This material is used to give you an overview of the basics of project management. This will supplement the handout “Project Management Tools” in your case packet. I expect MBA students to read it own their own outside class so that we can save class time for case discussions and topics that may need more explanation. I will be available for answering any questions related to this material after the evening class on Week 5. You WILL be tested on the material presented here in the QUIZ (Week 6) and Final Exam (Week 8) . So don’t ignore it just because it wasn’t covered during class time. Students with a background in Project Management can consider this as a refresher. But make sure you know the material. If any part of the printed slides is not legible, please refer to the power point slides uploaded on LMES.
There are 4 major phases in project management. Project planning involves specifying the goals of the project, breaking the goal into sub-activities, organizing them into a logical structure (called the Work Breakdown Structure, WBS) and estimating the amount of work needed for each activity. The Project scheduling phase takes input from the project planning stage (the WBS and the estimates of duration and cost). The main job in this stage is to specify when an activity will start and end (i.e. setting a time table). This would also be the stage where you would assign resources (workers/ other material etc.) to activities. After a project has started, the manager needs to monitor the cost and schedule and take corrective action if needed. There are a number of tools available to monitor the cost and schedule such as tracking Gantt chart and Earned Value Management. Project management tools such as MS Project allow you to generate a lot of reports that can be used to update senior management on project progress.
In the planning stage, one crucial activity is: defining what the project plans to achieve (the scope). After the main goal is specified, it may be broken up into sub-objectives. The sub-objectives are grouped into a logical grouping of activities/tasks called the Work breakdown structure (WBS). The PM (project manager) also needs to estimate the cost and time of the project. PM’s usually write up a document called as the “Scope document” that specifies what will be done as part of the project. Scope refers to all the work involved in creating the output of the project. Large projects where the scope doesn’t change are literally unheard of. This constant increase in what is considered to be the scope of the project is called “scope creep”.
This is an example of a WBS for an “Intranet Project”. Notice how different activities/tasks are hierarchically arranged in three levels. The Project Management Institute (PMI) recommends that having more than 5 levels in a WBS may not be useful. In the next slide you will see where this WBS appears in a project management software.
The WBS of the Intranet project from the previous slide appears on the left side of the slide. Notice how the Level 2 and Level 3 activities are indented. The Gantt chart of the project appears on the right.
For estimating the amount of work involved in a project activity, the PM may need some experience in the area. There are some other techniques available to a PM. Parametric analysis is a statistical technique that looks at other similar projects and uses the duration of tasks on those projects to estimate models for predicting amount of work needed. In case of some projects, such as projects developing a software, some additional techniques may be available such as Function Point Analysis.
Without getting into the details, Function Point Analysis (FPA) is a technique that is useful for software projects. Using this technique the number of lines of code to do a particular task can be estimated. Then a rule of thumb (the formula described above) can be used to estimate the amount of work needed (in person months).
The Program Evaluation and Review Technique (PERT) advises that it is a good idea to estimate three numbers (optimistic, pessimistic and likely, work estimates). Using these three numbers PERT suggests using the above formula to calculate the expected time for a task/activity.
In this stage, the PM specifies the task dependencies (for e.g. one task may start only after another task has finished). If there is a pool of resources at a company, workers can be assigned from that pool. This is important because depending on the wage rate of the assigned resource and the time he/she works on the activity the cost of the activity will be determined.
There are basically two tools which can be used in Project scheduling – Gantt Chart and Network Diagram. In some sense these are complimentary tools and most PMs end up using both. Gantt Chart is better at showing the duration and assigned resources, while Network Diagram shows dependencies and start and end date well.
The Gantt Chart of “Intranet Project” appears on the right hand of the slide. This Gantt Chart shows the start date, end date, as well as the duration (the length of the bar) for each of the tasks. The bars that appear in black color are called Summary tasks, and the duration of the summary task is from the start date of the first task to the end date of the last task under it. For e.g. “Concept” which is a Level 1 activity is a summary task whose start and end date is determined by start date of the first task and the end date of the last task under it.
The arrow shows a task dependency (see next slide for more infromation). For example, Web Site Development can only be started after Web Site Design is finished.
There are 4 types of dependencies which can be used in Project Management. Finish-to-Start (FS): the dependent task cannot begin until the task that it depends on is complete. This is the most commonly used dependency. Finish-to-Finish: (FF) The dependent task cannot be completed until the task that it depends on is completed. The dependent task can be completed anytime after the task that it depends on is completed. The FF link type does not require that both tasks be completed simultaneously. Start-to-Start (SS):The dependent task cannot begin until the task that it depends on begins. The dependent task can begin anytime after the task that it depends on begins. The SS link type does not require that both tasks begin simultaneously. Start-to-Finish (SF): The dependent task cannot be completed until the task that it depends on begins. The dependent task can be completed anytime after the task that it depends on begins. The SF link type does not require that the dependent task be completed concurrent with the beginning of the task on which it depends.
You will note that some of the task are in Red, while some of them are in Blue (Refer to the power point slide uploaded on LMES to view in color) . If a task is in red, it indicates it is a critical task, meaning that if that task gets delayed, the project will be delayed. The ones in blue are non-critical tasks, and some delay in that task won’t affect the completion date of the project. In other words the tasks in blue have a buffer/slack.
This is an example of a Network Diagram. You would notice that the Network Diagram more or less provides the same information Gantt Chart does, but in a different format. You can clearly see the task name, start and end dates, as well as the duration of each task. We are going to see how a Network Diagram could help us with the Critical Path Analysis. Critical path analysis tells a manager how much slack there exists for each task in the project i.e. by how many days the task can be delayed without delaying the project completion date. More information later on Critical Path Analysis.
Suppose we have a Project X here, the durations and the dependencies are as shown above. The dependencies are to be interpreted as follows: for e.g. Task H can only be started when both tasks D and E are complete. Let’s look at the path B-E-H-J, this is the longest duration path. All tasks on this path have zero slack, which means that if they are delayed the project completion date will be affected. This is the critical path . So a project manager needs to pay extra attention on all tasks on the critical path. Now let’s say the duration of task D is increased to 6 days instead of 4, the path A-D-H-J is now 16 days. In this case, the project will have two critical paths. Critical path is the longest duration through the network diagram. All activities along a critical path are critical tasks. More than one critical paths are possible.
Critical path analysis (CPA), CPA calculate two important values for each task. One is Total Slack Time and the other is Free Slack Time. We use four notations here to help us to do the analysis: ES – Earliest start date, EF – Earliest finish date, LS – Latest start date and LF – Latest finish date. ES is the earliest date on which a task can begin. EF is the earliest date on which a task can be finished. LS is the latest date by which the task has to be started without delaying the whole project. LF is the latest date by which the task has to be finished without delaying the whole project.
Let’s take a look at task K, L and M in Project Y. the duration and dependencies are showing above, and we can see that task M can only be started after K and L are finished.
We will calculate the ES and EF first. For task K, the ES is Day 0 (which means start right now), since the duration is 5 days, then the EF day is Day 5. You can use the same method to come up with the numbers for task L. Notice that the EF day for L is Day 10 which is later than the date task K finishes. Because that M can only be started after K and L finished, that is to say, M can be started on Day 10, and finished on Day17. It is important to know that the EF and LF are always same for the last task in the project. In this case, LF for task M is 17 and LS is 10. Now, we will go backward to calculate the LF and LS for task L and K. the Latest Start day of M is Latest Finish day for both task K and L. Latest Start day for K is 10-5 =5. Latest Start day for L is 10-10=0.
Total Slack is the amount of time that an activity can be delayed without delaying the project completion date Let us look at ES, EF, LS & LF for task K as calculated earlier. ES=0 and LS= 5. Task K can be delayed by 5 days without delaying project completion date. So task K in this case is not a critical task, because Total Slack > 0
Free Slack is the amount of time that an activity can be delayed without delaying the next activity. EF for K is 5 and ES for M is 10. So task K can be delayed by 5 days without delaying task M.
While using PM software, you will need to understand the relationship between three terms: Duration, Units, and Work. Work is measured by man-hours or man-days (usually a person will work 8 hours a day). Units usually refer to the number of resources (if you have three people working on a project, you have 3 possible resources to assign). If you make one person work at 150% his capacity, you have assigned 1.5 units to this task. Duration is number of days on schedule. The equation (Duration = Work/Units) shows the relationship between the three terms.
Work contour specifies how a resource time is assigned to a task. Consider a task the requires 32 man-hours and one resource is assigned to the task. In a project management software, by default, the work contour is Flat which means the work is uniformly assigned on all days. Assuming an 8 hour working day. The duration of the task is 4 days. However, this may not be efficient because for some tasks there may be more work in the beginning days than on later days or vice versa. Assigning resource time uniformly for these types of tasks is not efficient. Hence, PM software allow you to allocate resource time assigned to task non-uniformly. For example, a back loaded contour will assign more work in the later part of the project. Front loaded contour , on the other hand, will assign more work at the beginning of the project.
Project Monitoring plays a critical role in project management. Once the project has been started, a project manager needs to check whether the project is on schedule and whether the cost is within the budget or not. PMs’ can use tracking Gantt chart and/or Earned Value Management to monitor a project.
Tracking Gantt Chart can visually give the information on what percentage of a task has been completed and whether the task is delayed. The black lines filled in the task bar represent the percentage of completion of the task.
The gray line is called the baseline (initial schedule of tasks), if you see any stagger between the gray line and the actual start date of the task, the task is delayed. For e.g. one can see that tasks A and B have started late. Task A was supposed to start on Friday but could only start on the following Monday. Since tasks A and B have started late the PM software assumes they will end late (unless corrective action is taken) which will thus affect the start dates of tasks C and D which depend on tasks A and B finishing before they can start.
Once we notice the delay, we need to anticipate the new cost as well new completion date. Earned Value Management will help with that.
Say for example we have a task Y which is schedule for 10 days. Planned budget is $10,000.
By day 5, only 40% of the task has been completed, and the actually cost is $6,000.
Based on the amount of work completed, only 40% has been completed, so Earned Value = 40% * 10,000 = $4,000 Earned value is thus a measure of how much the project should have cost based on the amount of work that has been completed. Based on the time elapse, 5 days has been spent on this project, so Planned Value =(5/10) *10,000 = $5,000 Planned value is a measure of how much work should have been completed based on the time that has elapsed.
CPI is the efficiency measure of how well we are doing in terms of cost. Intuitively, for every $1 spent, how much amount of work is getting done. In this case, we spend $1 dollar but only got $0.67 worth of work done. So clearly the task is costing more than planned. So a CPI above 1 is good (activity is costing less than planned). A CPI below 1 means that activity is costing more than planned. An alternative measure of how well a task is doing is Cost Variance. If the CV is negative, such as in this case, activity is costing more than planned. If CV is positive, task is costing less than they planned. Base on the CPI, we can estimate the budget at completion. Planned budget was $10,000. CPI =0.67. So budget at completion = $10,000/0.67 = $15,000 Another way to look at this is: We planned to spend $4,000, but we actually spent $6,000 . So if we planned to spend $10,000 on the whole project, it will actually cost us: $15,000 = ($6,000/$4,000)* $10,000
SPI is an efficiency measure of how well the project is doing in terms of time. This activity is going at 80% of our planned pace of work. A SPI greater or equal to 1 is good, that means we are on schedule or even ahead of schedule. A SPI smaller then 1 means the project is running behind schedule. An alternative measure of how well a task is doing is Schedule Variance. If the SV is negative, the project is behind schedule and if SV is positive value indicates that the project is ahead of schedule.
K 5 days 0 5 10 5 Total Slack is the amount of time that an activity can be delayed without delaying the project completion date Total Slack = LS - ES Activity Total Slack K 5 – 0 = 5
K 5 days M 7 days 0 5 10 17 17 10 10 5 Free Slack is the amount of time that an activity can be delayed without delaying the next activity. Free Slack = ES M - EF K Activity Free Slack K 10 – 5 = 5