects Some means for coordinating and managing projects in this changing environment is needed Cen-tralization of project management processes and practices has been the practical outcome For example, Google, Apple, General Electric, and Sony all have over 1,000 projects being implemented concurrently every day of the year across bor-

ders and differing cultures Questions: How do these organizations oversee the

man-agement of all these projects? How were these projects selected? How do they ensure performance measurement and accountability? How can project management contin- ually improve? Centralization entails governance of all project processes and prac-

tices to improve project management

Governance is designed to improve project management in the whole tion over the long haul The rationale for integration of project management was

organiza-to provide senior management with:

• An overview of all project management activities;

• A big picture of how organizational resources are being used;

• An assessment of the risk their portfolio of projects represents;

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• A rough metric for measuring the improvement of managing projects relative

to others in the industry;

• Linkages of senior management with actual project execution management

Full insight of all components of the organization is crucial for aligning internal business resources with the requirements of the changing environment Gover-nance enables management to have greater flexibility and better control of all project management activities

Operationally, what does project management integration mean? It necessitates combining all of the major dimensions of project management under one um-brella Each dimension is connected in one seamless, integrated domain Gover-nance means applying a set of knowledge, skills, tools, and techniques to a collection of projects in order to move the organization toward its strategic goals

This integrative movement represents a major thrust of project driven tions across all industries See Figure 1.2, Integrated Management of Projects

organiza-Alignment of Projects with Organizational Strategy

Today, projects are the modus operandi for implementing strategy Yet in some

orga-nizations, selection and management of projects often fail to support the strategic plan of the organization Strategic plans are written by one group of managers, proj-ects selected by another group, and projects implemented by another These indepen-dent decisions by different groups of managers create a set of conditions leading to conflict, confusion, and frequently an unsatisfied customer Under these conditions, resources of the organization are wasted in non-value-added activities/projects

Since projects are the modus operandi, strategic alignment of projects is of major importance to conserving and effective use of organization resources Selec-tion criteria need to ensure each project is prioritized and contributes to strategic goals Anything less is a waste of scarce organizational resources—people, capital, and equipment Ensuring alignment requires a selection process that is systematic, open, consistent, and balanced All of the projects selected become part of a proj-ect portfolio that balances the total risk for the organization Management of the project portfolio ensures that only the most valuable projects are approved and managed across the entire organization

Organizational Culture Environment

Strategic Alignment

Portfolio Management

Project Management

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Technical

Scope WBS Schedules Resource allocation Baseline budgets Status reports

Sociocultural

Leadership Problem solving Teamwork Negotiation Politics Customer expectations

FIGURE 1.3

The Socio-Technical Dimensions of the Project Management Process

Project Management Today: A Socio-Technical Approach

Senior management is often involved in selecting projects but seldom involved in implementing them Implementing the project is the challenge

There are two dimensions within the actual execution of projects (see ure 1.3, The Technical and Sociocultural Dimensions of the Project Management Process) The first dimension is the technical side of the management process, which consists of the formal, disciplined, purely logical parts of the process This technical dimension includes planning, scheduling, and controlling projects Clear project scope statements are written to link the project and customer and to facil-itate planning and control Creation of the deliverables and work breakdown structures facilitates planning and monitoring the progress of the project The work breakdown structure serves as a database that links all levels in the organiza-tion, major deliverables, and all work—right down to the tasks in a work package

Fig-Effects of project changes are documented and traceable Thus, any change in one part of the project is traceable to the source by the integrated linkages of the sys-tem This integrated information approach can provide all project managers and the customer with decision information appropriate to their level and needs A successful project manager will be well trained in the technical side of managing projects

The second and opposing dimension is the sociocultural side of project ment In contrast to the orderly world of project planning, this dimension involves the much messier, often contradictory and paradoxical world of implementation It centers on creating a temporary social system within a larger organizational envi-ronment that combines the talents of a divergent set of professionals working to complete the project See Research Highlight: Works Well with Others Project managers must shape a project culture that stimulates teamwork and high levels of Lar96596_ch01_002-023.indd Page 17 10/07/13 8:09 AM user /204/MH01987/Lar96596_disk1of1/0078096596/Lar96596_pagefiles

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manage-Project management is a critical skill set in today’s world A project is defined as a nonroutine, one-time effort limited by time, resources, and performance specifica-tions designed to meet customer needs One of the distinguishing characteristics

of project management is that it has both a beginning and an end and typically consists of four phases: defining, planning, executing, and closing Effective project

manage-levels Advanced technical skills came in second, receiving

23 percent of the response.

The project was sponsored by RHI Consulting, which

pro-vides information technology professionals on a project

ba-sis An independent research firm was hired to administer the

survey Over 1,400 CIOs responded to the questionnaire.

Survey respondents were also asked:

In 2005, how frequently will employees in your IT

depart-ment work on project-based teams with members of other

departments throughout the company?

Their responses: Very frequently 57%

corre-* Joanita M Nellenbach, “People Skills Top Technical Knowledge, CIOs

Insist,” PMNetwork (August 1999), pp 7–8.

personal motivation as well as a capacity to quickly identify and resolve problems that threaten project work Things rarely go as planned and project managers must

be able to steer the project back on track or alter directions when necessary

The socio-cultural dimension also involves managing the interface between the project and external environment Project managers have to assuage and shape expectations of customers, sustain the political support of top management, ne-gotiate with their functional counterparts, monitor subcontractors, and so on

Overall, the manager must build a cooperative social network among a divergent set of allies with different standards, commitments, and perspectives

Some suggest that the technical dimension represents the “science” of project management while the sociocultural dimension represents the “art” of managing

a project To be successful, a manager must be a master of both Unfortunately, some project managers become preoccupied with the planning and technical di-mension 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; they attempt to manage a project from a distance Conversely, there are other managers who man-age projects by the “seat of their pants,” relying heavily on team dynamics and organizational politics to complete a project Good project managers balance their attention to both the technical and sociocultural aspects of project management

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This text is written to provide the reader with a comprehensive, integrative standing of the project management process The text focuses both on the science

under-of project management and the art under-of managing projects Following this tory chapter, Chapter 2 focuses on how organizations go about evaluating and selecting projects Special attention is devoted to the importance of aligning proj-ect selection to the mission and strategy of the firm The organizational environ-ment in which projects are implemented is the focus of Chapter 3 The discussion

introduc-of matrix management and other organizational forms is augmented by a sion of the role the culture of an organization plays in the implementation of projects

The next six chapters focus on developing a plan for the project; after all, ect success begins with a good plan Chapter 4 deals with defining the scope of the project and developing a work breakdown structure (WBS) The challenge of for-mulating 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 a timed and sequenced network of activities

Risks are a potential threat to every project, and Chapter 7 examines how nizations and managers identify and manage risks associated with project work

orga-Resource allocation is added to the plan in Chapter 8 with special attention devoted to how resource limitations impact the project schedule After a re-source schedule is established, a project time-phased budget is developed 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

proj-techniques for developing a high-performance project team Chapter 12 continues the theme of managing project stakeholders by discussing how to outsource proj-ect work and negotiate with contractors, customers, and suppliers

Chapter 13 focuses on the kinds of information managers use to monitor ect progress, with special attention devoted to the key concept of earned value

proj-The project life cycle is completed with Chapter 14, which covers closing out a project and the important assessment of performance and lessons learned Four

“supplemental” chapters are included to augment the project management core

Implementation of project management in multicultural, international ments is the subject of Chapter 15 Chapter 16 focuses the need for organizational oversight and how it impacts the management of projects The emergence of agile project management, a more flexible team approach to managing complex proj-ects where requirements cannot be clearly defined before the project begins, is the subject of Chapter 17 Finally, Chapter 18 concludes with coverage of career issues

environ-in the field of project management

management begins with selecting and prioritizing projects that support the firm’s mission and strategy Successful implementation requires both technical and so-cial skills Project managers have to plan and budget projects as well as orchestrate the contributions of others

Text Overview

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Throughout this text you will be exposed to the major aspects of the project management system However, a true understanding of project management comes not from knowing what a scope statement is, or the critical path, or part-nering with contractors, but from comprehending how the different elements of the project management system interact to determine the fate of a project If, by the end of this text, you come to appreciate and begin to master both the technical and sociocultural dimensions of project management, you should have a distinct competitive advantage over others aspiring to work in the field of project management

Key Terms Program, 7

Project, 6 Project life cycle, 8

3 Why is the implementation of projects important to strategic planning and the project manager?

4 The technical and sociocultural dimensions of project management are two sides to the same coin Explain

5 What is the impact of governance on managing an individual project? Why is this approach important in today’s environment?

Exercises 1 Review the front page of your local newspaper, and try to identify all the projects

contained in the articles How many were you able to find?

2 Individually identify what you consider to be the greatest achievements plished by mankind in the last five decades Now share your list with three to five other students in the class, and come up with an expanded list Review these accomplishments in terms of the definition of a project What does your review suggest about the importance of project management?

accom-3 Individually identify projects assigned in previous terms Were both cultural and technical elements factors in the success or difficulties in the projects?

socio-4 Check out the Project Management Institute’s home page at www.pmi.org.

a Review general information about PMI as well as membership information

b See if there is a PMI chapter in your state If not, where is the closest one?

c Use the search function at the PMI home page to find information on Project Management Body of Knowledge (PMBOK) What are the major knowledge areas of PMBOK?

d Explore other links that PMI provides What do these links tell you about the nature and future of project management?

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Note: If you have any difficulty accessing any of the Web addresses listed here

or elsewhere in the text, you can find up-to-date addresses on the home page of

Dr Erik Larson, coauthor of this text: and-staff-bios/erik-larson

http://business.oregonstate.edu/faculty-References Ball Parks of Baseball, “Cisco Field,” http://www.ballparksofbaseball.com/future/

CiscoField.htm (accessed June 2, 2009).

Benko, C., and F W McFarlan, Connecting the Dots (Boston: HBS Press, 2003).

Cohen, D J., and R J Graham, The Project Manager’s MBA (San Francisco:

Jossey-Bass, 2001)

Darnell, R., “The Emerging Role of the Project Manager,” PM Network, Vol 11,

No 7 (1997)

Derby, Charles, and Ofer Zwikael, “The Secret of (Defining) Success,” PM

Net-work, Vol 26, No 8, August 2012, pp 20–22.

Gray, Clifford, “Program Management, A Primer,” PM World Today, Vol 13,

No 8, August 2011, pp 1–7

Jonas, D., “Empowering Project Portfolio Managers: How Management

Involvement Impacts Project Management Performance,” International Journal

of Project Management, Vol 28, No 8 (2010), pp 818–831.

Koh, Aileen, and Lynn Crawford, “Portfolio Management: The Australian

Experience,” Project Management Journal, Vol 43, No 6 (2012), pp 33–41.

Peters, T., PM Network, January 2004, Vol 18, No 1, p 19.

Project Management Institute, Leadership in Project Management Annual

(Newton Square, PA: PMI Publishing, 2006)

Project Management Institute, A Guide to the Project Management Body of

Knowledge (PMBOK), (Newton Square, PA: PMI Publishing, 2013).

Project Management Institute, PMI Today, July 2011, p 11.

The Standish Group, CHAOS Summary 2009, pp 1–4.

Stewart, T A., “The Corporate Jungle Spawns a New Species: The Project

Manager,” Fortune (September 1996), pp 14–15.

A Day in the Life

Rachel, the project manager of a large information systems project, arrives at her office early to get caught up with work before her co-workers and project team arrive

However, as she enters the office she meets Neil, one of her fellow project managers, who also wants to get an early start on the day Neil has just completed a project overseas They spend 10 minutes socializing and catching up on personal news

Case

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