7th Lecture – Project Management

November 3, 2015

Project ManagementProject management is the management of the work to;

1. Develop and implement an innovation or 2. Change in an existing operation.

Therefore all operational activities that arenon-repetitive and unique, occurring only once within a specified time frame, such unique, one-time activities are referred to as Projects.

Project Management encompasses planning the project and controlling the project activities, subject to resource and budget constraints, and to keep the project on schedule. Examples of projects include constructing buildings, such as factories, a shopping mall, an athletic stadium; developing a military weapons system, planning a rock concert, or introducing new products into the market.

The nature of the global business environment is such that new machinery and equipment, as well as new production processes and computer support systems, are constantly evolving. This provides the capability of developing new products and services, which generates consumer demand for even greaterproduct diversity. As a result, a larger proportion of total organizational effort now goes toward project-oriented activities than in the past. Thus, the planning and management of projects has taken on a more crucial role in operations management.

PROJECT PLANNING

A project has a unique purpose, it is temporary, and it draws resources from various areas in the organization; as a result, it is subject to more uncertainty than the normal management process. Thus, the features and characteristics of the project management process tend to be unique.

Figure provides an overview of the project management process, which encompasses three other major processes—planning, scheduling, and control. It also includes a number of the moreprominent elements of these processes.

Activities that come under “Planning”.

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ELEMENTS OF A PROJECT PLAN

Project plans generally include the following basic elements.

• Objectives—a detailed statement of what the project is to accomplish and how it will achievethe company’s goals and meet the strategic plan; and an estimate of when it needs to becompleted, the cost and the return.

• Project scope—a discussion of how to approach the project, the technological and resourcefeasibility, the major tasks involved, and a preliminary schedule; includes a justification of theproject and what constitutes project success.

• Contract requirements—a general structure of managerial, reporting, and performance responsibilities,including a detailed list of staff, suppliers, subcontractors, managerial requirementsand agreements, reporting requirements, and a projected organizational structure.

• Schedules—a list of all major events, tasks, and subschedules, from which a master scheduleis developed.

• Resources—the overall project budget for all resource requirements and procedures for budgetrycontrol.

• Personnel—identification and recruitment of personnel required for the project team, including special skills and training.

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• Control—procedures for monitoring and evaluating progress and performance includingschedules and cost.

• Risk and problem analysis—anticipating and assessing uncertainties, problems and potential difficultiesthat might increase the risk of project delays and/or failure and threaten project success.

PROJECT RETURN

In order for a project to be selected to be undertaken it typically has to have some kind of positivegain or benefit for the organization that is considering it. In a business one of the most popularmeasures of benefit is return on investment (ROI). ROI is a performance measure that is oftenused to evaluate the expected outcome of a project or to compare a number of different projects.

To calculate ROI, the benefit (return) of a project is divided by the cost of the project; the result isexpressed as a percentage or a ratio:

If a project does not have a positive ROI, or if there are other projects with a higher ROI, then theproject might not be undertaken. ROI is a very popular metric for project planning because of itsversatility and simplicity.

However, projects sometimes have benefits that cannot be measured in a tangible way withsomething like an ROI, what’s referred to as a “soft” return. For example, a project that has raisingemployee satisfaction as its goal can result in real benefits—increased productivity, improvedquality, and lower costs—which are difficult to measure monetarily in the short run. A project byan Internet online retailer to install backup power generators to keep orders coming in and customershappy during a power outage is like insurance for something that may never happen, makingan ROI difficult to determine. In general, it maybe more appropriate to measure a project’s benefit not just in terms of financial return, but also interms of the positive impact it may have on a company’s employees and customers, that is, qualityimprovement.

THE PROJECT TEAM

The project team is typically cross-functional, consisting of a group of individuals selected from other areas in the organization or from outside the organization because of their special skills, expertise, and

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experience related to the project activities. Members of the engineering staff are oftenassigned to project work because of their technical skills, especially if the project is related to productionprocesses or equipment. The project team may also include managers and staff personnelfrom specific areas related to the project. Workers can also be involved on the project team if theirjob is a function of the project activity. For example, a project team for the construction of a newloading dock facility might include truck drivers, forklift operators, dock workers, and staff personneland managers from purchasing, shipping, receiving, and packaging, as well as engineers toassess vehicle flow, routes, and space considerations.

The term matrix organization refers to a team approach to special projects. The team is developedfrom members of different functional areas or departments in the company. For example, team members might come from engineering, production, marketing, or human resources, depending on the specialized skills required by the project. The team members are, in effect, on loan from their home departments to work on a project.

Assignment to a project team is usually temporary, which can have both positive and negative repercussions. The temporary loss of workers and staff from their permanent jobs can be disruptivefor both the employee and the work area. The employee must sometimes “serve two masters,” reporting to both the project manager and a regular supervisor. Since projects are usually exciting,they provide an opportunity to do work that is new and innovative, making the employee reluctantto report back to a more mundane, regular job after the project is completed.

THE PROJECT MANAGER

The most important member of the project team is the project manager. Managing a project issubject to lots of uncertainty and the distinct possibility of failure. Since a project is unique andusually has not been attempted previously, the outcome is not as certain as the outcome of an ongoingprocess would be..The project is subject to time and budgetary constraintsthat are not the same as normal work schedules and resource consumption in an ongoing process.

There is usually more perceived and real pressure associated with project management than in anormal management position. However, there are potential opportunities, including demonstratingmanagement abilities in a difficult situation, the challenge of working on a unique project, and theexcitement of doing something new.

SCOPE STATEMENT

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The scope statementis a document that provides a common understanding of a project. It includes ajustification for the project that describes which factors created a need within the company for the project. It also includes an indication of what the expected results of the project will be and what will constitute project success. The scope statement might also include a list of the types of planning reports and documents that are part of the project management process.

A similar planning document is the statement of work. In a large project, the statement of work is often prepared for individual team members, groups, departments, subcontractors, and suppliers. This statement describes the work in sufficient detail so that the team members responsible for it know what is required and if they have sufficient resources to accomplish the work successfully and on time. For suppliers and subcontractors it is often the basis for determining whether theycan perform the work and for bidding on it. Some companies require that a statement of work bepart of an official contract with a supplier or subcontractor.

WORK BREAKDOWN STRUCTURE

The work breakdown structure (WBS)is a tool used for project planning. The WBS organizes the work to be done on a project. In a WBS, a project is broken down into its major components, referred to as modules. These components are then subdivided into detailed subcomponents, which are furtherbroken down into activities and, finally, individual tasks. The end result is a project hierarchical organizational structure made up of different levels, with the overall project at the top of the structure and the individual tasks for each activity at the bottom level. The WBS format is a goodway to identify activities and to determine the individual task, module, and project workloads andresources required. It also helps to identify relationships between modules and activities as well as unnecessary duplication of activities. Finally, it provides the basis for developing and managing the project schedule, resources, and modifications.

There is no specific model to follow for the development of a WBS. It can be in the form of achart or a table. There are two good ways for a project team to developa WBS.

One way is to start at the top and work one’s way down asking, “What components constitutethis level?” until the WBS is developed in sufficient detail. The other way is simply tobrainstorm the entire project, writing down each item on a sticky note and then organizing themtogether into the branches of a WBS. The upper levels of the WBS hierarchy tend to indicate thesummary activities, major components, or functional areas involved in the project. They are typicallydescribed by nouns that indicate “what” is to be done. The lower levels of the WBS tend todescribe the detailed work activities of the project required under the major components or areas.

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Figure shows a WBS for a project for installing a new computerized order processing systemfor a textile manufacturer that links customers, the manufacturer, and suppliers. The WBS is organized according to the three major project categories for developmentof the system—hardware, software/system, and personnel. Within each of these categories the majortasks and activities under those tasks are detailed. For example, under hardware, a major task is“installation,” and activities required in installation include area preparation, technical/engineeringlayouts and configurations, and wiring and electrical connections.

Work Breakdown Structure for a Computer Order Processing System Project

RESPONSIBILITY ASSIGNMENT MATRIX

After the work breakdown structure is developed, which organizes the project work into smaller, manageable elements, the project manager assigns the work elements to organizational units— departments, groups, individuals, or subcontractors—using an organizational breakdown structure (OBS).

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The OBS is an organizational chart that shows which organizational units are responsible for work items. After the OBS is developed, the project manager can then develop a responsibility assignment matrix (RAM). The RAM shows who in the organization is responsible for doing the work in the project. Figure below shows a RAM for the Hardware/Installation” category from the work breakdown structure for the computerized order processing project shown inFigure. Notice that there are three levels of work assignment in the matrix reflecting who is responsible for the work, who actually performs the work, and those who perform support activities.

As with the WBS, both the OBS and RAM can take many different forms depending on the needs and preferences of the company, project team, and project manager.

A Responsibility Assignment Matrix

PROJECT SCHEDULING

The project schedule evolves from the planning documentsdiscussed above. It is typically the most critical element in the project management process, especially during the implementation phase (i.e., the actual project work), and it is the source of most conflict and problems.

One reason is that frequently the single most important criterion for the success of a project is that it be finished on time. If a shopping mall isnot completed on time, there will be a lot of angry tenants; and if a new military weapon is notcompleted on time, it could affect national security. Time is also a measure of progress that is absolute with little flexibility; you can spend less money or use fewer people, but you cannot slow down or stop the passage of time.

Activities that come under “Scheduling”.

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Developing a schedule encompasses the following basic steps.

1. First, define the activities that must be performed to complete the project; 2. Second, sequence the activities in the order in which they must be completed; 3. Estimate the time required to complete each activity; and finally, 4. Develop the schedule based on this sequencing and time estimates of the activities. Because

scheduling involves a quantifiable measure, time. Several quantitative techniques, including the Gantt chart and CPM/PERT networks, are available that can be used to develop a project schedule.

THE GANTT CHART

A Gantt chart(also called a bar chart) was developed by Henry Gantt, a pioneer in the field of industrialengineering, at the artillery ammunition shops of the Frankford Arsenal in 1914.

The Gantt chart is a graph with a bar representing time for each activity in the project being analyzed.Figure below illustrates a Gantt chart of a simplified project description for building ahouse. The project contains only seven primary activities, such as designing the house, laying thefoundation, ordering materials, and so forth. The first activity is “design house and obtain financing,”and it requires three months to complete, shown by the bar from left to right across the chart. Afterthe first

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activity is finished, the next two activities, “lay foundation” and “order and receive materials,”can start simultaneously. This set of activities demonstrates how aprecedence relationship works; thedesign of the house and the financing must precede the next two activities.

The activity “lay foundation” requires two months to complete, so it will be finished, at the earliest,at the end of month 5. “Order and receive materials” requires one month to complete, and itcould be finished after month 4. However, observe that it is possible to delay the start of this activityone month until month 4. This delay would still enable the activity to be completed by the end ofmonth 5, when the next activity, “build house,” is scheduled to start. This extra time for the activity“order materials” is called slack. Slack is the amount by which an activity can be delayed without delaying any of the activities that follow it or the project as a whole. The remainder of the Gantt chart isconstructed in a similar manner, and the project is scheduled to be completed at the end of month 9.

The Gantt chart provides a visual display of the project schedule, indicating when activitiesare scheduled to start, when they will be finished, and where extra time is available and activitiescan be delayed. The project manager can use the chart to monitor the progress of the activities and see which ones are ahead of schedule and which ones are behind schedule. The Gantt chart also indicates the precedence relationships between activities; however, these relationships are not always easily apparent. This problem is one of the disadvantages of the Gantt chart method, and it sometimes limits the chart’s use to smaller projects with relatively few activities.

Gnatt Chart is a precursor of The CPM/PERT network technique which is a bettertool for big projects.

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PROJECT CONTROL

Project control requires that the project be monitored and progress be measured so that any deviations from the project plan, and particularly the project schedule, are minimized. If the project is found to be deviating from the plan—that is, it is not on schedule, cost overruns are occurring, activity results are not as expected, and so on—then corrective action must be taken.

a. COST MANAGEMENT

Cost management is often closely tied to time management. If the schedule is delayed, costs tend to increase in order to get the project back on schedule. Also, as the project progresses, some cost estimates may prove to be unrealistic or erroneous. As such, it will be necessary to revise cost estimates and develop budget updates. If cost overruns are excessive, then corrective actions must be taken.

b. QUALITY MANAGEMENT

Quality management and control are an integral part of the project management process. Tasks and activities must be monitored to make sure that work is done correctly.If the work on an activity or

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task is flawed, subsequent activities may be affected, requiring rework, delaying the project, and threatening project success. Poor-quality work increases the risk of project failure, just as a defective part can result in a defective final product if not corrected. As such, the principles of quality management can also be applied to the project management process.

c. PERFORMANCE MANAGEMENT

Performance management is the process of monitoring a project and developing timed (i.e., daily, weekly, monthly) status reports to make sure that goals are being met and the plan is being followed. It compares planned target dates for events, milestones, and work completion with dates actually achieved to determine whether the project is on schedule or behind schedule. Key measuresof performance include deviation from the schedule, resource usage, and cost overruns. These reports are developed by the project manager and by individuals and organizational units with performance responsibility.

Activities that come under “Control

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d. COMMUNICATION

Communication needs for project and program management control in today’s global business environment tend to be substantial and complex. The distribution of design documents, budget and cost documents, plans, status reports, schedules, and schedule changes in a timely manner is often critical to project success. As a result, more and more companies are using the Internet to communicate project information, and are using company intranet project Web sites to provide a single location for team members to access project information. Internet communication and software combined with faxing, videoconferencing systems, phones, handheld computers, and jet travel are enabling transnational companies to engage in global project management.

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