Fpm module 02 initiation and integration april 11 2013

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Fpm module 02 initiation and integration april 11 2013

  1. 1. Foundations of Project Management Module 2: Project Initiation and Integration
  2. 2. Session Outline 1. 2. 2 Project Initiation and Selection Project Integration Management 2
  3. 3. Project Initiation     Initiating a project includes recognizing and starting a new project or project phase Some organizations use a pre-initiation phase, while others include items like developing a business case as part of initiation The main goal is to formally select and kick-off projects Key outputs include: – – – – 3 Assigning the project manager Identifying key stakeholders Completing a business case Completing a project charter and getting signatures on it Initiating Processes 4.1 Develop Project Charter 13.1 Identify Stakeholders 3
  4. 4. 4.1 Develop Project Charter Inputs 1. Project Statement of Work 2. Business Case 3. Agreements 4. Enterprise Environmental Factors 5. Organizational Process Assets 4 Tools and Techniques Outputs 1. Project Charter 1. Expert Judgment 2. Facilitation Techniques 4
  5. 5. Business Case Template 5 5 Source: IT Project Management, J Marchewka, J Wiley & Sons
  6. 6. The Project Charter    6 Process of formalizing projects after deciding what project to work on A project charter is a document that formally authorizes the existence of a project and provides direction on the project’s objectives and management Key project stakeholders should sign a project charter to acknowledge agreement on the need and intent of the project 6 PMBOK: p.71 Schwalbe: p.157
  7. 7. Project Charter Questions          7  What business need is the project undertaken to address? What is the purpose of the project? What organizational strategic objectives is this project meant to achieve? What factors, criteria or tools are you using for your justification? What are the customer’s priorities and in what order? Schedule, cost, quality and scope? What is your customer’s risk tolerance to changes in schedule, cost and scope? What are the project Requirements that will meet customer, sponsor or other stakeholder needs, wants and expectations? What are Stakeholder Influences? What Human Resources will the project require? What are the projects’ key Deliverables & Milestones? 7
  8. 8. Develop Project Charter – Inputs (4.1.1) • Project Statement of Work – – The Statement of Work (SOW) is a narrative description of products or services to be delivered by the project The SOW indicates the business need, the product scope description, and the strategic plan • Business Case – Provides the necessary information from a business standpoint to determine whether or not the project is worth the required investment • Enterprise Environmental Factors – Governmental or industry standards – Organization infrastructure – Marketplace conditions • Organizational Process Assets – Organizational standard processes, policies, and standardized process definitions – Templates – Lessons learned • Agreements – 8 Any contract, letter, note, e-mail or other communication describing intent. Contracts most common for external customers. 8
  9. 9. Project Kickoff Meeting The purpose of the kickoff meeting is to formally notify all team members, clients, and stakeholders that the project has begun A kick-off meeting has some basic objectives: – – Recap the information in the Project Charter, including the purpose of the project, the scope, the major deliverables, the risks, the assumptions, the estimated effort and budget, and the deadline – Discuss the major roles and responsibilities of the project team, clients and stakeholders – Discuss the project management procedures – Discuss and answer any outstanding questions – 9 Introduce the people at the meeting Confirm that the project is now underway 9
  10. 10. Identify Stakeholders (13.1) Is the process of identifying all people or organizations impacted by project, and documenting relevant information regarding their interests, involvement, and impact on project success Inputs 1. Project charter 2. Procurement documents 3. Enterprise environmental factors 4. Organizational process assets 10 Tools and Techniques 1. Stakeholder analysis 2. Expert judgment 3. Meetings Outputs 1. Stakeholder register This process is part of the Stakeholder Management Knowledge Area Section will be discussed further in Project Stakeholder Management 10
  11. 11. Project Stakeholders Government Agencies Project Team Contractors External Partners Functional Departments in Organizations Suppliers The Public Project and/or Internal Partners Community External Customers 11 Project Sponsor Internal Customers Performing Organization 11 PMBOK:p.30 Schwalbe: p512
  12. 12. Stakeholder Roles Stakeholder Role and Responsibility Sponsor Project Manager Defines, plans, implements and controls project Project Team Provides the knowledge and skills and performs the work to implement & control project Customer Defines product requirements and funds the project Functional Managers 12 Provides approval, authority & guidance Provide the organization’s policies and sector-specific knowledge and experience 12
  13. 13. Project Selection Project’s Product Description Project Selection Process Project’s Selection Framework Benefit Measurement Framework Organization’s Strategic Plan Project Selected • Project Charter • Assigned PM • Constraints • Assumptions Project Denied Decision Models Project Knowledge Base and Historical Information 13 • Lessons Learned 13
  14. 14. Methods for Selecting Projects  There are usually more projects than available time and resources to implement them  Project Selection Criteria – – – – – Generation of alternative ideas for project Estimation of investment costs and benefits Analysis of the cost/benefits of each alternative Selection and implementation of appropriate Strategy Evaluation of outcome of implemented investment ROI 14 PBP DCF NPV IRR 14
  15. 15. Project Selection Example A Project task can be implemented by either Machine A or Machine B. The original investment and cash flow from the two machines are shown below Machine A Original Investment $ 35,000 Year 1 2 3 4 Total Cash Flow Profit 15 Cash Flow 20,000 15,000 10,000 10,000 55,000 20,000 Machine B Original Investment $ 35,000 Year 1 2 3 4 Total Cash Flow Profit Cash Flow 10,000 10,000 15,000 20,000 55,000 20,000 15
  16. 16. Return on Investment  Return on investment (ROI) is calculated by subtracting the project costs from the benefits and then dividing by the costs ROI = (total discounted benefits - total discounted costs) / discounted costs    16 The higher the ROI, the better Many organizations have a required rate of return or minimum acceptable rate of return on investment for projects Internal rate of return (IRR) can by calculated by finding the discount rate that makes the NPV equal to zero 16
  17. 17. Return On Investment (ROI) ROI = [Average Annual Profit/Org. Investment] x 100 Machine A Original Investment $ 35,000 Year 1 2 3 4 Total Cash Flow Profit Cash Flow 20,000 15,000 10,000 10,000 55,000 20,000 Profit/Yr. : (55K – 35K)/4 = 5000 ROI: (5K/35K) x 100 = 14% 17 Machine B Original Investment $ 35,000 Year 1 2 3 4 Total Cash Flow Profit Cash Flow 10,000 10,000 15,000 20,000 55,000 20,000 Profit/Yr. : (55K – 35K)/4 = 5000 ROI: (5K/35K) x 100 = 14% 17
  18. 18. Payback Analysis     18 Another important financial consideration is 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 Payback occurs when the net cumulative discounted benefits equals the costs Many organizations want IT projects to have a fairly short payback period 18
  19. 19. Pay Back Period (PBP) PBP is the time taken to gain Financial Return equal to the Original Investment Machine A Original Investment $ 35,000 Year 1 2 3 4 Total Revenue PBP = 2 19 Machine B Original Investment $ 35,000 Cash Flow 20,000 15,000 10,000 10,000 Year 1 2 3 4 Cash Flow 10,000 10,000 15,000 20,000 55,000 Total Revenue PBP = 3 55,000 19
  20. 20. Discounted Cash Value DCV ( Time Value of Money) (Cash flow “n” years from today) DCV = ( 1+ r )n DCV = present value of future cash r = interest Rate n = number of years from today when cash flow occurs 20 20
  21. 21. Time Value of Money Tables No of Years 10% 20% 1 2 3 4 5 6 7 8 9 10 21 5% .9524 .9070 .8638 .8227 .7835 .7462 .7107 .6768 .6446 .6139 .9091 .8264 .7513 .6830 .6209 .5645 .5132 .4665 .4241 .3855 .8333 .6944 .5787 .4823 .4019 .3349 .2791 .2325 .1938 .1615 21
  22. 22. Future & Discounted Value of Money  The Present (Discounted) Value of a future income of $1000 at an interest rate of 10% is: 1 year 2 years 10 years  22 $909.10 $826.40 $385.50 The Future Value of a $ 1000 investment at an interest rate of 10% is: 1 year $1,100.00 2 years $1,210.00 10 years $2,594.00 22
  23. 23. 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  Projects with a positive NPV should be considered if financial value is a key criterion  The higher the NPV, the better  23 23
  24. 24. Net Present Value = Σ DCF - Initial Investment Machine A: Initial Investment= $ 35,000, Interest Rate = 20% Year 1 2 3 4 Cash Flow 20,000 15,000 10,000 10,000 Present Value 20,000 x .8333 = 16,666 15,000 x .6944 = 10,416 10,000 x .5787 = 5,878 10,000 x .4823 =4,823 Total Present Value = 16,666 + 10,416 + 5,878 + 4,823 = 37,783 24 Net Present Value NPV = 37,783 – 35,000 = 2,783 24
  25. 25. Net Present Value = Σ DCF - Initial Investment Machine B: Initial Investment= $ 35,000, Interest Rate = 20% Year 1 2 3 4 Cash Flow 10,000 10,000 15,000 20,000 Present Value 10,000 x .8333 = 8,333 10,000 x .6944 = 6,944 15,000 x .5787 = 8,681 20,000 x .4823 =9,646 Total Present Value = 8,333 + 6,944 + 8,681 + 9,646 = 33,604 Net Present Value NPV = 33,604 – 35,000 = (- 1,396) 25 25
  26. 26. Internal Rate of Return (IRR) IRR is the rate of growth a project is expected to generate. It is an indicator of the efficiency or quality of an investment. The Internal Rate of Return is the Value of the Discount Rate at which the NPV is equal to zero, or at which ΣDCF equals the Initial Investment. Σ CF/ (1 + IRR)n = Initial Investment The value of IRR is usually obtained by an iterative process. 26 26
  27. 27. Expected Monetary Value and Decision Trees Expected Potential Probability of Uncertain Event Outcome Decision Node Outcome Monetary Value O11 P11 x O11 O12 P12 x O12 O21 P21 x O21 O22 P22 x O22 Decision 27 EMV1 = P11 x O11 + P12 x O12 EMV2 = P21 x O21 + P22 x O22 27
  28. 28. Example: Choosing between 2 Projects Outcome probability Potential outcome Possible choices 20% Bid on Project 1 80% EMV per outcome Profit of $300,000 Total EMV 60,000 + Loss of $40,000 -32,000 Profit of $60,000 42,000 = $28,000 Decision 70% Bid on Project 2 10% + Loss of $20,000 20% 28 -2,000 + Loss of $50,000 -10,000 = $30,000 28
  29. 29. Balanced Scorecard Approach It is a performance management approach that involves measuring a company’s vision and strategy via four perspectives. Financial Perspective How do we look to our shareholders or to those who provide funding to us? Customer Perspective Innovation and Learning Perspective How do we look to our customers and other stakeholders? How do we keep getting better? By balancing internal process measurement and financial results with customer feedback, the performance picture becomes complete. 29 Internal Processes Perspective What internal processes we must excel at in order to attract and retain our customers and other key stakeholders? 29 Source: IT Project Management, J Marchewka, J Wiley & Sons
  30. 30. Project Integration Management • Project Integration Management includes the processes and activities needed to identify, define, combine, unify and coordinate the various processes and project management activities • Integration includes characteristics of unification, consolidation, articulation and integrative actions that are crucial to project completion 30 30
  31. 31. Project Integration Management Processes       31 4.1 Develop Project Charter: working with stakeholders to create the document that formally authorizes a project 4.2 Develop Project Management Plan: coordinating all planning efforts to create a consistent, coherent document 4.3 Direct and Manage Project Work: carrying out the project management plan by performing the activities included in it 4.4 Monitor and Control Project Work: overseeing project work to meet the performance objectives of the project 4.5 Perform Integrated Change Control: coordinating changes that affect the project’s deliverables and organizational process assets 4.6 Close Project or Phase: finalizing all project activities to formally close the project 31
  32. 32. 4.2 Develop Project Management Plan The process of documenting the actions necessary to define, prepare, integrate and coordinate all subsidiary plans. Inputs 1. Project charter 2. Outputs from other processes 3. Enterprise environmental factors 4. Organizational process assets Tools and Techniques 1. Expert judgment 2. Facilitation techniques Outputs 1. Project management plan The Project Management Plan defines how the project is executed, monitored, controlled and closed. 32 32
  33. 33. Project Management Plan  – – – – – – – – – – 33 A Project Management Plan consolidates other subsidiary management plans including: Scope management plan Requirement management plan Schedule management plan Cost management plan Quality management plan Process improvement plan Human resource plan Communication management plan Risk management plan Procurement management plan 33
  34. 34. Project Management Plan (continued)  – – – – – – – –  – – – 34 A Project Management Plan includes: Project Charter Budget Schedule Resources Scope Statement WBS Responsibility charts/assignments Management Plans The Project Management Plan also includes project baselines, including: Schedule baseline Cost performance baseline and Scope baseline 34
  35. 35. 4.3 Direct and Manage Project Work Is the process of performing the work defined in the project management plan to achieve the project’s objectives. Inputs 1. Project management plan 2. Approved change requests 3. Enterprise environmental factors 4. Organizational process assets 35 Tools and Techniques 1. Expert judgment 2. Project management information systems 3. Meetings Outputs 1. Deliverables 2. Work performance data 3. Change requests 4. Project management plan updates 5. Project documents updates 35
  36. 36. Direct and Manage Project Execution The process includes: – – – – – – – – – – 36 Perform activities to accomplish project requirements Create project deliverables Staff, train, and manage the team members assigned Obtain, manage, and use resources Implement the planned methods Establish and manage project communication channels Generate project data, such as cost, schedule, technical progress, and status Manage risks and implement risk response activities Manage sellers and suppliers Collect and document lessons learned 36
  37. 37. 4.4 Monitor and Control Project Work Is the process of tracking, reviewing, and regulating the progress to meet the performance objectives defined in the project management plan. Inputs 1. Project management plan 2. Schedule forecasts 3. Cost forecasts 4. Validated changes 5. Work performance information 6. Enterprise environmental factors 7. Organizational process assets 37 Tools and Techniques 1. Expert judgment 2. Analytical techniques 3. Project management information system 4. Meetings Outputs 1. Change requests 2. Project management plan updates 3. Project documents updates 37
  38. 38. Monitor and Control Project Work • The process is concerned with: – Comparing actual project performance against the project management plan – Assessing performance to determine whether corrective or preventive actions are required – Identifying new risks, and analyzing, tracking, and monitoring existing project risks – Maintaining an accurate, timely information base concerning the project’s product – Providing information to support status reporting, and forecasting – Monitoring implementation of approved changes as they occur 38 38
  39. 39. 4.5 Perform Integrated Change Control Is the process of reviewing all change requests, approving changes and managing changes to the deliverables, organizational process assets, project documents and the project management plan Inputs 1. Project management plan 2. Work performance information 3. Change requests 4. Enterprise environmental factors 5. Organizational process assets 39 Tools and Techniques 1. Expert judgment 2. Meetings 3. Change control tools Outputs 1. Approved change requests 2. Change log 3. Project management plan updates 4. Project documents updates 39
  40. 40. Perform Integrated Change Control • Configuration management with change control provides a standardized, effective and efficient process to centrally manage changes within a project. – It includes identifying, documenting, and controlling changes to the baseline • Project wide application of configuration management system, including change control processes, has three main objectives: – – Provides opportunities to continuously validate and improve the project by considering the impact of each change. – 40 Establishes an evolutionary method to consistently identify and request changes to the established baselines, and to assess the value and effectiveness of those changes Provides the mechanism for the project management team to consistently communicate all changes to the stakeholders 40
  41. 41. 4.6 Close Project or Phase Is the process of finalizing all activities across all the Project Management Process Groups to formally complete the project or phase Inputs 1. Project management plan 2. Accepted deliverables 3. Organizational process assets 41 Tools and Techniques 1. Expert judgment 2. Analytical techniques 3. Meetings Outputs 1. Final product, service or result transition 2. Organizational process assets updates 41
  42. 42. Close Project or Phase The act of completing a project or a phase of a project, either because it has been completed or because it has been terminated early. • • • • 42 The close project or phase process also establishes the procedures to investigate and document the reasons for actions taken if a project is terminated before completion Includes all of the activities necessary for administrative closure of the project or phase Also includes Releasing team members Celebration of completion 42

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