Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition)

Dr. Chen, Special Topic: Project Management

Chapter 6:Project Activity and Risk Planning

(Chapter 5 in Chinese Edition)

Jason C. H. Chen, Ph.D.Professor of MIS

School of Business AdministrationGonzaga UniversitySpokane, WA 99258

[email protected]


Part II

Project Planning


Project Management

Dr. Chen, Special Topic: Project Management4

Why do Projects Fail?

Studies have shown that the following factors contribute significantly to project failure:

• Improper focus of the project management system

• Wrong level of detail

• Lack of understanding about project management tools; too much reliance on project management software

• Too many people

• Poor communication

• Rewarding the wrong actions


Project Triangle (Project Management Trade-offs)

Time Cost

Scope

The objective of the PM is to define project’s scope realistically and ultimately deliver quality of product/service on time, on budget and within scope.

The center of project triangle

isQUALITY


Why Planning?Reasons for Planning

• To eliminate or reduce uncertainty• To improve efficiency of the operation• To obtain a better understanding of the

objectives• To provide a basis for monitoring and

controlling work


MOST MANAGERS DO NOT LIKE PLANNING DUE TO THE

FOLLOWING:

It takes time.You have to think.It involves paper work.You are bound to systematic

procedures.You are committed to achieve a specific

result within a specified time period.


Effective Planning

An effective plan will be: Explicit

stated in detail, leaving nothing merely implied.

Intelligible - it must be understood and be comprehensible.

Flexible - capable of accepting change.

Controllable - capable of being monitored for control

purposes.


DEFINITION OF A PROJECT LIFE CYCLE

CONCEPTUAL PHASE

DETAILEDPLANNING PHASE

FEASIBILITY ANDPRELIMINARY

PLANNING PHASE

IMPLEMENTATIONPHASE

CONVERSIONOR TERMINATION

PHASE

ResourcesUtilized

RE

SOU

RC

ES

TIME

PMO PM

O

PMO: Project Management Office


The Line Manager(s) ?The Project Manager ?

Both Parties ?

* Who plans the project?* Who executes the project?* Who is responsible for monitoring work and

controlling work?* Who is responsible for providing feedback

regarding the planning and execution phases of a project?

PLANNING QUESTIONS OFTEN ASKED


Project Manager vs. Line Manager

• A Project Manager manages the work taken up by a single project whereas the Line Manager will be managing the work taken up by a line of projects.

• The Line manager will interact/liase with the Project Managers who manage the projects that fall in his line.

• Usually projects in organizations are aligned based on the line of business, catered to, by the project. Hence, they will have a Line Manager who manages all those projects.


Project Manager’s Responsibility

• Project Manager will define:– Goals and objectives– Major milestones– Requirements– Ground rules and assumptions– Time, cost, and performance constraints– Operating procedures– Administrative policy– Reporting requirements


Line Manager’s Responsibility

• Line manager will define:– Detailed task descriptions to implement

objectives, requirements, and milestones– Detailed schedules and manpower

allocations to support budget and schedule– Identification of areas of risk, uncertainty,

and conflict


6.1 Initial Project Coordination and the Project Charter

• Early meetings are used to decide on participating in the project

• Used to “flesh out” the nature of the project

• Outcomes include:– Technical scope– Areas of responsibility– Delivery dates or budgets– Risk management group


Outside Clients

• When it is for outside clients, specifications cannot be changed without the client’s permission

• Client may place budget constraints on the project

• May be competing against other firms


Project Charter Elements

• Purpose• Objectives• Overview• Schedules• Resources• Personnel• Risk management plans• Evaluation methods


Systems Integration

• Performance• Effectiveness• Cost


6.2 Starting the Project Plan:The Work Breakdown Structure (WBS)

• A hierarchical planning process• Breaks tasks down into successively finer

levels of detail• Continues until all meaningful tasks or

work packages have been identified• These make tracking the work easier• Need separate budget/schedule for each task

or work package


Hierarchical Planning

• Major tasks are listed• Each major task is broken down into detail• This continues until all the activities to be

completed are listed• Need to know which activities “depend on”

other activities


A Form to Assist Hierarchical Planning

Figure 6-2


Work Breakdown Structure (WBS)


A Visual WBS

Figure 6-3 WBS with account numbers shown


Career Day

Figure 6-4 Partial WBS for college “Career Day”


The WBS

• What is to be done• When it is to be started and finished• Who is going to do it• Some activities must be done sequentially• Some activities may be done simultaneously• Many things must happen when and how

they are supposed to happen• Each detail is uncertain and subjected to risk


PURPOSE OF WBS

• Detailed planning can be performed• Costs and budgets can be established• Objectives can be linked to available

resources in a logical manner• Specific authority and responsibility can be

assigned

It is to STRUCTURE an ASSIGNED PROJECT into VARIOUS ACTIVITIES in ORDER that:


Most common type: Six-Level Indentured Structure

LEVEL DESCRIPTION1 Total Program2 Project(s)3 Task(s)4 Subtask(s)5 Work Package(s)6 Level of Effort

WORK BREAKDOWN STRUCTURE (WBS)


THE WBS BREAKS WORK DOWN INTO SMALLER ACTIVITIES THUS REDUCING THE RISK THAT

ANY MAJOR OR MINOR ITEM WILL BE OMITTED

WBS: SIX-LEVEL STRUCTURE

Usually specified by the client and managed the project manager.

Generated by contractor for in-house control and managed by the functional manager(s).

Planning accuracy is dependent on the WBS level selected. The lower the level the greater is the planning accuracy but the higher the management cost.

LEVELS RESPONSIBILITY

1 2 3 4 5 6


WBS Controls

WORKBREAKDOWNSTRUCTURE

MGT.COORDIN.

ORGANIZ.CHARTS

COSTSACCOUNT-ABILITY

DECISIONTREESSCHEDULES


6.3 Human Resources:The RACI Matrix and Agile Projects

• Useful to create a table that shows staff needed to execute WBS tasks

• One approach is a organizational breakdown structure (OBS)– Organizational units responsible for each WBS

element– Who must approve changes of scope– Who must be notified of progress

• WBS and OBS may not be identical


The Responsibility (RACI) Matrix

• Another approach is the Responsible, Accountable, Consult, Inform (RACI) matrix– Also known as a responsibility matrix, a linear

responsibility chart, an assignment matrix, a responsibility assignment matrix

• Shows critical interfaces• Keeps track of who must approve what and

who must be notified


Sample RACI Matrix

Figure 6-7


2009 ISACA All Rights reserved. 32

COBIT® Answers Key Business Questions –

A Model for Information EthicsIs my information technology

organization doing the right things?

Are we doing them the right way?

Are we getting them done well?

Are we getting the benefits? *

* Based on the “Four Ares” as described by John Thorp in his book The Information Paradox, written jointly with Fujitsu, first published in 1998 and

revised in 2003


COBIT® Defined Responsibilities for Each Process – A Model for Information Ethics

Link business goals to IT goals. C I A/R I C

Identify critical dependencies and current performance. C C R A/

R C C C C C C

Build an IT strategic plan. A C C R I C C C C I C

Build IT tactical plans. C I A C C C C C R I

Analyse programme portfolios and manage project and service portfolios. C I I A R R C R C C I

RACI Chart

Activities Func

tion

sA RACI chart identifies who is Responsible, Accountable, Consulted and/or Informed.


Project Development Methodologies

• The choice of development methodologies and managerial influences distinguish IT projects from other projects.

• There are four main methodologies IT professionals use to manage the technology projects: – Systems Development Life Cycle (SDLC) – Prototyping – Rapid applications development (RAD)– Joint applications development (JAD)


Agile Project Planning and Management

• When scope cannot be determined in advance, traditional planning does not work

• Agile project management was developed to deal with this problem in IT

• Small teams are located at a single site• Entire team collaborates• Team deals with one requirement at-a-time with

the scope frozen


Project Planning: Basic Four-Stage Model

Strategic

Project

Planning

Generic Activity

Project

Requirements

analysis

Project

Planning

Resource

allocation


Phases in the SDLC (Waterfall Approach) SDLC Revisited

Project Identification and Selection

Project Initiation and Planning

Analysis

Physical Design

Implementation

Maintenance

Logical Design

Analysis

Major features will be summarized in the next

slides.


Systems Definition/Investigation (Feasibility Study)

OperationalFeasibility

ScheduleFeasibility

EconomicFeasibility

TechnicalFeasibility

Can we afford it? Will it be accepted?

Does the ITcapability exist?

Will it be completed bythe deadline?

Legal and Contractual Feasibility

Is the proposed system legally?

Organizational Feasibility(Is it a good fit –

objective of the organization38

What are new from the last slide?


Systems Development Life CycleSDLC typically consists of seven phases

1. Initiation of the project2. The requirements definition phase3. The functional design phase4. The system is actually built5. Verification phase6. The “cut over” where the new system is put in operation and all links

are established. Possible conversion methodsa) Parallelb) Directc) Phased in/outd) pilot

7. The maintenance and review phase

Which one is the best approach?Sabre mini case

Dr. Chen, Special Topic: Project Management 40

System Conversion Approaches (4Ps)

1. Pilot• Implement entire system in limited portion of business• MRV uses system for selected customers.• Advantage: limits exposure to business if system fails

2. Phased• System is installed in phases or modules.• Each piece is installed and tested.

3. Parallel• Complete new and old systems run simultaneously• Very safe, but expensive

4. Plunge (or direct)• High risk if new system fails, no old system to fall back on• Only used if new system is not vital to company operation

10-40


Installation Conversion Methods: 4 Ps

Old System New System

Old System

New System



Parallel

Pilot

Phased

Plunge/Direct

Cut-over time

Name a major advantage and disadvantage of “Parallel” and Plunge”?


Skip the following ppts


6.4 Interface Coordination Through Integration Management

• Managing a project requires a great deal of coordination

• Projects typically draw from many parts of the organization as well as outsiders

• All of these must be coordinated• The RACI matrix helps the project manager

accomplish this


Integration Management

• Coordinating the work and timing of different groups

• Interface coordination is the process of managing this work across multiple groups

• Using multidisciplinary teams to plan the project– Requires structure

Q: What do you have at Ming-Chi regarding “Integration”?


Managing Projects by Phases and Phase-Gates

• Break objectives into shorter term sub-objectives

• Project life cycle is used for breaking a project up into component phases

• Focus on specific, short-term output• Lots of feedback between disciplines


Homework:Incidents for Discussion WBS (p. 265)

• Ringold’s Pool and Patio Supply• Tasks to do: • 1. Create a WBS like Figure 6-3 or Figure 6-4 • 2. Then, answer the following two questions

– a) Is John Jr.’s WBS projection reasonable?– b) What aspects of the decision will John Sr.

consider?


Incidents for Discussion (p. 265)WBS (continued)

• Ringold’s Pool and Patio Supply• Question:• 1. Is John Jr.’s WBS projection

reasonable?• 2. What aspects of the decision will John

Sr. consider?


Answer for Ringold’s Pool and Patio Supply

• This is a good opportunity to engage the class in a discussion of the importance of involving the team in developing plans and schedules.

• One way to do this is to engage the class in collectively creating the upper level or two of a WBS for the project. Chances are they will come up with several items that Junior missed in his, demonstrating the danger of working alone.


Answer for Ringold’s Pool and Patio Supply

• John Sr. is asking a reasonable question, but his son is giving him a defective answer. Even though Junior’s WBS looks very precise, it would be dangerous to base any decision on it. Since, it has not been validated by anyone who has actual experience in installing pools, there is no way of knowing if the estimates are reasonable, or even if it has accounted for all the work.

• Junior has made no effort to evaluate the requirements of the job. For example, he doesn’t list in his WBS anything related to permitting, electrical or plumbing. In addition to these concerns, John Sr. must consider several business issues including whether his company has the staff, skills, and equipment to take on this new area. He needs to consider whether this expansion matches his long-term goals for the business.


6.5 PROJECT RISK MANAGEMENT


Risk Management:Basic Concepts

• Risk management focuses on:– Known unknowns– Proactive management

• The alternative to proactive management is reactive management, also called crisis management.– This requires significantly more resources and

takes longer for problems to surface


RISK MANAGEMENT

• Risk Management focuses on the Future.• Risk and Information are inversely related.• Historically, we focused our attentions on

schedule and cost risk management.• Today, our primary emphasis on technological

risk management:– CAN WE DESIGN IT AND BUILD IT?– WHAT IS THE RISK OF OBSOLESCENCE?


Risk Management

• Projects are risky, uncertainty is high• Project manager must manage this risk• This is called “risk management”• Risk varies widely between projects• Risk also varies widely between

organizations• Risk management should be built on the

results of prior projects


Sub-processes to Risk Management1. Risk management planning2. Risk identification3. Qualitative risk analysis4. Quantitative risk analysis5. Risk response planning6. Risk monitoring and control7. The risk management register

– Creating a permanent register of identified risks, methods used to mitigate or resolve them, and the results of all risk management activities.


Risk Management Planning

• Need to know the risk involved before selecting a project

• Risk management plan must be carried out before the project can be formally selected

• At first, focus is on externalities– Track and estimate project survival

• Project risks take shape during planning• Often handled by project office


Risk Identification

• Risk is dependent on technology and environmental factors

• Delphi method is useful for identifying project risks

• Other methods include brainstorming, nominal group techniques, checklists, and attribute listing

• May also use cause-effect diagrams, flow charts, influence charts, SWOT analysis


Qualitative Risk Analysis

• Purpose is to prioritize risks• A sense of the impact is also needed• Each objective should be scaled and

weighted• Construct a risk matrix• Same approach can be used for

opportunities


Risk Matrix

Figure 6-12

There are “five” threats with

“three” categories (critical, monitor,

ignore) in this

example.


Quantitative Risk Analysis:Failure Mode and Effect Analysis (FMEA)

1. List ways a project can fail2. Evaluate severity (S)

with “1” “no effect”, “10” is “very severe”3. Estimate likelihood of cause of failure (L)

“1” is absolutely “uncertain”, “10” almost certain4. Estimate the inability to detect (D)

“1” detectability is almost certain and “10” failure is not be detected in time to avoid

5. Find the risk priority number (RPN) (RPN = S L D)6. Consider ways to reduce the S, L, and D for each cause of

failure since the lower numbers of S,L,D the BETTER for

reducing the cause of failure (i.e., the LESS risk)


A FMEA Example

Table 6-1

Q: Which one is with the “biggest” threat? Why?Answer: #2 (Can’t acquire tech knowledge)


Decision Tree Analysis

Figure 6-13 Decision Tree based on expected monetary value (EMV)

Q: 1. Why EMV is 8.0 for Stocks (a2)?2. Why EMV is 8.4 for this scenario?


Risk Response Planning

Threats– Avoid– Transfer– Mitigate– Accept

Opportunities– Exploit– Share– Enhance– Accept


Risk Monitoring and Control

• Monitoring covered in detail in Chapter 10• Control covered in Chapter 11


The Risk Management RegisterPurpose: The risk management system should maintain an up-to-date data register to ensure

against particular risk(s).• Environments that may impact projects• Assumptions made• Risks identified• List of categories and key words• Estimates on risk, states of project’s environment, or

on project assumptions• Minutes• Actual outcomes


Managing Scope Changes


Change Management

• YOU CANNOT MANAGE YOUR CUSTOMER WITHOUT MANAGEMENT OF YOUR PROJECT MANAGEMENT PROCESS.

• WHEN YOUR CUSTOMER INITIATES A CHANGE REQUEST, YOU MUST BE ABLE TO PREDICT IMMEDIATELY THE IMPACT ON SCHEDULE , COST AND TECHNICAL PERFORMANCE. (why not “SCOPE”)


Unmanaged vs. Managed Changes

UnmanagedChange

Where TIME

is invested

How ENERGYis invested

WhichRESOURCES

are used

ManagedChange

· Back-end

· Front-end

· Rework· Enforcement· Compliance· Supervision

· Education· Communication· Planning· Improvements· Value-Added

· SeniorManagement and key players only

· Stakeholders· Suppliers· Customers


Definition

Cost of Corrections

$1

PreliminaryPlanning

$5 $25 $100 $1000

DetailedPlanning Execution Implementation

/Conversion


Integrated Processes for The 21st Century

Project Management

ConcurrentEngineering

Total QualityManagement

RiskManagement

ChangeManagement


Video

• VIDEO. Understanding_Project_Mgt_Benefits (11m)

• FMEA (FMEA Services from Concept to Completion-Dynamic Positioning (6m)


In class Exercise and HW

• Problem #1 (p.263)– Construct a risk matrix (see Figure 6-12)

• Problem #2 (p.264)– FMEA analysis

• Problem #5 (p.264)– Decision Tree (which one is the best option)

• Start to read and prepare case study 1: Southwest Airlines


Problem #1 (p.263)Construct a risk matrix (see Figure 6-12)


Problem 1:Problem 1:Probability

7

6 Threat 2

5 Threat 1

4 Threat 4

3 Threat 3

2

1

1 2 3 4 5 6 7

Impact

Critical Monitor Ignore

Legend:


Problem

1:Problem

1:Probability

7

6 Threat 2

5 Threat 1

4 Threat 4

3 Threat 3

2

1

1 2 3 4 5 6 7

Impact

Critical Monitor Ignore

Legend:

Threat 1: The threat of costs being excessive could occur. Actually, the probability is somewhat high. This can be transferred to an outsourcing provider to help reduce this threat.Threat 2: The likelihood of the users resisting changes could cause major problems. This is somewhat likely to happen, but can be avoided if they are given an alternative and consulted in advance.Threat 3: The project may run longer than expected. This isn’t highly likely, but this can be transferred by outsourcing the project.Threat 4: The changes may reduce the quality of care in the hospital. The probability is satisfactory because the improvements brought about by the new system may not be significant. If the quality decreases, the impact could be fairly significant, thus the hospital may need to mitigate this threat by including more users in the planning.


Problem #2 (p.264)FMEA analysis (RPN)


Threat Severity (S)(Impact)

Likelihood (L)(Probability)

Inability to detect (D)

RPN

#1 3 5 4 60#2 5 6 1 30#3 4 3 3 36#4 7 4 6 168

Problem 2:The main thing that changes when using this approach is that threat #2 drops significantly from “critical” to possibly “ignore.” This is mostly due to the lack of inability to detect. Threat #2 is somewhat severe and the likelihood is great, but since the threat is relatively easy to detect, it can be mitigated early and possibly even removed. Thus, this is a much more realistic evaluation of the threats than just creating a risk matrix.


Problem #5 (p.264)Decision Tree (which one is the best option)

Problem 5:a1, a3 decision = (0.7 $3,000) + (0.3 $2,000) – $500 = $2,200YOUR TURN to compute a1,a4; a2,a5 and a2,a6 decisions

a1, a4 decision = (0.7 $1,000) + (0.3 $2,000) – $500 = a2, a5 decision = (0.4 $2,150) + (0.6 $3,000) – $1,000= a2, a6 decision = (0.4 $2,150)+ (0.6 $4,000) – $1,000=

Which one is the best option?Based on this analysis, the best option is a2, a6.

$800$1,660

$2,260

Revenue Expense Profit

Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition)

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