L03 integration management

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  • 1. IS5540 Project Management & Quality Assurance Week 3 - Project Integration Management Schwalbe: Information Technology Project Management, Chapter 4 Adapted by Janet Yu , Frank Lo
  • 2. Story of Airbus
    • The Airbus A380 megajet project was two years behind schedule in Oct. 2006 – expected loss of $6.1 billion over the next four years
    • Reason: integration management problems
      • Before 2000, Airbus was a loose consortium of aerospace companies in several countries
      • In 2000, decided to go-ahead with the A380 project & transformed into an “integrated” company
      • However, Design Center in Germany used an earlier version a design software; the assembly plant used the latest version
      • Design specs cannot flow
      • Result: Pre-assembled bundles (from Germany) containing some cabin wiring didn’t fit properly into the plane (assembly in France)
    *Matlack, Carol. “First, Blame the Software,” BusinessWeek Online (October 5, 2006).
  • 3. Learning Objectives
    • Understand the importance of project integration management and the processes involved
    • Learn how to apply different project selection methods to project selection
    • Describe in detail
      • the Project Charter
      • the Project Management Plan
      • Change Control
  • 4. PMI Framework: 9 Knowledge Areas People Integration Scope Time Cost Quality Communication Risk Procurement
  • 5. Why Project Integration Management
    • The key to overall project success
    • Project managers must coordinate all of the other knowledge areas throughout a project’s life cycle
    • Many new project managers have trouble looking at the “ big picture ” and want to focus on too many details
  • 6. So you know why Integration Management is so important ?! Now more details ……
  • 7. Project Integration Management Processes
    • Develop the project charter : working with stakeholders to create the document that formally authorizes a project—the charter
    • Develop the project management plan : coordinating all planning efforts to create a consistent, coherent document—the project management plan
    • Direct and manage project execution : carrying out the project management plan by performing the activities included in it
  • 8. Project Integration Management Processes (continued)
    • Monitor and control the project work : overseeing project work to meet the performance objectives of the project
    • Perform integrated change control : coordinating changes
    • Close the project : finalizing all project activities to formally close the project
  • 9. Before We Have a Project…. Project Selection Methods….
  • 10. Strategic Planning and Project Selection
    • Strategic planning involves determining long-term objectives, predicting future trends, and projecting the need for new products and services
    • As part of strategic planning, organizations:
      • Identify potential projects
      • Use realistic methods to select which projects to work on
      • Formalize project initiation by issuing a project charter
  • 11. Methods for Selecting Projects
    • There are usually more projects than available time and resources to implement them
    • Methods for selecting projects include:
      • Performing net present value (NPV) or other financial analyses
      • Using a weighted scoring model
      • Implementing a balanced scorecard
    • But for some projects, they may be selected because of a directive from management or Government
  • 12. Financial Analysis of Projects
    • Financial considerations are often an important consideration in selecting projects
    • Four primary methods for determining the projected financial value of projects
      • Net present value (NPV) analysis
      • Return on investment (ROI)
      • Internal Rate of Return (IRR)
      • Payback analysis
  • 13. Discounted Cash Flow
    • Money in the future is worth less than money received today
    • The future value (FV) is calculated as
      • FV = PV(1+i) n where i is the interest rate, PV the present value, n the no. of periods
      • PV = FV/(1+i) n
    • Example:
      • FV of $2000 is $2315.25 if i = 5%, n = 3
  • 14. Net Present Value Analysis
    • Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time
    • = Total discounted benefits – Total discounted costs
  • 15. Choose A Project to Invest
    • NPV of Project A = 87K;
    • NPV of Project B = 57K ??
    • NPV of Project A = -87K;
    • NPV of Project B = 57K ??
    • NPV of Project A = -87K;
    • NPV of Project B = -57K ??
  • 16. Net Present Value Analysis
    • The higher the NPV, the better
    • Projects with a positive NPV should be considered if financial value is a key criterion
  • 17. Figure 4-4: JWD Consulting NPV Example Multiply by the discount factor each year, then take cum. benefits – costs to get NPV Note: See the template called business_case_financials.xls
  • 18. Return on Investment (ROI)
    • ROI = (total discounted benefits - total discounted costs) / discounted costs
    • The higher the ROI, the better
  • 19. Internal Rate of Return (IRR)
    • Rate at which the total discounted benefits and total discounted costs are equal
    • The discount rate when NPV = 0
    • Difficult to calculate
    • The higher the better
  • 20. Payback Analysis
    • The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project
    • Time when NPV = 0
    • The shorter the better
  • 21. Figure 4-5: Charting the Payback Period
  • 22. Figure 4-4: JWD Consulting NPV Example Multiply by the discount factor each year, then take cum. benefits – costs to get NPV Note: See the template called business_case_financials.xls
  • 23. Weighted Scoring Model
    • A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria
        • Identify criteria important to the project selection process
        • Assign weights (percentages) to each criterion so they add up to 100%
        • Assign scores to each criterion for each project
        • Multiply the scores by the weights and get the total weighted scores
    • The higher the weighted score, the better
  • 24. Figure 4-6: Sample Weighted Scoring Model for Project Selection
  • 25. Implementing a Balanced Scorecard
    • To help select and manage projects that align with business strategy
    • A balanced scorecard :
      • Is a methodology that converts an organization’s value drivers to a series of defined metrics. Examples of such drivers are
        • customer service
        • Innovation
        • operational efficiency
        • financial performance
    • See www.balancedscorecard.org for more information
  • 26. Quick Quiz Project A Project B Choose NPV $87K $57K ROI 50% 40% IRR 12% 15% Payback Period 15 months 12 months
  • 27. Project Charter ….
  • 28. Project Charters
    • After deciding what project to work on, it is important to let the rest of the organization know, especially the key stakeholders
    • A project charter is a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management
  • 29.
  • 30.
  • 31.
    • Sample Project Charter
    • Project Title and Description
        • What is the project ? Brief background and purpose
    • Project Manager Assigned and Authority Level
        • Who is given authority to lead the project. Can he/she determine budget, schedule, staffing etc??
    • Business Need
        • Why is the project being done?
    • Project Justification
        • Business case
    • Resources Pre-assigned
    • Stakeholders (and their requirements)
    • Requirements related to both project and product
    • Product Description/Deliverables
        • List of the deliverables and their descriptions
    • Constraints and Assumptions
    • Signed and Approved By
        • Has to be a person from senior management
    Another Sample Project Charter
  • 32. Project Management Plan ….
  • 33. Project Management Plans
    • A project management plan is your plan on how to manage the project, e.g.
      • How do you define the scope?
      • How to deal with changes?
      • How to do estimation?
      • How to identify risks?
      • How to communicate with stakeholders?
    • Plans created in the other knowledge areas are subsidiary parts of the overall project management plan, like
      • Scope Management Plan
      • Staffing Management Plan
      • Etc.
  • 34. Integrated Change Control….
  • 35. Change Control System
    • The Project Management Plan provides the baseline for identifying and controlling project changes
    • A baseline is the approved project management plan plus approved changes
      • Used for comparing with actual
    • A formal, documented process that describes when and how official project documents and work may be changed
    • Describes who is authorized to make changes and how to make them
  • 36. Change Control Board (CCB)
    • A formal group of people responsible for approving or rejecting changes on a project
    • CCBs provide guidelines for preparing change requests, evaluate change requests, and manage the implementation of approved changes
    • Includes stakeholders from the entire organization
  • 37. Configuration Management
    • Part of change management
    • Ensures that the descriptions of the project’s products are correct and complete, including their support documentation
    • Configuration management specialists
      • identify and document configuration requirements
      • control changes
      • record and report changes
      • audit the products to verify conformance to requirements
  • 38. Revision
    • Project Selection Methods
      • NPV
      • ROI
      • IRR
      • Payback period
      • Weighted Scoring Model
      • Balanced Scorecard
    • Project Charter
    • Project Management Plan
    • Integrated Change Control
      • Baseline
      • CCB
      • Configuration Management