Project management - Indian Business Academy


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Project management - Indian Business Academy

  1. 1. Modern Project Management
  2. 2. What Is a Project? <ul><li>Project Defined </li></ul><ul><ul><li>A complex , nonroutine , one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs . </li></ul></ul>
  3. 3. Major Characteristics of a Project? <ul><ul><li>Has an established objective . </li></ul></ul><ul><ul><li>e.g. Unitech/TCS/NTPC </li></ul></ul><ul><ul><li>Has a defined life span with a beginning and an end. </li></ul></ul><ul><ul><li>Typically requires across-the-organizational participation. </li></ul></ul><ul><ul><li>e.g. Specialists (Eng-FA-Marketing etc) </li></ul></ul>
  4. 4. Major Characteristics of a Project? <ul><ul><li>Involves doing something never been done before. </li></ul></ul><ul><ul><li>e.g. nonroutine/ Chandrayan –DLF Customization </li></ul></ul><ul><ul><li>Has specific time , cost, and performance requirements. </li></ul></ul><ul><ul><li>Faster-Cheaper-Quality (???) </li></ul></ul>
  5. 5. Project Management in Action-UPS Moving the goods Project : Expand the delivering packages to helping net companies with everything from managing inventory to Tracking Shipment. Payoff : About 500,000 companies worldwide use the full package of UPS online logistics services, generating $ 1.4B in revenue. Action : UPS developed online system for e-tailers for everything from product delivery and tracking, managing inventories, and dealing with suppliers, to handling billings and payments. Cost are slashed for all stake holders in the supply chain to the final chain to the final customer. The UPS system leaves the competitors in a catch-up mode
  6. 6. Project Management in Action-Others <ul><li>PACCAR: Marketing Project: </li></ul><ul><li>Make the truck industry technically savvy by shifting parts purchasing online, building web-powered engine monitoring equipment in each truck </li></ul><ul><li>CISCO: Streamlining Project </li></ul><ul><li>Sales & inventory tracking system linking Cisco with suppliers, manufacturers and customers </li></ul><ul><li>SW Airlines: Customer Service Project </li></ul><ul><li>To make buying online irresistible by emphasizing simplicity </li></ul><ul><li>and speed over whizzy features. </li></ul><ul><li>Nortel Networks: Management Project </li></ul><ul><li>Speed up product development –key tactics: have development teams share ideas and documents. </li></ul>
  7. 7. Project Life Cycle FIGURE 1.2
  8. 8. The Challenge of Project Management: The Project Manager <ul><li>Manages temporary , non-repetitive activities and frequently acts independently of the formal organization . </li></ul><ul><ul><ul><li>Marshals resources for the project </li></ul></ul></ul><ul><ul><ul><li>Provides direction, coordination, and integration to the project team </li></ul></ul></ul><ul><ul><ul><li>Manages a diverse set of project stakeholders </li></ul></ul></ul><ul><ul><ul><li>Dependent upon others for technical answers </li></ul></ul></ul><ul><ul><ul><li>Is responsible for performance and success of the project </li></ul></ul></ul><ul><ul><ul><li>Must induce the right people at the right time to address the right issues and make the right decisions . </li></ul></ul></ul>
  9. 9. The Importance/Age of Project Management <ul><li>Factors Leading to the Increased Use of Project Management: </li></ul><ul><ul><li>Compression of the product life cycle-(Competitive Advantage) </li></ul></ul><ul><ul><li>Global competition </li></ul></ul><ul><ul><li>Knowledge explosion </li></ul></ul><ul><ul><li>Corporate downsizing </li></ul></ul><ul><ul><li>Increased customer focus (Need) </li></ul></ul><ul><ul><li>Small projects that represent big problems </li></ul></ul>
  10. 10. Growth in PMP Certification
  11. 11. Integrated Management of Projects FIGURE 1.3
  12. 12. Project Management Process The Technical and Socio-cultural Dimensions FIGURE 1.4
  13. 13. PM Today: Integrated Project Management Systems <ul><li>Problems Resulting from the Use of Piecemeal Project Management Systems: </li></ul><ul><ul><li>Do not tie together the overall strategies of the firm. </li></ul></ul><ul><ul><li>Fail to prioritize selection of projects by their importance of their contribution to the firm. </li></ul></ul><ul><ul><li>Are not integrated throughout the project life cycle. </li></ul></ul><ul><ul><li>Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors. </li></ul></ul>
  14. 14. Evolution of Project Driven Organization <ul><li>CMM Level 1: Ad Hoc- Unpredictable Processes (TCP) </li></ul><ul><li>CMM Level 2: Repeatable Basic Processes </li></ul><ul><li>CMM Level 3: Repeatable Well Defined Processes </li></ul><ul><li>CMM Level 4: Seamless/Integrated Managed Processes </li></ul><ul><li>CMM Level 5: Optimizing-Continuously Improving Process </li></ul>
  15. 15. Organization Strategy and Project Selection “If you don’t know where you are going, any road will take you there”…Confucius
  16. 16. Integrated Management of Projects FIGURE 1.3
  17. 17. Why Project Managers Need to Understand the Strategic Management Process? <ul><li>Involvement –Organization focus- Decision </li></ul><ul><li>Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects. </li></ul><ul><li>Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission. </li></ul><ul><li>Insight – Organizational capabilities and resource constraints </li></ul><ul><li>Project contribution- Organization focus - Direction </li></ul>
  18. 18. Strategic Management Process FIGURE 2. 1
  19. 19. The Strategic Management Process: An Overview <ul><li>Strategic Management </li></ul><ul><ul><li>Provides the theme and focus of the future direction for the firm. (Airlines – BA/ SAS/ Virgin) </li></ul></ul><ul><ul><ul><li>Responding to changes in the external environment—environmental scanning </li></ul></ul></ul><ul><ul><ul><li>Allocating scarce resources of the firm to improve its competitive position—internal responses to new action programs </li></ul></ul></ul><ul><ul><li>Requires strong links among mission, goals, objectives, strategy, and implementation. </li></ul></ul>
  20. 20. Strategic Management Process (cont’d) <ul><li>Four of Activities of the Strategic Management Process </li></ul><ul><ul><li>Review and define the organizational mission . (Focus) </li></ul></ul><ul><ul><li>Set long-range goals and objectives . (SMART) </li></ul></ul><ul><ul><li>Analyze and formulate strategies to reach objectives. (Customer-Needs –SWOT) </li></ul></ul><ul><ul><li>Implement strategies through projects . (How? i.e. Management-POSDC) </li></ul></ul>
  21. 21. Characteristics of Objectives EXHIBIT 2. 1 S Specific Be specific in targeting an objective M Measurable Establish a measurable indicator(s) of progress A Assignable Make the objective assignable to one person for completion R Realistic State what can realistically be done with available resources T Time related State when the objective can be achieved, that is, its duration.
  22. 22. Checklist Selection Model <ul><li>Strategy alignment: What specific organization does this project align with? </li></ul><ul><li>Driver: What business problem does the project solve? </li></ul><ul><li>Success metrics: How will we measure success? </li></ul><ul><li>Sponsorship: Who is the project sponsor? </li></ul><ul><li>Risk: What is the impact of not doing this project? </li></ul><ul><li>Risk: What is the project risk to our organization? </li></ul><ul><li>Benefits: What is the value of the project to this organization? </li></ul><ul><li>Organization culture: Is our organization culture right for this type of project? </li></ul><ul><li>Approach: Will we build or buy? </li></ul><ul><li>Training/resources: Will staff training be required? </li></ul><ul><li>Finance: What is estimated cost of the project? </li></ul><ul><li>Portfolio: How does the project interact with current projects? </li></ul>
  23. 23. Project Screening Matrix FIGURE 2.3
  24. 24. Applying a Selection Model <ul><li>Project Classification </li></ul><ul><ul><li>Deciding how well a strategic or operations project fits the organization’s strategy. </li></ul></ul><ul><li>Selecting a Model </li></ul><ul><ul><li>Applying a weighted scoring model to bring projects to closer with the organization’s strategic goals. </li></ul></ul><ul><ul><ul><li>Reduces the number of wasteful projects </li></ul></ul></ul><ul><ul><ul><li>Helps identify proper goals for projects </li></ul></ul></ul><ul><ul><ul><li>Helps everyone involved understand how and why a project is selected </li></ul></ul></ul>
  25. 25. Project Proposals <ul><li>Sources and Solicitation of Project Proposals </li></ul><ul><ul><li>Within the organization </li></ul></ul><ul><ul><li>Request for proposal (RFP) from external sources (contractors and vendors) </li></ul></ul><ul><li>Ranking Proposals and Selection of Projects </li></ul><ul><ul><li>Prioritizing requires discipline, accountability, responsibility, constraints, reduced flexibility, and loss of power </li></ul></ul><ul><li>Managing the Portfolio </li></ul><ul><ul><li>Senior management input </li></ul></ul><ul><ul><li>The priority team (project office) responsibilities </li></ul></ul>
  26. 26. Major Project Proposal FIGURE 2.4A
  27. 27. Risk Analysis FIGURE 2.4B
  28. 28. Project Screening Process FIGURE 2.5
  29. 29. Priority Analysis FIGURE 2.6
  30. 30. Organization Structure and Culture “ Successful project management can flourish within any structure, but the culture within the organization must support the four basic values of project management: Cooperation, Teamwork, Trust & Effective Communication ”
  31. 31. Project Management Structures <ul><li>Challenges to Organizing Projects </li></ul><ul><ul><li>The uniqueness and short duration of projects relative to ongoing longer-term organizational activities </li></ul></ul><ul><ul><li>The multidisciplinary and cross-functional nature of projects creates authority and responsibility dilemmas. </li></ul></ul><ul><li>Choosing an Appropriate Project Management Structure </li></ul><ul><ul><li>The best system balances the needs of the project with the needs of the organization. </li></ul></ul><ul><ul><li>Functional – Dedicated Team - Matrix </li></ul></ul>
  32. 32. Project Management Structures <ul><li>Organizing Projects: Functional Organization </li></ul><ul><ul><li>Different segments of the project are delegated to respective functional units. </li></ul></ul><ul><ul><li>Coordination is maintained through normal management channels. </li></ul></ul><ul><ul><li>Used when the interest of one functional area dominates the project or one functional area has a dominant interest in the project’s success. </li></ul></ul>
  33. 33. Functional Organizations FIGURE 3.1
  34. 34. Functional Organization of Projects <ul><li>Advantages </li></ul><ul><ul><li>No Structural Change </li></ul></ul><ul><ul><li>Flexibility </li></ul></ul><ul><ul><li>In-Depth Expertise </li></ul></ul><ul><ul><li>Easy Post-Project Transition </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Lack of Focus </li></ul></ul><ul><ul><li>Poor Integration </li></ul></ul><ul><ul><li>Slow </li></ul></ul><ul><ul><li>Lack of Ownership </li></ul></ul>
  35. 35. Project Management Structures (cont’d) <ul><li>Organizing Projects: Dedicated Teams </li></ul><ul><ul><li>Teams operate as separate units under the leadership of a full-time project manager. </li></ul></ul><ul><ul><li>In a projectized organization where projects are the dominant form of business, functional departments are responsible for providing support for its teams. </li></ul></ul><ul><ul><li>e.g. Apple – Macintosh, iPod, iApple etc </li></ul></ul>
  36. 36. Dedicated Project Team FIGURE 3.2
  37. 37. Project Organization: Dedicated Team <ul><li>Advantages </li></ul><ul><ul><li>Simple </li></ul></ul><ul><ul><li>Fast </li></ul></ul><ul><ul><li>Cohesive </li></ul></ul><ul><ul><li>Cross-Functional Integration </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Expensive </li></ul></ul><ul><ul><li>Internal Strife </li></ul></ul><ul><ul><li>Limited Technological Expertise </li></ul></ul><ul><ul><li>Difficult Post-Project Transition </li></ul></ul>
  38. 38. Project Organizational Structure FIGURE 3.3
  39. 39. Project Management Structures (cont’d) <ul><li>Organizing Projects: Matrix Structure </li></ul><ul><ul><li>Hybrid organizational structure (matrix) is overlaid on the normal functional structure. </li></ul></ul><ul><ul><ul><li>Two chains of command (functional and project) </li></ul></ul></ul><ul><ul><ul><li>Project participants report simultaneously to both functional and project managers. </li></ul></ul></ul><ul><ul><li>Matrix structure optimizes the use of resources. </li></ul></ul><ul><ul><ul><li>Allows for participation on multiple projects while performing normal functional duties </li></ul></ul></ul><ul><ul><ul><li>Achieves a greater integration of expertise and project requirements </li></ul></ul></ul>
  40. 40. Matrix Organization Structure FIGURE 3.4
  41. 41. Different Matrix Forms <ul><li>Functional (also Weak or Lightweight) Form </li></ul><ul><ul><li>Matrices in which the authority of the functional manager predominates and the project manager has indirect authority </li></ul></ul><ul><li>Balance (or Middleweight) Form </li></ul><ul><ul><li>The traditional matrix form in which the project manager sets the overall plan and the functional manager determines how work to be done </li></ul></ul><ul><li>Strong (Heavyweight) Form </li></ul><ul><ul><li>Resembles a project team in which the project manager has broader control and functional departments act as subcontractors to the project </li></ul></ul>
  42. 42. Project Organization: Matrix Form <ul><li>Advantages </li></ul><ul><ul><li>Efficient </li></ul></ul><ul><ul><li>Strong Project Focus </li></ul></ul><ul><ul><li>Easier Post-Project Transition </li></ul></ul><ul><ul><li>Flexible </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Conflict </li></ul></ul><ul><ul><li>Infighting </li></ul></ul><ul><ul><li>Stressful </li></ul></ul><ul><ul><li>Slow </li></ul></ul>
  43. 43. Choosing the Appropriate Project Management Structure <ul><li>Organization (Form) Considerations </li></ul><ul><ul><li>How important is the project to the firm’s success ? </li></ul></ul><ul><ul><li>What percentage of core work involves projects? </li></ul></ul><ul><ul><li>What level of resources (human and physical) are available? </li></ul></ul>
  44. 44. Choosing the Appropriate Project Management Structure (cont’d) <ul><li>Project Considerations </li></ul><ul><ul><li>Size of project </li></ul></ul><ul><ul><li>Strategic importance </li></ul></ul><ul><ul><li>Novelty and need for innovation </li></ul></ul><ul><ul><li>Need for integration (number of departments involved) </li></ul></ul><ul><ul><li>Environmental complexity (number of external interfaces) </li></ul></ul><ul><ul><li>Budget and time constraints </li></ul></ul><ul><ul><li>Stability of resource requirements </li></ul></ul>
  45. 45. Organizational Culture <ul><li>Organizational Culture Defined </li></ul><ul><ul><li>A system of shared norms, beliefs, values, and assumptions which bind people together, thereby creating shared meanings </li></ul></ul><ul><ul><li>The “personality” of the organization that sets it apart from other organizations. </li></ul></ul><ul><ul><ul><li>Provides a sense of identify to its members </li></ul></ul></ul><ul><ul><ul><li>Helps legitimize the management system of the organization </li></ul></ul></ul><ul><ul><ul><li>Clarifies and reinforces standards of behavior </li></ul></ul></ul>
  46. 46. Key Dimensions Defining an Organization’s Culture FIGURE 3.6
  47. 47. Defining the Project “ Select a dream Use your dream to set a goal Create a plan Consider resources Enhance skills and abilities Spend time wisely Start! Get organized and go…….”
  48. 48. Defining the Project <ul><li>Step 1: Defining the Project Scope </li></ul><ul><li>Step 2: Establishing Project Priorities </li></ul><ul><li>Step 3: Creating the Work Breakdown Structure </li></ul><ul><li>Step 4: Integrating the WBS with the Organization </li></ul><ul><li>Step 5: Coding the WBS for the Information System </li></ul>
  49. 49. Step 1: Defining the Project Scope <ul><li>Project Scope </li></ul><ul><ul><li>A definition of the end result or mission of the project —a product or service for the client/customer—in specific, tangible, and measurable terms. </li></ul></ul><ul><li>Purpose of the Scope Statement </li></ul><ul><ul><li>To clearly define the deliverable(s) for the end user. </li></ul></ul><ul><ul><li>To focus the project on successful completion of its goals. </li></ul></ul><ul><ul><li>To be used by the project owner and participants as a planning tool and for measuring project success . </li></ul></ul>
  50. 50. Project Scope Checklist <ul><li>Project objective-t/c/p </li></ul><ul><li>Deliverables-plc </li></ul><ul><li>Milestones-event </li></ul><ul><li>Technical requirements- </li></ul><ul><li>e.g. Free Willy-C17-US $ 2M </li></ul><ul><li>Limits and exclusions- </li></ul><ul><li>Reviews with customer-i/e </li></ul>
  51. 51. Project Scope: Terms and Definitions <ul><li>Scope Statements </li></ul><ul><ul><li>Also called statements of work (SOW) </li></ul></ul><ul><li>Project Charter </li></ul><ul><ul><li>Can contain an expanded version of scope statement </li></ul></ul><ul><ul><li>A document authorizing the project manager to initiate and lead the project. </li></ul></ul><ul><li>Scope Creep </li></ul><ul><ul><li>The tendency for the project scope to expand over time due to changing requirements, specifications, and priorities. </li></ul></ul>
  52. 52. Project Scope: Example <ul><li>LAN Project Scope statement </li></ul><ul><li>Objective: To design and install LAN with in one month with a budget not to exceed $60,000 for the Teleatlas. </li></ul><ul><li>Deliverables: </li></ul><ul><li>200 workstations </li></ul><ul><li>Server with duo core Pentium processor </li></ul><ul><li>2HP Laser printer </li></ul><ul><li>Window NT Server OS </li></ul><ul><li>4 Hrs training -WS user) </li></ul><ul><li>16 Hrs training-Admn </li></ul><ul><li>Fully operational LAN system </li></ul>
  53. 53. Project Scope: Example <ul><li>Milestones: </li></ul><ul><li>HW 2 nd Jan’09 </li></ul><ul><li>Setting users priority & authorization 25 th Jan’09 </li></ul><ul><li>In-house whole network test completed 2 nd Feb’09 </li></ul><ul><li>Training completed 1 st March’09 </li></ul><ul><li>Technical Requirement: </li></ul><ul><li>WS- 19” Monitor…… </li></ul><ul><li>System support –Window NT platform </li></ul><ul><li>PCI 64 ethernet LAN interface cards and connection </li></ul><ul><li>Limit & Exclusion: </li></ul><ul><li>System maintenance/repair-one month </li></ul><ul><li>Warranties transferred to client </li></ul><ul><li>Customer Review </li></ul><ul><li>Director –Technical Teleatlas </li></ul>
  54. 54. Step 2: Establishing Project Priorities <ul><li>Causes of Project Trade-offs </li></ul><ul><ul><li>Shifts in the relative importance of criterions related to cost, time, and performance parameters </li></ul></ul><ul><ul><ul><li>Budget –Cost </li></ul></ul></ul><ul><ul><ul><li>Schedule –Time </li></ul></ul></ul><ul><ul><ul><li>Performance –Scope </li></ul></ul></ul>
  55. 55. Project Management Trade-offs FIGURE 4.1
  56. 56. Step 2: Establishing Project Priorities <ul><li>Managing the Priorities of Project Trade-offs </li></ul><ul><ul><li>Constrain: a parameter is a fixed requirement. </li></ul></ul><ul><ul><li>Enhance: optimizing a parameter over others. </li></ul></ul><ul><ul><li>Accept: reducing (or not meeting) a parameter requirement. </li></ul></ul>
  57. 57. Step 3: Creating the Work Breakdown Structure <ul><li>Work Breakdown Structure (WBS) </li></ul><ul><ul><li>An hierarchical outline (map) that identifies the products and work elements involved in a project </li></ul></ul><ul><ul><li>Defines the relationship of the final deliverable (the project) to its subdeliverables, and in turn, their relationships to work packages </li></ul></ul><ul><ul><li>Best suited for design and build projects that have tangible outcomes rather than process-oriented projects </li></ul></ul>
  58. 58. Hierarchical Breakdown of the WBS FIGURE 4.3
  59. 59. Work Breakdown Structure FIGURE 4.4
  60. 60. Work Packages <ul><li>A Work Package Is the Lowest Level of the WBS. </li></ul><ul><ul><li>It is output-oriented in that it: </li></ul></ul><ul><ul><ul><li>Defines work (what) </li></ul></ul></ul><ul><ul><ul><li>Identifies time to complete a work package (how long) </li></ul></ul></ul><ul><ul><ul><li>Identifies a time-phased budget to complete a work package (cost) </li></ul></ul></ul><ul><ul><ul><li>Identifies resources needed to complete a work package (how much) </li></ul></ul></ul><ul><ul><ul><li>Identifies a single person responsible for units of work (who) </li></ul></ul></ul>
  61. 61. Step 4: Integrating the WBS with the Organization <ul><li>Organizational Breakdown Structure (OBS) </li></ul><ul><ul><li>Depicts how the firm is organized to discharge its work responsibility for a project </li></ul></ul><ul><ul><ul><li>Provides a framework to summarize organization work unit performance </li></ul></ul></ul><ul><ul><ul><li>Identifies organization units responsible for work packages </li></ul></ul></ul><ul><ul><ul><li>Ties the organizational units to cost control accounts </li></ul></ul></ul>
  62. 62. Step 5: Coding the WBS for the Information System <ul><li>WBS Coding System </li></ul><ul><ul><li>Defines: </li></ul></ul><ul><ul><ul><li>Levels and elements of the WBS </li></ul></ul></ul><ul><ul><ul><li>Organization elements </li></ul></ul></ul><ul><ul><ul><li>Work packages </li></ul></ul></ul><ul><ul><ul><li>Budget and cost information </li></ul></ul></ul><ul><ul><li>Allows reports to be consolidated at any level in the organization structure </li></ul></ul>
  63. 63. WBS Coding
  64. 64. Estimating Project Time and Costs
  65. 65. Estimating Projects <ul><li>Estimating </li></ul><ul><ul><li>The process of forecasting or approximating the time and cost of completing project deliverables </li></ul></ul><ul><ul><li>The task of balancing the expectations of stakeholders and the need for control while the project is implemented </li></ul></ul><ul><li>Types of Estimates </li></ul><ul><ul><li>Top-down (macro) estimates: analogy, group consensus, or mathematical relationships </li></ul></ul><ul><ul><li>Bottom-up (micro) estimates: estimates of elements of the work breakdown structure (WBS) </li></ul></ul>
  66. 66. Factors Influencing the Quality of Estimates Quality of Estimates Project Duration People Project Structure and Organization Organization Culture Planning Horizon
  67. 67. Estimating Guidelines for Times, Costs, and Resources <ul><li>Have people familiar with the tasks make the estimate. </li></ul><ul><li>Use several people to make estimates. </li></ul><ul><li>Base estimates on normal conditions , efficient methods, and a normal level of resources. </li></ul><ul><li>Use consistent time units in estimating task times. </li></ul><ul><li>Treat each task as independent , don’t aggregate. </li></ul><ul><li>Don’t make allowances for contingencies . </li></ul><ul><li>Adding a risk assessment helps avoid surprises to stakeholders. </li></ul>
  68. 68. Macro versus Micro Estimating TABLE 5.1 Conditions for Preferring Top-Down or Bottom-Up Time and Cost Estimates Condition Macro Estimates Micro Estimates Strategic decision making X Cost and time important X High uncertainty X Internal, small project X Fixed-price contract X Customer wants details X Unstable scope X
  69. 69. Estimating Projects: Preferred Approach <ul><li>Make top-down estimates </li></ul><ul><li>Develop the WBS </li></ul><ul><li>Make bottom-up estimates </li></ul><ul><li>Develop schedules and budgets </li></ul><ul><li>Reconcile differences between top-down and bottom-up estimates </li></ul>
  70. 70. Methods for Estimating Project Times and Costs <ul><li>Macro (Top-Down) Approaches </li></ul><ul><ul><li>Ratio methods/Parametric </li></ul></ul><ul><ul><li>Apportion method </li></ul></ul><ul><ul><li>Function point methods for software and system projects </li></ul></ul><ul><ul><li>Learning curves </li></ul></ul>Project Estimate Times Costs
  71. 71. Apportion Method of Allocating Project Costs Using the Work Breakdown Structure FIGURE 5.1
  72. 72. Simplified Basic Function Point Count Process for a Prospective Project or Deliverable TABLE 5.2
  73. 73. Example: Function Point Count Method TABLE 5.3
  74. 74. Methods for Estimating Project Times and Costs (cont’d) <ul><li>Micro (Bottom-Up) Approaches </li></ul><ul><ul><li>Template method (Past Project) </li></ul></ul><ul><ul><li>Parametric procedures applied to specific tasks (Ratio Method) </li></ul></ul><ul><ul><li>Detailed estimates for the WBS work packages (People-Three Time) </li></ul></ul><ul><ul><li>Phase estimating: A Hybrid </li></ul></ul><ul><ul><li>(Aero/IT/New Technology) </li></ul></ul>
  75. 75. Level of Detail <ul><li>Level of detail is different for different levels of management. (Strategic- e.g. “Build oil platform in the Narmada basin”-HEG Ltd) </li></ul><ul><li>Level of detail in the WBS varies with the complexity of the project. </li></ul><ul><li>Excessive detail is costly. </li></ul><ul><ul><li>Fosters a focus on departmental outcomes </li></ul></ul><ul><ul><li>Creates unproductive paperwork </li></ul></ul><ul><li>Insufficient detail is costly. </li></ul><ul><ul><li>Lack of focus on goals </li></ul></ul><ul><ul><li>Wasted effort on nonessential activities </li></ul></ul>
  76. 76. Three Views of Cost FIGURE 5.6
  77. 77. Types of Costs <ul><li>Direct Costs </li></ul><ul><ul><li>Costs that are clearly chargeable to a specific work package. </li></ul></ul><ul><ul><ul><li>Labor, materials, equipment, and other </li></ul></ul></ul><ul><li>Direct (Project) Overhead Costs </li></ul><ul><ul><li>Costs incurred that are directly tied to an identifiable project deliverable or work package. </li></ul></ul><ul><ul><ul><li>Salary, rents, supplies, specialized machinery </li></ul></ul></ul><ul><li>General and Administrative Overhead Costs </li></ul><ul><ul><li>Organization costs indirectly linked to a specific package that are apportioned to the project </li></ul></ul>
  78. 78. Contract Bid Summary Costs FIGURE 5.5 Direct costs $80,000 Direct overhead $20,000 G&A overhead (20%) $20,000 Profit (20%) $24,000 Total bid $144,000
  79. 79. Refining Estimates <ul><li>Reasons for Adjusting Estimates </li></ul><ul><ul><li>Interaction costs are hidden in estimates. </li></ul></ul><ul><ul><li>Normal conditions do not apply. </li></ul></ul><ul><ul><li>Things go wrong on projects. </li></ul></ul><ul><ul><li>Changes in project scope and plans. </li></ul></ul><ul><li>Adjusting Estimates </li></ul><ul><ul><li>Time and cost estimates of specific activities are adjusted as the risks, resources, and situation particulars become more clearly defined. </li></ul></ul>
  80. 80. Refining Estimates (cont’d) <ul><li>Contingency Funds and Time Buffers </li></ul><ul><ul><li>Are created independently to offset uncertainty </li></ul></ul><ul><ul><li>Reduce the likelihood of cost and completion time overruns for a project </li></ul></ul><ul><ul><li>Can be added to the overall project or to specific activities or work packages </li></ul></ul><ul><ul><li>Can be determined from previous similar projects </li></ul></ul><ul><li>Changing Baseline Schedule and Budget </li></ul><ul><ul><li>Unforeseen events may dictate a reformulation of the budget and schedule. </li></ul></ul>
  81. 81. Creating a Database for Estimating FIGURE 5.7 Estimating Database Templates
  82. 82. Developing a Project Plan “I had six honest serving men who taught me all I know: their names were- What? How? Why? When? Where? Who? …….. Rudyard Kipling
  83. 83. Developing the Project Plan <ul><li>The Project Network </li></ul><ul><ul><li>A flow chart that graphically depicts the sequence, interdependencies, and start and finish times of the project job plan of activities that is the critical path through the network </li></ul></ul><ul><ul><ul><li>Provides the basis for scheduling labor and equipment </li></ul></ul></ul><ul><ul><ul><li>Provides an estimate of the project’s duration (T) </li></ul></ul></ul><ul><ul><ul><li>Provides a basis for budgeting cash flow (C) </li></ul></ul></ul><ul><ul><ul><li>Highlights activities that are “critical” and should not be delayed </li></ul></ul></ul><ul><ul><ul><li>Help managers get and stay on plan </li></ul></ul></ul>
  84. 84. From Work Package to Network FIGURE 6.1 WBS/Work Packages to Network
  85. 85. From Work Package to Network (cont’d) FIGURE 6.1 (cont’d) WBS/Work Packages to Network (cont’d)
  86. 86. Constructing a Project Network <ul><li>Terminology </li></ul><ul><ul><li>Activity: an element of the project that requires time. </li></ul></ul><ul><ul><li>Merge activity: an activity that has two or more preceding activities on which it depends. </li></ul></ul><ul><ul><li>Parallel (concurrent) activities: Activities that can occur independently and, if desired, not at the same time. </li></ul></ul>A C B D
  87. 87. Constructing a Project Network (cont’d) <ul><li>Terminology </li></ul><ul><ul><li>Path: a sequence of connected, dependent activities. </li></ul></ul><ul><ul><li>Critical path: the longest path through the activity network that allows for the completion of all project-related activities. Delays on the critical path will delay completion of the entire project. </li></ul></ul>D (Assumes that minimum of A + B > minimum of C in length of times to complete activities.) C A B
  88. 88. <ul><li>Terminology </li></ul><ul><ul><li>Event: a point in time when an activity is started or completed. It does not consume time. </li></ul></ul><ul><ul><li>Burst activity: an activity that has more than one activity immediately following it (more than one dependency arrow flowing from it). </li></ul></ul><ul><li>Two Approaches </li></ul><ul><ul><li>Activity-on-Node (AON) </li></ul></ul><ul><ul><ul><li>Uses a node to depict an activity </li></ul></ul></ul><ul><ul><li>Activity-on-Arrow (AOA) </li></ul></ul><ul><ul><ul><li>Uses an arrow to depict an activity </li></ul></ul></ul>Constructing a Project Network (cont’d) B D A C
  89. 89. Basic Rules to Follow in Developing Project Networks <ul><li>Networks typically flow from left to right. </li></ul><ul><li>An activity cannot begin until all of its activities are complete. </li></ul><ul><li>Arrows indicate precedence and flow and can cross over each other. </li></ul><ul><li>Identify each activity with a unique number; this number must be greater than its predecessors. </li></ul><ul><li>Looping is not allowed. </li></ul><ul><li>Conditional statements are not allowed. </li></ul><ul><li>Use common start and stop nodes. </li></ul>
  90. 90. Activity-on-Node Fundamentals FIGURE 6.2
  91. 91. Activity-on-Node Fundamentals (cont’d) FIGURE 6.2 (cont’d)
  92. 92. Network Computation Process <ul><li>Forward Pass —Earliest Times </li></ul><ul><ul><li>How soon can the activity start? (early start—ES) </li></ul></ul><ul><ul><li>How soon can the activity finish? (early finish—EF) </li></ul></ul><ul><ul><li>How soon can the project finish? (expected time—ET) </li></ul></ul><ul><li>Backward Pass —Latest Times </li></ul><ul><ul><li>How late can the activity start? (late start—LS) </li></ul></ul><ul><ul><li>How late can the activity finish? (late finish—LF) </li></ul></ul><ul><ul><li>Which activities represent the critical path? </li></ul></ul><ul><ul><li>How long can it be delayed? (slack or float—SL) </li></ul></ul>
  93. 93. Activity-on-Node Network FIGURE 6.5
  94. 94. Activity-on-Node Network Forward Pass FIGURE 6.6
  95. 95. Activity-on-Node Network Backward Pass FIGURE 6.7
  96. 96. Determining Slack (or Float) <ul><li>Free Slack (or Float) </li></ul><ul><ul><li>The amount of time an activity can be delayed without delaying connected successor activities </li></ul></ul><ul><li>Total Slack </li></ul><ul><ul><li>The amount of time an activity can be delayed without delaying the entire project </li></ul></ul>
  97. 97. Activity-on-Node Network with Slack FIGURE 6.8
  98. 98. Activity-on-Arrow Network Building Blocks FIGURE A6.1
  99. 99. Activity-on-Arrow Network Fundamentals FIGURE A6.2
  100. 100. Activity-on-Arrow Network Fundamentals FIGURE A6.2 (cont’d)
  101. 101. Managing Risk
  102. 102. Risk Management Process <ul><li>Risk </li></ul><ul><ul><li>An uncertain event that, if it occurs, has a negative effect on project objectives </li></ul></ul><ul><li>Risk Management </li></ul><ul><ul><li>A proactive attempt to recognize and manage internal events and external threats that affect the likelihood of a project’s success </li></ul></ul><ul><ul><ul><li>What can go wrong (risk event) </li></ul></ul></ul><ul><ul><ul><li>How to minimize the risk event’s impact (consequences) </li></ul></ul></ul><ul><ul><ul><li>What can be done before an event occurs (anticipation) </li></ul></ul></ul><ul><ul><ul><li>What to do when an event occurs (contingency plans) </li></ul></ul></ul>
  103. 103. The Risk Event Graph FIGURE 7.1
  104. 104. Risk Management’s Benefits <ul><li>A proactive rather than reactive approach </li></ul><ul><li>Reduces surprises and negative consequences </li></ul><ul><li>Prepares the project manager to take advantage of appropriate risks </li></ul><ul><li>Provides better control over the future </li></ul><ul><li>Improves chances of reaching project performance objectives within budget and on time </li></ul>
  105. 105. The Risk Management Process FIGURE 7.2
  106. 106. Managing Risk <ul><li>Step 1: Risk Identification </li></ul><ul><ul><li>Generate a list of possible risks through brainstorming, problem identification and risk profiling. </li></ul></ul><ul><ul><ul><li>Macro risks first, then specific events </li></ul></ul></ul><ul><li>Step 2: Risk Assessment </li></ul><ul><ul><li>Risk assessment matrix </li></ul></ul>
  107. 107. Step 1: Partial Risk Profile for Product Development Project FIGURE 7.4
  108. 108. Step 1: Risk Breakdown Structure FIGURE 7.3
  109. 109. Step 2: Risk Assessment Form FIGURE 7.6
  110. 110. Impact Scales FIGURE 7.5
  111. 111. Risk Severity Matrix FIGURE 7.7
  112. 112. Managing Risk (cont’d) <ul><li>Step 3: Risk Response Development </li></ul><ul><ul><li>Mitigating Risk </li></ul></ul><ul><ul><ul><li>Reducing the likelihood an adverse event will occur </li></ul></ul></ul><ul><ul><ul><li>Reducing impact of adverse event </li></ul></ul></ul><ul><ul><li>Transferring Risk </li></ul></ul><ul><ul><ul><li>Paying a premium to pass the risk to another party </li></ul></ul></ul><ul><ul><li>Avoiding Risk </li></ul></ul><ul><ul><ul><li>Changing the project plan to eliminate the risk or condition </li></ul></ul></ul><ul><ul><li>Sharing Risk </li></ul></ul><ul><ul><ul><li>Allocating risk to different parties-Insurance/Sub-contactor </li></ul></ul></ul><ul><ul><li>Retaining Risk </li></ul></ul><ul><ul><ul><li>Making a conscious decision to accept the risk </li></ul></ul></ul>
  113. 113. Contingency Planning <ul><li>Contingency Plan </li></ul><ul><ul><li>An alternative plan that will be used if a possible foreseen risk event actually occurs </li></ul></ul><ul><ul><li>A plan of actions that will reduce or mitigate the negative impact (consequences) of a risk event </li></ul></ul><ul><li>Risks of Not Having a Contingency Plan </li></ul><ul><ul><li>Having no plan may slow managerial response </li></ul></ul><ul><ul><li>Decisions made under pressure can be potentially dangerous and costly </li></ul></ul>
  114. 114. Risk Response Matrix FIGURE 7.8
  115. 115. Risk and Contingency Planning <ul><li>Technical Risks </li></ul><ul><ul><li>Backup strategies if chosen technology fails </li></ul></ul><ul><ul><li>Assessing whether technical uncertainties can be resolved </li></ul></ul><ul><li>Schedule Risks </li></ul><ul><ul><li>Use of slack increases the risk of a late project finish </li></ul></ul><ul><ul><li>Imposed duration dates (absolute project finish date) </li></ul></ul><ul><ul><li>Compression of project schedules due to a shortened project duration date </li></ul></ul>
  116. 116. Risk and Contingency Planning (cont’d) <ul><li>Costs Risks </li></ul><ul><ul><li>Time/cost dependency links: costs increase when problems take longer to solve than expected. </li></ul></ul><ul><ul><li>Deciding to use the schedule to solve cash flow problems should be avoided. </li></ul></ul><ul><ul><li>Price protection risks (a rise in input costs) increase if the duration of a project is increased. </li></ul></ul><ul><li>Funding Risks </li></ul><ul><ul><li>Changes in the supply of funds for the project can dramatically affect the likelihood of implementation or successful completion of a project. </li></ul></ul>
  117. 117. Contingency Funding and Time Buffers <ul><li>Contingency Funds </li></ul><ul><ul><li>Funds to cover project risks —identified and unknown </li></ul></ul><ul><ul><ul><li>Size of funds reflects overall risk of a project </li></ul></ul></ul><ul><ul><li>Budget reserves </li></ul></ul><ul><ul><ul><li>Are linked to the identified risks of specific work packages </li></ul></ul></ul><ul><ul><li>Management reserves </li></ul></ul><ul><ul><ul><li>Are large funds to be used to cover major unforeseen risks (e.g., change in project scope) of the total project </li></ul></ul></ul><ul><li>Time Buffers </li></ul><ul><ul><li>Amounts of time used to compensate for unplanned delays in the project schedule </li></ul></ul>
  118. 118. Contingency Fund Estimate (000s) TABLE 7.1
  119. 119. Managing Risk (cont’d) <ul><li>Step 4: Risk Response Control </li></ul><ul><ul><li>Risk control </li></ul></ul><ul><ul><ul><li>Execution of the risk response strategy </li></ul></ul></ul><ul><ul><ul><li>Monitoring of triggering events </li></ul></ul></ul><ul><ul><ul><li>Initiating contingency plans </li></ul></ul></ul><ul><ul><ul><li>Watching for new risks </li></ul></ul></ul><ul><ul><li>Establishing a Change Management System </li></ul></ul><ul><ul><ul><li>Monitoring, tracking, and reporting risk </li></ul></ul></ul><ul><ul><ul><li>Fostering an open organization environment </li></ul></ul></ul><ul><ul><ul><li>Repeating risk identification/assessment exercises </li></ul></ul></ul><ul><ul><ul><li>Assigning and documenting responsibility for managing risk </li></ul></ul></ul>