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    Mot spring 2010 text (1) Mot spring 2010 text (1) Document Transcript

    • Organizations Through the Eyes of a Project Manager Harvey F. Hoffman, Ed.D. TCI 320 West 31st Street New York, NY 10001 (212) 594-4000 X 318 hhoffman@tcicollege.netAll material copyrighted 2001. Material may not be duplicated without permission inwriting from H. Hoffman. 1
    • TABLE OF CONTENTS PagePreface 11Acknowledgement 13Dedication 13CHAPTER 1 14 Organizational Expectations and Professionalism 14 Employer Expectations - TACT 16 Employee Expectations 21 Professionalism 25 Dissemination of Information 26 Service 27 Education 27 Managing Oneself 28 Professional Ethics 29 Certifications and Licenses 32 Trades and Crafts 32 Chapter 1 Questions 35CHAPTER 2 44 The Organization 44 Core Identity 45 Objectives and Goals 50 Strength, Weakness, Opportunity, Threat (SWOT) 50 2
    • Sidebar: A Personal SWOT Analysis 55 Activities 57 Standards 58 Policy, Process, Procedure, Rule 61 Sidebar: Public versus Private Companies 64 Chapter 2 Questions 68CHAPTER 3 71 Project Management Organizational Overview 71 Why Project Management? 81 Project Managers Responsibilities 83 Organizational Charts 86 Functional Organization 87 Project Management Structure 88 Matrix Organization 89 Line Organization 91 Chapter 3 Questions 97Chapter 4 100 Management Concepts 100 Management 101 Managers and Supervisors 105 Historical Management Overview 107 Classical Management 109 Human behavioral management 117 3
    • Human Resources School 120 Herzberg’s Hygiene Factors 120 Maslow’s Hierarchy 123 Douglas McGregor’s Theory X and Theory Y worker 125 Acceptance Theory of Authority 127 Management by Objective 128 Deming’s Ideas 129 Recent management views 133 Management Styles 135 Power 137 Teams 140 Project Managers Lead Teams 144 Leadership 146 Leadership versus management 149 Competitive Advantage 153 Chapter 4 Questions 154Chapter 5 158 Project Planning 158 Planning 158 Request for a Proposal and Request for a Quote 160 Project Charter 164 The Project Plan 169 Plan Benefits 173 4
    • The Project Plan Troika 174 Exhibit 5-1 -- Typical Hardware or Software Product Specification Outline 189 Exhibit 5-2 - Sample Statement of Work Outline 191 Exhibit 5-3 -- Sample Work Breakdown Structure (WBS) 196 Exhibit 5-4 – Example of a Statement of Work 200 Chapter 5 Questions 210Chapter 6 212 Project Time Management 212 Project Time Management 212 Rudiments of Schedule Preparation 215 Creating a Schedule 222 Microsoft Project 226 Task Entry 226 Working Time 228 WBS Number 230 Task Duration 231 Task Dependencies 233 Responsibility Assignment Matrix (RAM) 235 Critical Path 241 Schedule Progress 242 Printing Niceties 244 Sidebar: The 8-Hour Day 244 Summary 246 5
    • Chapter 6 Questions 249Chapter 7 256 Project Estimation and Cost 256 Direct and Indirect Costs 257 Material and Material Handling Costs 257 Travel and Living Charges 258 Other Direct Costs (ODC) 258 Sales Commission 259 Profit 259 Indirect Costs 260 Overhead and G&A Costs 261 Bottom-up estimating 263 Villa-Tech Bid Example 268 Overhead rates 269 General and Administrative Costs 271 Burdened Wage 273 Functional Manager Estimates 274 Risk Analysis 275 Villa-Tech Project Cost Summary 279 Project Spending Profile 280 Bottom up Estimate Summary 281 Top Down Estimate 282 Rule of Thumb Cost Estimating Approach 282 6
    • Parametric Modeling 283 Analogous Estimating Technique 286 Learning Curve 287 Project Estimating Summary 295 Cost Management 298 Financial and Schedule Analysis 299 Stakeholders Requiring Special Attention 302 Chapter 7 Questions 306Chapter 8 313 Project Communications 313 Communications Management 314 Communication Pathways 317 Organization Communications Protocol 319 Communications Process 319 Conducting Effective Meetings 321 Memos 325 Listening 327 Verbal Communications 329 Telephone Protocol 329 Face-to-face meetings 330 Chapter 8 Questions 333Chapter 9 335 Quality 335 7
    • The Quality Gurus 337 Quality and the Project Manager 344 Quality Policy 346 Quality Planning, Assurance, and Control 349 Quality Planning 353 IEEE Software Quality Plans 357 Capability Maturity Model® (SW-CMM®) for Software361 ISO Standards 365 Six Sigma 368 Quality Assurance 371 Quality Control 375 Responsibility for Quality 378 Chapter 9 Questions 380Chapter 10 383 Project Risk 383 Risk Management Process 383 Risk Identification at the Proposal Stage 385 Contract 385 Technical Risk 386 Technical and Operational Performance 392 Damages 394 Labor Rates and Forward Pricing Projections 394 Business risk issues 395 8
    • Terms and Conditions 397 Other Costs 398 Mitigating Risk at the Proposal Stage 399 Risk Management During the Project 401 Mitigating Risk 405 Chapter 10 Questions 407Chapter 11 409 Project Tracking, Reporting and Procurement 409 Project tracking and reporting 409 Project Tracking Example 413 Summary of Monitoring and Tracking Activities 440 Subcontracting 440 Selecting Qualified Vendors 442 Preparing and Evaluating a Bid 443 Contract Administration 447 Project Completion 448 Post Project Review – Lessons Learned 449 Chapter 11 Questions 451Chapter 12 461 Epilogue 461 Project Management Perspectives Within the Organization 462 Project Management Career 464 Project Management Social and Technical Skills 465 9
    • Social and People Skills 466 Technical skills 468Appendix 1 - Typical Employee Performance Appraisal Forms 472Appendix 2 - Ethical Codes of Selected Professional Organizations 484Appendix 3 - Wilderness Survival Answer And Rationale Sheet 491AppENDIX 4 – ISO 9000 QUALITY MANAGEMENT PRINCIPLES 494REFERENCES 502 10
    • PREFACEI know I could never forgive myself if I elected to live without humane purpose, withouttrying to help the poor and unfortunate, without recognizing that perhaps the purest joyin life comes with trying to help others. – Arthur Ashe <>During the first year of my tenure as the Dean of Technology at Technical CareerInstitutes (TCI), I spoke with human resource personnel from more than twentycompanies that hired the college’s graduates. Each company praised the technicalabilities of the TCI students, but they indicated that the students required improvementin their social skills and understanding of an organization’s operation. The departmentchairs and I discussed the type of course that would help our students and the outlinefor this book evolved. The book reflects my experiences as an engineer, departmentmanager, and project manager in my 30-year career in industry.Today medium to large organizations routinely use project managers. Technologystudents will likely encounter a project manager in their first job. They may be part of aproject team or if the organization does not use the project manager methodology, theywill meet this person as a supplier or customer. Most undergraduates have littleunderstanding of how an organization operates or of an organization’s expectations.Who makes which decisions and why? Who manages the group? How do you getthings done? What does the culture permit? Seasoned employees realize thatemployment success depends not only on technical abilities, but also on the ability tointeract well with colleagues and quickly learning the organization’s “ropes.”This book serves five purposes. First, it introduces students to project basedinformation technology, manufacturing, and research and development businessenvironments. Second, the student will learn business and industrys vocabulary,processes and procedures, and expectations. Third, they will be able to ask intelligentquestions regarding the operation of that organization during a job interview. Fourth,they will be better able to evaluate different organizational management styles to decidewhat is best for them. Fifth, and perhaps most important, the student will be ready tostep into a new job and have some understanding of the organization’s expectations.To successfully accomplish the first objective, we will examine the project managersrole. A large number of organizations use the project manager (PM) model to cutacross the entire set of departments in an effort to get a job done on time, withinbudget, and without compromising quality targets. Understanding this personsfunction will enable the new employee to quickly adjust and contribute to the workenvironment.In the discussions that ensue, ethical questions may arise. This book will familiarizestudents with ethical issues that arise in the business and industry context. Questions 11
    • both in the text and at the end of the chapter will promote class discussions and serveto sensitize students to the moral dimensions of an organization’s issues.The text material will assist the student in their preparations for the Project +certification examination offered by CompTIA and the Certified Associate in ProjectManagement (CAPM) offered by the Project Management Institute. These certificationprograms prepare new practitioners for introductory project management positions withtitles such as coordinator, expeditor, planner, project administrator, or projectmanagement assistant.The viewpoint taken will follow the Project Management Institute’s Project ManagementBody of Knowledge (PMBOK). The text material covers many of the topics required bythe CompTIA Project+ examination.TCI instructors have successfully used the text material for a one-term 45-hourintroductory project management course. Instructors select from the followingsequence of topics: 1. The organization’s expectations, project management overview 2. Organization structures and professionalism 3. Management concepts (Fayol, Taylor, Weber, the Gilbreths, Maslow, Herzberg, McGregor) 4. Leadership, teams, project lifecycle 5. Project planning, project objectives, statement of work, work breakdown structure 6. Time management – schedule, milestone charts, critical path analysis 7. Introduction to Microsoft Project 8. Project cost management 9. Cost estimating, learning curves 10. Project communications – assessment and reporting 11. Quality planning, assurance, control 12. Risk management 13. Project monitoring and trackingI recommend allocating six-hours to the Microsoft Project software application. Duringthe first three-hours I introduce the student to the fundamental techniques of preparinga schedule using this software. We work in a computer laboratory during this sessionand each student uses a computer. In the second three-hour session, I assign an in-class student project. I find that organizing the students into groups of 2 to 3 peopleworks best for student learning. The students share a computer during this session.The topic of quality contains a rich amount of material. It is ideal for students to preparereports and make class presentations. Consequently, I have allotted up to six classhours to the quality discussion. I lecture for 1½-hours and allocate the remainder of thetime to three person team presentations. 12
    • Many of the quotes at the beginning of each chapter have influenced my thinking overthe years. Others I discovered while doing this research. I hope that it will positivelyinfluence the reader. Harvey Hoffman Somewhere between Manhattan and Fairfield, CT on the Metro-North train. ACKNOWLEDGEMENTI would like to thank the reviewers of the initial text drafts for their valuable and insightfulcomments. TCI teachers, Roy Lau, Pedro Lopez, Gilbert Chan, Steve Maybar, and Dr.Bert Pariser class tested versions of the manuscript and provided constructive critiqueof the work. I am also indebted to the TCI students who suffered through the MOT-200notes phase and the CD-ROM PDF file. I am grateful for their suggestions, whichhelped me a great deal.Finally, I want to express my appreciation and thanks to Cristina Hernandez of the ArtHistory department at Mt. San Antonio College and Tony Mattrazzo, a Public RelationsSpecialist at the New York State Archives Cultural Education Center for the images thatthey furnished for this project. DEDICATIONI have worked with nontraditional college students for many years. I dedicate this bookto the hard work and perseverance of this group of dedicated people. ! To the nontraditional college age men and women who commute to college after or sometimes before a day’s work. ! To the student-parents who have concerns about the whereabouts of their children while they attend school. ! To the student care givers who worry about the health and welfare of their children, parents, friends or relatives. ! To the significant-others, spouses and children that give up time during the evenings and weekends so that the nontraditional student can complete homework or prepare for a test.Keep plugging. It may take a while, but graduation will come -- and success will feel sogood! 13
    • CHAPTER 1 Organizational Expectations and Professionalism Whether you think you can or whether you think you cant .... You are right. - Henry Ford <>Chapter objectivesAfter studying this chapter, you should be able to: Understand an organization’s expectations Understand the components of an employee assessment Understand the elements of professionalismCharacteristics of the business environment during the 1990s included rampanttechnical innovation, a global economic perspective, a free-market, and a requirementfor continuous employee learning. The 2000s began with a 30-year low unemploymentrate (4.1%) and black and Hispanic workers had the lowest rate (8% and 6.4%,respectively) since the Labor Department began breaking out statistics (Stevenson, p.A1). Even during these good times, numerous layoffs, downsizings, restructurings, anddelayerings occurred due to corporate mergers and reorganizations. Theseorganizations focused on productivity to ensure quarterly sales growth and regular profitincreases. The economy is cyclical and cooled down in 2001 with telecommunications,Internet, data processing, dot-com and other companies slashing their workforce. (Seefor example Washtech.com Technology Layoffs Watch at 14
    • http://www.washtech.com/specialreports/layoffs_bydate.html.) Unemploymentskyrocketed. Knowledge workers that maintained up-to-date skills kept their full-timejobs. Others survived on a mixture of part-time and contract work. Those not updatingtheir knowledge base had difficulty obtaining employment. The lesson is clear –people must take responsibility for continually managing their careers.Business and industry provides a service or a product to both internal and externalcustomers and exists not only to make money, but more to the point -- to make a profit.Todays corporation requires employees that are responsive to the customers needs --employees that will delight the customer while maintaining sensitivity to the bottom-line.Table 1-1 compares the forces and factors confronting the modern corporation andtodays employee with those of some years ago.Today, corporations move quickly through uncharted water, moving in a directiontoward a defined corporate mission, but frequently making seemingly chaoticexcursions from the azimuth. Employees must empower themselves. They mustembark on a lifelong journey that includes updating their skills and pursuing newopportunities that meet their professional objectives. Maintaining accountability toyourself increases your value to the corporation. Demanding new work experiences,requesting challenges, developing new skills makes you a more valuable person to theorganization. Paradoxically, the selfish attitude of looking out for number one makesyou a number one company resource! 15
    • Table 1-1 Forces and Factors Confronting the Corporation and Students Traditional TodayCorporation Long term profits Immediate profits! Quarter to quarter earnings growth Insulated Competitive Hierarchical Flat – fewer managers Parent Employer Rich Lean – fewer employees that do more, increased employee responsibility Thorough Fast and good Stable Changing, hectic, chaos, turbulentEmployee Specialized talents Broad capability Dependent Empowered Comfortable Stressed Loyal to company Loyal to self Entitled Accountable Learn then earn Learn to earn – lifelong learningAdapted from Goldman (http://www.asee.org/assessments/html/goldman.htm)Employer Expectations - TACTPut yourself in the position of a corporate chief executive officer. Suppose yourcompany has merged with another resulting in a duplication of some jobs and services.Keeping every person employed represents an unacceptable expenditure of funds.Stockholders demand profits and expect increased employee productivity because ofthe merger. Suppose the company has decided to reduce the workforce by 5%. Whatguidelines would you propose to your managers to help them decide on the employeesto include in a layoff? 16
    • The acronym TACT representing Technical Competence, Attitude,Communication, and Teamwork identifies four broad categories of employerexpectations (Figure 1-1). Certainly technical competencies would probably be mostpeoples first choice on the list of important employee capabilities. Every employeemust have the unique training, knowledge, and skills to perform the required tasks.Does the person have up-to-date skills? If not, out the door. However, this guidelinelists technical competence as one of four employee expectations -- attitude,communication, and teamwork skills complete the set. Employers want a reliableperson who will come to work with a positive, can-do attitude. Following the conclusionof a task, supervisors and managers expect employees to move onto the next activitywithout coaxing.Some time ago, a newspaper advertised for web masters and web designers with thefollowing words: "We need a variety of risk taking, fun loving, creative people who will thrive in a start-up environment. If you are looking for a traditional or comfortable place to work 9-to-5, FORGET IT! We need cutting edge, off- the-wall, 24/7 type people who dont worry about job descriptions to become a part of our team" (Connecticut Post, September 3, 2000, Section I, p. 2).The emphasis in this advertisement is attitude, enthusiasm, and a willingness to work.The employer expects technical capability, but clearly, it is not the only job requisite. 17
    • Employers will take the zeal and raw talent that a person brings and train them to do thejob, if they show promise.Business depends on accurate and complete verbal and written communication withcustomers, clients, colleagues, subordinates and supervisors. They expect promptinformation transfer so that managers and supervisors remain informed of all majorissues. Customer reports, manufacturing and production difficulties, vendor delays,engineering problems, and purchasing issues must be quickly documented so thatpeople take appropriate actions and make timely responses.The day of the lone wolf is gone. Business and industry work in teams operating withinter-department groups, cross-functional teams, "tiger teams", "skunk works", jointventures, and corporate teams. Companies place a premium on "people skills".Teams meet regularly to share information and discuss resolutions of common issues.Members depend on one another to meet commitments that support design,development and production schedules. Teams consist of a broad spectrum of ethnic,racial, regional and international personnel. Employees must work comfortably andcompatibly with a diverse mix of individuals. People must respect each other’s genderand age differences. A diverse workforce provides the wide range of skills and insightsdemanded by todays global marketplace. Unprecedented challenges confrontAmerican companies. They must be faster, smarter, and more flexible than thecompetition. Companies must take advantage of all of the knowledge inherent in adiverse workforce and individuals must respond by welcoming the opportunity to 18
    • maximize the benefits derived from working with people from a wide range of cultures,ages, and backgrounds.Selecting the best employees requires a detailed review of their previous efforts. Thehuman resource department maintains past employee performance evaluation records.Examining this data will permit managers to make conclusions regarding theemployee’s potential for contributing to future activities. 19
    • Figure 1- 1 Employer Expectations for a Desirable Employee – Remain on the TACT Target TECHNICAL COMPETENCE • Knowledge of ATTITUDE profession and its tools • Punctual • Good judgment • Attendance COMMUNI- • Creative • Dress CATIONS • Problem solver Appropriately TEAMWORK • Analytical and • Initiative ♦ Interact with others • Verbal Decisive • Self Starter ♦ Meet commitments • Written • Continued growth • Seeks ♦ Respect diversity • No in job and additional surprises ♦ Cooperate professional responsibilities knowledge • Adaptable • Accountable for • Flexible their career • Dependable success • Reliable • Lifelong learners 20
    • Employee ExpectationsPeople represent an organizations greatest asset. The way they perform has a directaffect on profitability. Performance reviews and evaluations give employers anopportunity to shape the development of employees, improve work standards, anddefine areas of responsibility. It promotes accountability, and identifies future goals andexpectations.Employees are judged on their contributions to the projects to which they are assigned.Employee performance reviews include two parts. First, the ongoing informal oral orwritten communication that takes place throughout the year between employee andsupervisor. Second the formal discussion between the employee and supervisor thatincludes a review of the written results in a periodic employee evaluation report.The periodic evaluation review represents a communications tool between the employerand employee. The document informs the employee of the manager or supervisorsexpectations. It provides an opportunity to establish or identify employee goals, andidentifies the assistance that the company can provide to assist the employee inattaining them (training, education, etc.). If required, the review usually identifies areasfor improvement that will enable the employee to reach a satisfactory level of jobperformance. The organization informs employees of its professional expectations atthe same time it tells employees about their performance relative to these indicators.Based on this evaluation the employer frequently makes decisions about employee 21
    • salary increases, promotions, and training. The performance review and employeeappraisal measures on-the-job performance and may indicate future job direction. Thereview clarifies employee duties and usually summarizes major employeeaccomplishments since the last review. Reviews should identify areas for improvementand recommend methods to improve to improve performance. The supervisor andemployee should discuss training and development needs for both current and futureassignments.Frequently, employers evaluate new employees more often during the first year thanthose employed for a longer term. New employees may receive reviews three months,six months, and one-year following the date of hire. These reviews encouragesupervisors and managers to closely associate with new employees and understandtheir capabilities while clarifying expectations. Longer-term employees may receiveonly an annual review.Examining the employee review forms in Appendix 1 confirms that technical capabilityis important, but not the sole criteria for long-term success. Companies value andmeasure many different aspects of the individual’s contirubtions. These include: • Quality (accurate, complete, timely, consistent). • Quantity of work (keeping pace with the workload, providing the "extra effort" when needed). • Dependable (consistent attendance, punctual, reliable). • Independent (ability to work with a minimum of supervision) 22
    • • Organizational ability (setting priorities, meeting commitments). • Team player (cooperative, interacts well with customers, suppliers, and colleagues). • Communication (good verbal and written communication skills, shares information with co-workers). • Motivation (committed to work and profession, self-starter, positive attitude). • Judgement (tactful, displays appropriate sensitivity, makes sound decisions). • Handles stress (can work under deadlines, remains calm, controls temper). • Problem solving (quick insight into problems, offers appropriate solutions, able to analyze complex interdependencies) • Creative (willing to try new solutions, develops new ideas). • Decisive (controls analysis paralysis tendencies, takes action). • Dress (reports for work properly attired, clean).The employees salary and salary increase will reflect the employees total performanceas perceived by managers and supervisors. Selecting people for a promotion -- or alayoff is a complex decision that depends on a broad range of factors only one of whichis technical competence. Since all companies keep records of these evaluations, youmay recommend that managers use performance evaluations as the basis foremployment decisions. Over time, the employees complete picture becomes clear andthe company takes action based on the overall performance record. 23
    • The following excerpt from an article that appeared on the web(http://biz.yahoo.com/rf/000816/l1688665.html -- August 16, 2000) illustrates theimportance of the employer’s perception of the individual’s capabilities and attitude. FedEx May Cut 200 Information Technology Jobs NEW YORK, Aug 16 (Reuters) - FedEx Corp could cut 200 jobs by next month from its information technology operations, a company spokesman said Tuesday. ``Some of our projects are not adding value, said Jess Bunn, a FedEx spokesman in the Memphis headquarters. ``Were looking for better ways to serve our customers and add values, so theres the possibility of about 200 layoffs. Layoffs will probably begin by mid-September. In the next two weeks employees will be evaluated based on their contributions to short-term tasks and objectives as well as long-term goals and strategies, their contribution to leadership, cooperation in teamwork and performance, other FedEx officials said. The information technology workers develop and maintain computer software and hardware to help FedEx run its operationsFedEx intended to make layoff decisions based on a variety of employeecharacteristics. Technical performance is necessary but not sufficient to keep a job.Social skills and willingness to “do whatever it takes” will help keep a job and enablepeople to advance in the organization. 24
    • ProfessionalismThe ideas of technical competency, responsibility to clients, customers and employers,lifelong learning, attitudes and behavior stems from the broad concept ofprofessionalism. The Institute of Electronic and Electrical Engineers (IEEE) defines aprofession as a learned occupation requiring systematic knowledge and training, andcommitment to a social good. There must exist a specialized body of knowledgeunique to the profession, which should be intellectual in character. It can be developedby a group of people in the initial stages, but educational institutions must transmit thisknowledge to succeeding generations of practitioners (Adams & Kirchof).Characteristics of a profession include the following: ♦ Predominantly intellectual and varied in character, as opposed to routine, menial, manual, mechanical, or physical work ♦ Sanctioning organizations members share common training, values, and skills ♦ Competencies require knowledge of an advanced type in a field of science or learning ♦ Recognized educational institutions of higher learning provide the coursework in the learned disciplines ♦ Participation in the establishment and maintenance of educational institutions that meet minimum acceptable standards that teach the body of knowledge ♦ Continuous learning ♦ Involvement in activities that required the consistent exercise of discretion and judgement 25
    • ♦ A well defined and growing body of literature ♦ Refereed (i.e. articles and research requiring peer review before publication) journals ♦ Service motiveUsing these characteristics, the community of people that share common training,values and skills create a sanctioning or authenticating organization that promotes theprofession. Dissemination of InformationEvery professional organization defines itself by its mission, guiding philosophy, andunique occupational body of knowledge. Perhaps the dissemination of information isthe primary vehicle used to promote the organization and the profession. Journalspublish peer-reviewed research and development results. Colleagues with similarbackgrounds first read these papers. Reviewers respond to the author(s) withcomments intended to improve or clarify the work. The author(s) make the correctionsand resubmit the manuscript. Papers require up to a year in the review process beforefinal publication. Monthly magazines offered by professional organizations print articlesof general interest, which do not pass through such an extensive review process. Evenso, it may take from three to six months before publication confirmation.Frequently the organization distributes a newspaper with current information containingarticles of an ephemeral nature, conference announcements, awards, electioninformation, and employment advertisements. Editorial comments may appear in the 26
    • newspapers that reflect members opinions about national political issues that relate tothe organizations mission. Local chapters of national organizations may also publish amonthly or quarterly newsletter. ServiceProfessional organizations have a wide range of activities. While individuals receivecompensation for their work as provided to customers and clients, they seldom receivepayment for service to the profession. Service activities include volunteering for localchapter or regional activities or supporting national seminar/symposium meetings.Authors of papers submitted to professional organizations do not receive financialcompensation, but do receive the appreciation and sometimes the accolades of theircolleagues. Professionals serving on accreditation committees that review the quality ofprograms offered by educational institutions do so on a voluntary basis. They seek tosupport and further their chosen profession. Many companies financially support andendorse educational programs, seminars and symposiums offered by professionalorganizations. They do so to improve the profession and the knowledge of thepractitioners in their employ. EducationOrganizations participate in a process to promote the quality of education and trainingreceived by prospective members and students. As an example, the Institute ofElectrical and Electronic Engineers (IEEE), American Society of Mechanical Engineers(ASME) and other engineering organizations collaborate under the Accreditation Board 27
    • for Engineering and Technology (ABET) umbrella to improve the education of technicalpersonnel in engineering and related disciplines. Upon request, ABET representativesvisit colleges offering engineering and technology programs. The team conducts adetailed review of the program to ascertain that the institution meets minimumstandards established by ABET and its member bodies (i.e. the engineering societies).Periodic follow-up reviews encourage the institution to maintain a quality program.ABET accreditation is a voluntary process that helps to assure that graduates of anaccredited program are prepared for careers in engineering and engineeringtechnology. With support from organizations like ABET, professions encourageinstitutions to provide education that meets the career’s changing needs, modernizeinstitutional facilities, employ competent faculty that participate in on-going learning, andintroduce new technology into the courses. Managing Oneself"Success in the knowledge economy comes to those who know themselves -- theirstrengths, their values, and how they best perform" (Drucker, 1999). We no longerenjoy the days of job security in exchange for moderate performance and corporateloyalty. We each must manage our careers to maintain our employability. Perhapslifelong education is the most important factor in developing a career-resilientworkforce. Waterman, et al, refers to the new professional as people dedicated to theidea of continuous learning and as people who "take responsibility for their own careermanagement. For each individual, this means staying knowledgeable about markettrends and understanding the skills and behaviors the company will need down the 28
    • road." With constant changes in technology, professionals must regularly assess theirskills and take action to upgrade themselves and direct their careers so that they canfunction with a maximum of effectiveness. Koonce (1995) advises “ the best way tostay employed today and in the future is to look upon yourself as being in business foryourself even if you work for someone else” (p.20).For the most part, professional employees are engaged in "at will" employment. Thatis, the employer can terminate the employee at any time and the employee can likewiseleave the employer at any time. Business and industry constantly asks the questions"What have you done for me lately?" and "Are you worth paying for?" Professionalsmust engage in ongoing and lifelong education to enable them to respond affirmatively. Professional EthicsProfessions want the public to perceive their members as following a principledstandard of behavior in dealing with clients, customers and colleagues. Consequently,professional organizations define a standard of behavior in the form of a code of ethicsto which members must adhere. Ethic deals with people’s behavior towards others.Ethics attempts to arrive at acceptable principles of obligation and general valuejudgements, which serves to help us determine human actions and conduct that aremorally right, good, and responsible. Several professional organizations ethical codesare shown in Appendix 2. A common thread among these ethical codes requires apractitioner to accept responsibility for actions taken in the conduct of professionalactivities. The professional must demonstrate responsibility to the public; the employer, 29
    • customer, client, and colleague; as well as to yourself. The profession requirespractitioners to engage in lifelong continuing education to maintain skills that will enablethem to perform with competence and the exercise of good judgement. Ethicaldiscussions are particularly relevant with the development of new technologies such asthe Internet and networking computers in the office. Ethical questions continually arisewith regard to product safety; worker safety; privacy in the workplace; employee andconsumer rights; corporations moral responsibility; obligations of employers to theiremployees, employment at will; businesss social responsibilities; and corporate self-regulations vs. government regulation.During the course of their work, technologists will confront ethical dilemmas. Thedecisions you make could quite conceivably affect a user’s health and safety, aprospective promotion or even your job. Technologist must make a decision even ifsituations arise that contain ambiguities and uncertainties. Space shuttle Challengerengineers’ suspected a safety problem regarding the cold temperature performance ofa gasket on a space shuttle. Failure to act on this issue resulted the loss of lives and amajor setback to the U.S. space program. Automotive engineers suspected theplacement of a gas tank in at least two vehicles could lead to an explosion on impact.Automotive organizations failoure to quicly act on this information also cost lives. Fromtime to time, engineers discover deficiencies in a buildings structural integrity andchoose not to act because it would breach client confidentiality to report the informationto a third party. Ethical considerations arise if you identify potential conflicts betweenyour interests and those of your client. Suppose you see hours charging more hours 30
    • than they actually work on a job. Do you report them? Do you do it yourself if no onewould report your indiscretion? Ethical dilemmas frequently confront us and we haveto first recognize it and then decide on a course of action.Sometimes the questions are not easily resolved and the professional may undergosubstantial inner turmoil in making decisions (figure 1-2). Decisions may result insignificant consequences to the employees future. Employees have resigned fromtheir job because of an ethical conflict. Some have lost their job. The federalgovernment has created the “whistleblower’s” to protect federal employees job aftermaking a charge involving an ethical question.As practicing members of a profession, we have responsibilities to a wide range ofpeople. Employers, customers, clients, and colleagues have concerns andexpectations about the professionals performance and ethical standards. Even in thesports arena, which is not a profession in the sense that we use it in this book, MichaelJordan on assuming the position of president of basketball operations at theWashington Wizards, commented that "Its my job to make sure they [the team players]put the effort on the court to show respect for the people paying to watch them"(Sandomir).The professional occupational organization spells out ethical responsibilities. If ever aconflict arises in your mind between the employers requests and demands and theprofessional organizations code of behavior review the organizations ethics code and 31
    • perhaps talk with a colleague to clarify your position. As a new member of a profession,consider joining and supporting your professional organization. Certifications and LicensesIn an effort to promote quality professional service, some organizations promotemember licensing or certifications by state government or private organizations tosignify member competence in the general discipline or specialty areas. Professionalorganizations frequently establish committees that accept complaints from the publicregarding members performance or behavior. This internal self-policing program hasthe power to discipline the member. The results of a disciplinary review may extendfrom no action to censure or even to license or certification revocation.Trades and CraftsThe foregoing discussion does not intend to demean the competency, importance orquality of trades and craft workers. This community participates in training andapprenticeship programs. Some trades and crafts have sanctioning organizations thatpromote the vocation. A trade emphasizes manual dexterity and physicals skills ratherthan intellectual activity. While some trades require a license or certification to practice,few trade organizations monitor their members and have a code of conduct. Fewvocations, other than professions, monitor the education providers’ program qualityusing voluntary service on accreditation committees. Trades and crafts tend not to havepeer-reviewed publications. Some students confuse the word expert with professional.A professional should be an expert, but an expert need not be a professional. The two 32
    • words are not synonyms. Plumbers, carpenters, electricians, machinists, automechanics, and cab drivers perform vital services and some in these occupations earnmore than lawyers, engineers, teachers or physicians. While they can be experts intheir discipline, in the strict sense used in this book, we don’t call them professionals. 33
    • Figure 1-2 -- A Cauldron of Difficult Decisions Confronting Employees Ideals Standards Responsibility Bias Fraud Virtue Duty Morality Plagiarism Dishonesty Professional Community Honor Public Welfare 34
    • Chapter 1 Questions1) Explain the statement used in the text “The selfish attitude of looking out for number 1 makes you a number 1 company resource.”2) Do you consider people practicing the following occupations as "professionals"? Explain your answer. a) Electrician b) Plumber c) Nuclear physicist d) Social worker e) Electrical or mechanical engineer f) Stock broker g) Librarian h) Physician i) Lawyer j) Teacher k) Union member l) Locomotive engineer m) Welder n) Military officer o) Police officer p) Politician3) We sometimes hear the phrase, "That person did or did not behave professionally." Write a short essay describing your concept of professionalism.4) The text describes characteristics of a profession. With which characteristics do you agree or disagree? Explain your answer.5) What are the common features of the ethical codes of conduct shown in Appendix 2? With which principles do you agree or disagree? Explain your answer.6) "The ends justify the means." Explain this statement. Do the ethical codes of conduct in Appendix 2 permit this philosophy? Describe circumstances under which this statement would be appropriate.7) Limit personal phone calls at work to emergencies only. Do you agree or disagree? Explain your answer.8) Morning social discussions with work associates a) Improves morale and should be engaged in every day. b) Reduces company productivity. c) Should not be conducted in front of a manager. 35
    • 9) Examine the three employee evaluations in Appendix 1. a) What are the common characteristics found in each? b) What are the major differences among them? c) What additional job performance criteria would you include in the evaluation? d) Describe your view of the perfect employee performance evaluation.10) In the December 27, 1999 issue of Sports Illustrated, Jeff Pearlman wrote an article about John Rocker of the Atlanta Braves. The article describes Rocker, as a 25 year old, hard-throwing 64", 225-pound left-hand relief pitcher. In the article, Rocker bashed African Americans, Asians, Koreans, Vietnamese, Indians, Russians, Hispanics, single mothers, Asian drivers, AIDS patients, gays and those people of a race or sexual orientation different from his. He called an overweight black teammate "a fat monkey." Bud Selig, the baseball commissioner, ordered Rocker to undergo psychological evaluation and then punished Rocker for his comments with a $20,000 fine, a two month suspension and ordered him to undergo "sensitivity training." In an article in The New York Times, Jeffrey L. Seglin commented, Perhaps without the added burden of tabloid headlines, many businesses face similar situations: A star employees privately tolerated "idiosyncrasies" spin out of control, and management must respond publicly. "In the business world, theres a very good chance that somebody like this would be fired immediately," said Joseph L. Badaracco Jr., professor of business ethics at the Harvard Business School. "The hideous content of his views would badly damage the companys reputation, so theyd want to disassociate themselves." In a subsequent chance meeting with Rocker after publishing the article, reporter Jeff Pearlman said the pitcher threatened him and tried to get him banned from the Atlanta clubhouse. Neither the team nor Major League Baseball took further action against Rocker. Outfielder Brian Jordan said "Youve got one guy being a cancer time and time again. Eventually, its going to have an effect on the team." The Atlanta Braves traded Rocker to the Cleveland Indians in June, 2001. a) Comment on the statements made by John Rocker. b) Should John Rocker be penalized for exercising his right of freedom of speech as provided for in the first amendment to the U.S. Constitution? c) Suppose you were John Rockers manager, what would you do to stabilize the situation? In your discussion, consider the impact on his teammates, other teams, the sport, and the public. 36
    • d) Suppose a "star employee" working at a company, voices derogatory comments about some other employee? In your opinion, what position should a company take?11) Suppose the Rekcor Company manufactured the finest Framistan (a fictitious component) at the lowest prices. If you were a purchasing agent from another company and you discovered that several employees from the Rekcor Company were intolerant of some of your personal beliefs, would you purchase Framistans from this company? Explain your position.12) The human resource department at Magna-Net has a policy requiring all non-union technical employees to work one unpaid overtime hour daily. Tundra Industries permits flexible hours and does not have a formal policy to check the coming and going of its employees. a) For which employer would you prefer to work? Why? b) What are the advantages and disadvantages of both policies? Formulate your response first from the employers viewpoint and then from the employees perspective. c) Which employer treats its staff in a more professional manner? Explain your answer. d) Why would Magna-Net institute such a policy?13) Do you agree with the statement “Personal ethical practices and business ethical practices have little in common”? Explain your answer.14) Class Exercise As stated in chapter 1, organizations emphasize cooperation among team members. This class exercise examines both an individuals and a groups response to an unusual set of questions. At the end of the exercise, you will compare your individual score with that of the group. Divide the class into groups of 3 to 4 people and follow the directions. Do not peek at the answers shown in appendix 3 until the group has completed the worksheet. Correct the worksheet after the group has completed their responses. WILDERNESS SURVIVAL WORK SHEETHere are twelve questions concerning personal survival in a wilderness situation. Yourfirst task is individually to select the best of the three alternatives given under each item.Try to imagine yourself in the situation depicted. Assume that you are alone and havea minimum of equipment, except where specified. The season is fall. The days arewarm and dry, but the nights are cold. 37
    • <>After you have completed this task individually, you will again consider each question asa member of a small group. Your group will have the task of deciding, by consensus,the best alternative for each question. Do not change your individual answers, even ifyou change your mind in the group discussion. Both the individual and group solutionswill later be compared with the "correct" answers provided by a group of naturalists whoconduct classes in woodland survival. 38
    • Question Your Answer Your Group’s Answer1. You have strayed from your party in tracklesstimber; you have no special signaling equipment.The best way to attempt to contact your friends is to:a. Call "help" loudly but in a low registerb. Yell or scream as loud as you canc. Whistle loudly and shrilly2. You are in "snake country". Your best action toavoid snakes is to:a. Make a lot of noise with your feetb. Walk softly and quietlyc. Travel at night3. You are hungry and lost in wild country. The bestrule for determining which plants are safe to eat(those you do not recognize) is to:a. Try anything you see the birds eatb. Eat anything except plants with bright red berriesc. Put a bit of the plant on your lower lip for fiveminutes; if it seems all right, try a little4. The day becomes dry and hot. You have a fullcanteen of water (about one liter) with you. Youshould:a. Ration it - about a cupful a dayb. Not drink until you stop for the night, then drinkwhat you think you needc. Drink as much as you think you need when youneed it5. Your water is gone; you become very thirsty. Youfinally come to a dried-up watercourse. Your bestchance of finding water is to:a. Dig anywhere in the streambedb. Dig up plant and tree roots near the bankc. Dig in the streambed at the outside of a bend 39
    • Question Your Answer Your Group’s Answer6. You decide to walk out of the wild country byfollowing a series of ravines where a water supply isavailable. Night is coming on. The best place tomake camp is:a. Next to the water supply in the ravineb. High on a ridgec. Midway up the slope7. Your flashlight glows dimly as you are about tomake your way back to your campsite after a briefforaging trip. Darkness comes quickly in the woodsand the surroundings seem unfamiliar. You should: a. Head back at once, keeping the light on, hopingthe light will glow enough for you to make outlandmarks b. Put the batteries under your armpits to warmthem, and then replace them in the flashlight. c. Shine your light for a few seconds, try to get thescene in mind, move out in the darkness, and repeatthe process.8. An early snow confines you to your small tent.You doze with your small stove going. There isdanger if the flame isa. Yellowb. Bluec. Red9. You must ford a river that has a strong current,large rocks, and some white water. After carefullyselecting your cross spot, you should:a. Leave your boots and pack onb. Take your boots and pack offc. Take off your pack, but leave your boots on 40
    • Question Your Answer Your Group’s Answer10. In waist-deep water with a strong current, whencrossing the stream, you should face:a. Upstreamb. Across the streamc. Downstream11. You find yourself rim-rocked; your only route isup. The way is mossy, slippery rock. You should tryit:a. Barefootb. With boots onc. In stocking feet12. Unarmed and unsuspecting, you surprise a largebear prowling around your campsite. As the bearrears up about ten meters from you, you should:a. Runb. Climb the nearest treec. Freeze, but be ready to back away slowlyScore:Number You Have Correct:Average Score For Your Group (Sum ofindividual scores/ number of group members):Group Score:Difference Between Group Score And Average: 41
    • Self-check testCircle the correct answer to each of the following questions or fill in the blanks.1) Which of the following are services? a) Mail delivery b) Valet parking c) Teaching d) Taxi ride e) Wedding pictures f) Newspaper2) Which of the following are products? a) Physician’s diagnosis b) Life insurance c) Fruits and vegetables d) Tire e) Tire changer3) What are characteristics of today’s organizations? a) Stable b) Specialized c) Accountable d) Stressed employees e) Dynamic4) Identify expectations that employers have of good employees a) Excellent Attitude b) Excellent communication skills c) Limit personal activities (personal telephone calls, web surfing, etc.) to 30 minutes during the workday d) Ethical practice e) Ready and willing to contribute to a team effort f) Sexy dresser g) Come late – leave early h) Outstanding technical capability5) How often do long-term employees receive formal written employee evaluations? a) Daily b) Weekly c) Monthly d) Annually6) Which are not examples of professional organizations? a) A trade union b) AFL-CIO c) Automobile Workers Union d) American Management Association e) American Medical Association f) American Bar Association 42
    • g) Institute of Electrical and Electronic Engineers7) Characteristics of a profession include a) Predominantly intellectual activity b) Learning a skill that will last a lifetime c) Common body of knowledge that is taught in institutions of higher education d) Code of ethics e) Journals publishing peer reviewed articles f) Uniform g) Use of Specific tools8) Select the best answer that describes a professional code of ethics. a) A principled standard of behavior in dealing with the employer, customers and colleagues. b) A standard of behavior that deals with customers. c) A set of rules to be used at the discretion of the professional. d) A certification that permits a person to practice a profession. 43
    • CHAPTER 2 The Organization You miss 100 percent of the shots you never take. -- Wayne Gretzky, Professional Hockey Player <>Chapter goalsAfter studying this chapter, you should be able to: Understand an organization’s core identity Explain the difference between objectives and goals Explain SWOT Apply the SWOT concept to your own personal life Understand organizational standards, policies and proceduresThe word organization is used throughout this book to mean a group of people workingtogether for common purposes. The group creates a structure in which individualscooperate to conduct activities. An organization may have a profit or non-profit financialorientation. It may consist of voluntary or paid workers or a combination of both. Theorganization may originate from the public (e.g., federal, state, local governmentagencies) or private sectors. It may have religious or secular purposes. It may consistof professionals or hobbyists. It may employ people represented by a labororganization, non-union personnel, or consultants. The organization may exist in a 44
    • local geographic area or have multiple sites around the world. Project managementideas discussed in this book apply to all organizations. Organizations consisting of asingle independent contractor as well as large international corporations with multi-million dollar contracts can use the concepts discussed.Core IdentityAn organization’s core identity consists of three items: a mission, a value ideology, anda vision. Not all organizations think about and intentionally create an identity. Ifmanagement does not prepare and articulate a core identity, the corporate culture willforce an identity to bubble up and surface. Lacking leadership, the identity that evolvesmay or may not inspire and guide the employees in the direction that managementprefers.Mission: The mission statement explains the organizations purpose. It is a statementof why the organization is in business. The mission is a raison dêtre (reason forexistence), not a goal or a business strategy. The mission statement serves as thebasis for establishing the organization’s strategic objectives. David Packard describedHewlett Packards mission in 1960: "I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume that a company exists simply to make money. While this is an important result of a companys existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company 45
    • so they are able to accomplish something collectively that they could not accomplish separately -- they make a contribution to society, a phrase which sounds trite but is fundamental…You can look around [in the general business world] and see people who are interested in money and nothing else, but the underlying drives come largely from a desire to do something else: to make a product , to give a service -- generally to do something which is of value" (Collins & Porras, 1996, p. 68).Hewlett Packard doesnt exist to make electronic test and measurement equipment butto make technical contributions for the advancement and welfare of humanity. Thismission is not time dependent. It will last for as long as Hewlett Packard’s seniormanagement regards it as important. Other corporate missions include: Konosuke Matsushita (Panasonic): Recognizing our responsibilities as industrialists, we will devote ourselves to the progress and development of society and the well being of people through our business activities, thereby enhancing the quality of life throughout the world. Mary Kay Cosmetics: to enrich women’s lives Sony: To experience the joy of advancing and applying technology for the benefit of the public ExxonMobil: to Provide quality petrochemical products and services in the most efficient and responsible manner to generate outstanding customer and shareholder value. Staples: Slashing the cost and hassle of running your office! 46
    • New Jersey Transit: to Provide safe, reliable, convenient and cost effective transit service with a skilled team of employees, dedicated to our customers’ needs and committed to excellence.Samsung: We will devote our people and technologies to create superior products and services, thereby contributing to a better global society.Readers Digest: to create products that inform, enrich, entertain and inspire people of all ages and cultures around the world. We are committed to understanding, anticipating and satisfying consumers needs. This takes precedence in all that we do.Southwest Airlines: dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit.Kellogg: committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value3Com: to connect more people and organizations to information in more innovative, simple and reliable ways than any other networking company in the world.Adolor Corporation: committed to the development of the next generation of novel analgesics and related therapeutics for the treatment of pain based upon recent advances in proprietary medicinal chemistry and recombinant opiate receptor technology 47
    • Abbott Laboratories: to improve lives worldwide by providing cost-effective health care products and services. Millennium Restaurant (San Francisco, CA.): We believe that a gourmet dining experience can be created out of vegetarian, healthy, and environmentally friendly foods.Value Ideology: The "core ideology provides the glue that holds an organizationtogether as it grows, decentralizes, diversifies, expands globally and developsworkplace diversity" (Collins & Porras 1996). These represent the values and beliefsystems underlying the company. Core values will not change over time. The WaltDisney Company is famous for its values of imagination and wholesomeness. HewlettPackard emphasizes a respect for the individual and a commitment to communityresponsibility. Mercks core values include corporate social responsibility, honesty andintegrity, and profit from work that benefits humanity. Sonys values include theelevation of the Japanese culture and national status, being a pioneer -- not followingothers, doing the impossible, and encouraging individual ability and creativity. Theorganizations core values should be so fundamental that the company should followthem even if at some point one or more of them became a competitive disadvantage.Vision: "A vision is an attempt to articulate what a desired future for a company wouldlook like. It can be likened to … an organizational dream -- it stretches the imaginationand motivates people to rethink what is possible [Belgard, Fisher, & Rayner 1988]. 48
    • Martin Luther Kings most famous speech is literally labeled, I have a dream, becausehe elucidated his vision of a nonracist America" (Jick 1989). The vision representssomething the organization aspires "to become, to achieve, to create -- something thatwill require significant change and progress to attain" (Collins & Porras 1996). TheMicrosoft vision is " A computer on every desk and in every home, all running Microsoftsoftware in every computer." This is certainly a lofty ideal. In the 1960’s, everyoneknew and understood the National Aeronautics and Space Administrations (NASA)mission -- Get to the moon and back before the end of the decade. Does NASA have avision today? Do you know it? No? Perhaps that is part of the reason NASA hasfunding problems in the congress.Vision statements may incorporate four elements: 1) customer orientation, 2) employeefocus, 3) organizational competencies, and 4) standards of excellence (Jick 1989, p.3).A vision should be vivid and evoke emotion. It should motivate people. It should bepowerful enough to engage all those in the organization to willingly align themselves inthe effort to achieve this mission. The vision should be ♦ Clear, concise, easily understandable ♦ Memorable ♦ Exciting and inspiring ♦ Challenging ♦ Excellence-centered ♦ Stable, but flexible ♦ Implementable and tangible (Jick 1989, p. 2). 49
    • Know the Companys Core Identity: Before joining an organization investigate its coreidentity. Ask questions and make certain that you feel personally comfortable with theorganization. Confirm that it shares your values and purpose. Try to ascertain that theorganization accepts a diversity of people and opinions. When joining an organization,dont expect to create a new core. If the core values are compatible with your valuesthen press on. If not, look into another organization. Sometimes you cannot determinewhether employees practice the core values described in the company’s literature. Ifafter joining the organization you discover a value gap exists with which you cannot livethen look for a new opportunity.Objectives and GoalsOnce the organization establishes the fundamental elements of mission, values, andvision, the employees can establish and pursue objectives and goals. Theorganization’s goals represent a general statement of purpose and direction. They donot include the setting of specific targets (objectives). Goals may be divided intostrategic (long-term) and tactical (short-term) categories. Upper managementdetermines long-term strategic goals that will guide the organization over a longerperiod – perhaps three to five years. Frequently they use a SWOT (Strengths,Weaknesses, Opportunities, Threats) analysis as an aid in determining direction.Strength, Weakness, Opportunity, Threat (SWOT) 50
    • A SWOT analysis helps find the best match between external trends (opportunities andthreats) and internal capabilities. • A strength is a resource the organization can use to achieve a desired result. • A weakness is an organizational limitation that will keep it from achieving this result. • An opportunity represents a situation that would increase demand for the organization’s product or service that it offers. • A threat represents a potentially damaging situation in the organization’s environment. The threat may be a restriction, a barrier, a constraint, or a political or economic situation that might cause problems in successfully delivering the organization’s products or services.An effective set of strategic goals takes advantage of opportunities by using theorganization’s strengths and wards off threats by overcoming them or by correctingweaknesses.The SWOT analysis requires an impartial examination of the organization and itsenvironment. SWOT analysis participants review markets; competition; technological,political, social, environmental issues, and economic trends; marketing and distributionsystem; research and development (R&D) status; reputation; and resources includingfinancial, availability of labor, computing, facilities, employee competencies andcredentials, inventories, and management skills. The SWOT team categorize this datainto strengths, weaknesses, opportunities or threats. Sometimes, information can be 51
    • considered both a strength and a weakness. Based on this analysis, managementcreates strategic goals as illustrated in Figure 2-1.Middle managers develop tactical goals to meet near term demands. Typical tacticalgoals might include increasing the dollar volume of sales; to reduce fixed costs; toincrease the number of pounds of material produced, to increase enrollment; toincrease worker productivity. Following the establishment of general goals, managersdevelop a plan to establish objectives to achieve a desired result.Objectives represent observable and measurable results that contribute towardsmeeting the general organizational goals as shown in Figure 2-1. They are measuredin terms of what, when, where, and how much. Objectives describe conditions that willexist after the work is performed. In many organizations, managers establishobjectives. In others, the people doing the work participate in setting objectivesrecognizing that approval of the objectives rests with the immediate supervisor ormanager. Typical objectives includes challenging a sales person to increase the salesof books in Bergen County, New Jersey from $5,000 per month to $8,000 per month bythe end of the year or demanding that an office reduced its mobile telephone costs inthe Fairfield County, Connecticut area from $5,000 per month to $3,000 per month bythe end of the first quarter. Organizations use the acronym SMART to help establishobjectives. Specific - Identify a single task. 52
    • Measurable - Establish a measurable indicator of progress.Assignable - Make the task assignable to someone for completion.Realistic - State what can realistically be achieved with budgeted time and other resources.Time-related - State the time duration. 53
    • Figure 2-1 SWOT Process 54
    • Sidebar: A Personal SWOT AnalysisOrganizations frequently use the SWOT analysis method to evaluate past efforts anddetermine its future. This process requires a great deal of soul searching. Frequentlyorganizations send their executives away from the office in which they work. They go toa neutral ground devoid of the daily business interruptions. At this retreat, they begina no-holds barred brainstorming session. They agree to consider all ideas with noconsequences or repercussions following the meeting.Each of the participants brings different life experiences to the session. They interpretexperiences differently. They will not all agree with each other. However, allparticipants must agree to respect each other and give one another the opportunity toarticulate their thoughts and perspectives. Many of the comments will be of a sensitivenature. Participants agree to respect information revealed at this meeting and not seekretribution following the meeting. Sometimes organizations cannot really recognize oraccept honesty and genuine open thought.Individuals can benefit from a similar analysis. All of us can profit from an introspectiveself-examination of our lives. Think about your vision. Put it down in on paper. If youhave not thought about it before, do it now. Does it relate to self-satisfaction, marriage,education, money, your career … something else? Then categorize your strengths andweaknesses. Consider the opportunities in your life. Identify the situational threats thatmight prevent you from attaining this vision. Be brutally honest with yourself. Writethem down and don’t show it to anyone else. 55
    • Now think about several broad actions that you need to take to pursue this vision.Perhaps it involves the development of a certain skill set or a college education or amove to a new location. These are your goals.If you have reached this point, you’ve done the hard part. Only the specific tasksremain. For each of the goals that you identified you have to identify objectives that willassist you in achieving these goals. List the actions that you think are required toachieve the goals. Associate with the tasks, some way of recognizing that you haveaccomplished the task. Each task should have a well-defined result or outcome that willclearly indicate satisfactory completion. Ideally, you should be able to accomplish eachseparate objective within a month or less. It’s too easy to postpone the start ofobjectives that take longer than a month. An overall sequence of objectives may takemany months.You may use the chart in Table 2-1 to assist yourself in developing this personal actionplan. Add more goals if required. Periodically examine your progress toward achievingthese objectives and make needed corrections. 56
    • Table 2-1 Personal Action PlanPersonal Vision:Goal or Broad-based Endeavor #1:Objectives to Achieve Goal #1: Specific Objective Measured Outcome Time for CompletionGoal or Broad-based Endeavor #2:Objectives to Achieve Goal #2: Specific Objective Measured Outcome Time for CompletionActivitiesActivities are work steps that must be accomplished before a objective or standard canbe achieved. Examples of activities include: prepare a specification, get a specificationapproved, complete a design, purchase a component, or install a telephone.Resources represent the raw material used by the organization to complete activities.Resources include people, money, materials, machine, facilities, information,technology, time, and energy, etc. needed to accomplish activities. People exercise 57
    • control of an activity by comparing current performance to expected performance intime and making required changes. Many managers create a model for expectedperformance by collecting data for similar previous activities. They record informationabout the resources used to complete the activity for a given level of quality. Thiscompiled data serves as the basis for their estimate of the resources required tocomplete an activity.StandardsExpected performance leads to the idea of standards. The International Organizationfor Standardization (ISO) (http://www.iso.ch/iso/en/ISOOnline.frontpage) definesstandards as Documented agreements containing technical specifications or other precise criteria to be used consistently as rules, guidelines, or definitions of characteristics, to ensure that materials, products, processes and services are fit for their purpose. For example, the format of the credit cards, phone cards, and "smart" cards that have become commonplace is derived from an ISO International Standard. Adhering to a size standard such as optimal thickness (0.76 mm) means that the cards can be used worldwide.ISO further states that “International standards contribute to making life simpler, and toincreasing the reliability and effectiveness of the goods and services we use.’ 58
    • Managers and supervisors usually have a notion as to the resources required tocomplete an activity. The estimate for these resources stems from either aperformance standard based on the organization’s experience or generally acceptedindustry practice. If a standard doesn’t exist then the organization establishes it. As anexample, suppose baseball wants to create a batting standard of performance. Thebaseball industry assembles a committee with outstanding knowledge about batting andimpeccable baseball credentials. This committee meets, creates and adopts thestandard of batting excellence shown in Table 2-2.Based on this standard, we categorize ballplayers based on hitting ability. Table 2-3illustrates the categories as applied to the 1999 New York Yankees baseball team.Each team member is assigned a quality rating. If after using this standard for sometime, the sports community decides that the standard does not reflect their intendedneeds, then the committee members would meet again to modify the standard. Allprofessional communities continually examine and update old standards, and createnew standards as technology and general expectations change. 59
    • Table 2-2 Standard of Batting ‘Excellence Last Season’s Batting Hitting Ability Hitting Quality Rating Average .326 or higher Outstanding A .301 to .325 Excellent B .276 to .300 Good C .251 to .275 Fair D .250 or Below Poor FThe player must have had at least 150 turns at bat to qualify for a rating. Table 2-3 1999 New York Yankees Batting Averages Player 1999 Batting No. of times At 1999 Hitting Average Bat Quality Rating D. Jimenez .400 20 NR D. Jeter .349 627 A B. Williams .342 591 A D. Cone .333 3 NR O. Hernandez .333 3 NR D. Strawberry .327 49 NR A. Watson .300 10 NR C. Knoblauch .292 603 C P. ONeill .285 597 C R. Ledee .276 250 C C. Davis .269 476 D T. Martinez .263 589 D C. Curtis .262 195 D L. Sojo .252 127 D S. Brosius .247 473 F J. Posada .245 379 F J. Girardi .239 209 F J. Leyritz .235 200 F S. Spencer .234 205 F C. Bellinger .200 45 NR A. Pettitte .200 5 NR J. Manto .182 33 NR T. Tarasco .161 31 NR A. Soriano .125 8 NR R. Clemens .000 4 NR H. Irabu .000 4 NR M. Stanton .000 1 NRR signifies that the ballplayer was not rated due to an insufficient number of times at bat. 60
    • The baseball batting example may be considered a production standard. Many types ofstandards exist. The size, shape, form, and weight of sporting equipment followprescribed standards. Technical standards exist that define electrical, mechanical, andsoftware interfaces. Standards establish requirements for the composition andstructure of material. Workmanship standards detail methods for evaluating welds,soldering connections, wiring harnesses, etc. Documentation standards clarify theformats used for submitting manuscripts. Standards establish expectations. If theitems organizations use meet established standards and these standards meet therequirements set forth by the customer, then we have confidence that the product orservice will be adequate. Independent organizations such as the U.S. Military, U.S.Department of Agriculture, IEEE, ANSI, Software Engineering Institute, UnderwritersLaboratory, and the International Organization for Standardization (ISO) publishstandards for a variety of applications.Policy, Process, Procedure, RuleOrganizations use several other common organizational terms. Policies are broadguidelines created to help the organization achieve its plans. A process is a method ofreaching a desired outcome within an organization. Davenport (1993) defines aprocess as "a structured, measured set of activities designed to produce a specifiedoutput for a particular customer or market. It implies a strong emphasis on how work isdone within an organization." Davenport & Short (1990) define a business process as"a set of logically related tasks performed to achieve a defined business outcome."They state that processes have two important characteristics: (1) they have internal or 61
    • external customers, and (2) they cross department boundaries. Recall that a person orgroup delivers a product or service. If the delivery of this product or service goes tosomeone within the same organization, we refer to that person or group as an internalcustomer. A person or group performing the work that is unaffiliated with the buyer ofthe product or service corresponds to an external customer. Procedures outline thesteps required to achieve a goal. Rules are definite, specific instructions. Standards,policies, procedures, and rules are necessary to implement plans. As shown in figure2-2 policies created by senior management establish a process. Managers createprocedures to implement the process. Rules are the specific detailed instructions thatsupport the procedures. 62
    • Figure 2-2 Organizational Policy-to-Rule Continuum ExamplePolicy – Broad organizational Policy – Organization will have a guidelines purchasing approval system prepared by senior management Process – a person or departmentProcess – a set of must complete a purchase procedures requisition and secure required to management approval implement policy Procedure –Procedure – outlines 1. complete purchase requisition the steps form; required to 2. obtain supervisor and achieve an management approval; objective in the 3. submit to purchasing department processRules – the specific Rules – detailed 1. Specify item, part no., vendor, instructions and preferred delivery date. 2. Purchases over $1000 require 3 bids 3. Purchases over $5000 require Vice President approval 4. Sign form 5. Obtain approvals 6. Employees can purchase items under $100 and receive reimbursement from petty cash. 63
    • The entire planning process enables us to determine the goals and the actionsneeded to achieve the desired results. Throughout any organization, all componentsassociated with the planning process must be in harmony at each level of management.The planning process is dynamic and requires review and adjustment to accommodatechanging circumstances.Sidebar: Public versus Private CompaniesPat and Sarah believed they had a wonderful idea for a fast food Middle Easternrestaurant. Into the pockets of pita bread they wanted to insert a mix of choppedvegetables with balls of spiced falafel (ground chick peas) and a special family devisedblend of hummus and tahina sauce. As an unusual dessert treat they wanted to offerbaklava -- a pastry covered with honey and filled with ground pistachio nuts. The minttea accompanying the pastry would include real peppermint leaves and could be servediced or hot depending on the season.Pat and Sarah took their life savings together with some money they borrowed fromtheir parents and opened Sa-pa’s Middle Eastern Restaurant in the city. The people inthe business district enjoyed the fresh high quality food, the excellent service, theunique background music and the clean surroundings. In less than a year, thebusiness earned a profit and Pat and Sarah repaid the loan. 64
    • Based on this accomplishment they decided to open Sa-pa’s Too -- a secondrestaurant in another part of town. With established credit, a proven successful idea,pluck and contagious enthusiasm, they convinced a local bank to loan them the fundsto open Sa-pa’s Too. After a great deal of hard work finding a good location and settingup the restaurant, they again earned a profit within a year. They repaid the bank loanswithin two years. Pat and Sarah demonstrated that they had good business sense inaddition to wonderful recipes.Pat and Sarah privately owned and operated the restaurants. The success of theserestaurants convinced them to expand the business and open other Sa-pa’s Too innearby towns and cities. This expansion effort required a great deal of money. Inorder to convince prospective backers, Pat and Sarah had to develop a good businessplan. Pat and Sarah began thinking strategically. They needed a long-term vision,goals, objectives, and values. They needed plans for recruiting and training qualitystaff, obtaining standard cooking equipment, standardizing the restaurant décor, legallyprotecting their ideas and recipes, identifying other prospective locations, anddeveloping a food distribution plan so that new Sa-pa’s Too restaurants would enjoy thesame food quality. It would take them away from direct involvement in the tworestaurants they started. They would change their careers from restaurant proprietors torestaurant executives.Pat and Sarah decided to sell a portion of their business and go public. They chose notto borrow the money from a bank because they didn’t want to have monthly principal 65
    • and interest payments. Instead, the founders decided to give up part of theirownership. Financial organizations, investment bankers and venture capitalists assistpeople in raising money for starting a new business or expanding an existing business.In return for the funding to greatly expand their business, the investment organizationdemanded two-thirds of Pat and Sarah’s business. The investment counselors dividedthe business into 30,000 shares. Pat and Sarah would keep 10,000 shares and setaside 20,000 shares for investors. After examining the industry, similar businesses,and their restaurant’s financial record, they collectively agreed to value each share at$25. The investment organization prepared the documents associated with an initialpublic offering (IPO) and attempted to sell the shares to people that had confidence inthe future success of other Sa-pa’s Too restaurants. If they successfully sold 20,000shares, they would raise $500,000, which the business would use to expand and grow.Pat and Sarah now led a publicly owned company. As a publicly traded company, Sa-pa’s Too shareholders could sell their stock to anyone at anytime. A stockbroker wouldhandle the transaction by arranging the stock sale between buyer and seller. Thepublic determines share value by their perception of the company’s future prospects.The company’s profits or earnings provide a good guideline for the stock price.Suppose Sa-pa’s Too restaurant earns profits of $300,000 or a profit of $10/share afterthe first year of operation. The price to earnings ratio is a commonly used method forvaluing stocks. Many companies have a price to earning ratio of from 15 to 20. Thatwould value Sa-pa’s Too restaurants at $150 to $200 per share, which would representa very healthy profit to the company’s shareholders. On the other hand if the restaurant 66
    • did not earn a profit or worse, lost money, then the value of the shares could plummetto pennies.Very often, newly formed companies (also known as start-ups) choose to compensatekey employees with a lower salary plus shares of stock as a “sweetener”. Theemployee exchanges immediate income for a potential of future profits. If the companydoes well, then the employee will do well because the stock price will likely increase.This arrangement serves to motivate managers and other executives to focus oncompany profits so that the value of the stock increases. 67
    • Chapter 2 Questions1) If you were to start a new organization tomorrow, describe the core values you would build into the new organization.2) Most large organizations have a corporate persona or identity that they share with the public. This identity becomes the public’s perception. Organizations use this identity to shape government policy as well as to convince the public to believe in them and use the services or products they offer. a) Use the Internet to find the names of the 30 companies comprising the Dow Jones Industrial average. b) Visit the web site of two of these companies. Try to discover their corporate identity by searching for their mission, values, and vision statements. The information may not be specifically called out as mission, values, and vision so you will have made a judgement about the data. c) Repeat part (b) using two of the following organizations: American Red Cross Avon Products Boy or Girl Scouts of America Colgate-Palmolive Eastern Mountain Sports Lands’ End Liz Claiborne Patagonia Procter & Gamble Reebok International Ltd. Salvation Army W. W. Norton & Company d) Compare the results of parts (a) and (b). Describe the similarities and differences in the information that you obtained.3) Use the Internet to determine the winners of the most recent Malcolm Baldrige award. 68
    • Self-check testCircle the correct answer to each of the following questions or fill in the blanks.1) An organization’s core identity consists of three items: ____________, _______________, and _______________ .2) Select the best answers. a) The mission statement explains the organizations purpose . b) A mission statement describes specific and time limited activities. c) A mission statement represents the values and belief systems underlying the organization. d) The vision statement represents something the organization aspires "to become, to achieve, to create -- something that will require significant change and progress to attain."3) Select the phrase that best defines an organization’s goals a) An organization’s goals represent a general statement of purpose and direction. b) An organization’s goals represent specific targets. c) An organization’s goals represent its Strengths, Weaknesses, Opportunities, and Threats.4) Which statement characterizes an organization’s objectives? a) Objectives represent observable and measurable results that contribute towards meeting the general organizational goals. b) Objectives are measured in terms of what, when, where, and how much. c) Objectives describe conditions that will exist after the work is performed. d) Objectives represent an organization’s Strengths, Weaknesses, Opportunities, and Threats.5) The acronym SMART represents the following: i) S ______________________ ii) M ______________________ iii) A ______________________ iv) R ______________________ v) T ______________________6) True or False: A SWOT analysis relates external trends (opportunities and threats) and internal capabilities (strengths and weaknesses). a) True b) False7) Examples of resources are a) people b) land c) machines d) materials e) money f) train ride 69
    • 8) True or False: The fundamental premise behind control of an activity is the comparison of current performance to expected performance in time and then making required changes. a) True b) False9) Which of the following can trace their assigned value to an accepted standard? a) A team’s won-loss record. b) U.S. Grade A meat c) Distance in miles d) Temperature e) Shoe size f) A container of milk purchased in a store g) Lumber 70
    • CHAPTER 3 Project Management Organizational Overview If I am not for myself, who will be? If I am not for others, what am I? And if not now, when? Hillel, Ethics of the Fathers Ch 1-14 <>Chapter goalsAfter studying this chapter, you should be able to: Define a project Explain the difference between a program and a project Understand and create an organization chart Understand the different types of organizational structures Explain a matrix operationGeneral management concerns itself with the leadership and management of theorganization as a whole. At a minimum, general management encompasses planning,organizing, staffing, coordinating, executing, communicating, and controlling theoperations of an ongoing enterprise. However, general managers go beyond the basicsof management. This group deals with the processes, systems, and technologies thatintegrates the enterprise and enables it to carry out its mission. By necessity, theyfrequently involve themselves with the broader community’s external constituencies. 71
    • They participate in the development of philosophies, values, and strategies that createa successful enterprise.Project managers on the other hand, have a narrower view. To be sure, they usegeneral management skills, but they use the processes and procedures developed byothers to accomplish a very specific effort. They work on projects. A project is anendeavor undertaken to create a unique product or service. Today, almost all types ofindustry commonly use the project management methodology including defense,information technology, construction, electronic systems, pharmaceutical, chemical, andothers. Typically, projects begin after signing a contract with a customer; or they areinternally initiated with the intent of introducing a new product to the marketplace(Shenhar, p. 33). The organization use internally funded projects to leapfrog thecompetition with a new creation or play “catch-up ball” and just stay abreast of thecompetitor.Every project has a definite beginning and a definite end. Projects do not go onforever. Projects start with an identifiable need. Staff members prepare a requirementlist or perhaps a detailed specification document. The organization’s purchasingdepartment distributes the requirements to potential internal or external suppliers.Organizations usually demand a response from prospective suppliers within 30 to 90days. The interested suppliers respond to the buying organization with a bid – aproposal describing the equipment they will deliver and the price they wish to charge. 72
    • The prospective buyer reviews the bid responses, selects a winner and awards acontract. Figure 3- 1 summarizes the process.Following contract award, a project manager assembles a team that develops theproduct or service embodied in the customer’s idea and distributes the work and theassociated budget to the organization’s departments. After product or servicedevelopment and test, technicians install the product or service at the customer’s siteand confirm the system operates. Very often, the final customer requirement involvestraining the customer’s staff in the correct way to use and maintain the product. Thisproject lifecycle summarizes the steps associated with a project. The bell shapedpattern shown in the Figure 3-2 depicts the money spent or the labor hours worked for alarge project. Project funding starts slowly then progressively increases. The designand development effort expends the maximum funds as the largest number of peoplework on the job. Fewer people perform the installation and the chart shows lessspending. Projects usually end with an acceptance test at the customer’s site followedby training of the customer’s staff in the use of the product or service. At this point, theremaining people on the project return to their respective departments forreassignment. Naturally, labor hour distributions and spending patterns vary amongprojects.A software or hardware product may require ongoing maintenance, but that is notconsidered part of the original project’s activities. Many organizations have a separategroup that concern themselves with product maintenance. Customers usually receive 73
    • annual payment notices for periodic hardware or software maintenance and productupdates 74
    • Figure 3-1 The Bid Process XYZ Company prepares a The XYZ Company purchasing XYZ Company list of requirements or a department distributes a identifies a need specification specification to potential suppliers Suppliers prepare and XYZ Company evaluates XYZ Company awards the submit a bid to the XYZ the supplier’s bids contract to the ABC Company Company 75
    • Figure 3-2 Project Lifecycle Phases No. of people on the job or Labor Hours or Project Spending TIMEContract Design, InstallationAward Planning - Training Transfer to Assembling Team & Development & Maintenance Disbursing Work Test A product or service provided by a project differs in some distinguishing way from previously delivered products or services. The Project Management Body of Knowledge (PMBOK) defines Project management as the application of knowledge, skills, tools, and techniques in order to meet or exceed stakeholder needs and expectations from a project. Project managers (PM) use many of the same techniques and tools employed by general managers. After negotiating for the organizations resources required for a project the PM assigns these resources with the intent of completing specific objectives 76
    • and goals. The PM has complete responsibility for the success or failure of the project.Frequently however this person lacks the authority to insist that members of theorganization support the completion of the required activities. We will discuss theramifications of this apparent paradox in the next section.Table 3-1 illustrates a family of microprocessor devices developed by Intel. Each ofthese internally funded microprocessor projects started with a set of requirements. Theyrequired a large number of software and hardware engineers and technicians to developa design that supported a machine code, which software designers could use to programthe device. Engineers and technicians built and extensively tested a prototype.Following satisfactory evaluation of the test results, the design group completed thedrawings and documentation. They then transferred the product to the integrated circuitmanufacturing department for large scale production. The design, fabrication and test ofeach of the microprocessors in Table 3-1 corresponds to a project. 77
    • Table 3-1 Thirty-years of Intel Microprocessor Projects Microprocessor Device Year of No. of Number Introduction Transistors4004 1971 2,2508008 1972 2,5008080 1974 5,0008086 1978 29,000286 1982 120,000386™ processor 1985 275,000486™ DX processor 1989 1,180,000Pentium® processor 1993 3,100,000Pentium II processor 1997 7,500,000Pentium III processor 1999 24,000,000Pentium 4 processor 2000 42,000,000Data taken from http://www.intel.com/research/silicon/mooreslaw.htmA program is a group of projects managed in a coordinated way to obtain benefits notavailable from managing them individually. The projects comprising a program sharesome common features. The commonalities may include application or purpose,components, development and/or fabrication tools, developer labor pool, training, andmaintenance. The organization desires to take advantage of this expertise associatedwith similar projects and thus creates a program. The entire effort shown in Table 3-1corresponds to the Intel microprocessor program conducted over a thirty-year period.The development of many of these projects overlapped. Very possibly a single personmanaged two or more of these projects simultaneously. A program manager hasresponsibility for several related projects. After a project team gains experience on oneof the projects in a program, the program manager would like to assign the existing teamto other projects in the program, which they do by negotiating with the functionalmanagers. A team that successfully completes a project, understands each other’s 78
    • strengths and weaknesses. They understand the major technical aspects of the old andnew projects. The team members have acquired a knowledge of the development toolsrequired to perform the job and do not require extensive training. They are ready to go.Program managers would like to apply this knowledge to other projects in the programthereby saving money. The organization and the customer benefits from combiningseveral similar projects into a program by making use of the experience that the team hasgained.Figure 3-3 illustrates another example of the difference between a project and program.Over a fifty-year time span, the U.S. Navys Blue Angel acrobatic flight team used eightaircraft - Grumman F6F Hellcat, Grumman F8F Bearcat, Grumman F9F Panther,Grumman F9F-8 Cougar, Grumman F11F-1 Tiger, McDonnell Douglas F-4J Phantom II,McDonnell Douglas A-4F Skyhawk II, and the McDonnell Douglas F/A-18 Hornet . Eachaircraft represents a separate and distinct project. Each aircraft project went throughseveral phases that included initial concept, aircraft development, prototype manufacture,and test and evaluation before it went into production. Keep in mind that a project doesnot include production manufacturing and aircraft maintenance. From the U.S. Navysperspective, all the aircraft represents the Blue Angel aircraft program. 79
    • Figure 3-3 The Blue Angel’s Project and ProgramFifty years of Blue Angels Aircraft - Grumman F6F Hellcat, Grumman F8F Bearcat, Grumman F9F Panther, Grumman F9F-8 Cougar, GrummanF11F-1 Tiger, McDonnell Douglas F-4J Phantom II, McDonnell Douglas A-4F Skyhawk II, McDonnell Douglas F/A-18 Hornet 80
    • Figure 3-4 Stratified Organizational Levels Upper Management -- Policy Middle Management - Planning Supervisory -- Scheduling Non-supervisory worker - Product or Service Figure 3-5 Functional Department View of the Organization Engin- Manu- Pur- Human Cust- Sales eering fac- chasing Resour- omer & … turing ces Service Market- ing Upper Management Middle Management Supervisory Non-supervisory worker Figure 3-6 Operational Islands Engin- Manu- Pur- Human Cust- Sales eering fac- chasing Resour- omer & … turing ces Service Market- ing Upper Management Middle Management Supervisory Non-supervisory workerWhy Project Management? 81
    • Organizations divide into four broad management categories (Figure 3-4). Uppermanagement establishes organizational policy and future direction, middlemanagement focuses on planning, supervisory levels focus on work distribution andscheduling, and the large non-supervisory workforce focus on completing and deliveringthe product or service. As shown in figure 3-5, functional managers take responsibilityfor activities in specialized departments or functions (e.g., engineering, purchasing,manufacturing, management information systems (MIS) or information technology (IT),sales, marketing, human resources, publications, customer service). They concentrateon their area of expertise. Most managers wear “blinders.” Engineering has littleinterest in the issues involving the manufacturing or publications department. Mostorganizations have self-imposed constraints if not outright restrictions on employeesfrom one department involving themselves in the activities of another department.Combining the stratified organization levels (Figure 3-4) with the functional departments(Figure 3-5) creates a patchwork of "fiefdoms" (Figure 3-6). Few managers in theorganization take a broad view. In fact, upper management usually prefers thatfunctional managers tend solely to their activities. Therefore, when you examine theorganization closely, you view a vast sea of operational islands. That is, highlyterritorial supervisory and non-supervisory personnel closely guarding the regions oftheir special interest. This leads to the need for a manager that can integrate and meldparts of these independent "fiefdoms" into a cohesive group that takes an interest incompleting a particular job or project. This person is the project manager. 82
    • The PM also provides a responsibility focal point. The ‘buck’ stops at the PM. Allstakeholders bring their questions, comments, complaints, and issues to the PM. ThePM speaks for the organization. Do not interpret this to mean that the PM actsunilaterally without seeking guidance and assistance from other stakeholders. Thatshould not happen. However, the PM makes the decision after consulting with thetechnical, financial, purchasing, manufacturing and sales communities; suppliers; and, ifnecessary, senior management.Project Managers ResponsibilitiesThe essential goal of project management is to make the most effective use ofresources such as labor, equipment, facilities, materials, money, information, andtechnology so that project goals can be achieved within budget, on schedule, whilemeeting performance requirements, and receiving customer acceptance. The projectmanager takes into consideration the changing legal, social, economical, political, andtechnological environments. The Project Manager is the focal point for integrativeresponsibility. Upper management holds this person totally accountable for all projectactivities. This person must coordinate across the organizations functional interfaces,resolve conflicts, and apply integrated planning and control techniques. The PMcontinually crosses organizational boundaries in an effort to acquire and deployresources. This person quickly develops the team into a harmonious group.Undoubtedly, a major project manager responsibility involves securing a customercommitment to a firm and realistic set of requirements. A good specification defines thejob scope, budgets, schedules, and quality controls. The requirement definition has 83
    • immense impact on the resources selected and profitability of the project. A successfulPM must have administrative expertise and an understanding of human behavior. Theperson must act as an integrator, communicator, leader, and environment enhancer.The project manager acts as the focal point to the stakeholders that include customer,upper management, functional management, and other individuals and organizationsinvolved in or affected by project activities (Figure 3-7). Project managers strive to meetor exceed stakeholders’ needs and expectations. Some PM’s believe that without aproject manager in charge the project will operate within the seven phases shownbelow: 1. Wild Enthusiasm 2. Disillusionment 3. Chaos 4. Search for the Guilty 5. Punishment of the Innocent 6. Promotion of the non-Participants 7. Definition of the Requirements 84
    • Upper Management FunctionalDepartmentManagement PM Customer Figure 3-7 Project Manager (PM) pulled in all directions 85
    • Organizational ChartsAll organizations formally divide management responsibility into layers, which arereferred to as organization charts. Figure 3-8 illustrates a traditional top-downorganizational chart. Organization charts are not one size fits all. A "best" organizationchart does not exist. An organization structure successfully used for a Fortune 500industrial company may not be suitable for the operations of a smaller business or adifferent industry. Organization charts are not cast in concrete. They changedepending on business, economic or labor conditions. Organization charts frequentlyreflect the chief executive’s personality and preferred way of conducting operations.The executive office may consist of the organization’s president, vice presidents, legalstaff, and administrative staff. The organization’s staff provides advice and support.The three types of staff personnel perform advisory, service, and control tasks. Thevice presidents report to the president and have responsibility for one or morefunctional or support departments.Depending on the organization’s size, either a vice president or a director reporting tothe vice president will lead functional and support departments. Frequently there existvice presidents of engineering, manufacturing, sales and marketing, informationtechnology, human resources, etc. Mid-level managers report to these vice presidentsand non-supervisory employees report to the mid-level managers. 86
    • Functional OrganizationThe functional organizational chart shown in Figure 3-8 identifies the disciplinesrequired to develop and produce a product or service. Each department manager cantrace a line back to the organization’s president. Everyone understands where he orshe stands in the “pecking” order. When a special project comes into the “house”, noparticular person receives responsibility for its completion. The managers meet andagree to divide the work according to a plan that they devise. Each mid-level managerestablishes priorities. A dispute among departments would likely work itself up thechain of command and require interdiction by vice presidents - probably not a veryefficient way to attack a project. Each department manager tries to maximize thepersonnel usage within each department. The manager assigns personnel andestablishes priorities according to his or her own preferences.The functional organization structure is based on specialization such as engineering,production, marketing, accounting, logistics, etc. Individuals report to one superior.In a multiple project environment, conflicts may develop over the relative priorities ofdifferent projects in competition for limited resources. If the organization policy doesuse a project manager, the PM has little formal project authority and relies onnegotiation, the informal power structure and interpersonal skills to realize the projectgoals. Project team members place more emphasis on their functional specialties,which can work to the detriment of the overall project. According to some managers, itis easier to manage specialists if they are grouped together and supervised by anindividual possessing similar skills or experiences. The functional organization 87
    • centralizes similar resources and provides mutual support to group members by closephysical proximity. This origination structure can usually define career paths for itsparticipants. Project Management StructureFigure 3-9 illustrates a project management structured organization. This focused orderexists to manage a variety of large, long-term projects. Employees are dedicated tospecific projects and work in one of several large project groups. Each project groupcontains a complement of engineers, technicians, administrators, and otherprofessional and nonprofessional personnel. Functional managers do not have tomake project priority decisions -- they only work on a single project. All managers reportto the project manager assigned to the project. This person has both the authority andresponsibility for project success. The project manager requests that functionalmanagers hire personnel to work on this specific project. At the end of the project,employers may find themselves looking for a new job unless they can obtain a positionin another project organization.The PM has total authority over the project and retains the flexibility to acquireresources needed for the project from either within or outside the parent organization.The structure promotes effective informal communications channels between theproject manager and the team. The project management structure may not promoteefficient use of resources and there may be a possible duplication of facilities. Sinceevery project has a beginning and end, project team members work themselves out of a 88
    • job, which may result in a layoff. Some fortunate employees may find a new position inanother project organization within the same parent organization. Matrix OrganizationMany organizations prefer not to duplicate personnel for each project. Instead, theyattempt to create a single "world class" functional organization and share the talentamong the various projects. This leads to the matrix organization shown in Figure 3-10.On receiving a new project, the organization assigns a project manager. This managerassembles a team by requesting support from the functional groups that contain theneeded personnel. Naturally, project managers negotiate with the functional managersto obtain the best people for the project. Project manager’s familiar with the functionaldepartment’s personnel have the best opportunity for successfully recruiting a capablestaff. PMs cultivate relationships with functional managers so that they can obtainpeople suitable for the project entrusted to them.The project manager plans and coordinates the project by working with and integratingall groups within the organization. The PM works with the team to identify and addressthe needs of all stakeholders. This person relies on organizational and people skillsmore than technical ability to pursue project success. The PM focuses on workrelationships and leadership including motivation, delegation, supervision, teambuilding, and conflict management and resolution. Following a discussion with thefunctional manager, the PM arrives at a suitable working relationship with the functionalmanager to reward and discipline employees. The PM influences the stakeholders 89
    • using written, verbal, and listening communication skills as well as demonstratingexcellent problem solving competencies.The matrix organization represents a combination of the functional and projectmanagement structures. It attempts to maximize the benefits of the projectmanagement and functional organizational structures and minimizes its weaknesses.The matrix maintains the functional or vertical lines of authority while establishing arelatively permanent horizontal structure to support new projects. It is designed to workwith all functional departments that support the project and reduce or eliminateduplicate effort found on the project team. The matrix design enables the organizationto manage several projects simultaneously even though the organization may haveinsufficient resources to staff each project separately.This system may create conflict with the project workers in that there are two "bosses"for each worker: the project manager and the functional manager. To reduce theconflict, the roles and responsibilities of each must have a clear definition before workbegins. A strong matrix refers to the idea that the project manager enjoys greaterauthority whereas in a weak matrix, authority passes to the functional manager. Apotential disadvantage to the functional department’s employee exists if the worker isplaced on a long-term project assignment. The time away from the parent functionaldepartment may negatively affect promotional progression or possibilities of receiving‘choice’ assignments. Table 3-1 summarizes the relationships among the functional,project and matrix organizations. 90
    • Line OrganizationMost people in organizations contribute directly to the organization’s product or service.For example, consider a company that manufactures computers: Engineers design the computing electronics boards, Technicians and engineers test the prototype, Technicians fabricate the printed circuit boards, Factory workers stuff the boards with electronic components, Factory technicians assemble the required configuration, Test technicians test the fabricated system, Sales people sell the product, and Field technicians install the equipment in the buyers’ facility or home.Without all of these people doing their job, the customer will not receive the qualityproduct or service they demand. On the other hand, some employees at this firm havelittle to do with the final product or service. Lawyers protect and advise the companyabout legal matters, nurses care for a person injured on the job, librarians assist peoplein obtaining information, marketing personnel develop advertisements and create ideasfor future products, and senior management guides the organization. Important as theymight be, none of these people has anything directly to do with the actual product orservice provided to the customer. 91
    • Organizations use the phrase line managers to describe managers actuallycontributing to making a product or performing a service. A line organization describesthe direct, straight-line relationships between different levels within the companyinvolved with a product line. The members of the line organization perform or managefunctions essential to the existence of the firm and product or service. The lineorganization has a clear chain of command and promotes fast decision-making. Themajority of people assigned to a project manager are line workers. All the people in thissection’s first paragraph represent line workers. Lawyers, nurses, librarians, marketingpersonnel, and senior managers support the organization, but do not perform workrequired to get the product or service to the customer and therefore are not line people. 92
    • Figure 3-8 Traditional Management Structure Functional Organization Executive Office Information Technology Engineering Operations Financial Administration Field Service Marketing (Director) And Sales Division Mechanical Technicians Marketing Electrical Financial Staff Department Software Manufacturing Publications, Sales Purchasing Configuration Force Management, SecretarialSections/ Digital StructuresFunctions Analog Adhesives CAD 93
    • Figure 3-9 Project Organization Executive Office Project/Program A Information Administration Technology (IT) Project B Manager ManagerEngineering Financial Sales Publications, Operations Field Service Configuration Management, Secretarial 94
    • Figure 3-10 Matrix Organization Executive OfficeInformation Engineering Operations Financial Administration Field Service MarketingTechnology And Sales Project Manager X Project Manager Y 95
    • Table 3-1 Comparison of Project Leadership for Different Organization Structures Traditional Project Matrix Functional Management Organization Organization StructureProject leadership May use a project PM PMresponsibility coordinatorProject priorities Established by PM Established by PMStakeholder Resolved by PM Resolved by PMDisputesPersonnel Functional PM designates Functionalselection managers recruit managers to recruit managers recruit personnel personnel personnelPM responsibility High HighPM authority None High WeakPersonnel at end Remains in Possible forced Return to functionalof Project functional organizational leave groups organization (layoffs) 96
    • Chapter 3 Questions1) Explain the difference between a project and a program.2) What is an organizational chart? What is its purpose?3) Think of a company, religious organization, charitable organization, or a college with which you have some familiarity. Perform a SWOT analysis. That is identify the strengths, weaknesses, opportunities, and threats confronting the organization. Based on your analysis, identify two strategic goals appropriate to the organization.4) Describe the advantages and disadvantages of functional, project, and matrix organizations.5) If a project organization completes a project, what may happen to the members of the organization?6) Describe a functional manager and a line manager. Can they be the same? Explain.7) Do you believe that a project manager need have a technical expertise in the organization’s specialty areas? Explain your answer.10) Sketch a project lifecycle. Describe its meaning.Self-check testCircle the correct answer to each of the following questions or fill in the blanks.1) True or False: A project is an endeavor undertaken to create a unique product.2) Every project has a definite ___________ and a definite _______________.3) True or False: Project management is the application of knowledge, skills, tools, and techniques in order to meet or exceed stakeholder needs and expectations from a project.4) True or False: The PM has responsibility for the success or failure of the project.5) True or False: A program is a group of projects managed in a coordinated way to obtain benefits not available from managing them individually.6) True or False: 97
    • A line organization describes the direct, straight-line relationships between different levels within the company involved with a product.7) A project manager is concerned about the following: a) Effective use of resources b) Completing the project within budget c) Completing the project on schedule d) meeting performance requirements stated in the contract e) receiving customer acceptance f) achieving state of the art performance g) Giving the customer everything they asked for.8) Examples of stakeholders are which of the following: a) External Customer b) Functional departments c) IRS auditors d) Suppliers e) Senior management9) Select the employee(s) that contributes to making a product or performing a service. a) Line manager b) Legal staff c) Librarian d) Company nurse e) Purchasing staff10) Characteristics of the functional organization include: a) Specialty personnel b) Colleagues sharing a common work area c) Manager with authority to make project priority decisions d) Technical problem solving skills11) Morning social discussions with work associates a) Improves morale and should be engaged in every day. b) Reduces company productivity. c) Should not be conducted in front of a manager.12) Characteristics of a functional organization include the following: a) Specialty skills b) Minimal skills c) Contains a broad cross section of the organization’s disciplines d) Outstanding writing skills 98
    • 13) . True or false: The matrix organization is designed to manage several projects simultaneously even though the organization may have insufficient resources staff each project separately.14) True or false: The matrix organization may create conflict with the project workers in that there are two "bosses" for each worker.15) The PM focuses on work relationships and leadership and uses the following techniques: a) Motivation b) Delegation c) Supervision d) Team building e) Conflict management and resolution f) Superior technical skills.16) A project manager’s primary goals involve delivering a product or service (choose all that apply): a) Within budget b) On schedule c) Meeting the performance requirements d) Exceeding the performance requirements described in the specification e) Receiving customer acceptance f) With employee satisfaction 99
    • CHAPTER 4 Management Concepts There is nothing more difficult to handle, more doubtful of success, and moredangerous to carry through than initiating changes. The innovator has for enemies allthose who have done well under the old conditions, and lukewarm defenders in thosewho may prosper under the new. -- Machiavelli, The Prince, Chapter 6 <>Chapter goalsAfter studying this chapter, you should be able to: Understand the difference between a manager and a supervisor Understand fundamental management theories Define efficiency and productivity Discuss the functions of management Discuss management styles Explain the types of power used by managers Compare a group and a team Explain the difference between a manager and a leaderClass Exercise: Before reading this chapter, students in the class should perform thefollowing the exercise. The purpose of this exercise is to stimulate your thinkingregarding a managers job. Divide the class into small groups consisting of three or fourstudents. Many students have held one or more jobs. Recall your supervisor ormanager in these jobs. Take a few minutes to answer the following questionsindividually. 100
    • 1) List the broad supervisory responsibilities that you believe this person had.2) List the reasons that you took the job.3) Identify the actions taken by the organization and the supervisor or manager that would motivate you to pursue your tasks with greater diligence.4) What did you like least about the job?Discuss your individual responses to each question with the small group. The groupshould evaluate the individual responses and select the five most significant answers toeach question. Discuss the results of your deliberations in class. <>ManagementWhat does a manager do? What makes a good manager? Practitioners and theoristshave wrestled with these topics at length. Most agree that management is the processof getting activities completed efficiently and effectively with and through other people.The manager’s goal is to get the job done in the shortest time with a minimum of costand expended resources. Resources consist of people, places, and things. From theorganizations perspective, it includes time, labor, material, facilities, land, tools, money,equipment, etc. An organization includes 1) people that do the work, 2) people thatplan and distribute the work, and 3) people that plan for the organizations future. The 101
    • second category includes the day-to-day managers and supervisors. The last groupconsists of upper management.Management is not a new idea. Consider the management skills required by theancient Egyptians to build the pyramids (Figure 4-1a). Depending on which historianyou believe, the pyramids required from 20,000 to 100,000 laborers -- an impressiveworkforce. The Chinese built the Great Wall (Figure 4-1b) a length of 4000 milesacross the border between China and territories in the north. The 4000-year-oldStonehenge (Figure 4–1 c) structure in the United Kingdom is a set of concentric ringsand horseshoe shapes. This construction likely involved moving stones weighing asmuch as 25 tons from a quarry location more than twenty miles away. Once in place,the inner stone circle was one of the earliest structures to align with the summersolstice sunrise. Roman engineers built aqueducts (Figure 4-1d) that crossedmountains, valleys and plains. Eleven major aqueducts built over a period of more than500 years, stretching over hundreds of miles supplied water for the city of Rome. Theybuilt aqueducts in numerous other parts of their empire, notably France, Spain, andNorthern Africa. In Chiapas, Mexico the Mayan civilization constructed the Temple ofthe Inscriptions (Figure 4-1e) – a pyramid that covered a subterranean tomb thathouses the sarcophagus of a Mayan ruler Pakal. The temple stands 30 meters highand approximately 60 meters wide at the base. These technically sophisticatedprojects required enormous amounts of human labor and involved planning, controlling,and coordination. In each project, the leaders established a vision and motivated theworkforce to accomplish the desired goals. Management just below the leadership 102
    • level worked with the technical experts to integrate their thoughts and ideas intofeasible plans of action. These managers prepared and monitored schedules. Theytook responsibility for obtaining and distributing raw materials and other resourcesrequired for the job. This participated in resolving conflicts among workers. Finally, theyconcluded the job by defining success with an acceptance test – water flowing, troopsmarching, or conducting a religious ceremony. In short, the jobs required managementskills.Figure 4-1b The Great Wall 103
    • Figure 4-1c StonehengeFigure 4-1d Roman Aqueduct 104
    • Figure 4-1a PyramidAll of us receive supervision at work and some of us will be managers during ourcareer. You will likely make employment decisions based on your perception of theorganization’s management quality. An understanding of basic management principleswill help us make informed decisions about the prospective organization. It will helpyou ask the right questions at the interview so that you can determine if you wouldenjoy the work environment. It will help you to decide whether you should consider amanagement opportunity during your career. Project management requires us tounderstand and use many of the fundamental management concepts discussed in thissection.Managers and Supervisors 105
    • The difference between managers and supervisors varies among organizations.Both a manager and supervisor represent the work group to a management level abovethem. In most organizations the hierarchy begins with a supervisor, followed in turn bya manager, middle manager, and senior manager. A project manager is at the level ofa middle manager. The supervisor must still have a good technical command of theneeded skills because they are so close to the "hands-on" work performed by theemployees. As the person moves up the management hierarchy, technical skillsbecome less important and interpersonal skills assume greater importance.Managers make broad decisions with potentially wide organizational impact andsupervisors makes decisions about a particular work unit. Frequently a manager hasan external role and may visit stakeholders such as customers and suppliers while thesupervisor has a more limited role confined to the unit or department. Supervisorymanagement is more focused and has a short-term outlook.The supervisor maintains the routine flow of work. Both the manager and supervisorreceive, collect and transmit information. The manager receives and transmits moreinformation from people outside the organization than the supervisor. The manager is aspokesperson to the outside world. The manager disseminates the organizationsinformation into its environment. The manager exists at the center of organizationaldecision-making. The manager may initiate change, deals with threats to theorganization, decides on organizational priorities and negotiates on behalf of theorganization. 106
    • Historical Management OverviewManagement thought has evolved over the years. An evolutionary continuum is shownin Figure 4-2. As people conducted social experiments and performed studies,organizations began to modify existing management processes and procedures andadopt new methods. Abrupt changes rarely occur, rather organizations ease into newideas. Researchers do not necessarily agree on the titles of the schools ofmanagement thought discussed below. Certainly, practitioners (managers working inbusiness, industry, profit and non-profit organizations, and public and private sectors)do not care about management categories. A senior executive cares about meetingthe planned quarterly financial targets and strategic goals. The mid-level executive orproject manager share concerns about achieving well defined objectives that thecustomer demands. Their interests lay in using techniques to motivate the staff toprovide a product or service that satisfies the stakeholders. Managers mix and matchideas and theories to help them get the job done. Recognizing that distinct categoriesblend into one another and do not have sharply defined edges, we will attempt toseparate and classify the schools of management thought in an effort to gain insightinto the subject. 107
    • Figure 4-2 – Selected Contributors to Management and Leadership Thought Other Recent Contributors -- Drucker, Peters, Blanchard Quality – Deming, Juran, Crosby, Feigenbaum, Ishikawa, Shewart, Taguchi Leadership Theory – Mintzberg, Bennis, Kotter Behavioral Theory – Barnard, Follett, Herzberg, Maslow, Mayo, McGregor Classical Management Theory (Scientific) – Gilbreth’s, Taylor Classical Management Theory (Administrative) – Fayol, Follett, Gantt, Weber1875 1900 1925 1950 1975 2000 108
    • Classical ManagementDuring the industrial revolution (1750 to 1850), the U.S. moved from an agrariansociety to urban factory based centers. Dramatic changes in the social and economicstructure took place as new technology created the factory system of large-scaleproduction. Managers emphasized the division of labor and the importance ofmachinery to assist labor.Classical management theory developed during the industrial revolution and continuedinto the first half of the twentieth century. Theorists believed that money motivatedemployees and called the concept “economic man”. The classical period focused onefficiency and relied on bureaucratic, scientific and administrative concepts. A commonassumption held that efficiency improvement led to productivity increases. Intechnology, we define efficiency as the ratio of output to input expressed as apercentage. In the organization, we can define efficiency as the resources spent tocomplete a specific task compared with a reference standard. The resources normallyused to complete a task may be an acceptable reference point. This data may stemfrom historical results based on previous projects. Reducing the time to complete thattask improves efficiency. Increased worker efficiency can result from gainingexperience on the job. Efficiency may also improve from the use of a new tool or pieceof equipment as more product will be produced within a given time period. Very often,the use of a new tool may reduce efficiency during the short term until personnel learnto use the equipment effectively. Good efficiency requires the ordering of job tasks in away that uses a minimum of resources. Increasing the efficiency of production 109
    • processes improves organizational productivity. Productivity measures the worker’soutput over some time. A productivity gain yields an increased amount of product orservices during a time period as compared with a previous time period.Managers expect activities to use specific processes, procedures and methods.Bureaucratic management relies on 1) a set of guidelines and procedures or rules, 2) ahierarchy, and 3) a clear division of labor. Scientific management focuses on the way todo a job that results in the highest productivity. Administrative management emphasizesinformation flow in the organization’s operation. The process involves acquiringinformation and then performing the operations to achieve organizational goals.Several of the leading classical management theorists include Fredric Taylor (the fatherof scientific management), Henri Fayol, Gantt, Weber, and the Gilbreths (originators oftime and motion studies).Henri Fayol revolutionized management thinking. He identified five functions ofmanagement that continue to serve as a basis for administrative actions. Theseincluded planning, organizing, commanding, coordinating, and controlling. Planningrequires an understanding of the work so that the supervisor or manager can identifythe tasks to be performed and then develop a schedule to perform the work.Organizing requires the manager to identify and assemble the resources required toperform the work. Commanding entails assigning people to the work and confirmingthat the job gets done. Coordinating involves unifying the activities, resources in alogical manner so that the work can get done. Finally, the manager must control the 110
    • operation so that the work is performed and completed in accordance with theorganizations established policies and procedures. Controlling the work operationyields output consistency from worker to worker. Luther Gulick and Lyndall Urwick(1937) modified Fayol’s list of management functions as follows: Planning, Organizing Staffing Directing Coordinating Reporting Budgeting.The addition of staffing, reporting, and budgeting adds tasks for which managersfrequently have responsibility. Directing, a softer less military-like word, replacedcommanding. Gulick & Urwick (1937) emphasized formal authority and the role ofdirect supervision. Later studies conducted by Mintzberg and Kotter found thatsuccessful managers spend a great deal of time communicating, cultivating networksand personal contacts and delegating work to subordinates.Fayol embellished the baseline five management responsibilities with fourteenmanagement principles. These principles or general rules apply to all organizations are: 111
    • 1. Division of work through labor specialization. Specializing encourages the development of expertise associated with the performance of specific tasks.2. Authority and Responsibility. Authority should reside with the people having the responsibility for the task. Recognized personnel should have the right to give orders and the power to demand that the employee comply. One individual receives recognition by the organization to assume responsibility for making certain that activities associated with a given job get done. Project managers frequently have the responsibility, but not the authority for completing a job.3. Discipline. The manager expects and insists that employees obey the rules and has the means to enforce this demand.4. Unity of command. Each employee should have one boss.5. Unity of direction. A single project plan controlled by a single individual.6. Subordinate Individual Interests to the organizations needs. Pursue only work-related activities at work.7. Employee Compensation. Employees receive fair payment for services performed.8. Centralization. Consolidation of management functions. Decisions are made from the top.9. Scalar Chain (line of authority). Use of a formal chain of command from the top to the bottom of the organization. This creates a pyramid-like top down structure that is standard operating practice in today’s organizations. 112
    • 10. Order. All materials and personnel have a designated location. The six-sigma quality concept implemented by Motorola and other major organizations used this as a starting point. 11. Equity. Equality of treatment (but not necessarily identical treatment) 12. Personnel Stability. Limited personnel turnover. Changing personnel requires retraining and will lower productivity. In good economic times, people tend to change jobs more often than in business slumps. 13. Initiative. Think out a plan and make it happen. Many managers take the initiative and use the credo “Do it now and ask forgiveness later.” 14. Esprit de corps. Encourage harmony and cohesion among personnel.The most widely known of these fourteen management principles include 1) division ofwork through specialization, 2) authority should be equal to responsibility 4) unity ofcommand, 5) unity of direction, and 9) the scalar chain of command. Classicaltheorists believed that understanding and applying these principles in a rational mannerleads to the successful resolution of management problems.Henry Gantt is best known for developing a chart used for scheduling tasks over time.Today managers use the Gantt chart more extensively than most other projectmanagement tools. Microsoft Project and Primavera are two software productscommonly used to develop schedules. Gantt also recommended motivational schemesthat emphasized rewards for good work rather than penalties for poor work. Headvocated a compensation incentive system with a guaranteed minimum wage and 113
    • bonus systems for people on fixed wages. Gantt believed in the importance ofleadership and management skills in building effective industrial organizations.At about the same time that Fayol described the managers job, Frederic Taylorintroduced scientific management. Both Fayol and Taylor were task- and thing-oriented, rather than people-oriented. Scientific management focuses on worker andmachine relationships. Taylor’s scientific model evolved from the factory massproduction experience and relied on standardization of work, control of quality, adivision of labor, and a structural hierarchy. He analyzed the work that had to becompleted and then organized work activities into a group of basic operations. Thisconcept worked reasonably well with industrial and repetitive tasks. Taylor stronglybelieved that managers and supervisors should cooperate with and motivate people toperform. In the effort to improve production efficiency, he advocated improving thetools employees used to perform the work and then selecting and training personnel intheir use. He argued that good working conditions and the use of economic incentivesto motivate employees would help gain their cooperation.Frank and Lillian Gilbreth further advanced the scientific model by performing detailedtime and motion studies. They focused on 1) identifying the fundamental motions inwork, 2)studying the way these motions combine to perform a task, and 3) assigning atime duration for each separate motion. Frank Gilbreth collected data by filmingindividual physical labor movements during the performance of a workers job. Theythen analyzed the workers movements. They showed managers how to break down a 114
    • job into its component parts and reassemble the motions to minimize the time toperform tasks. Using the resultant information, the manager prepared a more efficientprocedure that the employee followed. These procedures not only reduced the time tocomplete a job but it helped to make the times consistent from worker to worker. Theresult enabled managers to accurately estimate time to complete a job, whichcustomers appreciated. Workers found this mechanized method for performing workhighly restrictive and boring.Max Weber promoted bureaucracy as the most logical form for large organizations.During the early part of the twentieth century, the word bureaucracy did not have thenegative connotation with which we now associate it. Documented processes,procedures and a hierarchical structure governed by an impersonal authority typify abureaucracy. Authority stems from the individual’s position in the organization’shierarchy and not on an individual’s personality or charisma. The worker’s title definesthe person’s authority. Characteristics of a bureaucracy include the following: • Well-defined and specialized jobs • Qualifications for job tested • Formal behavior rules • Hierarchical system of supervision • Unity of command 115
    • • Preparation and use of written processes and procedures (e.g., an employee’s handbook, industrial safety directions, or directions on handling hazardous material – HAZMAT) • Skill based training • Work assignments and personnel recruitment based on technical expertise • Continuity of operations despite personnel changes • Promotions based on competence • Continued employment based on meritWeber believed that organizations would become successful by applying thesebureaucratic rules. Bureaucracies established concepts of fairness and equality ofopportunity. Bureaucracies excel at businesses involving routine tasks that can bespecified in writing and do not change quickly.The industrial revolution and the progress made by science and technology in the1900’s gave credence to the idea of a single best way to manage. Scientificmanagement seemed to reinforce this idea. The training that engineers and scientistsreceive leads them to expect a single answer to a problem. In mathematics andscience courses technology students tend to present a single number as the solution toa question. They are comfortable with the existence of a single, best way to accomplishan objective. During the twentieth century, it was common for engineers and scientiststo move up the ranks and become managers. So, the idea of a single best way toaccomplish a task moved with them. In the real world however, there frequently exists 116
    • an array of solutions to business and management problems -- perhaps some betterthan others, but many completely acceptable because they lead to job completion. Oneof Mary Parker Folletts important contributions to management theory was the Law ofthe Situation that emphasizes there is no one best way to do anything - it all dependson the situation. Contingency theory or situational theory developed by Fielder usesFollett’s concepts. Today this is considered mainstream management thinking. Precisemanagement formulas do not exist. If they did, far more managers would besuccessful. The techniques recommended by the classical theorists should be used asguidelines to manage organizations.Human behavioral managementHuman behavioral management studies began in the 1920s and dealt with the humanaspects of organizations. This group of theorists based their studies on psychologicalconcepts. The philosophy of "social man" began to compete with the concept of"economic man." The movement began with the Hawthorne Studies. From 1924 to1933 at the Hawthorne Plant of the Western Electric Company in Cicero, Illinois,researchers, T.N. Whitehead, Elton Mayo, George Homans, and Fritz Roethlisbergerconducted a series of industrial psychological experiments. One study examined theeffect of changing the electric lighting illuminating the employees work area. Theresearchers established two groups -- a control group wherein the workplace lightingwas held at a constant level and an experimental group that had varying illuminationstrengths. The researchers expected that the group of women workers receivingimproved illumination would have greater productivity. The surprising results showed 117
    • that the productivity of both groups improved. The researchers concluded that theincreased attention given to both groups making them both feel very special led to theimproved productivity. Mayo identified the “Hawthorne Effect” which is the productivityimprovement that results when people know they are being studied.The researchers at the Hawthorne plant conducted many experiments relating workerand group output to working conditions. Their efforts highlighted the importance ofinformal groups (i.e. groups arising out of the formal organization, but not specificallycreated by management) and the benefits of listening to employees’ feelings andopinions. Work breaks, the freedom to talk, and approved requests for supervisorychanges positively influenced individuals work behavior. Over a period of years, theresearchers found workplace changes other than increased wages influencedproductivity. Some of these changes included varying workday and workweek lengths,varying starting and stopping times, and providing lunches paid for by the company.Concerns about today’s families’ complicated work/life agenda have forcedorganizations to seek methods of improving worker satisfaction while improvingproductivity. Verespej (2000, p. 25) reports about a problem that a company had withmandatory worker overtime on weekends. “Taking the suggestion of its manufacturingemployees, the company switched to a schedule where workers put in a full workweekover four days. That allowed to company to schedule overtime, when needed, onFridays, and let employees save weekends for family activities and, occasionally, havea three-day weekend.” Similarly, Hewlett Packard (HP) decided to reconsider itstraditional 8 to 5 workday thinking. Verespej (2000) relates 118
    • “self-directed work teams in one HP financial-services center opted to switch to a four-day-week, 10-hour-day schedule to process the high number of transactions. The results: Overtime dropped 50%, workers had more ‘quiet’ time to develop process improvements, and the number of transactions processed daily per person increased by 70%.”The Hawthorne studies did not find a direct cause-and-effect relationship betweenworking conditions and productivity. Worker attitude was important. The researchersfound that employees complaints may be a symptom of some underlying problem onthe job, at home, or in the persons past. These findings led to the consideration of thepsychological and group dynamics aspects of group productivity. People are not therational and economic beings assumed by classical theorists. Social interaction isimportant in the workplace and people work well if they feel valued. The studies at theHawthorne plant gave birth to the human relations movement and behavioral scienceapproaches to management. In the 1940’s, group dynamics studies encouragedincreased individual participation in decision-making and group performance didimprove.Scientific management promotes a way of thinking about managing, which isappropriate for an assembly line operation. Many of todays organizations areknowledge based and service oriented. Industries characterized by rapidly changingtechnology or not well-understood processes require a different management approach.The "cookbook" approach may not work for many of these areas. Managing technology 119
    • and technologists demands solutions that use unconventional or "out of the-box"thinking.Human Resources SchoolDuring the 1950’s, researchers began to examine employee motivations in an effort toincrease productivity and efficiency. The behavioral approach did not always increaseproductivity. Thus, motivation and leadership techniques became a topic of greatinterest. Modern theorists such as Maslow, McGregor, Herzberg, Bennis and othersemphasize the importance of social relations in organizations, understanding workersand managers as human beings with social and emotional needs. The humanresources school believes that employees are creative and competent, and that muchof their talent is largely unused by employers. Employees want meaningful work; theywant to contribute; they want to participate in decision-making and leadership functions. Herzberg’s Hygiene FactorsHerzberg proposed a theory for motivating workers that introduced organizationalmotivating agents, which he called hygiene factors. Hygiene Factors are: ! Administrative Policies ! Working Conditions ! Salary ! Personal Life ! Peer, Superior, Subordinate Relationships 120
    • ! Status within the organization ! SecurityHerzberg concluded that positive hygiene factors are necessary, but not sufficient for acontented worker. Poor hygiene factors may destroy the employee’s motivation. Animprovement of hygiene factors will not likely increase worker motivation. Positiveresults stems from the opportunity to achieve and experience self-actualization orpersonal fulfillment. In order to gain maximum worker productivity and efficiency, theperson should experience a sense of self-worth or personal growth and responsibilityfrom their work. Positive motivating agents may include ! Recognition for a job well done ! Work content that is meaningful to the employee and to the employer ! Delegation of responsibility ! Ongoing professional growth 121
    • Figure 4-3 Abraham Maslow’s Hierarchy of Motivational Needs Self- Actualization Esteem Social Safety Basic Physiological Needs Maslow’s HierarchyAbraham Maslow formulated a theory of human motivational needs shown in Figure 4-3. He argued that people want to satisfy an orderly progression of needs, specificallyphysiological, safety, social, and feelings of esteem, before they can achieve self-actualization as shown in the pyramid. Each layer in the pyramid builds upon the onethat precedes it. Table 4-1 extends this concept to the workplace wherein we note thatworkers have a hierarchy of fundamental needs. 123
    • Table 4- 1 Workplace Equivalents of Maslows Basic Need Hierarchy BASIC HUMAN LIFE EXAMPLES WORKPLACE NEEDS ENVIRONMENT EXAMPLES Physiological Air, water, food, housing, and Adequate Wages; clothing Satisfactory Work Environment – Light, Temperature & Ventilation Safety Protection from danger, security, Freedom to change positions; stability, and freedom from threat Complaint system; Worker of physical harm Protection from hazards (e.g., Government work regulations - Occupational Safety and Health Administration (OSHA) rules, environmental protection (EPA)); Collective bargaining agreement; health and disability insurance; retirement packages. Social Love, affection, approval, friends, Social interaction; company and affiliations. sponsored functions; team or work groups; professional, trade or craft organization functions. Esteem Respect, dignity, attention, and Signs of accomplishment appreciation (college degree, titles, awards, honors, peer recognition, publications) Self Actualization Self-fulfillment, growth, learning, Participation in decision- realizing ones potential through making; creating something; competence, creativity, and participation in lifelong achievement learning.Maslow suggests that people follow a track extending from the lowest element in thehierarchy (physiological) to the highest (self-actualization). The pursuit of self-actualization is an ongoing activity, in which people attempt to attain perfection throughself-development. Integrity, responsibility, high-mindedness, simplicity and naturalnesscharacterize the highest state of self-actualization. Self-actualizers focus on problems 124
    • external to themselves. Reviewing Table 4- 1, we note that people reach the highestlevel of motivation only after achieving some measure of accomplishment. Douglas McGregor’s Theory X and Theory Y workerDouglas McGregor examined the attitudes and perceptions of managers and workers.He posed the idea that two diametrically opposed belief systems existed amongmanagers and workers in a company, which he called theory X and theory Y.McGregor compared two workers and the resulting management implications. First, thetheory X worker had the following characteristics: ! People are inherently lazy and require supervision ! People dislike work and prefer to avoid work whenever possible. ! To induce adequate effort, the supervisor must threaten punishment and exercise careful supervision. ! The average worker avoids increased responsibility and seeks to be directed.This view of people affects management style. Theory X managers rely on anauthoritarian style or a top down approach. They use external motivation techniquesthat include strict rules, performance incentives, rewards, and threats to job security.In contrast, McGregor’s Theory Y worker has the following characteristics: ! People are creative. ! People want to do the job and do not need continuous supervision. 125
    • ! People want to be active and find the physical and mental effort on the job satisfying. ! People willingly participate in a task. ! People not only accept responsibility, but actively seek increased authority. People are not necessarily resistant to the needs of the organization. They are concerned with self growth and fulfillment ! People seek opportunities for personal improvement and gain self-respect.The Theory Y manager believes that people are self-starters and advocates workerparticipation in decision-making. The manager expects that workers will tend to worktoward objectives without coercion and control. Theory Y managers try to establishcordial worker-manager relationships. They develop an environment where the workerscan achieve their objectives by directing their efforts toward organizational goals. Theypermit workers to design their own jobs. Knowledge workers including highly trainedand creative workers require this type of guidance. Using coercive or dictatorialmanagement style practices will find employees leaving for other job opportunities.Nonetheless, caution is advised. Some professionals will want to “tweak” a design orimprove the operation of a system beyond the requirement or insist on finding a betterway to achieve a desired result or simply exercise scientific curiosity regardless of cost.These people take great pride in their work and desire to express their individualismand talent. Project managers must balance the completion of the task within scheduleand budget with the employee’s ego and personality. 126
    • In recent years, Sotiriou and Wittmer (2001) have corroborated many of the ideasadvanced by Maslow, Herzberg, and McGregor. They found that a challenging projectis the single most important factor influencing the behavior of project team members.The other influence methods ranked in order of importance include project authority,project management expertise, similar future work, salary promotion, friendship, andcoercion. The findings from the studies conducted by Sotiriou and Wittmer (2001)showed that the project manager’s leadership techniques include negotiation,personality, persuasive ability, and management competence. Finally, team membersvalued professional integrity – fair, honest, consistent, trustworthy leaders thatmembers can count on during the project, Acceptance Theory of AuthorityChester Barnard, a former CEO of New Jersey Bell Telephone, developed the conceptsof strategic planning and the acceptance theory of authority. Strategic planning guidesthe organization in pursuit of major goals. Barnard believed that the most importantfunctions of the executive were to (l) establish and maintain an effective communicationsystem, (2) hire and retain effective personnel, and (3) motivate those personnel. Headvanced the idea that managers only have as much authority as employees allowthem to have. Employee acceptance of authority depends on the following fourconditions: ! Understanding what the manager wants them to do. ! Ability to comply with the directive. 127
    • ! Belief that the request is inline with the organization’s goals. ! Belief that the manager’s request is not in conflict with their personal objectives.Barnard believed that each individual accepts orders without consciously questioningauthority up to a point. The organization must provide inducements to broaden eachemployees band of acceptance so that the managers orders would be followed. Management by ObjectivePeter Drucker has interpreted management theory for more than 50 years. During the1940’s and 1950’s, he advanced the ideas that management would have to treatworkers as individuals, that organizational culture would influence production, andforeign competition would become a significant factor in American business. During the1960’s and beyond, Peter Drucker stressed management fundamentals includingstrategic management ideas and introduced the phrase management by objective(MBO) also known as managing by results. MBO is the annual process of selecting aset of objectives [targets that meet the SMART criteria] that an employee would attemptto achieve during the year. Organizations used MBO techniques to establish objectivesfor the staff in an effort to assess accomplishment. Technical and business managersfrequently believe that you can only improve what you can measure. Performancemeasurement indicators include financial margins, revenue per employee, price toearnings ratio, asset turnover, debt/equity ratio, current ratio, working capital, unit costs,inventory turns, manufacturing cycle time, forecast accuracy, units produced, win/lossrates, service margins, service call response rates, customer retention, number of new 128
    • customers, headcount, retention rate, hire cycle time, learning rate, recruitment, laborcosts, skills learned, absenteeism, overtime, on-time delivery, etc. The annualobjectives that employees develop usually include a combination of these performancemeasurement indicators.MBO gained popularity because 1) it was designed to produce tangible outcomes, 2) Itcould be used at any or all levels in the organization, and 3) It was relatively simple andinexpensive to implement following training. As a measure of performance, it attemptedto keep people focused on producing results. Results are evaluated against outcomes.The supervisor periodically meets with the subordinate to review progress in achievingthe objectives. Some organizations link salary increments to MBO success.Drucker (1986) further emphasizes that management must be tough outside (focusedon its mission and on the results of the organization), and inside (focused on thestructure, values, and relationships that enable the individual to achieve). Druckerasserts that management is a discipline and not a science – it is a practice. Deming’s IdeasDuring the 1950’s, Japanese industry exported a variety of products to the U.S. Poorquality characterized many of these products. It was during this time that Japaneseindustry embraced and incorporated W. Edwards Deming’s ideas of statistical qualitycontrol. He stressed both the human factors as well as the technological aspects ofproduction. He introduced the concept of Total Quality Management (TQM) with the 129
    • intent to actively involve workers in discovering ways of improving the quality of theproducts and services they delivered in an ongoing manner. He encouraged industry tocontinually examine the product at the various stages of production and gather data todetermine if the production process veered away from predetermined limits. If it did, heurged the worker and management to identify and implement appropriate changes to fixthe problem. In the 1970’s, Japanese car quality became legendary and forced theU.S. auto industry to wake up and improve. In part, these improvements came from theimplementation of Deming’s and Juran’s ideas of statistical process control. Forty yearsafter Japanese industry began to use Deming’s recommendations, the ideas of workerinvolvement and statistical process control were accepted and introduced into U.S.industry.In the 1980’s, Deming consulted with executives from Ford Motor Co. and GeneralMotors about their decision to adopt the continual improvement philosophy. InDemings system of management, continual improvement becomes a way of life inwhich everyone wins -- the organization, its people, suppliers, and customers.Managers and workers cooperate in process improvement teams and try to changeadversarial attitudes. They use statistical methods that involve collecting and analyzingdata. This helps the organization determine if a problem occurs randomly or isembedded in the process. Analyzing and acting on the data leads to a resolution path.Deming strongly opposed MBO. While he cared about results, he was equallyconcerned about the method used to try to achieve those results. He believed that 130
    • working to achieve quotas, fulfill numerical objectives, and otherwise manage bynumbers was destructive to the overall organization. This is decidedly different from theviews of many management theorists and practitioners.The 14 points describe Deming’s controversial fundamental philosophy and representhis program for improvement. The Deming-Shewhart Cycle (plan, do, check, act),discussed further in chapter 9, describes his approach towards continuousimprovement. Management selects areas for improvement and develops measurementstrategies and planning goals. Cross-functional teams using a Total QualityManagement (TQM) format coordinate improvement for each area of interest. Theteams develop tests and gather data to confirm the presents of problems. Theygenerate and then implement action plans to make improvements. The teams evaluatethe results of their efforts. They fine-tune the corrections and evaluate further until theyachieve satisfactory results. The team attacks newly recognized issues and problemsas they are discovered. 131
    • W. Edwards Deming -- 14 Points for ManagementExcerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming.1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.6. Institute training on the job.7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul as well as supervision of production workers.8. Drive out fear, so that everyone may work effectively for the company.9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.11. a) Eliminate work standards (quotas) on the factory floor. Substitute leadership. b) Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.12. a) Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. 132
    • b) Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual merit rating and of management by objective.13. Institute a vigorous program of education and self-improvement.14. Put everybody in the company to work to accomplish the transformation. The transformation is everybodys job. Recent management viewsIn the mid-1960s, the contingency view of management or situational approachemerged. This view integrated management thought by advocating the use of anymanagement approach that the manager deems appropriate to the situation. Themanager is an actor and should assume a behavior that deals with the situation’scircumstances.New management viewpoints have emerged during the last twenty years. Total QualityManagement emphasizes achieving customer satisfaction by providing high qualitygoods and services. Reengineering the organization redesigns the processes that arecrucial to customer satisfaction.Tom Peters promotes the idea of managing in chaos. He insists that the starts, stops,spurts, and other movements of the technological revolution demands personal andcorporate flexibility. The outpouring of information and data, the constant flow ofgovernmental, personnel, and technological changes requires a flat organizationwherein people have the authority to respond quickly to competitive pressures. 133
    • Managing in the future will face some unusual challenges. AT&T, IBM and otherorganizations are experimenting with alternative workplaces (see Apgar, 1998).Nontraditional work practices include a variety of techniques such as desk andequipment sharing, and “hoteling”. “Hotel” workspaces include shared space,equipment, and services. Satellite offices for people working in companies with manyoffices located in different geographic areas would use “hotel” workspaces. As a resultof the telecommunications revolution, many of us have heard about employees workingat home, also known as telecommuting. For most of us, this represents a new way ofoperating. Managers and organizations accustomed to face-to-face interaction wouldhave to adjust. Apgar (1998) points out that “managers and employees are moving upthe curve toward information-age literacy, which is characterized by flexibility,informality, the ability to change when necessary, respect for personal time andpriorities, and a commitment to using technology for improving performance.”Managers will have to adjust their way of monitoring employee and project progress.This may affect employee evaluations and salary reviews. Customers, suppliers andother stakeholders will require education in this new approach.Managers are still learning to manage diversity. Cultural, ethnic, and genderdifferences require special management considerations. Not long ago, I attended anannual corporate status review for a privately held technology company. The chiefexecutive officer (CEO) addressed the assembly of employees. The companyconsisted of about 400 employees with a minority population of perhaps 5%. Theexecutive, known for his sense of humor, decided to break the ice by telling a joke that 134
    • made fun of Jews. There was some nervous laughter following the joke’s punch line.The CEO was clearly surprised that his joke did not get the expected response andremarked, “Well, if you didn’t get it, see me in private.” After the meeting, several non-Jewish upper managers commented in private on the insensitivity of the CEO’s joke.They lost respect for this person. This joke contributed to a decision by one of thehandful of Jewish employees at the company -- a key manager -- that this was not afriendly place in which to work and the person left within a year.The global organization with transnational operations requires new managementapproaches. Managing in tomorrow’s environment will require a new set of rules, whichhave yet to be formulated.Management StylesFour generic management styles have evolved -- Autocratic, Laissez Faire,Democratic, and Participative. The autocratic manager is the traditional figure of aboss who exercises tight control over the employees. This manager expects theemployee to follow through on a directive regardless of the employee’s thoughts orwishes. “ I call the plays and don’t bother me with facts.” In today’s environment, thisstereotypical theory X manager could demoralize the organization. Perhaps thisextreme management style could successfully manage a low risk project with aninexperienced staff that will execute a project plan as presented. The autocratic stylecould lead to resentment if the staff’s contribution is not recognized. Highly skilledpeople desire and expect managers to listen to their voices. Not considering or 135
    • continually rejecting employee’s thoughts and opinions may lead to dissatisfiedemployees and incorrect decisions.Applied to organizational management practice, the French term Laissez-faire meansthe manager provides little guidance to the staff and employees are free to pursuealmost anything they wish. Projects that require considerable creativity benefit from aminimum of management oversight. As an example, people involved in a research anddevelopment, laboratory research or a university environment require a freethinking,tolerant, hands-off atmosphere. A laissez-faire management style will prove disastrousfor high visibility, schedule driven projects requiring quick decisions and fast actions.A democratic management style invites employee involvement. The management andstaff collectively discuss and evaluate issues and reach decisions. This managementstyle aligns itself with the American culture. A democratic manager lets the forceswithin the group work toward a decision. Democratic managers empower employeesby giving them more decision making power and by seeking ideas from every worker.Since the employees participate in the decision making process they will assumeownership and commit to the final plan of action. Democratic leadership impliesmajority rule or rule by consensus. Sometimes the majority rule may not lead to thebest solution – especially if a very vocal, but uninformed person takes a leadership role.A further disadvantage involves time. If full discussions of the issues take place,decisions may take a longer time. 136
    • The participative manager also encourages employees to participate in making thedecision. This manager asks for and receives input from the group. The atmosphere isone of trust, honesty, and open communication. The leader demonstrates to followersthat their inputs are valued. However, participative leadership is not the same asdemocratic leadership as the manager makes the decision. Most managers areunwilling to give up the right to make the decision.A person’s management style depends on their personality and the situation. Rarelydoes a manager use one style all the time. A manager must be flexible and use a styleappropriate to the stakeholder and to the situation.PowerManagers use power to directly influence the success of the project and elicit employeecooperation. Power is based on the subordinates perception of the leader and can becategorized as shown below (the first five were developed by French & Raven): • Reward power: the subordinate’s belief in the manager’s ability to obtain rewards (e.g. financial compensation, promotion, recognition, privileges) for those who comply with specific requests. • Coercive power: the subordinate’s belief in the manager’s ability to punish or to bring about negative outcomes (e.g. withholding salary raises and/or promotions, formal reprimands). 137
    • • Formal power: the right to exercise power because of the individuals designated position in the organization • Referent power: a subordinates identification with the leader because of attractiveness, reputation, or charisma • Expert power: competence, special knowledge or expertise in a well-defined discipline. • Control of Information power: possession of knowledge that others do not have. Information can be communicated or withheld at will.Legitimate forms of power (formal, reward, and coercive) stems from the person’sposition within the organization. Although the project manager exerts this type of power,it sometimes may not influence knowledge worker’s behavior as much as expected.Creative people and knowledge workers frequently respond better to expert powerrather than “bureaucrats”.Expert power results from internal and/or external recognition that a person hasachieved. Employees recently transferred to a project management role as aconsequence of demonstrating outstanding technical ability will discover a veryuncomfortable lesson. A project manager cannot stay technically current and managethe project. In any project of some complexity, the project manager will regularlyinteract with customers, suppliers, functional managers, upper management and otherstakeholders. There is much to do and there will not be time to stay technically current.Technical analyses and designs must be left to the functional personnel. People 138
    • entering the project management discipline via the technical ladder find it veryfrightening to leave their technical background behind them. They spent their careers tothat point accumulating, developing and honing their technical skills. Exchangingtechnical expertise for management competencies may be a sufficient reason todiscourage this job change for some people.Table 4-2 illustrates how others might view the project manager’s power from theirorganizational perspective. These evaluations represent subjective conclusions. Atechnical functional manager may have little regard for a PMs technical ability, but highregard for that person’s ability to control a customer. Upper management may highlyvalue a PM’s ability to plan and coordinate efforts and motivate people. As the primarycontact between the organization and external stakeholders, suppliers believe the PMwields great influence on selecting organizations for future contract awards. Suppliershungry for new work will make great efforts to deliver goods and services in a timelyfashion to impress the PM. 139
    • Table 4-2 -- Project Managers Power Impact GROUP POWER EXERTED ON Power Upper PM’s Functional Functional External Suppliers Type Management Direct Managers Department Customers (Vendors) Reports PersonnelFormal None Maximum Moderate Minimal Maximum MaximumReward None Maximum Minimal Minimal Minimal MaximumCoercive None Maximum Minimal Minimal Minimal MaximumExpert Minimal Maximum Minimal Minimal Moderate ModerateReferent None Maximum Maximum Maximum Moderate ModerateAdapted from J.R. Adams & B.B. Campbell, Roles and Responsibilities of the Project Manager inPrinciples of Project Management, J.S. Pennypacker, Editor, 1996, PMI PublicationsTeamsDuring the 1980’s and 1990’s, management discovered the benefits of using teams toget a job done. Katzenbach and Smith (1993) define a team as a small number ofpeople with complementary skills who are committed to a common purpose, set ofperformance objectives, and approach for which they hold themselves mutuallyaccountable.They are empowered by the organization to establish objectives within the framework ofthe project’s objectives. Competitive demands requires quick decisions byknowledgeable employees who work close to the source of problems. Empoweredteams promote fast decision making capability. Empowerment is the delegation ofauthority to an individual or team. The team receives organizational approval, trust andencouragement to make the decisions necessary to accomplish the job. Successfulteams depend on good communication methods to share information and demandoutstanding problem-solving skills. Effective supervisors empower employees by givingthem more decision making power and by seeking ideas from every worker. 140
    • Katzenbach and Smith (1993) point out that not all groups are teams. Theydifferentiate a team from a group in the ways shown below: Characteristics of a Working Group Characteristics of a Team! Strong, clearly focused leader ! Shared leadership roles! Individual accountability ! Individual and mutual accountability! The group/s purpose is the same as ! Specific team purpose that the the broader organizational mission team itself delivers! Individual work output ! Collective work output! Runs efficient meetings ! Encourages open-ended discussion and active problem solving meetings! Measures its effectiveness indirectly by ! Measures performance directly by its influence on others (e.g., financial assessing collective work output performance of the business)! Discusses, decides, and delegates ! Discusses, decides, and does real work togetherIn a sense, the leader of the team acts as a facilitator. A group achieves synergy(results greater than the sum of its parts) if its members become a team. A teambegins as a collection of individuals brought together in a work situation. Tuckmanidentified the process of uniting the group to form an effective team. The groupmembers must successfully move through four stages of development identified byforming, storming, norming, and performing.Forming: the members of the group come together and begin to get acquainted. Depending on their personality some are eager to meet and work, some act formally and tentatively, some are hostile, some focus on the task and others focus on people. The group decides and agrees on their objectives 141
    • and the basic operational ground rules, such as meeting dates and times, attendance requirements, how decisions will be made, and so on.Storming: members still view themselves as part of their parent department rather than part of the team. Individual personalities surface and generate interpersonal conflict. Individuals begin to compete for attention and influence. Emotions are stirred and depending on the personality type conflicts may arise. Individuals reveal personal agendas as they assert their feelings, ideas and viewpoints. Interpersonal skills are critical. Members learn to appreciate each other’s capabilities. The group must agree on the distribution of power, responsibility and authority among its members. A sense of humor helps you get through this stage. This is a stage of low morale and productivity. Success cannot begin until the next stage.Norming: The individuals blend together into a project team and realize that they can achieve work if they accept other viewpoints. The project manager can help this process in a structured manner by establishing an esprit d corps and a cohesive group. Individuals begin to think of one another. They become more sensitive to each others needs, and begin to share ideas, information, and opinions. Members spend less energy on conflict. Task considerations start to override personal objectives and concerns. Plans 142
    • develop. Both formal and informal procedures for problem solving, decision-making and conflict resolution develop. Productivity increasesPerforming: The group emerges as a team. Flexibility is the key and hierarchy is of little importance. Team roles are strongly connected to the task that is performed. Members work and problem solve together. Structural and interpersonal issues have been resolved. Members trust, support, and feel comfortable with each other. Everyone cares about doing a good job. If previous phases did not conclude, the team will return to Storming and Norming resulting in wasted time and energy.In 1983, General Motors began to plan the Saturn Corporation, which would build andsell small cars using an entirely new set of employment practices. Saturn decided tocompete with the Japanese cars using self-directed work teams of 10 to 15 members,who were cross-trained and rotated responsibility for the tasks in their unit. Each teamwould hire new members and elect their team leaders. Teams had responsibility forquality assurance, job assignments, record keeping, safety and health, material andinventory control, training, supplies, and housekeeping.These self-governing work teams would follow the construction of an automobilethrough the entire assembly line. The objective of the changes was to increase productquality, decrease boredom, and increase worker job satisfaction. Saturn incorporated 143
    • robots and other forms of automation into the production line to help reduce boredomand fatigue and ensure high quality standards.This successful approach at Saturn helped to alter the rigid department boundarieswithin the auto industry. This team-based structure consisting of knowledgeableemployees who work close to the source of problems promotes quick decisions. Laborand management leaders had to learn to overcome resistance to sharing power. Theteam concept forced management to redefine the organization’s mission, objectives,and hierarchical structures. Project Managers Lead TeamsTeams succeed if the team is taken seriously, given a clear purpose, given authority tomake decisions, have the appropriate technical skill mix and can work together.Effective teams share clear and well-understood objectives that are accepted by itsmembers. Frequently organizational outcomes benefit from teamwork and individualmember satisfaction improves. Nonetheless, implementing a program of teambuildingis far from easy.The project manager assembles and leads a team. The PM shares project relatedknowledge and information so that the team can solve problems. The team memberspossess the technical knowledge and skills. Power becomes the PM’s ability to facilitateand communicate to and on behalf of the team. The PM acts as the liaison withstakeholders such as upper management, other internal teams, customers, and 144
    • suppliers. The PM represents the teams interests, obtains needed resources, clarifiesexpectations, gathers information, and keeps the team informed.Implicit to the success of any team is the mutual trust and respect between the PM andthe team. They must each have credibility, integrity, character, and reliability. Lackingany of these elements will cause unneeded tension in the group and possibly cause itto return to the storming stage.Chris Argyris sums up the elements of an effective team in his book, Organization andInnovation. He states ! Contributions made within the group are additive. ! The group moves forward as a unit; there is a sense of team spirit, high involvement. ! Decisions are made by consensus. ! Commitment to decisions by most members is strong. ! The group continually evaluates itself. ! The group is clear about its goals. ! Conflict is brought out into the open and dealt with. ! Alternative ways of thinking about solutions are generated. ! Leadership tends to go to the individual best qualified. ! Feelings are dealt with openly. 145
    • Successfully dealing with and implementing these factors turns the group into a team.Jon R. Katzenbach argues for more attention to the "four Cs" of effective teamwork --communication, cooperation, collaboration, and compromise.LeadershipManagement and leadership concepts are intertwined. John Kotter, a well-knownleadership theorist, believes that todays managers must know how to lead as well asmanage. Questions arise: What is leadership. How does it relate to management?Leadership means different things to different people. The following quotes presentvarious thoughts and opinions on leadership. Do you agree? What do you thinkleadership is? Getting the job done using whatever means required! -- 1999 Fairfield University leadership class. Damn the torpedoes--full speed ahead! -- Vice Admiral David Glasgow Farragut at the Battle of Mobile Bay in August, 1864 Leadership is the ability to inspire other people to work together as a team, following your lead, in order to attain a common objective, whether in business, in politics, in war, or on the football field. … Leadership cannot really be taught. It can only be learned. -- Harold Geneen, Managing. Leadership is the capacity and will to rally men and women to a common purpose and the character which inspires confidence. – Bernard Montgomery, British Field Marshall Leadership is a dynamic relationship based on mutual influence and common purpose between leaders and collaborators in which both are moved to higher levels of motivation and moral development as they affect real, intended change. -- Kevin Freiberg and Jackie Freiberg, NUTS! Southwest Airlines Crazy Recipe for Business and Personal Success, Bard Press, 1996, p. 298 146
    • Take the course opposite to custom and you will almost always do well. -- Jean Jacques Rousseau There are many elements to a campaign. Leadership is number one. Everything else is number two. - Bertolt Brecht A leader is a man who has the ability to get other people to do what they dont want to do and like it. - Harry Truman Coaches who can outline plays on the blackboard are a dime a dozen. The ones who succeed are those who can get inside their players and motivate them. - Vince Lombardi Leaders have a significant role in creating the state of mind that is the society. They can serve as symbols of the moral unity of the society. They can express the values that hold the society together. Most importantly, they can conceive and articulate goals that lift people out of their preoccupations, carry them above the conflicts that tear a society apart, and unite them in the pursuit of objectives worthy of their best efforts. - John Gardner We herd sheep, we drive cattle, we lead people. Lead me, follow me, or get out of my way. -- George S. Patton Pull the string, and it will follow wherever you wish. Push it, and it will go nowhere at all. -- Dwight D. Eisenhower Leadership is an influence relationship among leaders and followers who intend real changes that reflect their mutual purposes. -- Joseph C. Rost A leader is responsible for lean and simple statements of policy consistent with beliefs and values, vision and strategy. Policy gives practical meaning to values. Policies must actively enable people whose job it is to carry them out. -- Max De Pree Leadership is the art of accomplishing more than the science of management says is possible. – General Colin PowellMany great minds have different views of leadership. As Bennis and Stogdill statebelow, defining leadership is not easy. Always, it seems, the concept of leadership eludes us or turns up in another form to taunt us again with its slipperiness and complexity. So we have invented an endless proliferation of terms to deal with it … and still the concept is not sufficiently defined. – Bennis, 1959 147
    • There are almost as many definitions of leadership as there are persons who have attempted to define the concept. -- Stogdill, 1974Kotter provides the definition of leadership that we will use in this book. This definitionemphasizes the idea that a leader promotes change. Leadership refers to a process that helps direct and mobilize people and/or their ideas…. Leadership does not produce consistency and order; it produces movement. … Leadership 1. Establishes direction - develops a vision of the future along with strategies for producing the changes need to achieve that vision 2. Aligns people -- communicates the direction to those whose cooperation may be needed so as to create coalitions that under the vision and that are committed to its achievement 3. Motivates and inspires -- keep people moving in the right direction despite major political, bureaucratic, and resource barriers to change by appealing to very basic, but often untapped, human needs, values, and emotions. -- John Kotter, A Force for Change.Kotter suggests that a leader must develop a future orientation – anticipate industrytrends and challenge the status quo. Think about the great leaders about whom youhave read. In biblical times, figures such as Moses, Jesus, and later Mohammedpresented a vision, communicated ideas to people and motivated their followers tocause change. Winston Churchill had a vision to save his country from the onslaughtof tyranny and oppression. He rallied the British people during World War II against ahorrific leader – Adolph Hitler. After September 11, 2001 President George W. Bushspoke about a vision of ridding this world of terrorism. Toward this end, hecommunicated this vision to other world leaders as well as the American people in aneffort to build coalitions to attack terrorist forces. Modern business leaders such asJack Welch (General Electric), Steve Jobs (Apple), Michael Dell (Dell Computers), andBill Gates (Microsoft) had visions of where to take their organizations. They 148
    • communicated this vision to their employees and then motivated them to implementtheir vision.After defining a vision, leaders set out to inform and persuade the organization or groupto follow their beliefs and philosophy. During the 1960’s, Martin Luther King had avision of a nonracist America that he communicated to the American people throughspeeches, marches, sit-ins and his writings. He mobilized his “troops” to action byinspiring them. King motivated the American people and their political representativesto take action and pass legislation in support of his vision.Leadership applies to all of us in our daily work, not only political, military, and businessfigures. At the very least, we lead our lives by creating a vision of where we want to goand then communicating that vision to people that need to know it. We then need tomotivate and inspire ourselves to pursue and attain this goal.Leadership versus managementAre managers leaders? Kotter (1990) draws the following distinction betweenmanagement and leadership: ! Management is more formal and scientific than leadership. It relies on universal skills such as planning, budgeting, and controlling. Management is an explicit set of tools and techniques, based on reasoning and testing, than can be used in a variety of situations. ! Leadership, in contrast to management, involves having a vision of what the organization can become. 149
    • ! Leadership requires eliciting cooperation and teamwork from a large network of people and keeping the key people in that network motivated, using every manner of persuasion.Management theorists draw an important distinction between leadership andmanagement. The leader creates a vision for the organization and gains support amongthe people in the organization. The leader specifies the objectives as well as thestrategy for attaining those objectives. In contrast to the leader, the manager’s keyfunction involves implementing the vision by establishing supporting objectives andusing skills such as planning, organizing, directing and controlling. The managerchooses the means to achieve the end that the leader formulates. Leadership dealswith change, inspiration, motivation, and influence. Management deals more withcarrying out objectives. Table 4- 3, reproduced from Kotter, compares the leadersand managers organizational approaches.Some researchers believe that a leader’s fundamental orientation differs from amanager’s. Table 4-4 compares the beliefs and attitudes of an administrator, manager,and leader. For the examples shown, what would you do? Does the leaders responsefollow Bennis and Nanus’ maxim “Managers are people who do things right, andleaders are people who do the right thing.”? 150
    • Table 4-3 - Manager/Leader Organizational approach Leader Manager Plans and budgets: Establishes direction: establishes detailed steps Creating an develops a vision and and timetables for achieving Agenda the strategies needed needed results; allocates for its achievement necessary resources Involves aligning people: Organizes and staffs: Communicates direction by Establishes structure for Developing a words and deeds to all those achieving the plans; staffs; Network whose cooperation may be delegates responsibility and for needed to help create teams authority for implementation; Achieving the and coalitions that understand develops policies and Agenda the vision and strategies, and procedures to guide people; accept their validity. creates monitoring systems Motivates and inspires: Energizes people to overcome Controls and solves problems: major political, bureaucratic, Monitors results against plans Execution and resource barriers to and then plans and organizes to change close the gap. change by satisfying basic human needs. Produces a degree of Produces change, often to a predictability and order: dramatic degree. Has the potential to consistently produce key Outcomes Has the potential of producing results expected by various extremely useful change, such stakeholders (such as meeting as new products desired by deadlines for customers managers. and paying dividends to stockholders)(John P. Kotter, A Force for Change: How Leadership Differs From Management, NewYork: The Free Press, 1990) 151
    • Table 4-4 Primary Beliefs -- Management Orientation Administrator Manager Manager/LeaderRewarding Get just what the policy Fair pay for fair work Major rewards for majorSubordinates provides for results/accomplishmentsDecision-making The decision is made by the Stick with policy except where Special circumstancesBasis policy / procedure exceptions are fully justified require different decisionsStrategic Internal Internal except when major ExternalOrientation external events interveneInnovation / Change is threatening Tries to plan out major Improvements comeCreativity changes through changeHandling One variable at a time Handle multiple variable if not Balances/blends multiple,Variables too complex complex variablesEfficiency / Covers every detail in depth Doing things right Doing the right thingsEffectivenessTime Frame for Short-range month to Medium-range StrategicThinking month, year to year 2-4 years 5-10 yearsBig vs. Small Concentrates on details Details as they fit into a Concepts and a big picturePicture systemOrganization Bureaucratic, many levels Traditional Flat, few levelsStructureSecurity Level Low, protect my rear Average, except when things Very secure and confident go wrongManagement You can’t fight city hall Your progress depends upon Win-win atmosphereAtmosphere youPolicies Cast in concrete, takes an Exceptions can be made but Use only as a guide to most Act of God to change must be heavily justified actionsPeople Emphasis on controls and Emphasizes team effort Lead by example time spentChange Maintain status quo, don’t Changes made if major Change is encouraged rock the boat or make problems dictate or when continuously waves pressure builds upConflict Avoid conflicts at any cost Address if they become major Recognizes they will occur- concentrates on resolving them for improvementsSubordinate Is to the policy Mixed between the policy and Is to the leaderLoyalty the managerRisk Taking Avoids at all costs Accepts minimal risk Encourages planned risk takingInformation Little Need to know basis Open and frankSharingApproach to Avoid like the plague Solve as they develop- Problems are normal part ofProblems reactive the job-proactiveHandling Protect my rear and offer Emphasize why it happened, Learn from them, don’tMistakes excuses, pin the guilty not who caused it dwell on them once solvedAuthority Emphasizes formal authority Authority goes with the Maximum use of informal and power position authority From McConkey, D. D. (September-October, 1989). Are you an administrator, a manager or a leader?. Business Horizons. pp. 15-21 152
    • Competitive AdvantageIndustry Week annually selects the 100 best managed companies. “”Each company isa leader in its industry and demonstrates superior management skills in areas such asfinancial performance, innovation, leadership, globalization, alliances and partnerships,employee benefits and education, and community involvement “ (Hasek, p. 49, 2000).Warren Bennis and Raj Aggarwal state that all of the companies understand that thekey to competitive advantage in this century will be the capacity of top leadership tocreate social architecture capable of penetrating intellectual capital.” Aggarwal went onto say “the best managed companies are able to integrate and implement the new-economy virtues of speed and e-commerce with the old-economy virtues of generatingprofit, market share, and excellent customer service.” (Hasek, p. 49, 2000). Majormanagement challenges confront organizations in this century. 153
    • Chapter 4 Questions1. What type of manager would a stereotypical ex-military officer make? Would this person be a good candidate to manage a drug research organization? Explain your answer.2. Presidents Carter and Reagan had distinctly different management and leadership styles. Use the Internet to obtain examples of each of these president’s style. Which person would you rather work for? Why?3. McClelland & Burnham in the article Power is the great motivator states, " A high need for power is an important characteristic of successful managers.” Comment on the statement: Managers with a high need for power frequently use it for the benefit of the organization rather than for self-aggrandizement.4. How well does the following quote describe the managers that you know? Explain. “Leaders articulate and define what has previously for new attention. By so doing, they consolidate or challenge prevailing wisdom remained implicit or unsaid; then they invent images, metaphors, and models that provide a focus. In short, an essential factor in leadership is the capacity to influence and organize meaning for the members of the organization.” (Warren Bennis and Burt Nanus, Leaders, Harper & Row, 1985, p. 33)5. The chapter talks about accountability. Describe the difference between “the boss holds me accountable” and “we (or I) hold ourselves (or myself) accountable.” 154
    • 6. Management theory has evolved based on influences from classical management, behavioral approaches, and quantitative methods. Many have contributed to the development of management as a discipline. Research and discuss someone who has contributed to the development of management theory. Limit the paper to 500 words. Examples of possible people include the following:Chester Barnard Elton MayoW. Edwards Deming Max WeberPeter Drucker Frederick W. TaylorHenri Fayol Max WeberMary Parker Follett Henry MintzbergHenry Gantt Peter DruckerFrank Gilbreth Warren BennisLillian Gilbreth John KotterDouglas MacGregor McClellandPeter Block Chris ArgyrisJames Kouzes and Barry Posner7. What is meant by “Managers are people who do things right, and leaders are people who do the right thing.”?8. What does leadership mean to you? Do you think there is a difference between management and leadership? Explain.9) Use the Internet or library to respond to this research question. a) Compare and contrast the leadership and management (e.g., vision, planning, organizing, and controlling) styles exhibited by Al Dunlap (formerly of the Sunbeam Corporation) and Howard Shultz (Starbucks Corporation CEO) . b) Characterize Dunlap and Shultz according to McGregors Theory X and Theory Y leadership style. Explain your answer.Self-check testCircle the correct answer to each of the following questions or fill in the blanks.1) When did classical management theory begin? 155
    • a) 1200’s b) 1650’s c) 1750’s d) 1850’s e) 1950’s2) Define efficiency.3) Define productivity.4) What are characteristics of bureaucratic management? a) Quick reaction to competitive issues b) Wasting time c) Written processes and procedures d) Hierarchical structure e) Impersonal authority f) Large number of employees5) Which type of work is appropriate for a bureaucratic organization? a) Installing tires on an automobile b) Bank teller c) Designing jewelry d) Train conductor e) Writer6) Select the basic management functions established by Fayol? a) Planning b) Organizing c) Staffing d) Commanding e) Directing f) Coordinating g) Reporting h) Delegating i) Budgeting.7) What are three of fourteen management principles discussed by Fayol? a) division of work through specialization b) time and motion c) authority should be equal to responsibility d) unity of command e) unity of direction f) the scalar chain of command8) What is Fredric Taylor known for? a) Time and motion b) Father of scientific management c) Hawthorne experiments9) What is a time and motion study?10) What is the Hawthorne Effect?11) What are the five basic human needs described by Maslow? Give examples of each.12) What are characteristics of a theory X worker? 156
    • 13) What are characteristics of a theory Y worker?14) What are four generic management styles?15) What are the five types of power used by people in organizations?16) What is the difference between a team and a group?17) What are the four stages of development that a team passes through?18) Is conducting a meeting an example of leadership or management? Explain. 157
    • CHAPTER 5 Project Planning Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, vision cleared, ambition inspired, and success achieved. -- Helen Keller <>Chapter objectivesAfter studying this chapter, you should be able to: Understand project scope Understand the use of a project charter Understand the components of a project plan Understand and prepare a project statement of work Understand and prepare a project work breakdown structurePlanningHenri Fayol identified five functions of management that included planning, organizing,commanding, coordinating, and controlling. Hallows (1998) identified four-projectphases: (1) understanding the project, (2) defining the project, (3) planning the project,and (4) running the project. The Project Management Institute has identified six projectmanagement phases (Initiating, planning, executing, controlling, closing, and project-driven organization environment) for eight project management knowledge areas(scope, time, cost, quality, human resources, communications, risk, procurement). 158
    • Common to these approaches is the need to plan. Once the organization commits toan endeavor, planning becomes paramount.Planning is the process of establishing courses of action to accomplish predeterminedobjectives (Badiru, 1991). Establishing a project foundation in the form of a planbefore committing the organization’s resources maximizes the likelihood of developingand delivering a customer’s product or service on time, within budget and meeting thetechnical specifications. The project manager manages the preparation of a projectplan and then manages to the plan. This chapter deals with the activities that precedethe start of the project. The planning discussion that follows applies to ♦ Electronic, mechanical, electro-mechanical and software based products, ♦ Small systems consisting of the integration of these components, ♦ Construction of facilities to house the components and systems, and ♦ Services required to support the design, fabrication, installation, training and maintenance of these components, systems and services.Planning lies at the heart of managing a project’s scope. Without a thorough andmutually agreed upon plan, scope management becomes impossible. Scopemanagement includes the processes required to ensure that the project includes all thework, and only the work required, to complete the project successfully (PMBOK).Scope management extends the length and breadth of the job and encompasses allactivities. At some point in most projects, the buyer or seller requests changes. Thechange may evolve for several reasons. Technology improvements occurring between 159
    • project conception and approval may force changes. Obsolescent components or newsoftware versions may demand changes. Customer requirements may change.Frequently the discussions that take place during the proposal evaluation phase or theinitial product development improves the customer’s understanding of the product’suse. Following this education, the customer sometimes requests the developer toincorporate “minor” product modifications without a corresponding price change. Scopechange control becomes paramount. The organization must include a method forevaluating changes and determining the cost. Armed with the facts, the organizationcan make an informed decision. Agreeing to changes– whether initiated by a customeror the internal organization – without thoroughly understanding their impact is the pathto breaking the budget and late delivery. Request for a Proposal and Request for a QuoteA product or service acquisition process begins with a customer (or a buyer) sending adescription of its needs to several suppliers (also called a seller or vendor) in the formof either a Request for a Proposal (RFP) or a Request for a Quote (RFQ).Frequently, organizations use an RFQ for seeking bids for familiar, standard items andan RFP for consulting, advertising, maintenance, or items requiring development. Manyorganizations establish a minimum dollar amount (e.g., $2500), below which neither anRFQ nor RFP are required. A customer distributing an RFP for a high technologyproduct or service may do so for the following reasons: (1) the customer believes that the product is not readily available off-the-shelf from suppliers and requires a special development effort, 160
    • (2) if it is readily available, it may require the addition of special features, which the customer chooses not to add themselves, or (3) the product demands technical expertise during the installation or initial operating phases.The planning process begins during the preparation of the RFP or RFQ response. TheRFP response requires a very detailed description of the deliverable items including atechnical discussion describing the unique features of the design and the activities thatthe organization will perform to ensure delivery within the customer’s requestedtimeframe. The proposal frequently includes discussions detailing the product historyand description, the unique technical features, a descriptions of the organization’stechnical competencies, management philosophy, quality assurance approach, andtraining capabilities. The RFP response also includes sections entitled statement ofwork (SOW) that includes a work-breakdown structure (WBS) and schedule, and aspecification compliance matrix. The specification compliance matrix lists everybuyer requirement with a seller statement agreeing to meet or not meet therequirement. Sometimes the seller meets the intent of the specification requirement,but not its literal interpretation. In this case, the seller provides a brief description of thecourse of action they recommend. Larger organizations attach a set of the terms andconditions to the RFP or RFQ response – a legal statement attached to the bid thatamong other things limits the organization’s liability and establishes a return policy.Finally, the RFP or RFQ includes a cost proposal that contains a price for each itemon the list of deliverables. Often during the proposal process, a proposal team 161
    • identifies several technical options that may enhance the baseline product or service.Separately identify these options. Do not mix the option price with the baseline productor service price.Managing the preparation of an RFP response is a project. Responding to an RFPrequires a significant organizational team effort that a project manager leads. The effortcosts time and diverts resources designated for other activities. Suppliers interested inproviding the buying organization products or services may spend approximately 2% ofthe final sales price on the preparation of a RFP response package. Organizationsevaluate the likelihood of a win before pursuing the RFP. No one wants to investresources in a hopeless cause. Larger organizations use a formal evaluation approachsometimes called an opportunity review board (ORB) for this purpose. Seniorexecutives make the decision to pursue an RFP for a variety of reasons. Mostimportant, they believe that the organization has a greater than 50% chance of winning.Sometimes an organization submits a bid for strategic reasons. Perhaps theorganization wishes to break into a new market and desires to establish a presence forname recognition purposes or an important customer wants the organization to submita bid. Most organizations will expend the effort to satisfy an existing good customer.The response to an RFQ requires much less of an effort than a response to an RFP.The respondent prepares a price for each item on the list of deliverables, adds theorganization’s standard terms and conditions, and a cover letter (also known as a letterof transmittal). During the response preparations, the supplier may decide that they 162
    • must spend funds to develop new software, hardware or both. If so, manydepartments must participate. The project manager contacts the departmentscontributing to the effort, such as engineering (mechanical, electrical, chemical,software, networking, etc.), purchasing, training, service, quality assurance, technicalsupport, etc. For either an RFP or RFQ the PM prepares a ResponsibilityAssignment Matrix (RAM) which identifies the tasks required during the effort, theperson responsible for the task and the task due date. The project manager provideseach functional department manager and other stakeholders, baseline informationrequired to perform their task, which includes the customer’s technical specification,quantity of units required, documentation requirements, a schedule, installation needs,testing demands, special standards, quality assurance requirements, etc. For the workrequired to meet the customer’s specification, each department provides a laborestimate in hours, hardware and software material costs, travel and living estimates,special tools or capital equipment required, consultant fees, and documentationpreparation labor hours. The RFQ sums up the costs in a manner that will bediscussed later, and provides a bottom line number. The details are not usuallyprovided to the customer. The RFP may provide bottom-line prices for the first andsubsequent systems plus support service prices or a detailed price breakdown thatreflects the customer’s demands. 163
    • Project CharterProjects funded by an external customer, receive automatic recognition from theorganization. Money is honey! Organizations react to cash. Following a contractaward, senior management immediately assigns a PM with the responsibility to dowhatever must be done to satisfy the customer with a product or service that meets thecustomer’s technical specification while delivering it on time and within budget. Ideally,the person that led the RFP or RFQ preparation receives the project. That person hasgained familiarity with the effort and should take responsibility for the execution of theplan. There is no need for a document entitled project charter, if the contract includes atechnical specification and a SOW.A contract without a definition is like a car without a destination. The motor runs andyou go everywhere and nowhere at the same time. Absolutely do not begin aproject without a written agreement that includes a specification andSOW -- or a project charter! With the lack of a specification, people will do theirown thing. Designers will proceed with their interpretation of the customer’s needs.Purchasing will buy their customary material. Manufacturing will build product followingstandards that they select. Invariably the customer will have a different view and thecompleted work will require modifications wasting schedule time and labor. Theabsence of a project definition guarantees cost overruns and delays -- project failure. 164
    • Projects that receive internal funds require a project charter. This charter representsformal recognition within the organization of the existence of this project. As definedby the Project Management Institute the document includes three items: 1. The business need that the project addresses, 2. A product description, and 3. A signature from a senior executive.A senior manager’s signature denotes organizational commitment and acceptance ofthe effort. An approved charter authorizes the project manager to proceed and applyorganizational resources to project activities.The charter as recommended by the Project Management Institute is necessary but notsufficient to describe the project. The project charter should also include a schedule,budget, and a summary of the resources required to complete the project. Someauthors have broadened the concept of a project charter (e.g., (Hayes, 2000). Tryonand Associates (1998) promote the use of the following 10-part project chartertemplate: • Project Description - a brief explanation of why the project was initiated, a description of project intent and the identity of the initial Project Owner. • Opportunity Statement - The business reasons for doing this project. 165
    • • Impact Statement - The influence this project may have on business, operations, schedule, other projects, current technology and other systems.• Constraints and Assumptions - Limitations or restrictions placed on the project along.• Project Scope – A precise definition of project boundaries. Specific scope components may include the business areas or functions to be examined by the project (Domain of Study), the work that will be performed (Domain of Work) and the actual results that will be produced (Deliverables). Project Scope should identify both what IS in scope and what IS NOT scope.• Project Objectives - A list of measurable criteria that defines project success.• Project Justifications - A recap of known costs and benefits from performing the project. These financials must be reforecast during the life of the project and should be compared to actuals at the conclusion of the project.• Project Approach - The general strategy for how the project will be done along with non-technical descriptions of any methods, processes or tools that will be used during the project. 166
    • • Project Organization - Identification of the roles and responsibilities. The Project Organization should identify the people who will play assigned roles. • Management Commitment – Signatures of senior management signifying agreement with the plan.The outline from Tryon and Associates (1998) goes well beyond the traditional view ofthe project charter. Some organizations use it as the basis for a thorough internalproject plan (Hayes, 2000).Plans for internally funded projects differ from those associated with externally fundedcontract awards. The traditional project charter used for an internally funded projectsuccinctly describes the job. Externally funded projects require far more extensiveplanning and preparation. Figure 5-1 compares internally funded versus externallyfunded efforts. The next section offers a plan outline that establishes the baseline forproject planning. 167
    • Figure 5-1 Project Planning Process Project PlanExternally Funded Internally Funded Receipt of RFP or Identify need for RFQ product or service Assemble RFP or RFQ Response Team Prepare Project Charter and other Supporting Prepare Response Documents Sections ♦ Letter of Transmittal ♦ Management ♦ Specification (if not Submit Project included in RFP/RFQ) Charter to Senior ♦ Statement of Work Management for ♦ Specification Approval Compliance Matrix (Responds to Spec in RFP/RFQ) Receive Management Submit Package to Commitment customer Answer customer questions Begin Work Receive Contract Award 168 ( )
    • The Project PlanWhether the job receives internal organizational funds or external funds, the projectplan answers the standard news reporter’s questions: Who, What, Why, Where,When, and How. Who will do the work? Who is assigned to the project? Do we have adequate personnel to perform the tasks? Will we hire consultants, permanent staff or temporary workers? What must be done? What is the budget? What is the budget for each task? What resources are required to complete the project: What will the people assigned to the project do? What are the deliverables? What equipment do we have to purchase? What documentation is required? What is the chain of command? Why is the organization doing this? Where will the work be done? When are the activities scheduled to start and finish? How will the activities be done?The project manager defines the project’s scope by listing the technical requirementsand objectives. The PM prepares a schedule, which identifies the dates for starting andcompleting activities and milestones. A milestone represents the identification of asignificant event. Examples of milestones include the start or end of a project, the start 169
    • or end of a design review, the completion of a major system evaluation, shipping aproduct, or installing a product.The plan identifies assumptions made by the different stakeholders. People make allkinds of assumptions during a proposal bid. Managers realize that the organizationmust acquire labor skills to complete a task. They must inform senior management andthe human resource department of the need. A department anticipates outsourcingtasks to other organizations, but senior management may have other plans.Designers may assume that the organization will purchase new software or hardwarerequired for an analysis. Software developers may assume the availability of anupdated database application. If the department purchases the latest and greatestequipment, did they also remember to obtain training, maintenance and productupdates? Managers may assume that the customer will furnish equipment to facilitateinstallation and system testing. It may be a correct assumption, but inform thecustomer of the expectation. Very often there are internal disconnects due to a lack ofcommunication. The PM must obtain the information from stakeholders and put it intothe plan.The project plan identifies schedule, budget, and performance constraints. Theschedule must clearly pinpoint tasks that precede others. Sometimes additionalfunding is contingent upon reaching a certain performance criterion. Functionalmanagers should identify design, operational, or testing sequences. Uninterruptiblesequences represent important constraints. 170
    • All plans include reporting requirements. On a periodic basis, stakeholders reviewtechnical, financial, and schedule status. Plans often schedule technical interchangemeetings (TIM) that clarify issues arising during the design and development phases.The proposal specifies the frequency of reporting and the type of information providedto the customer. Senior management usually wants to review technical, financial, andschedule status on a monthly basis. Functional department personnel frequentlyparticipate in these status meetings and the plan should make them aware of this need.While the PM has responsibility for creating a plan, this person requests functionalmanagers to contribute to the process. Product or service expertise comes from thefunctional area and not project management. The PM depends on functional ordepartment managers to provide particulars. As part of their input, technical personnelidentify risk areas, uncertainties or conflicts, which the PM factors into the price andschedule during the proposal preparation. (Refer to Chapter 10 for further informationabout risk.) At the onset of the proposal effort, the PM initially creates a top-levelschedule that complies with the customer’s delivery requests. Functional managersprovide detailed task descriptions to implement objectives, requirements andmilestones. They prepare detailed schedules and labor allocations consistent withproject constraints. After reviewing the data, the PM gains an understanding of possibleschedule conflicts arising from competing department demands. Internal stakeholdersmust resolve schedule or technical complications that surface. The PM must informsenior management of exceedingly troublesome technical, schedule or budget issues. 171
    • Ethical conflicts can arise during the preparation of plans for an RFP submission.Suppose a project manager receives draft proposal material from members of theorganization that shows the organization cannot meet the customer requested scheduledelivery date or perhaps a technical requirement cannot be met. Does the PM proceedwithout informing the customer? Does the PM submit the proposal response and agreeto the customer’s schedule request or technical requirements knowing the slimlikelihood of meeting these targets? Does the fear that your competitor may agree toan impossible situation govern your organization’s actions? These are not easyquestions to answer.Consider this actual scenario. A customer intentionally inserted several technicalrequirements into an RFP that were impossible to achieve. After discovering thequestionable specifications during the proposal response phase, a respondingorganization wrestled with the actions to take. They ruminated over the answers tothese questions: Has the organization misunderstood the customer’s requirement? Does the customer realize what they requested? What will competitors do? Should the organization point out the problem in the proposal response? Should the organization agree to everything in the proposal and hope to renegotiate after the contract award? 172
    • The RFP team members met and agreed upon a response strategy. They decided tostate in the proposal response that they could not meet certain technical and schedulerequests and instead offered an alternative approach. They won the contract. Duringa kick-off meeting following the contract award, the organization raised the question tothe customer “Did the contractor realize that they inserted impossible conditions in theproposal document? “ The customer’s response astounded them. The contractorintentionally inserted certain impossible to meet conditions to see the biddingorganization’s response. First, they wanted to see if the bidders would recognize theissues. Were they technically savvy? Then they looked at the response and eliminatedcompanies that gave them a “line of goods.” Sometimes honesty prevails.Plan BenefitsA plan defines the project. It clarifies stakeholders’ expectations, reduces ambiguityand uncertainty and eliminates conflict among functional managers. Who does whatand by when? By describing the functional managers’ roles, a plan improves anoperation’s efficiency. A plan defines the resources required by the organization toperform the work. A properly prepared plan distributes the expected labor and materialexpenditures over time, which provides a basis for monitoring and controlling work. Aplan identifies the critical areas and permits the organization to focus its efforts onmonitoring them. Stakeholders use the plan embedded in the proposal as acommunications tool. The PM monitors technical, schedule and budget status basedon the agreed upon plan. 173
    • The Project Plan TroikaSo, how does a PM create a project plan? We address all of the news reporter’squestions in three documents – (1) a formal product or system definition in the form ofa list of requirements or a specification, (2) a Statement of Work (SOW) that includes aWork Breakdown Structure (WBS) and a schedule, and (3) a budget for each taskassigned to organization departments and to subcontractors. The PM submits thesystem definition and the SOW to the external customer. Usually department budgetdata remain within the organization and are not submitted to the customer. 1) Requirements/specification This document represents a quantitative definition of the deliverables as delineated in the contract, sales order or an internal project agreement. The company receiving the contract award agrees to deliver a product or service that meets the customer’s requirements. Organizations call this list of requirements a product or service specification. The PM assigned to the job distributes the specification to all stakeholders. A PM monitors the project and continually reminds development personnel of the minimum technical requirements. The organization receiving the award has an obligation to deliver a product or service that meets the minimum requirements and not a bit more. Improving on the specification may be a challenge and great technical fun, but it costs labor effort and time for which the customer did not agree to pay. The PM is interested in maximizing the organization’s profit and certainly not losing money (especially for a non-profit organization). 174
    • Exhibit 5-1 illustrates a typical hardware or software product specification. Thespecification includes critical performance factors describing product or systemspeed, size, capacity, scalability, upgradability, reliability, and required software andhardware interfaces. Products delivered to environmentally unfriendly regionsrequire special consideration. A computing system that must operate at the NorthPole or the heat of a desert demands special consideration. Likewise, a systemdelivered to an offshore oilrig may have to withstand the rigors of high humidity andsalt-water conditions. A medical project development such as a pacemaker willrequire careful design and quality components to ensure high reliability. Thedevelopers of the space shuttle Challenger ‘O’ ring assembly (Morton-Thiokol)assumed a Florida ambient temperature of greater than 50° F. On that tragic day in1986, the temperature at Cape Canaveral dipped below 40° F. The rubber ‘O’ ringjoining the two rocket sections became brittle. During the launch, a crack appeared,internal flammable gases escaped and ignited after a few seconds into the mission.The rocket exploded and lives were lost. The engineers built the system to aspecification, but NASA officials and Morton-Thiokol executives chose to ignore thespecification limitations. Customers and development organizations must carefullydefine a product’s design parameters and constraints taking into consideration all ofthe possible applications – especially critical life critical issues. 175
    • Stakeholders involved in a sole source contract frequently develop a specificationtogether and complete it before work begins on the project. The product definitionattempts to anticipate all questions that designers might ask.If a product or system definition doesn’t exist, create one and circulate it among thestakeholders for approval. Invite the stakeholders to comment on the draftdocument. Request the reviewers to complete their efforts within a reasonabletime. Comments not received by that date will signify tacit approval of the definition.This is hardball, but if you are the project manager, it’s you’re neck that’s on the line.Developing a system, product, etc. without a definition guarantees breaking thebudget and ensures late delivery. A stakeholder may complain after the projectstart, “I didn’t realize that we were doing this.” Well, if it’s in the specification andthey didn’t comment on it, they lost all rights to complain. We have all heard aboutthe proverbial camel -- a horse built by a committee without a specification.Everyone on the committee had a different view of the horse and no one took thetime to write it down. A product definition baseline must exist and it’s up to theproject manager to make it happen. 2) Statement of Work (SOW)The SOW is a detailed narrative description of the products and services suppliedunder the contract. The specification describes what will be supplied; the SOWstates the quantity and defines the supporting material and services. The SOW alsodetails responsibilities for supplying material, products, and services that may not be 176
    • explicitly included in the list of deliverables. A schedule accompanies the SOW thatlists the tasks and the time relationships among the tasks.A SOW includes a methodology for proving to a customer that the product or servicemeets the specification. Where do we conduct the verification tests – at thedevelopment site, at the customer’s site, both locations? How extensive should thetesting be? The buyer and seller must agree on these issues during pricenegotiations.Two actual examples serve to illustrate the importance of clear definition. A mediumsized industrial company delivered a large system to a desert site in Nevada. Theinstallation process required two employees to remain at the site for a month. Thecontract did not clearly identify which organization would supply utilities such aselectricity and water, nor did it take into consideration basic human needs like aportable toilet and a cabin for protection from the intense sun. The resolution of thisoversight delayed the schedule by two weeks until the portable generator, fuel,water supply and a trailer were brought to the site. The lack of clarity in the SOWforced the company to pay for these items, which reduced the job’s profit.On another occasion, a manufacturer delivered a water monitoring system to a sitein China. Technicians from the company installed the system on the bank of a river,but the statement of work did not describe the system acceptance testing at thecustomer’s site. Seller and buyer had two different ideas about a system 177
    • acceptance test. The buyer wanted to confirm the operation of the system using asix-month evaluation period and the seller expected to install the system andperform a three-day brief confirmation of operation. Clearly a disconnect. A veryexpensive disconnect for the seller because the customer expected the seller toparticipate in this six-month on-site evaluation. Even if the seller could provide atechnician to live in a remote area in China for six-months, they did not want to incurthe costs and the loss of an employee for this extended stay. The resolution of thisdilemma required the seller to extend the product warranty for two-years beyond theoriginal warranty.A SOW exists to clarify both buyer and seller’s expectations and should anticipateall eventualities. During the preparation of the SOW, the PM contacts all internalstakeholders to discuss the product. This enables the PM to understand as many ofthe possible problems that could arise during the development, delivery, installation,and operation of the product or service. The statement of work reflectsstakeholders’ comments. Adding work or deliverables to the contract will have anupward influence on the price quoted to the customer.The key elements of the SOW include a) General statement describing the scope of work (refer to the functionality section of the specification) b) List of deliverables -- includes hardware, software, construction items, documentation, supplied utilities, training, etc. 178
    • c) Reference to related studies, documentation, standards, and commercial or military specifications that apply to this project d) Data and Documentation requirements e) Support equipment for contract end item f) Customer furnished material (property, facilities, equipment, services, documentation) required by the contractor g) Overall schedule of performance h) Testing (define expectations at the developer’s location and the customer’s site) i) Governmental regulations and permit responsibilities j) Method of shipping. k) Explanatory exhibits, attachments and appendices l) Standard Terms and Conditions used by a supplier for all proposalsThe very detailed SOW template in Exhibit 5- 2 outlines many of the items thatdefine a product or service job. Exhibit 5-4 illustrates an actual statement of work.The SOW describes a short project with the objective of delivering and installing astandard database software package to a medical office. The document uses asubset of items described in 5- 2. The actual SOW is tailored for this specificproject. It does not contain every item listed in Exhibit 5-2. The PM takesresponsibility for the preparation of the SOW. It may read like a legal document andthat’s because it is. In large organizations, the PM frequently obtains assistancefrom the legal staff. If this is not possible then the PM must examine the agreement 179
    • and confirm that it protects the organization while delivering the product that thecustomer requires.Critically examine the sample statement of work in Exhibit 5-4. Identify theparagraphs that describe the customer’s responsibilities. A typical area of confusionsurrounds software maintenance. This is customarily part of the buyer’sresponsibility. Unsophisticated customers frequently believe that software does notrequire maintenance. A month or two after the installation of a database applicationsoftware, customers may complained to the supplier that the package runs slow.Failure to maintain the system will result in poor performance. Sellers protect theorganization by warning the customer that the system requires maintenance. Thisminimizes misunderstandings as well as notifies the customer to budget funds forthis effort in the future. 180
    • One bite at a time! How do you eat an elephant?In one old joke, an insect asks “How do you eat an elephant?” A second replies”One bite at a time.” A gruesome story perhaps, but it serves to make the point thatsuccessfully completing a huge project requires dividing the job into a large numberof bite sized pieces to which we apply adequate resources. Viewing a job as anentire entity seems overwhelming. We need to define a process that breaks theproject into manageable steps. The Work Breakdown Structure (WBS)accomplishes this task. Although frequently not explicitly called out, a WBS is anintegral part of the SOW. The WBS consists of a grouping of tasks that organizesand defines the total scope of the project. The WBS is prepared in outline form so 181
    • that each descending level represents an increasingly detailed definition of theproject (table 5-1). The lowest level or highest number of the WBS defines a workpackage or assignment performed by a team member. The tasks may involvelabor, or purchases for products or services. The WBS becomes the basis for theperformance schedule. Table 5-1 Work Breakdown Structure HierarchyWBS No. Project Task WBS Level1 Project 11.1 Task #1 21.1.1 Subtask 31.1.1.1 Work Package 41.2 Task #2 21.2.1 Subtask 31.2.1.1 Work Package 4Sometimes a buyer provides a WBS, which is called a Contractual Work BreakdownStructure (CWBS). The CWBS generally includes less detail than the WBS used bythe seller to manage the project. The customer uses the CWBS to define the levelof reporting that they want the seller to provide.Think about a WBS as a list all of the tasks needed to complete a job. As anexample, an organizer planning a wedding would begin by listing the activitiesassociated with the bride, groom, bride’s parents, groom’s parents, catering hall,caterer, musicians, invitations, and church, synagogue or mosque facilities. Toobtain specific information about each activity the organizer requests informationfrom the different activity leaders – menu details from the caterer, songs and 182
    • dances from the musicians, requirements for chairs, tables, linen, cutlery, glassware from the catering hall, etc. Through the process of involving the people thatwill take responsibility for the tasks, the organizer obtains a very detailed list ofactivities that must be completed to successfully conduct a wedding.The PM performs the same effort for a project as the wedding organizer. First, thePM outlines all the known activities. The PM might base this list on experience orfrom historical records of other similar projects. For further details, the PM goes tothe functional managers that thoroughly understand the specialized activities andrequest them to identify and their tasks. The PM adds the inputs from the functionalmanagers to the previously created outline.The completed WBS represents the basis for task assignments and the schedule.A typical WBS used for an electromechanical and/or light construction developmentproject is shown in Exhibit 5-3. The final price represents a summation of the costsfor each task listed in the WBS. The PM creates a schedule by assigning a timespan for each task listed in the WBS following consultation with the functionalmanagers. Usually the PM assigns responsibility for each task assignment anddeliverable item to a person or department as part of the schedule. The nextchapter focuses on schedule preparation. The WBS facilitates status reporting bypermitting the PM to track time, cost, and performance progress versus each task inthe plan. 183
    • The WBS represents a planning tool that enables the PM to gain project personnelcommitment. Each task item has a name or department associated with it, thusminimizing the possibility of omitting deliverable items and clarifying stakeholderresponsibilities. Including a task in the WBS permits status tracking and ensuressome level of visibility.A well-written SOW minimizes stakeholder interpretation. Avoid impreciselanguage such as nearly, approximately, almost. Quantify expectations. Clearlystate alternatives and consequences. Obtain customer review and approval ofspecifications, documentation, schematic, tests, etc. Preclude delaying tactics byrequiring a limited number of customer review and approval cycles. Delineateresponsibilities where questions could arise.The conclusion of the statement of work includes the sellers terms and conditions.Section 15 of Exhibit 5-4 (the sample statement of work) lists typical terms andconditions. Paragraphs in this section state the sellers standard business policiesregarding hardware and software warranties, return policy, and liability limitations inthe event things don’t go as planned. Suppose an installation of the softwarepackage doesn’t go as smoothly as predicted. Perhaps a development problem or asupplier labor issue caused a 30-day delay before project completion. Theconsequences of the late installation to the buyer can result in a significant loss dueto missed business opportunities. As an example, a nuclear power plant’srevenues exceed $1 million per day. A company failing to deliver a software or 184
    • hardware product essential to the operation of the business on schedule, will forcethe plant to lose a significant sum of money – possibly resulting in a demand fromthe buyer for damages. Usually a clause in the terms and conditions limits theseller’s liability to the purchase price of the system.Other clauses of the terms and conditions define ownership of the product,documentation and patent rights. Many people are unaware that purchasingsoftware only gives them a license to use the software application. The purchaserdoes not own the software and cannot make copies for sale. Frequently the licensegives them permission to install the software on a single computer. This informationlies within the terms and conditions. Most often, the seller’s organization has astandard set of terms and conditions and the PM need only insert those at the endof the proposal. 3) Department Tasks and budgetsMultiple departments and external suppliers contribute to performing tasks in theWBS. After consultation with functional managers, the PM assigns a budget in laborhours or dollars to each department performing work on a task. Each employeerecognizes they have a limited time to complete an assigned task and their progresswill be monitored. Towards this end, every person that works on a project taskrecords his or her working time on the project. The employee enters the amount oftime worked on a project task on a time card, which the time recording systemultimately places into a computer database. A typical time card may look like 185
    • Figure 5-2. Each project and each task within the project have assigned numbers. Administrators assign number identifications to describe projects because they are shorter and less confusing than project names. Every employee inserts the project and task numbers on which they worked during the week. On a daily basis, they enter the number of hours worked on the task. At the end of the week, the PM examines the collective number of hours worked on each task on the job. This bookkeeping procedure represents the basis for fiscal control. If people assigned to a specific project task, do not work it, then the PM must find out why. If people charge the job but have not accomplished the expected work, the PM again must find out why. Are employees mischarging their time or is the task more difficult than anticipated? Certainly if the customer is charged for each hour worked on the job, the organization has a responsibility to make certain of the billing statement’s accuracy.Project planning is essential. The first two elements of the plan – specification andSOW – serve as the basis for a project proposal submittal to the customer. The thirdelement – task budgets -- provides the basis for the project proposal price. After acustomer awards a contract to an organization, the three plan elements become thebasis for assigning project resources, monitoring project progress and controllingproject spending. 186
    • The PM exists to deliver a product or service requested by a customer on time, withinbudget and technically satisfactory. Only a well thought out plan enables the PM toexecute Fayol’s other management responsibilities -- organizing, coordinating, andcontrolling. 187
    • Figure 5- 2 – Typical Employee Time CardBlank CardEmployee Name: ______________ Employee ID No.: _____________Department No.: _____________ Week Ending Date: ____________Project No. TotalTask No. HoursSundayMondayTuesdayWednesdayThursdayFridaySaturdayTotalOvertimeHoursCompleted CardEmployee Name: John Sanchez Employee ID No.: 451880Department No.: 814 Week Ending Date: October 2Project No. 3705 7829 3712 TotalTask No. 12 43 2 HoursSundayMonday 4 2 2 8Tuesday 8 8Wednesday 3 4.5 .5 8Thursday 2 5 1 8Friday 1 6 1 8SaturdayTotal Hours 10 17.5 12.5 40OvertimeHours 188
    • Exhibit 5-1 -- Typical Hardware or Software Product Specification OutlineSpecification Title:Date:Specification Number (if required):Specification Revision No.:Author (s):Name & address of organization preparing document:1. Product Or Service Description – including intended usage2. Definition Of Terminology3. Requirements 3.1. System Architecture 3.2. Software Required 3.3. Components Required 3.4. Unique Hardware Or Software Features 3.5. Test Features 3.6. Product or System Self-Test Capability 3.7. Factory Test 3.8. On-Line Test4. Interfaces 4.1. Software 4.2. Hardware 4.3. Equipment 4.4. Operator 4.5. Input/Output Devices 4.6. Electrical 4.7. Mechanical5. Product Or Service Characteristics 5.1. Physical 5.1.1. Size 5.1.2. Weight 5.1.3. Power 5.2. Performance Characteristics 5.2.1. Speed 5.2.2. Response Time 5.2.3. Data Rates 5.2.4. Electrical Performance 5.2.5. Mechanical Performance 5.2.6. Start-Up and Shut-Down Characteristics 5.2.7. Capacities (e.g.. electrical, mechanical, memory) 5.3. Reliability 5.4. Maintainability 5.5. Environmental 189
    • 5.5.1. Temperature 5.5.2. Humidity 5.5.3. Vibration levels 5.5.4. Shock 5.5.5. Natural Environments (e.g., earthquake levels) 5.5.6. Electromagnetic interference 5.5.7. Nuclear Effects5.6. Safety Considerations5.7. Quality Assurance Provisions 190
    • Exhibit 5-2 - Sample Statement of Work Outline1. Top level functional description (reference specification for details)2. List of required customer supplied items a) Items required for development purposes b) Items Required for factory acceptance test (FAT), Installation, site acceptance test (SAT)3. List of contractor supplied deliverables and quantity a) Site construction equipment b) Hardware c) Software d) Manuals, documentation & data No. of copies of documents Documentation examples include the following: i) Site architectural drawings ii) System interconnection drawings iii) Design review documentation iv) Functional design specification v) Assembly drawings vi) Electrical schematics vii) Intermediate & final product test results viii) Factory acceptance test ix) Site acceptance test x) System software specification xi) Software license rights xii) Software source code rights (sometimes a provision exists to store source code in escrow) xiii) Software user manuals xiv) Maintenance manual xv) Block diagrams xvi) Installation & operating manuals xvii) Training manual xviii) Original Equipment Manufacturer (OEM) manuals and documentation for items such as a computer, I/O devices (printer, bar code reader, display, etc.) and third party software as received from the manufacturer. xix) List of required or recommended spare parts xx) Reliability analysis xxi) Environmental analyses xxii) Performance bond xxiii) Certifications required4. Customer/Subcontractor Reviews 191
    • a) Quantity & location of Technical Interchange Meetings (TIM), Design Reviews, etc. b) Preliminary list of discussion Items (schematics, drawings, hardware specifications, software specifications, documents, testing, QA policies, etc.) for each meeting. c) Define contents and expected outcomes of Preliminary Design Review (PDR) and Critical Design Review (CDR). d) No. of times customer may review documentation e) Policy on travel and living expenses (who pays at what price?) to attend reviews.5. Preferred Vendors - Identify/Comment6. Applicable Reference Documents and Appropriate Standards a) Quality Assurance standards (e.g., ISO 9000, IEEE) b) Hardware standards (e.g., UL license, CE compliance, electromagnetic interference) c) Software standards (e.g., IEEE 730, Software Engineering Institute) d) Construction (e.g., building codes) standards e) Fabrication (e.g., welding and soldering) standards f) Environmental (e.g., Federal Environmental Protection Agency and/or local requirements)7. Schedule a) Create a WBS b) Link tasks c) Assign Start & Finish Dates d) Identify Critical Dates e) Specify customer approval dates f) Identify critical path8. Define Task Responsibility a) Contractor - responsible for the design, production, integration, calibration, factory testing, installation and training for the proposed system. b) Customer - responsible for all site preparations needed for the installation and operation of the system. Customer personnel responsible for ensuring the readiness of the installation site, and for providing all heavy equipment and professional riggers required to receive, transport, and assemble the system at the installation site. c) Identify party or parties responsible for the readiness of the installation site. These matters include i) Designating heavy equipment and professional riggers to unload system components from delivery truck(s), transport system components through the facility, and reassemble system components at the installation site. ii) Ensuring floors, thresholds, loading dock ramps, freight elevators, cranes, forklifts, etc., have sufficient loading capacity to allow heavy 192
    • equipment to unload and transport system components without exceeding maximum weight limits, and to enable the system to be installed and operated. iii) Ensuring loading docks, doorways, hallways, rooms, etc., have sufficient size to allow heavy equipment to unload and transport system components through the facility, and to enable the system to be installed and operated. iv) Examining and if necessary, moving ductwork, piping, security cameras or other obstructions before delivery and installation to allow the unloading, transport and assembly of system components. v) Ensuring readiness of all system facility requirements (i.e., electrical power, heating, air conditioning, etc.), for system installation and operation. vi) Ensuring that facility labor is available at the time of installation. d) Define responsibility for site modifications in areas such as i) Plumbing ii) Electrical iii) Heating, Ventilation, and Air conditioning iv) Gas lines v) Fuel storage and distribution vi) Chemical material storage and distribution vii) Hazardous material storage9. Acceptance criteria agreement a) Sub-assembly acceptance b) System Factory Acceptance c) Site Acceptance10. Method of Shipment a) Air, Train, Truck, Courier b) Identify freight cost responsibility c) Clarify FOB location. d) Identify customer responsibilities relating to off-loading, rigging, forklift, overhead crane, positioning, leveling, placing equipment positioned in the area desired for installation and use. e) Identify moment when title to and risk of loss passes to buyer. Is it at the factory or when delivered to transportation center, or site?11. Discuss site installation issues a) Required customer support b) Data Migration for database products c) Product Calibration12. Training a) Course description 193
    • b) No. of people attending c) Location of course d) Define facilities and resources required e) Define supplier of facilities and resources13. Warranty and Support a) Define equipment warranty term and coverage. b) State start of warranty (e.g., within two months of delivery to customer or following SAT) c) Policy on software updates. d) Prohibit buyer from installing user-written programs on penalty of voiding warranty e) Define specific warranty exclusions (reference Exhibit 5-4 – Example of a Statement of Work)14. Permits, licenses and special training a) Identify responsibility for obtaining permits and licenses required for the installation and operation of the proposed system. b) Identify employee site training requirements15. Union and Organized Labor Considerations a) Assign the customer responsibility for making in-house labor arrangements necessary for the installation and operation of the proposed system. b) Assign responsibility for special local, state, federal, and country requirements (e.g., OSHA)16. Price and Payment Terms State that the final sale price may vary if the customer makes changes to the specification or makes other testing, documentation, training, and/or support service requests. Limit the proposal term to a comfortable period (e.g., sixty days). Beyond this time, changes in market material or labor costs may necessitate a price re-examination. For quotes submitted to non-USA customers, state that the quote is based on U.S. dollars. Identify responsibility for payment of local taxes, permits and fees. Require payment for goods and services within 30 days of invoice. Consider using a payment milestone schedule, such as the following: Approval of Design 10% Material Procurement 25% Completion of Factory Acceptance Test 25% Delivery to site 30% Completion of Site Acceptance Test 10%17. Ownership of Data, etc. 194
    • a) State that the contractor retains all ownership and rights to the contractor- manufactured software supplied. Buyer purchases a license to use the supplied software and cannot resell the product. b) State that specifications, drawings, manufacturing data, and other information given to the buyer by the seller remains the property of the seller. Without the seller’s written consent, the information shall not be reproduced or copied. c) State that the contractor retains all ownership of patents and copyrights that may be issued as a result of the contract.18. Late Delivery or Technical Performance Failure Penalties19. General Corporate Terms and Conditions 195
    • Exhibit 5-3 -- Sample Work Breakdown Structure (WBS) Project WidgetProject Number: 1175WBS No. Tasks or Work Packages1 System1.1 Define the System Performance Requirements1.1.1 Distribute Specification1.1.2 Distribute Statement of Work1.2 System Architecture Definition1.2.1 Major Trade-off Studies – Review of alternative approaches1.3 Define Major Electrical/Mechanical Assemblies1.4 Cable Definition1.5 Unique Algorithm Development1.6 Define Software/Firmware Functions and Architecture1.7 Technical Analyses2 Design Assembly #12.1 Hardware2.1.1 Define Hardware/Software Interfaces2.1.2 Electrical/Electronic Design2.1.2.1 Define Subassemblies/Modules/Functions2.1.2.2 Module/Function Specification2.1.2.3 Make/Buy/Subcontract Trade Studies2.1.2.4 Design2.1.2.4.1 Electrical Schematic and/or Wiring Drawing2.1.2.4.2 Harness & Connector Definition2.1.2.5 Fabricate subassemblies2.1.2.6 Assemble the Units2.1.2.7 Software Integration2.1.2.8 Calibrate & Test2.1.3 Mechanical2.1.3.1 Define Assemblies/Subassemblies2.1.3.2 Assembly/subassembly Specifications2.1.3.3 Make/Buy/Subcontract Trade Studies2.1.3.4 Design2.1.3.5 Fabricate Components and subassemblies2.1.3.6 Assemble the Subassemblies2.1.3.7 Integrate components and subassemblies2.2 Software2.2.1 Define Hardware/Software Interfaces2.2.2 Define Software Modules in a Software quality assurance plan (SQAP)2.2.3 Prepare a Software Requirements Specification – SRS 196
    • 2.2.4 Make/Buy/Subcontract trade-off Studies2.2.5 Prepare a Software Design Document – SDD2.2.6 Integrate Software with Hardware2.2.7 Prepare Software Verification and Validation Plan – SVVP2.2.8 Perform Verification and Validation tests and prepare a report2.2.9 Provide to Software Library and Distribute Software3 Design Assembly #2 - WBS tasks for subsequent assemblies4 Project Management4.1 Interdepartmental Coordination4.2 Work Authorization Preparation4.3 Cost Management4.4 Technical Management4.4.1 Establish Specifications4.4.2 Engineering Task Definition And Partitioning4.4.3 Parts Coordination4.4.4 Internal Specification Review4.4.5 Engineering Document Release4.4.6 Engineering Support To Production4.4.7 Assembly Fabrication & Rework4.4.8 Coordinate Resolution Of Vendor Problems4.5 Schedule Management4.6 Material Procurement4.7 Prepare and Coordinate Subcontracts4.8 Internal Hardware/Software Design Reviews4.9 Customer Reviews & Technical Interchange Meetings4.9.1 System Requirements Review (SRR)4.9.2 Preliminary Design Review (PDR)4.9.3 Critical Design Review (CDR)4.9.4 Interim Technical Interchange Meetings (TIM)4.10 International, Federal, State, and Local Code Issues5 Engineering Equipment5.1 Identify Equipment Needed for System Design and/or Test (e.g., CAE or CAD software, test equipment, other application software, software platform)5.2 Equipment Acquisition Plan (buy, borrow, lease, in-house)6 Support Equipment6.1 Identify Equipment Needed to Support/Maintain System in Field6.2 Equipment Acquisition Plan for fielded system.7 Site Construction7.1 Plan Development7.1.1 Architect’s Plans7.2 Identify Zoning Issues7.2.1 Obtain Permits7.3 Prepare Bid for Subcontractor’s7.4 Bid Process to Select Construction Subcontractor(s)7.5 Construction7.5.1 Roads 197
    • 7.5.2 Earth Moving7.5.3 Facility7.5.3.1 Foundation and Structure7.5.3.2 Electrical7.5.3.3 Plumbing7.5.3.4 Heating, Ventilation, and Air-conditioning (HVAC)7.5.4 Beautification –Trees, Shrubs, Lawns8 System Integration & Test8.1 Prepare Factory Acceptance Test8.2 Prepare Site Acceptance Test8.3 Collect and Assemble Component Items8.4 Interconnect All Assemblies8.5 Install special Hardware8.6 Perform Software-Hardware Integration8.7 Verify Quality Assurance Documentation8.8 Calibrate System8.9 Perform Temperature Tests8.10 Perform Shock and Vibration Tests8.11 Perform Reliability Tests8.12 Perform Factory Acceptance Test8.13 Crate and Ship9 Site Installation and Test9.1 Special Site Training (e.g., Hazardous Material - HAZMAT)9.2 Confirm Resolution of Labor Issues9.3 Unpack System9.4 Interconnect All Assemblies9.5 Calibrate System9.6 Perform Site Acceptance Test10 Data10.1 Technical Publications10.2 User’s Manual10.3 Training Manual10.4 Engineering Data10.5 Electrical Schematics10.6 Printed Circuit Board Art Work Drawings10.7 Mechanical Assembly Drawings10.8 Software Requirements Specification10.9 Software Design Document10.10 Software Verification and Validation Plan/Report10.11 Software Source Code10.12 Environmental Test Reports10.13 Factory Acceptance Test Report10.14 Site Acceptance Test Report10.15 Management Data10.16 Labor Hours Data10.17 Material Cost Data 198
    • 10.18 Schedule10.19 Engineering Analyses and Support data10.20 Quality Plan/Report10.21 Reliability Plan/Report10.22 Maintainability Plan/Report10.23 Failure Mode and Effects Analysis10.24 User Guide10.25 Training manual10.26 Repair manual10.27 Data/software repository11 Operational & Site Activation11.1 Site Construction/Conversion11.2 Vehicle Purchase and Conversion11.3 Site Equipment Rental/Purchase12 Services and Training12.1 Software/Hardware Field Installation12.2 Warranty12.3 Hardware12.4 Software12.5 Maintenance12.6 Training12.6.1 Identify and Obtain Required Training Equipment12.6.2 Make/buy Training Decision12.6.3 Design and Develop Training Material In-house12.6.4 Subcontract Training Material12.6.5 Conduct Training13 Industrial Facilities13.1 Factory Construction/Conversion/Expansion13.2 Manufacturing Equipment Acquisition/Modernization13.3 Factory Maintenance14 Spares and Repair Parts 199
    • Exhibit 5-4 – Example of a Statement of WorkThe following representative statement of work describes a fictitious medical practicesoftware appointment scheduling and invoicing application entitled SoftApps. Thefictitious company SoftHuge developed and manufactures the software. Althoughcomplex, SoftApps is a standard off-the-shelf product. The document states thatSoftHuge offers to install both the hardware and software, transfer existing data from anexisting legacy software application presently operating in the office to the new system,test the resulting system, train the staff, deliver documentation and provide a warrantyto the customer. The customer’s name is MedPrac.While a relatively short project, the SOW describes in detail both SoftHuge’s and thecustomer’s obligations and responsibilities. Most brand names used in this documentto describe products are fictitious. The SOW establishes the deliverables anddelineates the expectations so as to minimize surprises.The author provides this statement of work purely for educational purposes and doesnot advocate its use without obtaining appropriate technical guidance and legalrepresentation. Every project and contract award requires unique tailoring. 200
    • Statement of Work1 Product DescriptionSoftHuge Industries offers software and hardware to MedPrac that will perform billing,scheduling, document control and patient history software management for medical anddental offices. The software package called SoftApps developed by SoftHugeIndustries provides full financial and receivables tracking, electronic billing/claimssubmission, medical records, managed care data, and appointments management.Some of the unique software features contained in SoftApps include: ♦ Relational database structure ♦ Real-time data processing ♦ Patient account retrieval by a variety of search criteria ♦ Family billing capability ♦ Preparation of a budget payment plan specific to each patient ♦ Capacity for up to 50 insurance fee schedules ♦ Sequential billing of up to six insurance carriers per patient ♦ Open item posting ♦ Insurance payment accuracy audit against carrier fee schedules ♦ Automatic reporting and resubmission of delinquent claims ♦ Collection notes on patient accounts ♦ User defined billing cycles ♦ User defined linkage between procedure codes and appropriate diagnosis codes ♦ Insurance specific diagnosis and procedure codes ♦ On demand insurance forms, itemized statements and receipts ♦ On demand reprinting/resubmission of insurance form or patient statement ♦ Electronic payment posting ♦ Treatment plans ♦ Cross checking of diagnosis to procedure codes ♦ Reconciliation of actual payments to expected payment ♦ Built in Automatic Re-bill capabilitySoftApps calculates your practice’s procedures and fees. The system can submit youroffice’s claims to major medical insurance commercial carriers electronically. Thereare multiple levels of system security, and the administrator or provider can designateeach users level of access. This protects patient confidentiality and limits access toclinical, bookkeeping, and financial data entry to unauthorized personnel.Areas of particular interest to mental health practices are: ♦ Integrated word processing and medical records features allows for recording treatment plans and progress notes, and can generate letters and reports to referring physicians or other appropriate sources. ♦ Track and record patient outcomes. 201
    • ♦ Multiple providers schedules can be easily viewed at one time. ♦ Setup future appointments for patients who want the same times/day(s) of the week. ♦ Track referral sources ♦ Automatically provides warnings when the number of remaining allowable visits is approaching the limit. ♦ Track medications, dosages, and prescriptions ♦ Track patients paying on sliding fee schedules based upon income, family size, etc.2 Installation ScheduleFollowing the contract award, SoftHuge Industries will organize a meeting withMedPrac’s personnel to conduct a detailed review of the project activities. The kick-offmeeting will review MedPrac’s detailed requirements, computer hardware and existingdatabase software, schedule, prospective software customizations, initial softwareinstallation, data transfer from the your practice’s existing system, testing, and training.The two organizations will develop a process to ensure prompt responses to questionsarising during the project as well as timely reviews of the hardware and software plans.The meeting will finalize the support that SoftHuge Industries personnel will need fromMedPrac during the installation and test periods. Following this discussion, theSoftHuge Industries project manager will provide MedPrac with an in-depth schedule.Task priorities and schedule may change as a result of discussions between MedPracand SoftHuge Industries’ personnel.In general, the program will proceed according to the following phases: TASK WEEKS ARO*Phase I Planning - Organization & 2 Review/Agreement on PlanPhase 2 Hardware Procurement 3-7Phase 3 Hardware & Software Customization (if None required required)Phase 4 Hardware & Software Installation & Testing 8-10Phase 5 Data Migration 11-12Phase 6 Site Acceptance Test 13Phase 7 Training 14-15Phase 8 First Year Warranty Support 14-65*ARO – After Receipt of Order3 DeliverablesDeliverables include the following: 202
    • Software SoftApps version 10.8 application software Report WriterHardware 1 - Server computer Dual Pentium IV, 1.5 GHz. processors 256 Mbytes memory 1 Mbytes cache memory 40 gigabyte RAID hard drive 24X DVD Ethernet interface FAX Interface 56K Modem interface Printer interface 19” monitor Laser printer – 20 PPM Mouse KeyboardDocumentation SoftApps user manual 10 - SoftApps System Operation training manuals 10 -- SoftApps Database Administration training manuals Third party supplied hardware documentationServices SoftApps installation resident on server computer Installation of MedPrac supplied Elcaro database management system Creation of operational and test environments Data migration of MedPrac data into new system Site test Verification of printer, network, modem, and FAX interfaces. Verification of customer data transfer Verification of standard SoftApps screens One-year service and maintenance agreement for SoftHuge provided hardware and software Two training courses with up to 10 students in each course: SSO-1234 [SoftApps System Operation] SDA-5678 [SoftApps Database Administration]4 Installation and Database Security Guidelines 203
    • The effort includes installation of SoftApps on MedPrac’s computer, creation of trainingand production environments, and the initial relational database tuning. SoftHugeIndustries will install the system on MedPrac’s server. At extra cost, SoftHugepersonnel can install SoftApps on MedPrac’s client computers. SoftHuge Industriespersonnel will require assistance from MedPrac’s personnel on these tasks.MedPrac must assist SoftHuge Industries personnel to ensure strict controls betweenthe operational and test versions of databases. The data migration (transfer of existingdata to new system) phase requires that MedPrac establish a cut-off date after whichdata will not change. MedPrac will collect and store new data for future system entry.MedPrac must provide SoftHuge personnel a comma delimited ASCII file of the data tobe migrated to the new system. SoftHuge personnel will transfer MedPrac’s data intothe new database.SoftHuge personnel will require a workplace area at MedPrac’s faculty during portionsof the project.SoftHuge expect MedPrac to perform several tasks during and after the installation.These customer performed tasks include the following: ♦ Maintain a copy of all operational databases. ♦ Ensure that backups of all database software are made on a regular basis. ♦ Develop a database recovery policy. ♦ Develop and implement adequate office security features to protect the database integrity, confidentially, and availability. ♦ Appoint a database administrator. This person should support SoftHuge personnel during the installation and data migration phases.The customer accepts responsibility for installing the network, attaching the computersto the network, and maintaining the network.5 Relational DatabaseThe Elcaro relational database management system will be provided by MedPracunless otherwise arranged. SoftHuge Industries requires Elcaro version x.y.z andSQL*NET version v.w. Elcaro will be installed as part of the normal system installation.6 Manuals and DocumentationSoftHuge Industries will supply the SoftApps user manual, ten - SoftApps SystemOperation training manuals, and ten -- SoftApps Database Administration trainingmanuals. Additional User or training manuals may be purchased at a cost of $150 percopy. All third party supplied hardware documentation will be delivered to MedPrac asreceived by SoftHuge. 204
    • SoftHuge Industries will provide one copy of the following SoftApps documentation:Software Requirements Specification (SRS), Software Design Documentation (SDD),Software Verification and Validation Plan (SVVP), Software Verification and ValidationReport (SVVR).7 Software CustomizationsThe baseline effort provides a standard off-the-shelf software product. SoftHugeIndustries has a staff of outstanding software engineers and technicians dedicated todeveloping and maintaining database products. The technical database productsupport staff, database trainers, and project managers are supported by knowledgeablehealth practice and medical insurance professionals. Consequently, SoftHugeIndustries’ engineers can provide software customizations as an extra cost option, ifrequested to do so by the customer.8 Factory Acceptance TestSpecific factory acceptance tests will not be performed on this product.9 Site Acceptance TestA standard SoftApps site acceptance test will be used to verify SoftApps installationand performance at MedPrac’s site as part of the installation process.10 Maintenance and SupportSoftHuge Industries provides upgrades to SoftApps as part of its annual maintenanceprogram. The first year warranty service, included in the price, begins followingcompletion of the SoftHuge Industries site acceptance test. During the softwaremaintenance and support warranty period, the customer’s staff may contact theSoftHuge Industries technical staff from 8:30 AM to 5:00 PM (Eastern Time) onbusiness days. The cost for subsequent years is detailed in the price quote. SoftHugeIndustries can provide a quote for 24-hour/7 day per week SoftApps support service.The SoftApps support software service agreement includes the following services:♦ Toll free telephone assistance during the warranty period♦ SoftApps software and documentation updates♦ Immediate notification of critical software problemsAs a courtesy to SoftHuge customers purchasing the service agreement, SoftHugeIndustries software engineers can provide limited assistance on third party softwareassociated with the SoftApps package (e.g., Windows and Elcaro). Elcaro relationaldatabase maintenance support is not part of this service agreement. If requested,SoftHuge Industries will provide a quote for a separate Elcaro database maintenanceservice contract. As part of this extra cost option, SoftHuge Industries engineers willperform the following work on a periodic basis: Monitor Performance 205
    • Monitor file I/O Monitor tables and Indices Monitor space utilization Database tuning Distribute table spaces among different disks based upon usage Re-size table and index storage parameters based upon statistics Add/remove indices for faster response to complex queries Adjust system parameters based on changing needs Database maintenance De-fragment table spaces Cleanup temporary (unused) space Archive unused data Backup system11 LicenseSoftHuge Industries provides the license to use its software products and copies of theexecutable files. SoftHuge Industries retains all ownership rights to the software.SoftHuge does not transfer either the title or the intellectual property rights to MedPrac.MedPrac may not sell, redistribute or reproduce the Software, nor decompile, reverseengineer, disassemble or otherwise convert the Software to a any other form. SoftHugeowns all trademarks and logos and the customer may not copy or use them in anymanner.12 SoftHuge Industries Quality Assurance ProgramThe SoftHuge Industries software quality assurance program requires the completion ofa Software Quality Assurance Plan (SQAP) for each project. The SQAP describes themethodology SoftHuge uses to produce the software and related documentation. TheSQAP for SoftApps includes a Software Verification and Validation Plan (SVVP) and aSoftware Verification and Validation Report (SVVR).The SVVP ensures the software meets the requirements in the Software RequirementSpecification (SRS) and the design in the Software Design Description (SDD). TheSVVP also ensures compatibility between the software and the user documentation.These quality assurance documents (SQAP, SVVP, and SVVR) are placed in storagefor five years.13 Service SupportSoftHuge employs a corrective action system to accept and act on customer complaintsand process related problems. This software support program includes telephonesupport, software and documentation updates released during the support period, andnotice of any critical software problems. Service support is included for the first year of 206
    • operation following the site test. The customer may purchase support for subsequentyears.14 TrainingSoftHuge Industries maintains a Training Department that will conduct two trainingcourse for up to 10 students in each course at your facility. The courses will be SSO-1234 [SoftApps System Operation] and SDA-5678 [SoftApps Database Administration].15 Terms and Conditions15.1 Software Product ConditionsSoftHuge Industries agrees to grant and the customer agrees to accept anontransferable and nonexclusive License from SoftHuge Industries on the followingterms and conditions:15.1.1 The customer shall have the right to use SoftApps software solely for internal purposes on designated computers.15.1.2 Title to and ownership of the SoftApps software shall remain with SoftHuge Industries.15.1.3 MedPrac agrees not to provide or make available the SoftApps software to any person other than MedPrac or SoftHuge Industries employees without the prior written approval of SoftHuge Industries.In the event, MedPrac neglects or fails to perform or observe any of its obligationsunder this agreement, all licenses granted to MedPrac shall immediately terminate.Within two (2) weeks after any such termination, MedPrac shall return the SoftAppssoftware, all documentation to SoftHuge Industries and cease using the SoftAppssoftware.15.2 Cancellation or ChangesMedPrac may cancel this order on written notice to SoftHuge Industries and uponpayment to SoftHuge Industries of the cancellation charges specified below.MedPrac agrees to pay SoftHuge Industries 75% of the contract price for goods and/orservices if the cancellation occurs 31 days or more after order placement.MedPrac agrees to pay SoftHuge Industries 50% of the contract price for goods and/orservices if the cancellation occurs 30 days or less after order placement. MedPrac maynot cancel the order after shipment. MedPrac may not reschedule or change any orderwithout SoftHuge Industries’ prior written consent.15.3 Price and PaymentTerms of payment are cash upon delivery as described in the attached quotation. Afinance charge of 1 1/2% per month will be assessed on any amounts outstandingbeyond 30-day payment terms. Price is in U.S. currency. 207
    • 15.4 TaxesPrices are exclusive of all federal, state, or local property, license privilege, sales, use,excise, and other taxes and government charges. Customer shall be responsible for allsuch taxes.15.5 Title and Risk of LossTitle to and risk of loss for Domestic U.S. shipments shall pass to the customer at thecustomer’s shipping address.15.6 Limitation of LiabilityUnder no circumstances, including negligence, shall SoftHuge be liable for any specialor consequential damages that result from the use of, or the inability to use SoftAppsmaterials. In no event shall SoftHuge’s total liability from all damages, losses, andcauses exceed the amount paid to SoftHuge on this contract.The seller and its subcontractor’s liability for damages arising out of or connected withthe sales contract shall not exceed the purchase price of such goods and/or services.15.7 Right to Use SoftwareSoftware supplied by SoftHuge Industries may only be used on the computer systemspecified. It shall not be made available to any other person or entity without priorapproval of SoftHuge Industries.15.8 DelaysSoftHuge Industries shall not be liable for delays in performing or failure to perform itsobligations under the sales agreement resulting directly or indirectly from acts of God;Customer actions; governmental priorities; fires; strikes or other labor disputes;accidents; floods; war; riot; terrorism; delays in obtaining or inability to obtain materials,components, labor, fuel or supplies; or any other circumstances beyond SoftHugeIndustries’ control. In the event of any such failure or delay, the time for SoftHugeIndustries’ performance shall be extended by a period equal to the time lost due to suchfailure or delay. SoftHuge Industries shall notify the customer promptly of any materialdelay.15.9 PatentsSoftHuge Industries owns all patents associated with developments made under thisSales Contract.15.10 Ownership of SoftHuge Industries’ Data, Etc.Any drawings, manufacturing data, documentation or other information delivered toMedPrac by SoftHuge Industries are the property of SoftHuge Industries and may notbe reproduced or copied, and shall not be used except in connection with the goodsand/or services described in this agreement.15.11 Warranty 208
    • 15.11.1 Basic WarrantyEquipment manufactured and software developed by SoftHuge Industries is warrantedagainst defects in materials and workmanship for a period of twelve months from thedate of shipment, provided that the equipment/software has been used properly.Equipment and/or software provided by SoftHuge Industries from other manufacturerscarry the warranties provided by those manufacturers.During the warranty period, MedPrac will return the equipment to the factory for repairor replacement. The transportation cost, to and from SoftHuge Industries includinginsurance, will be paid by SoftHuge Industries.15.11.2 Warranty ExclusionsWarranty service is contingent upon the proper use of all equipment and does not coverequipment which has been modified without SoftHuge Industries written approval, orwhich has been subjected to unusual physical or electrical stress as determined bySoftHuge Industries Service personnel. SoftHuge Industries shall be under noobligation to furnish warranty service: (1) if adjustment, repair, or parts replacement isrequired because of accident, neglect, misuse, causes other than ordinary use; (2) ifthe equipment is maintained or repaired by other than SoftHuge Industries personnelwithout the prior approval of SoftHuge Industries; (3) if the SoftApps software has beenmodified or a software application has been added to SoftApps by the customer’spersonnel. 209
    • Chapter 5 Questions1) Define organizational planning.2) Define scope management.3) What are the essentials of a project plan?4) Why is project planning so important?5) Why is managing the project scope important?6) What is the difference between an RFP and a RFQ? Which is easier to assemble and why?7) Why does a customer distribute an RFP?8) What should an RFP response contain?9) Describe the circumstances under which an organization decides to respond to an RFP or RFQ.10) Explain why it is necessary to involve other departments and functional managers in the preparation of a labor estimate and a schedule.11) Describe the use of a project charter.12) What should a project charter contain?13) The ABC organization has received a contract from the XYZ organization to develop a Widfram. Must the project manager develop a project charter? Explain your answer.14) Explain why it is necessary to involve other departments and functional managers in the preparation of a labor estimate and a schedule.15) A technical person at the Zeta Corp0oration has an idea for an improvement to a product presently manufactured by the organization. She would like to prepare a prototype unit. Describe the information that she should present to the Vice President to seek funding approval for this project.16) What is a milestone?17) List five benefits of a project plan.18) Identify the three documents required for a project plan.19) What is the fundamental purpose of a statement of Work? 210
    • 20) Identify 10 items included in a statement of work and describe their importance.21) The text requests the reader to critically examine the sample statement of work in Exhibit 5-4 and identify the paragraphs that describe the customer’s responsibilities. What are they?22) Describe the document that a project manager must have before preparing a project schedule.23) Professionals frequently complete a timecard describing their daily activities. Why is this important?24) Describe the importance of a work breakdown structure.25) Prepare a list of tasks to make a breakfast for six people. We will offer hot oatmeal, eggs, bread, fresh orange juice, a fruit cup, coffee, and cake. We wish to serve the breakfast soon. Identify the tasks that can be completed together. Organize the list into a work breakdown structure and assign personnel to each task. Estimate the time required to complete each task and sketch a schedule for the breakfast.26) Describe the contents of a project specification.27) Discuss the value of a project specification.28) What environmental characteristics may be considered in a product or system specification?Note: Widget, Plamfly, Widram are fictitious products and companies created forillustrative purposes. 211
    • CHAPTER 6 Project Time Management Out of clutter, find simplicity From discord, find harmony In the middle of difficulty lies opportunity. -- Albert Einstein, Three Rules of Work <>Chapter objectivesAfter studying this chapter, you should be able to: Understand the relationship between the project schedule and the work breakdown structure Understand the need for a project schedule Read and interpret a project schedule Analyze a project schedule to determine task priorities Identify and find the critical path Prepare a project scheduleProject Time ManagementProject time management includes the processes required to ensure timely completionof the project (PMBOK, 1996). The schedule represents the fundamental tool used bya project manager to plan and then control activities. At a minimum, it consists of thefollowing: 212
    • 1) A list of tasks required to complete the project, 2) Task duration, and 3) Task dependencies.Frequently, PMs include as part of the schedule the department or personnelresponsible for task completion. Sometimes, the PM creates a separate documentcalled a Responsibility Assignment Matrix (RAM) that lists the people or the departmentresponsible for each WBS element. These tools represent ways of communicatingproject information with the project team.Task dependencies require knowledge of the predecessor and successor tasksassociated with a given task. This chapter will enable the reader to read, interpret andprepare a project schedule. It will accomplish this by actively engaging the reader in theprocess of preparing a Gantt chart.The time management process begins with the creation of the Work BreakdownStructure discussed in chapter 5. The PM and the functional managers identify thespecific activities needed to produce and deliver the project deliverables. With everyactivity defined, the project team determines duration and sequence relationships. Toaccomplish this with the highest confidence in its accuracy, the PM requests assistancefrom the functional managers. They estimate the length of time for each task andrecommend the appropriate sequence relationship. That is, they identify the task ortasks that should precede or follow any given task. Teams use their collective expert 213
    • judgement to estimate activity durations. Some organizations keep history files of pastproject experiences to support the estimating process. You want it when? ScheduleRequesting assistance from the functional managers and using their recommendationspromotes harmony and encourages ownership of the project among the stakeholders.The stakeholders assume responsibility for their labor and time duration estimates. Ifthe PM assigns task durations without consultation with the functional managers, theirresponse will be “Well, you assigned the dates, you meet it!” Therefore, it is imperativethat discussions take place, issues raised, and disagreements voiced and resolvedbefore the project begins. The output of this phase will be a schedule with whichstakeholders can live. 214
    • The schedule establishes a basis for communications among stakeholders. It providesthe entire picture for all participants to view and promotes understanding of activityrelationships. The schedule permits the determination of the project’s critical path. Thecritical path represents the subset of project activities that leads to the shortest projectcompletion time. Extending the length of time for any of the activities on the criticalpath increases the overall project duration. Knowledge of the tasks on the project’scritical path enables project managers to establish task priorities. Stakeholdersunderstand the need to assign resources (money, labor, facilities, tools, and equipment)in support of critical path items. Employees can anticipate both project and functionalmanagers to pay close attention to personnel working on tasks in the critical path. Ifissues arise, they want to know about it so they can resolve the problems using theappropriate resources. Understanding the schedule clarifies and highlights short-termproject objectives. This knowledge informs and consequently aligns personnel withregard to the project’s needs.Rudiments of Schedule PreparationThe schedule development process involves defining the activities to be accomplished,assigning responsibility for completing activities to stakeholders, identifying logicalactivity sequences, establishing activity dependencies by identifying successor andpredecessor tasks, and designating task durations. Managers use a Gantt or bar chartthat lists all tasks on the left. A horizontal bar is associated with each task andillustrates the task duration. An example of a Gantt chart using Microsoft Project isshown in Figure 6- 1. 215
    • Figure 6-1 – Gantt Chart Gantt Chart Wizard IconGanttChartOption 216
    • Figure 6-2 – Milestone Schedule 217
    • Organizations commonly use the Microsoft Project software tool for developingschedules and assigning resources. Figure 6-2 illustrates a schedule consisting solelyof milestones. The diamond ! signifies a milestone. The milestone chart provides anoverview of the entire project and lists only the expected beginning or ending dates ofsignificant activities. The summary solid rectangular line in Figure 6-2 serves to indicatethe duration of all of the activities falling under it.Traditional Gantt charts use a horizontal rectangle to denote the duration of a task.The length of the rectangle indicates the length of time the task takes. The user mustobserve the units on the time scale to assess the actual task time. The horizontal timeaxis in Figure 6-2 denotes quarters or 3-month intervals. The user has the ability tomake these intervals finer or coarser to suit their needs.A rectangle partially filled with a solid bar illustrates that work has begun on this task.If the bar extends across the entire task then work on the activity has completed. 218
    • Usually, the start of a task depends on the conclusion of a prior activity. This commonfinish to start (FS) relationship looks likeTask A Finish to Start (FS) RelationshipTask BThe arrow extending from task A to task B signifies that task B begins after Task Afinishes. The tasks are sequential. Task B requires the completion of task A. Thevertical down arrow identifies the dependency of task B on task A. Task B need notfollow immediately after the conclusion of Task A. The Gantt chart concept permits adelay before the next task begins as shown below. Finish to Start Relationship includes a delay in the start of Task BTask ATask BAs an example of finish to start relationships, when baking bread, the baker must mixthe ingredients before kneading. The baker places the dough in the oven after risinghas completed. To ensure a successful product, the baker cannot deviate from thetask sequence. The schedule below illustrates the bread baking sequence. All of theserelationships follow a finish to start sequence. Time always appears on the schedule’s 219
    • horizontal axis. For a very short duration project, the user can adjust the time axis toread hours or even minutes.Mix bread ingredientsKnead DoughBread risesBake TimeOther relationships exist between tasks such as a start-to-start (SS) relationship. In thediagram below, Task D begins only if task C begins.Task CTask DAn example of a start-to-start operation involves laying tar on a road surface. Workersplace asphalt on the road surface and then distribute it evenly in an interactive manner. 220
    • The asphalt and tar smoothing process begins immediately following the placement ofthe material on the road surface and continues concurrently until task completion.The finish-to-finish relationship demands linked tasks finish together as in tasks E andF.Task ETask FFinish-to-Finish (FF) tasks frequently involve inspections or testing. The electricalhouse-wiring task in the fabrication of a new house cannot be considered complete untilthe town or city inspects it. Only then can the contractor feel confident about releasingthe electricians. An example in the software development industry involvesprogramming. Writing software code and preparing the documentation represents twoprocesses of many in a large software project. The successful execution of theSoftware Verification and Validation Plan enables Quality Assurance personnel toconfirm correct software operation. Only at that point will the software design manageracknowledge completion of the software design process.Some tasks have no predecessors and can proceed at the same time, also referred toas in parallel, with other tasks. These activities begin at the discretion of the project 221
    • planner. If possible, link tasks. This enables the planner to easily shift the schedule ifthe team decides to insert an additional task into the plan.Schedule planners regard some task dependencies as mandatory because theprocesses that they describe force the relationship. Project teams use their experienceand judgement to establish task linkages.Creating a ScheduleIn order to obtain the maximum benefit from the text, the remainder of this chapterrequires the reader to use Microsoft Project. Consider this non-technical projectexample to illustrate the schedule development process using Microsoft Project. A localcharity decides to conduct a fund raising event. The event will feature a motivationalspeaker. The charity seeks to use neighborhood facilities and the organization wishesto hold the event in 4 months. Organization committees will decide the food serviceand the price of tickets.A charity executive committee meets to identify the tasks required to conduct this event.They accomplish this by engaging in a brainstorming session and creating lists of tasksin a random fashion. After this initial attempt to identify the work, they organize theactivities into logical groupings. The executive committee selects a person who agreesto take responsibility for leading the effort -- a project manager. The PM integrates thelists of activities and resolves the organization’s competing needs for commonresources into a viable plan. The PM presents the draft schedule and submits it to 222
    • organization members (functional managers, committee members and otherstakeholders) for comments and corrections. After incorporating the stakeholders’responses, the PM presents a baseline operational schedule to the team.The PM prepared the baseline work breakdown structure for the charity event shown inExhibit 6-1. The table in Exhibit 6-1also includes an estimate of the labor hours that thestakeholders have provided. Note that 0d in Microsoft Project designates a milestone.Tasks consisting of lower level tasks do not have associated labor hours. MicrosoftProject will automatically compute the time required for the higher-level tasks from theentries associated with lower level tasks. For example, WBS numbers 8.4.1, 8.4.2 and8.4.3 determine the hours in 8.4. After reviewing the list of tasks, enter the data intoMicrosoft Project following the directions in the next section. 223
    • Exhibit 6-1 - WBS for a Charity Organization Speaking EventLINE WBS TASK NAME OR DESCRIPTION LABOR PREDECESSORNO. NO. HOURS LINE 1 Executive Group Agrees to hold 0d 1 Charity Speaker Event 2 Executive Group Organizes 60h 1 committees and prepares draft 2 schedule 3 3 Activity & committee budgets 4 3.1 Prepare Budgets 10h 2 3.2 Budget acceptable -- Go/no-go 0d 4 5 decision 6 3.3 Distribute Budgets to Committees 24h 5 7 4 Agree on Event Date - 12/4/04 0d 6 8 5 Site selection committee 5.1 Contact neighborhood fraternal 40h 7 9 association hall for availability 10 5.2 Confirm Event date 8h 9 11 5.3 Site Status Decision 0d 9,10 12 6 Speaker selection Committee 13 6.1 Evaluate potential speakers 80h 6 14 6.2 Select speaker 24h 13 15 6.3 Make offer to speaker 24h 14,16 16 6.4 Confirm date availability with speaker 8h 14 17 6.5 Speaker Decision 7d 15 18 7 Critical Review Meeting 19 7.1 Organizational meeting 7.1.1 Status - Budget, event date, site, 8h 6,11,17 speaker agreement, committees in 20 place 21 7.1.2 Final Go/No-go decision 0d 20 22 8 Publicity Committee 23 8.1 Prepare information circular 40h 6,21 24 8.2 Mail flyer to organization members 24h 23 25 8.3 Distribute flyer to community stores 40h 23 26 8.4 Event Advertisement 27 8.4.1 Prepare advertisements 80h 6,21 28 8.4.2 Place ad in Newspaper 8h 27 29 8.4.3 Place ad on Radio & TV 8h 27 30 9 Ticket committee 31 9.1 Print event tickets 80h 6,21 32 9.2 Event ticket distribution 160h 31 224
    • Exhibit 6-1 - WBS for a Charity Organization Speaking Event (continued)LINE WBS TASK NAME OR DESCRIPTION LABOR PREDECESSORNO. NO. HOURS LINE 33 10 Food and refreshment committee 34 10.1 Decide on Food and refreshments 2h 21,6 35 10.2 Purchases 36 10.2.1 Food 3h 34,44SS-3d 37 10.2.2 Wine & Liquor 1d 34,44SS-3d 38 10.2.3 Refreshments 39 10.2.3.1 Snacks, cake, soda, coffee, tea 1.5h 34,44SS-3d 40 10.2.4 Supplies 10.2.4.1 Paper plates, cups, napkins & 0.5h 34,44SS-3d 41 utensils 42 10.2.4.2 Trash bags 0.5h 34,44SS-3d 43 11 Event Day Activities 44 11.1 Day of Event Kick-off Status Meeting 30m 30,22,21 11.2 Day of event preparations - Set-up 45 committees 46 11.2.1 Set-up Tables 45m 44 47 11.2.2 Set-up Chairs 45m 46 48 11.2.3 Set-up Table Place Settings 1h 47 49 11.2.4 Set-up cocktail hour area 1h 44 50 11.2.5 Audio system 51 11.2.5.1 Install 2h 44 52 11.2.5.2 Test 30m 51 225
    • Exhibit 6- 1 - WBS for a Charity Organization Speaking Event (continued) LINE WBS TASK NAME OR DESCRIPTION LABOR PREDECESSOR NO. NO. HOURS LINE 53 11.3 Food and refreshment committee 11.3.1 Obtain pots, pans, and serving 30m 44 54 dishes 55 11.3.2 Prepare & cook food 4h 54 56 11.3.3 Set up food and refreshment tables 3h 44 57 11.3.4 Refreshment and food distribution 3h 55,56 58 12 Event Activities 59 12.1 Ticket Collection 3h 44 60 12.2 Cocktail hour 1h 49 61 12.3 Speaker meets reception committee 0.5h 60 62 12.4 Introduction of speaker to audience 0.2h 61 63 12.5 Speaker’s talk 1h 62 64 12.6 Thank speaker 0.1h 63 65 13 Clean-up Committee 66 13.1 Obtain trash bags 0.2h 64 67 13.2 Clean hall 2h 66 68 13.3 Teams Collapse and Rest 1h 67 Microsoft ProjectLoad Microsoft Project on your computer and select the Gantt chart option (refer toFigure 6-1). The Gantt chart icon appears in the column on the left side of the screen.Click on Project - Project Information and enter the project start date -- August 1, 2004.Select Schedule from: Project Start Date. This last statement references all activitiesto the project’s start date. Task EntryEnter each activity listed in Exhibit 6-1 under the column called Task Name or load thefile called Charity Event on the disk supplied with the text. For the moment, disregardthe WBS number. Do not skip lines between tasks. Figure 6- 3 illustrates the entry of 226
    • some of the activities into the column called Task Name. If you need to add or deletelines, use the INS (insert) key or the DEL key, respectively. Save your data every 10minutes to avoid losing information. Use the save without a baseline option. Call thefile Charity Event. 227
    • Figure 6-3 – Project Task Name Data Entry ProjectIndent or Tools Information Formatoutdent Working TimeMicrosoft Project defaults to an 8-hour workday (8:00 a.m. to 12:00 noon and 1:00 p.m.to 5:00 p.m.). Other than defining Saturday and Sunday as non-working days, theprogram makes no assumptions regarding other non-working days. To modify non-working days (e.g., to accommodate vacation, holidays, organization events, creating a 228
    • six or seven day week, etc.) or the number of hours in a working day, click on Tools –Change Working Time and make changes as required. Use the pop-up window buttonsor type the correct working time. Press OK to save your preferences.The project organization’s schedule planner controls the horizontal length of the chartby choosing to view it in days, weeks, months, or quarters. Microsoft Project offers avariety of options that enables the planner to use two time scales simultaneously(Major and Minor Scale) and choose the scale’s units. Choose your preference byselecting Format – timescale. For this exercise, make the selections shown in Figure 6-4. Figure 6- 4 -- Microsoft Project Timescale Selection 229
    • WBS NumberDesignate a column to the left of the task name for the WBS number. To do this,highlight the task column by clicking once on the word Task Name. Select Insert –column. Under the Column Definition window (Figure 6- 5), use the drop down menulisted under Field name and select WBS. Click OK. Figure 6-5 – Creation of WBS column using the Drop-down MenuAfter completing the entry of the list of project activities and inserting the column for theWBS number, assign a WBS level number to the tasks in Exhibit 1. As an example,highlight the task Prepare Budgets on line 4. Move the cursor and click on the rightarrow indent shown in Figure 6-6. The task entitled Prepare Budgets moves to the rightand the WBS number on line 4 changes to a 3.1. Repeat the process for all secondthrough fifth level tasks shown in exhibit 6-1. A level 3 task such as 6.1.2 requires twoclicks on the right arrow. If you inadvertently click too many times, use the left arrow toreduce the WBS level. 230
    • Figure 6-6 – Task Names with WBS Completed WBS Column EntryIndent Task Duration Duration on the Microsoft Project Gantt chart corresponds to the number of labor hours required to complete an activity. A job that takes a person 6 hours to complete will reduce to 3 hours, if we decide to put assign 2 people to do the work. Just a word of caution. In its default mode, Microsoft project halves the time to complete work if two people are assigned to a job, life does not always work in that linear fashion. A woman requires nine months to deliver a baby. Placing two women on the job will likely have 231
    • very little influence on the results. Indeed, placing additional people onto a job willfrequently not provide a proportional relationship in time saved. More often than not,the time to complete the task will reduce, but not necessarily inversely proportional tothe number of people assigned to the job.The standard Microsoft Project day lasts 8-hours. Consequently, unless the userchanges the day’s length, the application automatically distributes a task requiringgreater than 8 hours (after taking into consideration the applied resources) over multipledays. Exhibit 6-1 offers recommendations for the duration of the charity event activities.Enter duration data only for the non-bold tasks. As previously stated, Microsoft Projectautomatically calculates the duration time for tasks in bold print. Planners refer tothese bold print tasks as roll-up activities. They correspond to summations of the lowerlevel WBS elements that make up that task.As you enter the durations, use the abbreviation w, d, h, and m corresponding toweeks, days, hours, and minutes. (1w corresponds to 1 week, 3d corresponds to 3days, 2h corresponds to 2 hours, and 20 m corresponds to 20 minutes.) Change theduration times if you wish. Do not enter any dates in the start or finish columns. Figure6-7 illustrates the entry of the duration data onto the Gantt chart. 232
    • Figure 6-7 – Task Duration entered into the Gantt Chart Task DependenciesThe next step in the development of a schedule involves establishing taskdependencies. The planner must identify the tasks that precede or follow otheractivities. As in estimating labor time, this step depends on the planner’s opinions,perceptions, and preferences. Microsoft Project Gantt chart includes a Predecessorcolumn, which the planner completes.The predecessor column in Exhibit 6-1 identifies tasks that precede a given line. As anexample, WBS no. 8.1 on line 23 (Prepare information circular) can only begin 233
    • following the completion of the tasks on line numbers 6 and 21. If during the actualproject either of these activities incurs delay, then WBS 8.1 will not begin on time. Itmust await the completion of the tasks Distribute Budgets to Committees and FinalGo/No-go decision. The PM then must inquire into the nature of the delay and makedecisions to get the job back on schedule. As the planner inserts the predecessor linenumbers into the schedule, a light line drops from the predecessor task to thesuccessor task. Figure 6-9 illustrates the insertion of the predecessor tasks into theCharity Event schedule.As you enter dependency information into the chart, most should be relativelystraightforward. Creating a schedule making extensive use of dependencies permitsan easily modifiable chart. The planner may desire to insert at task. If the plannerpreviously linked all tasks, then the tasks automatically shift to accommodate the addedtask and the changed dependencies.Sometimes the plan includes a firm date as in the date of the charity event in ourexample. The executive committee scheduled December 4 for the gala event. Wecannot change this date – “it’s cast in concrete.” Consequently, during the preparationof the schedule, we inserted December 4 as a hard date in the Gantt chart for linenumber 44 (WBS number 11.1). The Microsoft Project indicator column (the columnheaded by the encircled (i) signifies a schedule constraint in line 44. 234
    • The Food and Refreshment committee decided to purchase the food 3 days before theactual event day. The predecessor constraint includes the type of food decision (line34, WBS no. 10.1) and the day of the event minus 3. That is, the food purchasesprecede or lead the event day as determined by line 44 by 3 days. SS-3 means thatthe food purchases start 3 days before the start of the event day activities. Therefore,the purchases on line numbers 36,37,39,41,and 42 reads 34,44SS-3.There may be times for which a successor task must lag the predecessor task by 3days. To delay a successor task the entry would look like 44SS+3. Responsibility Assignment Matrix (RAM)Frequently project planners prepare a Responsibility Assignment Matrix (RAM) asshown in Exhibit 6-2. This is an ideal tool to assign people to tasks and make themaware of the due date. The creator of the list distributes it to all team members. Thisavoids any misunderstandings. Some planners use the schedule to recordresponsibility. To do this, place the cursor on a task and double-click on the task name.Select the Resource tab in the Task Information window. Enter the group, departmentor person’s name in the Resource Name line that will assume responsibility forperforming the task (figure 6-8). The number 100% signifies that the Resource willwork on the job 100% of their time. If, for example, the resource spends 50% of its timeon the task, the 60-hour calendar time doubles and the schedule stretches. Experimentwith this feature. 235
    • Figure 6-8 – Task Information Window 236
    • Figure 6-9 - Charity Event Schedule Includes Predecessor Information 237
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    • 240
    • Exhibit 6-2 – Responsibility Assignment Matrix (RAM) WBS NO. TASK NAME OR DESCRIPTION Task Responsibility1 Executive Group Agrees to hold Charity Executive Committee Speaker Event2 Executive Group Organizes committees and Executive Committee prepares draft schedule3 Activity & committee budgets3.1 Prepare Budgets Project Manager3.2 Budget acceptable -- Go/no-go decision3.3 Distribute Budgets to Committees4 Agree on Event Date - 12/4/04 Executive Committee5 Site selection committee Site Selection Committee5.1 Contact neighborhood fraternal association hall for availability5.2 Confirm Event date5.3 Site Status Decision6 Speaker selection Committee Speaker Selection Committee6.1 Evaluate potential speakers6.2 Select speaker6.3 Make offer to speaker6.4 Confirm date availability with speaker6.5 Speaker Decision Critical PathAs previously stated, the critical path controls the project’s completion date. The projectmanager identifies those tasks that cannot be delayed without affecting the finish date.Those tasks demand the PMs close attention. Microsoft Project permits thedetermination of this path. Click the Gantt chart wizard icon (Figure 6-1) and followdirections. Microsoft highlights the resulting critical path in red. The PM usuallyinforms the managers and personnel working on the tasks in the critical path of theimportance to project success of their start and completion dates. 241
    • Schedule ProgressAfter the PM develops the baseline schedule and gains agreement among thestakeholders of its value, the PM uses it to track progress. Microsoft Project permits theuser to enter the percent completion for each task on the chart. Double clicking thetask, once again brings up the Task Information window. On the General tab, thepercent complete entry area permits the PM to enter any value between 0 and 100%(Figure 6-10). A solid line appears in the horizontal task bar that corresponds to theamount of work completed.Different philosophies exist among PMs with regard to this value. Some permit thefunctional manager or person responsible for the task to select any numerical estimatethat approximates the percent of the task completed. While this offers the functionalmanager great flexibility in selecting the progress, it is very subjective. Can themanager really distinguish between 17% and 19% task completion? Therefore, somePMs restrict the selected completion estimate to only five values – 0, 25, 50, 75, and100%. Still others believe in assigning only three numbers – 0, 50, and 100%. In thislast case, if the functional department did not begin the task then the schedule reflectsthe completion of 0% of the task. The PM assigns 50% completion as soon as thefunctional department begins the task. Only following the completion of the task doesthe PM assign 100%. Selecting the percent of task completion is very subjective. Thislast approach attempts to simplify the percent complete selection. However, if ascheduled task lasts for more than 4 weeks, the PM may not have an accurate 242
    • indication of the progress for most of this time. At the end of a long working period, thePM could face an unpleasant surprise.During the schedule preparation phase, the PM requests functional managers toexamine long duration efforts and separate them into their constituent parts. One or twoweek task durations are best – certainly not more than 4 weeks. The PM requests thatfunctional managers arrange that each activity have an easily measured and well-defined output. This gives the PM maximum insight into the job’s progress. A majorcontributor to project success involves clarifying stakeholder expectations so thateveryone understands their roles and the work expected of them.Figure 6-10 Task Information Window Used to Enter Percent Task Completion 243
    • Printing NicetiesThe planner can tidy up the completed schedule by adding the project name to thehead of each printed sheet, the date the planner prepared the schedule and theplanner’s name to the printed output. To enter this information, click Page Setup on theFile menu. After clicking the Header, Footer, or Legend tab and selecting the Left,Center, or Right tab add the project information in the text box.Sidebar: The 8-Hour DayMost planners use an 8-hour day for the purposes of schedule preparation. Do wereally work on the job for 8 hours? If we work from 8 a.m. to 5 p.m. and take an hourfor lunch, we remain at the job for 8 hours. Eight hours a day, five days a week over 52weeks results in 2080 labor hours during a year. Perhaps you are thinking to yourself,“Well we don’t work during vacation and holidays.” The benefit packages in mostorganizations include two weeks or 80 hours of vacation time and 10 paid holidays(e.g., Memorial day, Independence day, Labor day, Thanksgiving, and Christmas)during the year. Think about all the non-productive work time that we engage in duringthe workday – department meetings, coffee breaks, office chitchat, talking with yourcolleagues about the latest political scandal or baseball scores. How about sick daysand personal days? Table 6-1illustrates that we average less than seven productivework hours per day after taking into consideration non-productive work associatedactivities. Microsoft project can adjust the schedules by changing the work hours from8 to 7 hours per day. A schedule that uses a 7-hour day will extend the completion timeby 12% as compared with a schedule based on 8 working hours per day. However, 244
    • very few executives will accept this change or the argument just advanced. They willargue that 1) the organization compensates workers for 8-hour days and expects 8hours of work, 2) the planner should adjust the schedule for holidays and vacations,and 3) don’t plan for sick and personal time because employees may then take it as amatter of course. 245
    • Table 6-1 Approximate Annual Labor HoursTASK DAILY WEEKLY ANNUALLYDepartment meeting 1 50Vacation 80Designated Holidays 80 (10 Days including New 80 Years Day, Christmas, July 4, Labor Day, Memorial Day, Thanksgiving day, etc.)Personal and sick time 30Training 30Coffee break 2/3 (40 minutes) 3 150Total non-working time 420Baseline Employment Hours 40 2080Baseline Working Hours 1660 1660 labor hours per year averages 6.5 hours per day.SummaryThe Gantt or Bar Chart tool assists project managers to organize jobs. The scheduleforms the basis for all project planning and predicting. PMs should never unilaterallyassign activity labor hours or time durations during the preparation of the schedule.Functional managers must contribute to the schedule’s development. Participation inthe estimation process forces “ownership” and requires functional managers to takeresponsibility for their decisions. The PM leads the team in identifying the workactivities, assigning priorities, developing task dependencies and time durations. ThePM uses the schedule as a communications tool. Team members gain anunderstanding of their project roles and responsibilities by reading the specification and 246
    • developing estimates. During the project, monitoring the schedule on a daily basisinforms all participants of potential trouble spots.The PM and the project team benefits from the use of scheduling tools. The scheduleprovides management with the ability to plan for best possible use of resources in orderto achieve a given objective within time, cost and resource limitations. The schedulefacilitates “what if “ exercises. With an understanding of the critical activities, slacktime, uncertainties and the crucial task elements, the PM and the functional managerscan experiment with the schedule by applying a variety of resources at different times todetermine the overall project impact.The project schedule planning process takes place during the proposal phase. Itconsists of the following steps: 1. PM highlights the deliverables and distributes the specification to the functional managers 2. Establish project start and completion dates 3. Create a project Responsibility Assignment Matrix (RAM) to complete the proposal 4. Kick off meeting to review assignments 5. Identify capital equipment required 6. Functional managers submit to PM department names/titles of personnel necessary to accomplish each task 7. Functional managers submit to PM task duration estimate 247
    • 8. Task dependency decisions - Which tasks can be done in parallel? - Which tasks require the completion of other tasks before they can start?9. PM prepares draft WBS10. Functional managers review draft schedule. 248
    • Chapter 6 QuestionsGANTT Charts1) Identify whether the following statements are True or False: a) The vertical axis on the Gantt chart matrix lists all the tasks to be performed. b) Each row in a Gantt chart contains a single task that must be completed during the work effort. c) Each row in a Gantt chart contains a WBS number. d) The horizontal axis on the Gantt chart has columns indicating estimated task duration and sometimes the name of the person or department assigned to the task. e) A solid bar on the horizontal axis indicates progress for project task under-way.2) Select the best answer. A critical path a) Contains the maximum schedule slack time. b) Involves a set of unrelated tasks. c) Consists of a set of dependent tasks, which together take the longest time to complete. d) Consists of tasks all performed by a single department or person.3) Tasks falling on the critical path a) Should receive special attention by both the project manager and the personnel assigned to them. b) Require minimal attention. c) Will be performed by an external organization. d) Will be performed by the PM department.4) The schedule development process involves a) Defining the activities to be accomplished b) Assigning responsibility for completing activities to stakeholders c) Identifying logical activity sequences d) Establishing activity dependencies by identifying successor and predecessor tasks e) Designating task durations. f) All of the above5) Plan for remodeling a bathroomThe following list represents typical tasks involved in remodeling a bathroom. Use thetask list and prepare a schedule by performing the following: a) Establish a start date for this project. 249
    • b) After reviewing the tasks shown in the accompanying table, identify the milestones.c) Assign duration times for each task.d) Assign responsibility for each task.e) Assign task interdependenciesf) Prepare a schedule by entering the data in parts a) through e) using Microsoft project.g) Determine the project’s critical path. 250
    • Bathroom Remodeling Task ListTask no. Task Description Duration Dependency 1 Decision to Redesign bathroom 2 Design Concept & Layout 3 Obtain Construction Permit 4 Component selection 5 Plumbing fixture selection 6 Electrical fixture selection 7 Wall and floor cabinet selection 8 Tile selection 9 Window selection 10 Shower closure 11 Seek design input from contractors 12 Receive contractor bids 13 Plumber 14 Electrician 15 Tile layer 16 Carpenter 17 Painter 18 Award Contract(s) 19 Payment #1 20 Procure Material 21 Bath & faucets 22 Shower & faucets 23 Toilet 24 Sink & faucets 25 Tile 26 Floor cabinet 27 Medicine cabinet 28 Towel rack 29 Toilet paper holder 30 Soap dish 31 Tooth brush holder 32 Window 33 Shower door 34 Payment #2 35 Order and receive trash debris container 36 Remove existing walls and floor 37 Remove old fixtures 38 Plumbing 39 Electrical 40 Equipment delivery 251
    • Bathroom Remodeling Task List (continued)Task no. Task Description Duration Dependency 41 Rough installation 42 Carpentry 43 Window 44 Install plumbing pipes 45 Install electrical wiring, switches, fixtures 46 Install wallboard 47 Install wall and floor tile 48 Install accessories 49 Install plumbing fixtures 50 Test and evaluate 51 Trash pick up 52 Paint 53 Town Inspection 54 Final Payment 252
    • 6) Plan for a Computer Network InstallationThe following list represents typical tasks involved in installing a computer network.Use the list and prepare a schedule by performing the following: a) Establish a start date for this project. b) After reviewing the tasks shown in the accompanying table, identify the milestones. c) Assign duration times for each task. d) Assign responsibility for each task. e) Assign task interdependencies f) Prepare a schedule by entering the data in parts a) through e) using Microsoft project. g) Determine the project’s critical path. Computer Network Installation Task ListSite survey Air conditioning Electric capacity Electric outlet placement Available roomsPlans Define number and location of users Air conditioning plan Electric power distribution and outlet placement Equipment location Network Architecture plan Cabling type (fiber optic, wire, RJ-45, 10baseT, category 5 etc.) Wide area network (WAN) Local area Network (LAN) Server protocol Ethernet Token ring TCP/IP Novell Routers Bridges Software and software tools Firewall Security Virus detection E-mail 253
    • World wide web File transfer protocol Internet service provider trade study Internet connectivity option trade study Dial-up access Leased line Infrastructure Planning Room construction Furniture (desks, chairs, etc.) Cabling Internet connections Client workstation connections Identify central wiring area Local Construction code impact Required licenses and permits Preparation of implementation planComputer specification Server Workstation Hubs, Bridges & routersDesign ReviewInitial and Ongoing support Assemble and train staff Select Network management & system administration tools Develop a user address plan Develop Help desk procedures Develop End user technical support policiesPurchases Computers Furniture Cable and connectors Hubs, Bridges & routers Wire trays Dropped ceiling equipment Miscellaneous cabling equipment and toolsConstruction Obtain local permits and licenses Rooms Heating/air conditioning equipment Install cabling trays and cabling Electric power connections 254
    • Internet connections LAN connectionsInstall furnitureComputer Installation Unpack Install software Place and connect computers in approved locations Assign and install user addressesSite Test Prepare a system test procedure Perform testUser Training 255
    • CHAPTER 7 Project Estimation and Cost Always bear in mind that your own resolution to succeed is more important than any other one thing. --Abraham Lincoln <>Chapter objectivesAfter studying this chapter, you should be able to: Understand the difference between bottom-up and top-down estimating. Understand the elements that enter into a project’s cost Understand the meaning of direct and indirect costs Identify indirect cost components. Understand the difference between cost and price. Read and interpret the project’s financial statements Participate in a project cost estimate effortThe PM together with the project cost estimating team establishes a budget before theproject begins. Typically, the cost estimating team consists of the project manager,functional managers, selected commercial partners and subcontractors. This team hasthe objective of approximating the costs of the resources needed to complete projectactivities. Every employee action on the project has cost implications. The PM’steam must predict the cost for the work packages. Following contract award, the PMcarefully monitors both the work progress and the expended funds. At the job’s 256
    • conclusion financial analysts compare the predicted costs with actual costs todetermine the accuracy of the estimate and the amount of profit the organizationearned on this job. The profit earned on the job may determine the PM’s next job -- aharsh fact.Direct and Indirect CostsProject costs consist of a wide assortment of expenditures – some obvious and somenot. Perhaps the most obvious expense is the employee’s base salary. However, laborcosts represent only a portion of the cost associated with a project. Employees receivefringe benefits and require office furniture and computers. They share tools, officefurniture, conference rooms, coffee machines and water coolers. Basic operating costssuch as rent and utility bills have to enter the equation. Accountants separate all costsinto direct and indirect categories.Direct costs identify with a single product, project or contract. Employee salariesinvolved with designing, building, testing and installing a product or providing a servicerepresents one of the largest direct costs. Other direct costs include project relatedsupplies and material and subcontracted costs. The paragraphs below examineseveral of the other significant project direct costs. Material and Material Handling CostsAll material and supplies required for a job represents a direct project cost. In additionto purchases, this category includes the lease or rental of special hardware and/or 257
    • software tools and equipment. Organizations usually add a handling charge to thematerial and equipment purchased for a specific job for which they expect the customerto pay. Material handling costs cover a host of expenses that include storage,inspection to verify receipt of the correct material, breakage, theft, restocking fees andthe cost of borrowing money to obtain the material. Many organizations chargecustomers an additional 10 to 25% of the material cost to offset these expenditures. Travel and Living ChargesTravel, living and entertainment costs include the costs associated with a business tripor hosting customers to lunch or dinner. Charges associated with a short business tripinclude air, bus, train, taxi fares; reasonable costs for breakfast, lunch, and dinner; carrental; hotel charges; and parking fees. Travel and living charges can be direct orindirect. Charges applied to support a specific contract or project are direct costs.Travel and living charges placed into the indirect category may support a proposaleffort. Many organizations add a percentage of the travel and living charges to coverthe costs of making and sometimes rescheduling reservations, and penalty charges forchanging reservations. Other Direct Costs (ODC)Other Direct Costs (ODC) include labor supplied by people and organizations notdirectly affiliated with the organization that received the contract. A typical example ofODC includes engaging a consultant to assist the staff. Frequently organizationsbolster their technical expertise in a discipline by employing independent consultants. 258
    • The organization may lack manpower to complete a task or they may not have the in-house expertise in a technology. Sometimes an organization may request theconsultant to provide an independent assessment and review of the work completed to-date. Outsourcing is a term that organizations use if they choose to subcontract aportion of the project’s work to external organizations. Other ODC items may includethe rental or purchase of project dedicated equipment such as copy machines,telephones and FAX units. Project related postage or overnight mail deliveries also fallinto the ODC category. If the contract requires attendance at a conference, thentypical charges to the ODC account also include conference registration fees andspecial course costs. Sales CommissionAs with many of the accounting and conventions discussed in this section,organizations have options in regard categorizing sales commission. Someorganizations combine sales commission as part of general management andadministration others. Others place sales commission into a separate category. ProfitProfit is the lifeblood of business. Very few reasons exist for not making a profit. Poorestimating, inept management, or sudden market changes may result in unintentionallosses. If an organization desires to venture into a new area, they may choose to enticea customer with a lower price than customary or perhaps offer to do the project at cost. 259
    • Organizations may permit some projects not to make a profit, but they cannot losemoney or they will confront challenges to their continued existence.Industry executives managing publicly traded companies feel pressure to produceshort-term profits to satisfy Wall Street analysts and stockholder demands. In return forongoing short-term profits, the financial expects immediate increases in stock value. So,a commercial profit-making organization must make a profit to remain viable. Manydot.com businesses created in the early 2000’s failed because they did not make aprofit. How much profit does the financial community expect of businesses? GeneralElectric, one of the best operated businesses in the world earned a profit (net incomebefore taxes divided by gross revenues) of 13-15% percent from 1998-2000. Duringthe last few years, the Walt Disney Company’s operating profit hovered around 10%.Organizations doing business with the US government earn about a 12% profit. At theother extreme, during 1999 and 2000 Microsoft’s profits reached 40%. It’s your call.Indirect CostsIndirect costs include all costs that are not direct. Indirect costs apply to two or moreproducts, projects or services provided or performed by the organization. Thiscategory includes support costs incurred for common or joint objectives. These costscannot be identified readily or specifically with a particular project.Operational costs refer to the sum of direct and indirect costs associated with adepartment, business unit or organization. 260
    • Overhead and G&A CostsOften indirect costs are divided into two subcategories -- overhead and generalmanagement and administrative (G&A). Overhead costs are indirect costs that supporta specific part or function of the company, but not the whole company. For example,manufacturing organizations distribute factory maintenance costs to the variousmanufacturing jobs performed in the factory. Administrators combine engineeringlibrary costs into the engineering department overhead and not with material handlingor the accounting department. In addition to the cost/lease/rental of buildings andequipment in which project activities take place, other basic overhead costs include thelicenses and certifications to do business; facility heating; lighting; malpractice, liability,fire and theft insurance; building, equipment and property maintenance; costsassociated with staffing; supporting libraries; advertising costs; indirect labor such asplant security, clerical and administrative support personnel; social security,unemployment and worker’s compensation insurance; and fringe benefits such asvacation, medical, dental and disability insurance, and pension costs.General management and administrative (G&A) costs are required to support thebusiness as a whole and are not associated with any particular department, project, orprogram. Common examples of G&A costs include the salaries of the chief executiveofficer and his or her staff, legal and accounting costs, marketing expenses, researchand development costs, and bid and proposal (B&P) costs. 261
    • The classifications of direct versus indirect has to do with the relationship of the cost toa final cost objective. Overhead and G&A costs are indirect because they benefit morethan one cost objective. The classification into direct or indirect does not bear on theimportance or need for the activity or position. Factory equipment maintenance,usually an indirect cost, is just as necessary as the direct cost of the machine operator.The organization’s accounting system collects cost information. As projects incur coststhrough labor, material, equipment and other expenditures, the accounting systemassigns and distributes these costs to departments and projects. Accounting systemscreate an indirect expense rate, which PMs must add to the individual’s labor rate todetermine the true cost of employing that person. The PM quotes a price to thecustomer for the use of an employee that includes the employee’s salary, indirect costs,sales commission, and profit. The formula for this calculation is:Customer Price for Employee Labor = Employee Base Salary + Overhead costs + G&A costs + Sales Commission + ProfitThis formula describes the fully burdened labor price that the customer pays to use anorganization’s employee. Most often, organizations relate the overhead costs to adepartment and calculate the overhead as a percentage of the employee’s base salary.The Villa-Tech example later in the chapter illustrates this approach. 262
    • Some organizations follow an accounting policy of not applying overhead and G&A toODC activities. A lower sales price results if the organization wraps a profit around aconsultant’s charges, but not overhead and G&A charges. In this case, reselling aconsultant’s efforts enables the organization to make a profit without using its ownresources -- that’s a winner. Organizations do charge the customer a salescommission and profit on ODC items.Bottom-up estimatingBottom-up estimates begin with a detailed WBS that the project manager develops withthe functional managers. The PM requests support from the functional managers toestimate the cost of each work package assigned to their department. The estimateaccounts for all of the resources needed to support the design and development, test,installation, training and any customer handholding. The PM receives the estimates foreach project element and sums the individual project element estimates into a projecttotal. Table 7-1 illustrates the format for collecting data using a partial WBS. Providedthe organization has a good understanding of the job, this method should result in anaccurate estimate. However, this process is labor intensive and time consuming.A large electromechanical system may involve an enormous number of technicalspecialties, departments and people. Depending on the job, the functional departmentsmay include many of the following disciplines: • Electrical/electronics engineering • Mechanical engineering 263
    • • Software engineering• Networking engineering• Systems engineering• Model shop• Engineering assistants• Hardware test technicians• Software test technicians• Factory technicians• Field service support• Purchasing• Publications• Training• Configuration management• Quality assurance• Reliability and maintainability engineering• Specialty engineering such as hazardous material control, environmental testing, nuclear• Project management• Incoming inspection• Administrative support (secretarial and financial)• Shipping• Heating, ventilation and air-conditioning (HVAC)• Legal 264
    • • Marketing • Technical libraryThe job function for the majority of these departments is either intuitive or self-explanatory. The engineering departments design products, equipment or provideservices within their disciplines. The model shop builds limited product runs indistinction to the factory, which fabricates larger product quantities. The model shopgenerally works closely with engineers and technologists during the construction phaseand requires less instruction than the factory. The software and hardware test groupperforms product tests to verify that the product meets the customer’s requirements.Purchasing receives approved orders for goods and services and attempts to obtain thebest price for these products. Publications accepts the documentation prepared by theengineering organization and formats to meet the organizations standards so that thefinished document has the same look and feel as other released documents. Theysometimes review and correct grammar and spelling as well as prepare art work for thedocuments. Incoming inspection examines packages to verify the contents of thecontainer agree with the packing slip. They then pass the packing slip to accountspayable for payment to the supplier. The quality group addresses issues involvingquality assurance, quality control, process improvement, standards, audits, and nationalor international quality certifications. Configuration management monitors the projectdeliverables – documentation, hardware, software, and services such as training,maintenance, and product repair. Sometimes a product has several variations andconfiguration management keeps track of the product’s versions and releases so that 265
    • the customer receives the correct order. Discrepancies between the customer’s orderand the product or service delivered require discussion and resolution with the projectmanager. The sales department members work directly with the customer in identifyinga prospective customer, or receiving an RFP or RFQ, or taking an order. Themarketing department leads the process of identifying future markets to enter, selectingfuture products, and preparing advertisement campaigns.The PM obtains estimates from each of these departments. Based on theirunderstanding of the job, the functional managers estimate department labor hours,material purchases, the business travel (number of trips and length of stay) required forthe job, and the need for consultants. Most PMs list the data in a spreadsheet similar toTable 1.Labor – includes time required to gain familiarity with the documentation required for thejob; special training required to learn to use a new tool; preparation for and attendanceat design reviews and other technical interchange meetings; travel time to visit andevaluate prospective suppliers; and design, development, and test time. 266
    • Table 7-1 Project Cost Summary Department Hours Elect Mech Soft Netw Tech Field Pubs Training Material Travel ODC Line Eng. Eng ware ork Service Purchases & Item Eng Eng Living CostTask WBS NO. Tasks or Work Packages $ $ $ $ No.10000 1. System11000 1.1. Define the System Performance Requirements11100 1.1.1. Review Specification11120 1.1.2. Review Statement of Work12000 1.2. System Architecture Definition12100 1.2.1. Major Trade-off Studies13000 1.3. Define Major Assemblies13020 1.3.1. Electrical Assemblies13050 1.3.2. Mechanical Assemblies13100 1.3.3. Cable Definition14000 1.4. Unique Algorithm Development15000 1.5. Define Software/Firmware Functions and Architecture16000 1.6. Technical Analyses20000 2. Assembly #121000 2.1. Hardware21100 2.1.1. Define Hardware/Software Interfaces21200 2.1.2. Electrical21210 2.1.2.1. Define Subassemblies /Modules/Functions21220 2.1.2.2. …21230 2.1.2.3. Subtotal 267
    • Villa-Tech Bid ExampleTo illustrate the concepts associated with developing a bid estimate for a project, wewill examine a fictitious company called Villa-Tech. The organization’s accountantsnormally calculate the salary rates, overhead rates, and G&A rates and distribute thisinformation to the project managers. However, we will perform the computations toenhance the student’s understanding of the technique.Villa-Tech intends to bid on a job. The project manager has distributed the customer’sdata and a draft WBS and schedule to the functional managers. As part of aninteractive process, functional managers prepare and submit the following to the projectmanager: a technical response corresponding to the contributor’s expertise, eachcontributor’s sections of the WBS and schedule, and the associated cost. The PMplaces this data into a spreadsheet to calculate the customer’s price.Villa-Tech accountants have decided on the following financial ground rules: • Material handling costs -- Add 10% to all purchases, rentals, and leases. • Travel and living fees – Add 15% to all travel, entertainment, and living costs. • Profit -- !5% • Sales commission – 6% • Do not apply overhead and G&A to purchased material 268
    • • Apply the organization’s standard sales commission and profit to purchased material • Do not apply overhead, G&A, sales commission, and profit to travel costs. Overhead ratesThe accounting department determines that the wages paid to the engineering staff atthe Villa-Tech Company consist of electrical, mechanical, software, and networkingpersonnel. The annual Villa-Tech company engineering salaries totals $1,711,000(shown in Table 7-2 ). These represent the engineering department’s direct labor costs.Table 7-2 Villa-Tech Engineering Payroll Engineering Department or No. of Total Engineering Discipline Personnel Direct Labor Electrical 4 $340,000 Mechanical 3 $261,000 Software 9 $810,000 Networking 4 $300,000 Total 20 $1,711,000However, $1,711,000 does not represent Villa-Tech’s total cost for these employees.Accountants at Villa-Tech aggregate all the indirect costs that support the 20 person 269
    • engineering staff into an engineering overhead pool as shown in Table 7-3. Althoughthere exists generally accepted accounting practices, organizations use different rulesfor assigning overhead and distinguishing overhead from G&A costs. The approachused here is representative of the overhead calculation. Table 7-3 Villa-Tech’s Engineering Overhead Expenses Expense Description Allocated Annual Cost Indirect Labor Administrative, clerical and secretarial $75,000 Federal, state, or Social security (FICA), unemployment and $214,320 local mandated costs worker’s compensation insurance Fringe Benefits Vacation, medical, dental and disability $267,900 insurance, retirement pension costs. Training Non-project or contract related training and $80,000 educational expenses Indirect Operating Share of rent and utilities (e.g., oil, gas, $132,000 Expenses electricity, and telephone), share of organization’s liability insurance, copy machine lease, office supplies, postage, depreciation of computers and associated equipment, professional and business organization memberships. Maintenance & Copy machine and other equipment repair $12,000 Repair contracts, share of facility maintenance and repair Total Indirect $781,220 ExpensesEngineering staff salaries aside, Table 7-3 corresponds to the expenses required tooperate the engineering departments. In addition to the $1,711,000 direct laborcharges Villa-Tech spends $781,220 to support the engineering organization. 270
    • Accountants define the engineering overhead rate as the ratio in percent of the annualengineering indirect expenses to the annual engineering direct labor costs orEngineering Department Overhead Rate = Annual Engineering Indirect Expense x 100% Annual Engineering Direct Labor CostsThe Villa-Tech engineering department overhead rate isEngineering Department Overhead Rate = $781,220 x 100% = 45.6% . $1,711,000This means that almost $.46 of indirect charge is added to every $1 of direct laborcharged to the contract or project. While the overhead rate continually changes,organizations tend to keep the overhead rate constant for the year. General and Administrative CostsVilla-Tech has a small executive management team. The general and administrativecosts total $2,2640,000 as shown in Table 7-4. Table 7-4 Villa-Tech General and Administrative Expenses Engineering Department or Discipline G&A Expenses President/CEO & Staff $350,000 Vice President $155,000 Marketing Department $290,000 Corporate Accounting $280,000 Annual Research and Development Budget $775,000 B&P Budget $540,000 Legal staff $250,000 Total $2,640,000 271
    • Accountants have determined that Villa-Tech’s annual payroll is $11,200,000. Anorganization’s G&A rate is the ratio of the Annual G&A expenses to the Annual directlabor costs orOrganization’s G&A Rate = Annual G&A Expenses x 100% Annual organization Direct Labor CostsIn this case, Villa-Tech’s G&A rate isOrganization’s G&A Rate = $2,640,000 x 100% = 23.5% . $11,200,000This means that $.23 ½ of G&A charge is added to every $1 of direct labor assignedto the project or contract. 272
    • Table 7-5 – Villa-Tech Employee’s Burdened Hourly Wage Departments and/or Disciplines Electrical Mechanical Software Network Technician Field Configuration Training Eng. Eng Eng Eng Service ManagementAverage $38.60 $37.50 $41.00 $36.50 $22.00 $29.75 $15.45 $31.00Departmenthourly laborcostsOverhead – $18 $17 $19 $17 $10 $14 $7 $1445.6%General & $9 $9 $10 $9 $5 $7 $4 $7Administrative –23.5%Sales $4 $4 $4 $4 $2 $3 $2 $3commission –6%Profit – 15% $10 $10 $11 $10 $6 $8 $4 $8Burdened $80 $77 $85 $75 $45 $61 $32 $64Hourly Wage Burdened WageTable 7-5 illustrates the method of arriving at the fully burdened hourly wage for severaldisciplines and departments. In order to determine the dollar amount to charge acustomer, accountants start with the department’s average salary and add overhead,general and administrative costs, sales commission and profit. Examining this chartreveals that a customer will pay Villa-Tech slightly more than double an employee’shourly salary for the use of their services. A company cannot charge less than theburdened hourly labor wage and remain in business for long. Unless they reduce theoverhead or G&A expenses, the only significant flexibility that a company has surroundsthe profit or sales commission they choose to apply. By its nature, overhead is difficultto change in the short run, but profit and sales commission are easy to modify. 273
    • Functional Manager EstimatesAfter due deliberation, the Villa-Tech functional departments submit project estimatesto the project manager as shown in Table 7-6. The functional managers may havebased the response on professional judgement, historical data, a parametric approach,a wild guess or any other means. The PM places the data into the summary chart(Table 7-8). 274
    • Table 7- 6 Functional Department EstimatesFunctional Department Labor Material Travel, Living ODC Hours Purchases & & Leases/Rentals EntertainmentElectrical Engineering 1675 $45,000 $800 $2,400Mechanical Engineering 495 $31,000 $500 $2,100Software Eng 2237 $37,000 $1,000 $3,700Network Eng 234 $29,000Technician 348 $3,000 $500Field Service 150 $4,500 $2,500Configuration 45ManagementTraining 110 $4,500 $4,200Total 5294 $154,000 $9,500 $8,200 Risk AnalysisAn in-depth discussion of project risk occurs in chapter 10. This section identifies amethod for including risk funding into the cost estimate. Every work activity hasassociated with it some measure of risk and uncertainty. Adding the costs for eachwork package comprising the WBS should yield a bid estimate accurate to within +/-10% of the actual costs -- an acceptable risk. Some individual task estimates may turnout high and others low, but at the project’s conclusion, estimate variations average out.Functional managers identify a limited number of tasks with time duration or costuncertainty ranging from 20% to 75%. The labor and material for very risky asks (that 275
    • is, more than 75% likely to happen) should be considered a certainty and the entireeffort placed in the baseline estimate. Certainly there should be fewer than 10 activitiesinvolving more than a 20% risk -- otherwise, executive management might seriouslyquestion the logic of pursuing the job at all. The cost estimator identifies theseactivities in a separate chart (Table 7-7). The estimator enters the task’s nominal laborhours, material, travel & living funds, and ODC into the chart. Quantify the risk in hoursor dollars. For each task, assign a risk probability ranging from 0.25 to 0.75. Theweighted risk is the product of the risk probability and the maximum risk in hours ordollars. Complete this process for each risk item. The last line in Table 7-7 sums theweighted risk hours and dollars for all of the Risk items. The PM transfers these resultsto Table 7-8. 276
    • Table 7- 7 Including the Project’s Financial Risk in the Cost Department Labor HoursRisk Elect Mech Soft Net Tech Field Pubs Training Material Travel ODCItem Eng. Eng ware work Service Purchases & No. Eng Eng Living Task WBS Tasks or Work Packages $ $ $ No. No. 1 WBS Item 1a Maximum Risk in hours or $ 1b Probability of Risk 1c Weighted Risk – hours or $ (= line 1b multiplied by line 1a) 2 WBS Item 2a Maximum Risk in hours or $ 2b Probability of Risk 2c Weighted Risk – hours or $ Risk Impact Total (1c +2c + …) 277
    • Table 7-8 Villa-Tech Project Cost Summary Electrical Mechanical Software Network Technician Field Configuration Training Material Travel ODC Eng. Eng Eng Eng Service Management Purchases & LivingProject Subtotal – 1675 495 2237 234 348 150 45 110 HoursNon-labor Project $154,000 $9,500 $8,200 Subtotal - $Risk ImpactSubtotal 1 – Includes RiskDepartment hourly $38.60 $37.50 $41.00 $36.50 $22.00 $29.75 $15.45 $31.00 labor costsDepartment Labor $64,655 $18,563 $91,717 $8,541 $7,656 $4,463 $695 $3,410 Costs - $Material handling $15,400 charges –10%Travel & Living $1,425 Overhead charges – 15%Overhead – 41% $29,483 $8,465 $41,823 $3,895 $3,491 $2,035 $317 $1,555General & $15,194 $4,362 $21,553 $2,007 $1,799 $1,049 $163 $801 Administrative – 23.5%Subtotal 2 $109,332 $31,389 $155,093 $14,443 $12,946 $7,546 $1,176 $5,766 $169,400 $10,925 $8,200Sales commission – $6,560 $1,883 $9,306 $867 $777 $453 $71 $346 $10,164 $492 6%Subtotal 3 $115,892 $33,273 $164,399 $15,309 $13,723 $7,999 $1,246 $6,112 $179,564 $10,925 $8,692Profit – 15% $17,384 $4,991 $24,660 $2,296 $2,058 $1,200 $187 $917 $26,935 $1,639 $1,304Total Price - $ $133,275 $38,263 $189,059 $17,606 $15,782 $9,199 $1,433 $7,029 $206,499 $12,564 $9,996 Total Project Price $640,704 278
    • Villa-Tech Project Cost Summary Table 7-8 illustrates the summary of the results of the bottom-up project estimate started in Table 7-1 for the Villa-Tech project. The PM inserted the estimates into the Table 7-1 spreadsheet for which functional managers provided labor, material, travel and ODC costs. After due consideration, the Villa-Tech PM together with the functional managers deemed the risk to complete the project’s activities to be within +/-10% of the cost and therefore, added no risk funding to the price. Summing the individual columns in Table 7- 8 yields a price to the customer of $640,704. Villa-Tech executives consider this price in the light of the organization’s desire and need for the job. After due diligence they submit a bid to the customer. Figure 7-1 -- Project Lifecycle Phases No. of people on the job or Labor Hours or Project Spending TIMEContract Design, InstallationAward Planning - Training Transfer to Assembling Team & Development & Maintenance Disbursing Work Test 279
    • Project Spending ProfileThe project lifecycle discussed in Chapter 3 and reproduced in Figure 7-1 provides anapproximate illustration of the project spending at any point in a large project.Integrating or summing up the costs in Figure 7-1 with respect to time yields thecumulative project spending profile or “S” curve shown in Figure 7-2. Projects usuallystart spending money slowly. The initial project activities require planning. The PMdevelops work packages to make certain that the team members perform productively.These packages authorize employees in the various departments to start the project.They contain brief descriptions of specific work activities, schedules, and associatedbudgets. The project manager assembles a team. Employees prepare documentationfor subcontracts. These initial tasks require a relatively small number of people.Consequently, the spending is low. The rates of spending increases during thedevelopment effort wherein departments make major project purchases and the bulk ofthe money for labor is spent. As the project enters the test and installation phases,spending tales off. The project usually concludes with the completion of the siteacceptance test and training. These latter items involve a relatively small number of theorganization’s personnel. 280
    • Figure 7-2 Time Distribution of Project Labor or Cost ($)ProjectCumulativeLabor Hoursor Cost Time Bottom up Estimate Summary The accuracy of the bottom up estimate depends on the quality of the input received from the stakeholders participating in the process. This team examines every task in the WBS and provides expert judgement of the labor involved in completing the activities. They estimate time and material based on their experience performing similar activities on other projects. By submitting an estimate, the individual estimators make a commitment to complete the job with the specified hours. Many people participate in the exercise resulting in a highly labor intensive and expensive effort. A concern arises if team members lack expertise in new or different technologies -- their 281
    • estimates lack credibility. Project cost evaluators take issue with expert judgement as itdepends on the personnel making the estimate. Individual biases may slant theestimate and some estimators don’t document their work well. For this reason,organizations frequently maintain a historical record of the costs of previous jobs tosupport the staff’s expert judgement. Cost data associated with previously completedwork authorizations enables the team to develop an accurate new estimate for theproject under consideration. Based on this documented past experience, the team canarrive at a reasonable rationale for the activity’s costs.Top Down EstimateThe bottom-up approach provides an accurate approach to project estimating.However, it is labor intensive and takes time for the team to complete. A top-downestimate yields a project estimate in a relatively short time and uses a minimum of laborhouse to support the estimate. Top-down estimates use rules of thumb, parametricmodels, analogies, or commercial databases. Project planners and estimators canchoose apply these techniques to the entire job or only a portion of the project.Rule of Thumb Cost Estimating ApproachExamples of cost estimating relationships or rules of thumb based on historicalexperience include 2.5 hours of software labor time to develop a line of source code, ortwo-hours of labor time to write a single page of text in a technical document, or $125 ofcost per square foot for home construction. Project planners and estimators arrive atthese values after participating in a variety of projects and develop these rules. 282
    • Sometimes the industry accepts these values as a good reference point, other timesthe values are company specific.Parametric ModelingParametric modeling involves the use of project characteristics (parameters) in amathematical model to predict a gross estimate for development project costs. Once agroup has achieved confidence in a parametric model, the calculation is fast andinexpensive. Practitioners find this objective approach to cost estimating consistent andrepeatable. As with all estimates, the result depends on the quality of the informationinserted into the system. The model requires calibration by the user, which limits itseffectiveness to the use of old technology. If the technical staff decides to use newtechnology, the results will require some tinkering to accommodate the new approach.Only after project completion and the insertion of the actual labor results into the modelwill the parametric system provide a more accurate labor estimate with the use of thenew technology. Some organizations use the results obtained from parametric modelestimates as independent assessments of cost estimates prepared by other methods.Managers call this a “sanity check” on the calculations obtained from a bottom-upestimate.Several commercial databases using parametric models exist. These include Cocomoand the Price system. The Martin Marietta Price Systems (formerly RCA Price andthen GE Price) models both hardware and software. As with all parametric models, the 283
    • systems require extensive training and user calibration before application on actualbids.The PRICE H Model provides hardware system cost estimates based on • quantitative parameters such as system complexity, quantity, weight, and size • qualitative parameters such as environmental specification, equipment function, packaging and level of integration and • schedule driving parameters such as months to first prototype, manufacturing rate, and amount of new design.The PRICE-S system calculates software development costs from system conceptthrough operational test and evaluation. Costs are calculated and reported for designengineering, programming, data, project management, quality assurance, andconfiguration management.Cocomo is a model designed by Barry W. Boehm to give a labor estimate fordeveloping a software product. The team developed the first COnstructive COst MOdelafter studying about 60 projects at TRW. Boehm states that "Basic COCOMO is goodfor rough order of magnitude estimates of software costs, but its accuracy is necessarilylimited because of its lack of factors to account for differences in hardware constraints,personnel quality and experience, use of modern tools and techniques, and otherproject attributes known to have a significant influence on costs (1981)." Teams atUSC revised the software cost estimation model in the 1990’s to reflect the changes in 284
    • professional software development practices that evolved since its development in the1970s. COCOMO II provides a range for project cost and schedule. The software toolpermits a planner to examine the effects of adjusting requirements, resources, andstaffing on costs and schedules (e.g., for risk management or job bidding purposes).The following list of organizations provides those interested in pursuing additionalinformation about parametric estimating techniques a starting point: Galorath Incorporated -- www.galorath.com/SEER_tools.html Mainstay Software Corporation -- www.mainstay.com NASA/Air Force Cost Model -- www.jsc.nasa.gov/bu2/NAFCOM.html PRICE Systems -- www.pricesystems.com Quantitative Software Management -- www.qsm.com Acquisition Reform Network -- www-far.npr.gov COCOMO Models -- sunset.usc.edu/COCOMOII/suite.html Cost Estimating Resources-- www.jsc.nasa.gov/bu2/resources.html Defense Acquisition Desk book -- www.deskbook.osd.mil DOD Acquisition Reform -- www.acq.osd.mil/ar/ar.htm National Performance Review (NPR) -- www.npr.gov Software Engineering Institute (SEI) -- www.sei.cmu.edu Software Engineering Laboratory (SEL) -- sel.gsfc.nasa.gov Software Technology Support Center (STSC) -- www.stsc.hill.af.mil International Society of Parametric Analysts (ISPA) -- http://www.ispa-cost.org Tecolote Research, Inc.-- http://www.aceit.com/Products/ace.htm 285
    • Analogous Estimating TechniqueAnalogous estimating uses the actual cost of a previous, similar project as the basis forestimating the cost of the current project. The approach assumes that comparableelements of the new and existing systems and subsystems cost the same. The projectplanner together with other stakeholders concludes that a prospective job opportunity isa constant percentage more or less difficult than a similar previous job. Based on theircollective experience, they arrive at a percentage that expresses the degree of difficultyas compared to the reference project. The estimator multiplies the cost of thereference job by this number to arrive at a cost for the opportunity under consideration.Managers sometimes use this technique to estimate total project costs if only a limitedamount of detailed information exists about the project. Here again, people may havedifficulty estimating new technologies because of the lack of a precedent referenceproject.As an example of analogous estimating, suppose a company receives an RFQ to quoteon the purchase, installation, networking and test of 100 computers. The estimatorassigned to the project recalls that a previous network installation of 150 computers inan office building actually cost $750,000 inclusive of all direct and indirect costs.Based on the principle of analogous estimating, the planner concludes that since 100computers represents two-thirds of the previous job; a reasonable estimate would betwo-thirds of $750,000 or $500,000. This approach is fast, easy, and economical but is 286
    • heavily dependent on the accuracy of the information about prior work. It also requiresthe expertise of people qualified to evaluate and compare different jobs.Learning CurveThis last project can also use another approach to estimate the opportunity. Theconcept of a learning curve recognizes that employee productivity improves as theperson gains familiarity with the sequence of activities involved in the productionprocess. Task repetition results in a learning effect. “Practice makes perfect.” Up to apoint, people gain familiarity with a process, they become more skilled and the timetaken to complete the process decreases. Musicians and athletes understand thelearning experience well. As they train, their confidence grows; they gain speed,improve reliability and gain accuracy. Plotting the number of wrong notes that a studentlearning a musical instrument plays while practicing a new piece might look like the datain Table 7-9.Table 7-9 – Improvements Resulting from Practicing an Instrument No. of Repetitions No. of Incorrect Musical Notes 1 20 2 12 3 9 4 7 5 6 6 6 7 5 8 4The student experienced a learning effect. Initially unfamiliar with the piece, the studentgained confidence and expertise after each repetition and the number of incorrect notes 287
    • decreased. The majority of the learning benefit occurred over the first few attempts, butcontinual slight improvement occurred over time.T. P. Wright published an article in the February 1936 Journal of the AeronauticalScience describing the learning curve concept as applied to the aircraft industry. In thearticle, he described a theory for obtaining cost estimates based on repetitiveproduction of airplane assemblies. Ever since, estimators have applied learningcurves to all types of work ranging from simple to complex tasks.The learning curve states that each time the quantity produced doubles, the cumulativeaverage time to produce a unit reduces by a constant percentage of the previouscumulative time. As an example, suppose a technician performs a site acceptance teston a recently installed computing system. The functional manager estimates that thefirst system requires 100 hours to test and prepare a written report. The managerbelieves that subsequent tests will follow an 80% learning curve. Applying the learningcurve concept results in an 80 hour per system average test time for the first twosystems and a 64 hour per system average test time for the first four systems. Table7-10 shows the results of this 80% learning curve.Table 7-10 80% Learning Curve Applied to a Computer System Test No. of Learning Curve Average Estimated Cumulative Estimated Units Factor time to Test units Time to Test n Units Tested - n (Hours/unit) (hours) 1 100 100 288
    • 2 80% 80 160 4 80% 64 256 8 80% 51.2 409.6 16 80% 40.96 655.36The first unit required 100 hours to test. The second unit, doubling the previousquantity of one, results in an average of 80 hours of test time to test each unit for a totalof 160 hours for the 2 units. Doubling the tested systems to 4 units reduces theaverage time to test and prepare a report to 80% of 80 hours or 64 hours, which resultsin a total estimated time of 256 hours. The learning curve process continues as shownin the remainder of table 7-10.Table 7-11 90% Learning Curve Applied to a Computer System Test Learning Curve Average No. of Cumulative Estimated Factor Estimated time to Units Time to Test n Units Test unitsTested – n (hours) (Hours/unit) 1 100 100 2 90% 90 180 4 90% 81 324 8 90% 72.9 583.2 16 90% 65.61 1049.76Table 7-12 100% Learning Curve Applied to a Computer System Test – No Learning No. of Learning Curve Average Estimated Cumulative Estimated Units Factor time to Test units Time to Test n UnitsTested – n (Hours/unit) (hours) 289
    • 1 100 100 2 100% 100 200 4 100% 100 400 8 100% 100 800 16 100% 100 1,600Table 7-13 50% Learning Curve Applied to a Computer System Test No. of Learning Curve Average Estimated Cumulative Estimated Units Factor time to Test units Time to Test n Units Tested - n (Hours/unit) (hours) 1 100 100 2 50% 50 100 4 50% 25 100 8 50% 12.5 100 16 50% 6.25 100Table 7-11 illustrates the time required to perform the identical tests using a 90%learning curve. Note that the average test time increases compared with the 80%curve. The learning curve upper limit of 100% means that learning does not take placeat all. Each system takes the same labor time as the first system (see Table 7-12). A50% learning curve results (Table 7-13) if the worker takes no additional time to test thenext doubled number of systems. Using a 50% learning curve is akin to a perpetualmotion machine. It is difficult to conceive of testing n systems for the price of one.The estimator can use the log-log graph in Figure 7- 3 to calculate the labor hours tocomplete a repetitive task. Suppose the first system requires 100 hours, we canestimate the labor to complete ten systems using the monograph. For a ten system 290
    • production run, the average number of hours to complete a system using a 75, 80, and85% learning curve is approximately 39, 49 and 60 hours respectively. The cumulativenumbers of hours to complete ten systems assuming the 75, 80, and 85% learningcurves are 390, 490, and 600 hours. Of course, if no learning took place, the ten-system completion total would be 1000 hours. 291
    • Figure 7-3 – Learning Curve Parametric GraphFigure 7-4 illustrates the use of the learning curve graph to calculate the labor hours formultiple prototype systems with an initial system estimate other than 100 hours.Suppose a planner uses the graph to estimate the labor hours required to build 2, 5 and10 computer prototype systems. Figure 7-3 provides data for units based on a 100-hour first unit . The estimator feels confident that the first system will take 150 hours.Create an adjustment factor, which is the ratio of the system number 1 labor estimateto the system 1 baseline reference of 100 hours (150/100). From Figure 7-3, we read 292
    • that for a 5 prototype run, the average number of labor hours per system with a 75%learning curve is 52 hours. Adjust the average number of hours to compensate for the150 hour initial system effort. Do this by multiplying 52 hours by the 1.5 adjustmentfactor, which results in an average of 78 hours per system. The total number of hoursto produce 5 systems is found by multiplying 78 hours by 5 or 390 hours. 293
    • Figure 7- 4 Use of the Learning Curve Parametric GraphNumber of Systems 1 2 5 10ProducedLabor hours required 150 150 150 150for system #1Ratio of labor 1.5 1.5 1.5 1.5estimate for systemno. 1 to reference(100 hours)From Figure 3 - 100 75 52 39Average number oflabor hours persystem with a 75%learning curveAdjusted Average 150 113 78 59number of Laborhours with a 75%learning curveTotal Labor hours 150 126 390 590with a 75% learningcurve 294
    • Learning curves usually range from 75% to 90%. A 90% learning curve represents acautious selection that anticipates a modest amount of learning, whereas a 75% curverepresents an aggressive estimate that expects the stakeholders to learn rapidly. Theselection of the learning curve can dramatically affect the labor estimate and thereforethe price of a project. Even if the technician or engineer does not contribute to theestimate for a repetitive task, you can assume that the project manager has applied thiscurve to the estimate. The PM will expect to see reductions in the labor effort as therepetitive work progresses. If you are the technologist performing this repetitive task,anticipate a visit from the PM if the reduction doesn’t correspond to the estimate’spredictions.Project Estimating SummaryAccurately predicting the cost of a project is vital to the survival of any organization. Theproject manager has the responsibility for assembling and gathering ! Labor estimates, ! Material costs, ! New equipment and tool costs, ! Special training costs ! Amount of business related travel, ! Consultant usage costs, ! Other required project resources, ! Quantitative estimates of risk, and ! Coordinating prospective subcontractor bids. 295
    • To remain competitive, organizations must arrive at the lowest price yet deliver atechnically superior product or service in the fastest time with the best quality – themodern technology mantra faster, cheaper, better. A challenge to be sure and theteam led by the PM must make it happen.The estimating process begins with the decision to submit a bid. After reviewing thespecifications and other project documentation, the estimator meets with the functionalmanagers to decide on the methodology used to calculate the price -- top-down orbottom-up, and learning curve percentage. The project estimator compiles andanalyzes data on all the factors that can influence costs—such as materials, labor,location, and equipment. Since most organizations earn only a relatively small profitmargin on many projects, it is vital to obtain an accurate answer. The accuracy of theresultant effort will determine the project’s financial success. As a top-down estimaterequires appropriate historical data as well as software and personnel training, smallerorganizations that have not acquired the software may decide to use a bottom-upapproach – sometimes in combination with an analogous method to complete theestimate. Many senior executives use their own favorite rules of thumb to test the“sanity” of the organization’s final estimate.Estimating the impact of a new technology on a project represents a challenge toalmost all of the cost estimating approaches discussed. Technical staff unfamiliar withthe use of a new tool will usually require more time than expected to gain the requiredexpertise. The staff may require formal training in the use of new or different versions 296
    • of existing products. Cutting edge efforts may even use tools or equipment that have“bugs” – usage problems not yet worked out. Manufacturers sometimes offer “Beta”software packages, which means they have not yet formally released the product forsale because minor technical issues remain. The use of unproven software will slowdown the project. Teams must make allowances for new tools, equipment andtechnologies. Aggressive labor estimates in these cases will likely come back to hauntthe organization. Project cost estimating is as much an art as a skill. It improves withexperience.If time permits, the use of multiple estimating techniques will corroborate thetechnologist’s expert judgement. Anticipate a management review of the estimate.Executives will examine the resulting estimate from a broad perspective. They will likelynot examine the details that support the estimate. Instead, they will pay particularattention to the final price and compare it to the organization’s intelligence on thecompetition’s submittal and the customer’s expectations. Management will also take aclose look at the anticipated profit percentage and the risk exposure. Quantify the risk.As part of the risk analysis, be prepared to discuss the following issues: ! Technical and performance concerns, ! Schedule challenges, ! Organizational labor availability, ! Costs and availability of equipment and tools, ! Cost and availability of other required resources, ! Required personnel training, 297
    • ! Supplier problems, ! Competitive situations, and ! Other cost drivers.After reviewing and digesting this information, management will decide to go with theestimating team’s recommendation, adjust the price, or possibly no-bid the job.Cost ManagementYou win the contract. Congratulations, but you have no time for celebrating; now yourorganization must perform. Although not the only concern, making a profit is high onthe list. In the preceding sections, we discovered that most corporate profits are only inthe 10-15% region. The PM must protect against excessive spending and this requirescareful cost control procedures. Cost control requires cooperation from everystakeholder. At a minimum, it includes these items: ! Organization Support ! Preparation and distribution of budgets together with Work Authorizations based on the WBS ! Monitoring schedule, technical performance progress and budget ! Data Accumulation and Reporting ! Cost and schedule variance analyses ! Baseline Maintenance and Control -- manage the customer 298
    • Financial and Schedule AnalysisProject cost management begins with a set of expectations that includes a realistic andaccurate estimation of project costs together with an equally valid schedule. It certainlyis not a good first step if suppliers and functional managers gasp and throw up theirhands in horror on first examining the budget and schedule. The PM also has the rightto expect that stakeholders feel committed to support the project by providingappropriate resources at the times designated by the schedule. People work on the jobwhen required. Material arrives on time. Suppliers deliver equipment on time.Personnel obtain the requisite training to use equipment and tools on time. After thePM creates and distributes budgets to the functional managers for each of the workpackages (detailed short tasks) identified in the work breakdown structure, he/sheexpects that stakeholders will act responsively to meet the schedule’s demands.Unfortunately, this frequently doesn’t happen. So the PM carefully monitors the budgetand schedule to identify issues at an early stage. The internal organization completesand submits timecards so that financial administrators can determine who is working onthe job and how much time they are spending. 299
    • Figure 7-5 Comparison of Project’s Budgeted Funds versus Actual Expenditures – OverspendingProjectCumulative Budgeted FundsLabor Hoursor Cost Costs in excess of the budget – a potential problem Actual Expenditures to Date – Curve A Today’s date Time Financial analysts total labor, material purchases, ODC, travel, etc. data on a weekly basis. At the beginning of the project, the PM calculated a spending profile budget. Each week, financial administrators compare the budgeted time distribution of funds to the actual expenditures. If actual charges are too high (figure 7-5), it could signify that a technical problem exists (bad news!) or on the positive side, it could mean that the 300
    • schedule is farther along than initially planned. In the former case, the PM seeks to identify the reasons and then tries to secure greater expertise for the group to enable them to resolve the issues as soon as possible. Figure 7-6 Comparison of Project’s Budgeted Funds versus Actual Expenditures -- Under spendingProjectCumulative Budgeted FundsLabor Hoursor Cost Under spending the budget – a potential problem Actual Expenditures to Date – Curve A Time 301
    • If the actual time and material project charges are lower than the budget (figure 7-6)different issues exist. Perhaps the functional managers overestimated the workcomplexity and accomplished the expected amount of work spending less money thananticipated. (The probability of this happening is only slightly better than a used carsalesperson telling the truth.) The more probable reason for a budget under run fallsinto one or more of these categories: ! Fewer people have worked the job than promised and the project is behind schedule ! The purchasing department has not ordered equipment and material ! Suppliers have not shipped equipment or materialExamining the schedule’s progress should reveal the problem areas. The PM thenexamines the root cause for these issues and focuses on resolving them. Many PMsuse the earned value method, which provides the project manager with a powerfulquantitative tool to monitor schedule and financial progress. Earned value does requirethat the organization have extensive software and administrative capabilities as a greatdeal of information must be collected and analyzed in a short time. An enterpriseresource planning (ERP) system provides the ideal vehicle to collect data. Stakeholders Requiring Special AttentionMany project managers periodically visit or at a minimum maintain contact withsuppliers of critical material and equipment used on the project. The PM contacts thesevendors regularly to discuss technical and schedule progress in an effort to confirm that 302
    • no surprises await them. If technical or schedule issues surface, the PM needs time toprepare “work-arounds.” The PM may devise alternative plans, modify schedules,reshuffle labor, or even consider withdrawing the contract from the subcontractor if theproblems warrant the action.Engineers and technicians enjoy tinkering. They love to experiment, to “tweak” just abit more performance from the system. While scientific curiosity may be an admirabletechnical trait, uncontrolled it can cost time and money. The PM must sometimesremind the technologist to provide customers with the products and servicescontractually agreed upon. The customer should get what they paid for and not a bitmore – if more means additional cost or schedule. Keep the delivery objective in sight.Conversely, if the functional manager or project manager requests a work change, itbehooves the technologist to request added budget and schedule. After all, thetechnician or engineer developing the product or service will also be judged on theiradherence to the schedule and budget.Perhaps the most difficult aspect of cost control involves customer management. .Invariably customers discover at some point in the project that they require a contractchange -- perhaps some additional features, or an additional piece of equipment, oranother report or a newer software version. The changes from an innocent realizationthat the customer missed something in the specification of the original contract mayhave huge ramifications. Once the project has started and the team proceeds, they 303
    • quickly complete tasks. A contract change would require redoing some of the workthereby incurring additional labor charges. Items returned to a supplier may incurrestocking fees. The use of a new or revised software package may bring with itunforeseen system integration issues that cost time. The PM walks a delicate line –balancing contractual agreements with the desire to “delight the customer.” The PMwishes to satisfy the customer in hopes of obtaining repeat business but yet wishes tomake a profit on this project. Keep in mind that the substance of the PM’s annualreview or financial bonus frequently depends on the project’s success. The projectmust turn a profit.A common approach to resolving the issues involves good old “horse trading.” The PMexchanges an existing contractual item for the change that the customer desires. ThePM should attempt to exchange items of similar cost. Say a customer desires toreplace an old but reliable software package with a recently released version. Thefunctional manager would love to use this package since it contains several newfeatures that customer’s have requested. A “win-win” situation emerges. Managementmay view this as an opportunity to invest a small amount of money to update theorganization’s product. Perhaps the new software version incorporates features thatthe organization would develop as part of the project. Using the new software mightsave money. Sometimes the organization can agree to a customer demand inexchange for relieving a difficult contractual specification. 304
    • The PM’s rule of thumb should not change the SOW without a corresponding increasein contract funding. Some government contractors have used this idea to theiradvantage. Recognizing that the vast majority of contracts involve changes aftercontract award, they would bid the job with little or no profit. After they won thecontract, the organization would “get well” by charging very significant sums for thechanges that almost certainly follow the award. 305
    • Chapter 7 Questions1) Explain the statement that a project manager has responsibility for the following -- technical content, project cost, and schedule.2) What quantitative measures can a project manager use to determine that project activities are progressing satisfactorily? a) Examine budget b) Compare labor and material budget with actual expenditures c) Compare schedule plan to actual progress d) Ask the functional managers e) Ask the company’s vice president3) Explain the difference between bottom-up and top-down estimating.4) True or false: A project manager uses a learning curve to estimate the labor time required to perform repetitive activities.5) The time required for a person to perform an activity a second time will usually take more or less time than required to perform the activity the first time. Explain your answer.6) Describe the difference between direct and indirect costs.7) Explain the purpose of a material-handling fee. Do you think it justified? Explain.8) Give examples of Other Direct Costs (ODC) that may be charged to a project.9) Describe the difference between overhead and general and administrative (G&A) costs. 306
    • 10) Your boss has developed the following documentation preparation time rules of thumb: Each Power Point slide requires 45 minutes per page including research time. Each text page requires 6 hours. Each graphic (picture, drawing, etc.) requires 2 hours. The contract requires the preparation of a training manual. Based on similar previous jobs, the trainers estimate that a manual will contain 25 pages of text and 12 graphic illustrations. They estimate that they will require 37 slides to teach the course associated with the product. Estimate the time (in hours) to complete the training manual document and the training class presentation.11) Why does the use of a new hardware or software tool entail some measure of risk? How should the project or functional managers minimize this risk?12) A small service business wishes to determine the amount of money to charge its customers. The service manager calculates that the average salary the company pays its technicians is $32 per hour. The company’s accountant informs the service manager that the overhead expense and general and administrative (G&A) rates are 50 and 25%, respectively. The company president informs the service manager that they expect a 20% profit. What labor charge should the service manager charge the company’s customers on an hourly basis?13) Explain the difference between the price a customer pays for the product or service and the developer’s cost. 307
    • 14) As the project manager for a medium sized company, you have collected the following data from the organization’s functional department managers during a proposal preparation effort.Functional Average Labor Dept. Material Travel, Living ConsultantsDepartment Salary - Hours Overhead Purchases & & -$ $ Rate Leases/Rentals - Entertainment - % $ -$Electrical $45.50 1775 55 $45,000 $800 $4,400EngineeringMechanical $42.75 225 55 $31,000 $500 $5,100EngineeringSoftware $48.10 2400 45 $37,000 $1,000 $6,200EngNetwork Eng $53.00 160 48 $29,000Technician $31.60 310 35 $1,000 $500Field Service $29.30 145 40 $1,500 $2,500Training $28.75 90 30 570 $4,200The company’s accountant informs you that the organization’s general andadministrative (G&A) rate is 33%. The software department has indicated that theyhave a 10% risk associated with the development process. No other department hasidentified significant risk. The company’s vice-president expects to earn a 15% profitand has asked you to prepare a chart that summarizes the project’s costs and the priceto the customer. She would like to discuss the project with you tomorrow afternoon. a) What information will you bring to the meeting with the vice president? 308
    • b) Will you request support personnel to accompany you to the meeting? If so, who and why will you bring them? c) Prepare the financial material that you will show to the vice president that leads to the suggested customer price. Keep in mind that the material must be clear – almost self-explanatory. Minimize written material and try to organize the material in charts.15) Team Project: The following problem simulates a small business activity. You will create a three member team corresponding to the three owners of CompRep -- a small system maintenance and repair company. The principals represent three different perspectives. Gayle provided the majority of risk funding to start the business and becomes involved in major business decisions. She invested $100,000 into the business at its founding. As the major investor, she is interested in protecting her investment and expects to see at least a 10% annual return on her money. Keisha provides the technical expertise. She is thoroughly familiar with the construction, maintenance, repair, and networking software associated with computers. Keisha has passed the A+, N+, Project +, MCP, MCSE, CNA and CCNA certification examinations. Her motto is “Never fear, Keisha is here.” She receives a salary of $45,000 per year. Tamir is in charge of sales. During the past three years, maintenance and repair contract sales have grown consistently from $200,000 in the first year to last year’s $450,000 total. Tamir works on a 6% commission of the gross sales price. He wants to offer the customer a low contract price to get their business. After all, no sale means no commission and no salary for Tamir. 309
    • The CompRep owners have decided to bid on a two-year computer maintenanceand repair project for a local school district. The school district has 780 computerslocated in two buildings that are 10 miles apart. The schools are open for operation180 days per year. The school district has determined that on the average, 1% ofthe computers fail each week of operation. The chart below illustrates the historiccomponent failure rate for the computers. Component Distribution of Present Year Average Labor component and Average to diagnose module Failures Material cost - and repair - -% $ HoursPower supply 45 75 1.2Memory chip 15 68 0.6Floppy disk 8 27 1.5Hard drive 5 179 2.5Sound card 3 79 0.8Video card 3 119 0.8Mother board 5 375 2.5Network interface card 6 65 0.9Other interface cards 9 55 1.0Cables and connectors 1 30 1.0The CompRep facility lies mid-way between the two schools. The contract demandsa 24-hour repair turn-around time. Service personnel may gain access to the schoolfrom Monday to Friday between the hours of hours of 8:00 a.m. to 4:00 p.m.Component distributors guarantee to deliver replacement components within 48hours of placing an order. The existing business presently grosses $450,000 310
    • annually. The owners wish to expand the business and winning this contractrepresents a significant step in this direction.As the owners of this company, your team must calculate a competitive price tosubmit to the school district. In addition to Keisha and Tamir, CompRep alsoemploys another computer technician and a receptionist on a full time basis for atotal of four full-time employees. Half-time employees include a bookkeeper and acomputer technician. As your team goes through the bid process, questions willarise that will require the principles to make certain assumptions. Note thesequestions and the assumptions reached about CompRep and its business. Item Quantity Annual Comment Expense -$ Salaries of Full-time employees 4 Salaries of Part-time employees 2 Legal expenses $1,500 Retainer – review documents Advertising expenses $7,500 Rent $30,000 Utilities $8000 Liability insurance $4000 Office supplies Professional and local organization membership Facility maintenance and repair $1000 Office equipment costs FAX, copy machine, cell phone, office phonea) Complete the annual costs omitted in the chart.b) Calculate CompRep’s annual payroll. 311
    • c) Calculate the overhead and G&A expenses. Assume that FICA and Medicaid taxes total 10% of the employees’ annual salary.d) Decide if you need to stock certain hardware components. If stock is required, identify which components and the quantity to purchase.e) What profit should CompRep seek?f) What was the cost of living increase last year? How would you find this out?g) As this is a two-year contract, separate the costs into year 1 and year 2 to take into account the likelihood of inflation increases in labor and material.h) Based on the data provided, how many trips to each school are required during the year? What is the annual transportation cost? Use a travel expense of $.33 per mile in your calculations.i) How much labor time is required to fulfill the contract requirements?j) What price will CompRep submit to the customer for the two-year computer maintenance and repair contract? Support your team’s decision with the appropriate spreadsheet calculations. 312
    • CHAPTER 8 Project Communications There is a w and e but no i in teamwork. <>Chapter objectivesAfter studying this chapter, you should be able to: Understand the role of communications in projects. Prepare crisp, informative and to-the-point memos. Conduct a worthwhile meeting. Understand how to follow-up on meeting actionsCommunications represents a process for exchanging information among people. Inorganizations, we use a variety of means to inform and influence others that includesthe following: ♦ Written messages such as memos and reports ♦ Discussions that use verbal and nonverbal information exchanges ♦ Telephone conversations 313
    • ♦ Radio and video conferencing ♦ Meetings ♦ Lectures ♦ Graphics (charts, illustrations, photographs, clip-art, graphs)Project communication includes the processes required to ensure timely andappropriate generation, collection, dissemination, storage, and ultimate disposition ofproject information (PMBOK). Technical project managers spend a large portion of theday receiving or distributing information. The delivery of this information frequentlydemands project managers with excellent social as well as technical skills. Knowinghow and when to say and present information is just as important as knowing what tosay.Communications ManagementDuring the early project phases, project managers promote the exchange of technicalrequirements, data, interface descriptions, assignment responsibilities, schedules, workauthorizations and contractual documents among stakeholders. Throughout the job,the PM prepares performance and status reporting information after receiving data fromthe stakeholders. Members of the organization submit interim reports to management,regulatory agencies, suppliers, and the customer. All stakeholders need to be quicklyinformed about significant issues that arise during the project. The PM controls andcoordinates this information flow. The end of the job brings with it a flurry ofdocumentation preparation that includes test reports, final product or service 314
    • descriptions, training and maintenance manuals, and financial analyses. Delivery andinstallation of the newly developed product requires a good deal of interaction betweenproject and customer personnel. Finally just before closing out the project, the staffprepares a list of “lessons learned” and shares the information with colleagues. In thisway, everyone benefits from one another’s experience.Table 8-1 illustrates the varied type of information exchanged by technologists duringthe project. Depending on the recipient, technologists prepare material in differentways. Personnel frequently submit monthly reports and descriptions of problems andissues by E-mail. Many use overhead transparencies or present a Power Pointpresentation for larger audiences. Unbelievably, governmental agencies and somelarge organizations still insist on typewriters for completing some standard forms. 315
    • Table 8-1 Information transfer considerations Feature ExamplesTarget audience Colleagues, manufacturing, customers, technicians, management, government regulators, suppliersMaterial Type Data sheets, specifications, documents, drawings, graphics, reports, proposals, letters, orders, statements, invoices, schematics, manuals, contracts, samples, memos, technical information, directions, standard formsTransfer Time Urgency Overnight, immediate, futureTransfer Method E-mail, US mail, overnight delivery, courier service, telephone conference, voice mail, video, meetings, lectureElectronic format ASCII files, rtf, Word files, Macintosh or PC, voice, video, other application specific software.Electronic images Gif, jpeg, bmp, tifMedia Paper, vellum, electronic (e.g., zip drive, floppy disk, magnetic tape), computer display, overhead transparencies, 35 mm slides. 316
    • Communication PathwaysA project usually requires decisions and actions from a large number of areas. Mostinformation exchange takes place in a lateral direction -- among colleagues in functionalgroups. Figure 8-1 illustrates the usual communication pathways followed by projectstakeholders. For example, only the project manager should speak with the customer.The PM provides the customer’s point of contact with the organization. Commitment toperform a task or agreement for a change normally comes from the PM. If a topic ofdiscussion with the customer involves details with which the PM does not feelcomfortable, then the PM frequently requests a technical person to participate indiscussions. PMs lead management briefings. Functional groups, manufacturing, andsuppliers support the effort as required. If required to hire permanent or temporaryworkers, then each of the internal stakeholders work with the human resourcedepartment directly. 317
    • Customers Executive Management, Sales & MarketingFunctionalGroups Project Management Project Manager Office Operations - Human Resources Manufacturing Purchasing Incoming Inspection Suppliers Figure 8-1 Communication Pathways 318
    • Organization Communications ProtocolIn their zeal to impress all people in the organization with their unbounded knowledge,new employees sometimes let the ease of adding names to the E-mail list overcomegood judgement. Always inform your immediate supervisor first about anything andeverything. Report problems, issues, customer compliments or complaints, latedeliveries, system failures, machine breakdowns, whatever else … to your supervisor.The novice technician loves to announce to the immediate world that they havediscovered the “next best thing to sliced bread.” They have solved problems that havetroubled the organization since the founders began operation. Wait. Informing yourboss’s boss before informing your boss violates courtesy as well as an unwrittenorganizational cardinal rule. Weber’s organizational hierarchy still applies. Follow thechain of command and give your supervisor the courtesy of assessing your finding.Then let your supervisor suggest the time, place and the people to whom to announcethe information.Personnel in the organization have an assortment of political agendas. Upsetting yoursupervisor may impede your advancement. Making your boss look good may bringchoice job opportunities and a better chance for a salary increase. Remember thefunctional manager assigns work and recommends people for promotion and salaryadjustments. Develop your supervisor into an ally. Become a team player. Treadlightly and share the glory until you have learned to operate in the politicalorganizational jungle.Communications Process 319
    • The project manager has the responsibility for the flow of information. S/he makesneeded information available to project stakeholders in a timely manner (PMBOK). ThePM decides on the message content, to whom to send the message, the tone of themessage, and the degree of technical complexity. Highly technical informationsometimes requires translation into language that all can understand. Politicallysensitive or damaging messages require the selection of words calculated to minimizethe organization’s discomfort. Project managers use communication to buildconsensus.Depending on our backgrounds, we interpret words in different ways. Sociologyteaches us that people from different cultures have different expectations andperceptions. In our diverse organizational environment, we interpret statementsdifferently. Suppose you saw the following E-mail messages:Message #1 COME SEE ME! BOBMessage #2 See me at your earliest convenience. BillBoth messages convey the same information, but after the first, you think “Uh Oh, whathave I done now.” The tone of the second message is not quite as threatening. Manypeople familiar with E-mail interpret all capitals as shouting. On the other hand, Bobmay not be an experienced typist and does not want to bother with lower case letters. 320
    • Figure 8-2 illustrates a message interpreted differently by two people. Maria commentsthat she would like to eat strawberries for lunch and Tom interprets the snack requestas strawberry pie. A minor misunderstanding, but not unusual. Use specifics inconveying information to others in order to minimize misinterpretation. Some culturesprefer a forthright and frank presentation. Others find that approach offensive. Thinkabout the people to whom we send information. Respect their sensitivities. We allbring unique personality and background experiences to the workplace, which maycolor our interpretation of the information.MessageSource Message Personality Personality, Destination Experience Perception & Encoder and Experience Filter Decoder and FilterFigure 8-2 The communication encoder decoder environmentConducting Effective MeetingsProject managers spend a lot of time in meetings. Meetings represent a cost effectiveway to convey information to a group of people. It is certainly less time consuming tomeet collectively than individually. Participants discuss the presented information and 321
    • begin to clarify issues. During the meeting, activities frequently arise that requiresfurther information. At the conclusion of the meeting, the chair reviews the activitiesdiscussed and assigns action items. That is, the chair requests selected people toobtain answers to questions arising during the meeting.An effective meeting requires preparation (figure 8-3). Before calling the meeting, thinkthrough the items you expect to accomplish. Prepare an agenda to clarify the meeting’spurposes. The agenda should reflect the meeting’s priorities. If not officially part of theagenda, estimate the time that you will allocate to each topic on the agenda. Selectand inform the people that you wish to attend the meeting. Include the agenda, startingtime, place and anticipated length of the meeting in your notice requesting people toattend the meeting. The latter item acknowledges that people have busy schedulesand represents a courtesy to enable them to plan the remainder of their day. Start themeeting on time. If people are late, conduct the meeting without them. If you beginlate, people will come late.Distribute data, documents and special information in advance. This is especially true ifthe group will review or make decisions regarding the material. If possible, try to permitall people to comment on the material, but do not let anyone dominate the discussion.At the start of the meeting, assign a person to take minutes. Meeting participantsshould receive copies of the minutes within a reasonable time following the event. Nomeeting is complete without assigning action items. During the course of mostmeetings, participants raise issues requiring examination and resolution. The meeting 322
    • chair assigns responsibility to resolve these actions to appropriate people and expectsresolution by an agreed date. Unless the work demands a specific deadline date,request the person assigned to the action item for a reasonable closure date. Often,the participants decide to hold another meeting to review the progress or completion ofthe action items. 323
    • Figure 8-3 Procedure for Effective Meetings Distribute Information Select People Data Notify People -- Time & Place Agenda ~-~-~~~-~-~ ~-~-~~~-~-~ Hold MeetingReview Action Items Minutes ~~--`..-~~ - -`--‘~~~~+- 324
    • MemosMemos represent the grease for the communication machinery that makes thingshappen in today’s moderate to large size organization. A memo is a no-nonsensecommunications document. It is designed to quickly inform or ask something frompeople within an organization or work group. Employees use memos to tell theirsupervisor that they accomplished a specific task or they have confronted a problem.Many project managers keep a memo record of the activities performed on the project.They create a paper trail for the actions and agreements among the projectstakeholders. While most memos are brief, they should follow good technical writingprinciples. They use clear and accurate language. Memos reflect back onto theorganization and the person that wrote it. Stakeholders jump to the conclusion that thewriter of a sloppily written and unclear memo is unfocused.E-mail messages are by far the most common form of memo. Every memo shouldfollow E-mail format. It should include the following basic information: Date: To: From: cc: Subject: Memo Body 325
    • The term cc comes from Carbon Copy paper. While obsolete technology, the termpersists. People placed on the cc list receive a copy of the memo. Observe the chainof command. Gain the trust and respect of your management organization bydistributing memos to the proper personnel.Make your memos short and to the point – no more than one page. Clearly state thepurpose in the first paragraph – preferably in the first sentence. Indeed, why do youwant to write that memo? Crystallize your objective. Ask for something. Providesupporting and clarifying information in subsequent paragraphs. Answer the journalistsquestions: who, what, when, where, and why. Use bullet lists to get your idea acrosssuccinctly. The memo receiver can then immediately prioritize the memo’s importanceand decide whether or not to read the additional information. Do not use jargon unlessyou are certain the reader will understand it. To be on the safe side, define unusualexpressions and acronyms. Organize performance information, status reporting,progress measurement, forecasting, and other numerical based reports into charts withappropriate column headings. Send copies of the memo to those people that have aneed for the information.Always be polite and upbeat. Unless the purpose of the memo is simply to inform,conclude with action recommendations. State the actions that you plan to take next andidentify the completion dates. Managers value the professional that identifies aproblem and provides recommendations to solve it. 326
    • Finally, proofread the document. Does it say what you mean? Soften criticism. Deleteoverly harsh comments. Do not use the memo as a cathartic psychological experienceto vent your emotions. Check your English usage. Use the spell check word processorfeature. Proofread it again. Spell check will not catch correctly spelled words usedincorrectly. Obvious grammatical errors and misspellings reflect badly on the memowriter.ListeningPerhaps the most difficult aspect of communication is listening. We all love to talk andhave our view heard. Do we really listen to others?The single most important step to improve our listening skills requires us to stop talking.Pay attention to people. Listen to their verbal statements and watch their nonverbalgestures. Look at the speaker. Make eye contact. Your eyes pick up the nonverbalsignals that people send out when they are speaking. Show you want to listen byputting the talker at ease and removing distractions. Stop answering the telephone andhalt other interruptions. Be patient and let the talker get the idea across. Hold yourtemper and take it easy on arguments and criticism. This does not mean that youshould not react to the speaker. Show emotion. Move your face to indicate that youfollow what the speaker has to say. Ask questions. Listen to the answers and repeatthe speaker’s words to emphasize that you are listening. Remain open to new ideas.People feel strongly about issues and want to be taken seriously. Even if you do notagree with a person’s argument, listening to it helps to build rapport between you and 327
    • the other group members. During the ensuing discussions, put forth your points firmlybut in a friendly manner. Support your opinions with facts and refer back to pointsmade by other members of the group.During the project lifecycle, we continually engage in negotiation -- the processthrough which two people or groups with differing wishes or views strive to reach asatisfactory agreement. The parties may not reach a level of mutual satisfaction, butthey can accommodate the decision.You cannot begin to negotiate until you listen to the other party. Only after groupsbegin to understand one another can they work toward a solution to their disagreement.Listen and ask for your colleague’s opinions. Then build on others’ ideas and offer yourown ideas. The structure of a compromise solution frequently evolves -- borrowing fromeveryone’s ideas and melding them together.Listening is just one of the people skills that project managers develop. A projectmanager gets things done through people. Respect people and foster trust. Givesupport and help as needed. Make your expectations clear. Let people do their thingand let them know how they are doing. Do not micromanage every task. Offer praise.Praise does not cost anything and can sometimes make employees who feelundervalued more cooperative. Establish an open and active communications policyearly in the project. 328
    • Verbal Communications Telephone ProtocolTelephone conversations consume project managers for much of the day. The PMspeaks with suppliers, aids a technician in obtaining technical information, requests astatus report from a software functional manager, asks FedEx about their deliveryschedule, requests travel information, reassures a customer regarding their order,discusses a personnel issue with a member of the human resource department,requests financial information from an administrative assistant and talks with otherinternal and external stakeholders about a myriad number of issues. The PM followscorrect telephone protocol during these telephone meetings. Identify yourself at thebeginning of the phone call. A typical greeting might be “This is Jane Dawkinsspeaking. May I help you?” If you initiate the call, immediately state “Good morning,this is José Padua. I am a project manager from Villa-Tech and I am inquiring about______________.”Courtesy and tact is mandatory. Perhaps the customer just finished yelling at you foromitting an instrument from the last shipment, which caused a week slippage in theirschedule. The customer vented all their frustration on you and you feel like exploding.Naturally, you remained calm and courteous during the customer’s tirade. Youexplained that the omission was inadvertent and would never happen again. You getoff the phone drained and upset. This is a time to take a break. Do not answeranother phone until you calm down. A customer will detect your upset and stressed 329
    • condition if you answer the phone immediately following this episode. Avoidjeopardizing relationships by placing yourself under further stress.Take notes during the conversation. Develop a rapport with the caller by using theirname. At the end of the call, briefly summarize the actions that each of you will take.The exchange may warrant a summary E-mail sent to the caller with copies to acolleague or your supervisor. Sometimes you may want to send the summary e-mailonly to yourself as a record of the conversation. The E-mail system provides anopportunity to maintain a historic record of the project’s communications. Face-to-face meetingsSpeaking in front of both large and small groups is a fact of organizational life. The PMdoes it everyday. Your talks should inform, persuade and involve the participants.Conduct conversations with one or two people in a businesslike manner. Stick to thetechnical or business matters. Take care to minimize small talk or non-business relateddiscussion. This area is fraught with danger. Avoid discussions about politics, religion,race, ethnicity, gender issues, sex and your personal or family issues. People hold verystrong opinions about politics and religion. Some group members may find evenseemingly innocent conversation on these subjects offensive. You risk creatingenemies. Do not treat customers, work associates, and suppliers as friends. They arebusiness associates. You might choose not to have them as friends, but frequently youhave no choice in the selection of coworkers and stakeholders. 330
    • Discussions about sex will likely offend someone and you risk disciplinary charges oreven dismissal. Do not comment about your colleague’s clothing or body. Yourassociate could charge you with sexual harassment, which may lead to dismissal. Donot burden the conversation participants with your family’s problems. Chances are theyhave problems of their own and do not want to be involved in yours. Restrict lunch,coffee break or dinnertime chitchat to non-provoking issues. Start the conversation withcomments about the weather. Neutral issues include topics such as sports, yourhobby, computers, software, a non-controversial book that you recently read, food,cooking or an amusing travel story. If someone else brings up one of the forbiddentopics (politics, religion, race, ethnicity, sex and personal life), keep your mouth shutand limit your nonverbal movements to normal breathing. Change the subject at anopportune time.Research shows that many people dread public speaking. An ideal way to overcomestage fright involves the use of visuals such as overhead transparencies and PowerPoint presentations to support your talk. Visual aids enable the speaker to plan andcontrol the talk. Follow your prepared material. Do not memorize your talk and do notread the slide presentation. Paraphrase the words shown on the screen to prevent thetalk from sinking into boredom. Keep the audience awake. Visuals focus theaudience’s attention. They reinforce the presentation and help the audience rememberyour talk. Other presentation tips include the following: ! State the purpose of the presentation. 331
    • ! Speak loudly and vary your voice tone and volume to emphasize key points. Speak naturally – not too fast or slowly.! Make eye contact with individuals in the audience. Look at a person, and act as if you are speaking directly to him or her. After a minute, pick someone else. This helps you communicate with the audience.! Liven up your presentation by using graphics to make a point (pictures, graphs, charts, etc.)! Smile! Show enthusiasm! Do not wander. Stick to the topic as outlined in the visuals! Summarize your main points at the end! Ask for something. A researcher presenting the results of a study to top management might request funds to pursue an avenue of research. A salesperson might ask a group of prospects for an order. A project manager might request a customer to accept a delayed delivery in exchange for a longer product warranty.! Offer a question-and-answer period.! Distribute handouts describing the talk. 332
    • Chapter 8 Questions1) What type of communication techniques do organizations use?2) Identify the steps in conducting a meeting.3) Define action items. Give three examples.4) Politeness and saying “please” and “thank you” when speaking with stakeholders a) Is not necessary. b) Is appropriate protocol in all situations? c) Is far too formal for today’s times.5) If a customer is abusive on the phone, the appropriate reactions are to a) Hang up b) Tell them that this is not your job c) Grin and bear it d) Transfer the call to your supervisor e) Yell at the customer because you will not accept this from anyone.6) When speaking on the phone with stakeholders a) Take notes b) Identify yourself early in the discussion c) Summarize the action items at the end of the discussion d) Send an e-mail summarizing the discussion e) All of the above7) The first paragraph in an E-mail should a) Describe the purpose of the memo. 333
    • b) Ask how the family and kids are doing. c) Set the stage -- Describe the historical background surrounding the issue.8) Describe five group presentation suggestions.9) You are taking a customer out to lunch. Identify five non-business topics to discuss during the meal.10) You are an Evangelical Christian. You have recently discovered that your work associate professes atheism. This view is abhorrent to your thinking. You are considering raising the issue during your lunch with the idea of converting this person to your religious views. Identify three reasons why you should and should not hold this conversation.11) Which of the following are good presentation tips? (Select all that apply.) a) Speak softly and fast so that the group will pay attention. b) Do not offend anyone by looking directly at him or her. c) Do not inject any humor into the discussion when dealing with serious subjects. d) Liven up your presentation by using graphics to make a point e) Smile f) Show enthusiasm g) Do not wander. Stick to the topic as outlined in the visuals h) Summarize your main points at the end 334
    • CHAPTER 9 Quality Show me someone who has done something worthwhile, and Ill show you someone who has overcome adversity. Lou Holtz <>Chapter objectivesAfter studying this chapter, you should be able to: Define quality Understand the role of quality assurance in projects. Understand the major contributors to the quality field Understand the role of quality policies, planning, assurance and control in organizations. Compare and contrast quality planning, assurance and control in organizations. Understand the meaning and importance of ISO, CMM, and other quality plans. Support ISO, CMM and other quality efforts in your organization. Contribute to the software quality assurance effort in your organizationHow do you define quality? Imai (p. xxiii) states, “There is very little agreement on whatconstitutes quality. In its broadest sense, quality is anything that can be improved.”The PMBOK (p. 6) defines quality management as the processes required to ensure 335
    • that the project will satisfy the needs for which it was undertaken. Quality applies toproducts and services. A software process is a set of activities, methods, and practicesused to develop and maintain software. Quality involves procedures, techniques andtools used to ensure that a product meets or exceeds an agreed upon specification.Deming suggests that quality involves product or service uniformity and repeatability.The commuter expects the train to arrive at the station at 7:27 a.m. Arrivingsignificantly earlier or later leads to disappointment and dissatisfaction with the service.Software that consistently performs as advertised satisfies the consumer and gives theimpression of a quality product. Pralahad and Krishnan argue that the emerging view ofquality requires organizations to adjust to its customers’ dynamically shiftingexpectations (1999, p 110). They support Reicheld and Sasser (1990) who offered theview that the focus of quality has shifted from zero defects in products to zerodefections of customers. Pralahad and Krishnan offer a view of quality that integratesthe ideas of conformance to requirements, organization adaptability and innovation.Kerzner (p. 1085) sums it up with a broad definition of quality: Quality is a process toretain existing customers, win back lost customers, and win new customers.Intuitively we can understand that the lack of quality affects product and service cost aswell as the organization’s profits. Traditional costs of poor quality result from scrapmaterial costs, product rework, extensive inspection, rejects and a customer’sexcessive use of product warranty due to failures or faulty operation. Less obviousissues that impact quality costs stem from engineering changes, long times, moremanufacturing setups than planned, labor to expedite material purchasing resulting 336
    • from inadequate planning, excessive test time to validate a product of service’soperation, lost customer loyalty due to late delivery or not meeting the customer’sexpectations, and excess inventory due to excessive material orders. Quality is a verybroad term that encompasses a myriad of issues. Every employee contributes to aproduct or service’s quality or lack of it.The Quality GurusToday’s quality movement traces its roots back to the 1920’s with developments by Dr.Walter A. Shewhart and Dr. Joseph Juran at Western Electric. Shewhart , the fatherof modern quality control , pioneered the use of statistical techniques to controlprocesses in an effort to minimize defective output. He combined elements ofstatistics, engineering and economics in his work. Dr. W. Edwards Deming who alsoworked briefly at Western Electric based much of his work on Shewhart’s teachings.Following World War II, Deming introduced statistical quality control concepts and theidea of total quality management to Japan. He referred to the Shewhart Cycle as asystematic approach to problem solving. Proponents called it the Deming-Shewhartcycle or simply the Plan-Do-Check-Act cycle, which is the essence of continuous qualityimprovement. Deming stresses that management has an obligation to constantlyimprove the system of production and service. The Plan-Do-Check-Act (Figure 9-1)cycle permits management to install a process that promotes ongoing qualityimprovements. The process implies that inspecting the product or service at the end ofthe job is too late and too costly. Plan-Do-Check-Act shifts the paradigm from detection 337
    • to continuous examination of the process thereby proactively attempting to preventproblems.Figure 9-1 The Deming-Shewhart Plan-Do-Check-Act Cycle Do Plan Movement Toward Continuous Check Quality Act ImprovementAlthough Deming began to discuss these concepts in the 1930’s and 1940’s, Americanindustry did not accept Deming’s ideas until the 1980’s. In his 1986 book Out of theCrisis, Deming presented his 14 points, which he believed applied to small or largeorganizations, and to service as well as to manufacturing organizations. The 14 pointsrequire a good deal of discussion by members of the organization before adoption.These points are controversial and at times contradict industry practices and theapproaches described by other gurus. Table 9-1 examines some of these differences. 338
    • Dr. Edward W. Deming( Quality ManagementPhilosophy and Continuousquality improvement)Dr. Joseph M. Juran(quality trilogy)Dr. Philip Crosby(zero defects and cost of quality)Dr Armand Feigenbaum,(Originator of "Total QualityControl" phrase)Dr. Kaoru Ishikawa(Quality tools) 339
    • Table 9-1 – Alternative Views on Selected Items from the 14 PointsPoint Deming’s Text Dissenting or Alternative Views No. 4 End the practice of awarding business on Most organizations including the U.S. the basis of price tag. Instead, minimize Government require a minimum of 3 bids total cost. Move toward a single supplier for before awarding a contract. Many any one item, on a long-term relationship of purchasing departments would look with loyalty and trust. suspicion if a department awarded a contract to another organization without a bid process. 5 Improve constantly and forever the system This effort requires meetings of of production and service, to improve employees at all levels in the quality and productivity, and thus constantly organization and may not show decrease costs. immediate results. Managers may resent a subordinate making suggestions to improve a process while in a meeting with their superiors. 6 Institute training on the job. Many organizations offer minimal training and expect the employee to train themselves on their own time. 8 Drive out fear, so that everyone may work Coercive power is a commonly used effectively for the company. technique by many managers. Some managers and supervisors continue to use stated or implied threats. For example, “Four hours of free overtime per week is expected of all employees, ”Do this task or I will assign you to second shift,” etc. 10 Eliminate slogans, exhortations, and targets For many years, slogans such as Zero for the work force asking for zero defects Defects (recommended by Crosby) and and new levels of productivity. Such Quality is Job One, etc. were used by exhortations only create adversarial industry to motivate workers. relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. 11 b) Eliminate management by objective. Most production and sales organizations Eliminate management by numbers, use numerical goals to spur on their numerical goals. Substitute leadership. employees. 12 b) Remove barriers that rob people in American business and industry regards management and in engineering of their the annual employee review as a “holy” right to pride of workmanship. This means practice. abolishment of the annual merit rating and of management by objective. 13 Institute a vigorous program of education Many organizations offer less than 40 and self-improvement. hours of staff development per year. 340
    • The Union of Japanese Scientists and Engineers (JUSE) sponsored Deming’s lecturesto Japanese industry during the early 1950’s. The material so influenced Japaneseindustry that they named a quality award after him. The Deming award is givenannually to organizations worldwide that meet demanding quality standards. In 1960,Deming received the Second Order of the Sacred Treasure award for his contribution toJapans reindustrialization.Dr. Joseph M. Juran followed Dr. Deming to Japan in 1954. Like Deming, Juranreceived training in statistics. His lectures also sponsored by the Union of JapaneseScientists and Engineers added to Japan’s focus on quality improvement. He alsoreceived the Second Order of the Sacred Treasure award for his contribution to Japansindustry. He developed the idea of a quality trilogy: quality planning, qualityimprovement and quality control. Quality Planning • Determine customer’s needs • Develop a product or service that responds to those needs. • Optimize the features to meet producing organization and customer’s needs. Quality Improvement • Develop a process that produces the product or service • Optimize the process. Quality Control 341
    • • Prove that the process can produce the product under operating conditions. • Transfer the process to operations (manufacturing). • Optimize the manufacturing process.Central to Juran’s message is the belief that quality requires planning. For success, theorganization should integrate quality improvements into corporate plans. Organizationwide plans should include the identification of customer’s needs; establishing optimalquality goals; creating metrics to facilitate measurement; and developing processescapable of meeting quality goals under actual operating conditions. Quality requiresteamwork and problem solving. Ultimately, Juran declared, quality is fitness forpurpose.Japanese industry’s adoption of quality concepts advocated by Deming and Juranassisted them in turning around a country decimated by war into a quality powerhousewithin a decade. During the 1950’s, Japan exported a variety of merchandise to theUnited States ranging from trinkets for sale in five and dime stores to automobiles. Thisinexpensive merchandise would break apart and fail in a short time. Japanese vehicleshad a reputation of turning into a “rust bucket” after a few years of use. Japaneseautomakers failed to sell their cars in the U.S. market because of their poor quality andperformance. By the late 1960s - after the implementation of quality concepts into theproduction system, Japanese cars became competitive against U.S. products.Although it took some time, Japanese industry turned this reputation for poor qualitymerchandise around. Assisted by a domestic oil crisis caused by the Arab-Israeli war in 342
    • 1973 and the Iranian revolution of 1979, U.S. consumers willingly paid a premium for afuel efficient Japanese built automobile that met their needs and provided reliableservice.Feigenbaum advocated the concept of total quality control. Involve all businessfunctions in the pursuit of quality including design, engineering, administration,marketing, purchasing, manufacturing, production, inspection, packaging, delivery,installation and service. Everyone had responsibility for quality not only the qualityprofessionals. He stresses that quality does not mean ‘best but best for the customeruse and selling price.Crosby advocated satisfying the customers needs and expectations by implementingthe four absolutes of quality management, which are • Quality is conformance to requirements • The system of quality is prevention • The performance standard is zero defects. • The measurement of quality is the price of nonconformance.Crosby championed the slogans Do It Right First time and Zero defects, which manyorganizations adopted. The U.S. Military placed posters around their facilitiesreminding civilian and military personnel about this quality goal. Crosby’s writingsemphasized that poor-quality products could prove disastrous for the organization. Hebelieved that quality paid for itself in the end. 343
    • Ishikawa developed a tool to assist in the analysis of process quality. The "Ishikawa"or "cause-and-effect" diagram uses statistical data to categorize the causes ofinadequate quality into • Materials, • Processes or work methods, • Equipment, and • Measurement.For example, materials may differ when sources of supply or size requirements vary.Equipment or machines also function differently depending on variations in their ownparts. These variations affect a products quality. Ishikawas work lead Japanese firmsto focus quality control attention on improvements in these four areas.Quality and the Project ManagerQuality is paramount in the eyes of the project manager. It leads to a satisfiedcustomer, which makes the job easier. Producing quality products and services has aschedule and cost impact. To some managers, quality costs additional money. Theybelieve that the price of goods and services may surge astronomically if theorganization follows Crosby’s goal of zero defects. Other quality practitioners arguethat quality ultimately leads to cost reduction and the practices that ensure qualityshould be a way of doing business. Creating a quality product or service involves avariety of organization wide processes and procedures. The project manager must beaware of these practices. Aguayo points out two methods used by organizations toimprove quality – 1) inspection and 2) the constant improvement of the process and 344
    • products. Both approaches affect the project’s cost, schedule and resource usage.Both approaches require planning to incorporate the process into the schedule.The costs of quality involve evaluating products and services for conformance to a setof standards. Many organizations rely on inspecting the product at various stages in itsproduction or development. In some production operations, inspectors merely removeout-of-tolerance or faulty units from the line without considering the underlying reasonsfor the failures. Modern quality approaches focus on prevention techniques. That is,personnel continually examine the product, service or process with the idea ofimproving it. Continuous quality improvement brings with it the expectation that higherproductivity, lower costs, higher profits and higher quality result from this effort. TheJapanese use a quality control method called Kaizen, which means continuousimprovement in personal life, home life, social life, and working life as a whole. Asrelated to the workplace, kaizen means continuing improvement involving managersand workers, customers and suppliers alike. Implementing kaizen processes leads tomore competitive products and services. Management concepts such as total qualitymanagement (TQM) and quality circles involve employees at all levels within theorganization meeting to examine or create processes and procedures that lead toproduct or service improvement. They believe that a great number of smallimprovements over time will create substantial improvement in organizationalperformance (see for example http://www.kaizen-institute.com). Kaizen ideasencourage people to continually question current practices and seek a better way of 345
    • doing something. The practice does not demand perfection – only continual movementtowards the ideal. The process demands contributions from the cross-functional team.Quality PolicyOrganizations start the quality process by establishing a quality policy, which is astatement of operational practice principles. The quality policy promotes uniformity andconsistency in the processes and procedures used by the organizations. The policyidentifies specific guidelines for performing work. Functional experts prepare thesection of the quality policy manual pertaining to their jobs. After reviewing andunderstanding the document, the organization’s executive management approves andsupports the policy. This commitment on management’s part is crucial to the successof the quality process. It means that they will not dispense with quality procedures toship a product. Management’s commitment to quality receives the real test when theend of the fiscal quarter approaches and they have not reached their sales goal. Willmanagement support the quality organization’s efforts to maintain a product or servicefor which the company can feel proud or will they buckle under to the sales orproduction department’s drive to meet the monthly quotas? Will employees adhere toand implement the policies under stressful conditions? Imagine the pressure. Thecustomer calls hourly demanding delivery. Bonuses are at stake for the vicepresidents on down to the sales department personnel for shipping on time. Perhaps afollow-up contract hinges on a successful delivery. This places a huge psychologicaland perhaps a physical burden on the purchasing, manufacturing, engineering, andtraining departments to follow the purchasing, fabrication, installation, testing, anddocumentation procedures they have established. However, if the organization’s 346
    • reputation for delivering a reliable, robust, easy to use, unbreakable, technicallysuperior product is to be upheld, personnel must adhere to these quality policies.It is common for customers to request a review of an organization’s quality policy beforeplacing the order. They may wish to determine if the organization performs operationsin conformity with accepted industry practices. The quality policy quickly helps outsidersunderstand the organization’s procedures. Many customers are leery of placingbusiness with a firm that has little depth and has not trained the staff to follow standardoperating procedures. If a cadre of employees follow unwritten and undocumentedprocedures to accomplish the tasks, the customer becomes uneasy. The customer hasconcerns that their job will not be completed satisfactorily and within the allotted time ifone of those crucial people leaves and the remainder of the organization chooses not tofollow the undocumented task procedures. Therefore, the organization counters thisanxiety by developing a methodology that enables others to complete the task.The organizations quality policy manual frequently includes statements related to thetopics shown in Table 9- 2. The table illustrates the typical topics with each departmentor function deals. The project manager need not be intimately familiar with thesepolicies, but the PM must recognize that they exist and understand whom to contact ifadditional information is required. If a policy exists then the PM must include itsimplementation in the overall project plan. That translates into allocating schedule,budget and resources to complete the quality policy requirements. 347
    • Table 9-2 – Typical Quality Policy Items in the Organization Department or Typical Policy Topics FunctionExecutive Management Mission; vision; values; organization chart; strategy; tactics.Human resources Personnel policy manual; job descriptions; recruitment; hiring process including psychological testing and interview scheduling; new employee orientation; phone list; discipline; employee reviews; salary guidelines; employee training; Compliance with U.S. Department of Labor and Justice regulations and requirementsEngineering Documentation requirements; design guidelines; design reviews; testing; component selection; preferred standards; software selection; proposal preparation, format and review.Project Management Documentation and activities required to begin, manage, and terminate a project. (For example, requirements list, project charter, SOW, schedule, WBS, periodic actual versus expected costs, etc.)Quality General guidelines; ISO requirements; internal quality audits; preparation of quality records; Control of Quality RecordsOther functional Training and Personnel Qualifications; ongoing training;department guidelines Customer Supplied Products and equipment; Identification and Control of customer ItemsManufacturing Equipment usage training; safety training; dress; fabrication techniques; purchased material processingSales and Marketing Territory distribution; warranty; new product development and introduction; pricingInformation Technology Desktop and portable computer policies; networking; Internet(IT) access; firewall; external/internal access to E-mail; organization web page; computing system maintenance and upgrade; data back-up; business records and information storage.Accounting Accounting practicesLegal Contract acceptance Review; Standardized terms and conditions; government regulatory issuesDocumentation and Preferred publishing software; format guidelinespublishingPurchasing Supplier selection; preferred vendors; vendor negotiations; multiple bid requirementIncoming Inspection Control of nonconforming material and equipmentInstrument Maintenance Calibration and Control of Test Equipment; Instrumentand Repair Maintenance frequencyField service Corrective and Preventive Actions; customer servicing; dress; response speed to customer request 348
    • Table 9-2 – Typical Quality Policy Items in the Organization (Continued) Department or Typical Policy Topics FunctionTraining Developing and preparing customer courses and seminarsSafety and Handling of hazardous materials; Protection of workers fromEnvironmental hazardous material; worker safety policiesHandling, Storage, Material and equipment Handling; Static sensitive devicePackaging and Delivery handling; Ambient storage conditions (e.g., temperature and humidity); Shipping and DeliverySecurity Employee access to the facilityFacility Maintenance Equipment replacement schedule; Equipment maintenance schedule; Building maintenance; Compliance with U.S. Department of Labor Occupational Safety & Health Administration (OSHA) requirements; compliance with U.S. Department of Justice Americans with Disabilities Act (ADA) requirementsQuality Planning, Assurance, and ControlAt some point in an organization’s maturing process, it considers the need for qualityprocesses and the associated documentation. Frequently the motivation arises from adesire to do business with customers that demand a well-defined quality policy. Forexample, many European companies demand ISO 9000 compliance. Electric powercompanies such as the Tennessee Valley Authority, demand that an organization havea quality policy in place and employees use it. After they establish broad policies, manyorganizations institute three quality management processes: • Planning – selecting quality standards 349
    • • Assurance – a means of ensuring that organization members implement the written plans and policies, and selected standards • Control – quality control centers on a monitoring activity that measures and evaluates data. On an assembly line, it includes inspections that focus upon testing the product and rejecting faulty items. In a service environment, organizational performance may be objectively compared with pre-established criteria. The group then analyzes and interprets this information with an eye towards improving the product or service.Figure 9- 2 graphically depicts the need for organizations to build a quality structure onwell-rooted and supported quality policies. Quality planning, assurance, and controlfollow from these policies. Ultimately, this combination will blossom into satisfiedcustomers.The continuous quality improvement cycle shown in Figure 9-3 follows from the gurus’work. As discussed by Deming, Juran and others, quality is a never-ending sequenceinvolving all employees. During the planning process, departments and functionaldisciplines identify the standards, which they agree to meet. To assure a qualityproduct, the staff develops standard operating procedures that personnel follow. Afterreceiving training in the organization’s procedures, the quality assurance staff auditspersonnel to verify that they are aware of the procedures and use them. Data arecollected, analyzed and compared with a reference. As part of the evaluation process,the organization encourages staff members to suggest process improvements. After 350
    • discussion, the staff develops procedural changes. The staff pilots the recommendedprocess change while continuing to collect and analyze data. Changes that make theproduct easier to produce, cheaper, better, simpler, smaller, and faster becomepermanent while those that do not show an improvement are discarded. As aconsequence of operational changes, organizations periodically review and updateoutmoded policies and procedures. Figure 9-2 The Quality Tree of Organization Life Customer Satisfaction Quality Assurance Quality Planning Quality Control Quality Planning Quality Policies 351
    • Figure 9-3 Continuous Quality Improvement Cycle Policies • Identify organizations and functional areas requiring formal quality policies • Create broad objectives • Create quality policiesChange PlanningDevelop a model forchange if • Define Outcomes a) performance criteria (performance criteria) are not met, or • Establish goals b) process modifications • Identify resources may improve outcomes • Select external standardsKeep successful changes. • Select and/or prepareDiscard unsuccessful internal standardsactivities.Control• Define performance indicators & criteria• Measurement (Tools and Procedures) Assurance –• Data collection, Implementation process reduction & analysis • Preparation of• Data Evaluation procedures • Staff development and training • Audit • Measurement methodology • Feedback 352
    • Quality PlanningQuality planning involves identifying and selecting the quality standards relevant to theproject and determining how to satisfy them. These standards include both internallyand externally driven requirements. Internal standards comply with each department’smethodology for performing work. They may have evolved from product testing, safetyconsiderations, and experience or past successful practice. Examples of internalstandards include the following: • Physical or educational requirements required to perform a job • Minimum test scores required to perform a job • Checklist used to verify a hardware or software development effort during a design review • Software or hardware Installation procedures • Usage of standard software, tools, system components and/or equipment • Purchased item inspection • Hazardous material handlingExternal standards may include requirements derived from professional and/orinternational organizations; and local, state and federal government guidelines andregulations. Contracts may require product deliveries that meet generally acceptedindustry standards prepared by organizations such as those shown in Table 9-3. Attimes, a customer may impose its own internal standard onto a contractor. 353
    • Table 9-3 – Typical External Standards Standard PurposeSoftware Engineering Institute (SEI) Software standards for product design, development, test and documentation.European Software Institute Software standards for product design, development, test and documentation – used primarily in Europe.Institute of Electrical and Electronic The IEEE standards cover the fields ofEngineers (IEEE) electrical engineering, electronics, radio and the allied branches of engineering, and the related arts and sciences. Design development, test, and installation of electronic hardware, computer software, and computer networking standards.American Society for Quality (ASQ) Standards in the field of Quality Management, Environmental Management, Dependability, and Statistics.American National Standards Institute ANSI registers and distributes standards(ANSI) from accredited developers.International Organization for Covers international standardization in theStandardization (ISO) field of Information Technology.e.g., ISO-9001: 2000, ISO/IEC JTC 1 Information Technology includes the specification, design and development of systems and tools dealing with the capture, representation, processing, security, transfer, interchange, presentation, management, organization, storage and retrieval of information.U.S. Department of Defense Military Military Standards covering everythingStandards from component selection to welds and from specification preparation to product testing. Design development, test , and installation of electronic hardware, computer software, and computer networking used for military purposes.Malcolm Baldrige Award Group that establishes quality standards for business, academic, and health organizations. Designates outstanding examples as award recipients.U.S. Department of Labor Occupational Occupational safety, health andSafety and Health Administration (OSHA) ergonomic standards to protect workers in organizations. 354
    • The organization’s quality plans clarify stakeholders’ expectations of the design,development, fabrication and installation processes. Employees understand the natureand complexity of the design review(s) at the outset of the project. Software andhardware developers recognize that at some point in the process, the design freezes.That is, the design can only change for good reason and must pass through anapproval cycle. Supporting documentation such as an engineering change notice (ECN)must accompany the proposed change. These precautions exist because of the highlikelihood that a design change following the “official design release” will affect anotherdepartment’s work. The approval process forces awareness of the modification byother departments by requesting functional managers to “sign” the paper work. Thischange may trigger a variety of reactions. Depending on the nature of the change,purchasing may have to order a different part, or the installation or maintenanceprocedure changes, or software version changes may introduce compatibility problems,etc. A formalized notification process informs all departments of the impending changeand permits them to take appropriate action.Policy plans spell out the organization’s philosophy for managing software andhardware documentation such as requirements statements, schematics, drawings,manuals, specifications, test plans and test results etc. following stakeholderacceptance. The documentation policy establishes a change “paper trail” or producthistory that frequently assists the organization in identifying the reasons for problemsthat arise. 355
    • Typically after product test, purchased material cannot change without approval fromthe engineering development team. Frequently, engineers transfer the tests used toverify the operation of the development system to the manufacturing organization. Testtechnicians do not change these tests arbitrarily. Even the equipment used to test thedeveloped system “freezes.” The PM requests test technicians to record the testequipment manufacturers’ model numbers and software versions so that the test canbe accurately repeated in the future. This control ensures an accurate baseline systemconfiguration.Many external organizations provide outlines for establishing a quality plan. Theseinclude the Institute of Electrical and Electronic Engineers (IEEE), the SoftwareEngineering Institute (SEI), the European Software Institute (ESI), the InternationalOrganization for Standardization (ISO), and the Malcolm Baldrige Award organization.All these organizations have their place and are important. The six sigma concept doesnot have an organization that promotes it, but many companies have adopted thisapproach to quality. For the most part, these programs do not conflict with one another.Indeed, they are mutually supportive. Each of these processes affects the projectmanager’s process and documentation responsibilities. The PM does not have toperform the work, but must understand the process so that the project gets done ontime and within budget. Usually the customer accepts the quality program in-place atthe organization. Some customers demand that the contractor use one or more ofthese external standards. We will briefly examine several quality plans thatorganizations commonly use. 356
    • IEEE Software Quality PlansThe software project plan documents the work necessary to conduct, track and reporton the progress of a project. It contains a full description of how the technical staff willperform the work. The Institute of Electrical and Electronic Engineers (IEEE)developed a set of software lifecycle standards representing its view of best commercialpractices. Table 9-4 illustrates a list of these plans. Some software developmentorganizations follow a combination of these specifications. For example, theycommonly use the following five plans: Software Quality Assurance Plan (SQAP): IEEE 730.1 Software Requirements Specification (SRS): IEEE 830 Software Design Document (SDD): IEEE1016 Software Verification and Validation Test Plan (SVVP): IEEE1012 Software Verification and Validation Report (SVVR) 357
    • Table 9-4 -- IEEE Software Quality Standards IEEE Quality Standard IEEE Standard NumberSoftware Quality Assurance Plans 730-1998Guide for Software Quality Assurance Planning 730.1-1995Software Configuration Management Plans 828-1998Software Test Documentation 829-1983Guide for Software Requirements Specifications 830-1984Software Unit Testing 1008-1987Software Verification and Validation Plans 1012-1998Recommended Practice for Software Design Descriptions 1016-1987Software Reviews and Audits 1028-1988Guide to Software Configuration Management 1042-1987Software Productivity Metrics 1045-1992Software Project Management Plans 1058-1998Guide for Software Verification and Validation Plans 1059-1993Software Quality Metrics Methodology 1061-1992Software User Documentation 1063-1987Developing Software Lifecycle Processes 1074-1991Software Maintenance 1219-1998Guide to the Project Management Body of Knowledge 1490-1998The SQAP serves as a contract between the project team and the software qualityassurance department. The SQAP identifies the specific tasks the software qualityassurance department must perform to support the project team. These activities mayinclude the following: • Reviewing project plans • Identifying software standards, practices, and conventions used on the project • Specifying a method of verifying compliance with the selected standards, practices, and conventions 358
    • • Describing the configuration management activity to ensure that project documents (such as the project management plan, the SQAP, the test plan; and deliverable documentation) are maintained under change control • Performing audits to verify that all software personnel follow the software plans • Coordinating software review meetings • Participating in the risk management program, and • Monitoring the software test program.The SRS collects and formalizes the customer’s requirements in a systematic andcomprehensive manner. The document’s goal is to define the system to meet theusers needs, which should lead to user satisfaction. Some contracts demand that thesoftware developer submit the SRS to the customer for review and approval. Thisprocedure verifies that the developer has correctly interpreted the customer’s requestsand included all of the customer’s requirements in the document. The customer andcontractor must negotiate and resolve all discrepancies before work can proceed.The SDD represents a detailed version of the SRS. It examines the systems functionsand sub-functions before coding. In addition to providing a detailed description of theinternal design details of each function, the SDD defines naming standards and codingstandards; specifies the software architecture; includes appropriate design analyses;and describes interdependencies among the software functions and system interfaces.The interfaces specified in the SRS may include operator, computer, and input/output 359
    • devices such as a bar code reader, terminal or printer. The interfaces frequentlyconsist of the linkages between third party software such as a database and a reportwriter. The descriptions can take the form of narratives, flow charts, or any othermethodology on which the team agrees. This design information becomes the basisfor coding and software testing.Following the completion of the SDD, the programmers code using the agreed uponsoftware tools. The software verification and validation plan (SVVP) uses the SDD asthe basis for functional testing. Verification involves reviewing, inspecting, testing,and checking something to ascertain that processes, services or documents conform tospecific requirements. Validation requires the software developer to evaluate softwarethroughout the development process to ensure compliance with user requirements.Programmers generate a plan that tests every aspect of the software and its interfaces.The programmer prepares test cases and procedures to enable a quality assurancetechnician to evaluate the software’s operation. Software developers prepare softwaretest documentation that contains detailed instructions and templates for every aspect ofthe software test process. The tests performed by a software quality assurancetechnician verify that the developers implemented the customer’s requirements asexpected. Technicians record the results of test cases. At the test’s conclusion, thetechnician prepares a software verification and validation report (SVVR) that describesto stakeholders the software package’s status. In addition to verifying that the softwareprogram correctly implemented all of the customer’s requirements, the software testtechnicians determine the robustness of the package. That is, they intentionally make 360
    • mistakes while using the application; they combine unusual key combinations; pursueunintended pathways in the software package. The object of this effort is to determinethe software’s sensitivity to human error. If the software goes off to “never-never-land”(locks up the computer or breaks down in some fashion), then further work is requiredby the developers. After SVVR approval, the Q.A. Department releases the softwarefor manufacture and distribution. ® ® Capability Maturity Model (SW-CMM ) for SoftwareThe Software Engineering Institute (SEI) is a federally funded research anddevelopment center sponsored by the U.S. Department of Defense (DOD) andoperated by Carnegie Mellon University. In the 1970’s and 1980’s, Military andcommercial software projects consistently fell behind schedule, exceeded budgets anddid not meet the customer’s operational requirements. Paulk (1995) reported thatorganizations complete typical commercial software projects a year late and overrun theplanned budget by 100%. In a review of one DOD software organization’s 17 majorprojects, auditors discovered that software developers missed the average 28-monthschedule by an average of 20 months. A planned four-year project took seven-years tocomplete and no project was delivered on time. Clearly, a problem existed. The U.S.Department of Defense engaged the Carnegie Mellon University to participate in thedevelopment of a software development methodology to bring the management ofsoftware projects under control. SEI developed a model to establish a coherentsoftware design process that organizations could follow. The Software CapabilityMaturity Model (CMM or SW-CMM) assists managers in judging the maturity of an 361
    • organization’s software processes. The model does this by categorizing the processes(Table 9-5) used by organizations on a scale from poor to outstanding or as SEI terms itfrom ad hoc, chaotic processes to mature, disciplined software processes. Asdescribed on the Software Engineering Institute web site(http://www.sei.cmu.edu/cmm/cmm.sum.html), CMM places an organization into one offive maturity levels. Organizations that develop software with this model have as anobjective predictability, customer responsiveness, and control so that managers canaccurately predict software development costs and delivery.Each key process area is described in terms of the key practices that contribute tosatisfying its goals. The key practices describe the infrastructure and activities thatcontribute most to the effective implementation and institutionalization of the keyprocess area. 362
    • Table 9-5 Software Capability Maturity Model (CMM)CMM CMM Level CMM Level Characteristics Key Process Areas Organization FocusLevel Descriptor 5 Optimizing Continuous process improvement is Defect Prevention, Technology Implement continual, enabled by quantitative feedback from the Change Management, and measurable software process process and from piloting innovative ideas Process Change improvement and technologies. Management. 4 Managed Detailed measures of the software process Quantitative Process Establish a quantitative and product quality are collected. Both the Management and Software understanding of both the software process and products are Quality Management. software process and the quantitatively understood and controlled. software work products built 3 Defined The software process for both management Organization Process Focus, Establish an infrastructure that and engineering activities is documented, Organization Process institutionalizes effective standardized, and integrated into a Definition, Training Program, software engineering and standard software process for the Integrated Software management processes across organization. All projects use an approved, Management, Software all projects tailored version of the organizations Product Engineering, standard software process for developing Intergroup Coordination, and and maintaining software. Peer Reviews. 2 Repeatable Basic project management processes are Requirements Management, Establish understanding established to track cost, schedule, and Software Project Planning, between customer and software functionality. The necessary process Software Project Tracking and developer. Establish basic discipline is in place to repeat earlier Oversight, Software project management controls successes on projects with similar Subcontract Management, applications. Software Quality Assurance, and Software Configuration Management. 1 Initial The software process is characterized as ad hoc, and occasionally even chaotic. Few processes are defined, and success depends on individual effort and heroics.Source: Software Engineering Institute (http://www.sei.cmu.edu) 363
    • Most small organizations today remain at level one. They do not prepare technical andmanagerial plans and schedules, nor do they prepare and monitor budgets.Requirements are sometimes fuzzy. They may or may not hold formal or informaldesign reviews. Slightly in excess of 200 organizations had the courage to declare theirCMM status level (Table 9-6). Approximately 37% of those place themselves in level 3– which is quite good.Table 9-6 The Software Engineering Communitys Compiled List of Published Maturity Levels (as of June 5, 2001) CMM Level Number of Declared Percent Distribution Organizations 1 -- -- 2 35 17% 3 76 37% 4 40 20% 5 52 26%Source: Software Engineering Institute (http://www.sei.cmu.edu), July 2001The Software CMM has had a wide influence on software design processes and qualityimprovements. It may be the best known and most widely used model worldwide forsoftware process improvement. As with all of the quality methodologies discussed, itdemands that employees receive training in its use. By following the model, software 364
    • developers learn that software development consists of more than code writing. Thesoftware CMM model promotes evolutionary or incremental change as espoused by akaizen-style or CQI approach to organizational change. That is, it supports gradual,cumulative improvement to business processes rather than revolutionary changes.Following the CMM process prohibits the project manager from saying “Ship it now andfix it in the field.” This kind of sloppy management damages the organization’sreputation and credibility. ISO StandardsThe International Organization for Standardization (ISO) is a worldwide federation ofnational standards bodies from approximately 140 countries (refer to the web sitehttp://www.iso.ch/iso/en/ISOOnline.frontpage). ISO’s mission “is to promote thedevelopment of standardization and related activities in the world with a view tofacilitating the international exchange of goods and services, and to developingcooperation in the spheres of intellectual, scientific, technological and economic activity.ISOs work results in international agreements which are published as InternationalStandards.” Many of the ISO ideas link directly to the perspectives espoused byCrosby, Deming, Feigenbaum, Ishikawa, and Juran (Smith and Angeli, 1995). Incommon with the quality plans previously discussed, ISO standards strives to: • Form a foundation for project improvement, consistency and profitability. • Provide stability, improved products and services, customer satisfaction and reduce waste. • Increase employee awareness of company requirements and procedures. 365
    • • Establish a basis for continuing improvementThe terms ISO 9000, ISO 9001, ISO 9002, ISO 9003 and ISO 9001:2000 all deal withquality management in organizations. People use the generic term ISO 9000certification to mean certification against ISO 9001, ISO 9002 or ISO 9003. Thedifference among the three is one of scope. The ISO website distinguishes onestandard from another in the following ways: • ISO 9001 sets out the requirements for an organization whose business processes range from design and development, to production, installation and servicing; • ISO 9002 is the appropriate standard for an organization that does not carry out design and development. The organization may be involved in product production, installation and servicing. Appropriate for a distributor or manufacturer without design functions . • ISO 9003 is the appropriate standard for an organization whose business processes do not include design control, process control, purchasing or servicing. The company uses inspection and testing to ensure that final products and services meet specified requirements.As with all quality systems, ISO 9000 compliance success requires extensive employeetraining. Although the primary purpose of ISO 9000 compliance is to improve productand service quality, the marketing aspects of achieving certification should not beoverlooked. Some organizations will only purchase products and services from thosethat have achieved ISO 9000 certification. This is particularly true for the automotive 366
    • industry and European based organizations. You can bet that a company’s sales andmarketing department’s will use ISO 9000 certification as a marketing tool.The International Organization for Standardization (ISO) is in the midst of a transitionperiod. The three levels of certification (ISO 9001, ISO 9002 or ISO 9003) havechanged to a single certification (ISO 9001: 2000). Organizations have until December15, 2003 to make the transition to the new standard. ISO 9000:2000 has definedeight quality management principles for performance improvements, which are 1. Customer focus 2. Leadership 3. Involvement of people 4. Process approach 5. System approach to management 6. Continual improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationshipsThe complete document may be found on the ISO web site(http://www.iso.ch/iso/en/ISOOnline.frontpage).CMM and ISO 9000 series of standards share a common concern with quality andprocess management. Paulk (1994) compared the two systems. His analysis showedthat by following ISO 9000 procedures, the organization would satisfy most of the level2 and many of the level 3 goals. Because there are practices in the CMM that are not 367
    • addressed in ISO 9000, it is possible for a level 1 organization to receive ISO 9001registration. Some areas addressed by ISO 9001 are not addressed in the CMM.Paulk (1994) states that a level 3 organization would have little difficulty in obtainingISO 9001 certification, and a level 2 organization would have significant advantages inobtaining certification. The two models continue to evolve and influence each other.An organization that complies with ISO 9000 quality plans employs processes thatdescribe and control every element of the project lifecycle. As part of the ISOqualification process, an external group audits the organization to verify that theorganization performs the quality routines they purport to do. In preparation for theseexternal reviews, the internal quality department periodically performs audits of theorganization’s departments to verify that all department members have familiarizedthemselves with the processes. ISO recognizes that every organization uses processesunique to it. The question with regard to obtaining ISO certification is does theorganization practice what it preaches? Do the organization’s members consistentlyfollow the policies and procedures outlined in the quality plan? Organizations that cansatisfy these issues have minimal difficulties passing audit examinations. Six SigmaAll of the quality plans discussed share a great many similarities. They focus oncustomer satisfaction, emphasize data analysis, strive for product and processimprovements and demand senior management involvement. Six sigma also focuseson customer satisfaction and continuous improvement to reduce defects. However,unlike the others, six sigma quantifies the defect rate objective to 3.4 defects per million 368
    • installations, products manufactured, etc. The method also specifies tools designed toboth identify and correct these defects.How good is good? Motorola (Harrold, 1999) asks if the following defect rates areacceptable: • 20,000 lost pieces of mail every hour. • Unsafe drinking water almost 15 minutes every day. • 5,000 incorrect surgery operations per week. • 2 short or long landings at most major airports each day. • 200,000 incorrect drug prescriptions each year. • No electricity for almost 7 hours each month.These numbers reflect a defect rate of about four sigma or a bit less than 1 failure inevery 100 units produced. Do you think a 1% failure rate is acceptable for a heart ratemonitor or a pacemaker? Is one airplane crash in every 200 takeoffs acceptable? Table9-7 identifies the failure rate in several industries. A test grade of 99 out of a 100 maybe praiseworthy, but 99% is unacceptable in many industries. You may have secondthoughts about contacting the IRS for tax advice if they provide the wrong answer oneout of four times (table 9-7). Perhaps the IRS could benefit from quality training.Indeed, the average company at 3σ could use help.In the 1980’s Motorola decided to strive for something better and coined the term "SixSigma." Six sigma uses a DMAIC (Define, Measure, Analyze, Improve and Control)program to affect positive change in business processes. The method represents an 369
    • alternate view to the approach shown in Figure 9- 1. The concept does not differdramatically from the Deming-Shewhart plan-do-study-act cycle. In addition toMotorola, General Electric, Allied Signal, Sony and Cummins Engine, have used the sixsigma approach to achieve customer satisfaction. Table 9-7 Typical Defect Rates in Selected Industries and Professions Approximate Profession Defect Failure Percent Defect Rate Rate -%IRS phone-in tax advice (2.2σ) 25Restaurant bills, doctors prescription writing, 8.5and payroll processing (2.9σ)Average company (3.0σ) 6.7Airline baggage handling (3.2σ) 5Best in class companies (5.7σ) 0.002U.S. Navy aircraft accidents (5.7σ) 0.002Watch off by 2 seconds in 31 years (6σ) 0.00034Airline industry fatality rate (6.2σ) 0.00032Source: Harrold, D. (1999). Designing for Six Sigma Capability. Control Engineering Online. http://www.controleng.com/archives/1999/ctl0101.99/01a103.htmAlthough Six Sigmas tools and methods include many of the statistical tools used inother quality approaches, here they are employed in a systematic project-orientedfashion. Six sigma requires extensive employee education. From 1996 to 2000, GEinvested heavily in six sigma activities by training the vast majority of its employees –almost 300,000 people. They hired outside consultants to support this effort. FormerGeneral Electric chief executive officer (CEO), Jack Welch committed the organizationto support this effort because he strongly believed that it would pay for itself.(Remember, rarely does a CEO in the capitalist system embark on a project without 370
    • expectations of a healthy return on investment.) Portions of the executives’ bonuseswere linked to the introduction of six sigma – this had to be serious business. By allaccounts, the quality program has proven very successful at GE.The six sigma training program borrows titles from the martial arts and creates MasterBlack Belts, Black Belts, and Green Belts all of whom have varying levels ofcompetency. The Master Black Belts are the teachers. Black Belts provide projectleadership. Green Belts work for a Black Belt and lead smaller projects. The tools thatthese quality practitioners use includes: 1) Histograms that show the range anddistribution of the product’s variances, 2) Ishikawa diagrams, 3) check sheets to verifythe order and number of the tasks to perform, 4) diagrams that show the factors thatcontribute the most defects, 5) graphs that plot output versus time, and 6) scatterdiagrams – a statistical technique that plots variations with respect to a reference. Thequality gurus listed in this chapter introduced many of these techniques. Six sigma builtand expanded on the concepts already widely used by different businesses andindustries. The approached integrated many of these concepts into a cohesivepackage, introduced quantitative targets and further emphasized mass employeetraining. Quality AssuranceThe foregoing examples of quality plans involve specific actions that employees mustfollow to provide a product or service. The quality assurance process attempts tocreate a culture that centers on the use of reliable processes and systems involving 371
    • checking and feedback. Quality assurance concentrates on policy and proceduralmechanisms for quantifying organizational performance. The typical means ofimplementing quality assurance involves employee training and followed by an auditingprocess.To make certain that employees follow the recommended plans and procedures, theQA organization encourages departments to prepare forms and procedures (Table 9-8)that define what to do and how to do the department’s work. Usage of these formscreates a “paper-trail” that confirms that employees used approved design, fabrication,test, and installation methods in performing their activities. In medium to largeorganizations, the quality assurance department periodically audits functionaldepartment to verify that employees understand and follow recommended procedures.Total quality management (TQM) is the generic concept behind quality assurance. Thecontinuous quality improvement process described in one form or another by all of thegurus goes into action. With executive management’s support and blessing allemployees on a project meet on a regular basis to discuss ways of improving theproducts and services they offer. Everyone has the right, in fact the responsibility, ofthinking about the product and service and saying “I think we should do this …” or “thecustomer believes that the product would be better if …” or “we could save money if wedid this ….” or “the competition is doing …., why don’t we do … .” or “ this supplier’sproduct gives us these problems …. consider using XYZ supplier.” 372
    • At a TQM meeting, don’t be shy. Express your viewpoint. Each member of theorganization from management to line worker has a unique perspective that helps topinpoint problems and improve the product or service. Help open up the discussion ata TQM meeting. This will improve the CQI process. Avoid the Abilene Paradox - awell known tale in management literature wherein a family (team members), eachprivately opposed to an action, encourage others to continue, for fear of offending ateam member or appearing negative. 373
    • Table 9-8 -- Typical Quality Assurance DocumentationOrganization Chart ProceduresProposal Documentation Firmware Development Statement of Work Hardware Development Procedure Specification Document Control Procedure Work Breakdown Structure Project Management Procedure Schedule System Configuration ProcedureForms Software Development (e.g., SQAP, SRS, SDD, Project Kick off Meeting Assignments SVVP & SVVR) Responsibility Assignment Matrix (RAM) Product or Service Test Procedures Engineering Change Notice (ECN) Work Instruction Product or system configuration checklist Work Authorization Project Management Checklist Product Assembly InstructionsGuidelines Computer setup Instructions Hardware Development Guidelines Manufacturing Equipment Instructions Software Development Guidelines Computer Backup Instructions Test Integration Instructions 374
    • Quality ControlHarold Geneen states, “In quality control, you are controlling the down side. You arestipulating how many defects, how many minus numbers, are acceptable (p. 35).”During the manufacturing process, quality control involves product inspection,measurement of variation from norms, collecting and then analyzing data. At selectedstages of the design, fabrication or manufacturing process, technicians test the productto verify it performs according to expectations. Variances outside of a preset tolerancerange require examination to determine the reason for the discrepancy. Reasons forlarge variation include poor design, worn tools, unclear fabrication directions, tiredworkers, suppliers providing defective material, and others. The issue requires study ofthe process to determine appropriate solutions.In a service environment, quality assurance typically makes use of customer surveys,focus groups, and customer feedback. Surveys exist to determine if the company doesits job of “delighting the customer.” Most college students have completed course andfaculty evaluation reports. These reports represent one aspect of a college’scontinuous quality improvement system targeted at upgrading course content andassisting faculty in improving course presentation. Restaurants place evaluation formson tables that help them evaluate the quality of the dining experience. They seekcomments regarding food, service or facilities that will help them better serve the dineror reward outstanding employees. Typical restaurant surveys ask the diner to commenton a scale from poor to excellent on items such as: • Pleasant greeting on entering the establishment 375
    • • Speed of service • Food quality • Value • Restaurant/restroom cleanlinessAn airport in the United Kingdom conducts surveys to determine passengersperception of its service. They ask travelers to rate the airport from poor to excellent ontheir day’s experiences in the following areas: • Ease of finding your way through airport • Flight information screens • Availability of flights to a destination • Ease of making connections with other flights • Availability of baggage carts • Courtesy, helpfulness of airport staff • Restaurant facilities • Shopping facilities • Washrooms • Passport and visa inspections • Customs inspection • Comfortable waiting /gate areas • Cleanliness of airport terminal • Speed of baggage delivery service • Ground transportation to/from airport • Parking facilities 376
    • • Sense of security • Ambience of the airport • Overall satisfaction with airport.A Holiday Inn hotel in downtown Vancouver requests each customer to comment ontheir stay by responding to a survey that rates their satisfaction from very dissatisfied tovery satisfied in a five step scale. The include the following items in the survey: • Outside appearance of hotel • Lobby condition • Service at check-in (friendly, efficient, prompt) • Guestroom ! Overall cleanliness ! Bath facilities ! Heating/air-conditioning ! Bed comfort ! Television/radio ! Condition of furniture ! Condition of bedspread/drapes/carpet • Service of hotel staff ! Responsiveness to your needs ! Friendliness ! Attitude and appearance • Restaurant ! Quality of food/beverage 377
    • ! Restaurant cleanliness ! Quality of service • Telephone services (wake-up calls, messages, long distance/ local services) • Lighting • Hotel safety and security (lighting, locks, safety deposit) • Accuracy of billing • Service at check-out (friendly, efficient, prompt) • Value received for price paidWhether prepared for a specific project or for a more general purpose, organizationscollect and analyze both quantitative and qualitative data. Organizations identify andselect the corrective actions to pursue as they follow the Deming-Shewhart Plan-Do-Check-Act Cycle. In the operations area, quality control also considers post-manufacture issues such as distribution, installation, service and product use.Responsibility for QualityNo matter which quality approach the organization follows, the project manager has theresponsibility for implementing the selected process. The PM works with theorganization’s quality department, functional managers, suppliers, executivemanagement, customer and all other stakeholders to make certain that they follow theprescribed quality policies. The PM works with the stakeholders to • Identify quality problems 378
    • • Recommend solutions • Execute solutions • Stop work if the product or service does not conform to expectations until satisfactory problem resolution. • Prepare the required documentationThe costs for implementing quality measures should be included in the project’s priceduring the preparation of the RFQ or RFP. Juran believed that quality does not happenby accident, it must be planned. The PM has the responsibility to make certain that theorganization successfully carries out the plan. 379
    • Chapter 9 Questions1) W. Edwards Deming, Joseph Juran, and Phillip Crosby were instrumental in the development of quality management thought. Go to each of the following Web sites and compare and contrast each of their philosophies: W. Edwards Deming Institute (http://www.deming.org/), Juran Institute (http://www.juran.com/), and Philip Crosby (http://www.philipcrosby.com/).2) Identify four quality management theorists and briefly describe their contributions.3) What are the three aspects of a quality program? Briefly, describe them.4) Briefly describe four quality plans used by organizations.5) Describe the five Software Capability Maturity Model (CMM) levels.6) Is a quality level of one defect out of a hundred sufficient? Explain your answer.7) At the Juran Institute’s Web site (http://www.juran.com/,), you will find several of Dr. Juran’s articles available for download. Select one article and develop a two or three paragraph summary of its key points.8) Visit the Malcolm Baldrige Web site (http://www.quality.nist.gov/show.htm) and examine the profiles and web sites of the most recent winners. What aspects of their quality management system distinguish them?9) A page on the Malcolm Baldrige Web site (http://www.quality.nist.gov/show.htm) identifies the features of outstanding colleges. Compare and contrast five attributes expected of quality colleges with a college with which you have some familiarity.10) Do you agree with the statement “Personal quality standards and business quality standards have little in common.”? Explain your answer.11) Do you agree with the statement “Quality relates to the process as much as to the goal?” Explain your answer.12) Only idealists talk about quality. Explain why you agree or disagree with the statement.13) The organization that sponsors ISO 9000 is the International Organization for Standardization. Why do they refer to themselves as ISO? If you need assistance, look on the ISO Web site: http://www.iso.ch/. 380
    • 14) Visit the Malcolm Baldrige Web site and determine the quality requirements that they advocate. Compare it with any other quality plan discussed in this chapter.15) Contact a local organization that has a quality assurance program. Example organizations include engineering design, development and manufacturing; a hospital; or your college. Prepare a written report to determine the employees perceived value of the program. Interview both members of the quality assurance organization and members of functional departments affected by the program. In separate interviews, ask them the same questions. Sample discussion items and questions asked of the stakeholders include the following: Explain their quality assurance process to you. Do the stakeholders seem to understand the program? Does every department in the organization have a quality plan? If not, why? Describe the conditions under which they have suspended or would suspend the quality assurance program. Name three benefits of the quality assurance program. How does the quality assurance program streamline the work process? Does the quality assurance process make the final product or service more consistent and reliable? Does the quality assurance process cost or save money? How much? Describe the continuous quality improvement activities. After you compile the information, compare and discuss the results.16) Class Exercise - Team Quality DiscussionDivide the class into three person teams. Each team will select a topic for a report andclass presentation. The team will research, write and present a report on a subject thatdeals with some aspect of quality. For example, consider discussing a majorcontributor’s research in the quality field, a policy and/or procedure used to promotequality products and services in industry, or describe an organization’s experiencebefore, during, or after implementing a quality program. The following partial list oftopics represents a starting point: Individual Quality Policies and Procedures Organizations ContributorsW. E. Deming Six Sigma MotorolaA. V. Feigenbaum ISO 9000 General ElectricTaguchi Total Quality Management United TechnologiesDodge and Romig Statistical Process Control A Malcolm Baldrige Award WinnerAcheson Duncan Software Capability A Deming Award winner Maturity Model (CMM)Walter Shewhart Tennessee Valley Authority 381
    • Philip CrosbyKaoru IshikawaJoseph JuranAs part of your work, you may want to elucidate on the following items: What is quality? What is quality assurance? Do producer and consumer definitions of quality differ? Have organizations implemented the described plans? If so, to what degree of success? Describe the significant operational changes that resulted from the implementation of the ideas discussed. Did the organization find them beneficial? How long did it take to implement the quality plan? Identify the costs of quality.Submit a report within two weeks of the assignment date. Base your class presentationon the report. Each presentation should take no more than fifteen minutes – fourminutes for each presenter and three minutes for questions and answers. Do not readyour written report to the class, plan on a Power Point slide presentation.Self-check testAnswer True or False1. Quality is preventing problems rather than picking up the pieces afterward.2. Quality can always be improved.3. The most important reason for a quality program is to have satisfied customers.4. Constant attention to quality is unnecessary.5. Quality involves the little things as well as the big things.6. A quality program must have management support to be successful.7. Quality guidelines are best communicated by word-of-mouth.8. Customers pay little attention to quality.9. A quality program must integrate with the organization’s goals and profit plans.10. Quality means conformance to standards.11. Quality should operate in all parts of a business.12. Quality requires commitment. 382
    • CHAPTER 10 Project Risk When one door of happiness closes, another opens; but often we look so long at the closed door that we do not see the one which has been opened for us. --Helen Keller <>Chapter objectivesAfter studying this chapter, you should be able to: Understand the concept of risk management Understand the four processes and actions to manage risk involved in risk management Understand the risks during the proposal stage Use a template to estimate the cost of risk during the proposal pricing stage Gain familiarity with the risks that might occur during the project execution phase Recognize the role of technology selection in the risk process Contribute to resolving the risk management effort in your organizationRisk Management ProcessRisk deals with the uncertainty of attaining a goal or objective. The PMBOK (2000, p.127) states “Project Risk Management includes the processes concerned withidentifying, analyzing, and responding to project risk. It includes maximizing the resultsof positive events and minimizing the consequences of adverse events. “ The PMBOKsuggests using the following processes and actions to manage risk: 383
    • • Risk Identification – determine the risks likely to affect the project and document the characteristics of each. • Risk Quantification - evaluate risks and risk interactions to assess the range of possible project outcomes. • Risk Response Development – define the steps to thwart the threats. • Risk Response Control - respond to changes in risk over the course of the project.Risk management recognizes that things can go wrong throughout the project lifecycleand demands that PMs prepare for it. During the project planning stage, the PMtogether with the functional managers, suppliers and other stakeholders review thecustomer’s requirements. The team assesses the ability of the system underdevelopment to meet these requirements. As they progress during the planning stage,the team identifies areas of concern. If they identify a customer requirement or projectobjective that seems questionable, the planning team documents the issues (technicalor otherwise) and estimates their impact on the cost, schedule, and available resources.The stakeholders prepare an action plan to mitigate the risk if any of the problem issuesarise. The PM sets aside a contingency budget to fund the inevitable problems andissues that arise. During the project, team members track and report on the projectactivities with attention paid to the emergence of the noted risk indicators. If theanticipated problem issues arise, then the stakeholders whip out the corrective actionplans and implement them. 384
    • Risk Identification at the Proposal Stage ContractMost customers award a firm, fixed price contract. The fixed price includes all of thecosts, overhead, G&A, and profit in the final price. That is, the customer and thecontractor agree on a price and that is the price paid to the contractor no matter thecost. The customer does not care if the contractor or developer makes a profit on thejob. The customer simply wants a finished product or service at the end of a specifiedtime at the agreed price. In years gone by, the government sometimes offered a “costplus” contract. Under a cost plus contract, the contractor received a profit (typically10%) based on total project expenditures. Under this contract format, the contractorhad no incentive to reduce costs and frequently would load the project with unneededpersonnel. It was a wonderful way to train new employees in the organization’sprocedures. After six months to a year, the employees gained the experience tocontribute meaningfully to the organization’s activities. Some of them would likely betransferred to different job – perhaps a fixed price contract – and replaced by anothercrop of new hires. The government would pay for all of this. Not too efficient, butpermissible on a cost plus contract. In defense of this policy, some contractors refusedto bid on a new and potentially difficult development project using unproventechnologies for fear of under-estimating the costs and losing money. The governmentoffered the cost-plus contract to entice companies to pursue difficult new and riskydevelopments. 385
    • Sometimes circumstance demands project completion by a given date and thecustomer willingly agrees to pay a premium for this outcome. The customer develops acontract intended to motivate the developer by offering a fixed price plus an incentivefee. That is, the customer pays the agreed price to the contractor if the contractorcompletes the project on the scheduled date. However, if the contractor delivers early,then the customer pays the contractor the agreed price plus an additional percentage ofthe price, which is commonly referred to as an incentive fee. The downside of thisarrangement involves a penalty if the contractor delivers late. The penalty aspect ofthis contract represents risk and the PM must carefully monitor the execution of theplans to prevent returning money to the customer. Technical RiskSmall information technology, electronic, mechanical and electromechanical systemand software developers frequently face a variety of technical risks in a new project.Risk exists if your organization has not previously delivered a similar system or softwarepackage. The use of software, hardware or manufacturing tools not previously used byyour organization entails risk. Initiating changes into the development or fabricationprocess introduces risk. Frequently, the consequence of these risks surroundsschedule, which may lead to additional labor hours to complete the task(s). It may takelonger for the staff to learn to use a new tool or to gain comfort with a new process thananticipated. Murphy’s laws never take a vacation. [ 1) If anything can go wrong, it will.2) Nothing is as easy as it looks. 3) Everything takes longer than you think it will.] 386
    • A new technology brings with it all manner of risk. By its very nature, a research projectcontains very significant risk because the staff does not know if it will succeed. Thematurity of the technology used on the project has a major bearing on the system risk.Referring to Table 10-1, the use of a leading edge technology raises the eyebrows ofmost PMs. Whether software or hardware, unproven or recently introduced technologywill have bugs – unknown problems that limit the use of the application software.Sometimes engineers on technology’s front cusp insist on using Beta software. Theterm Beta signifies software in an advanced state of development but still in test andnot yet officially released for production. This software has problems. Manufacturersrelease Beta software versions to knowledgeable customers to help “wring out” thesoftware just before production. The customer willingly accepts the risk entailed in usingunproven software to take advantage of unique features that it desires. When usingleading edge technology, functional managers and project managers anticipate settingaside time and budget for staff training. Depending on the complexity of the newtechnology or software, it may take some time for the staff to achieve proficiency in theuse of the new products. PMs understand that new technology has inadequatedocumentation. Organizations frequently deliver documentation such as applicationnotes, operational user manuals, maintenance manuals, and training manualssometime after the product’s initial release.Invariably the standard computers available in the organization will require upgrade tooperate leading edge software. New developers tend to use the latest available 387
    • computer features. For cutting edge software they will expect a cutting edge platformthat includes a large hard drive, gobs of memory, intensive graphics and other features.Make certain to budget for additional computer hardware to operate the new software.Expect reliability issues associated with the purchase and use of newelectromechanical and electronic products. Assuming there are no engineering designissues, large production runs usually require some time to work out the manufacturingkinks. Great demand and limited initial production translates into a high price for theproduct during the first months following introduction.Initially, a new electronic product usually has only a single supplier. Some time elapsesbefore other manufacturers decide to second source the product. Usually thecomponent price remains high during the time for which only a single source exists.Another downside consideration of using a sole sourced item is that your organizationwill have major redesign issues if the sole source supplier decides to change ordiscontinue the component. If the sole source supplier experience production problemsor gains success in the marketplace and your organization is not a preferred customer,then your organization may have difficulty acquiring the required component. Ofcourse, situations exist that demand the use of a sole sourced supplier. Anothercompany may not offer a product containing the requirements that your organizationdemands. If this is the case, then you must develop a close rapport with the supplierand stay abreast of any anticipated product specification, technology or price changes. 388
    • For these reasons, many project managers prefer not to use leading edge technology.They prefer to consider state of the art or mature technologies to eliminate the risksinherent in this technology. It does take some convincing, because most engineers andtechnicians want to use “the latest and the greatest” product. They feel they becomeobsolete if they do not use the most recent technological innovation.During the state of the art years, the leading edge technology products become reliable,available and the price stabilizes. Training becomes readily obtainable and secondsources emerge.The PMs favorite, the mature technology, has everything going for it – productavailability, low price, reliability, multiple sources, and accurate documentation. Productavailability will likely continue for several years to come, which will satisfy systemmaintenance issues. By this time, technology practitioners have received training andthe project will not incur schedule delays or budget surprises due to lack of training.The software will work on all computers, because computer hardware will have caughtup to the features required by the software. Little, if any, risk is involved. A greatchoice.Risk begins to increase if the project personnel intend to use sunset or agedtechnology. Technical personnel become harder to recruit. They voice reluctanceabout working on older technology. While on the job they may seek other opportunitieswithin and external to the organization to enable them to work on projects with newer 389
    • technology. Job changing may result in schedule delays while a new person assumes atransferees responsibilities. Component multiple sources disappear as productdemand decreases and manufacturers no longer enjoy the profits they would like.Avoid legacy system components. Only companies specializing in obsolete productsales will help obtain material and supplies. If a supplier has obsolete product in stock,expect a high cost. Within your organization, few personnel will have familiarity withobsolete components. Certainly, no one wants to work on them. Recent graduates willnot have any background in this technology and will be at a loss. In a Pentium 4 world,would you want to work on a computer with an 80386 or 80486 processor?Manufacturers no longer support legacy components. Few people in their organizationcan help you with an application. The most recent computers may have difficultyoperating legacy software. As an example, try running DOS based software in aWindows 2000 environment. Forget about it! 390
    • Table 10-1 Technology RiskTechnology Elapsed Employee Training Software or Electronic Time in Training Availability Electronic Hardware Years Since Hardware Product Introduction Reliability AvailabilityLeading edge <1 Maximum Few courses Poor Limited availableState of the 1-3 Moderate Courses Good Good toart become Excellent availableMature 3-5 Minimal Plentiful Excellent Excellenttechnology CoursesSunset 5-8 Moderate Fewer Excellent Moderate courses availableLegacy >8 Seek No courses Excellent Limited specialists Availability 391
    • Table 10-1 Technology Risk (Continued)Technology Computer Electronic Documentation Product Price Platform to Hardware Availability Operate Second Source Software AvailabilityLeading edge New or None Lack of High Upgraded availability and older system error prone. Few application engineers available to assist with problems.State of the New or Likely Improving Moderateart Upgraded older systemMature Standard Yes Complete with all Lowtechnology Platform updatesSunset Standard Yes but Complete with all Moderate Platform decreasing updatesLegacy Limited Limited Complete with all High Availability Availability updates. Technical and Operational PerformanceSome customers request that the contractor demonstrate compliance with everyrequirement listed in the specification. An operational performance test of thismagnitude requires significant preparation as well time to actually perform the test. It iscustomarily performed during the factory or site acceptance test. Anticipate that thingswill not go smoothly. This will cost schedule and labor hours. 392
    • At times, customers require a hardware product to achieve a minimum reliability or amaximum repair time. Mean time before failure (MTBF) is a measure of a hardwaresystem’s reliability. As the name implies, it signifies the approximate theoretical timethe hardware system operates before incurring a failure.Reliability engineers can calculate the mean time before failure (MTBF) using standardfailure rate tables. This data does not exist for newer technologies. Consequently,technologists may not be able to accurately calculate the MTBF. This may force a “live”MTBF test, also known as a reliability demonstration, before the customer accepts theproduct. If this test includes a provision in the specification to set the elapsed time tozero following every failure, this could severely affect the schedule and test budget.Delete this latter provision from the customer’s list of test requirements during theproposal phase.A new packaging approach may bring with it difficulty in meeting a customer’s desiredmean time to repair (MTTR). A customer’s application may require quick productrepair. If so, they may include a provision in the contract designating a specific MTTRgoal - perhaps 30 minutes. Proving this may also require an extensive array of testing,which the PM should estimate and for which the customer should pay.The risk involved in both the MTBF and MTTR tests surrounds the possibility of testfailure. Correcting the product will inevitably cost a great deal of money. Manyorganizations upon failing this type of test would rather extend the warranty or offer the 393
    • customer a number of replacement units in lieu of correcting the system and repeatingthe reliability or time-to-repair test. DamagesSome projects critical to an organization’s operation may cause great harm to thebusiness if it becomes inoperative or does not meet contract specifications afterinstallation. The organization may include a statement in its terms and conditionsrequiring the project developer to pay for lost business or demand some othercompensation during the time the developer makes corrections. The contract may notbe worth the risk of this type of damage or the ensuing court fight. Delete this from thecustomer’s terms and conditions during the proposal phase. Labor Rates and Forward Pricing ProjectionsSome projects require several years to complete. This multi-year procurement bringswith it a very positive outcome – work for an extended time. However risks abound, notthe least of which is the need to reflect the increased labor costs in the estimate.Typically, the staff receives 3-4% annual salary increases. Material costs rarely godown. The multi-year price to the customer must reflect salary and material increases.In addition to taking into account small labor and material price increases, some PMsword the price statements to take into account inflation. The contractor states that allprices are given in a particular year’s dollars – say 2003 dollars. Therefore, if rampantinflation takes over the economy in 2004, the customer pays the additional inflationarycosts. 394
    • Business risk issuesFrom time to time, a contractor decides to move into a new business area and offers avery low price containing little if any profit, which is intended to influence the customerto place the order with them. Under these circumstances, the PM continuallyscrutinizes labor and material expenditures during the course of the project to preventover-running the budget. The contractor willingly undertakes the risk of exceeding thebudget in hopes of establishing themselves as potent players in the new business area.Sometimes a customer structures a project in phases with each successive phasecontingent upon the successful completion of the previous stage. A contractor maydecide to bid a low price on the first stage. They believe that the customer will bereluctant to switch contractors if they successfully fulfill the terms of the first phase. Thecontractor anticipates recovering the profit during subsequent project phases. Thisstrategy, known as cost amortization, has worked successfully many times. As long asthe contractor does not become too greedy, a customer will tend to remain with theoriginal contractor. The organizations involved have developed a rapport andunderstand each other’s method of operating. It is easier for the customer to continuethe relationship than to seek a new developer – especially if the contractor met thetechnical requirement and delivered the product on time.Outsourcing, the process of subcontracting work to organizations not part of youroperation, has always been a way of doing business. This places a burden on the 395
    • PM. The subcontractors require intensive monitoring to verify that they will deliver theproduct or service on schedule, technically acceptable and at the agreed price.Organizations outsource for a variety of reasons. Some of these reasons include thefollowing: • The selected contractor may not have the critical technical skills to perform some aspect of the job. • The selected contractor may have the technical skills and knowledge to perform some aspect of the job, but not have the resources to complete the set of tasks within the required schedule. • The customer may direct the selected contractor to use a particular subcontractor. • The contractor may have entered into a teaming arrangement with another organization. The agreement requires them to subcontract a portion of the job to team members.Organizations commonly enter into a teaming relationship to make the total package ofexperience and available resources more attractive than either of the team membersalone could provide. Organizations select team members that complement one anotherby providing greater technical or managerial depth than they alone could provide.Sometimes an organization selects a team member because they understand thecustomer very well and believes that the selected team member can provide insight intothe customer’s operation. 396
    • Outsourcing brings with it a whole host of issues and risks. Can the designatedorganization that receives the outsourcing contract do the job? Do they have a historyof success with similar projects? Do they have the technical expertise available to workon your job? Do they have the facilities, tools and other needed resources in place? Dothey have the financial resources to accomplish the task? Can they schedule your taskinto their to-do list? Can they do the job within your budget and still maintain the qualitythat you expect? Do they have the resources to adequately test the product or service?Can they provide maintenance and repair services and training, if required, after theydeliver the product or service to you? Have you allocated sufficient labor to monitor theoutsourcing organization’s progress? Terms and ConditionsReview the customer’s terms and conditions contained in the RFP or RFQ during theproposal phase. Raise potential risk issues to executive management for discussionand resolution. Look for an unusual warranty – for example, an extended warranty or awarranty that includes the installation of new software versions during the first year afterdelivery and installation. In addition to installation labor and software cost, thiscondition may have software compatibility issues. For example, if the system that yourorganization intends to deliver includes third party software in addition to theorganization’s developed software, a risk exists that the installation of new untestedsoftware versions may not operate satisfactorily in the customer’s environment. Onlyinclude updating software if your organization receives payment for this task – usuallyon a time and material basis. 397
    • Make certain that a satisfactory payment schedule exists on longer developmentcontracts. Customers prefer to pay for the job at the conclusion. That is OK for them,but your organization must use its own money until it receives payment. Organizationsprefer to use the customer’s money to fund the project’s progress. Include a paymentfollowing the completion of each significant milestone or deliverable.Companies collect patents for protection purposes. If company A appears to infringeon one of company B’s patents, company B slaps company B with a lawsuit. Afterreceiving notice of the lawsuit, very often company A examines company B’s productpatents in an effort to counter sue for patent infringement. In all likelihood, the suits willsettle out of court. Customers frequently include in the terms and conditions, the rightto own all patents that emanate from a development contract. Organizations try tokeep patent rights for inventions that they develop even if the customer pays for it. ThePM settles these stipulations before the parties sign the final contract. Other CostsCapital expenditures involve the purchase of equipment, facilities or other non-laborresource above a preset financial minimum that will serve several different projects.Capital expenditures do not usually include equipment that serves a single project. Theproject purchases unique tools or equipment. In an effort to reduce project costs, PMsreview required equipment and tools and try to include them as capital expenditures. 398
    • Mitigating Risk at the Proposal StageAfter examining the different types of risk discovered during the proposal phase, the PMquantifies the risk by creating Table 10-2. The PM together with the functionalmanagers calculate the cost of a WBS item as two parts. The first part corresponds tothe likely cost of labor and material for the WBS task. The second part corresponds tothe additional cost resulting from a worst-case risk scenario. Assign a risk probability of25%, 50% or 75% for this case. The weighted risk is the product of the probability ofrisk and the risk cost estimate. The WBS item cost corresponds to the sum of the likelyWBS item cost and the weighted risk cost. The results of this calculation transfers tothe proposal cost spreadsheet shown in Chapter 7, Table 7-7 – Including the Project’sFinancial Risk in the Cost.Senior management generally reviews the risks before submitting the project price tothe customer. Depending on their desire to win the contract or just plain “gut feel,” theywill take all or a portion of the identified risk and add it to the baseline project cost toarrive at a total project cost, which the organization submits to the customer. 399
    • Table 10-2 Quantifying Risk WBS Item Task Item Cost - Risk Cost - Probability of Weighted Risk Total Item Cost - $ Description $ $ Risk -$Total 400
    • Risk Management During the ProjectDuring the proposal phase, the project team completed the risk management analysisthat included risk identification, risk assessment, and risk abatement. As part of thelatter task, the team developed plans that defined the actions should the unwantedevents occur. This proactive planning function identified and ranked elements of riskthat could compromise a successful project outcome. Finally, the team sets asidecontingency funds to minimize the financial impact.During the project’s execution phase, a host of issues can arise that could causeproject delays, cost overruns, and/or performance issues stemming from a failure toachieve technical or operational requirements. Perhaps the most common reason fordelays involves changing requirements. As they learn about the capabilities of theproduct or service they contracted, customers have a tendency to “fine tune” theirneeds. In order to ensure a profit and deliver the project on schedule, the PM mustcontrol the scope of the job. This translates into controlling the customer andimplementing a change control management process. Insist that the customer submita formal change order request that describes in detail the nature of the change. Thisenables the contractor to respond with a price and schedule impact statement. Onlyafter the customer approves the change and agrees to a price increase do youproceed. The PM does not agree to a verbal approval. Have an authorized customerrepresentative sign and date the change order and then proceed. In this manner, thePM gains assurance that the customer understands and agrees to the cost and 401
    • schedule ramifications. Generally, changes made early in the schedule cost the leastto implement.Modern systems use many complex interconnected components containing multiplehardware and software interfaces. These interfaces frequently contain unknown quirksand represent a source of integration problems. Once a software or hardware moduleoperates consistently well, urge engineers to use it on similar interfaces rather thanredesigning it for the technical challenge.Technologists dislike preparing documentation. They love to design. They even willaccede to testing a system, but they generally dislike writing. Because of that aversion,they will postpone writing as long as possible. The risk is not only that it may not bedone, but also that the technologist may forget important details that should becontained in the material. Incomplete documentation may cause support (e.g.,maintenance and training) problems down the road. During project status reviews thePM gently reminds all associates of unfinished tasks.Frequently the customer has the contractual right to review and approve acceptancetests and other written material. Here again, the PM prompts the customer to expeditedocumentation review and approval. Failure to do so can slow the project’s progress.The PM may halt some activities for fear that without documentation approval somework would require modification, thereby costing additional time and labor. 402
    • Rarely do we plan for staff turnover. Anticipate that a small percentage of the staff willdepart during the project effort for a variety of reasons such as illness, disability, familyleave, sabbatical or simply a different job. Today, people with skills in demandfrequently hop from job to job in an effort to broaden their technical experience base aswell as increase their salary. Leaving a position in midstream causes a significantdisruption to the workflow. The recruitment process requires time to advertise, interviewprospective applicants and select an appropriate match. The newly hired person needstime to adjust to the company’s processes and procedures. Sometimes the newemployee must undergo a period of training. Meanwhile, tasks go undone and theproject falls behind schedule. If too many people leave, the organization shouldinvestigate the reasons. It may face a broad salary, benefit, or working conditionproblem that requires attention by the human resource department and uppermanagement.A special staffing problem involves the use of consultants. At times, the team decidesto use consultants to “kick-start” the project. That is, the team brings in experts to getthe project off to a fast start. In some situations, temporary workers supplement theexisting employee base. In these cases, the PM must ensure that adequate provisionsfor contractor/consultant knowledge transfer take place.Preparing for disaster recovery represents a sound business strategy. Plan for the daythere might be a fire, flood, earthquake, or terrorist attack. Perhaps you cannot preparefor the kind of terrorist attack that struck the World Trade Center in New York City and 403
    • the Pentagon on September 11, 2001, but you should protect the project and theorganization as best as possible. Consider installing a back-up power source to supplypower to a system or facility. Assume that computers will fail. Although important, it isinsufficient to simply have another copy of the computer hard drive on a zip drive or CD-Rom within the same facility. A fire or flood could destroy both the computer hard driveand back up, if placed in the same location. Regularly place the back-up data in anoffsite storage location away from your office or manufacturing facility. Do the samewith engineering drawings, schematics, software source code and documentation.Some organizations use a bank vault or safe deposit box for this purpose and transferthe material to this location weekly. Commercial repositories for data storage exist (e.g.,Iron Mountain). Back-up computers daily or weekly. Some installations permit settingan automatic daily hard drive backup that simplifies the process.Other risk areas confronting the project include: • Technical errors or misjudgements • Task omissions • Non-specification related design changes • Component or equipment unavailability • Management commitment to project • Changes in senior management forcing extensive and frequent status reporting • Estimating and scheduling errors • Collective bargaining unit actions • Late delivery of supplier deliverables 404
    • • Priority changes that result in loss of resources • Delayed approvals and acceptances • Weather and other random events • Incorrect learning curve selection • Unavailable or unreliable tools and methods • Project Team Factors - experience, skills, background, and dedication of the project team.Mitigating RiskThe project team attempts to produce a desired outcome while minimizing the risk offailure. Interpret failure to mean any of the following project outcomes: • Late delivery • Unacceptable product or service installation at customer’s site • Over budget • Product or service technical inadequacies • Unacceptable technical performance • Product or service unreliability • Inadequate product or service maintainability • Inadequate documentation • Inadequate customer training • Inadequate after delivery support • Product or service safety issues 405
    • • Unacceptable attitude toward customer • Slow help-desk responseRisk management first involves identifying the risk areas before the project begins –that is, during the proposal phase. Once identified, the PM and the team tracks theserisk items during project execution. Invariably, new risk elements of emerge. Stayingon top of the project enables the team to take action before activity-delaying problemsoccur. The PM works closely with team members to change the development processand reallocate resources to help control and minimize the risk. These actions helpdirect a project team to select the best path, thereby improve the teams ability to effecta positive outcome and meet project objectives. 406
    • Chapter 10 Questions1. With what does risk management deal?2. Identify four processes and actions to manage risk.3. Describe the difference between a “cost plus” contract and a “firm, fixed price award”. Which would you prefer and why?4. Senior management dictates the use a new project scheduling and project tracking software tool. Describe the issues associated with the use of this new tool. As the PM of a new project that must use this tool, what steps can you take to minimize the risks?5. The engineering staff has decided to use a new composite material to construct an enclosure for the system under contract. The engineering department believes the new product has superior properties (inexpensive, lightweight, strong, and malleable) when compared with traditional materials used for this application. What issues do you think may arise from using this new material? Describe steps you can take to minimize these problems.6. Discuss the advantages and disadvantages associated with using new technology.7. Engineering recommends the purchase of a newly introduced attachment to a personal computer that would be ideal for use on the project for which you are the PM. The device will reduce the size, weight, and manufacturing time for the new system under design. If used, engineering estimates 10% reduction in the cost of the material used on this project. Sentrex Technologies, a multibillion dollar 407
    • company and long established company, manufacturers the unit. At this time, they are the only company that manufacturers the unit. a. Does the use of this device represent a risk? b. If risks exist, describe it. What can the project manager and the engineering organization do to mitigate the risk(s)?8. Describe the advantages and disadvantages of using newer versus older technology in systems.9. Discuss the difference between MTBF and MTTR.10. Describe the circumstances under which an organization might offer a product or service with little or no profit. Under these circumstances what must a PM do?11. Describe the circumstances under which a company might team with another organization to deliver a product or service. What risks does this entail? What can a PM do to mitigate these risks?12. What does outsourcing mean? Identify the risks associated with outsourcing? What can a PM do to mitigate these risks?13. Describe the process of preparing for risks during the proposal phase.14. What is the purpose of contingency funds?15. How can an organization plan for staff turnover?16. What does controlling the customer mean? How does a PM do it?17. What steps can people take to protect against natural or man-made disasters? 408
    • CHAPTER 11 Project Tracking, Reporting and Procurement There is nothing in this world constant, but inconstancy. – Jonathan Swift in Critical Essay upon the Faculties of the Mind (1707) Change alone is unchanging. - Heraclitus (circa 535- 475 B.C.E), Herakleitos & Diogenes, pt. 1, fragment 23Chapter objectivesAfter studying this chapter, you should be able to: Understand the importance of project tracking. Recognize the constituencies from whom a PM requests information Understand the contents of reports to prepare. Understand the frequency of reporting. Understand the information required to begin to track the project. Analyze project tracking data. Recognize when a project is in financial or technical trouble. Identify the stakeholders responsible for financial or technical problems. Understand the steps used to end a project. Prepare yourself to lead a lessons learned session.Project tracking and reportingFollowing the proposal and contract award, the moment comes to execute all theorganization’s promises. Once the project is underway, project tracking andreporting becomes uppermost on the list of the PMs activities. During this stage, the 409
    • project manager acts primarily as a functional department observer. The projectmanager monitors status information and keeps the customer happy – and far awayfrom the technical organization. The PM tracks the project’s progress against theimplementation plan. Throughout the process, the PM watches for the signs of riskissues emerging. Many PMs obtain information using the practice of management bywandering around. Just talking with people uncovers a variety of concerns and issuesthat people don’t put on paper. Most PMs try to cultivate relationships with project teammembers, product or service users, suppliers, customers and senior management.They visit team members, subcontractors and other project related personnel to assessproject progress. Talking informally with these people frequently uncovers issues thatmight otherwise take time to surface. Few managers discuss employee attitude,morale, job iniquities, etc. during status reviews. If these managers raise these issuesduring reviews, they have generally reached a crisis level. Wandering around canenable the PM to evaluate project status from a qualitative as well as a quantitativeperspective.Typical monitoring activities include attendance at functional department meetings,customer reviews, project status reviews and executive management briefings. ThePMs attendance at functional department briefings is usually inversely proportional tothe PMs workload. However, attendance is mandatory if the team identified some levelof activity risk during the proposal phase. For high risk project activities, dailymonitoring includes reviewing status information and meeting with key project leadersto understand the progress of activities and making changes to priorities if required. For 410
    • lower risk project activities, the PM might limit monitoring to include a review of monthlystatus reports, attending regularly scheduled briefings by project staff, and conductingrandom visits to the project site to assess progress.Project tracking serves the needs of senior management, the functional managers andthe customers to understand the issues associated with the job. Before commencingtracking, the PM should gain familiarity with the project history, management, anddevelopment methodology. After completing these preliminary steps the PM has thebackground to proceed with project tracking, which involves • Monitoring and reviewing the project accomplishments and results against plan estimates of project scope, resources, schedule, and cost • Verifying that the organization receives material procurements on time • Maintaining contact with subcontractors and receiving the status of their assigned work. • Developing work-around plans to correct technical, schedule, cost, and subcontracting plans that go awry. • Verifying that resources become available when required • Acting on feedback from the user or external customer.Project tracking and reporting compares planned versus actual status for the following: • Project schedule and milestones (including changes to scheduled dates for key deliverables or milestones and planned completion date) • Project budget (including cash flow and funding sources) 411
    • • Project scope, objectives, or requirements (if any changes occur)The PM maintains awareness of changes to project sponsorship, management, or otherrelevant organizational adjustments that may affect the work. Most status briefings andreports begin with a summary of accomplishments since the last reporting period.Reports frequently conclude with a summary of past, current and future issues includingsteps to mitigate actual or potential problems and an updated risk analysis.Project tracking methods and requirements vary based on project size, budget,complexity, and impact on the affected organizations. The management of a projectincludes processes for tracking and communicating project status and performing riskassessments. The project manager has responsibility for tailoring the frequency ofreporting to meet the specific needs of the project. All projects terminate with a finalreport that summarizes final costs, issues, and lessons learned.Table 11- 1 illustrates guidelines for the frequency of monitoring project activities. MostPMs examine schedule progress and actual spending versus planned spending on aweekly basis. The PM contacts functional departments and suppliers at least weekly tostay abreast of developing technical, resource and procurement issues. As discussedin previous chapters, both under and overspending represent areas of concern. Doesthe progress correspond to the spending or does overspending indicate a technicalissue? Does the lack of spending indicate that people are not working on the job?Weekly stakeholder meetings can root out the answers to these questions. The PMuses common sense in deciding the amount of information gained from these meetings 412
    • to share with the customer. Too much negative information will make the customerhave cause for concern – an undesirable event. On the other hand, only fictionalprojects contain no problems. An experienced customer or project manager becomessuspicious if activities proceed without issues developing. Senior management doesnot want to know about every hiccup in the development process. Usually a monthlyproject overview satisfies upper management’s need to remain aware of project status.The PM maintains weekly contact with purchasing to understand the status ofsignificant component, equipment and service purchases or subcontracts.Project Tracking ExamplePerhaps project tracking and reporting can be best understood by an example thatillustrates the data examined by the project manager when monitoring and controllingthe project. The following project example describes a plan to provide a customer witha custom-built employee security entry system, conceptually shown in Figure 11-1. Thecustomer operates an industrial facility containing three entrances in the surroundingfence. The customer has concerns about plant security and wishes to controlpersonnel access by requiring each employee to carry and use a magnetic identificationcard. Before entering the facility, each employee swipes their identification cardthrough a magnetic card entry reader device and places their thumb on a scanner. TheID card contains personal and biometric information about the employee. The entryprocess verifies that the person swiping the card is the employee seeking entrance bymatching the employee’s fingerprint with data stored on the card. Simultaneously, thesystem accesses a central database to confirm that the person works at the facility, has 413
    • the appropriate security clearance for this site, and has completed all training (e.g.,Hazmat) required for the job. After performing these checks in five seconds or less, thecontrol computer sends a signal to the entrance gate to permit or reject the person’sentry request. The customer requires the contractor to install three identical accesscontrol systems to monitor the entry locations and link each system to a central guardheadquarters.The contractor receiving the award, decided to use as much commercial off-the-shelfcomponents and equipment as possible in an effort to reduce costs and developmenttime. Their schedule, shown in Figure 11-2 a, required sixteen weeks from contractaward to product installation and training. The contractor requires the followingdepartments in the effort to complete the work on this project: Electrical Engineering,Mechanical Engineering, Software Engineering, Networking Engineering, FactoryTechnicians, Field Service Technicians, Project Management, Publications, QualityAssurance, Training, Shipping, and Purchasing. These functional departmentscontributed to the labor hour estimate for each element of the simplified WBS shown inTable 11-2. Table 11-3 illustrates the plan for the time distribution of the labor. Thedata found on the charts represent a joint planning effort between the PM and allproject contributors.The labor hour spending plan shown in figure 11-3 does not follow the “traditional”inverted U characteristic described in chapter 3 because of the project’s small size andshort duration (16 weeks). Limited funding on this project prohibits the staff from 414
    • spending all of their time on this job. The nature of small short-term jobs requirespeople to quickly complete their assigned tasks and move onto another project. Eventhe project manager does not charge full-time to this job. Project managers canmanage four to five projects of this size and spread their weekly work hours over themanaged jobs. With a spending plan distribution such as this, the PM carefullyscrutinizes actual costs to ensure that employees do their work and stop charging thejob following completion of their tasks.The project manager begins to gain control of the project by first reviewing andunderstanding the project’s planned budget and schedule. Once the project begins, thePM has the responsibility to deliver the product or service within budget, on time, andtechnically satisfactory. Workers charging the job, enter the hours they work on eachtask in the WBS into a database that collects this information. At the end of each week,a financial administrative assistant prepares a variety of reports for the PM and thefunctional managers to examine. These reports enable the comparison of actual laborand material expenditures with planned expenditures in a variety of ways. At the sametime, the project manager also examines the work accomplished by the functionaldepartments to verify that they have maintained the planned schedule. Significantdifferences between expected and actual spending demands further investigation.This example focuses on the labor hours expended by the workers at the end of theproject’s fourth week. The example does not include material purchases. Table 11-2describes the functional department’s budget for each task composing the work 415
    • breakdown structure. Table 11-3 presents the expected spending for each functionaldepartment over the length of the job. Each week the project’s administrative assistantprepares data similar to Tables 11-4 through 11-6. The data shown in Tables 11-4through 11-6 reflect the status of the job at the end of the fourth week. Tables 11-4 a)and b) identifies the actual project spending by each functional department during thefirst four weeks of the project, while Table 11-4 c) summarizes the total labor charged toeach WBS task during this time.Many PMs begin the weekly status analysis by first comparing the total hours actuallycharged to the project by each functional department with the expected spending plan.The PM or the project financial administrator compares the expected data from Table11-3 and the actual charged labor hours listed in Table 11-4, and notes a discrepancybetween the anticipated planned rate of spending and the hours actually worked on theproject. During the first two weeks, the team expected to spend 214 (96 and 118)hours. They actually spent 143 (57 and 86) hours. During weeks 3 and 4, the teamattempted to catch up by working 175 hours each week.Functional managers may rationalize not placing the required number of people towork. From their perspective, they have a limited number of people in the departmentand they usually feel a responsibility to supply labor for long-term complex jobs.Functional department managers tend to use short-term projects for “fill-in” work duringa lull in the long-term job. Consequently, functional managers may not assign staff tothe short-term effort until they can fit it into their timetable. Many functional managers 416
    • incorrectly perceive the short-term project as less important than the longer effort. Thiscan result in work falling behind schedule.At the four-week point, we know that several groups did not put the required number ofpeople on the job. Arbitrarily we establish that time charged to within +/- 10% of thespend plan is satisfactory. The PM or the project financial administrator creates thecomparison in Table 11-5 from the expected data in Table 11-3 and the actual timecharges listed in Table 11-4 to determine the departments putting the correct number ofpeople on the project. Examining table 11-5 leads us to conclude that the electricalengineering, factory technicians, field service technicians, project management,publications, training, shipping and purchasing departments have spent the plannedlabor budget. We have not determined if these departments have completed therequisite work corresponding to the expenditures. We only know that they spent therequisite time on the job. The mechanical engineering and quality assurancedepartments have overspent the +/- 10% guideline. Initially, we ignore the qualityassurance department’s 20% overrun (2 hours) because it is too small compared withthe overall budget. However, the 20% overrun by the mechanical engineeringdepartment does raise questions. Did they complete the work they set out toaccomplish? Has the department moved ahead of schedule? On the other hand, boththe software and networking engineering departments have under spent their allottedlabor funding. These departments appear not to have placed the required labor ontothis job. Why? Did they overestimate the complexity of the job or do they lack thepeople? Did they complete their assigned tasks? Comparing actual time charges with 417
    • the planned labor expenditures does not provide sufficient information to determine theproject’s status. We must investigate further.The schedule plan in figure 11- 2 (a) indicates that at the end of the fourth week, WBSactivities 1 and 2.1.1 should be completed. WBS activities 2.1.2, 2.2.3, 2.2 and 2.3should have approximately 50% of the work done. As they do at the end of every week,the functional managers provide the PM with the fourth week’s schedule statusinformation that estimates each department’s progress to date in completing the WBSactivities. In order to gain a meaningful estimate, each task must have a well-definedoutput so that both the functional managers and the PM can objectively confirm thepercentage of the task completed. The PM or his/her designee places this data into thecolumn in table 11-6 entitled Estimate of Work Completed. The project financialadministrator creates the remainder of Table 11-6 by forming the ratio of actual laborhours charged (Table 11-4c) to the planned labor hour estimate (Table 11-2) shown asa percentage.Examine each WBS item in detail in table 11-6. The data for WBS 1.0, states that thedepartments’ collectively consider the work on the task completed. The electricaldepartment charged 68% of the estimated hours for WBS 1.0, whereas projectmanagement charged 120% of its plan. That is, the project management groupoverspent its budget by 20% on this task. Earlier we noted that the softwaredepartment did not place all the planned labor on the job, but nonetheless completedthe task. So, this issue is satisfactorily resolved. The training department charged the 418
    • project on WBS 1.0 but did not include this in their original estimate. Quality assuranceunder spent. Overall, WBS item 1.0 worked out well. The team completed WBS 1.0 byspending 78% of its planned expenditures. Work completed on time and underbudget– music to a project manager’s ears.WBS task 2.1.1 turns out to be quite a different story. The schedule plan indicates thatthe task should be done, but the departments report only 75% complete. Everydepartment has overspent its labor budget. The training and quality assurance havecharged unplanned time to the task. What is happening? The PM must visit eachdepartment as soon as possible. Has a difficult technical issue arisen? Has thecustomer requested the engineers to use a different software application or a differentpiece of equipment than agreed upon in the proposal? Has a supplier changed thespecifications for a piece of equipment, which has created havoc among the designengineers? Do the users have incomplete and/or inaccurate data associated with theuse of equipment or software? Did the team simply underestimate the complexity ofthe job? The PM must quickly discover and resolve the problem(s). Table 11-7identifies typical issues that may arise during the project’s early stages. More oftenthan not, a problem occurring during an early phase is due to a misunderstanding of therequirements, failure to place people onto the job at the required times, anunderestimate of the job’s complexity, or a subcontractor failing to perform as expected.With regard to the latter issue, many organization’s prefer to place work with reliablesubcontractors with whom they have developed trusted relationships – even if the task 419
    • costs a bit more. Deming advocated such an arrangement in the fourth of his fourteenpoints: End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.Receiving reliable hardware or software on time such that it does not delay other workis crucial to the success of the job.If the delay associated with WBS task 2.1.1 results from a likelihood of not meeting acustomer requirement then a very significant issue has surfaced. The functionaldepartments and PM must first develop several alternative plans and then notify seniormanagement. Finally, after bringing senior management on board, notify the customer.Very often, a good project manager can trade a difficult implementation requirement foranother feature that the customer may value.Note that in this example, the PM examined both functional department spending andWBS activity status. Formal techniques to perform this analysis exist. In particular,PMs sometimes use earned value analyses to quantify project status. This analysismethod relies on the original project estimates and actual progress to determine status.Table 11-8 identifies the earned value definitions. Figure 11-5 graphically illustrates therelationships among several of the variables in Table 11-8. The data are reviewed inFigure 11-5 during the first week of October. Based on this information, the PM 420
    • concludes that the project is behind schedule and over budget. The graph denotes theestimate at project completion based on the formula provided in Table 11-8.Project managers monitor the schedule and cost performance indices on a weeklybasis to gain a quick understanding of developing problem tasks. Task indices greaterthan one signify that all goes well – less than one signifies possible issues. Whenconfronted with a long column of tasks, the PM can easily scan the list to identify thosetasks with a CPI or SPI less than 1.0. The larger the variation below 1.0, the more theconcern. In this way, the method automatically prioritizes the tasks calling for the PMsattention. The earned value method continually estimates project cost at completion.This enables the PM to respond to one of management’s first questions – how muchwill the problem cost?Whatever method of analysis is used, it should be performed in a regular andconsistent manner - preferably each week. The PM examines the project the labor,financial and schedule data for all WBS tasks in a similar manner as this example.Meetings then take place with functional department managers to discuss actionsrequired for problem resolution. Stakeholders find it crucial to keep thecommunications channel active and inform one another of changes. The PM alwaysinforms the customer of project changes in writing. 421
    • Figure 11- 5 Earned Value Relationships Review Estimate at Date Completion ACWP BCWS Over budget Behind Schedule BCWP 422
    • Table 11-8 Earned Value Definitions TERM ACRONYM FORMULA DERIVED FROM DESCRIPTIONBudgeted Cost Of BCWS Budget Estimate Time phased budget for each task in the entireWork Scheduled projectBudgeted Cost Of BCWP Budget Estimate The amount of money the PM expected to spendWork Performed for the work on each task that has been completed by a specific date.Budget At Completion BAC Budget Estimate Approved budget to complete all the work on the projectEstimate To Complete ETC Actual Funds Spent The funding required to complete the remaining work on the project. Estimate calculated at designated points during the project performance.Estimate At EAC = ACWP + ETC Actual Funds Spent An estimate of the total funding that will be spentCompletion on the project. Estimate calculated at designated points during the project performance.Actual Cost of Work ACWP Actual Funds Spent The actual costs for each project task.PerformedCost Variance CV = BCWP – ACWP Budgeted and actual A positive value signifies that less money than funds anticipated has been spent on the task. A negative value signifies that more money has been spent on the task than anticipated.Schedule Variance SV = BCWP - BCWS Budgeted and actual A positive value signifies that the task is ahead of funds schedule. A negative signifies value the task is behind schedule.Cost Performance CPI = BCWP/ACWP Budgeted and actual CPI greater than 1 signifies all goes well on theIndex funds task. CPI less than 1 signifies problems associated with the task and the team has spent too much.Schedule Performance SPI = BCWP/BCWS Budgeted and actual SPI greater than 1 indicates that the work is aheadIndex funds of schedule. Less than 1 signifies that the work is behind schedule.Cost at completion CAC = TOTAL BUDGET x Budgeted and actual Estimated total project cost based on progress to (ACWP/BCWP) funds dateCost to complete = Cost at completion - Budgeted and actual ACWP funds 423
    • Figure 11- 1 Proposed Factory Employee Access Project Concept 424
    • Figure 11- 2 Factory Employee Access Project Design, Fabrication and Installation Schedulea) Planned Schedule 1st Quarter 2nd Quarter ID WBS Task Name Duration Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 1 1 System Definition 1 wk 2 2 Design 39 days 3 2.1 Hardware 34 days 4 2.1.1 Define Hardware-Software 4 days Interfaces 5 2.1.2 Electrical & Electronic 5 wks Design 6 2.1.3 Mechanical 6 wks 7 2.2 Software 6 wks 8 2.3 Networking 4 wks 9 2.4 Design Review 1 wk 10 3 Purchase Material 3 wks 11 4 Fabricate system 1 wk 12 5 System Integration & Factory Test 1 wk 13 6 Crate and Ship 1 wk 14 7 Site Installation and Test 1 wk 15 8 Documentation 1 wk 16 9 Training 40 days 17 9.1 Training Preparation 3 wks 18 9.2 Conduct Training Class 5 days 425
    • b) Actual Work Status Four Weeks into the Project 1st Quarter 2nd Quarter ID WBS Task Name Duration Remaining Duration Month 1 Month 2 Month 3 Month 4 1 1 System Definition 1 wk 0 wks 2 2 Design 39 days 24.72 days 3 2.1 Hardware 34 days 20.03 days 4 2.1.1 Define Hardware-Software 4 days 1 day Interfaces 5 2.1.2 Electrical & Electronic 5 wks 3.75 wks Design 6 2.1.3 Mechanical 6 wks 3 wks 7 2.2 Software 6 wks 4.5 wks 8 2.3 Networking 4 wks 2 wks 9 2.4 Design Review 1 wk 1 wk 10 3 Purchase Material 3 wks 3 wks 11 4 Fabricate system 1 wk 1 wk 12 5 System Integration & Factory Test 1 wk 1 wk 13 6 Crate and Ship 1 wk 1 wk 14 7 Site Installation and Test 1 wk 1 wk 15 8 Documentation 1 wk 1 wk 16 9 Training 40 days 40 days 17 9.1 Training Preparation 3 wks 3 wks 18 9.2 Conduct Training Class 5 days 5 days 426
    • Figure 11-3 Planned Project Labor Hour Distribution for the Factory Employee AccessProject 200 180 160 140 Labor Hours 120 100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Weeks 427
    • Figure 11-4 Planned versus Actual Costs after Four Weeks into the Factory EmployeeAccess Project Interim Actual vs. Planned Labor Hours Spending 200 180 160 Planned Labor 140 Hours Labor Hours 120 100 Actual Labor Hours to Date 80 60 40 20 0 1 3 5 7 9 11 13 15 Weeks 428
    • Table 11- 1 Frequency of Project Management Reviews and Interactions Customer Functional Suppliers Senior Quality Purchasing Departments Management AssuranceActivity progress Weekly Weekly Weekly Monthly, Monthly Weeklycompared with schedule unless issues existActual spending Weekly Weekly Weekly Monthly, Monthly Weeklycompared with planned unless issuesspending existComponent, Equipment, As Required Weekly As As Required Weeklyand Service Purchases RequiredTechnical Issues ASAP ASAP ASAP As Required As Required ASAPFinancial Issues As Required ASAP ASAP As Required As Required ASAPTechnical Interchange As Required As Required As As Required As Requiredmeetings (TIM) RequiredPreliminary Design Once or Once or twice Once or Once or twice Once or twiceReview(s) (PDR) twice per per project twice per per project per project project projectCritical Design Reviews Once per Once per Once per Once per Once per Once per(CDR) project project project project project projectTesting Issues (e.g., As Required Weekly As As Required As Required As Requiredfactory, site, thermal, Requiredreliability, maintainability,ruggedness, etc.)Documentation Once per As Required As As Required As Required document RequiredASAP- As soon as possible after identifying existence of issue 429
    • Table 11-2 Factory Employee Access Control Project Labor Hours Plan Engineering Electrical Mechanical Software Networking Factory Field Service Project Publications Training Quality Shipping Purchasing Total Technicians Technicians Management Assurance Labor Project Task1 SystemDefinition 40 40 40 20 10 10 1602 Design2.1 Hardware2.1.1 DefineHardware-SoftwareInterfaces 10 10 10 10 4 442.1.2 Electrical &Electronic Design 60 6 662.1.3 Mechanical 120 10 1302.2 Software 160 16 1762.3 Networking 40 4 442.4 DesignReview 15 25 25 10 253 PurchaseMaterial 4 4 4 4 1 40 574 Fabricate system 4 4 2 120 20 12 1625 SystemIntegration &Factory Test 50 50 50 30 30 40 20 20 2906 Crate and Ship 4 4 8 167 Site Installationand Test 8 8 8 8 80 16 10 1388 Documentation 16 16 16 8 5 40 10 1119 Training 6 80 86Total 207 277 313 132 150 144 139 40 80 50 8 40 1580 430
    • Table11- 3 Factory Employee Access Control Project Labor Hours Spending Plana) Distribution of Planned Labor Hours by Week Week NumberDepartment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 TotalElectrical Engineering 20 30 40 20 15 8 2 2 2 2 40 10 8 8 207Mechanical Engineering 20 30 40 40 40 25 8 2 2 2 2 40 10 8 8 277Software Engineering 20 30 40 88 40 25 8 2 2 40 10 8 313Networking Engineering 10 20 20 10 10 8 2 2 2 30 10 8 132Factory Technicians 60 60 20 10 150Field Service Technicians 20 20 20 4 80 144Project Management 8 8 8 8 8 20 8 8 8 8 8 8 8 4 10 9 139Publications 40 40Quality Assurance 10 20 10 10 50Training 8 6 6 20 40 80Shipping 8 8Purchasing 24 10 3 3 40Total Labor 96 118 148 166 88 119 50 19 19 74 92 198 104 48 192 49 1580 431
    • b) Cumulative Planned Labor Hours by Week Week NumberDepartment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Electrical Engineering 20 50 90 110 110 125 133 135 137 139 141 181 191 199 207 207Mechanical Engineering 20 50 90 130 170 195 203 205 207 209 211 251 261 269 277 277Software Engineering 20 50 90 178 218 243 251 253 255 255 255 295 305 305 313 313Networking Engineering 10 30 50 60 60 70 78 80 82 84 84 114 124 124 132 132Factory Technicians 0 0 0 0 0 0 0 0 0 60 120 140 150 150 150 150Field Service Technicians 0 0 0 0 0 0 0 0 0 0 20 40 60 64 144 144Project Management 8 16 24 32 40 60 68 76 84 92 100 108 116 120 130 139Publications 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40 40Quality Assurance 10 10 10 10 10 10 10 10 10 10 10 10 30 40 50 50Training 8 8 8 8 8 8 8 8 8 8 8 8 14 20 40 80Shipping 0 0 0 0 0 0 0 0 0 0 0 0 0 8 8 8Purchasing 0 0 0 0 0 24 34 37 40 40 40 40 40 40 40 40Total Labor 96 214 362 528 616 735 785 804 823 897 989 1187 1291 1339 1531 1580 432
    • Table 11-4 Actual Factory Employee Access Control Project Labor Hoursa) Actual Labor Hours by Week by Functional Department Week NumberDepartment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Electrical Engineering 5 22 60 30Mechanical Engineering 20 32 40 65Software Engineering 4 16 40 58Networking Engineering 2 8 27 10Factory TechniciansField Service TechniciansProject Management 10 8 8 8PublicationsQuality Assurance 8 4Training 8ShippingPurchasingTotal Labor 57 86 175 175 433
    • b) Cumulative Actual Labor Hours by Week by Functional Department Week NumberDepartment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Electrical Engineering 5 27 87 117Mechanical Engineering 20 52 92 157Software Engineering 4 20 60 118Networking Engineering 2 10 37 47Factory Technicians 0 0 0 0Field Service Technicians 0 0 0 0Project Management 10 18 26 34Publications 0 0 0 0Quality Assurance 8 8 8 12Training 8 8 8 8Shipping 0 0 0 0Purchasing 0 0 0 0Total Labor 57 143 318 493 434
    • c) Actual Functional Department Labor Hours Charged to Each Project Task Labor Hours Spent at the End of the Fourth Week Engineering Electrical Mechanical Software Networking Factory Field Service Project Publications Training Quality Shipping Purchasing Total Technicians Technicians Management Assurance Labor Project Task1 SystemDefinition 27 40 20 12 12 6 8 1252 Design 02.1 Hardware 02.1.1 DefineHardware-SoftwareInterfaces 22 12 20 10 6 2 4 762.1.2 Electrical &Electronic Design 64 4 682.1.3 Mechanical 102 4 1062.2 Software 78 6 842.3 Networking 25 252.4 DesignReview 03 PurchaseMaterial 4 3 2 94 Fabricate system 05 SystemIntegration &Factory Test 06 Crate and Ship 07 Site Installationand Test 08 Documentation 09 Training 0Total 117 157 118 47 0 0 34 0 8 12 0 0 493 435
    • Table 11-5 Comparison of Cumulative Planned Spending versus Actual Project Labor Charges at the End of the Fourth Week Week 4 Cumulative Week 4 Cumulative +/- 10% Over or UnderDepartment Planned Hours Actual Hours SpentElectrical Engineering 110 117Mechanical Engineering 130 157 OverSoftware Engineering 178 118 UnderNetworking Engineering 60 47 UnderFactory Technicians 0 0Field Service Technicians 0 0Project Management 32 34Publications 0 0Quality Assurance 10 12 OverTraining 8 8Shipping 0 0Purchasing 0 0 436
    • Table 11-6 Ratio of Actual Labor Hours Spent to Planned Labor Hour Estimate at the Fourth Week into the Project Engineering Electrical Mechanical Software Networking Factory Field Project Publications Training Quality Shipping Purchasing Total Estimate of Techs Service Mgmt Assurance Labor WorkProject Task Techs Completed1 SystemDefinition 68% 100% 50% 60% 120% --- 80% 78% 100%2 Design2.1 Hardware2.1.1 DefineHardware-Software Interface 220% 120% 200% 100% 150% --- --- 173% 75%2.1.2 Electrical &Electronic Design 107% 67% 103% 75%2.1.3 Mechanical 85% 40% 82% 50%2.2 Software 49% 38% 48% 75%2.3 Networking 63% 0% 57% 50%2.4 DesignReview 0% 0% 0% 0% 0%3 PurchaseMaterial 100% 75% 0% 0% 200% 0% 16%4 Fabricatesystem 0% 0% 0% 0% 0% 0% 0%5 SystemIntegration &Factory Test 0% 0% 0% 0% 0% 0% 0% 0% 0%6 Crate and Ship 0% 0% 0% 0%7 Site Installationand Test 0% 0% 0% 0% 0% 0% 0% 0%8 Documentation 0% 0% 0% 0% 0% 0% 0% 0%9 Training 0% 0% 0%Total 57% 57% 38% 36% 0% 0% 24% 0% 10% 24% 0% 0% 31% 437
    • Table 11- 7 Typical Issues Arising during a Project’s Early Stages Issue PM ActionStakeholders uncover an • Request affected stakeholder(s) to define theundefined parameter associated parameter in question using appropriatewith a task or requirement standards and guidelines. • Inform affected stakeholders (but not the customer) of the change. • Following stakeholder agreement to the change, inform the customer in writing of the plan.Unclear requirement in the • Review the unclear requirement(s) with thespecification functional organization(s). Agree on an interpretation that minimally affects the project • Inform stakeholders (but not the customer) of the change. • Following stakeholder agreement with the change, inform the customer in writing of the contractor’s interpretation of the specification requirement. • Seek clarification from the customer only if absolutely necessary.Customer has not provided • Request that the customer submit data to thetechnical data required to contractor by a specific date.perform a task • If customer fails to deliver the data, meet with the customer to discuss the issues. • As a last resort, inform the customer that the organization will stop work on the job if technical personnel do not receive the required informationCustomer has second thoughts • Request that the customer submit data to theabout a requirement in the contractor by a specific date.original agreement and has not • If customer fails to deliver the data, meet withprovided technical personnel the customer to discuss the issues.required data • Consider trading requirements to offset the change cost and schedule impact. • As a last resort, inform the customer that the organization will stop work on the job if technical personnel do receive the required information 438
    • Table 11- 7 Typical Issues Arising during a Project’s Early Stages (Continued)Customer has introduced • PM must immediately stop the practice of thechanges by bypassing the PM customer directly contacting theand talking directly to the organization’s personnel without permissionengineers on the project. • PM must firmly but gently inform the customer of the organization’s contract change process. • Indicate that contractor will proceed with the original agreement.Unavailability of selected • Seek an alternate source for the materialcomponents, equipment or • Select different components, equipment orsoftware software. • Inform stakeholders if changes to components, equipment or software are made.Unanticipated technical issue • Resolve issue by obtaining internal or external (consultant) expertise. • Understand the cost and schedule impact of the alternative solutions. • Agree on a solution to the problem with the affected internal stakeholders. • If issue is visible to the customer, meet with customer to discuss alternatives considered and solution chosen.Unavailability of manufacturer’s • Contact manufacturer or manufacturer’sdata representative and arrange for a technical discussion between organization’s and manufacturer’s technical personnel.Labor not placed on job • Meet with functional departments to resolve issue. 439
    • Summary of Monitoring and Tracking ActivitiesThe project team can only begin to work the issues if they know that a deviation fromthe plan occurred. They then assess the impact of the variance on overall projectdelivery. After identification, the team formulates a plan to take corrective actions thatoffset the unwelcome news. Project monitoring detects processes or outputs thatdeviate from the plan(s) and task costs that deviate from the budget. PMs payparticular attention to items on the critical path and to the risk areas identified earlier inthe process. Close attention to basic control principles will improve the success ofprojects. Achieving this requires a disciplined approach to tracking project status,anticipating potential problems that may arise, and quick attention to resolve issues.SubcontractingFrom time to time, an organization decides to subcontract one or more tasks in theproject to external organizations. They do this for a variety of reasons that include: • Organization lack’s expertise • Insufficient labor available to complete the task • Contract requirement • Stringent schedule demands • Economic reasons (i.e. another organization can complete the task for a lower price)The PM has the responsibility of coordinating the activities required to contract out thework and then monitor the progress. Of course, the buyer expects the vendor to 440
    • provide a quality product or service on schedule, at the negotiated price, and meetingthe specified requirements.Sometimes a project manager is in a quandary over permitting the PMs internalorganization to perform a task or subcontracting it to an external organization. Perhapsthe internal organization’s price appears high or the organization has raised significanttechnical concerns or the functional group’s have raised labor or schedule issues.Under these circumstances, the PM may choose to conduct a make-or-buy analysis,which would compare the advantages and disadvantages of performing the task in-house or selecting an external vendor to perform the effort. If sufficient schedule timeexists, the PM might prepare a Request for Quotation (RFQ) or a Request for Proposal(RFP) for distribution to industry. The RFQ/RFP process could take two or moremonths.This exercise sometimes represents a “fishing” expedition. The PM and the functionaldepartments want information – perhaps a corroboration that they have pursued a goodtechnical approach. They will carefully evaluate the received bids for their price andtechnical content. An ethical question arises if an organization performs this exercisesolely for the purpose of gathering competitive information. Vendors recognize thatevery time they respond to a RFP, they give the prospective buyer valuable informationabout their organization and its technical abilities. Unfortunately, this is a cost and riskof doing business. After receiving the bids, the PM analyzes the received information 441
    • and then decides whether it is in the best interests of the organization to perform thetask themselves or subcontract it. Selecting Qualified VendorsThe organization demands that the chosen vendor provides a competitively pricedproduct or service that meets the contract’s needs. Purchases made with fundsstemming from a contract with a federal government agency require vendors to adhereto certain terms and conditions, for example, equal employment opportunity (EEO) andcivil rights requirements, fair wage standards, anti-kickback regulations, etc.Organizations evaluate potential suppliers for compliance with these governmentalregulations as well as quality assurance plans and other terms. This process takes afair amount of time. Consequently, many organizations develop lists of preferredvendors to assist and hasten the selection process.If the organization has never selected a vendor for the required product or service, theymight begin by: • Consulting colleagues in other departments or organizations who have purchased a similar product or service, • Checking the Internet, • Using library references such as the Thomas Register or Moodys Industrials, • Consulting the Yellow Pages for local suppliers, • Consulting trade publications, directories, vendor catalogues, and professional journals. 442
    • • Placing advertisements in general circulation publications such as newspapers or in specialty publications such as professional journals.After a buyer develops a list of potential vendors, they evaluate each supplierscapabilities. The purchasing department obtains a Dun & Bradstreet (D&B) financialreport for each proposed vendor. In addition to the vendor’s credit worthiness andfinancial stability, some D&Bs also include brief profiles of key management personneland historical information on the company. The purchasing department may also checkthe supplier’s reliability with local Better Business Bureaus. If the prospective sub-contract is important to the project’s success, visit the vendor’s facilities to verify thatthey have the equipment and labor pool to complete the project. Evaluate their qualityassurance process and determine if they use state-of-the art technology. Thepurchasing department usually requests and checks the vendors references. Thesesteps should narrow the field to a manageable set of vendors who will be asked to bidon the needed product or service. Preparing and Evaluating a BidA buyer requires from two to four weeks to prepare a bid request (RFP or RFQ).Vendors need from four to six weeks to prepare a bid response and the buyer requiresabout two weeks to evaluate the documents and make a decision. The process gives anorganization a standard for comparing price, quality, and service thereby allowing theorganization to make an informed and objective choice among potential suppliers. 443
    • The buying organization prepares a bid package as described in chapter 5. Recall thatthe RFP and RFQ includes a clear statement of the item sought, a specification and astatement of work (SOW) containing a work-breakdown structure (WBS), schedule, anda blank specification compliance matrix which the vendor completes to signifycompliance with each requirement. This process helps to identify the vendor who canmeet the buyers requirements for the best price.If members of functional departments believe that this subcontract represents asubstantial challenge that requires a highly competent technical labor pool, they requestthe vendor to include in their response a description of the qualifications of thoseindividuals who may be involved in implementing the goals and objectives of the RFP.Sometimes the writers of the RFP seek input from the vendors because they feeluncertain that the product or service that they have requested will satisfactorilyimplement the solution to their problem. If so, they include a statement in the bidpackage requesting bidders to describe how they would meet a specific objective, whatunique contributions they would make toward the project, and what alternativeproposals they would offer. The vendors might also be asked to solve specific problemsconcerning time constraints, new technology, or on-the-job training for end users. Ofcourse, realize that these requests involve the vendors providing free consultingservices. They may not respond to these requests for information unless a verysubstantial contract is involved. 444
    • Sometimes the buyer holds a pre-bid conference during which the organizationdistributes and clarifies the solicitation for all preferred vendors. The pre-bidconference ensures that all vendors have a clear and common understanding of theprocurement (technical requirements, contract requirements, etc.). Conducting an openmeeting prevents any vendor from having an unfair advantage of additionalinformation.The buyer distributes identical copies of the solicitation and any subsequent changes inthe bid specification to all prospective suppliers. One of the first pages in thesolicitation document should clearly state the deadline for submittal and the person inthe organization to whom the vendors should address their response. The buyerrecords the date and time on receipt of the bid response packages from the vendors.Most proposal documents contain a set of objective evaluation criteria, which thebuyer uses to rate the proposal response. Including these criteria in the solicitationrequest not only assists the vendors in the preparation of their work, but alsocrystallizes to the buyer which items are most important. The evaluation criteria mayinclude the following: A. Technical approach – do the solicitation proposal response documents demonstrate that the vendor understands and meets the project’s requirements? B. Low life-cycle cost – the initial purchase price may not be the only cost factor. Some buyers express interest in a low operating cost as well. If so, the seller must describe these costs in detail and illustrate a low cost of ownership. 445
    • C. Technical capability – does the seller present a convincing argument that they have the technical skills and knowledge needed to complete the subcontract? D. Management approach – does the seller have management processes and procedures in place (including quality assurance) to ensure a successful project? E. Financial capacity – does the seller demonstrate that they have the financial wherewithal to complete the project? F. Past performance history – has the vendor delivered similar systems or services in the past? G. After-sale support and services - Can the seller provide services such as training, help-desk, and maintenance capabilities?Very often, the buyer assigns a weighting system that quantifies the evaluative data tominimize the effect of personal prejudice on source selection. Most such systemsinvolve 1) assigning a numerical weight to each of the evaluation criteria, 2) rating theprospective sellers on each criterion, 3) multiplying the weight by the rating and 4)totaling the resultant products to compute an overall score. Some buyers include ascreening system that establishes minimum requirements for one or more of theevaluation criteria. That is, failure to meet the minimum requirement automaticallydisqualifies the bid. The buyer clearly states these “go-no go” criteria in the solicitationdocument. 446
    • After receiving all bids, the buyer carefully examines them. Frequently three or morepeople read all of the responses and meet to discuss them. The proposal reviewersnarrow the field by determining which vendors are "responsive". A "responsive" bidprovides all the information asked for and addresses all the issues in the RFQ or RFP.The specification compliance matrix provides evaluators a quick summary of sellerresponsiveness. Eliminate nonresponsive bidders, unless the seller has a compellingreason for noncompliance with a requirement.Technical personnel generally review the technical proposal without knowledge of thevendor’s price. Members of the purchasing department review the proposed prices.When they meet, they compare price and technical content and reach a conclusion forawarding the subcontract. Most purchasing and project managers are wary of avendor who substantially underbids the competition. They may have submitted a low-ball" price to win the bid but not have the resources to deliver a quality product ordeliver the product on schedule. A significantly lower price might also indicate that thevendor has misunderstood or misinterpreted the requirements. Contract AdministrationFollowing contract award the project manager must ensure that the vendor delivers aspromised. Contract administration is the process of ensuring that the seller performsas expected. On larger projects with multiple product and service providers,coordinating the interfaces among the various providers becomes a major task. Theproject manager, assuming responsibility for contract administration, applies the tracking 447
    • and monitoring processes described earlier in the chapter. The PM seeks tosuccessfully integrate the subcontractor’s outputs into the overall project. The projectmanagement activities include: • Monitoring and tracking the subcontractors cost, schedule and technical performance. • Employing quality assurance techniques to verify the adequacy of the subcontractor’s product. • Using change control practices to ensure the proper approval of changes • Communicating information to all stakeholders • Observing the factory and site acceptance tests to verify conformance with the contract’s requirement.Finally, the project manager approves subcontractor payments that are linked to welldefined progress milestones.Project CompletionThe end of the project approaches. The subcontractors delivered the required productand services. Factory technicians have integrated the software and hardware. Fieldservice technicians have installed the products and services at the customer’s site.Engineers and technicians have completed the acceptance tests. The technologists andtechnical writers have completed the required documentation. Training personnel haveprepared the training material and will soon deliver the courses to the customer’sdesignated personnel. The process of contract close-out involves confirming that theorganization correctly and satisfactory completed and delivered all work required by the 448
    • prime contract. The PM requests the appropriate departments to review open invoicesand payment records to settle the project’s financial statements. The PM participates inthe process of updating records to reflect final costs and technical results and thenarchiving this information for future use. Post Project Review – Lessons LearnedMost organizations agree that a post-project evaluation review exercise should be done.However, hardly anybody ever does it. “Right now we’re too busy, but well get to itlater," they say. Well they usually don’t and they go out and make the same mistakeson the next job. But a lessons learned session--a project postmortem-- helps theteam do a better job on future projects. During this brief activity, the organizationassesses the technical, cost and schedule project outcomes. They examine theproject’s planning, organizing, directing, controlling, execution, and budget phases. Didthe organization achieve the desired results? What went right and what went wrong?Why? What should and should not be done in the future? Which organizationalmethod or process was difficult or frustrating to use? Did the selected suppliers deliverthe products and services on schedule, within budget and technically satisfactory? Didthe stakeholders participate effectively and understand their role in the project? If not,what steps should be taken to improve their participation and understanding of their roleresponsibility? The PM communicates the results of this evaluation to other members ofthe organization, so that all can benefit from changes and improvements in themanagement of future projects. 449
    • The project financial administrators collect the total project-related expenditures throughthe cost tracking system. By analyzing actual expenditures versus budgetedexpenditures, the project team can refine its cost estima