IT Project Management


IT Project Management: Third Edition Student Manual IT Project Management: Third Edition
VP and GM of Courseware:      Michael Springer Series Product Managers:        Caryl Bahner-Guhin, Charles G. Blum, and Adam A. Wilcox Series Designer:                       Adam A. Wilcox                      
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Contents[25-Apr-13 03:07:19 PM]

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Introduction Topic A:  About the manual Topic B:    Setting your expectations Topic C:    Reviewing the course Project management: context and processes Topic A:  Introduction to project management Topic B:    The project management profession Topic C:    The project management context Topic D:  An organizational view Unit summary:  Project management: context and processes Integration management Topic A:  Project integration management Topic B:    Plan execution and change control Unit summary:  Integration management Scope management Topic A:  Project initiation Topic B:    Scope planning and scope statement Topic C:    Scope verification and scope change control Unit summary:  Scope management Time management Topic A:  Schedules and activities Topic B:    Schedule development Topic C:    Controlling changes to the project schedule Unit summary:  Time management Cost management Topic A:  Components and principles of cost management Topic B:    Resource planning Topic C:    Cost estimating Topic D:  Cost budgeting Topic E:    Cost control Unit summary:  Cost management Quality management Topic A:  Quality planning Topic B:    Quality assurance Topic C:    Quality control Unit summary:  Quality management Human resource management Topic A:  Organizational fundamentals Topic B:    Staff acquisition Topic C:    Team development Topic D:  Using software to assist in human resource management Unit summary:  Human resource management Communications management Topic A:  Communications planning Topic B:    Performance reporting Unit summary:  Communications management Risk management[25-Apr-13 03:07:19 PM]

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Topic A:  Risk management planning Topic B:    Risk identification Topic C:    Qualitative risk analysis Topic D:  Quantitative risk analysis Topic E:    Risk response planning Topic F:    Risk monitoring and control Unit summary:  Risk management

Procurement management Topic A:  Procurement planning and solicitation Topic B:    Source selection and contract management Unit summary:  Procurement management Initiating, planning, and executing projects Topic A:  Initiation Topic B:    Planning Topic C:    Execution Unit summary:  Initiating, planning, and executing projects Controlling and closing projects Topic A:  Control Topic B:    Closure Unit summary:  Controlling and closing projects Suggested readings Topic A:  Suggested readings Course summary Topic A:  Course summary Topic B:    Continued learning after class Glossary Index

IT Project Management: Third Edition Introduction
After reading this introduction, you will know how to:
A  Use Course Technology ILT manuals in general. B  Use course objectives to properly set your expectations for

the course.
C  Re-key this course after class.[25-Apr-13 03:07:19 PM]

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Topic A:   About the manual
Course Technology ILT philosophy
We believe strongly in the instructor-led classroom. During class, focus on your instructor. Our manuals are designed and written to facilitate your interaction with your instructor, and not to call attention to manuals themselves. We believe in the basic approach of setting expectations, delivering instruction, and providing summary and review afterwards. For this reason, lessons begin with objectives and end with summaries. We also provide overall course objectives and a course summary to provide both an introduction to and closure on the entire course.

Manual components
The manuals contain these major components: ·    Table of contents ·    Introduction ·    Units ·    Appendices (optional) ·    Course summary ·    Quick reference (optional) ·    Glossary (optional) ·    Index Each element is described below. Table of contents The table of contents acts as a learning roadmap. Introduction The introduction contains information about our training philosophy and our manual components, features, and conventions. It contains objective and setup information for the specific course. Units Units are the largest structural component of the course content. A unit begins with a title page that lists objectives for each major subdivision, or topic, within the unit. Within each topic, conceptual and explanatory information alternates with activities, which can be hands-on, question-and-answer, or a combination of both. Units conclude with a summary comprising one paragraph for each topic, and an independent practice activity or review questions section to help you reinforce the concepts and skills that you’ve learned. The conceptual information takes the form of text paragraphs, exhibits, lists, and tables. The activities are structured in one or two columns. In two-column activities, the left column tells you what to do, while the right column provides explanations, descriptions, and graphics. Appendices An appendix is similar to a unit in that it contains objectives and conceptual explanations. However, an appendix does not include activities, a summary, an independent practice activity, or review questions. Course summary This section provides a text summary of the entire course. It is useful for providing closure at the end of the course. The course summary also indicates the next course in this series, if there is one, and lists additional resources you might find useful.[25-Apr-13 03:07:19 PM]

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Quick reference In computer software courses, the quick reference is an at-a-glance job aid summarizing some of the more common features of the software. Glossary The glossary provides definitions for all of the key terms used in this course. Index The index at the end of this manual makes it easy for you to find information about a particular software component, feature, or concept.

Manual conventions
We’ve tried to keep the number of elements and the types of formatting to a minimum in the manuals. We think this aids in clarity and makes the manuals more classically elegant looking. But there are some conventions and icons you should know about.

Italic text Bold text

In conceptual text, indicates a new term or feature. In unit summaries, indicates a key term or concept. In an independent practice activity, indicates an explicit item that you select, choose, or type. Indicates code or syntax. In the hands-on activities, any code that’s too long to fit on a single line is divided into segments by one or more continuation characters (?). This code should be entered as a continuous string of text. In the left column of hands-on activities, bold sans-serif text indicates an explicit item that you select, choose, or type. Indicate a key on the keyboard you must press.

Code font Longer strings of ?    code will look ?    like this.

Select bold item Keycaps like e

The activities are the most important parts of our manuals. Depending on the subject matter, an activity can have a one-column or two-column format. Two-column format In a typical two-column activity, the “Here’s how” column gives short instructions to you about what to do. The “Here’s why” column provides explanations, graphics, and clarifications. Here’s a sample: Do it!                    A-1:    Creating a commission formula

Here’s how
   1  Open Sales

Here’s why
This is an oversimplified sales compensation worksheet. It shows sales totals, commissions, and incentives for five sales reps. The commission rate formulas use the name “C_Rate” instead of a value for the commission rate.

   2  Observe the contents of cell F4


For these activities, we have provided a collection of data files designed to help you learn each skill in a real-world business context. As you work through the activities, you will modify and update[25-Apr-13 03:07:19 PM]

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these files. Of course, you might make a mistake and, therefore, want to re-key the activity starting from scratch. To make it easy to start over, you will rename each data file at the end of the first activity in which the file is modified. Our convention for renaming files is to add the word “My” to the beginning of the file name. In the above activity, for example, a file called “Sales” is being used for the first time. At the end of this activity, you would save the file as “My sales,” thus leaving the “Sales” file unchanged. If you make a mistake, you can start over using the original “Sales” file. In some activities, however, it may not be practical to rename the data file. If you want to retry one of these activities, ask your instructor for a fresh copy of the original data file. One-column format The one-column format is typically used for question-and-answer activities. Here’s a sample: Do it!                    A-2:    Examining the elements of organizational structure

Questions and answers
   1  Which of the following refers to the grouping of employees? A    Staff division B    Centralization C    Standardization D    The extent of control    2  What are the advantages of having a wider extent of control?


Topic B:   Setting your expectations
Properly setting your expectations is essential to your success. This topic will help you do that by providing a list of the objectives for the course.

Course objectives
These overall course objectives will give you an idea about what to expect from the course. It is also possible that they will help you see that this course is not the right one for you. If you think you either lack the prerequisite knowledge or already know most of the subject matter to be covered, you should let your instructor know that you think you are misplaced in the class. After completing this course, you will know how to: ·    Identify the elements of a project and project management framework, discuss project management as a profession, discuss and apply a systems approach to project management and project phases, and identify how organizational structures influence projects. ·    Identify and discuss the processes involved in developing a project plan and discuss plan execution and change control. ·    Identify the key elements of project scope management and tools for strategic planning and project selection during project initiation, identify the key elements of scope planning and a scope statement, and discuss scope verification and change control as they relate to project scope management. ·    Define schedules and activities, identify activity sequencing, and discuss activity duration estimation, discuss schedule development with the help of Gantt charts, PERT, critical path analysis, and critical chain scheduling, and identify how to control changes to a project schedule and use software to manage time.[25-Apr-13 03:07:19 PM]

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·    Identify the components and principles of cost management, discuss the elements of resource planning, discuss cost estimation and identify the techniques used for it, discuss cost budgeting and identify the techniques used it, and discuss cost control using EVA. ·    Explain the processes of project quality management and describe quality planning, discuss quality assurance and its importance, and discuss quality control and identify the tools and techniques to implement it. ·    Define the elements of organizational planning, discuss staff acquisition and explain how to negotiate successfully, discuss the development of successful teams and how to motivate them, and use software to assist in human resource management. ·    Identify the key aspects of project communications planning and evaluate and measure the performance of a project. ·    Discuss and classify project risks, identify risks and explain the use of risk identification tools, define and discuss qualitative risk analysis, discuss the steps involved in quantitative risk analysis, discuss risk response planning, and describe how to monitor and control risks. ·    Describe procurement planning, identify the tools and techniques used for procurement planning, and describe solicitation planning and perform source selection, identify types of contracts, and describe contract administration and close-out. ·    Discuss the early stages of the Northwest Airlines’ ResNet project in terms of project initiation, discuss planning a project and its application to the ResNet project, and discuss project execution and procurement of necessary resources. ·    Discuss the ResNet project in terms of project control and describe project closure and explain the lessons learned from the ResNet project.

Topic C:   Reviewing the course
This section explains what you’ll need to do in order to be able to review this course after class.

Setup instructions for reviewing the course
If you would like to use the PowerPoint presentations for this course, you will need to perform the following steps: 1   Download the PowerPoint presentations for the course to your computer. a   Connect to b   Click the link for IT Project Management to display a page of course listings, and then click the link for Course ILT: IT Project Management, 3rd Edition. c   Click the link for downloading the PowerPoint files, and follow the instructions that appear on your screen.

Unit 1 Project management: context and processes
Unit time: 90 Minutes Complete this unit, and you’ll know how to:[25-Apr-13 03:07:19 PM]

IT Project Management:

A  Identify the elements of a project and project management

B  Discuss project management as a profession. C  Discuss and apply a systems approach to project

management and project phases.
D  Identify how organizational structures influence projects.

Topic A:   Introduction to project management
Explanation                 There has been renewed interest in project management. Until the 1980s, project management focused primarily on providing schedule and resource data to senior managers. This process of tracking a few key project parameters is still an important element, but project management now involves much more than what was believed originally. In the late 1990s, business environments became more complex than those of earlier decades. Today, new technologies have become a significant contributor to many businesses. Computer hardware, software, and networks and the use of interdisciplinary and global work teams have radically changed the work environment. These changes fueled the need for sophisticated and improved project management. Today’s corporations recognize the need to understand and use modern project management techniques to be successful. Many organizations claim that using project management techniques provides them benefits such as: ·    Improved control of financial, physical, and human resources ·    Improved customer relations ·    Shorter development time ·    Low costs ·    High quality products and increased reliability ·    High profit margins ·    Improved productivity ·    Improved internal coordination ·    High worker morale

Before we discuss project management, it is important that we first understand the meaning of the term project. A project is a temporary endeavor undertaken to accomplish a unique purpose. Projects normally involve several human resources from various areas performing interrelated activities. The project’s main sponsor is often interested in the effective use of resources to complete the project in an efficient and timely manner. The attributes described in the following table help to further define a project.

Project attribute
Unique purpose Temporary Require resources from various areas

Every project has a well-defined objective—a unique product, service, or result. A project has a definite beginning and end. Resources include people, hardware, software, or other assets. Many projects are executed across departmental or organizational boundaries to achieve their unique purposes. For[25-Apr-13 03:07:19 PM]

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an IT collaboration project, human resources from technology, marketing, sales, distribution, and other areas of the company need to work together to ensure successful completion of the project. The project might also hire external consultants— product vendors and consulting companies—to provide input.

Has a primary sponsor or a customer

Most projects involve many interested parties, and a key sponsor. The project sponsor usually provides the direction and funding for the project. For example, if a project was initiated to provide direct product sales via the Internet, the head of sales might be the project sponsor. If a company needs to undertake several projects related to Internet technologies, then it might form a program. A program is a group of projects managed in a coordinated way. A program director provides leadership for these projects, and the sponsors might belong to several different business areas. Because every project is unique, it is sometimes difficult to clearly define the project’s objectives, the duration of the project, or the cost. This uncertainty is one of the main reasons why project management is challenging, especially when projects involve new technologies.



Project managers A project manager is the key to a project’s success. Project managers work with the project sponsors, the project team, and others involved in a project to ensure successful completion of the project. Project constraints Every project is constrained in different ways by its scope, time goals, and cost goals. These limitations are, sometimes, referred to in project management as the triple constraint. To create a successful project, scope, time, and cost must all be taken into consideration, and the project manager must balance these three constraints. To balance these, a project manager must consider the following issues: ·    Scope. What is the project goal? Which unique product or service does the customer or sponsor expect from the project? ·    Time. How long will it take to complete the project? What is the project’s schedule? ·    Cost. What is the cost involved in completing the project? Each area—scope, time, and cost—has a target at the beginning of a project. For example, an IT collaboration project might have an initial scope of producing a 50-page report and a 1-hour presentation on 30 different potential IT projects. The project scope might be further defined by providing a description of each potential project, an analysis of what other companies have implemented for similar projects, a time and cost estimate, and assessments of the risk and potential payoff as high, medium, or low. The initial time estimate for this project might be 1 month, and the cost estimate might be $50,000. These expectations provide targets for the scope, time, and cost dimensions of the project. Managing the triple constraint involves making trade-offs between scope, time, and cost goals. Because of the uncertain nature of projects and competition for resources, it’s rare that the scope, time, and cost plans will remain constant as originally predicted. The project’s sponsor, team members, or other interested parties might differ in their views of the project as it progresses. For instance, suppose the CEO has learned about the project and wants the project team to come up with at least 40 potential projects instead of 30. Should the project team try to accomplish this increase in scope without changing the cost and schedule goals? To make important decisions about scope, time, and cost goals, the project manager must negotiate with the project team and sponsor. Although the triple constraint describes how the basic elements of a project—scope, time, and cost— are interrelated, other elements can also play significant roles. Quality is often a key factor in projects[25-Apr-13 03:07:19 PM]

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as is customer or sponsor satisfaction. Some refer to the “quadruple” constraint of project management, including quality along with scope, time, and cost. Others believe that quality considerations, including customer satisfaction, must be inherent in setting a project’s scope, time, and cost goals. How can you avoid the problems that occur when you meet scope, time, and cost goals, but do not ensure quality or meet customer requirements? The answer is good project management. Do it!                    A-1:    Discussing projects

Questions and answers
   1  What is a project?

   2  How is working on a project different from what most people do in their dayto-day jobs?

   3  Give three examples each of activities that are projects and not projects.

   4  Explain in your own words what the term “triple constraint” means.

   5  Give an example of the triple constraint on a real project with which you are familiar.


Managing projects
Explanation Project management is “the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements.”1 Project managers strive to meet specific scope, time, cost, and quality goals of projects, and facilitate the entire process to meet the needs and expectations of the people involved or affected by the project’s activities. Exhibit 1-1 provides a framework in which to understand project management. Key elements of this framework include the project stakeholders, project management knowledge areas, and project management tools and techniques. Exhibit 1-1: Project management framework Stakeholders are the people involved or affected by project activities and include the[25-Apr-13 03:07:19 PM]

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project sponsor, project team, support staff, customers, users, suppliers, and even opponents of the project. People’s needs and expectations are important throughout the execution of a project. Successful project managers work on developing good relationships with project stakeholders to ensure that the stakeholders’ needs and expectations are understood and met. Knowledge areas describe the key competencies project managers must develop. The center of Exhibit 1-1 shows the nine knowledge areas of project management. These knowledge areas lead to specific project objectives: ·    Scope management involves defining and managing the work required to successfully complete the project. ·    Time management includes estimating how long it will take to complete the work, developing an acceptable project schedule, and ensuring timely completion of the project. ·    Cost management consists of preparing and managing the project’s budget. ·    Quality management ensures that the project will meet the stated or implied needs for which it was undertaken. ·    Human resource management refers to making effective use of the resources hired for the project. ·    Communications management involves generating, collecting, disseminating, and storing project information. ·    Risk management includes identifying, analyzing, and responding to risks related to the project. ·    Procurement management involves acquiring or procuring from outside the performing organization the goods and services needed for the project. Project integration management, the ninth knowledge area, ensures that all project elements are properly coordinated so that project goals are achieved. This function affects and is affected by the other knowledge areas and includes making tradeoffs between competing or conflicting objectives. Project managers must have knowledge and skills in the nine areas. Despite the advantages that project management offers, it might not guarantee success on all projects. Rather, it’s a very broad, often complex discipline. What works on one project might not work on another; therefore, it’s essential for project managers to continue to develop their knowledge and skills. The unique nature of projects and the challenges involved in managing them helps project managers hone their management skills. Project management tools and techniques assist project managers and their teams in carrying out scope, time, cost, and quality management. Additional tools help project managers and teams carry out human resource, communications, risk, procurement, and integration management. For example, some popular time management tools and techniques include Gantt charts, network diagrams (sometimes referred to as PERT charts), and critical path analysis. Project management software is a tool that can facilitate management processes in all knowledge areas. How project management relates to other disciplines Much of the knowledge required to manage projects is unique to project management. However, to work effectively with specific industry groups and technologies, project managers must also gain knowledge and experience in general management and understand the project’s application areas. For example, project managers must understand general management areas, such as organizational behavior, financial analysis, and planning techniques. If a project involves sales force automation, the project manager needs to understand the sales process, sales automation software, and mobile computing. Exhibit 1-2 shows the relationships between project management, general management, and application areas. Exhibit 1-2: Project management and other disciplines[25-Apr-13 03:07:19 PM]

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Although being a project manager requires knowledge and experience in general management areas, the role of a project manager differs from the role of a corporate manager or an executive. What distinguishes project management from general or operations management is the nature of the projects. Because projects are unique and temporary, project managers must focus on integrating all the various activities required to complete the project successfully on time and within budget. In contrast, most tasks performed by a general manager or an operations manager are repetitive and ongoing day-to-day activities of an organization and do not require skills to balance scope, time, and cost factors. General managers or operations managers also focus on a particular discipline or functional area. For example, a manager of an accounting department focuses on the discipline of accounting. If a project manager needs to manage an IT project for the accounting department, then he or she requires understanding of accounting as well as IT. However, the project manager’s main job would be to manage the project, not to perform accounting or IT functions. Project management also requires knowledge of the particular industry or domain of the project. For example, this course focuses on IT projects—projects that involve computer hardware, computer software, and telecommunications technology. For a person with little or no knowledge in IT, it might be a challenge to manage a large IT project. Such a project manager might face problems while working with other managers and suppliers as well as with team members who have sound technical expertise in the required IT domains. New project managers will need to balance their time between acquiring IT knowledge and learning to become better project managers. History of project management It might be argued that the building of the Egyptian pyramids or the Great Wall of China can be considered examples of project management. However, most believe that the modern concept of project management began with the Manhattan Project, which the U.S. military led to develop the atomic bomb. In fact, the military was the key industry behind the development of several project management techniques. In 1917, Henry Gantt developed the famous Gantt chart as a tool for scheduling work in job shops. Managers drew charts by hand to show tasks to be performed against a calendar timeline. This tool provided a standard format for planning and reviewing the work required for the completion of early military projects. Today’s project managers still use the Gantt chart as the primary tool to communicate project schedule information but, with the aid of computers, they no longer need to draw charts manually. Exhibit 1-3 displays a Gantt chart for a building construction project. This version of the chart was created with Microsoft Project, the most widely used project management software on the market. Note that a Gantt chart illustrates, in a calendar format, the tasks that need to be done and the time, or duration, needed to perform these tasks. A Gantt chart can also display the actual time taken to complete tasks, which helps project managers measure performance.

Exhibit 1-3: Sample Gantt chart in Microsoft Project Another type of graphical project representation is a network diagram. Network diagrams display a project as a flowchart. These diagrams help managers model the relationships among project tasks, which allow them to create realistic schedules. Network diagrams were first used in 1958 for the Navy Polaris missile and submarine project. Exhibit 1-4 displays a network diagram created using Microsoft Project. Note that the diagram includes arrows that show the related tasks and the sequence in which tasks must be performed. The concept of determining relationships among tasks is key to improving project scheduling. This concept allows you to find and monitor the critical path—the series of tasks that dictates the completion date for the project. Exhibit 1-4: Sample Network Diagram

By the 1970s, the military had begun to use software to manage large projects. Early project[25-Apr-13 03:07:19 PM]

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management software products were very expensive and ran on mainframe computers. For example, Artemis was an early project management software product that helped managers analyze complex schedules for designing aircraft. A full-time person was often required to run the complicated software and expensive pen plotters were used to draw network diagrams and Gantt charts. As computer hardware developed, and software became user-friendly, project management software became less expensive, easier to use, and more popular. Today, many different industries use project management software on all types and sizes of projects. New software makes basic tools, such as Gantt charts and network diagrams, inexpensive, easy to create, and available for update. In the latter part of the 20th century, people in every industry began to investigate and apply different aspects of project management to their projects. The sophistication and effectiveness with which project management tools are being applied and used today is influencing the way companies conduct business, use resources, and respond to market requirements. The job title “project manager” can describe the role leading the construction of a new sports arena, planning a fund-raiser for a charitable organization, or managing the development of an electronic commerce application. All these examples illustrate one key point: no matter what industry, you need to understand and resolve problems if you are to be a project manager. A project manager’s real challenge is to understand the concepts of project management and determine the tools and techniques to be applied on specific projects. Do it!                    A-2:    Discussing project management

Questions and answers
   1  What are the key elements of the project management framework?

   2  What are the knowledge areas required for project management?

   3  How does project management differ from general management?

   4  Why do you think so many IT projects are unsuccessful?


Topic B:   The project management profession
Explanation                 As the year 2000 approached, there was unprecedented demand for other types of IT projects, such as projects meant to exploit Web-based applications, take advantage of fast telecommunication technologies, and establish data warehousing capabilities. Experiencing the results of these demands, many companies adopted a far more rigorous approach to project management to improve the success rate of IT projects. A 2003 ComputerWorld article states that since 2000, money has gone elsewhere, leading to a lack of in-house IT project management skills. 2 Consequently, there is an increasing need for people to learn more about IT and the skills and expertise required to be project managers of IT projects.

Project management careers
Most IT projects require human resources to work in various roles, and the key role is that of a project manager. Some project managers might start working in that role very early in their careers, but the general understanding is that to be a project manager, an aspirant requires several years of[25-Apr-13 03:07:19 PM]

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experience and vast technical knowledge. Although this might be true for project managers required to handle large, complex, and expensive projects, many IT projects are led by not-so-experienced project managers. There is a demand for efficient and competent project managers. The Project Management Institute (PMI), an international professional society for project managers, continues its fast-paced growth. At the beginning of 2001, the organization included over 70,000 members worldwide. Presently, there are in excess of 100,000 PMI members, with many others joining PMI to pursue the PMP certification Membership. Statistics from PMI indicate that the Computers/Software/DP and IT industries are the top two industry areas among PMI members, with about 15,000 and 12,000 members, respectively, in each industry category. 3 In the 1990s, many companies began developing project offices to enhance project management expertise in their organizations and create a formal career path for project managers. Many colleges, universities, and firms now offer courses related to various aspects of project management. The problems in managing projects, the publicity about project management, and the belief that it is a key role that maximally impacts projects are all contributing to the growth of this field. In 2004, with the threat of offshore outsourcing of jobs, good project management is critical. In the ComputerWorld article “It’s IT’s Turn,” the author suggests that while outsourcing is likely to continue, we’re now able to identify which projects do and don’t make sense to outsource. 4 This, combined with a transition in company focus from simple cost-cutting to revenue growth, will keep many critical projects in-house. Project management certification Professional certification is an important factor in recognizing and ensuring quality in a profession. PMI provides certification as a Project Management Professional (PMP) to individuals who document sufficient project experience, follow the PMI code of ethics, and demonstrate knowledge about project management by scoring high in a comprehensive examination. Foote Partners LLC, an IT workforce research company, assesses the skills and pay of more than 35,000 IT professionals in over 1,800 North American and European companies. In a 2003 survey, the company found that the PMP certification provides the best bonuses for IT professionals, averaging 15% of base pay. The number of aspirants earning certification in project management continues to be on the rise. In 1993, there were only about 1,000 certified project management professionals, whereas, by the end of 2000, the number had grown to approximately 28,000. In Jan 2004, the number was 73,263 PMPcertified professionals throughout the world. As IT projects become more complex and global in nature, the need for people with demonstrated knowledge and skills in project management will continue to grow. Just as passing the CPA exam is a standard for accountants, passing the PMP exam is becoming a standard for project managers. Some companies are requiring that all project managers be PMP certified. Project management certification is also enabling professionals in the field to share a common base of knowledge. For example, any PMP can list, describe, and use the nine project management knowledge areas. Sharing a common base of knowledge is important because it helps advance the theory and practice of project management. International Data Corporation conducted a study in 1995 (on behalf of Drake Prometric, the IBM Corporation, Lotus Development Corporation, and Microsoft) to learn whether a company’s IT support function was more productive when the staff included a high percentage of professionally certified employees. Certification was defined as including technical expertise in products, such as NT or Lotus Notes, or broader certification in areas such as data processing or project management. The study found that companies supporting certification tended to operate in more complex IT environments and were more efficient than companies not supporting certification. Code of ethics Professional ethics constitute an important element of all professions. PMI developed a project management professional code of ethics that all project managers must sign in order to become certified project management professionals. PMI states that it is vital for all PMPs to conduct their work in an ethical manner. Doing so helps the profession earn the confidence of the customers,[25-Apr-13 03:07:19 PM]

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employers, employees, and project team members. The following list is excerpted from the code of ethics for the project management profession. As professionals in the field of project management, PMI members pledge to uphold and abide by the following: ·    I will maintain high standards of integrity and professional conduct. ·    I will accept responsibility for my actions. ·    I will continually seek to enhance my professional capabilities. ·    I will practice with fairness and honesty. ·    I will encourage others in the profession to act in an ethical and professional manner.5 Do it!                    B-1:    Discussing project management careers and certification

Questions and answers
   1  List some advantages of joining a group such as the Project Management Institute.

   2  What is PMP certification?

   3  What is the code of ethics to be followed by PMPs?


Project management software
Explanation                 The project management and software development communities responded to the need to provide additional software to assist in managing projects. ALLPM.COM, an Internet site that publishes project management information and resources for IT professionals, provides information on more than 100 products that can help manage projects. 6 Deciding on the project management software to be used is an important decision. This section provides a brief summary of the basic types of project management software and includes references for finding more information. Many project managers use basic productivity software, such as Microsoft Word or Excel, to perform project management functions, such as determining project scope, time, and cost, assigning resources, and preparing project documentation. Project managers often use this software instead of specialized project management software because they are familiar with the productivity software. However, hundreds of different project management software tools provide specific functionality for managing projects. These project management tools can be divided into three general categories based on their functionality and price. ·    Low-end tool. These tools provide basic project management features and cost less than $200 per user. They are recommended for small projects and[25-Apr-13 03:07:19 PM]

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single users. Most of these tools allow users to create Gantt charts, a task they cannot perform by using current productivity software. For example, Milestones Simplicity by KIDASA Software, Inc. has a Schedule Setup Wizard interface that describes simple steps to produce a Gantt chart. For $49 per user, this tool also includes a large assortment of symbols, flexible formatting, an outlining utility, and an Internet Publishing Wizard.7 Another product, called “How’s it going?” was written in Microsoft Access 97 by LogicAbility. For $145 per individual user, this tool includes an online guide and templates for many project management deliverables; reports for project tracking, status reporting, and budgeting; time reporting and resource management features; and scheduling features for creating Gantt charts and performing critical path analysis. 8 ·    Midrange tools. A step up from low-end tools, midrange tools are designed to handle large and multiple projects and multiple users. All these tools can create Gantt charts and network diagrams and can assist in critical path analysis, resource allocation, project tracking, and status reporting. Prices range from about $200 to $500 per user. Several of these tools require additional server software for using workgroup features. Microsoft Project is still the most popular project management software. Microsoft Project Server 2003, a companion product, facilitates collaboration and communication of project information over a corporate intranet. Also, Microsoft Office InfoPath allows you to initiate projects in Project Server 2003. Other companies that sell midrange project management tools include Artemis, PlanView, Primavera, RightWare™ Inc, Providence Systems, and Welcom.   ·    High-end tools. Another category of project management software includes high-end tools, sometimes referred to as enterprise project management software. These tools provide robust capabilities to handle very large projects, dispersed workgroups, and enterprise functions that summarize and combine individual project information to provide an enterprise view of all projects. These products are licensed on a per-user basis. One example, the Advanced Management Solutions (AMS) product AMS REALTIME interfaces with midrange tools, such as Microsoft Project and Primavera Project Planner. It also offers a complete suite of application programming interfaces (APIs) to enable integration with other business information systems. 9 Several companies that provide midrange tools, including Microsoft, are also starting to offer enterprise versions of their software. Do it!                    B-2:    Discussing project management software

Questions and answers
   1  Why do project managers prefer to use productivity software instead of specialized project management software?

   2  On what basis are project management tools divided into various categories? What are these categories of tools?

   3  Make a list of the tools that you use in your organization for project management.[25-Apr-13 03:07:19 PM]

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Topic C:   The project management context
Explanation                 Many theories and concepts of project management are easy to understand. However, it might be difficult to implement them in real-life projects. Project managers must consider many different components when managing projects. This topic discusses two of these components: using a systems approach and following a project life cycle.

A systems approach
Organizations cannot run projects in isolation. Therefore, projects must operate within a broad organizational environment, and project managers need to consider projects within this broad organizational context. To handle complex situations effectively, project managers need to take a holistic view of a project and understand how it impacts the larger organization. Taking this type of holistic view is called systems thinking. The term systems approach emerged in the 1950s to describe a holistic and analytical approach to solving complex problems that includes using a systems philosophy, systems analysis, and systems management. A systems philosophy is an overall model for thinking about things as systems. Systems are sets of interacting components working within an environment to fulfill a purpose. For example, the human body is a system composed of many subsystems, such as the brain, the skeletal system, the circulatory system, and the digestive system. Systems analysis is a problem-solving approach that requires defining the scope of the system to be studied, dividing it into components, and identifying and evaluating its problems, opportunities, constraints, and needs. The analyst then examines alternative solutions for improving the current situation, identifies an optimum (or at least satisfactory) solution or action plan, and examines the plan against the entire system. Systems management addresses the business, technological, and organizational issues associated with making a change to a system. Using a systems approach is critical to successful project management. Senior managers and project managers must identify key business, technological, and organizational issues related to each project so that they can identify and satisfy key stakeholders and take actions in the best interest of the organization. Many IT professionals become enamored with the technology and day-to-day problem solving approach while working on information systems. They tend to ignore important business issues, such as does it make financial sense to adopt this new technology or should the software be developed inhouse or purchased off-the-shelf? Using a more holistic approach helps project managers integrate business and organizational issues into their planning. It also helps them look at projects as a series of interrelated phases. By adopting this approach, you can do a better job of ensuring project success. Do it!                    C-1:    Discussing systems approach

Questions and answers
   1  What does it mean to take a systems view? How does taking a systems view apply to project management?

   2  In what way(s) is a systems approach to project management beneficial? Who does it benefit?[25-Apr-13 03:07:19 PM]

IT Project Management:

Project phases and the project life cycle
Explanation Because projects operate as part of a system and involve uncertainty, it is a good practice to divide projects into several phases. A project life cycle is a collection of project phases, which might vary with the project or industry, but some general phases include concept, development, implementation, and close-out. The first two phases (concept and development) focus on planning and are often referred to as project feasibility . The last two phases (implementation and close-out) focus on delivering the products and are often referred to as project acquisition. A project must successfully complete each phase before moving on to the next. This project life cycle approach provides better management control and appropriate links to the ongoing operations of the organization. Exhibit 1-5 provides a summary framework for the general phases of the project life cycle. In the concept phase of a project, managers describe the project briefly—that is, they create a high-level or summary plan for the project, which describes the need for the project and basic underlying concepts. They also develop a preliminary cost estimate in this first phase and an overview of the work involved. Project work is usually defined in a work breakdown structure (WBS) —an outcomeoriented document that defines the total scope of the project. At the end of the concept phase, a committee is able to deliver a report and presentation on its findings. The report and presentation are examples of a deliverable —a product created as part of a project. Exhibit 1-5: Phases of the project life cycle After the concept phase is completed, the development phase begins. In this phase, the project team creates a detailed project plan, an accurate cost estimate, and a thorough WBS. This phased approach minimizes the time and money spent performing irrelevant tasks. A project idea must pass the concept phase before evolving during the development phase. The third phase of the project life cycle is called implementation. In this phase, the project team delivers the required products, creates a definitive or relatively accurate cost estimate, and provides performance reports to stakeholders. The bulk of a project team’s efforts and most of the money allocated for the project are spent during the implementation phase. The last phase of the project life cycle is called close-out. In the close-out phase, all the work is completed and the customer confirms acceptance of the entire project. The project team documents its experiences on the project in a lessons-learned report. The project team might also want to share these lessons learned with other project teams that might be considering a similar project. Project life cycles You learned about various project phases developed by organizations while working on a project. Collectively, the project phases are known as the Project Life Cycle (PLC). Some of the common characteristics of the PLC are as follows: ·    Cost and staffing levels are low at the beginning, higher toward the end, and decrease rapidly as a project heads toward its conclusion. ·    The probability of successful completion is the lowest, and therefore, risk and uncertainty are the highest at the beginning. This probability of successful completion of a project increases as the project gains momentum. ·    The ability of stakeholders to influence the final characteristics and the final cost of a project is high at the start and low at the end of the PLC. Most IT professionals are familiar with the concept of a Systems Development Life Cycle (SDLC), which is a framework for describing the phases involved in developing and maintaining information systems. Common names for these general phases are information systems planning, analysis, design, implementation, and support. Some popular models of a systems development life cycle include the waterfall model, the spiral model, the incremental release model, the Rapid Application Development (RAD) model, and the prototyping model. ·    The waterfall model has well-defined, linear stages of systems development and support.[25-Apr-13 03:07:19 PM]

IT Project Management:

·    The spiral model was developed based on experience with various refinements of the waterfall model as applied to large government software projects. It recognizes that most software is developed using an iterative or spiral approach rather than a linear approach. ·    The incremental release model provides for progressive development of operational software, with each release providing added capabilities. ·    The RAD model, used to produce systems quickly without compromising quality, includes four phases—requirements planning, user design, construction, and cutover. RAD tools are available to facilitate rapid prototyping and code generation. ·    The prototyping model is used to develop software prototypes to clarify user requirements for operational software. These models are examples of product life cycles, and most introductory management information systems texts describe each of them in detail. The type of software and complexity of the information system being developed determines the model in use. Exhibit 1-6 shows Boehm’s famous spiral model of software development. 10 The spiral model illustrates how complex the process of developing an information system can be.

Exhibit 1-6: Spiral model of software development It is important not to confuse the project life cycle with the product life cycle. The project life cycle applies to all projects, regardless of the products being created. On the other hand, product life cycle models vary considerably based on the nature of the product being developed. Most large IT products are developed as a series of projects. For example, the systems planning phase for a new information system can include a project to hire an external consulting firm to help identify and evaluate potential strategies for developing a particular business application, such as a new order processing system or a general ledger system. It can also include a project to develop, administer, and evaluate a survey of users’ opinions on the current information systems used for performing a business function in the organization. The systems analysis phase might include a project to create process models for specific business functions in the organization. It can also include a project to create data models of existing databases, related to the business function and application, in the company. The implementation phase might include a project to hire contract programmers to code a part of the system. The support phase might include a project to develop and run several training sessions for users of the new application. All these examples show that large IT projects are usually composed of several small projects. When developing information systems, project management is a cross-life cycle activity that is performed in all the product phases of developing information systems. Because project management needs to occur during all phases of the systems development life cycle, it is critical for IT professionals to understand and practice good project management skills. Just as a project has a life cycle, so too does a product. IT projects help produce products, such as new software, hardware, networks, research reports, and training material on new systems. Understanding the product life cycle is just as important to good project management as understanding the phases of the project life cycle. The importance of project phases and management reviews Given the complexity and importance of many IT projects and their resulting products, it is important that project managers spend time reviewing the progress of these projects. A project should successfully pass through each project phase before continuing to the next. A management review should occur after each phase to evaluate progress, probable success, and continued compatibility with organizational goals. These management reviews, called phase exits or kill points, are essential for running projects as planned and determining if they should be continued, redirected, or terminated. Recall that projects are just one part of the entire system of an organization. Changes in other parts of the organization might affect projects, and that might in turn, affect other departments of the organization. By breaking projects into phases, senior managers can make sure that the projects are compatible with the goals of the company.[25-Apr-13 03:07:19 PM]

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Do it!                    C-2:    Discussing project phases and project life cycles

Questions and answers
   1  What are the four phases of the project life cycle?

   2  What is the difference between a project life cycle and a product life cycle?

   3  What is a PLC? What is the importance of this approach?

   4  What are the benefits of a management review?


Project management process groups
Explanation                 Project management consists of nine knowledge areas: integration, scope, time, cost, quality, human resource, communications, risk, and procurement. Another important concept related to project management is the five project management process groups: initiating, planning, executing, controlling, and closing. It is important to understand each project management process group and how the groups relate to the nine knowledge areas. Project management is an integrated endeavor so that decisions and actions taken in one knowledge area at a specific time affect other knowledge areas. Managing these interactions often requires making trade-offs among the project objectives of scope, time, and cost—the triple constraint of project management. A project manager might also need to make trade-offs between knowledge areas, such as between risk and human resources. As a consequence, you can view project management as a number of interlinked processes. A process is a series of actions directed toward achieving a particular result. Project management process groups progress from initiating processes to planning, executing, controlling, and closing processes. Initiating processes include actions to begin or end projects and project phases. Several tasks must be performed to initiate a project in the concept phase. You need to define the business need for the project and ensure that the project has a sponsor and project manager. Initiating processes take place during each phase of a project. For example, project managers and teams should examine the business need for the project during every phase of the project life cycle to determine if the project must be continued as planned. Planning processes include devising and maintaining a workable model to meet the business need for which the project was undertaken. Project plans are created to define each knowledge area as it relates to the project at that point in time. For example, plans must be developed to define the scope of the project, the schedule for various project activities, the key team members responsible, the approximate costs, and the resources to be procured. To account for changing conditions on the project and in the organization, project teams often need to revise plans during each phase of the project life cycle. Executing processes include coordinating between team members and other resources to carry out the project plans and develop the products or deliverables. Examples of executing processes include developing the project team, providing leadership, assuring project quality, disseminating information, procuring necessary resources, and delivering the work. Controlling processes ensure that project objectives are met. The project manager and team member monitor and measure progress against plans and take corrective action, when required. A common controlling process is to conduct performance and status reviews. If changes are necessary, project[25-Apr-13 03:07:19 PM]

IT Project Management:

managers must identify, analyze, and manage the changes. Closing processes include formalizing acceptance of the phase or project and bringing it to an end. Administrative activities are involved, such as archiving project files, documenting knowledge acquired, and receiving formal acceptance of work delivered as part of the phase or project. Exhibit 1-7 shows the project management process groups and their inter-relationships in terms of typical level of activity, time frame, and overlap. Notice that the process groups are not discrete, onetime events. They occur at varying levels of intensity throughout each phase of a project. The level of activity and time and the length of each process group vary for every project. The executing processes require the maximum resources and the largest amount of time, followed by planning. The initiating and closing processes are the shortest and require the least amount of resources and time. However, every project is unique, so there can be exceptions. Exhibit 1-7: Overlap of process groups in a phase (source: PMBOK Guide, 2000, 31) Each of the five project management process groups is characterized by the completion of specific tasks. During initiating processes for a new project, the organization recognizes that a new project exists. This is accomplished by completing a stakeholder analysis, requirements document, and feasibility study. These reports outline a project’s potential supporters and opponents, its definition, and its high-level goals, scope, deliverables, deadlines, and resources. The main outcome of the initiating process at the beginning phase is the creation of a project charter and the selection of a project manager. Key outcome of the planning process includes completion of a work breakdown structure, project schedule, and project budget. Planning is especially important for IT projects. If you have worked on a large IT project involving new technology, you would know the saying “A dollar spent up front in planning is worth 100 dollars spent after the system is implemented.” The executing process involves taking the actions necessary to ensure that the work described in the planning activities will be completed. The main outcome of this process is the delivery of the product of the project. For example, if an IT project involves providing new hardware, software, and training, the executing processes include leading the project team and other stakeholders to purchase the hardware, develop and test the software, and deliver and participate in training. This process group overlaps with all the other process groups and requires the maximum resources to be accomplished. Controlling is the process of measuring progress towards the project objectives, monitoring deviation from the plan, and taking corrective action to match progress with the plan. The outcome of controlling is a completed project that successfully delivers the agreed upon project scope within time, cost, and quality constraints. If changes need to be made to project objectives or plans, controlling processes ensure that they help meet stakeholder needs and expectations. Controlling processes overlap all the other process groups because changes can be made at any time. During the closing processes, the project team works to gain acceptance of the end product and bring the phase or project to an end. Key outcomes include formal acceptance of the work and creation of closing documents, such as a project audit and a lessons-learned report. You can map the main activities of each project management process group, which apply to an entire project or a phase of a project, into the nine project management knowledge areas. The following table provides a big picture of the relationships among the 39 project management activities, the time in which they are completed, and their corresponding knowledge areas. The activities listed in the table are the main processes for each knowledge area listed in the PMBOK Guide 2000. Notice that the majority of project management activities occur as part of the planning process group. To succeed at performing unique and new activities, project teams do adequate planning.
Knowledge area   Integration Project process groups Initiating

Project plan development Scope planning

Project plan execution Scope verification

Overall change control Scope change



Initiation[25-Apr-13 03:07:19 PM]

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Activity definition Activity sequencing Activity duration estimating Schedule development  


Schedule control    








Resource planning Cost estimating Cost budgeting    


Cost control


    Quality Human resources

    Quality planning Organizational planning Staff acquisition

    Quality assurance Team development  

    Quality control  






Knowledge area   Communications

Project process groups Initiating

Communications planning Risk identification

Information distribution  

Performance reporting Risk response control    

Administrative closure  





Risk quantification Risk response development Procurement planning Solicitation planning Contract administration







Contract closeout    



Source selection  



Do it!                    C-3:    Discussing project process groups

Questions and answers
   1  What are the project management process groups?

   2  On which processes should the most team members spend the maximum time?

   3  How do the project management process groups differ from the processes with which most IT professionals are familiar? How are they similar? How are they related?[25-Apr-13 03:07:19 PM]

IT Project Management:


Topic D:   An organizational view
Explanation                 The systems approach to project management requires that project managers always view their projects in the context of the organization. Organizational issues are often the most difficult part of managing projects. For example, many might believe that most projects fail for political reasons. Project managers frequently do not spend enough time identifying all the stakeholders involved in projects, especially the people opposed to the projects. To improve the success rate of their projects, it is important that project managers develop a better understanding of the personnel as well as organizations. Organizations can be viewed as containing four different frames: structural, human resources, political, and symbolic. ·    The structural frame describes how an organization is structured (as depicted in an organizational chart) and focuses on the roles and responsibilities of various groups toward meeting the goals and policies set by senior managers. This frame is rational and focuses on coordination and control. For example, a key issue in IT related to the structural frame is whether IT personnel should be centralized to one department or decentralized across several different departments. ·    The human resources frame focuses on correlating the needs of an organization with those of its employees. This frame recognizes that there are often mismatches between these two sides and works to resolve potential problems. For example, many projects might be more efficient for an organization if personnel worked 80 or more hours a week for several months. However, such a routine would most likely conflict with the personal lives of the employees. Important issues in IT related to this frame are the shortage of workers and the unrealistic schedules for many projects. ·    The political frame addresses organizational and personal politics. Politics in organizations might take the form of competition between groups or individuals for power and leadership. The political frame assumes that organizations are coalitions composed of varied individuals and interest groups. Often important decisions need to be made based on the allocation of scarce resources. Competition for scarce resources leads to conflicts and power tactics. Power obviously improves a group’s or an individual’s ability to use a situation to their advantage. Project managers must discourage politics and power games in their teams. Important issues in IT related to the political frame are power shifts from central functions to operating units or from functional managers to project managers. ·    The symbolic frame focuses on symbols and meanings. What is most important about any event in an organization is not that it happened, but what it means. Was it a good sign that the CEO attended a kickoff meeting for a project or was it a threat? The company’s culture is also related to this frame. How do people dress? How many hours do they work? How do they run meetings? Important symbolic frame issues in IT are the interpretations of work in high-technology environments and the need for IT workers as either key partners in the business or a necessary cost.

  Organizational structure
Discussions in organizations also focus on the organizational structure. There are three[25-Apr-13 03:07:19 PM]

IT Project Management:

general classifications of organizational structure: functional, project , and matrix . Exhibit 1-8 displays these three structures. A functional organization is a hierarchical structure in which functional managers or vice presidents in specialties, such as engineering, manufacturing, IT, and human resources (HR), report to the chief executive officer (CEO). Their teams have specialized skills in their respective disciplines. For example, most colleges and universities have strong functional organizations. The faculty in the Business department teaches only business courses; the faculty in the History department teaches only history; the faculty in the Art department teaches only art, and so on. A project organization also has a hierarchical structure, but instead of functional managers or vice presidents reporting to the CEO, project managers do so. Their teams have a range of skills required to complete their particular projects. Many large defense organizations use project structures. For example, major aircraft corporations usually have vice presidents in charge of each aircraft the corporation produces. Many consulting firms also follow a project organizational structure and hire resources to work on specific projects. A matrix organization represents the middle ground between functional and project structures. Personnel often report to both a functional manager and one or more project managers. For example, IT personnel at 3M (and many other companies) often split their time between two or more projects, but they report to their manager in the IT department. Project managers in matrix organizations have teams from various functional areas working on their projects, as shown in Exhibit 1-8. Matrix structures can be strong, weak, or balanced, based on the amount of control exercised by the project managers. Exhibit 1-8: Functional, project, and matrix organizational structures

Do it!                    D-1:    Discussing organizational structures

Questions and answers
   1  What are the four frames of organizations?

   2  What are the three general types of organizational structures?

   3  Which type of organizational structure can be strong, weak, or balanced based on the amount of control exercised by the project managers?


Influence of an organizational structure on projects
Explanation                 The following table summarizes how organizational structure influences projects and project managers. 11 Project managers are designated the maximum authority in a project organization and the least authority in a functional organization. It is important that project managers understand the structure of their organization. For example, in a functional organization, you are leading a project that requires strong support from several different functional areas, you should ask for sponsorship from the senior management. This sponsor should solicit support from all functional managers to ensure that they cooperate on the project and that qualified resources are available to work as needed. The project manager might also ask for allocation of additional budget to be able to pay for projectrelated trips, meetings, and training or to provide financial incentives to those supporting the project.

Project characteristics

Organization type[25-Apr-13 03:07:19 PM]

IT Project Management:   Functional Matrix Balanced matrix Project Strong matrix


  Little or none

Weak matrix

  High to almost total 85–100%

Project manager’s authority Percent of performing organization’s personnel assigned full-time to project work Project manager’s role Common title for project manager’s role Project management administrative staff


Low to moderate 15–60%

Moderate to high 50–95%

Virtually none







Project Coordinator or Project Leader Part-time

Project Coordinator or Project Leader Part-time

Project Manager or Project Officer Part-time

Project Manager or Program Manager Full-time

Project Manager or Program Manager Full-time

Even though project managers are designated the maximum authority in a project organization structure, this type of organization is often inefficient for a company. Because resources are assigned full-time to the project, they might not always be fully utilized. Project organizations might also miss out on economies of scale available by pooling of requests for materials with other projects. Disadvantages such as these illustrate the benefit of using a systems approach to managing projects. When project managers use a systems approach, they are better able to make decisions that address the needs of the organization. Stakeholder management Recall that project stakeholders are involved in or affected by project activities. Stakeholders can be internal or external to the organization and might be directly involved in the project or affected by it. Internal project stakeholders include the project sponsor, project team, support staff, and internal customers. Other internal stakeholders include senior management, other functional managers, and other project managers. Given that organizations have limited resources, projects affect senior management, other functional managers, and other project managers because they use some of the organization’s limited resources. Therefore, while additional internal stakeholders might not be directly involved in the project, they remain the project’s stakeholders because the project affects them in some way. External project stakeholders include the project’s customers (if they are external to the organization), competitors, suppliers, and other external groups who might be involved in or affected by the project, such as government officials or concerned citizens. Because the purpose of project management is to meet project requirements and the requirements of stakeholders, it is critical that project managers spend adequate time identifying, understanding, and managing relationships with all project stakeholders. Using the four organizational frames to think about project stakeholders can help to meet their expectations. Senior management commitment A crucial factor in helping project managers successfully lead projects is the level of commitment and support they receive from senior management. In fact, without commitment from senior management, many projects might fail. As described earlier, projects are part of the larger organizational environment, and many factors that might affect a project are out of a project manager’s control. Several studies cite executive support as one of the key factors associated with project success for virtually all projects.[25-Apr-13 03:07:19 PM]

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Senior management commitment is crucial to project managers for the following reasons: ·    Project managers need adequate resources. The best way to support a project is to provide it the required money, people, resources, and visibility. If project managers have the commitment from senior management, they will also have adequate resources to bring their projects to completion. ·    Project managers often require approval for unique project needs in a timely manner. For example, on large IT projects, senior management must understand that unexpected problems might result from the nature of the products being produced or the skills of the team members working on the project team. The project might need additional hardware and software halfway through for proper testing, or the project manager might need to offer special pay and benefits to attract and retain key project personnel. With senior management commitment, project managers can meet these specific needs in a timely manner. ·    Project managers must have cooperation from other employees of the organization. Most IT projects cut across functional areas; therefore, senior management must help project managers handle the political issues that often arise in these types of situations. If certain functional managers do not respond to project managers’ requests for necessary information, senior management must step in to encourage functional managers to cooperate.   ·    Project managers many times need guidance on leadership issues. Many IT project managers might have held technical positions but might be inexperienced as managers. Senior managers should take the time to pass on advice about how to be good leaders. They should encourage new project managers to develop leadership skills and allocate the time and funds to allow them to do so. Project managers for IT projects work best in an environment in which senior management values IT. Working in an organization that values good project management and sets standards for its use also helps project managers succeed. The need for organizational commitment to IT Another factor affecting senior management commitment to IT projects is an organization’s commitment to IT, in general. It is very difficult for an IT project to be successful if an organization does not value IT. Many companies realized that IT is integral to their business and created a vice president or equivalent level position for the head of IT, often called the Chief Information Officer (CIO). Some companies designate employees from non-IT areas to work on large projects full-time to increase involvement from end users of the systems. Some CEOs even take a strong leadership role in promoting the use of IT in their organizations. The Gartner Group, Inc., a well-respected IT consulting firm, awarded Boston’s State Street Bank and Trust Company’s CEO, Marshall Carter, the 1998 Excellence in Technology Award. Carter provided the vision and leadership for his organization to successfully implement new IT that expanded the bank’s business. The bank had to gather, coordinate, and analyze large amounts of data from around the world to provide new asset management services to its customers. It took the bank six years to transform State Street into a company that provides its customers state-of-the-art tools and services. The bank’s revenues, profits, and earnings per share more than doubled during Carter’s first five years. A key to his success was his vision that technology is an integral part of the business and not simply a means of automating old banking services. Carter used a highly personal style to motivate his employees, and he often attended project review meetings to support his managers on IT projects. 12 The need for organizational standards Another problem in most organizations is a lack of standards or guidelines for performing project management tasks. These standards or guidelines might be simple outlines or examples of project plans and guidelines that a project manager can use to provide status information to senior managers. This standardized information might be of use to many new IT project managers who are new in their[25-Apr-13 03:07:19 PM]

IT Project Management:

role. Some organizations invest heavily in project management by creating a project management office or center of excellence. A project management office or center of excellence is an organizational entity created to assist project managers in achieving project goals. Rachel Hollstadt, founder and CEO of a project management consulting firm, suggests that organizations consider adding a new position, a Chief Project Officer (CPO), to elevate the importance of project management. Some organizations develop career paths for project managers, while others require that all project managers obtain PMP certification. All these examples of setting standards demonstrate an organization’s commitment to project management. Do it!                    D-2:    Understanding the influence of an organizational structure on

projects Questions and answers

   1  How does a project manager’s authority vary in a project organization and a functional organization?

   2  Why is senior management commitment crucial to project managers?


Suggested skills for a project manager
Explanation A good project manager requires diverse skills. Achieving high performance on IT projects requires strong managerial skills, particularly strong communication, leadership, and political skills. Project managers also need skills in organization, teamwork, coping with pressure, and making effective use of technology. Why do project managers need strong management skills? One reason is that to understand, navigate, and meet stakeholders’ needs and expectations, project managers need to lead, communicate, negotiate, solve problems, and influence the organization at large. They also need to be able to listen actively to what others are saying, help develop new approaches for solving problems, and persuade their teams to work toward achieving project goals. Project managers must lead their teams by providing vision, delegating work, creating an energetic and positive environment, and setting an example of appropriate and effective behavior. Project managers must also have strong organizational skills to be able to plan, analyze, set, and achieve project goals. They must focus on teamwork skills so that the team can work effectively. They need to be able to motivate different types of team members and develop esprit de corps within the project team and with other project stakeholders. Most projects involve changes and trade-offs between competing goals, so it is important for project managers to be strong in coping skills. Project managers must be flexible, creative, and sometimes, patient in working toward project goals; they must also be active in making project needs known. Even if organizations can find people with all these skills and characteristics, a project might still require more input. Success is more likely, however, when project managers work to develop these skills and organizations promote effective project management. Do it!                    D-3:    Discussing skills of a project manager[25-Apr-13 03:07:19 PM]

IT Project Management:

Questions and answers
   1  What are the suggested skills for a project manager?

   2  Why do project managers need to have organizational skills?


Developing a project management methodology for IT
Explanation                 This unit discussed various topics, including systems thinking and systems analysis, the project life cycle, product life cycles, management reviews, the need for understanding organizations, and project management process groups. Many organizations talk about project management and spend much time and expense in training efforts, but after training, most trainees are not sure how to apply good project management techniques. As a result, some organizations develop their own internal IT project management methodologies. For example, after implementing a SDLC at Blue Cross Blue Shield of Michigan, the methods area became aware that developers and managers were performing different types of tasks even when working on IT projects. Deliverables were often missing or looked different from project to project. The methods area noticed the need to ensure consistency and define standards to guide both new and experienced project managers. Senior management decided to authorize funds to develop a methodology for project managers that might also become the basis for IT project management training within the organization. This initiative was viewed as part of an overall effort to help raise the company’s Software Capability Maturity Model level. Blue Cross Blue Shield launched a three-month project to develop its own project management methodology. Some of the project team members already carried the PMP certification, so they decided to base their methodology on the PMBOK Guide, making the required adjustments to best describe how their organization managed IT projects. Exhibit 1-9 shows a one-page picture of the resulting IT project management processes and the information flow among them.13

Exhibit 1-9: IT project management methodology at Blue Cross Blue Shield The Blue Cross Blue Shield team realized that some processes in the PMBOK Guide would have to be dropped or de-emphasized to fit their organization’s needs. For example, in contrast to some industries, the overriding financial investment in software development was made in salaries, not in materials. In addition, at Blue Cross Blue Shield, negotiations with contracting firms were not made in the IT area. Therefore, most procurement functions were used by other processes, such as Scope Planning and Definition and Resource Planning. Additional processes were also added. For example, to keep track of the large amount of documentation necessary for an IT project, the team decided to develop a process for maintaining and updating a project workbook that will serve as an information resource for team members and a printed record of project activities. Project Book Records was, therefore, added as a separate process under Information Distribution. Another new process, Issue Control, was added because of its importance to IT projects. Problems occur in IT projects, in part because of the inherent complexity of information systems and the rapidly changing technology. The team also decided to combine the PMBOK Guide’s processes of Activity Sequencing, Activity Definition, Activity Duration Estimating, and Schedule Development into one process that was to be called Work Plan Development. In addition, to enhance usability and simplify the overall process, the team combined the PMBOK Integrated Change Control, Scope Change Control, Schedule Control, and Cost Control processes into a process called Project Change Control. Blue Cross Blue Shield wanted its IT project management methodology to work with any of the SDLC models. This forced team members involved in software development phases to separate plans[25-Apr-13 03:07:19 PM]

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for product creation from the efforts to manage development activities. Understanding the difference between the SDLC and the methodology of IT project management lead to a paradigm shift for some team members who were performing the dual role of developer and project manager. Today, Blue Cross Blue Shield’s IT project management methodology is the basis for its training programs and is used to develop and implement its IT projects. The project management process groups—initiating, planning, executing, controlling, and closing— provide a useful framework for understanding project management. They apply to most projects (IT and non-IT) most of the time, and along with the project management knowledge areas, they help project managers take into account the big picture of managing a project in their organizations. Do it!                    D-4:    Developing a project management methodology

   1  Why is an IT project management methodology needed?

   2  What is the importance of project process groups in project management methodology?

   3  Analyze the Blue Cross Blue Shield of Michigan example of IT project management methodology. Have you ever developed a methodology of the same kind in your organization?

Unit summary: Project management: context and processes
Topic A                      In this topic, you learned that a project is a temporary endeavor undertaken to accomplish a unique purpose. Then you learned that the triple constraint of a project is managing scope, time, and cost dimensions. Further, you learned that project management is the application of knowledge, skills, tools, and techniques to project activities to meet or exceed stakeholder needs and expectations. Finally, you examined the framework for project management , including project stakeholders, project management knowledge areas , and project management tools and techniques . Topic B                      In this topic, you learned about project management as a profession, some of the criteria for the Project Management Professional (PMP) certification , and the different software packages used for project management. Topic C                     In this topic, you learned that a systems approach is critical to successful project management. You also learned that the phases of the project life cycle are concept , development, implementation, and close-out. You learned that a systems development life cycle (SDLC ) is a specific type of framework for describing the phases involved in developing and maintaining information systems. Finally, you learned the common names for the general phases in an SDLC: information systems planning, analysis, design, implementation, and support . Topic D                     In this topic, you learned that organizations use four different frames : structural , human resources, political, and symbolic. Next, you learned that the three general classifications of organizational structures are functional , project, and matrix . You also learned about the potential influence of stakeholders on projects and project management. Finally, you learned that project management is a system of interlinked processes, and that the five process groups are initiating , planning, executing, controlling, and closing .[25-Apr-13 03:07:19 PM]

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Independent practice activity
  1  Have you used project management software? If so, list the software and for what purpose you have used it. After reading about software tools in this unit, are there any additional tools that might be helpful to you?
Answers might vary.

  2  Apply the information on the four frames of organizations to an IT project with which you are familiar. If you cannot think of a good IT project, use your personal experience in deciding where to attend college to apply this framework. Describe, in not more than two pages, key issues related to the structural, human resources, political, and symbolic frames. Which frame seemed to be the most important and why? For example, did you decide where to attend college primarily because of the curriculum and structure of the program? Did you follow your friends? Did your parents influence your decision? Did you like the culture of the campus?
Answers might vary.

  # 1 Reference Project Management Institute (PMI) Standards Committee. A Guide to the Project Management Body of Knowledge (PMBOK Guide) (2000). The PMBOK Guide is a key document in the project management profession and is ANSI approved. Excerpts are available free of charge from PMI’s Web site, Hoffman, Thomas. “IT Departments Face a Lack of Project Management Know-how,” ComputerWorld Web site ( (August 11, 2003). Project Management Institute (PMI). PMI Web site ( (2001). Hayes, Frank. “It’s IT’s Turn,” ComputerWorld Web site ( (December 22, 2003). Project Management Institute (PMI). “Member Code of Ethics” ( (revised November 2003). PM Products ( Web Site of KIDASA Software ( How’s it going? From LogicAbility ( Advanced Management Solutions ( Boehm, Barry. “A Spiral Model of Software Development and Enhancement,” IEEE Computer (May 1988) 5, 61–72. PMI Standards Committee. A Guide to the Project Management Body of Knowledge (PMBOK Guide) , PMI, 2000, 19. Melymuka, Kathleen. “Old Bank, New Ideas,” ComputerWorld (February 15, 1999). Munroe, William. “Developing and Implementing an IT Project Management Process,” ISSIGreview (First Quarter 2001). This article can also be found online (


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Unit 2 Integration management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Identify and discuss the processes involved in developing

a project plan.
B  Discuss plan execution and change control.

Topic A:   Project integration management
Explanation                 Project integration management involves coordinating the eight other knowledge areas of project management throughout a project’s life cycle. Integration management ensures that all the elements of a project are used at the right time so that the project is completed successfully. The main processes involved in project integration management include: ·    Project plan development, which involves compiling the results of other planning processes into a consistent, coherent document, called—the project plan. ·    Project plan execution, which involves carrying out the project plan by performing the activities it describes. ·    Integrated change control, which involves coordinating changes throughout the project. Exhibit 2-1 provides an overview of the processes, inputs, tools and techniques, and outputs of project integration management. For example, inputs to project plan development include other planning outputs, historical information, organizational policies, constraints, and assumptions. Tools and techniques to assist in developing a project plan include a project planning methodology, stakeholder skills and knowledge, a project management information system or project management software, and earned value management. Outputs of project plan development are the project plan and supporting detail. Exhibit 2-1: Project integration management overview

An integrating force
To achieve project integration management, you perform management of the project scope, time, cost, quality, human resources, communication, risks, and procurement. Project integration management depends on activities from all the other eight knowledge areas. It also requires commitment throughout the project’s life cycle from senior managers sponsoring the project. Exhibit 2-2 provides a framework for understanding how project integration management provides the guidelines in managing a project. Recall that projects pass through the basic phases of concept, development, implementation, and close-out. These phases are represented on the x-axis of this exhibit, and the y-axis represents the eight other project management knowledge areas. The project integration management knowledge area is represented as an arrow that becomes increasingly focused as the project progresses through its life cycle. Project integration management combines all the elements for the successful completion of the project. By ensuring good project planning, execution, and change control, project managers and their teams can meet or exceed needs and expectations of[25-Apr-13 03:07:19 PM]

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the project’s stakeholders. Many consider integration management to be the key to overall project success. A project manager using project integration management must be responsible for: ·    Coordinating with the teams ·    Defining the plans ·    Resolving conflicts among project goals or team members ·    Making final decisions ·    Communicating key project information to senior managers ·    Enabling the work required to complete a project Exhibit 2-2: Framework for project integration management

Integration management includes interface management, which involves identifying and managing the points of interaction between various elements of a project. The number of interfaces can increase exponentially as the number of people involved in a project increases. Therefore, an important task of a project manager is to establish and maintain good communication relationships across organizational interfaces. The project manager must communicate well with all project stakeholders, including customers, the project team, senior managers, other project managers, and the project opponents. Project integration management involves integrating the other knowledge areas within a project as well as integrating areas outside a project. Integrating across knowledge areas and across the organization requires a good project plan. Therefore, the first process of integration management is developing a good project plan. Do it!                    A-1:    Discussing project integration management

Questions and answers
   1  What are the main processes involved in project integration management?

   2  Why is integration management considered key to overall project success?


Project plan development
Explanation A project plan is a document used to coordinate all project planning documents and help guide a project’s execution and control. Project plans also document assumptions and decisions regarding choices, facilitate communication among stakeholders, define the content, extent, and schedules of key management reviews, and provide a baseline for progress measurement and project control. Plans should be dynamic, flexible, and subject to change when the environment or project changes. Plans should be used by project managers to lead project teams and assess project status. To create a good project plan, the project manager must practice integration because he or she will require information from all knowledge areas. Working with the project team and other stakeholders to create a project plan can help the project manager gain overall understanding of the project and its execution.[25-Apr-13 03:07:19 PM]

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Just as projects are unique, so are project plans. A small project involving a few team members working together over a couple of months might use a project plan consisting of a two-page description of the project along with a work breakdown structure and a Gantt chart. A large project involving 100 team members working on a project that will run over three years might use a detailed project plan. It is important to tailor project plans to fit the needs of specific projects. The plans should guide the work so that the detail of a project plan meets the needs of the project. There are, however, elements common to most project plans. These elements include an introduction or overview of the project, a description of how the project is organized, the management and technical processes used on the project, and sections describing the work to be done, the schedule, and the budget. Common project plan elements The introduction or overview of the project should at least include the following information: ·    The project name. Every project must be assigned a unique name to help identify it and avoid confusion with other related projects. ·    A brief description of the project and the need it addresses. This description clearly outlines the rationale and goals of the project. It should be written in simple terms, avoiding technical jargon, and it must include a rough time and cost estimate. ·    The sponsor’s name. Every project needs a sponsor. You must include the sponsor’s name, title, and contact information in the project introduction. ·    The names of the project manager and key team members. The project manager is always the contact for providing all project-related information. However, depending on the size and nature of the project, you can include the names of key team members. ·    Project deliverables. This section briefly describes the products to be created as part of the project. Software packages, hardware components, technical reports, and training material are examples of deliverables. ·    A list of important reference materials. Many projects have a history that is pertinent to the project. Listing important documents or results of meetings held in the past help project stakeholders understand the project’s history. This section also refers to the plans for other knowledge areas. For example, the overall project plan refers to and summarizes important parts of scope, schedule, cost, quality, staffing, communications, risk, and procurement management plans. ·    A list of definitions and acronyms, if applicable. Many projects, especially information technology (IT) projects, involve terminology unique to a particular industry or technology. Providing a list of definitions and acronyms helps ensure consistency in their use across the project. Project organization The description of how a project is organized includes the following information: ·    Organizational charts. In addition to an organizational chart for the company sponsoring the project and for the company’s customer (if it is an external customer), you include a project organizational chart to show the lines of authority, responsibilities, and communication for the project. ·    Project responsibilities. This section of the project plan describes the major project functions and activities and identifies the individuals responsible. A responsibility assignment chart often displays this information. ·    Other organizational or process-related information. Depending on the nature of the project, you can document the major processes followed during the life cycle of that project. For example, if a project involves launching a major software upgrade, you can create a diagram or timeline of the major steps involved in this process.[25-Apr-13 03:07:19 PM]

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Management and technical processes The section of the project plan describing management and technical processes includes the following information: ·    Management objectives. It is important for team members to understand senior managers’ views, priorities, assumptions, or constraints regarding the project. ·    Project controls. This section describes how to monitor the progress and changes in the project. This information answers the questions: Will monthly status reviews and quarterly progress reviews be held? Will specific forms or charts be used to monitor progress? Will the project use earned value analysis to assess and track performance? What is the process for change control? What level of management is required to approve different types of changes? (Change control is discussed later in this unit.) ·    Risk management. This section briefly addresses how to identify, manage, and control risks. It refers to the risk management plan if the project requires one. ·    Project staffing. This section describes the number and types of personnel required for the project. It also refers to the staffing management plan, if the project requires one. ·    Technical processes. This section describes the specific methodologies a project might use and how information is to be documented. For example, many IT projects follow specific software development methodologies or use particular Computer Aided Software Engineering (CASE) tools. Many companies or customers also use specific formats for technical documentation. It is important to describe these technical processes in the project plan. Work to be done The section of the overall project plan describing the work to be done refers to the scope management plan and summarizes the following: ·    Major work packages . Project work is organized into several work packages by using a work breakdown structure (WBS). To describe the work in detail, you might need to create a statement of work (SOW). This section briefly summarizes the main work packages for the project and refers to the appropriate sections of the scope management plan. ·    Key deliverables. This section lists and describes the key products developed as part of the project. It also describes the stakeholders’ expectations regarding the quality of the deliverables. ·    Other work-related information. This section highlights key information related to the work to be performed as part of the project. For example, it might list specific hardware or software to be used or define the specifications to which the team must conform. It documents major assumptions made in defining the project work. Schedule The project schedule information section includes the following: ·    Summary schedule. It is a one-page summary of the overall project schedule. Depending on the project’s size and complexity, the summary schedule might list only key deliverables and their planned completion dates. For other projects, it might include a Gantt chart with details of all the work and associated dates for the entire project. ·    Detailed schedule. This section provides detailed information about the project schedule. It refers to the schedule management plan and discusses dependencies among project activities that can affect the schedule. For example, a detailed schedule might explain that a major part of the work can start only after funding by an external agency. You can use a project network diagram or a PERT chart to show these dependencies. ·    Other schedule-related information. Many assumptions are made while preparing project schedules. This section documents major assumptions and highlights other important information related to the project schedule. Budget The budget section of the overall project plan includes the following:[25-Apr-13 03:07:19 PM]

IT Project Management:

·    Summary budget. The summary budget includes the total estimate of the overall project’s budget. It can also include the budget estimate for each month or year categorized into specific budget categories. It is important to provide an explanation of what this data means. For example, is the total budget estimate a firm number that cannot change, or is it a rough estimate based on projected costs over the next three years? ·    Detailed budget. This section summarizes the cost management plan and includes detailed budget information. For example, it defines the fixed and recurring cost estimates for the project each year. It also includes information about the projected financial benefits of the project, the skills and competencies of the human resources required for the project, and the basis for calculating the labor costs. ·    Other budget related information. This section documents major assumptions and highlights other important information related to financial aspects of the project. Do it!                    A-2:    Developing a plan

   1  What is a project plan, and why is it essential?

   2  What are some crucial elements of a good project plan?

   3  Keeping in mind your current project, create a project plan including all the essential elements.

   4  What are the inputs and outputs of project plan development?

   5  What are the tools and techniques that aid in project plan development?

   6  Describe the contents of a plan for a project to develop a Web-based information system that provides transfer credit information for all colleges and universities in the world.

   7  What are the various components of a project schedule?

Project plan guidelines
Explanation                 Many organizations use guidelines for creating project plans. For example, Department of Defense (DOD) Standard 2167, Software Development Plan, describes the format for contractors to use in[25-Apr-13 03:07:19 PM]

IT Project Management:

creating a plan for DOD software development projects. IEEE Standard 1058.1 describes the contents of a Software Project Management Plan (SPMP). The following table provides the format for the IEEE Standard SPMP. Note that this format includes five main sections—introduction, project organization, managerial process, technical process, and work packages, schedule, and budget. Companies working on software development projects for the DOD must follow this standard. Most private organizations do not follow rigorous documentation standards; however, they usually follow guidelines for developing project plans. It is a good practice in an organization to follow standards or guidelines for developing project plans because it facilitates the development and execution of the plans. The organization can work more efficiently if all project plans follow a similar format.

Project management plan sections
Introduction Project organization Managerial process

Section topics
Project overview, project deliverables, evolution of the SPMP, reference material, and definitions and acronyms. Process model, organizational structure, organizational boundaries and interfaces, and project responsibilities. Management objectives and priorities; assumptions, dependencies, and constraints; risk management; monitoring and controlling staffing plan. Methods, tools, and techniques; software documentation; and project support functions. Work packages, dependencies, resource requirements, budget and resource allocation, and schedule.

Technical process Work packages, schedule, and budget

Because the goal of project management is to meet or exceed the stakeholders’ needs and expectations for the project, it is important to include stakeholder analysis as part of project planning. A stakeholder analysis documents information, such as key stakeholders’ names and organizations, their roles on the project, unique facts about each stakeholder, their level of interest in the project, their influence on the project, and suggestions for managing relationships with each stakeholder. A stakeholder analysis often includes sensitive information; therefore, it should not be part of the overall project plan available to all stakeholders. In many cases, only project managers and other key team members should be allowed access to the stakeholder analysis. Do it!                    A-3:    Discussing project plan guidelines

Questions and answers
   1  What are the five sections of IEEE Standard SPMP?

   2  Why is it important to include a stakeholder analysis as part of project planning?


Topic B:   Plan execution and change control[25-Apr-13 03:07:19 PM]

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Project plan execution involves performing the work described in the project plan. The majority of project time and resources are spent during execution. Therefore, developing and following a well-designed plan facilitates managing these valuable and finite elements. Project integration management involves project planning and execution as intertwined and inseparable activities. The main objective of creating project plans is to guide project execution. A good plan helps develop good products and documents what comprises good products. Knowledge gained from work during the initial phases of a project must be included in updates to the project plans. A common sense approach to improving the coordination between project plan development and execution is to follow this simple rule: First you plan the work, then you work the plan. All project personnel need to experience and develop both planning and executing skills. In IT projects, programmers writing detailed specifications and then creating the code based on their own specifications are observed to be better at writing specifications. Similarly, most systems analysts begin their careers as programmers so they understand the types of analysis and documentation needed to write quality code. Although project managers develop the overall project plan, they must invite inputs from team members developing plans in each knowledge area. Project managers must lead by example to demonstrate the importance of creating good plans and then follow them in project execution. Project managers who follow their own plans carefully usually have team members who abide by the project plan. Executing a project plan well requires many skills; some essential ones include leadership, communication, and political skills. For example, organizational procedures can help or hinder project plan execution. If an organization provides guidelines for creating overall project plans and plans for each project management knowledge area, and everyone in the organization follows these, it is easier to create the plans. Similarly, if the organization uses the project plans as the basis for performing and monitoring progress during execution, the culture promotes the relationship between good planning and execution. Project managers must lead their specific projects to interpret these planning and execution guidelines. Project managers must also communicate well with the project team and other project stakeholders to create and execute project plans. Project managers might sometimes find it necessary to break organizational rules to produce project results in a timely manner. When project managers break the rules, they must have sound reasons to do so and must communicate the same to all involved in the project. For example, if a particular project requires use of nonstandard software, the project manager must provide appropriate reasons to convince concerned stakeholders of the need to break the rules on using only standard software. Breaking organizational rules requires excellent leadership and communication skills. Product skills and knowledge are also critical to successful project execution. Project managers and their team members must have the required expertise to work on a project. If they do not, it is the project manager’s job to help the team acquire the necessary skills, arrange alternate resources for the project, or alert senior managers to the problem. Organizations must choose carefully their IT projects and ensure they have adequate resources for the same. It is also important for IT project managers to have product knowledge so they can help plan and lead projects that take advantage of new technologies.

Tools and techniques of project plan execution
Project plan execution also requires specialized tools and techniques, some of which are unique to project management. Tools and techniques that help project managers perform activities related to execution processes include: ·    Work authorization systems. A method for ensuring that qualified people do work at the right time and in the proper sequence. This system can be a manual process in which written forms and signatures are used to authorize work to begin on specific project activities or work packages. Automated work authorization systems are also available to streamline this process. ·    Status review meetings. Regular meetings must be held to exchange project[25-Apr-13 03:07:19 PM]

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information. These meetings serve as an excellent means to motivate team members to contribute to the project. These meetings also help project stakeholders know about the exact status of the project. ·    Project management software. Software specifically designed for project management can help create and execute the project plan. For example, project managers or team members can create Gantt charts for project plans by using software, such as Microsoft Project 2003. These Gantt charts can include hyperlinks to other planning documents. For example, a project plan might include a deliverable for creating software test plans. This item on the Gantt chart can include a hyperlink to a Microsoft Word file for that software test plan. If a project team member updates the Word file containing the test plan, the hyperlink feature on the Gantt chart automatically links to the updated file. When a baseline plan is set for the project, project team members can enter information about the start and end of each project activity, the time spent on completing each activity, and other information. The project manager can then use project management software to compare the baseline and actual information by viewing reports on project progress—running a report to show the planned versus the actual tasks completed and project costs. Although these tools and techniques can aid in project execution, project managers must remember that positive leadership is the key to successful project management. Project managers can focus on providing leadership for the project by delegating the detailed work involved in using these tools to other team members. Do it!                    B-1:    Discussing plan execution

   1  Which are the essential skills needed for plan execution?

   2  Which one of the following is a tool used for plan execution? A    Status review meetings B    Project plan execution C    Project integration

Integrated change control
Explanation                 Integrated change control involves identifying, evaluating, and managing changes throughout the project life cycle. The three main objectives of integrated change control are: ·    Influencing the factors that lead to beneficial changes. To ensure that changes are beneficial and that a project is successful, project managers and their teams must make tradeoffs among key project dimensions, such as scope, time, cost, and quality. ·    Determining that a change has occurred. To determine that a change has occurred, project managers must know the status of key project areas at all times during the life cycle of the project. In addition, project managers must communicate significant changes to senior managers and key stakeholders, who need to be informed of important information such as low project productivity, long execution time, high cost, or poor quality. ·    Managing changes as and when they occur. Managing change is a key job of project managers and their team members. It is important that project managers exercise discipline in managing their projects to help minimize the number of changes. Important inputs to the integrated change control process include project plans, performance reports, and change requests. Important outputs include project plan updates, corrective actions, and[25-Apr-13 03:07:19 PM]

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documentation of lessons learned during the project. Exhibit 2-3 provides a schematic representation of the integrated change control process. Exhibit 2-3: Integrated change control process The project plan provides the baseline for identifying and controlling project changes. For example, the project plan includes a section describing the work to be performed as part of a project. This section of the plan describes the key deliverables, products, and quality requirements for the project. The schedule section lists the planned dates for completing key deliverables, and the budget section provides the planned cost for the deliverables. The project team must focus on delivering the work as planned. If changes are made during project execution, the project plans must be revised. Performance reports provide status information on project execution. The main purpose of these reports is to alert the project manager and team of potential problems related to the project. They must decide if corrective actions are needed, the best course of action, and the best time to take this action. For example, suppose one of the key deliverables in a project plan is installation of a new Web server for the project. If one of the project team members reports problems coordinating the purchase and installation of this Web server, the project manager should assess the impact of the problems on the output of the project. If a late installation will cause problems in other areas of the project, the project manager should take necessary actions to help the team member resolve the problem. If the situation is inevitable, the project manager should alert the other team members who will also be impacted by the changes in the schedule. The project manager should also look at the overall progress of the project. If the project manager identifies a recurring trend of missing deadlines, he or she should alert key stakeholders and negotiate a later completion date for the project. Change requests are common and occur in different forms. They can be oral or written, formal or informal. For example, the team member responsible for installing a Web server seeks the project manager’s approval for the purchase of a server with a faster processor than planned, but at the same cost. Because this change is positive and has no negative effects on the project, the project manager might verbally approve the same. Nevertheless, it is important to document this change to avoid any problems in the future. The team member should update the section of the scope management plan with the new specifications for the server. Remember that many change requests can have a major impact on a project. For example, customers changing their minds about the number of Web servers they want as part of a project will definitely impact the project’s scope and cost. Such a change might also affect the project’s schedule. More significant changes must be written, and a formal review process must be arranged to analyze and decide on implementing these changes. In addition to updating project plans and taking corrective actions, documenting lessons learned is an important output of the overall change control process. The project manager and team should share the knowledge they acquired while working on the project. There should be some documentation of these lessons learned in change control and discussing them at an open meeting is also an effective way to share this information. Change control on IT projects A widely held view of IT project management from the 1950s to the 1980s was that the project team should strive to achieve the results within the planned time and budget. However, it was observed that project teams could rarely meet project goals set originally at the start of the projects, especially when the projects involved new technologies. Stakeholders rarely agreed on the scope of the project or the end product. In addition, time and cost estimates created early in a project were rarely accurate. Today, most project managers and senior managers realize that project management is a process of constant communication and negotiation about project objectives and stakeholder expectations. This view assumes that changes can be made throughout the project life cycle and recognizes that changes are often beneficial to projects. For example, if a project team member discovers a new hardware or software technology that can help meet the customers’ requirement for less time and money, the project team and key stakeholders can make changes to the project.[25-Apr-13 03:07:19 PM]

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All projects undergo changes, and managing them is a key issue in project management, especially for IT projects. Many IT projects involve the use of hardware and software that is updated frequently. For example, in a project, the initial plan for the Web server specifications might have to be revised because of the availability of a much-improved version at the same cost. This example illustrates a positive change. In contrast, if the manufacturer of the server specified in the project plan goes out of business, it results in a negative change. IT project managers must build some flexibility into their project plans and execution to accommodate such changes. Customers for IT projects must allow for meeting project objectives in different ways. Even if project managers, teams, and customers are flexible, it is important that projects use a formal change control system. To plan for managing changes, a project must use a good change control system. Change control system A change control system is a formal, documented process that describes when and how to change project documents. It also describes the personnel authorized to make changes, the necessary documentation, and the automated or manual tracking systems the project will use. A change control system often includes a change control board (CCB), configuration management, and a process for communicating changes. A CCB is a formal group that approves or rejects project changes. A CCB primarily provides guidelines for preparing change requests, evaluating change requests, and managing the implementation of approved changes. An organization can assign key stakeholders for the entire organization on this board, and a few members could rotate based on the unique needs of each project. Creating a formal board and a process for managing change results in better-integrated change control. Configuration management is another important technique for integrated change control. Configuration management ensures that the descriptions of the project’s products are correct and complete. Configuration management focuses on the management of technology by identifying and controlling the functional and physical design characteristics of products and their support documentation. Members of the project team, often called configuration management specialists, are designated to perform configuration management for large projects. These specialists’ key job is to identify and document the functional and physical characteristics of the project’s products, control any changes to such characteristics, record and report the changes, and audit the products to verify that they conform to requirements. Another factor in change control is communication. Project managers should use written and oral performance reports to help identify and manage project changes. In addition to formal reports, some project managers hold stand-up meetings every morning or once a week, depending on the nature of the project. The goal of a stand-up meeting is to quickly communicate what is most important on the project. Standing keeps meetings short and forces all attendees to focus on the most important matters related to the project. Why is good communication critical to success? An important aspect of project change is to ensure all team members are aware of the latest project information. The project manager integrates all project changes to ensure the project executes as planned. The project manager and the team must develop a system for notifying everyone affected by a change in a timely manner. E-mail and the World Wide Web make it easier to disseminate the latest information. Using special project management software also helps project managers track and communicate project changes. As described earlier, project management is a process of constant communication and negotiation. Project managers must plan for changes and use appropriate tools and techniques, such as a change control board, configuration management, and effective communication. It is helpful to define procedures for making timely decisions on minor changes, use performance reports to help identify and manage changes, and use software to assist in planning, updating, and controlling projects. The following list describes suggestions for managing integrated change control. ·    View project management as a process of constant communication and negotiation. ·    Plan for change. ·    Establish a formal change control system, including a CCB.[25-Apr-13 03:07:19 PM]

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·    Use good configuration management. ·    Define procedures for making timely decisions on minor changes. ·    Use performance reports to help identify and manage change. ·    Use project management and other software to help manage and communicate changes. Project managers must also be strong leaders to steer their projects to successful completion. Project managers must delegate part of their work to team members and focus on providing overall leadership for the project. Remember, to lead the teams and the organization to success, project managers must focus on the big picture and perform project integration management well. Do it!                    B-2:    Discussing change control

Questions and answers
   1  What are the three main objectives of integrated change control?

   2  What is the main purpose of performance reports?

   3  What are the guidelines provided by a CCB?

   4  What is the main focus of configuration management?

   5  How do the features of project plan execution function in relation to change control?


Unit summary: Integration management
Topic A                      In this topic, you learned that the key processes of integration management include project plan development, execution, and overall change control. You also learned that a thorough project plan , with its many elements and sections, is the foundation of any successful project. Finally, you learned that project plan execution and overall change controls require highly specialized tools and techniques in order to carry out, monitor, and modify the project plan, if required. Topic B                      In this topic, you learned about the importance of integrated change control. You also learned about the change control system when controlling changes. Finally, you learned the tools and techniques for plan execution.

Independent practice activity
  1  Which of the following is a component of project integration management? A  Developing a plan[25-Apr-13 03:07:19 PM]

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B  Implementing the budget C  Controlling project risks D  Coordinating work packages   2  Project integration management involves integrating the other knowledge areas within a project as well as integrating areas outside a project. True or False?

  3  List information that might be included in a stakeholder analysis document. Is this information available to all stakeholders as part of the overall project plan?
Answers might vary, but can include: stakeholders’ names and organizations, their roles on the project, unique facts about each stakeholder, their level of interest in the project, their influence on the project, and suggestions for managing relationships with each stakeholder. Due to the sensitive nature of this information, it is not available to all stakeholders. In many cases, only project managers and other key team members should be allowed access to the stakeholder analysis document.

  4  List possible ways of managing integrated change control.
Answers might vary, but can include: view project management as a process of constant communication and negotiation, plan for change, establish a formal change control system—including a CCB, use good configuration management, define procedures for making timely decisions on minor changes, use performance reports to help identify and manage change, and use project management and other software to help manage and communicate changes.  

Unit 3 Scope management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Identify the key elements of project scope management

and tools for strategic planning and project selection during project initiation.
B  Identify the key elements of scope planning and a scope

C  Discuss scope verification and change control as they

relate to project scope management.

Topic A:   Project initiation
Explanation                 One of the most important and difficult aspects of project management is defining the scope of a project. Scope refers to the work involved in creating the project’s products and the processes used to create them. Project stakeholders must come to an agreement on what products are to be developed[25-Apr-13 03:07:19 PM]

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and the associated procedures. Project scope management includes the processes involved in defining and controlling what is or is not included in a project. It ensures that the project team and stakeholders share the same understanding of the products or services to be developed as part of the project and the processes used to produce them. The main processes involved in project scope management include: ·    Initiation. This involves committing the organization to begin a project or continue to its next phase. Initiation processes define a project charter , which is a key document for formally defining a project and providing its broad overview. ·    Scope planning. This involves creating documents, defining the basis for future project decisions, including the criteria for determining if a project or a phase is completed successfully. During the scope planning process the project team creates a scope statement and a scope management plan. ·    Scope definition. This involves subdividing the major project deliverables into smaller, more manageable components. The project team creates a Work Breakdown Structure (WBS) during this process. ·    Scope verification . This involves formalizing the acceptance of the project scope. Key project stakeholders, such as its customer and sponsor, formally accept the project deliverables during this process. ·    Scope change control. This involves handling changes to project scope. Scope changes, corrective action, and lessons learned are part of the output of this process.

Strategic planning
Managers and sales professionals take into consideration the big picture or strategic plan of the organization to identify types of projects will provide the maximum value to the organization. Therefore, the project initiation process involves identifying potential projects, using realistic methods to select the projects to work on, and then formalizing their initiation by issuing the project charter. Identifying potential projects The first step in scope management is to decide the type of projects that the organization must take on. Exhibit 3-1 shows a four-stage planning process for selecting information technology (IT) projects. Note the hierarchical structure of this model and the results of each stage. Starting at the top of the hierarchy, the first step in IT planning is to develop an IT strategic plan based on the organization’s overall strategic plan. Strategic planning involves determining longterm objectives by analyzing an organization’s strengths and weaknesses, studying opportunities and threats in the business environment, predicting future trends, and projecting the need for new products and services. The “SWOT” analysis— analyzing Strengths, Weaknesses, Opportunities, and Threats—is used to aid strategic planning.   For organizations in the IT sector, it might be important to get managers from outside the IT field to assist in the IT strategic planning process because they can help IT personnel understand organizational strategies and identify the business areas that support them. Exhibit 3-1: IT planning process After you have identified business areas to focus on, the next step in the IT planning process is to perform a business area analysis. This analysis documents the business processes that are central to achieving strategic goals and aid in discovering the processes that best apply to IT. The next step is to start defining potential IT projects, their scope, benefits, and constraints. The last step in the IT planning process is to select the projects and assign resources to them. Information systems can be and often are central to business strategy. Michael Porter, who developed[25-Apr-13 03:07:19 PM]

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the concept of the strategic value of competitive advantage, has written several books and articles on strategic planning and competition. He and many other experts emphasized the importance of using IT to support strategic plans and provide competitive advantage. Many information systems are classified as being “strategic information systems” because they directly support key business strategies. For example, information systems can help an organization to be a low-cost producer. Wal-Mart’s inventory control system is a classic example of such a system. Information systems can support a strategy of providing specialized products or services that set a company apart from others in the industry. Consider, for example, Federal Express’s introduction of online package tracking systems. Information systems can also support a strategy of selling in a particular market or occupying a specific project niche. Owens-Corning developed a strategic information system that boosted the sales of its home-insulation products by providing its customers with a system for evaluating the energy efficiency of building designs. Even though many IT projects might not produce strategic information systems or receive great publicity, it is critical that the IT project planning process start by analyzing the organization’s overall strategy. Organizations must develop a strategy for using IT to define how it will support the organization’s objectives. This strategy must be aligned with the organization’s plans. Most organizations face a large number of problems and opportunities for improvement. Therefore, an organization’s strategic plan must guide the project selection process. Research shows that supporting explicit business objectives is the primary reason that firms cite for investing in IT projects. Other main reasons include supporting implicit business objectives and providing financial incentives, such as a good internal rate of return (IRR) or net present value (NPV). These financial criteria are discussed later in this unit. The following table summarizes the main reasons why firms invest in IT projects and shows that most IT projects score well on a weighted scoring model.

Reason for investing in IT projects
Supports explicit business objectives Provides good internal rate of return (IRR) Supports implicit business objectives Provides good net present value (NPV) Grants reasonable payback period Used in response to competitive systems Supports management decision making Meets budgetary constraints Provides high probability of achieving benefits Provide good accounting rate of return High probability of completing projects Meets technical/system requirements Supports legal/government requirements Helps obtain good profitability index Introduces new technology

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15[25-Apr-13 03:07:19 PM]

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Do it!                    A-1:    Discussing strategic planning

   1  Imagine a situation in which you work as a project manager of the McCormick project, and the project is unsuccessful. Resources are unavailable, the project exceeds its time frame, and the goals are not met. In your opinion, which component was incorrect in this situation? A    Integration B    Time management C    Project scope D    Contracts and procurement What can you do to avoid such situations in the future?

   2  Explain strategic planning and SWOT analysis.

   3  Why do most firms invest in IT projects?


Methods for selecting projects
Explanation                 Organizations identify many potential projects as part of their strategic planning processes, but the list of most beneficial potential projects needs to be created. Selecting projects is not an exact science, but it is a critical part of project management. You can choose from several methods for selecting possible projects. Four common methods are: ·    Focusing on broad organizational needs ·    Categorizing IT projects ·    Performing analyses of the NPV or other financial aspects ·    Using a weighted scoring model In practice, organizations use a combination of these approaches to select projects. Each approach offers several advantages and disadvantages, and management can decide the best approach for selecting projects. Focusing on broad organizational needs Senior managers must focus on meeting their organization’s needs when deciding the projects to undertake and their time span. Projects meeting the overall organizational needs are likely to be successful. However, it is often difficult to correlate many IT projects with organizational needs. For example, it is often impossible to estimate the financial value of such projects, although managers might be able to indicate such projects do have a high value. A method for selecting projects based on broad organizational needs is to determine whether the projects meet three important criteria: need, funding, and will. For example, many visionary CEOs can highlight the need for their organization to improve communication. Although it might not be clear how this improvement will be brought about, funds might be allocated to projects that address[25-Apr-13 03:07:19 PM]

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this need. Another example is that of a project for developing strong IT infrastructure, providing all employees, customers, and suppliers with the hardware and software they need to access information. As projects progress, the organization must reevaluate the need, funding, and will for each project to decide if it should be continued, redefined, or terminated. Categorizing IT projects Another method of selecting projects is based on various categorizations. One type of categorization assesses whether projects provide a response to a problem, an opportunity, or a directive: ·    Problems are undesirable situations that prevent an organization from achieving its goals. Problems might be current or anticipated. For example, users of an information system might face problems logging on to the system or accessing information because the system has reached its capacity. To solve this problem, the company can initiate a project to enhance the current system by adding more access lines or upgrading the processor, memory, and storage space that are part of the hardware. ·    Opportunities are circumstances that help an organization to improve. For example, a company might believe that it can enhance sales by selling products directly to customers over the Internet. The company can initiate a project to enable direct product sales from its Web site. ·    Directives are new requirements imposed by management, government, or an external body. For example, an organization might want all its vendors to use a form of electronic data interchange (EDI) for all business transactions. The organization initiates a project to implement this form of EDI. Organizations select projects for many reasons. Projects that address problems or directives are approved and funded readily because organizations must carry out these categories of projects to prevent any negative impact on their business. Most problems and directives must be resolved quickly, but managers must also take a holistic view and seek opportunities for improving the organization by carrying out IT projects. Another categorization for IT projects is according to the time required to complete them or the end date of the project. For example, some projects must strictly be completed within a specific time line, after which they lose their viability. Some projects can be completed quickly—within a few weeks, days, or even minutes. Many organizations have a help desk function that handles small projects with a short life span. While many IT projects can be completed quickly, it is important to prioritize them. A third categorization for project selection is according to its overall priority. Many organizations assign the high, medium, or low priority to IT projects. The high-priority projects must always be completed first, even if a low or medium priority project can be finished in less time. Usually, more potential IT projects are available than an organization can undertake at any point in time, so it is important to work on the most crucial ones first. Net present value analysis, return on investment, and payback analysis Financial considerations are an important concern in the project selection process. The three primary methods for determining the projected financial value of projects are net present value (NPV) analysis, return on investment (ROI), and payback analysis. NPV analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflow (income) and outflow (payments, negative values). Only projects with a positive NPV should be considered if financial value is a key criterion for project selection. This is because a positive NPV means the return from a project exceeds the cost of capital —the return available by investing the capital elsewhere. Projects with high NPVs are preferred to projects with low NPVs, if all other parameters are constant. Exhibit 3-2 illustrates this concept for two different projects. Exhibit 3-2: Examples of NPV

Note that the sum of the cash flow, $5,000, is the same for both projects. The NPV differs because it accounts for the time value of money. Money earned today is worth more if the same amount is[25-Apr-13 03:07:19 PM]

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earned in the future. Project 1 had a negative cash flow of $5,000 in the first year, but Project 2 had a negative cash flow of only $1,000 in the first year. Although both projects had the same total cash flow without discounting, the financial value of the cash flow cannot be compared. NPV analysis, therefore, is a method that involves comparing cash flows for projects running into several years. To determine NPV: 1   Determine the cash inflow and outflow for the project. Exhibit 3-2 shows an example. Notice that the sources of cash inflow are listed as projected benefits and the sources of cash outflow are listed as projected costs for the project. The cash flow each year is calculated by subtracting the cost from the benefits for each year. 2   Determine the discount rate. A discount rate is the minimum acceptable rate of return on an investment. It is also called the required rate of return, hurdle rate, or opportunity cost of capital. Most companies use a discount rate based on the return that the organization expects to receive for an investment from other sources of comparable risk. In Exhibit 3-2, the discount rate used is 10 percent per year. 3   Calculate NPV. There are several ways to do so. Most types of spreadsheet software use a built-in function to calculate NPV. For example, Exhibit 3-2 shows the formula that Microsoft Excel uses: =npv(discount rate, range of cash flows), where the discount rate is in cell B3 and the range of cash flows for Project 1 are in cells B8 through F8. The formula’s result yields an NPV of $2,316 for Project 1 and $3,201 for Project 2. Because both projects have positive NPVs, they are both good candidates for selection. However, since Project 2 has a higher NPV than Project 1, an organization would prefer Project 2 over Project 1. The mathematical formula for calculating NPV is:
NPV = ?t=1…n A/(1+r) t

where t equals the year of the cash flows, A is the amount of cash flow each year, and r is the discount rate. A simpler way to use this formula is to first determine the annual discount rate and then apply it to the cost and benefits for each year. Calculate NPV by determining the total discounted benefits and adding the discounted cost, assuming the cost is entered as a negative number. Exhibit 3-3 and Exhibit 3-4 illustrate this method of calculating NPV. Recall that the discount rate in this example is 10 percent or 0.10. You can calculate a discount factor—a multiplier for each year based on the discount rate and year—for each year as follows:
Year Year Year Year Year 1: 2: 3: 4: 5: discount discount discount discount discount factor factor factor factor factor = = = = = 1/(1+0.10) 1 1/(1+0.10) 2 1/(1+0.10) 3 1/(1+0.10) 4 1/(1+.010) 5 = = = = = .91 .83 .75 .68 .62

You can then calculate the discounted cost each year by multiplying the discount factor by the cost for each year. You calculate the discounted benefits in the same way. To calculate NPV, add the discounted benefits and the discounted cost, entering cost as a negative number. Notice that the NPV for Project 1 is 2,316 and that for Project 2 is 3,201 in Exhibit 3-3, and Exhibit 3-4, respectively. Return on investment Another important financial consideration is return on investment (ROI). ROI is calculated by dividing the income by investment. For example, if you invest $100 today and the next year, it is worth $110, your ROI is $110/100 or 0.10 or 10 %. It is best to consider discounted income and investment for multi-year projects when calculating ROI. You calculate the ROI for Project 1 as follows:
ROI = (total discounted benefits - total discounted costs)/total discounted costs ROI = (9,747 – 7,427) / 7,427 = 31%

A high ROI value is best for an organization. Because the ROI for Project 2 is 42 percent, an organization will prefer this project over Project 1. Many organizations have a required rate of return for projects. The required rate of return is the minimum acceptable rate of return on an investment, and it is based on the return that the organization expects to receive by investing in other sources of comparable risk. Payback analysis[25-Apr-13 03:07:19 PM]

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Payback analysis is another important financial tool that organizations use when selecting projects. Payback period is the amount of time it will take to recoup, in the form of net cash inflows, the net dollars invested in a project. In other words, payback analysis determines how much time will lapse before accrued benefits exceed accrued and continuing costs. Payback occurs when the cumulative discounted benefits and costs are greater than zero. Exhibit 3-3 and Exhibit 3-4 show how to calculate the payback period, NPV, and ROI. For Project 1, payback occurs in year 5 (see Exhibit 3-3), and for Project 2, it occurs in year 3 (see Exhibit 3-4). Project 2, therefore, has a better payback period because the period is shorter. Many organizations follow specific recommendations for the length of an investment’s payback period. They might require all IT projects to be planned for a payback period of less than three or even two years, regardless of the estimated NPV or ROI. To aid in project selection, it is important for project managers to understand their organizations’ financial expectations from projects. It is also important for senior managers to understand the limitations of financial estimates, particularly for IT projects. For example, it is difficult to develop good estimates of projected costs and benefits for IT projects. Exhibit 3-3: NPV, ROI, and payback analysis for Project 1

Exhibit 3-4: NPV, ROI, and payback analysis for Project 2 Weighted scoring model A weighted scoring model is a tool that provides a systematic process for selecting projects based on several criteria. These criteria can include factors, such as the organizational needs; the problems, opportunities, or directives for the organization; the amount of time it will take to complete the project; and the project’s overall priority and the projected financial performance. The first step in creating a weighted scoring model is to identify the criteria important for the project selection process. This is a critical activity that is performed by holding facilitated brainstorming sessions or using groupware to exchange ideas. Some possible criteria for IT projects include: ·    Support for key business objectives ·    A strong internal sponsor ·    Strong customer support ·    A realistic level of technology ·    Ability to be implemented in one year or less ·    A positive NPV ·    Low risk in meeting scope, time, and cost goals After you define the criteria, you need to assign a weight to each criterion. These weights indicate how important each criterion is. You can assign weights based on percentages. The total of these weights must be 100 percent. You then assign numerical scores to each criterion (for example, 0 to 100) for each project. The scores indicate to what extent each project meets each criterion. At this point, you can use a spreadsheet application to create a matrix of projects, criteria, weights, and scores. Do it!                    A-2:    Selecting projects

Questions and answers
   1  What are the common methods for selecting a project from among possible projects?[25-Apr-13 03:07:19 PM]

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   2  What are the criteria on which various projects are selected?

   3  In your experience, which project selection tools have been the most helpful in assessing a project’s potential? Why?

   4  What is NPV analysis?

   5  What are the three methods of calculating a project’s financial value?


Project charters
Explanation After senior managers decide the projects to undertake, it is important to inform all concerned teams in the organization about these projects. Managers need to create and distribute documentation to start the work. This documentation can be in many different forms, but the most common form is a project charter. A project charter is a document that formally recognizes a project and provides direction on the project’s objectives and management. Instead of charters, some organizations initiate projects using a simple letter of agreement, while others use formal contracts. Key project stakeholders should sign the project charter to acknowledge agreement on the need and intent of the project. A project charter is a key output of the initiation process. Exhibit 3-5 provides a sample project charter. Notice that the key parts of this project charter are: ·    The project’s title and date of authorization ·    The project manager’s name and contact information ·    A brief scope statement for the project ·    A summary of the planned approach for managing the project ·    A roles and responsibilities matrix ·    A sign-off section for signatures of key project stakeholders ·    A comments section in which stakeholders can provide important comments related to the project Exhibit 3-5: Sample project charter The sample charter shown in Exhibit 3-5 fits on one page. A project charter can be as simple as a one-page form or a memo from a senior manager, briefly describing the project and listing the responsibilities and authority of the new project manager and stakeholders. Charters can also be long, however, depending on the nature of the project. For example, a contract might serve as a project charter. Project charters need to be authored by the concerned authority with the proper knowledge and[25-Apr-13 03:07:19 PM]

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experience to write and sign project charters. Senior managers might verbally approve a project, but it is important to create a formal charter to clarify roles and expectations. It might be assumed that senior managers must write the charter, but that need not be the case. A simple project charter helps define clear requirements and expectations to all involved in the project. If project stakeholders are unavailable, project managers can refer to the project charter to get a better understanding of the project. After formally recognizing the existence of a project, the next step in project scope management is detailed scope planning. Do it!                    A-3:    Discussing project charters

   1  What is a project charter?

   2  Discuss the sample project charter shown in Exhibit 3-5. Use the sample charter to prepare a project charter for your current project.

   3  You are working in the Internet division of your organization. You decide to upgrade from category 3 cables to category 5 cables, which is a large-scale project change. How should you modify the project charter? A    Issue a new project charter B    Update the current project charter C    Update the product outline D    Update the product description    4  A project charter includes several elements. From the items listed below, identify the element that doesn’t belong to a project charter. A    Scope of the project B    Organizational structure C    Description of the product D    Benefit measurement methods

Topic B:   Scope planning and scope statement
Explanation Project scope planning involves creating documents that detail the basis for future project decisions, including the criteria for determining if a project or a phase is completed successfully. The project charter, descriptions of the products involved in the project, project constraints, and project assumptions are input for the scope planning process. The main output of this process is the written scope statement, including supporting detail, and a scope management plan.

The scope statement
A scope statement is a document used by a project team to arrive at a common understanding of the project scope. The scope statement includes a project justification, a brief description of the project’s products, a summary of all project deliverables, and a statement of what determines project success. ·    The project justification describes the business needs that lead to project creation. ·    The brief description of a project’s products summarizes the characteristics of the products or[25-Apr-13 03:07:19 PM]

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service that the project will produce. ·    The summary of project deliverables lists the deliverables. Deliverables in an IT upgrade project might include documentation, such as a project plan, a WBS, a detailed cost estimate, a communications management plan, and performance reports. Other deliverables include an updated inventory of all hardware and software, upgraded hardware and software, and status presentations. ·    The final section of the scope management plan describes the quantifiable criteria that determine project success, such as cost, schedule, and quality measures. Scope statements also vary by type of project. Large, complex projects have long scope statements. Government projects often include a scope statement known as a Statement of Work (SOW). Some comprehensive SOWs might include detailed product specifications. As with many other project management documents, the scope statement should be tailored to meet the needs of the particular project. Do it!                    B-1:    Discussing scope planning and scope statement

   1  What does scope involve?

   2  How do scope statements vary with the types of projects?

   3  Which of the following is an output of scope planning? A    Descriptions of the products involved in the project B    Project charter C    Project constraints D    Scope statement    4  The Winslow project was originally slated to create a teleconferencing system for the Winslow company’s corporate office. Halfway through the project, the client wanted to add a videoconferencing system and update the company’s voice mail service as well. What was the problem with this project’s scope? A    The scope was not analyzed. B    Nothing was wrong with the project scope. C    The scope was too narrow. D    The scope was too broad.    5  When planning the scope of a project, you want to gain an in-depth understanding of the product to be produced. Which action will you take to achieve this? A    Completing a product analysis. B    Conducting a cost/benefit analysis. C    Asking for expert recommendations. D    Identifying alternatives.[25-Apr-13 03:07:19 PM]

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Scope definition and the work breakdown structure
Explanation After completing scope planning, the next step in project scope management is to further define the work to be done as part of the project and break it into manageable sections. Breaking work into manageable sections is called scope definition . Good scope definition helps clearly define the time, cost, and resource estimates, defines a baseline for performance measurement and project control, and aids in communicating clear work responsibilities. The output of the scope definition process is the work breakdown structure for a project. The work breakdown structure A work breakdown structure (WBS ) is an outcome-oriented analysis of the work involved in a project that defines the project’s scope. A WBS is a foundation document in project management because it provides the basis for planning and managing project schedules, costs, and changes. Project management experts believe that work must be done on a project only if it is included in the WBS. A WBS is often depicted as a task-oriented family tree of activities. It is usually organized around project products or phases. A WBS can appear as an organizational chart, which can help people visualize the project and its main components and phases. Exhibit 3-6 shows a WBS for an intranet project. Notice that this structure is organized by product area. In this case, there are main boxes for developing the Web site design, the home page for the intranet, the marketing department’s pages, and the sales department’s pages. Exhibit 3-6: Sample intranet WBS organized by product In contrast, a WBS for the same intranet project can be organized according to project phases, as shown in Exhibit 3-7. Notice that project phases of concept, Web site design, Web site development, roll out, and support provide the basis for this organization.

Exhibit 3-7: Sample intranet WBS organized by phase The work breakdown structures in Exhibit 3-6 and Exhibit 3-7 present information in a hierarchical form. The top level of a WBS is the 0 level and represents the entire project. (Note the labels on the left side of Exhibit 3-7.) The next level is level 1, which represents the major products or phases of the project. Level 2 includes the main subsets of level 1. For example, in Exhibit 3-7, the level 2 items under the level 1 item “Concept” include: evaluate current system, define requirements, define specific functionality, define risks and risk management approach, develop project plan, and brief Web development team. Under the level 2 item called “Define Requirements” are four level 3 items: define user requirements, define content requirements, define server requirements, and define server owner requirements. In Exhibit 3-7, the lowest level is level 3. The lowest level of the WBS represents work packages. A work package is a deliverable or a product at the lowest level of the WBS. As a rule, each work package in a WBS represents roughly 80 hours of effort. You can also define work packages in terms of accountability and reporting. If a project has a short time frame and requires weekly progress reports, a work package might represent 40 hours of work. On the other hand, if a project runs for a long time and requires quarterly progress reports, a work package might represent more than a 100 hours of work. The sample WBS shown here seems easy to construct and understand. However, it might be difficult to create a good WBS. To do so, you must understand both the project and its scope and incorporate the needs and knowledge of stakeholders. It is important to involve the entire project team and the customer in creating and reviewing the WBS. The team that will work on the project must be involved in creating its WBS. Arranging group meetings to develop a WBS helps all in the team understand the nature of the work and the procedures to be followed to complete the work. It also helps identify the links of coordination required between different work packages. Do it!                    B-2:    Discussing project scope and WBS

Exercises[25-Apr-13 03:07:19 PM]

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   1  Why is good scope definition important?

   2  How is project scope definition related to WBS?

   3  A ______________ is the foundation for project planning. It helps identify the required deliverables for a project and provides a standard way to organize work. A    Project charter B    Work breakdown structure C    Scope verification and control document D    Project management scope plan    4  What is the benefit of using an outline WBS? A    It’s a practical way to list a large number of deliverables. B    It provides a visual representation of all deliverables in a treelike structure. C    It simplifies understanding the various parts of the project and their interrelationships. D    It includes a basic summary of each deliverable for the project.

Approaches to develop work breakdown structures
Explanation                 There are several approaches you can use to develop work breakdown structures (WBSs). These approaches include: ·    Using guidelines ·    Using the analogy approach ·    Using the top-down approach ·    Using the bottom-up approach Using guidelines If you are provided guidelines for developing a WBS, it is important to follow them. Some organizations—for example, the U.S. Department of Defense (DOD)—prescribe the form and content for WBSs for particular projects. Many DOD projects require contractors to prepare proposals based on the DOD-provided WBS. These proposals must include cost estimates for each task in the WBS at a detailed and summary level. The cost for the entire project must be calculated by adding the cost of all of the lower-level WBS tasks. When DOD personnel evaluate cost proposals, they must compare the contractors’ costs with the DOD’s estimates. A large variation in costs for a certain WBS task often indicates lack of clarity about the nature of work. Consider a large automation project for the U.S. Air Force. In the mid-1980s, the Air Force requested proposals for the Local On-Line Network System (LONS) to automate 15 Air Force systems command bases. This $250-million project involved providing the hardware and developing software for sharing documents, such as contracts, specifications, and requests for proposals. The Air Force proposal guidelines included a WBS that contractors were required to follow while preparing the cost proposals. Level 1 WBS items included hardware, software development, training, and project management. The hardware item was composed of several level 2 items, such as servers, workstations, printers, and network hardware. Air Force personnel reviewed the contractors’ cost proposals against their internal cost estimate, which was also based on this WBS. Having a prescribed WBS helped contractors prepare their cost proposals and the Air Force to evaluate them.[25-Apr-13 03:07:19 PM]

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The analogy approach Another approach for constructing a WBS is the analogy approach. In the analogy approach, you use a similar project’s WBS as a starting point. McDonnell Aircraft Company provides an example of using an analogy approach when creating a WBS. McDonnell designs and manufactures several different types of fighter aircrafts. When creating a WBS for a new aircraft design, the company starts by using 74 predefined subsystems for building a fighter aircraft based on past experience. There is a level 1 WBS item for the airframe composed of level 2 items, such as a forward fuselage, center fuselage, aft fuselage, and wings. This generic product-oriented WBS provides a starting point for defining the scope of new aircraft projects and developing cost estimates for new aircraft designs. Some organizations maintain a repository of WBSs and other project documentation on file to assist the project teams. Viewing examples of other similar projects’ WBSs allows you to understand different ways to create a WBS. The top-down and bottom-up approaches Two other approaches for creating WBSs are the top-down and bottom-up approaches. Most project managers consider the top-down approach of WBS construction as conventional. To use the topdown approach , start with the largest items of the project and break them into their subordinate items. This process involves progressively dividing the work into minute levels of detail. For example, Exhibit 3-7 shows how work was broken down to level 3 for part of the intranet project. After finishing the process, all resources are assigned at the work package level. The top-down approach is best suited to project managers who have vast experience and technical insight into several types of projects. In the bottom-up approach , team members first identify the maximum possible specific tasks related to the project. The team members then aggregate the specific tasks and organize them into summary activities or higher levels in the WBS. For example, a group of team members might be responsible for creating a WBS to create an intranet. These team members can directly focus on the tasks they need to perform to create an intranet. Next, they group the tasks into categories. Then, they group these categories into high-level categories. Project managers often use the bottom-up approach for projects that represent entirely new systems or approaches to performing a task or to help create buyin and synergy with a project team. Advice for creating a WBS Creating a good WBS can require several iterations. Often, it is best to use a combination of approaches to create a project WBS. There are some basic principles that apply to creating any good WBS: ·    A unit of work must appear at only one instance in the WBS. ·    The work content of a WBS item is the sum of the WBS items below it. ·    A WBS item is the responsibility of only one individual, even though many team members might work on it. ·    The WBS must be consistent with the way in which work will be performed; it should serve the project team first and serve other purposes only if required. ·    Project team members should be involved in developing the WBS to ensure consistency and buy-in. ·    Each WBS item must be documented to ensure accurate understanding of the scope of work included and excluded. ·    The WBS must be a flexible tool used to accommodate inevitable changes while maintaining control of the work in the project. At the request of many of its members, the Project Management Institute recently developed a WBS Practice Standard to provide guidance for developing and applying the WBS to project management. Do it!                    B-3:    Developing a WBS[25-Apr-13 03:07:19 PM]

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   1  What are the four approaches for constructing a WBS?

Which of these approaches will be best for a project manager developing an IT project for your organization?

   2  In your organization, have you or your project manager conducted meetings with the project team to review the WBS?

If you attended/conducted a meeting for reviewing your project’s WBS, how did the meeting impact the WBS?

   3  The first step you should take to design and use a WBS includes: A    Reviewing the relevant historical information B    Listing the breakdown of deliverables C    Comparing project progress to the WBS D    Asking for expert recommendations about the WBS    4  Consider a project where you are helping a company construct a new office building. What is the first step you take to create a good WBS? A    Identify data relevant to the WBS B    Examine use of resources C    Compare actual progress to scheduled progress D    List the breakdown of the deliverables

Topic C:   Scope verification and scope change control
Explanation                 It can be difficult to create a good scope statement and a WBS for a project. It is even more difficult, especially on IT projects, to verify the project scope and minimize scope changes. Many technical projects suffer from scope creep —the tendency for project scope to get bigger than initially anticipated. For this reason, it is important to verify the project scope and develop a process for controlling scope changes. Scope verification involves formal acceptance of the project scope by the stakeholders. To receive formal acceptance, the project team must create clear documentation of the project’s products and procedures and evaluate if they were completed correctly and satisfactorily. In contrast, scope change control involves controlling changes to the project scope. To minimize scope change control, it is crucial that the project scope be verified accurately. The table below lists, in the order of importance, the factors reported to cause the maximum problems when executing IT projects. Notice that the top three factors are directly related to scope verification and change control.

Lack of user input

1[25-Apr-13 03:07:19 PM]

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Incomplete requirements and specifications Changing requirements and specifications Lack of executive support Technology incompetence Lack of resources Unrealistic expectations Unclear objectives Unrealistic time frames New technology

2 3 4 5 6 7 8 9 10

Suggestions for improving user input
Lack of user input, one of the important factors contributing to project failure, can lead to problems with managing scope creep and controlling change. How can you manage this important issue? The following are suggestions for improving user input: ·    Develop a good project selection process for IT projects. Insist that all projects have a sponsor from the user organization. Make IT project information, including the project charter, scope statement, and WBS, easily available to the organization. This helps avoid duplication of effort and ensures that teams work on the most important projects on priority. ·    Make users part of the project team. Some organizations assign co-project managers to IT projects, one from IT and one from the main user group. Generally, users will be assigned full-time to large IT projects and part-time to small projects. ·    Conduct regular meetings. Meeting regularly ensures frequent interaction and exchange of information among users. Meetings also ensure dissemination of user feedback and encourage interaction so that users sign off on key deliverables presented at meetings. ·    Deliver portions of deliverables to project users and sponsors on a regular basis. If the team is developing hardware or software, they must ensure it is functional. ·    Collocate users with the developers. Collocating encourages high interaction and exchange of information. If users cannot be physically moved to a location near developers for the complete duration of a project, they can set aside specific days for collocation. Suggestions for reducing incomplete and changing requirements IT projects might have flexibility to accommodate minor changes in requirements, but too many changes to requirements, especially during the later stages of a project life cycle might make it difficult to implement them. The following are suggestions for improving the requirements process: ·    Develop and follow a requirements management process that includes procedures for determining the initial requirements. ·    Employ techniques, such as prototyping, use case modeling, and Joint Application Design, to clearly understand user requirements. Prototyping involves developing a working replica of the system or an aspect of the system. These working replicas might be throwaways or an incremental component of the deliverable system. Prototyping is an effective tool for gaining an understanding of requirements, determining the feasibility of requirements, and resolving uncertainties related to the user interface. Use case modeling is a process for identifying and modeling business events, the parties that initiated them, and the procedures that the system should follow to respond to them. Use case modeling is an effective tool for understanding requirements for object-oriented systems. Joint Application Design (JAD) uses organized and intensive workshops to bring together project stakeholders—the sponsor, users, business analysts, and programmers—to jointly define and design information systems. These[25-Apr-13 03:07:19 PM]

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techniques also help users play a key role in defining system requirements. ·    Articulate all requirements, document them, and make them readily available. Several tools are used to automate this function. For example, a type of software, called a requirements management tool, helps record and maintain requirements, provides immediate access to the information, and assists in establishing necessary relationships between requirements and information created by other tools. ·    Create a requirements management database for documenting and controlling requirements. Computer Aided Software Engineering (CASE) tools or other technologies can help maintain a repository for project data. ·    Ensure adequate testing to verify that the project’s products perform as expected. Conduct testing throughout the project life cycle. ·    Use a process for reviewing requested changes in requirements from a systems perspective. For example, ensure that scope changes include associated cost and schedule changes. Ensure approval by appropriate stakeholders. ·    Emphasize completion dates. For example, a project manager at Farmland Industries, Inc. in Kansas City, Missouri, kept a 15-month, $7 million integrated supply-chain project on track by setting the project deadline. In the project manager’s words, “May 1 was the drop-dead date, and everything else was backed into it. Users would come to us and say they wanted something, and we’d ask them what they wanted to give up to get it. Sticking to the date is how we managed scope creep.” Project scope management is important, especially on IT projects. Organizations must first select important projects, plan how to perform the work of the project, break down the work into manageable segments, verify the scope with project stakeholders, and manage changes to project scope. Using the basic project management concepts and techniques discussed in this unit can help you successfully perform project scope management. Do it!                    C-1:    Discussing scope verification and change control

   1  From the following statements, select the option that correctly states what happens during scope verification. A    This process is used to make the WBS clear and easy to understand. B    This process is used to gain the acceptance of the current project status and the final sign-off on the project’s scope. C    This process is used to provide a framework that you can use to identify projects for organizations, accounting systems, and funding sources. D    This process is used to break down the summary deliverables into small, clearly defined deliverables.    2  List some factors that can lead to scope creep in IT projects.

   3  Discuss the theory and practice behind using project charters, scope statements, and WBSs.

   4  Rate the suggestions to increase user input on a scale from 1 to 5. Which suggestions seem most beneficial?[25-Apr-13 03:07:19 PM]

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   5  Which types of projects will most benefit from your first choice in the list? From your last choice?


Unit summary: Scope management
Topic A                      In this topic, you learned that strategic planning and project selection involve assessing an organization’s needs, and that project selection can be facilitated by using various tools and strategies. Three primary methods of determining the projected financial value of projects include examining NPV, ROI , and Payback analysis. You also learned how to create a project charter . Topic B                      In this topic, you learned about scope planning and the scope statement. You also learned to create and use a WBS . Topic C                     In this topic, you learned about scope verification and scope change control. You also learned how to improve user input.

Independent practice activity
  1  Create a WBS for one of the following projects (break down the work to at least the third level for one of the items on the WBS. Make notes of your questions while completing this exercise. A  Building your dream house B  Planning a traditional wedding C  Creating a new information system for your school or company
Answers might vary.

  2  A project constraint is a factor that must be managed to finish a project successfully. True or false?

  3  List the actions to be taken during scope planning?
Scope planning involves creating documents and defining the basis for future project decisions, including the criteria for determining if a project or phase is completed successfully. During the scope planning process the project team creates a scope statement and a scope management plan.

  4  When writing a scope statement, list the information you want to include.
The scope statement includes a project justification, a brief description of the project’s products, a summary of all project deliverables, and a statement of what determines project success.

  5  List some basic principles for creating a good WBS.
Answers might vary, but can include: a unit of work must appear at only one instance in the WBS; the work content of a WBS item is the sum of the WBS items below it; a WBS item is the responsibility of only one individual, even though many team members might work on it; the WBS must be consistent with the way in which work will be performed; project team members should be involved in developing the WBS to ensure consistency and buy-in; each WBS item must be documented to ensure accurate understanding of the scope of work included and excluded; and the WBS must be a flexible tool used to accommodate inevitable changes while maintaining control of the work in the project.

  6  After reviewing a project’s scope statement, the project stakeholders are happy with what they read and decide to move on to the next phase. What is the next phase? A  Begin the project management process B  Create a statement of work C  Rewrite the scope statement D  Develop a detailed project plan[25-Apr-13 03:07:19 PM]

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Unit 4 Time management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Define schedules and activities, identify activity

sequencing, and discuss activity duration estimation.
B  Discuss schedule development with the help of Gantt

charts, PERT, critical path analysis, and critical chain scheduling.
C  Identify how to control changes to a project schedule and

use software to manage time.

Topic A:   Schedules and activities
Explanation                 Managers often cite delivering projects on time as one of their biggest challenges. Many information technology (IT) projects are run to meet tough deadlines and struggle to meet scope, time, and cost projections.

Components of time management
Managers also cite concerns related to schedules as the main reason for conflicts during the project life cycle. Exhibit 4-1 shows the results of research on the causes of conflicts in projects. This exhibit shows that problems with schedules are the main reasons for conflicts during the project life cycle. Note that project phases in this study were called project formation, early phases, middle phases, and end phases. You can interpret these names as concept, development, implementation, and close-out. During the project formation or concept phase, priorities and procedures cause more conflict than schedules. During the early phases, also called the development phase, priorities cause more conflict than schedules. During the middle and end phases or implementation and close-out phases, problems with schedules are the predominant cause of conflicts. You can debate scope and cost overruns so that actual progress appears similar to planned estimates. However, after a project schedule is defined, schedule performance can be calculated by subtracting the original time estimate from the actual time spent. Project managers compare planned and actual project completion time, without taking into account changes in the project. Time is also a variable that is minimally flexible. Exhibit 4-1: Conflict intensity over the life of a project 1

Project time management involves all tasks and processes performed to ensure timely completion of a project. However, achieving this result can be challenging. The main processes involved in project time management include:[25-Apr-13 03:07:19 PM]

IT Project Management:

·    Activity definition, which involves identifying the specific activities that the project team members and stakeholders must perform to develop project deliverables. An activity or a task is an element of work, listed on the WBS, which can be completed in an expected duration, at a specific cost, and by meeting specific resource requirements. ·    Activity sequencing, which involves identifying and documenting the relationships between project activities. ·    Activity duration estimating, which involves estimating the number of work periods required to complete each activity. ·    Schedule development, which involves analyzing activity sequences, activity duration estimates, and resource requirements to create the project schedule. You can effectively manage your time by performing these processes and by using basic project management tools and techniques. Generally project managers are familiar with some form of scheduling, but many managers are not experienced in using most of the tools and techniques unique to project time management, such as Gantt charts, network diagrams, and critical path analysis. Do it!                    A-1:    Discussing the components of time management

Questions and answers
   1  Which of the following is a leading cause of conflicts during the project life cycle? A    Cost B    Priorities C    Schedules D    Manpower    2  What are the main processes involved in time management?

   3  How can you effectively manage time?


Schedule and activity definition
Explanation Project schedules are derived from the basic documents created at the start of a project. The project charter often mentions planned project start and end dates, which serve as the starting points for a detailed schedule. The project manager uses the charter to develop a detailed scope statement and WBS. The project charter should also include an estimate of the budget allocated to the project. Then, the project manager and the team use the scope statement, WBS, and budget information to develop a detailed project schedule and arrive at the estimated completion date. If the estimated completion date varies significantly from the plans created by the senior management or the customer, the project manager must negotiate changes in scope or cost to meet schedule expectations. Recall the triple constraint of project management—balancing scope, time, and cost goals—and note their order. Ideally, a project team and key stakeholders define the project scope, then the time or[25-Apr-13 03:07:19 PM]

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schedule for the project, and finally, the project’s cost. The order of these three items reflects the basic order of the first three processes in time management: activity definition (detailing the scope), activity sequencing (detailing the time), and activity duration estimations (detailing the cost). These three project time management processes are the basis for creating a project schedule. Activity definition results in a project team developing a detailed WBS and supporting explanations. The goal of this process is to ensure that members of the project team completely understand the work that is part of the project scope. The WBS is often examined further during this process as the project team members define, in detail, the activities required for performing and completing the work. As stated earlier, activities or tasks are elements of work performed during the course of a project and they are defined in terms of expected duration, costs, and resource requirements. Activity definition also provides supporting documents, important product information, and assumptions and constraints related to specific activities. The project team should review the revised WBS and supporting documents with project stakeholders before moving on to the next step in project time management. Do it!                    A-2:    Defining a schedule and an activity

Questions and answers
   1  If a project team decides to deliver a shipment of PCs, list the activities that the team will perform to prepare for the delivery.

   2  What is the goal of activity definition?


Activity sequencing
Explanation                 After defining project activities, the next step in project time management is activity sequencing. Activity sequencing involves reviewing the activities in the detailed WBS, detailed product descriptions, assumptions, and constraints to determine the relationships between activities. It also involves evaluating the reasons for dependencies and the different types of dependencies. A dependency or a relationship shows the sequencing of project activities or tasks. Determining these relationships or dependencies between activities has a significant impact on developing and managing a project schedule. There are three basic reasons for creating dependencies among project activities: ·    Mandatory dependencies are inherent in the nature of the work being done on a project. They are sometimes referred to as hard logic. For example, you cannot test code until after the code is written. ·    Discretionary dependencies are defined by the project team. For example, a project team might follow a good practice and not start detailed design of a new information system until the users sign off the analysis work. Discretionary dependencies are sometimes referred to as soft logic. They should be used with care because they might limit later scheduling options. ·    External dependencies involve relationships between project and non-project activities. The installation of a new operating system and other software might depend on the delivery of new hardware from an external vendor. As with defining activities, it is important that project stakeholders work together to discuss and define the activity dependencies on their project. Some organizations define guidelines based on the activity dependencies of similar projects. Other organizations rely on the skills of the experts working on the project and their interactions with other employees. Some stakeholders like to write each activity letter or name on a Post-It note or some other moveable paper to determine dependencies or sequencing. Still others use project management software to establish relationships. Just as it is easier to write a research paper by first putting down the thoughts on paper before typing into a word[25-Apr-13 03:07:19 PM]

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processor, it is usually easier to manually perform activity sequencing before entering the information into project management software. Many organizations might not define activity dependencies and do not use them in project time management. You must define the sequence of activities to be able to use some of the most powerful schedule tools: network diagrams and critical path analysis. Project network diagrams Project network diagrams are preferred for showing activity sequencing. A project network diagram is a schematic display of the logical relationships among, or sequencing of, project activities. A sample network diagram for Project X, which uses the arrow diagramming method (ADM) or activity-on-arrow (AOA) approach, is shown in Exhibit 4-2. Exhibit 4-2: Sample activity-on-arrow (AOA) network diagram for Project X The format of this project network diagram uses the activity-on-arrow (AOA ) or arrow diagramming method (ADM )—a network diagramming technique in which activities are represented by arrows and connected at points called nodes to illustrate the sequence of activities. A node is simply the start and end point of an activity. The first node signifies the start of a project, and the last node represents the end. Note the main elements in this network diagram. The letters A, B, C, D, E, F, G, H, I, and J represent activities required to complete the project. These activities are derived from the WBS and activity definition process described earlier. The arrows represent the activity sequencing or relationships between tasks. For example, Activity A must be performed before Activity D; Activity D must be completed before Activity H, and so on. Keep in mind that a network diagram represents activities that must be performed to complete a project. Every activity on the project network diagram must be completed for the project to finish. It is also important to note that not every item on a WBS needs to be included in a project network diagram, especially on large projects. Sometimes, it might be enough to include summary tasks on a project network diagram or split the project into several small network diagrams. Some tasks that the team is familiar with must be completed regardless of other activities, and these tasks might not be included in the network diagram. Assuming you have a list of project activities and their start and finish nodes, follow these steps to create an AOA network diagram: 1   Identify all the activities that start at node 1. Draw their finish nodes, and draw arrows from node 1 to each of the finish nodes. Insert the activity letter or the name of the associated arrow. If you are working with a duration estimate, specify the estimate next to the activity letter or name, as shown in Exhibit 4-2. For example, A = 1 means that the duration of Activity A is one day, one week, or other standard unit of time. Ensure you insert arrowheads on all arrows to signify the direction of the relationships. 2   Continue drawing the network diagram, working from left to right. Look for bursts and merges. Bursts occur when a node is followed by two or more activities. A merge occurs when two or more nodes precede a node. For example, in Exhibit 4-2, node 1 is a burst because it is followed by the nodes 2, 3, and 4. Node 5 is a merge preceded by nodes 2 and 3. 3   Continue drawing the project network diagram until all activities are included. 4   All arrowheads should face toward the right, and no arrows should cross the AOA network diagram. You might need to redraw the diagram to make it look presentable. Even though AOA or ADM network diagrams are easy to understand and create, a different method is more commonly used: the precedence diagramming method. The precedence diagramming method (PDM) is a network diagramming technique in which boxes represent activities. It is useful for visualizing specific types of time relationships. Exhibit 4-3 illustrates the types of dependencies that can occur among project activities. After you determine the reason for a dependency between activities (mandatory, discretionary, or external), you must determine the type of dependency. Note that the terms activity and task are used interchangeably, as are relationship and dependency. The four types of dependencies or relationships between activities[25-Apr-13 03:07:19 PM]

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are: ·    Finish-to-start. A relationship where one activity must finish before its successor activity can start. For example, you cannot provide user training until the software or a new system is installed. Finish-to-start is the most common type of relationship or dependency. ·    Start-to-start. A relationship where one activity must start when or before its successor activity can start. For example, if a company wants to set up a data center with 100 workstations, the successor activity of configuring applications on each of the desktops will start only if the activity of physical   installation of the computers has begun. ·    Finish-to-finish. A relationship where two activities can begin independently of each other, but the predecessor activity must finish before its successor activity can finish. For example, quality control efforts cannot finish before production is complete, although the two activities can be performed at the same time. ·    Start-to-finish. A relationship where one activity must start before its successor activity can finish. This type of relationship is rarely used. Exhibit 4-3: Task dependency types

Exhibit 4-4 illustrates Project X using the PDM method. Notice that the activities (A, B, C, D, etc.) are listed inside boxes, which represent the nodes in this diagram. Arrows and arrowheads are again used to show the relationships between activities. This exhibit was created using Microsoft Project 2003, and the application automatically places additional information inside each node. Each task box includes the start and finish date, labeled Start and Finish; the task ID number, labeled ID; the task’s duration, labeled Dur; and the names of any resources assigned to the task, which is labeled Res. Some nodes appear in red with a thicker border and no shading. These nodes represent the critical path, which will be discussed later in this unit. Exhibit 4-4: Sample precedence diagramming method (PDM) network diagram for Project X PDM is used more often than AOA diagrams and offers a number of advantages over the AOA technique. First, most project management software uses the PDM method. Second, the PDM method avoids the need for using dummy activities—activities without the duration and resources occasionally required on AOA diagrams to show logical relationships between activities. Third, the PDM method shows different dependencies among tasks, but the AOA method uses only finish-tostart dependencies. Do it!                    A-3:    Sequencing activities

   1  What is activity sequencing?

   2  Why is activity sequencing a critical step in project time management?

   3  List the four types of dependencies or relationships between activities.[25-Apr-13 03:07:19 PM]

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   4  What is the benefit of the precedence diagramming method?


Activity duration
Explanation                 After defining activities and determining their sequence, the next process in project time management is to estimate the duration of activities. Duration includes the amount of time worked on an activity plus the elapsed time. For example, even though it might take one week or five working days to perform an activity, the duration estimate might be two weeks to allow a developer working only half time on the activity and a developer who must wait a week to obtain the required information. As in defining activities and their sequences, it is important for the project stakeholders to discuss activity duration estimates. The developers who perform the work, in particular, should participate in defining the duration estimates because they will be able to provide realistic estimates regarding the productivity and performance. It also helps to review similar projects and seek the advice of experts in estimating activity durations. Several types of input are required for activity duration estimations. The detailed activity list and sequencing provides a basis for estimates. It is also important to review constraints and assumptions related to the estimates. Historical information related to the activities can also be helpful. One of the most important considerations in making duration estimates is the availability of resources, especially human resources, and the skills of the human resources. The output of activity duration estimations includes duration estimates for each activity, the basis of the estimates, and updates to the WBS. Updates to the WBS are made when project team members decide that specific activities should be examined further based on their duration estimates. Do it!                    A-4:    Estimating activity duration

   1  What is activity duration?

   2  What are the inputs to activity duration estimating?

   3  Write about a project that you completed successfully. Recall some of the constraints and assumptions and how they impacted your duration estimates.

   4  List the outputs of an activity duration estimate.[25-Apr-13 03:07:19 PM]

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Topic B:   Schedule development
Explanation                 Schedule development uses the results of all the preceding project time management processes to arrive at a project’s start and end dates. You might go through several iterations of the time management processes before finalizing the project schedule. The goal of schedule development is to create a realistic project time estimate that provides a basis for monitoring project progress. ·    A Gantt chart is a common tool used for displaying project schedule information. ·    PERT analysis is a means of evaluating schedule risk on projects. ·    Critical path analysis is an important tool for developing and managing project schedules. ·    Critical chain scheduling is a technique that accounts for resource constraints. The following sections provide samples of each of these tools and techniques and a discussion of their advantages and disadvantages.

Gantt charts
Gantt charts provide a standard format for displaying project schedule information by listing project activities and their corresponding start and finish dates in a calendar format. Henry Gantt developed the first Gantt chart during World War I to schedule work in job shops. Early versions simply listed project activities or tasks in one column to the left and calendar time units, such as months, to the right. The charts used horizontal bars under the calendar units to illustrate when activities should start and end. Nowadays, most project managers use project management software to create sophisticated versions of Gantt charts that allow easy updates of information. Exhibit 4-5 shows a simple Gantt chart for Project X. Exhibit 4-6 shows a more sophisticated Gantt chart based on a software launch project. The activities on the Gantt chart coincide with the activities on the WBS.

Exhibit 4-5: Gantt chart for project X Notice that the software launch project’s Gantt chart contains several different symbols in addition to task bars (Exhibit 4-6). ·    The black diamond symbol represents a milestone —a significant event on a project with no duration. In Exhibit 4-6, Task 1, “Marketing Plan distributed,” is a milestone achieved on March 17. Tasks 3, 4, 8, 9, 14, 21, 23, 30, and 32 are also milestones. For very large projects, senior managers might want to see only the milestones on a Gantt chart. Project 2003 allows you to filter information displayed on a Gantt chart so you can easily show specific tasks, such as milestones. ·    The thick black bars with arrows at the beginning and end represent summary tasks. For example, Activities 12 through 15—“Develop Creative Briefs,” “Develop Concepts,” “Creative Concepts,” and “Ad Development”—are all subtasks of the summary task called Advertising, Task 11. WBS activities are referred to as tasks and subtasks in most project management software. ·    The light gray horizontal bars, such as those in Exhibit 4-6 for tasks 5, 6, 7, 10, 12, 13, 15, 18, 20, 22 and 31, represent the durations of their respective tasks. For example, the light gray bar for Subtask 5, “Packaging,” starts in mid-February and extends until early May. ·    Arrows connecting these symbols show relationships or dependencies between tasks. Gantt charts often do not show dependencies, which is their major disadvantage. However, if dependencies have been established in Project 2003, they are automatically displayed on the Gantt chart.[25-Apr-13 03:07:19 PM]

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Exhibit 4-6: Gantt chart for software launch project Milestones are a particularly important part of schedules, and some project managers use the SMART criteria to help define them. The SMART criteria are guidelines suggesting that milestones should be specific, m easurable, a ssignable, realistic, and time-framed. For example, distributing a marketing plan is specific, measurable, and assignable if all team members are familiar with the following components: the marketing plan and the process to distribute it, the number of copies to be distributed and the recipients, and the representative responsible for the final delivery. Distributing the marketing plan is realistic and time-framed if it is an achievable event and scheduled at the appropriate time. You can use Gantt charts to evaluate progress on a project by showing the schedule information. Exhibit 4-7 shows a tracking Gantt chart—a Gantt chart that compares planned and actual project schedule information. The planned schedule dates for activities are called the baseline dates. The tracking Gantt chart includes columns (hidden in Exhibit 4-7) labeled “Start” and “Finish” to represent actual start and finish dates for each task as well as columns labeled “Baseline Start” and “Baseline Finish” to represent planned start and finish dates for each task. In this example, the project is completed, but several tasks missed their planned start and finish dates.

Exhibit 4-7: Sample tracking Gantt chart To serve as a progress evaluation tool, a tracking Gantt chart uses a few additional symbols: ·    Notice that the Gantt chart in Exhibit 4-7 often shows two horizontal bars for tasks. The bottom horizontal bar represents the planned or baseline duration for each task. The bar above it represents the actual duration. If the two bars are the same length and start and end on the same date, then the schedule was the same as the planned schedule for the task. This scheduling occurred for subtask 1.1, where the task started and ended as planned on 3/4. If the bars do not start and end on the same date, then the actual schedule differed from the planned schedule. If the top horizontal bar is longer than the bottom one, the task took longer than planned, as you can see for subtask 1.2. If the top horizontal bar is shorter than the bottom one, the task took less time than planned. A striped horizontal bar, illustrated by Main Task 1, represents the planned duration for summary tasks. The black bar adjoining the striped bar shows progress for summary tasks. ·    A white diamond on the tracking Gantt chart represents a slipped milestone. A slipped milestone means the milestone activity was completed later than originally planned. For example, the last task illustrates a slipped milestone because the final report and presentation were completed later than planned. ·    Percentages to the right of the horizontal bars display the percentage of work completed for each task. For example, 100% means the task is completed, but 50% means the task is still in progress and is only half completed. ·    In the columns to the left of the Gantt chart, you can display baseline and actual start and finish dates. A tracking Gantt chart is based on the percentage of work completed for project tasks or the actual start and finish dates. It allows the project manager to monitor schedule progress on separate tasks and on the entire project. For example, Exhibit 4-7 shows that this project is completed. It started on time, but it finished a little later than planned. The main advantage of using Gantt charts is that they provide a standard format for displaying planned and actual project schedule information. In addition, they are easy to create and understand. The main disadvantage of Gantt charts is that they generally do not show relationships or dependencies between tasks. If Gantt charts are created using project management software and tasks are linked, then the dependencies will be displayed, but not as clearly as they are displayed on project network diagrams. Do it!                    B-1:    Discussing Gantt charts

Exercises[25-Apr-13 03:07:19 PM]

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   1  What is a Gantt chart? What does it depict?

   2  Compare and discuss the Gantt charts shown in Exhibit 4-5 and Exhibit 4-6.

   3  Are there any disadvantages to using a Gantt chart? If so, describe them.


Critical path method
Explanation Many projects fail to meet schedule expectations. Critical path method (CPM)—also called critical path analysis —is a project network analysis technique used to predict total project duration. It is an important tool that will help you combat project schedule overruns. A critical path for a project is the series of activities that must be completed on schedule for a project to finish on time. It is the longest path through the network diagram and with the least slack or float. Slack or float is the time by which an activity might be delayed without delaying a succeeding activity or the project finish date. To determine the critical path for a project, you must first develop a good network diagram, which in turn, requires a good activity list based on the WBS. After you create a project network diagram, you must also estimate the duration of each activity to determine the critical path. Calculating the critical path involves adding the durations for all activities on each path through the project network diagram. The longest path is the critical path. The AOA project network diagram for Project X is shown in Exhibit 4-8. Note that you can use either the AOA or PDM network diagramming method to determine the critical path on projects. Exhibit 4-8 shows all the paths—a total of four—through the project network diagram. Each path starts at the first node (1) and ends at the last node (8) on the AOA diagram. This exhibit also shows the length or total duration of each path through the project network diagram. The duration is computed by adding the duration of each activity on the path. At 16 days, the path B-E-H-J has the longest duration, making it the critical path for the project. Exhibit 4-8: Determining the critical path for Project X The critical path shows the shortest time in which a project can be completed. Even though the critical path is the longest path, it represents the shortest time required to complete a project. If one or more activities on the critical path take longer than planned, the project schedule will be missed unless the project manager takes corrective action. Managers often do not clearly understand what the critical path for a project is or how it can be interpreted. Some managers think the critical path includes only the most critical activities. However, the critical path is related only to the time dimension of a project and does not necessarily include all critical activities. Another misconception is that the critical path is the shortest path through the project network diagram. In some areas—for example, transportation modeling—similar diagrams are drawn in which identifying the shortest path is the goal. For a project, however, each activity must be completed to complete the project, and the goal is not to choose the shortest path. Some other aspects of critical path analysis might cause confusion: can there be more than one critical path on a project and does the critical path ever change? There can be several critical paths on a project. In the Project X example, suppose that Activity A has a duration estimate of 3 days instead of 1 day. This new duration estimate increases the length of Path 1 equal to 16 days. Now, the project has two longest paths of equal duration, so there are two critical paths. Project managers must closely[25-Apr-13 03:07:19 PM]

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monitor performance of activities on each critical path to avoid late project completion. The critical path for a project can change as the project progresses. For example, suppose in a project, Activities A, B, C, D, E, F, and G start and finish as planned. Then, suppose Activity I runs into problems. If Activity I takes more than 4 days, it will cause path C-G-I-J to be longer than the other paths, assuming they progress as planned. This change will cause path C-G-I-J to become the new critical path. Using critical path analysis to make schedule tradeoffs It is important to know the critical path throughout the life of a project so you can make tradeoffs. If the project manager knows that one of the tasks on the critical path is running behind schedule, he or she needs to decide corrective action. Should the schedule be renegotiated with stakeholders? Should additional resources be allocated for other activities on the critical path to make up for the time? Alternatively, is it okay if the project is completed later than the planned end date? By monitoring the critical path, the project manager and the team can proactively manage the project schedule. A technique that can help project managers make schedule tradeoffs is determining the free slack and total slack for each project activity. Free slack or free float is the delay permissible for an activity, impacting the activities that follow subsequently. The early start date for an activity is the earliest possible time an activity can start based on the project network logic. Total slack or total float is time by which an activity can be delayed from its start without delaying the planned project finish date. You calculate free slack and total slack by performing a forward and backward pass through a network. A forward pass determines the early start and early finish dates for each activity. The early finish date for an activity is the earliest time when an activity can be completed based on the project network logic. The project start date is the same as the early start date for the first network activity. Early start plus the duration of the first activity brings you to the early finish date of the first activity. It is also equal to the early start date of each subsequent activity. When an activity is preceded by multiple activities, its early start date is the latest of the early finish dates of those activities. For example, task H in Exhibit 4-8 is immediately preceded by tasks D and E. The early start date for task H is the early finish date of task E because it occurs later than the early finish date of task D. A backward pass through the network diagram determines the late start and finish dates for each activity. The late start date for an activity is the latest possible time an activity might begin without delaying the project finish date. The late finish date for an activity is the latest possible time when an activity can be completed without delaying the project finish date. Though you can determine the early and late start dates of each activity manually, using project management software helps you complete the same task faster. The following table shows the free and total slack for all activities on the project network diagram for Project X. Determining the amount of float or slack allows project managers to know whether the schedule is flexible and the extent of flexibility. For example, at seven days, task F in this example has the most free and total slack. The most slack on any other activity is only two days. Understanding how to create and use slack information provides a basis for negotiating project schedules, if required.


6/2 6/2 6/2 6/3 6/4 6/4 6/5 6/11

6/2 6/3 6/4 6/6 6/10 6/9 6/12 6/18

Late start
6/4 6/2 6/4 6/5 6/4 6/13 6/9 6/11

Late finish
6/4 6/3 6/6 6/10 6/10 6/18 6/16 6/18

Free slack
0d 0d 0d 2d 0d 7d 0d 0d

Total slack
2d 0d 2d 2d 0d 7d 2d 0d[25-Apr-13 03:07:19 PM]

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I J  

6/13 6/19

6/16 6/23

6/17 6/19

6/18 6/23

2d 0d

2d 0d

Importance of updating critical path data In addition to determining the critical path at the beginning of a project, it is important to update the schedule with the factual data. After the project team completes activities, you should document the time taken to complete the activities and calculate the revised estimates for activities in progress or yet to be started. These revisions often cause a project’s critical path to change, resulting in a new estimated completion date for the project. Proactive project managers and their teams can make informed decisions and keep stakeholders informed and involved in major project decisions. Do it!                    B-2:    Discussing the critical path method

   1  What is critical path analysis? Why is it helpful?

   2  How can you make a schedule tradeoff?

   3  Why is it important to update critical path data?


Techniques for shortening a project schedule
Explanation                 The project manager and his or her team can use the critical path along with several duration compression techniques to shorten the project duration. One technique is to reduce the duration of activities on the critical path. You can shorten the duration of critical path activities by allocating more resources to the activities or by changing their scope. Crashing is a technique used for making cost and schedule tradeoffs to obtain the maximum schedule compression for the least incremental cost. By focusing on tasks on the critical path that can be completed quickly for no extra cost or a small cost, you can shorten the project duration. Another technique for shortening a project schedule is fast tracking. Fast tracking involves performing sequential activities simultaneously or in slightly overlapping time frames. The main advantage of fast tracking, as with crashing, is that it can shorten the time required to finish a project. The main disadvantage of fast tracking is that starting specific tasks too soon might increase project risk and result in additional work, thus lengthening the project’s duration. Do it!                    B-3:    Shortening a project schedule

Questions and answers
   1  What are the techniques used for shortening a project’s duration?

   2  What is crashing?[25-Apr-13 03:07:19 PM]

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Critical chain scheduling
Explanation Another technique that addresses the challenge of meeting project finish dates is applying a theory of constraints called critical chain scheduling. The theory of constraints (TOC) is a management philosophy developed by Eliyahu M. Goldratt and introduced in his book The Goal. The theory of constraints is based on the fact that like a chain with a weak link, any complex system, at any point in time, often has only one aspect or constraint that limits it from achieving its goal. For the system to achieve significant improvements, the constraint must be identified and the system must be managed accordingly. Critical chain scheduling is a method of scheduling that takes into account limited resources when creating a project schedule and includes buffers to ensure the project completion date is met. You can find the critical path for a project without considering resource allocation. For example, you can make task duration estimates and dependencies without considering the availability of resources. In contrast, an important concept in critical chain scheduling is the availability of resources. If a particular resource is required full time to complete two tasks originally planned to occur simultaneously, critical chain scheduling acknowledges that you must either delay one of the tasks until the resource is available or find another resource. In this case, accounting for limited resources often extends the project finish date, which is not desired by most project managers. Other important concepts related to critical chain scheduling include multitasking and time buffers. Multitasking occurs when a resource works on more than one task at a time. This situation occurs frequently on projects. Team members are assigned to multiple tasks within the same project or different tasks on multiple projects. For example, suppose a developer is working on three different tasks, tasks 1, 2, and 3, for three different projects, and each task takes 10 days to complete. If the developer did not work on the tasks simultaneously, and instead, completed each task sequentially, then task 1 will complete on day 10, task 2 will complete on day 20, and task 3 will complete on day 30, as shown in Exhibit 4-9. However, developers often work on the three tasks simultaneously, completing each task in parts, as shown in Exhibit 4-10. In this example, the tasks were all half-done one at a time, then completed one at a time. Task 1 is now completed at the end of day 20 instead of day 10, task 2 is completed at the end of day 25 instead of day 30, and task 3 is completed on day 30. This example illustrates how multitasking can delay task completion. Multitasking also often involves wasted setup time, which adds to the duration of the tasks. Exhibit 4-9: Three tasks without multitasking

Exhibit 4-10: Three tasks with multitasking Critical chain scheduling assumes that resources do not multitask. A developer cannot be assigned to two tasks, simultaneously, on the same project, when critical chain scheduling is in effect. Similarly, critical chain theory suggests that projects be prioritized so that developers working simultaneously on several projects can identify the tasks that are a priority. Preventing multitasking avoids resource conflicts and wasted setup time caused by shifting between the tasks. An essential concept to improving project finish dates with critical chain scheduling is to change the way managers calculate task estimates. Many managers include in an estimate a safety or a buffer, which is additional time required to complete a task, to account for various factors. These factors include the adverse impact of multitasking, distractions, interruptions, pressures, and Murphy’s Law, which states that if something can go wrong, it will. Critical chain scheduling removes buffers from each task and, instead, creates a project buffer, which is the time added before the project’s due date. Critical chain scheduling also protects tasks on the critical path from being delayed by using feeding buffers, which is the additional time added before tasks on the critical path that are preceded by noncritical-path tasks. Exhibit 4-11 provides an example of a project network diagram constructed using critical chain scheduling. Note that the critical chain accounts for a limited resource, X, and the schedule includes[25-Apr-13 03:07:19 PM]

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the use of feeding buffers and a project buffer in the network diagram. The task estimates in critical chain scheduling should be less than traditional estimates because traditional estimates do not include the buffers. Task buffers should not be used so that the occurrence of Parkinson’s law, which states that work expands to fill the time allowed, is reduced. The feeding buffers and project buffers help meet the project completion date. Exhibit 4-11: Example of critical chain scheduling2

Critical chain scheduling is a complicated yet powerful tool that involves critical path analysis, resource constraints, and changes in making task estimates in terms of buffers. Some project managers consider critical chain scheduling one of the most important new concepts in project management. Other managers, however, argue that this concept is the same as critical path analysis with resource leveling, a technique for resolving resource conflicts by delaying tasks. Several companies reported successes with critical chain scheduling: ·    Lucent Technology’s Outside Plant Fiber Optic Cable Business Unit used critical chain scheduling to reduce its product introduction interval by 50 percent, improve on-time delivery, and increase the organization’s capacity to develop products. ·    Synergis Technologies Group successfully implemented critical chain scheduling to manage more than 200 concurrent projects at 9 locations, making on-time delivery its top priority. ·    The Antarctic Support Associates project team switched to critical chain scheduling to enable the Laurence M. Gould research vessel to pass sea-trial tests and be ready to embark on its voyage to Antarctica on schedule in January 1998, rather than four months late as had been anticipated.3 Do it!                    B-4:    Discussing critical chain scheduling

   1  What are the important concepts related to critical chain scheduling?

   2  ____________ occurs when a resource works on more than one task at a time.

   3  How does critical chain scheduling protect tasks on the critical path from being delayed?


Program Evaluation and Review Technique
Explanation Another project time management technique is the Program Evaluation and Review Technique (PERT)—a network analysis technique used to estimate project duration when the activity duration estimates are uncertain. PERT applies the critical path method to a weighted average duration estimate. PERT uses probabilistic time estimates—duration estimates based on using optimistic, most likely, and pessimistic estimates of activity durations—instead of a specific or discrete duration estimate. Similar to the critical path method, PERT is based on a project network diagram called the PDM method. To use the PERT method, you calculate a weighted average for the duration estimate of each project[25-Apr-13 03:07:19 PM]

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activity using the following formula:
PERT weighted average = (optimistic time + 4X most likely time + pessimistic time)/6

The main advantage of PERT is that it attempts to address the risks associated with duration estimates. PERT has three disadvantages: it requires additional work because it requires several duration estimates; lacks several features that other probabilistic methods offer, and it is rarely used in practice. In fact, many managers confuse PERT with project network diagrams because the latter are often referred to as PERT charts. Do it!                    B-5:    Discussing PERT

Questions and answers
   1  What is PERT?

   2  What is the main advantage of PERT?


Topic C:   Controlling changes to the project schedule
Explanation                 Controlling changes to project schedules has several associated limitations and concerns. It is important first to ensure that the project schedule is realistic. Many projects, especially those related to IT, are planned with unrealistic schedule expectations. It is also important to ensure discipline and leadership to emphasize the importance of following project schedules and meeting deadlines. Although various tools and techniques assist in developing and managing project schedules, project managers must handle several personnel-related issues to run projects as planned. Project managers can perform a number of reality checks that help them manage changes to project schedules. Several other skills also help project managers control schedule changes related to personnel issues.

Reality checks on scheduling
One of the first reality checks a project manager should make is to review the draft schedule included in the project charter. Although this draft schedule might include only a project start and end date, the project charter sets initial schedule expectations for the project. Next, the project manager and the team must prepare a detailed schedule and seek stakeholders’ approval. To finalize the schedule, it is critical to involve and seek commitment from all project team members, senior managers, the customer, and other key stakeholders. It is important to create realistic project schedules and allow for contingencies throughout a project’s life cycle. Another type of reality check comes from progress meetings with stakeholders. The project manager is responsible for running the project as planned and communicating the progress to key stakeholders, which might be through high-level periodic reviews. Managers might want to review progress on projects every month. Project managers often illustrate progress with a tracking Gantt chart showing key deliverables and activities. The project manager needs to understand reasons for changes made to the original project schedule and the activities that are performed as planned to be able to take a proactive approach to meeting stakeholder expectations. It is essential that the project manager is clear and honest in communicating project status to senior management. By no means should project managers create the illusion of the project operations proceeding as planned when a project is facing serious problems. When serious conflicts arise that might affect the project schedule, the project manager must alert senior managers and work with them to resolve the conflicts. Do it!                    C-1:    Discussing reality checks on scheduling

Questions and answers
   1  What are two scheduling reality checks?[25-Apr-13 03:07:19 PM]

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   2  What is the importance of reality checks?


Managing personnel
Explanation                 Good project managers realize that their main job is to lead the people involved in the project. It’s their responsibility to coordinate between the project team and the other important project entities to create and update the project schedule. Good project managers realize that an important part of their job is to lead the human resources involved in the project. Delegating parts of a project schedule allows the project manager to focus and lead the entire project. Several leadership skills that help project managers control schedule changes include: ·    Empowerment ·    Incentives ·    Discipline ·    Negotiation It is important for a project manager to empower the project team to take responsibility for their activities. Engaging team members when creating a detailed schedule and providing timely status information empowers them to take responsibility for their actions. As a result, they feel more committed to the project. A project manager can also use financial or other incentives to encourage team members to meet schedule expectations. It might, sometimes, be effective to use coercive power or command to ensure team members’ respect and to meet deadlines. For example, one project manager started penalizing her team members twenty-five cents each time they delayed submitting the weekly time sheets for a project. She was amazed at how only a few of her team members were late in their submissions after the rule was implemented. Project managers must also use discipline to manage project schedules. Several project managers handling IT projects discovered that setting firm dates for key project milestones helps minimize schedule changes. It is easy for scope creep to impact IT projects. Insisting that important schedule dates be met and that proper planning and analysis be completed helps all in the team focus on completing the tasks important to the project. This discipline results in meeting project schedules. Project managers and their team members need to use good negotiation skills. Customers and management often pressure teams to shorten project duration. Some managers blame IT schedule overruns on poor estimation, but others state that the real problem is that software developers and other IT professionals might not be able to provide enough or convincing reasons in support of their estimates. It is important for the project manager and team members to provide sufficient relevant information in support of their estimates and learn to negotiate with stakeholders. Do it!                    C-2:    Discussing people issues

Questions and answers
   1  What are some leadership skills that help project managers handle schedule changes?

   2  Describe an example of using a negative incentive?[25-Apr-13 03:07:19 PM]

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   3  As a project manager, what leadership skills do you require to control schedule changes?


Software to assist in time management
Explanation Several types of software are available to assist project managers in project time management. Software for facilitating communication helps project managers exchange project-related information with project stakeholders. Decision support models can help project managers analyze various trade-offs that can be made to minimally impact the project schedule. However, project management software, such as Microsoft Project 2003, was designed specifically for performing project management tasks. You can use Project 2003 to draw network diagrams, determine the critical path for a project, create Gantt charts, and report, view, and filter specific project time management information. Project management software can facilitate the creation of project network diagrams and the use of the critical path method. Many projects involve hundreds of tasks with complicated dependencies. After you enter the necessary information, project management software automatically generates a network diagram and calculates the critical path(s) for the project. The software also highlights in red the critical path on the network diagram and calculates the free and total float or slack for all activities. Using project management software eliminates the need to perform cumbersome calculations manually and allows for “what if” analysis with changes in activity duration estimates or dependencies. Recall that knowing the activities with the maximum slack gives the project manager an opportunity to reallocate resources or make other changes to shorten the project duration or help run it as planned. Project 2003 easily creates Gantt charts, which simplify tracking actual schedule performance versus a planned or baseline schedule. It is important, however, to enter actual schedule information if you want to benefit from using the Tracking Gantt chart feature. Some organizations use e-mail or other communications software to send up-to-date task and schedule information to the team member responsible for updating the schedule. The team member can then quickly authorize these updates to be entered directly into the project management software. This process provides an accurate and upto-date project schedule in the Gantt chart form. Project 2003 also includes many built-in reports, views, and filters to assist in project time management. For example, you can quickly run a report to list the tasks that are to start in a specified time frame. You can then send a reminder to the team members responsible for completing these tasks. If you need to present project schedule information to senior managers, you can create a Gantt chart showing only summary tasks or milestones. You can also create custom reports, views, tables, and filters. Do it!                    C-3:    Using software to aid time management

Questions and answers
   1  Name some of the time management utilities Microsoft Project 2003 provides.

   2  Which software do you use to manage time? What advantages have you noticed?

Unit summary: Time management[25-Apr-13 03:07:19 PM]

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Topic A                      In this topic, you learned that activity definition, sequencing, and duration estimating are all important processes in project time management. You learned that by determining task dependencies and then developing a project network diagram , activity sequencing is facilitated. Topic B                      In this topic, you learned the different tools and techniques project managers use to develop schedules. You also learned that Gantt charts, critical path method , and PERT are effective techniques in project schedule development. Topic C                     In this topic, you learned how to control changes to the project schedule. Finally, you learned about the various leadership skills and personnel-related issues considered while controlling changes.

Independent practice activity
  1  Have you used, or known a manager who uses, some of the techniques discussed in this unit? If so, how do you, or this manager, feel about network diagrams, critical path analysis, Gantt charts, using project management software, and managing the personnel-related issues involved in project time management?
Answers might vary.

  2  Choose the component that is correctly paired with its definition. A  Activity definition and sequencing—identifying project activities and their order of completion. B  Assessing activity duration—considering and managing factors to alter the original schedule. C  Schedule development— approximating the time needed to complete each project activity. D  Schedule control—allotting activity time frames on a schedule based on resources and cost.   3  Two activities, C and D, are controlled by a finish-to-finish dependency. The lag time between Activity C and Activity D is four days. Choose the answer that explains what this means to your project. A  Activity C must finish four days before Activity D can start. B  Activity D must finish four days before Activity C can finish. C  Activity C must finish four days before Activity D can finish. D  Activity C must start four days before Activity D can finish.   4  Select the answer that correctly identifies the sequence of activity flow from a project’s start to finish, and identifies the series of activities that must be completed on schedule for a project to finish on time. A  Optimal sequence B  Preferred activity order C  Event cycle D  Critical path   5 From the following options, select the benefit of using a Gantt chart. A  It provides a standard format for displaying planned and actual schedule information. B  It provides a schematic display of the logical relationships among project activities. C  It illustrates activity dependencies, so that concurrent activities can be identified. D  It’s useful for visualizing specific types of time relationships.   6  Select the term that correctly describes activities such as crashing, fast tracking, assigning limited overtime, and implementing shortcuts. A  Limited scope alteration B  Duration compression C  Activity crunching[25-Apr-13 03:07:19 PM]

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D  Time frame reduction

  # 1 Reference Thamhain, H. J. and Wilemon, D. L., “Conflict Management in Project Life Cycles,” Sloan Management Review (Summer 1975). Goldratt, Eliyahu. Critical Chain , Great Barrington, MA, The North River Press, 1997, 218. Avraham Y. Goldratt Institute Web site, (January 2001).

2 3


Unit 5 Cost management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Identify the components and principles of cost

B  Discuss the elements of resource planning. C  Discuss cost estimation and identify the techniques used

for it.
D  Discuss cost budgeting and identify the techniques used

for it.
E  Discuss cost control using EVA.

Topic A:   Components and principles of cost management
Explanation                 Project cost management includes the processes that ensure a project is completed within the approved budget. Project managers must ensure projects are well defined with accurate time and cost estimates and a realistic budget. The project manager must execute a project in a way that meets the stakeholders’ expectations while keeping the cost low. The project cost management processes include: ·    Resource planning, which involves determining the resources (team, equipment, and material) and the quantity of each resource to be used for a project. The output of the resource planning process is a list of resource requirements. ·    Cost estimation, which involves approximating or estimating the cost of[25-Apr-13 03:07:19 PM]

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resources required to complete a project. The main outputs of the cost estimating process are cost estimates, supporting detail, and a cost management plan. ·    Cost budgeting , which involves allocating a cost estimate to each work item to establish a baseline for measuring performance. The main output of the cost budgeting process is a cost baseline. ·    Cost control, which involves controlling changes to the project budget. The main outputs of the cost control process are revised cost estimates, budget updates, corrective actions, estimates at completion, and lessons learned. To understand each process of project cost management, you must first understand the basic principles of cost management. Many of these principles are not unique to project management; however, project managers need to understand how these principles relate to their specific projects.

Basic principles of cost management
Many information technology (IT) projects require a good understanding of basic accounting and finance principles. Project management professionals need to be able to present and discuss project information in financial as well as technical terms. This is because cost management is an important component of project management. In addition to net present value analysis, return on investment, and payback analysis, project managers must understand several other cost management principles, concepts, and terms. Profits Profits are revenue excluding expenses. To increase profits, a company can increase revenues, decrease expenses, or both. When planning investments in new information systems and technology, it is important to focus on the impact on profits, not just revenues or expenses. You cannot measure the potential benefits of the system without knowing the profit margin. The profit margin is the ratio of profits to revenue. If revenues of $100 generate $2 as the profit, there is a 2 percent profit margin. If the company loses $2 for every $100 of revenue, there is a –2 percent profit margin. Life cycle costing Life cycle costing helps develop an accurate projection of a project’s financial benefits. Life cycle costing takes into account the total cost of ownership, or development and support cost, for a project. Cash flow analysis Cash flow analysis is a study of the cash inflow and outflow. You must perform this analysis to determine the net present value. Managers must take into account cash flow concerns when selecting projects for making investments, as the value of the dollar keeps fluctuating. If managers select several projects with high cash flow needs in the same year, the company will be unable to support all the projects and maintain its profitability. Therefore, it is important to define clearly the year on which the dollar amount is based. Internal rate of return Internal rate of return (IRR ) is the discount rate that makes net present value equal to zero. It is also called the time-adjusted rate of return . Some companies prefer to estimate the IRR instead of or in addition to net present value and set minimum values required for projects to be selected or continued. Tangible and intangible costs Tangible and intangible costs and benefits need to be calculated for determining how definable the estimated costs and benefits for a project are. Tangible costs or benefits can be easily measured in dollars. In contrast, intangible costs or benefits are difficult to measure in monetary terms. Because intangible benefits are difficult to quantify, they are often harder to justify. Direct, indirect, and sunk costs[25-Apr-13 03:07:19 PM]

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Direct costs are those related to a project that can be traced back in a cost-effective way. You can attribute this cost directly to a certain project. For example, the salaries of the team working full-time on the project and hardware and software purchased specifically for the project are direct costs. Project managers should focus on direct costs because they can control them. Indirect costs are costs related to a project that cannot be traced back in a cost-effective way. For example, the cost of electricity and office supplies in a large building housing several employees working on many different projects are indirect costs. Indirect costs are allocated to projects, and project managers have little control over them. Sunk cost is the money spent in the past, before starting on a project. When deciding the projects to invest in or continue, you should not include sunk costs. Learning curve theory Learning curve theory states that when items are produced repetitively, the unit cost of the items decreases in a regular pattern over a period. Learning curve theory is used to estimate costs involved in projects for the production of large quantities of items. Reserves Reserves are dollars included in a cost estimate to mitigate cost risk by allowing for any unforeseen situations. Contingency reserves are set aside for situations that may be partially planned for (sometimes called known unknowns) and that are included in the project cost baseline. Management reserves are set aside for unpredictable situations (sometimes called unknown unknowns). For example, if a project manager is unwell for two weeks or if an important supplier goes out of business, management reserve can be used to cover the costs. Do it!                    A-1:    Discussing cost management

Questions and answers
   1  What are the main processes involved in cost management?

   2  What is cash flow analysis? Why is it done?

   3  Compare tangible and intangible costs.


Topic B:   Resource planning
Explanation                 To estimate, budget, and control costs, project managers and their teams must determine the physical resources (team, equipment, and material) and the quantities of the resources that are required to complete the project. The nature of the project and the organization’s goals affect resource planning. Expert judgment and planning for alternatives are the tools that assist in resource planning. It is important to engage experienced team members and managers in planning because they can utilize their expertise from similar projects. Important questions to answer in resource planning include: ·    How difficult is it to perform specific tasks on this project?[25-Apr-13 03:07:19 PM]

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·    Does the project require any unique task as stated in the project’s scope statement that will impact the selection of resources? ·    What is the organization’s history in completing similar projects? ·    What types of resources (team and material) were utilized in such projects in the past? ·    Does the organization have the necessary human resources, equipment, and material that you can use for performing the work? ·    Are any organizational policies likely to affect the availability of resources? A project’s work breakdown structure (WBS), scope statement, historical information, resource information, and policies are important input to answering these questions. It is important to brainstorm and evaluate alternatives related to resources, especially on projects that engage human resources from multiple disciplines and companies. Because human resources are critical for most projects, it is advisable that ideas and information be gathered from different sources to help develop alternatives and address resource- and cost-related issues early in a project.

Resource assignment
There are three ways to assign resources to project activities. ·    Assign resources at a constant rate. For example, if 10 days are allotted to complete a project and a developer needs 40 hours to complete the job, the developer will work four hours per day for 10 days to complete the project. The team member’s time is assigned at a constant rate. ·    Assign resources as a total. Using the previous example and assuming that a workday is eight hours long, the developer will work continuously until the job is completed and will complete the job in 5 days. ·    Assign resources based on availability. For example, when a team member’s schedule does not permit a dedicated engagement, you can assign that member work when he or she has time to complete it. For example, the developer may be assigned to work the first 2 days for 10 hours each and then work 5 hours per day for the next 4 days to complete the job.   Understanding how resources are assigned to activities When determining the manner in which to assign resources to a project, it is important to understand how the project will bill for those resources. For example, if it takes 10 days to develop software and the developer needs 40 hours to complete the job, you must determine if the project will be billed for 10 complete working days or for 40 hours of work. The different ways that the project can be billed for the developer’s time can impact the project budget. Do it!                    B-1:    Planning resources

   1  Why is it important for project managers and their teams to determine the physical resources and the quantity of these resources?

   2  What are the three ways to assign resources to project activities?

   3  Select the way in which resources are being assigned in the following example: you assign 25 programmers to work on updating the software[25-Apr-13 03:07:19 PM]

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continuously until the activity is completed. A    At a constant rate B    Based on availability C    Based on established number standards D    As a total    4  Select the way in which resources are assigned in the following example: you assign 25 programmers to work on updating the software for 2 days each week for 6 months. A    Based on established number standards B    At a constant rate C    As a total

Topic C:   Cost estimating
Explanation                 Project managers must invest considerable time in arriving at cost estimates to be able to complete projects within budget constraints. Project managers must create a comprehensive list of resource requirements and then collaborate with members of their team to calculate the cost estimates for these resources. This section describes the various types of cost estimates, tools and techniques for cost estimation, and the problems associated with IT projects. It provides a detailed example of cost estimation for an IT project.

Types of cost estimates
One of the main outputs of project cost management is the cost estimate. Project managers normally prepare several types of cost estimates. These include: ·    Rough order of magnitude ·    Budgetary ·    Definitive These estimates vary primarily in their use, application, and accuracy. Rough order of magnitude A rough order of magnitude (ROM ) estimate provides a rough idea of the costs involved in a project. This estimate is calculated early in a project, or even before it is officially started. Project managers and senior managers use this estimate to make project selection decisions. The timeframe for this type of estimate is often three or more years prior to project completion. The accuracy of a ROM estimate typically ranges from –25 percent to +75 percent, which means that the project’s actual costs can be 25 percent less or 75 percent more than the ROM estimate. For estimates related to IT projects, the accuracy range is often much more. Many IT professionals automatically double estimates for software development because of the risk of cost overruns on these projects. Budgetary estimate A budgetary estimate is used to allocate money according to an organization’s budget. Many organizations create budgets for projects planned for the next two years. Budgetary estimates are made one to two years prior to project completion. The accuracy of budgetary estimates ranges from –10 percent to +25 percent, which means that actual cost can be 10 percent less or 25 percent more than the budgetary estimate. Definitive estimate A definitive estimate provides the most accurate estimate of project costs. Definitive estimates are used for making purchasing decisions for which accurate estimates are required and for estimating final project costs. For example, if a project involves purchasing 1,000 personal computers from a[25-Apr-13 03:07:19 PM]

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vendor over the next three months, a definitive estimate is required to aid in evaluating vendor proposals and in allocating funds for the purchase. Definitive estimates are made one year or less prior to project completion. The accuracy of this type of estimate ranges from –5 percent to +10 percent, which means that actual costs can be 5 percent less or 10 percent more than the definitive estimate. The following table summarizes the three basic types of cost estimates.
Type of estimate ROM When done Very early in the project life cycle, often 3-5 years before project completion. Early, 1–2 years before the project start. Later in the project, less than 1 year after the start of the project. Why done Provides estimate of cost for selection decisions. How accurate? –25% to +75%


Adds dollars in the budget plans. Provides details for purchases and estimates actual costs.

–10% to +25%


–5% to +10%


Two additional output of the cost estimating process are supporting details and a cost management plan. It is important to include supporting details with all cost estimates. These details include the ground rules and assumptions used in creating the estimate, a description of the project (such as the scope statement and WBS) used as a basis for the estimate, and details of the cost estimation tools and techniques used to create the estimate. This supporting detail makes it easier to prepare an updated estimate or a similar estimate when required. A cost management plan is a document that describes how cost variances will be managed on a project. For example, if a definitive cost estimate provides the basis for evaluating vendor cost proposals for all or part of a project, the cost management plan describes how to respond to proposals that vary from the estimates. Some organizations assume that a cost proposal within 10 percent of the estimate is acceptable and negotiate only items more than 10 percent higher or 20 percent lower than the estimated costs. Do it!                    C-1:    Discussing cost estimation

Questions and answers
   1  Describe the types of cost estimates.

   2  What are the various types of output of the cost management process?

   3  What is a cost management plan?


Cost estimation tools and techniques[25-Apr-13 03:07:19 PM]

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Explanation                 There are four basic tools and techniques you can use for cost estimating: ·    Analogous estimating ·    Bottom-up estimating ·    Parametric modeling ·    Computerized tools Analogous estimating Analogous estimating , also called top-down estimating , uses the actual cost of a previous, similar project as the basis for estimating the current project’s cost. It is a form of expert judgment. This method costs less than the others, but it is also less accurate. Analogous estimates are most reliable when the previous projects are similar in fact and not just appearance. In addition, the groups preparing estimates must consist of experts to determine whether specific parts of the project will be more expensive or less expensive than analogous projects. However, if the project to be estimated involves a new programming language or working with a new type of hardware or network, the analogous approach can easily result in a low estimate. Bottom-up estimating Bottom-up estimating involves estimating each work item and adding them to obtain the project total. The size of the each work item and the experience of the estimators drive the accuracy of the estimates. If a detailed WBS is available for a project, the project manager can obtain cost estimates for each work package from the team member handling that package. All the estimates would then be added to create estimates for each higher-level WBS item and finally, for the entire project. Using small work items increases the estimate’s accuracy because the team assigned for the work develops the estimate instead of a third party that might be unfamiliar with the work. The drawback with bottom-up estimates is that they are usually time-intensive and therefore expensive to develop. Parametric modeling Parametric modeling uses project characteristics (parameters) in a mathematical model to estimate project costs. For example, a parametric model might provide an estimate of $50 per line of code for a software development project based on the programming language the project is using, the level of programmers’ expertise, and the size and complexity of the data involved. Parametric models are most reliable when the historical information used to create the model is accurate, the parameters are readily quantifiable, and the model is flexible in terms of the size of the project. For example, the engineers at the McDonnell Aircraft Company developed a parametric model for estimating aircraft cost based on a large historical database. The model included the following parameters: the type of aircraft (fighter aircraft, cargo aircraft, or passenger aircraft), the maximum attainable speed of the aircraft, the thrust-to-weight ratio of the engine, the estimated weights of various parts of the aircraft, the number of aircrafts produced, and the amount of time available to produce them. In contrast to this sophisticated model, some parametric models involve simple rules of thumb. In another example, a large office automation project might use a ballpark figure of $10,000 per workstation based on a history of similar office automation projects developed during the same time period. More complicated parametric models are computerized. Computerized tools Computerized tools , such as spreadsheets and project management software, can simplify working with different cost estimates and cost estimation tools. Computerized tools, when used properly, can also help improve the accuracy of estimates. In addition to spreadsheets and project management software, more sophisticated tools are available for estimating software project costs. Barry Boehm is well known in the field of software development and cost estimation. He developed the popular Constructive Cost Model (COCOMO ), a parametric model for estimating software development costs based on parameters, such as the lines of source code or function points. Function points are technology-independent assessments of the functions involved in developing a system. For example, the number of input and output, the number of files maintained, and the number of updates are examples of function points. COCOMO II is a new, computerized version of Boehm’s model that allows you to estimate the cost, effort, and schedule when planning a new software development activity. Boehm suggests that only algorithmic or parametric models do not suffer from the limits of[25-Apr-13 03:07:19 PM]

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human decision-making capability. As a consequence, Boehm and many other software experts favor using algorithmic models when estimating software project costs. Do it!                    C-2:    Using tools and techniques for cost estimation

   1  Your company is building a 10,000 square foot office complex in a district where real estate costs $250 per square foot. If you estimate the cost by multiplying these figures, which type of estimating are you using?

   2  Match the following list of cost-estimating techniques with their definitions given below: bottom-up estimating, parametric estimating, and top-down estimating. Requiring senior managers to examine historical data from similar projects to develop a cost estimate for the current project Developing a cost estimate for each work package in the WBS and then compiling the total cost estimate from this information Using historical data and other variables to calculate statistical relationships

Problems with IT cost estimates
Explanation                 Although many tools and techniques are available to assist in creating project cost estimates, many IT project cost estimates, especially those involving new technologies or software development, may still be inaccurate. In his book Controlling Software Projects, Tom DeMarco, a well-known author on software development, suggests four reasons for these inaccuracies and some ways to overcome them. ·    Developing an estimate for a large software project is a complex task requiring a significant amount of effort. Many estimates must be done quickly and before clear system requirements are produced. The more precise, later estimates are rarely less than the earlier estimates for IT projects. It is important to remember that estimates are made at various stages of the project, and project managers need to explain the rationale for each estimate. ·    Software developers providing cost estimates may often lack the necessary experience with cost estimation, especially for large projects. There might also not be enough accurate and reliable project data available on which to base estimates. If companies use good project management strategies and a history of recording project information, including estimates, it should help them arrive at better estimates. Training and mentoring IT professionals on cost estimation also improves cost estimates. ·    Human beings have a bias toward underestimation. For example, senior IT professionals or project managers might make estimates by disregarding the skills and abilities of the project team. Estimators might also not allow for extra costs needed for integration and testing on large IT projects. It is important for project managers and senior managers to review estimates and ask important questions to make sure the estimates are not biased. ·    Management might use an estimate to bid for a major contract or get internal funding. It is important for project managers to make accurate cost and schedule estimates and to use their leadership and negotiation skills for the same.[25-Apr-13 03:07:19 PM]

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Do it!                    C-3:    Discussing problems with IT cost estimates

Questions and answers
   1  What is the main problem with IT cost estimate?

   2  How can you resolve this problem?


Topic D:   Cost budgeting
Explanation Project cost budgeting involves allocating the project cost estimate to each work item, which is based on the project’s WBS. The WBS, therefore, is the required input to the cost budgeting process. Likewise, the project schedule is required to allocate costs over time. The main goal of the cost budgeting process is to prepare budgetary estimates and produce a cost baseline for measuring project performance. Most organizations have a well-established process for preparing budgets. For example, the company involved with a Business Systems Replacement requires budget estimates to include the number of full-time equivalent (FTE) staff—often referred to as headcount—for each year of the project. This number provides the basis for estimating total compensation costs each year, as shown in Exhibit 5-1. The budget also requires input in the categories of consultant and purchased services, travel, depreciation, rents or leases, and other supplies and expenses. Notice that the total cost for the IS&T budget for FY97, $1,800,000, is based on the costs highlighted in the cash flow analysis in Exhibit 5-1 ($600,000 for total purchased costs plus $1,200,000 for IS&T effort in FY97). Exhibit 5-1: Project budget estimates for business systems replacement for FY97 and their explanations

Exhibit 5-1 also includes explanations to support budget estimates. Staff from the IS&T department included nine programmer/analysts, two database analysts, and two infrastructure technicians. Their compensation is based on employee change notices (ECNs), which provide actual salary and benefit information for employees when they are hired or transferred within the company. Notice that the compensation costs are the main part of the budget estimate. For compensation costs to form the largest part of cost estimates is typical of many IT projects. Notice that the budget amount for compensation includes an allowance for raises and overload support or overtime pay. Other explanations include brief descriptions of the travel, depreciation, rents or leases, and other supplies and expenses for the project. It is important to document assumptions and explanations when preparing cost estimates and cost budgets. In addition to providing input for budgetary estimates, cost budgeting provides a cost baseline. A cost baseline is a time-phased budget that project managers use to measure and monitor cost performance. Estimating costs for each major project activity over time provides project managers and senior managers with a foundation for project cost control.

Standards to be applied when establishing budgets
There are two types of standards that project managers must consider when establishing project budgets: ·    Work results[25-Apr-13 03:07:19 PM]

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·    Performance results The work results of a project are qualitative and include processes that personnel complete and the physical environment in which they work. It is important to keep these issues in mind when allocating budgets, because the money allocated can affect work results. The performance results of a project are quantitative and regulate the quality and quantity of work completed and the amount of time required to complete the work. When allocating budgets, it is important to keep in mind that the amount of money allocated for a project can affect performance results. Cost management plan A cost management plan is developed to provide guidelines for the project manager, when dealing with cost variances. The extent of detail included in a cost management plan is dependent on the needs of the project stakeholders. The plan should outline steps to be taken if the actual project costs are higher or lower than the approved project budget. To make a project management plan useful, the accumulated costs of the project must always be available by looking at the cost baseline, which is displayed as an S-curve. Project stakeholders can then compare the approved budget to the cost baseline to determine if the project costs are as planned. Do it!                    D-1:    Budgeting cost

Questions and answers
   1  What is a cost baseline?

   2  What are the two standards to be kept in mind while establishing standards for cost budgeting?

   3  Why is a cost management plan developed?


Capital budgeting
Explanation                 Organizations choose projects in which the benefits exceed the costs. These benefits can be financial or non-financial. Capital budgeting is a technique used to determine the financial benefits that a project can bring to an organization. In addition, capital budgeting involves the evaluation of projects that require the purchase of major fixed assets, such as buildings and equipment. It is important to understand some specific concepts when learning about capital budgeting. ·    Payback period ·    Discounted cash flows ·    Net present value ·    Internal rate of return Payback period A payback period is the amount of time that an organization needs to recover its initial investment and become profitable. To recover its initial investment, an organization calculates expected cash inflows. For example, if a building costs an organization $30,000 to build, and the expected inflows are $6000 per year, the payback period would be 5 years.[25-Apr-13 03:07:19 PM]

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However, it is important to realize that using the payback period technique is not a precise method of capital budgeting because it does not take into account the time value or the effects of inflation on the value of today’s dollars. In the previous example, the $6000 inflow in the fifth year would not necessarily be worth the amount it is today. Discounted cash flows It is important to understand that a dollar today is worth more than a dollar 10 years from now. Discounting cash flows enable you to discount future values of money to their present values to compare them. This can be an effective way to assess the value of an investment. The equation to use for discounted cash flows is:
PV = [CF 1 /(1 + k) 1 ] + [CF 2 /(1 + k) 2 ] . . . [CF n /(1 + k) n ]

In this equation, PV represents the present value of the cash flow stream, n represents the number of years, CF n represents the cash flow amount during period n, and k is the investment interest rate. For example, you want to determine the present value (PV) of an uneven cash flow stream (CF1, CF2, and so on) over a three-year time period (n), at an interest rate of 10% (k). The asset’s cash flow stream includes $300 in the first year, $400 in the second year, and $500 in the third year. To calculate the PV of this cash flow stream, plug the appropriate numbers into the equation:
PV = [300/(1 + .10) 1 ] + [400/(1 + .10) 2 ] . . . [500/(1 + .10) 3 ] = $978.96

Net present value Net present value , or NPV, is a capital budgeting equation that compares the discounted cash inflows against the initial investment to make sure that the inflows are large enough to recover the investment. Completing the NPV enables an organization to determine if an investment is worthwhile. To calculate NPV, subtract the initial investment from the sum of discounted cash flows. If the NPV is negative, you should reject the investment. If the NPV is positive, you should accept the investment. Do it!                    D-2:    Budgeting capital

   1  What will the payback period be if an organization purchased a piece of equipment for $90,000 and expects it to produce inflows of $3000 per year? A    30 years B    3 years C    35 years D    18 years    2  Which of the following capital budgeting concepts enables you to reduce future values of money to the present value of money in order to compare them? A    Payback period B    Discounted cash flows C    Net present value D    Internal rate of return    3  Determine why using a project’s payback period is not completely accurate. A    Using the payback period doesn’t take into account the time value of money or the effects of inflation. B    Using the payback period doesn’t consider revised project strategies and goals. C    Using the payback period doesn’t account for a project’s long-term financial growth and time management advantages.[25-Apr-13 03:07:19 PM]

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D    Using the payback period doesn’t consider adjustments to the project’s time frame or the project’s scope.    4  Determine whether the following project was worthwhile: Company A invested $2,000,000 to streamline its production process and expected cash inflows of $1,850, 000 over the long term. A    These amounts don’t provide enough information to determine whether or not Company A’s investment was worthwhile. B    Using the payback period doesn’t account for a project’s long-term financial growth and time management advantages. C    Based on these amounts, Company A was correct in investing the money to streamline its production process.

Topic E:   Cost control
Explanation Project cost control includes monitoring cost performance, ensuring that only appropriate project changes are included in a revised cost baseline, and informing project stakeholders of authorized changes that will affect cost. The cost baseline, performance reports, change requests, and the cost management plan are input for the cost control process. The output of this process includes revised cost estimates, budget updates, corrective action, revised estimates for project completion, and lessons learned. Several tools and techniques assist in project cost control. A change control system must be used to define procedures for changing the cost baseline. This cost control change system is part of the overall change control system of a project. Because many projects do not progress exactly as planned, they often require new or revised cost estimates, as well as estimates to evaluate alternative courses of action. Another crucial tool for cost control is performance measurement. Although many general accounting approaches are available for measuring cost performance, one powerful cost control tool is unique to the field of project management—earned value analysis (EVA).

Earned value management
Earned value management (EVM) is a project performance measurement technique that integrates scope, time, and cost data. Earned value management is sometimes called earned value analysis (EVA), which should not be confused with economic value added, also referred to as EVA. Given a cost performance baseline, project managers and their teams can determine how well the project is meeting scope, time, and cost goals by entering actual information and then comparing it to the baseline. A baseline is the original project plan plus the approved changes. Factual information includes whether or not a WBS item was completed or approximately how much of the work was completed, when the work actually started and ended, and how much the work cost. Exhibit 5-2 shows the Business Systems Replacement (BSR) project’s input form for collecting information for cost control and earned value management. This internal company form includes the following information. ·    Descriptive information. The top line of this form lists the WBS number for an activity, a description of the activity, a revision number, and a revision date. This example of input form reports information for WBS Item, a level 4 WBS activity (based on the numbering scheme) called “Design Interface Process-Customer Information.” ·    Assignment information. This activity is assigned to a team member with the initials SMC. Other assignment information includes the responsible person’s role and the availability in number of hours per day for the activity. ·    Forecast information. The BSR project used a PERT weighted average to estimate the number of hours required to complete the activities. The PERT weighted average uses most likely, optimistic, and pessimistic estimates. In this case, the PERT calculation results in a[25-Apr-13 03:07:19 PM]

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planned effort of 30 hours. The planned duration is five days. ·    Description. This section provides a detailed description of the activity. ·    Assumptions. Major assumptions related to this particular WBS item are documented. ·    Results/Deliverables. This section briefly lists the main outcomes from the WBS item. ·    Dependencies . This section lists the WBS number for any predecessor or successor activities. Exhibit 5-2: Cost control input form for a business systems replacement project Because the activity has not yet started, it does not include the actual number of hours or the actual duration for the activity. Actual cost, actual duration, and percentage complete information is required to perform EVM. Do it!                    E-1:    Controlling cost

   1  What is EVM?

   2  Which one of the following best defines cost control? A    Cost control involves identifying changes to the cost baseline and then managing the changes. B    Cost control involves deciding the resources required to complete project activities. C    Cost control entails estimating the cost of the resources needed to complete a project. D    Cost control involves distributing overall cost estimates to specific project activities.

Performing Earned Value Analysis (EVA)
Explanation                 Earned value management involves calculating three values for each activity or summary activity from a project’s WBS. ·    The planned value (PV) , formerly called the budgeted cost of work scheduled (BCWS), also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given period. The following table shows an example of earned value calculations. Suppose a project includes a summary activity of purchasing and installing a new Web server. Suppose further that according to the plan, it will take one week and cost a total of $10,000 for the labor hours, hardware, and software involved. The planned value (PV) for that activity that week is $10,000. ·    The actual cost (AC) , formerly called the actual cost of work performed (ACWP), is the total direct and indirect costs incurred in completing work on an activity during a given period. For example, suppose it actually took two weeks and cost $20,000 to purchase and install the new Web server. Assume that $15,000 of these actual costs was incurred during week 1 and $5,000 was incurred during week 2. These amounts are the actual cost (AC) for the activity each week. ·    The earned value (EV) , formerly called the budgeted cost of work performed (BCWP), is the percentage of work actually completed multiplied by the planned value. Again, using the example in the following table, suppose you estimated the activity of purchasing and installing a Web server to be 75%[25-Apr-13 03:07:19 PM]

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complete after week 1. To calculate the earned value (EV) for week 1, you multiply the planned value of $10,000 for week 1 by 75 percent to obtain an earned value of $7,500 for the activity at that point in time.
Activity Week 1 Week 2 Total % Complete after week 1 75% Earned value after week 1 (EV) 7,500

Purchase Web server Planned value (PV) Actual cost (AC) Cost variance (CV) Schedule variance (SV) Cost performance index (CPI) Schedule performance index (SPI)









15,000 –7,500





















The following table summarizes the formulas used in EVA. Note that all these formulas start with EV, the earned value. Variances are calculated by subtracting the actual cost or planned value from EV, and indexes are calculated by dividing EV by the actual cost or planned value. The earned value calculations in the previous table are carried out as follows:
EV = $10,000 x 75% = $7,500 CV = 7,500 – 15,000 = –7,500 SV = 7,500 – 10,000 = –2,500 CPI = 7,500/15,000 = 50% SPI = 7,500/10,000 = 75%  

Earned value Cost variance Schedule variance Cost performance index Schedule performance index

EV = PV to date X percent complete CV = EV – AC SV = EV – PV CPI = EV/AC SPI = EV/PV

Cost variance (CV ) is the budgeted cost of work performed minus the actual cost of work performed. In other words, cost variance shows the difference between the estimated cost of an activity and the actual cost of that activity. If cost variance is negative, it means that performing the work cost more than planned. If cost variance is positive, it means that performing the work cost less than planned. Schedule variance (SV) is the budgeted cost of work performed minus the budgeted cost of work scheduled. Schedule variance shows the difference between the scheduled completion of an activity and the actual completion of that activity. A negative schedule variance means it took longer than planned to perform the work, and a[25-Apr-13 03:07:19 PM]

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positive schedule variance means it took less time than planned to perform the work. The cost performance index (CPI ) is the ratio of work performed to actual costs and can be used to estimate the projected cost of completing the project. If the cost performance index is equal to one, then the budgeted and actual costs are equal, or the costs are exactly as planned. If the cost performance index is less than 1 or less than 100 percent, the project is exceeding its budget. If the cost performance index is greater than 1 or more than 100 percent, the project is within its budget. The schedule performance index (SPI) is the ratio of work performed and work scheduled. It can be used to estimate the projected time to complete the project. Similar to the cost performance index, a schedule performance index of 1 or 100 percent means that the project is according to the schedule. If the schedule performance index is greater than 1 or 100 percent, then the project is ahead of schedule. If the schedule performance index is less than 1 or 100 percent, the project is behind schedule. Note that, in general, negative numbers for cost and schedule variance indicate problems in those areas. The project will cost more than planned or will take longer than planned. Likewise, CPI and SPI of less than 100 percent also indicate problems. Earned value calculations for all project activities (or summary level activities) are required to estimate the earned value for the entire project. Some activities may be over budget or behind schedule, but others may be under budget and ahead of schedule. By adding all the earned values for all project activities, you can determine how the entire project is performing. Exhibit 5-3 provides sample earned value information for a one-year project. This project had a planned total cost of $100,000. The spreadsheet shows the actual cost and percentage complete information for the first five months, or through the end of May. Notice the “% Complete” column on the upper-right side, or in column O, of the spreadsheet. The EV for each activity is calculated by multiplying the percent complete value with the planned or budgeted cost. The “Monthly Actual” row (row 15 of the spreadsheet) shows the actual cost each month for the project’s activities through May. By calculating the total budgeted or planned costs, the total actual costs, and the earned value costs, you can determine the cost variance, schedule variance, cost performance index, and schedule performance index for the entire project (see cells A18 through B25 in Exhibit 5-3. Exhibit 5-3: Earned value calculations for a one-year project after five months of operations In this example, the cost variance is –$9,000, and the schedule variance is –$2,000. These values mean that the project is both over budget and behind schedule after five months. The cost performance and schedule performance indexes are 83 percent and 96 percent, respectively. You can use the SPI to calculate the time required to complete the project. For example, in Exhibit 5-3 the estimated cost at completion is $120,455, or $100,000/83 percent. The estimated time to complete the project is 12.55 months, or 12 months/96 percent (see cells A26 through B27). You can graph earned value information to track project performance. Exhibit 5-4 shows an earned value chart for the one-year sample project from Exhibit 5-3. The chart includes: ·    Planned value (PV), the cumulative planned amounts for all activities by month. Note that the planned value line extends for the estimated length of the entire project. ·    Actual cost (AC), the cumulative actual amounts for all activities by month. ·    Earned value (EV), the cumulative earned value amounts for all activities by month. ·    Budget at Completion (BAC) , the original total budget for the project, or $100,000 in this example. The BAC point is plotted on the chart at the original time estimate of twelve months. ·    Estimate at Completion (EAC) estimated to be $120,455. This EAC point is plotted on the chart at the estimated time to complete in 12.55 months. Exhibit 5-4: Earned value chart for the project after five months Viewing earned value information in chart form helps you visualize how the project is performing. For example, you can see the planned performance by looking at the PV (or BCWS) line. If the[25-Apr-13 03:07:19 PM]

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project progresses as planned, it will complete in 12 months and cost $100,000, which is represented by BAC. In this example, the actual cost of work performed line is always to the right or above the EV (or BCWP) line. When this is the case, costs are equal to or more than planned. The PV line is pretty close to the EV line, just slightly higher for the last month. This relationship means that the project progressed on schedule until the last month, when the project got a little behind schedule. Senior managers overseeing multiple projects often like to see performance information in a graphic form, such as this earned value chart. Earned value charts allow you to see quickly how projects are performing. If there are serious cost and schedule performance problems, senior managers might decide to terminate projects or take other corrective action. The estimates upon project completion are important input to budget decisions, especially if total funds are limited. EVA is an important technique because when used effectively, it helps senior managers and project managers evaluate progress and make sound management decisions. Earned value analysis, however, is not used on many projects outside of government agencies and their contractors for two reasons: its focus on tracking actual performance versus planned performance and the importance of percentage completion data in making calculations. Many projects, particularly IT projects, lack good planning information, therefore, tracking performance against a plan might produce misleading information. Several estimates are made on IT projects, and keeping track of the latest estimate and the actual costs associated with it can be cumbersome. In addition, estimating percentage completion of tasks might produce misleading information. What does it really mean to say that a task is 75 percent complete after three months? Such a statement is often not synonymous with saying the task will be finished in one more month or after spending an additional 25 percent of the planned budget. To make EVA easier to use, organizations can modify the level of detail and still reap the benefits of the technique. For example, you can use percentage completion data such as 0 percent for items not yet started, 50 percent for items in progress, and 100 percent for completed tasks. Till the time the project is defined in detail, this simplified percentage completion data provides enough summary information to allow managers to see a project performance. You can obtain very accurate information about total project performance by using these simple percentage complete amounts. Earned value analysis is the primary method available for integrating performance, cost, and schedule data. It can be a powerful tool for project managers and senior managers to use in evaluating project performance. Do it!                    E-2:    Calculating EVA

   1  Calculate the cost variance for the following example: Company A’s office construction team estimated that the budget for laying the building’s carpet should be $35,000. However, after the work was completed, the cost was $40,000. A    $5000 B    $75,000 C    –$75,000 D    –$5000    2  If the cost variance for laying the carpet is –$5000, determine if Company A overspent, underspent, or spent on budget to complete this activity. A    Company A underspent its budget to carpet the premises. B    Company A overspent its budget to carpet the premises. C    Company A’s budget is right on track after laying the carpet.    3  Calculate the schedule variance in the following example: For landscaping, the budgeted cost of work performed is $25,000, and the budgeted cost of work scheduled is $65,000.[25-Apr-13 03:07:19 PM]

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A    $90,000 B    –$90,000 C    $40,000 D    –$40,000    4  Determine the project’s status in the following example: During the one-year update of Company A’s office construction project, the analysis showed that the PV (or BCWS) was $1,000,000, the AC (or ACWP) was $500,000, and the EV (or BCWP) was $750,000. A    The project operated within its budget but was behind schedule. B    The project operated over its budget and was behind schedule. C    The project operated both on schedule and according to the assigned budget. D    The project operated within its budget but ahead of its schedule.

Unit summary: Cost management
Topic A                      In this topic, you learned that project cost management includes the processes that ensure a project is completed within the approved budget. Then, you learned some basic accounting and finance principles including, profits , life cycle costing, cash flow analysis, internal rate of return, tangible and intangible costs, direct , indirect, and sunk costs, learning curve theory, and reserves . Topic B                      In this topic, you learned about resource planning, which constitutes the first component of cost management. Next, you learned about resource assignment. You learned that you can assign resources at a constant rate, assign resources as a total, and assign resources based on availability. Topic C                     In this topic, you learned about cost estimation. Then, you learned about the types of cost estimates: rough order of magnitude , budgetary, and definitive. Next, you learned that a cost management plan is a document that describes how cost variances will be managed on a project. Then, you identified the tools and techniques you can use for cost estimating. You also discussed problems with IT cost estimates. Topic D                     In this topic, you learned about cost budgeting . Then, you learned about the standards that project managers must consider when establishing project budgets: work results and performance results . Next, you learned about capital budgeting and its concepts. Topic E                      In this topic, you learned about cost control. Then, you learned about Earned Value Analysis , which is one of the important tools for cost control. Next, you learned how to calculate earned value , cost and schedule performance indices , and cost and schedule variances. You also learned about Budget at Completion and Estimate at Completion.

Independent practice activity
  1  Given the following information for a one-year project, answer the following questions. (Recall that PV, or BCWS, is the budgeted cost of work schedule, EV, or BCWP, is the earned value or budgeted cost of work performed, AC, or ACWP, is the actual cost of work performed, and BAC is the budget at completion.) ·    PV or BCWS = $23,000 ·    EV or BCWP = $20,000 ·    AC or ACWP = $25,000 ·    BAC = $120,000       What are the cost variance, schedule variance, cost performance index (CPI), and schedule performance index (SPI) for the project?[25-Apr-13 03:07:19 PM]

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CV = EV – AC = 20,000 - 25,000 = -5,000 SV = EV – PV = 20,000 – 23,000 = -3,000 CPI = EV / AC = 20,000 / 25,000 = 80% SPI = EV / PV = 20,000 / 23,000 = 87%

      How is the project doing? Is it ahead of schedule or behind schedule? Is it under budget or over budget?
Because the CPI is less than 100% (it’s 80%), the project is exceeding its budget. Because the SPI is less than 100% (it’s 87%), the project is behind schedule.

      Use the SPI to estimate how long it will take to finish this project.
The project is scheduled for 1 year; therefore, 12months / SPI = 12 / 87 = 13.79 months.

  2  Create a cost estimate for building a new state-of-the art multimedia classroom for your organization within the next six months. The classroom should include 20 high-end personal computers with appropriate software, a network server, Internet access for all machines, a teacher station, and a projection system. Be sure to include all personnel costs associated with the project management for this project. Document the assumptions you made in preparing the estimate and provide explanations for key numbers.
Answers might vary.

Unit 6 Quality management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Explain the processes of project quality management and

describe quality planning.
B  Discuss quality assurance and its importance. C  Discuss quality control and identify the tools and

techniques to implement it.

Topic A:   Quality planning
Explanation The International Organization for Standardization (ISO) defines quality, as “the totality of characteristics of an entity that bear on its ability to satisfy stated or implied needs.” You can also define quality based on conformance to requirements and fitness for use. Conformance to requirements means the project’s processes and products meet all specifications. For example, if the scope statement requires delivery of 100 Pentium 4 computers, you can easily check whether computers of the correct configuration are delivered. Fitness for use means a product can be used as intended. For example, if the Pentium 4 computers were delivered with one or more components missing, the computers will not be fit for use.[25-Apr-13 03:07:19 PM]

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Quality must be viewed at an equal level with project scope, time, and cost. If stakeholders are not satisfied with a project’s quality or its resulting products, the project team will need to make adjustments to scope, time, and cost to meet the stakeholder’s expectations. Meeting documented requirements for scope, time, and cost is not sufficient. For stakeholder’s satisfaction, the project team must develop a good working relationship with all stakeholders and understand their stated or implied needs. The main purpose of project quality management is to ensure that a project meets the needs for which it was undertaken. It involves three processes: ·    Quality planning includes identifying and meeting the quality standards relevant to the project. Incorporating quality standards into project design is a key part of quality planning. For an information technology (IT) project, quality standards may include allowing for system growth, planning a reasonable response time for a system, or ensuring consistent and accurate information. Quality standards can also apply to IT services. For example, you can set standards to limit the time taken by a help desk to answer queries or ship a replacement for a hardware item. ·    Quality assurance involves continuously evaluating overall project performance to ensure that the project meets the relevant quality standards. The quality assurance process involves taking responsibility for quality both during the project and at the end of the project. Senior management must emphasize the roles of employees in quality assurance, especially the role of senior managers. ·    Quality control involves monitoring specific project results to ensure that they comply with the quality standards and identifying ways to improve the quality. This process is often associated with the technical tools and techniques of quality management, such as Pareto charts, quality control charts, and statistical sampling.

Project quality planning
The first step to ensure project quality management is planning, which refers to the ability to anticipate problem situations and prepare action plans to achieve the desired outcome. The current thrust in modern quality management is the prevention of defects through a program for selecting the right resource, training the team in quality standards, and planning a process that ensures achievement of the desired result. In project quality planning, it is important to identify quality standards relevant to each project and then meet these standards both in products and the processes of the project.

Design of experiments is a quality technique that helps identify variables that maximally influence the outcome of a process. Understanding the variables that affect the outcome is a crucial part of quality planning. For example, computer chip designers might want to determine a combination of materials and equipment to produce reliable chips at a reasonable cost. Planning also involves communicating the correct actions clearly and completely to the team for ensuring quality. While planning for ensuring quality in projects, you must describe important factors that directly contribute to meeting the customer’s requirements. Organizational policies related to quality, project’s scope statement and product descriptions, and related standards and regulations are essential input for the quality planning process. The main outputs of quality planning are a quality management plan and checklists to ensure quality throughout the project life cycle. It is often difficult to completely understand the performance dimension of IT projects. Even if hardware, software, and networking technology remain constant, it is often difficult for customers to explain their requirements clearly. Important scope aspects of IT projects that affect quality include functionality and features, system output, performance, reliability, and maintainability. ·    Functionality is the degree to which a system performs its intended function. Features are the special characteristics that appeal to users. It is important to clarify the business functions and features that the system must perform, and the functions and features that are optional. ·    System output refers to the screens and reports that the system generates. It is important to define clearly the types of screens and reports for a system.[25-Apr-13 03:07:19 PM]

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·    Performance addresses how well a product or service performs the customer’s intended use. To design a system with high-quality performance, project stakeholders must address issues such as the volumes of data and transactions that the system can handle, the number of simultaneous users that the system can handle, the projected growth rate of the number of users, the type of equipment that the system must use, and the response time for aspects of the system under different circumstances. ·    Reliability is the ability of a product or service to perform as expected under normal conditions without unacceptable failures. ·    Maintainability addresses the ease of maintaining a product. Most IT products cannot reach 100 percent reliability, but stakeholders must define their expectations. These aspects of project scope are just a few requirements issues related to quality planning. Project managers and their teams must consider all these project scope issues to determine quality goals for the project. The project’s customers must also understand their role in defining the most critical quality needs for the project and constantly communicate these needs and expectations to the project team. Because most IT projects involve requirements that might be flexible, it is important for all project stakeholders to work together to balance the scope, time, cost, and quality dimensions of the project. Project managers, however, are responsible for quality management on their projects. According to Deming’s philosophy, 85% of all quality problems are management problems. Issues addressed by quality management Project managers and team members should carefully examine specific issues during project quality management. Some important quality management issues are: ·    Error-prevention, which eliminates errors before they occur. ·    Accountability, which means that the project manager is ultimately responsible for making sure the resources necessary for successful project completion are available to team members. ·    Activity verification, which ensures that each activity is executed as planned. ·    Lessons learned from past projects, which enable the project team to create better products, provide better service, attract new customers, retain existing customers, and regain former customers. Quality plans Quality plans are guidelines set by the project manager to maintain product standards. Some goals of quality plans include: ·    Making sure products are fit for use when they reach customers. Products that require assembly by a customer are considered fit for use unless parts are damaged or missing. ·    Fostering customer satisfaction by providing quality products and efficient customer service. ·    Developing products that conform to customers’ needs and expectations. Do it!                    A-1:    Addressing quality management issues

Questions and answers
   1  Which issues should be addressed during project quality management?

   2  What are the goals of quality plans?[25-Apr-13 03:07:19 PM]

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   3  Mr. Harris, a project manager, needs each of his team members to list the resources required for successful completion of the project. Which quality management issue is he trying to address?


Initial planning of a project
Explanation                 Quality planning in a project involves anticipating and preparing for positive and negative situations that might arise during a project. The following should be included in initial project planning: ·    Network planning arranges project activities in their logical order of completion and diagrams the activities for visual reference. ·    Time analysis allows comparison between estimated and actual activity durations. ·    Resource analysis allows comparison between the quantity of resources allocated and the actual quantity of resources used for each activity. ·    Cost analysis enables comparison of funds allotted and the actual amount of funds used for completion of each activity. ·    Multiple schedules are contingency plans used to tackle crisis situations when the master schedule cannot be followed. ·    Progress reports communicate actual project progress as compared to planned progress, and identify any variations in a project schedule or resources. ·    Key events signify project status to customers and are used as control points for project managers. ·    Deadlines and activity logic account for the earliest and latest possible start dates for all project activities, and for activity relationships. Quality-related activities Quality management should be a priority throughout a project. As a project manager, it is essential that you carry out and/or verify the completion of the following quality-related activities: ·    Making sure product design standards are compatible with customer expectations ·    Listing the materials needed to manufacture a product ·    Maintaining the project team’s focus on quality standards ·    Checking for over-design that increases production cost ·    Checking for under-design that cuts corners to keep a project on schedule ·    Clearly detailing a product’s design specifications   Quality planning techniques Project managers can use different techniques to verify whether or not specific production processes or materials conform to a project’s quality standards. Some techniques used during quality planning include: ·    Benefit/cost analysis. This compares benefits with cost to make sure that a project meets quality requirements without exceeding the project’s budget. ·    Benchmarking. Helps compare planned project activities to past project[25-Apr-13 03:07:19 PM]

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activities. This technique allows the project manager to determine the adjustments that must be made to the project before work begins. ·    Flowcharting. Uses flowcharts, such as cause and effect diagrams, to illustrate relationships among parts of a project. ·    Design of experiments. Distinguishes the parts of a project that maximally impact a project’s final product. Quality policy A quality policy is a company’s statement that describes the procedures and methodologies that it will follow to develop quality products and the corrective actions it will take if products are defective. Most often, the senior management defines a quality policy to be implemented by project managers and team members. If a company does not have a formal quality policy, then project managers and team members must draft one before starting a new project. It is also important that a project’s stakeholders are familiar with the terms of the quality policy before a project begins. Do it!                    A-2:    Planning for quality

   1  Which of the following is a quality planning technique used to verify if production processes meet a project’s quality standards? A    Decomposition B    Resource loading C    Design of experiments D    Procurement verification    2  In your opinion, why is it important for project stakeholders to know the terms of quality policy before a project begins?


Topic B:   Quality assurance
Explanation Quality assurance refers to project activities that are planned and executed to ensure quality products and services. The goal of quality assurance is improved quality of a project’s processes and end products. Quality assurance also aims for continuous quality improvement. Several tools used in quality planning can also be used in quality assurance. For example, design of experiments can help ensure and improve product quality. Benchmarking can be used to generate ideas for improving quality by comparing specific project practices or product characteristics to those of earlier projects or products within or external to the organization. However, quality audits are a main technique for establishing quality assurance.

Quality audits
Project quality audits are evaluations of a project’s quality management system. One purpose of project quality audits is to identify areas of improvement. It is important to conduct project quality audits because they highlight incidents of deviation from a project’s quality objectives. Project quality audits can be planned or spontaneous, announced or unannounced, and should be conducted by an independent person or group. Project audits are conducted before, during, and after a project. The scope of an audit depends on the[25-Apr-13 03:07:19 PM]

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time at which it is performed. For example: ·    Audits conducted before a project begins focus on the technical aspects of a project, such as product design. Auditing a product’s design before production begins can be an important first step toward quality improvement. ·    Audits conducted during a project might focus on the progress of the project according to the schedule and budget provisions. If a project runs behind schedule, an audit can help determine the causes. ·    Audits conducted after project completion might focus on whether a product meets legal requirements or meets the actual expenses as compared to the budgeted expenses. Conducting a credible audit For a quality audit to be credible, it is important that the person or group conducting the audit is independent from the organization whose project is the focus of the audit. Auditors should never be involved in conflicts that occur within a project’s parent organization since involvement in such conflicts could jeopardize the credibility of the audit. A quality audit must be conducted by the person or group qualified to analyze project data. Qualifications vary depending on the project and the level of detail necessary for the audit. In addition, the person or group conducting the audit must be provided free access to all project data and members of a project team. Without access to the proper information and personnel, the audit cannot be conducted effectively. Do it!                    B-1:    Conducting an audit

   1  The goal of quality assurance is improved quality of a project’s processes and improved quality of end products. True or false?

   2  To conduct an effective audit, the auditor should: A    Be part of the organization whose project is the focus of the audit B    Be qualified to analyze project data C    Not be involved in conflicts occurring within a project’s parent organization D    Be provided free access to all project data

Responsibilities of the project auditor
Explanation                 Whether an audit is conducted by a person or an audit team, there are certain responsibilities that must be acknowledged throughout the audit. These responsibilities include: ·    Conducting objective analysis of project data, which includes avoiding the biases of interested parties and maintaining political and technical independence. ·    Admitting limitations of technical knowledge, if any, that might affect the results of the audit. ·    Ensuring honest representation of audit results. Project managers and team members must be aware of an auditor’s responsibilities so that they can avoid interfering with the auditor’s work. In addition, project managers and team members should leave auditors out of disputes, should not ask auditors to reveal confidential information, and should allow auditors access to all information pertinent to the audit. Components of a project audit report[25-Apr-13 03:07:19 PM]

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Project quality audit reports are useful tools for project managers. Audit reports contain information, such as a project’s status at the time of the audit and the status of activities that most influence a project’s success. Audit reports often analyze the level of risk, such as likelihood of a project’s failure. Determining the level of risk gives project managers and stakeholders the opportunity to consider ways to minimize the risk. In addition, audit reports should detail the assumptions made and restrictions faced during the audit. If an auditor made a faulty assumption during an audit, that assumption can impact the accuracy and validity of the audit report. Do it!                    B-2:    Assuring quality

   1  It is the responsibility of a project quality auditor to conduct a subjective analysis of project data to determine whether a project will be a success or failure. True or false? Give reasons.

   2  As a project manager for an IT project at Company A, you hired an auditor from Bedford & Brown to conduct an audit for Company A’s technical support team. Which information should your audit report include?

If the auditor makes any assumptions and faces any restrictions during an audit, should that be included in the audit report?


Topic C:   Quality control
Explanation Quality control measures are used throughout a project’s life cycle to make sure work is completed properly and the project results match the expectations outlined in the project’s quality management plan. During quality control, both the processes used to complete the project are examined to make sure they meet quality standards. Quality control ensures that a finished product meets specific quality norms and that unacceptable product characteristics are corrected. As with quality assurance, one of the main goals of quality control is to improve quality. The main output of quality control includes acceptance decisions, rework, and process adjustments. ·    Acceptance decisions determine if the products or services developed as part of the project will be accepted or rejected. If project stakeholders reject some of the products or services developed as part of the project, the team must rework. ·    Rework includes the actions performed to rectify problems with rejected items so that they comply with the product requirements, specifications, or stakeholder expectations. Rework can be expensive; therefore, the project manager must ensure effective quality planning and assurance to avoid or minimize rework.[25-Apr-13 03:07:19 PM]

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·    Process adjustments correct or prevent further quality problems based on quality control measurements.

Statistical quality control
Statistical quality control evaluates the extent of product variation and identifies the changes, if any, that must be made to production processes to decrease product variation. Incidents of product variation are represented on a graph by data points, and a normal distribution curve indicates whether or not the variations are of an acceptable degree of quality standards. Basic statistical terms Quality monitoring involves the use of statistics. Therefore, it is important to know the following basic statistical terms: ·    Population. Refers to the total number of product units developed during a project. ·    Sample size. Refers to the number of product units derived from a population for evaluation during a project’s quality monitoring process. This number varies depending on the product, the time of the inspection, and the company’s needs. ·    Mean. Refers to the sum of the sample divided by the number of units in the sample. For example, in the sample {2, 3, 4, 3}, the mean is (2 + 3 + 4 + 3)/4, which is 3. ·    Median. When an odd-numbered set of data is arranged sequentially, the middle number in the set is the median. For example, in the set {2, 4, 7}, the median is 4. When an even-numbered set of data is arranged sequentially, the median is the average of the middle two numbers. For example, in the set {3, 4, 6, 8}, the median is. (4 + 6)/2, which is 5. ·    Mode. Represents a number that occurs most frequently in a sample of data. For example, in the set {1, 4, 6, 1, 8, 1}, the mode is 1. Do it!                    C-1:    Using statistical terms

   1  The term “mean” refers to the number of defects that occur most frequently in a sample of product units. True or false?

   2  In a data sample, the number that occurs most frequently represents: A    Mean B    Median C    Mode D    Sample size

Tools and techniques for quality control
Explanation                 There are several tools and techniques that you can use for quality control. These include: ·    Pareto analysis ·    Statistical sampling ·    Quality control charts Pareto analysis Pareto analysis involves identifying the vital contributors that account for the maximum quality[25-Apr-13 03:07:19 PM]

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problems. It is, sometimes, referred to as the 80–20 rule, which means that 80 percent of problems are often due to 20 percent of the causes. Theoretically, if project managers focus on the 20% of processes identified using Pareto analysis, they will be able to solve 80% of the project’s problems. Pareto analysis uses histograms to list product defects based on their type and frequency of occurrence. Project managers can use Pareto analysis to rank defects according to severity, and then focus on correcting the most critical defects. In addition, Pareto analysis diagrams are used to determine whether corrective action has actually rectified a problem. It also evaluates the differences between project activities or methods. A Pareto diagram is an effective tool for analyzing user complaints and helping project managers prioritize the complaints to be addressed. For example, suppose users issued several complaints about a new Executive Information System (EIS) launched recently. You can use the Pareto diagram to analyze and address these complaints. Exhibit 6-1 shows the Pareto diagram of user complaints by category that can apply to an EIS project. The bars represent the number of complaints for each category, and the line shows the cumulative percent of the complaints. Exhibit 6-1 shows that the most frequent user complaint is log-in problems, followed by the system locking up, the system being too slow, the system being hard to use, and the reports being inaccurate. The first type of complaint accounts for 55 percent of total complaints, and the first and second types of complaints together account for a cumulative percentage of almost 80 percent, which means that these two types of complaints alone account for 80 percent of all complaints. Therefore, the company should focus on making it easier for users to log in to the system to improve quality because the majority of users face this problem. The company should also determine why systems lock up. Because the problem of inaccurate reports was rare, the project manager should determine the user who faced this problem before spending effort on addressing this potentially critical problem with the system. The project manager should also find out if complaints about the system being too slow were because users were unable to log on or the systems were locking.

Exhibit 6-1: A sample Pareto diagram Statistical sampling and standard deviation Statistical sampling is a key concept in project quality management. Members of a project team who focus on quality control must clearly understand statistics, but other team members need to understand only the basic concepts. These concepts include statistical sampling, certainty factor, standard deviation, and variability. Standard deviation and variability are fundamental concepts for understanding quality control charts. Statistical sampling involves choosing part of a population for inspection. For example, suppose a company wants to develop an electronic data interchange (EDI) system to handle data on invoices from all of its suppliers. Assume that in the past year, the total number of invoices received from 200 suppliers was 50,000. It will be time-consuming and expensive to review each invoice to determine data requirements for the new system. Even if all invoice forms were reviewed, the data might be entered differently on every form, posing problems related to interpretation. To manage and process data from a large number of sources, statisticians developed techniques to help determine an appropriate sample size. If system developers used statistical techniques, they might find that by studying only 100 invoices, a sample of the type of data required to design the system will be available. The size of the sample depends on the extent of sample representation you require. A formula for determining sample size is:
Sample size = .25 x (certainty factor/acceptable error)2

The certainty factor denotes how certain you want to be that the data sampled will not include variations that do not naturally exist in the population. You calculate the certainty factor from tables in statistics books. The following table shows commonly used certainty factors.

Desired certainty

Certainty factor
1.960[25-Apr-13 03:07:19 PM]

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90% 80%

1.645 1.281

For example, the developers of the EDI system described earlier accept a 95 percent certainty that a sample of invoices contain no variation, unless it was part of the population of total invoices. They then calculate the sample size as:
Sample size = 0.25 x (1.960/.05)

= 384

If the developers require 90 percent certainty, they calculate the sample size as:
Sample size = 0.25 x (1.645/.10)2 = 68

If the developers want 80 percent certainty, they calculate the sample size as:
Sample size = 0.25 x (1.281/.20)2 = 10

Another key concept in statistics related to quality control is standard deviation. Standard deviation measures the variation in the distribution of data. A small standard deviation means that data cluster closely around the center of a distribution, and there is little variation in the data. A large standard deviation means that data are spread out around the center of the distribution, and there is relatively higher variation. Statisticians use the Greek symbol s (sigma) to represent standard deviation. Exhibit 6-2 provides an example of a normal distribution —a bell-shaped curve that is symmetrical about the mean or average value of the population. In any normal distribution, 68.3 percent of the population is within one standard deviation (1s) of the mean, 95.5 percent is within two standard deviations (2s), and 99.7 percent is within three standard deviations (3s) of the mean. Note that being within 3s of the mean in this example indicates plus or minus 3s. Exhibit 6-2: Normal distribution and standard deviation

Standard deviation is important in quality control because it is a key factor in determining the acceptable number of defective units. Some companies, such as Motorola, GE, and Polaroid, are setting high quality standards by using Six Sigma (6s) as a quality control standard instead of three or four sigma. Six Sigma is considered to be one of the best-known contributions to quality improvement. The following table further illustrates the relationship between sigma, the percentage of the population within the sigma range, and the number of defective units per billion. The next section describes how sigma is used on quality control charts.

Specification range (in +/- sigmas)
1 2 3 4 5 6

Percent of population within range
68.27 95.45 99.73 99.9937 99.999943 99.9999998

Defective units per billion
317,300,000 45,400,000 2,700,000 63,000 57 2

Quality control charts, six sigma, and the seven run rule A control chart is a graphic display of data that illustrates the results of a process over a period of[25-Apr-13 03:07:19 PM]

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time. The main use of control charts is to prevent defects, rather than to detect or reject defects. Quality control charts allow you to determine whether a process is in control or out of control. When a process is in control, any variations in the results of the process are created by random events. Processes that are in control do not need to be adjusted. When a process is out of control, variations in the results of the process are caused by nonrandom events. You need to identify the causes of nonrandom events and adjust the process to correct or eliminate such events. Control charts are often used to monitor manufactured products, but they can also be used to monitor the volume and frequency of change requests, errors in documents, cost and schedule variances, and other items related to project quality management. Exhibit 6-3 illustrates an example of a control chart for a process that manufactures 12-inch rulers. Assume that these are wooden rulers created by machines on an assembly line. Each point on the chart represents a length measurement for a ruler that leaves the assembly line. The scale on the vertical axis extends from 11.90 to 12.10. These numbers represent the lower and upper specification limit for the ruler. This means that the customer has specified that all rulers must be 11.9 to 12.1 inches long or 12.0 inches, plus or minus 0.1 inch. Thus, the lower and upper control limits on the quality control chart are 11.91 and 12.09 inches, respectively. This means the manufacturing process is designed to produce rulers that are 11.91 to 12.09 inches long.

Exhibit 6-3: Sample quality control chart Note the dotted lines on the chart at 12.03 inches, 12.06 inches, and 12.09 inches. These dotted lines represent the points at one, two, and three standard deviations above the mean. The dotted lines at 11.97 inches, 11.94 inches, and 11.91 represent the points at one, two, and three standard deviations below the mean. Based on the definition of ±3s described earlier, 99.73 percent of the manufactured rulers should be 11.91 to 12.09 inches long, if the manufacturing process is operating in control. Exhibit 6-4 illustrates the concept of moving from a quality control process operating at ±3s to a process operating at ±6s. Important goals of quality are to reduce defects and process variability. By reducing process variability, the standard deviation of the process distribution decreases. As you continue to reduce process variability, it is possible for the product tolerance or control limits that formerly included only three sigmas to eventually include six sigmas. 1 Exhibit 6-4: Reducing defects with six sigma

Looking for patterns in process data and analyzing them is an important part of quality control. You can use quality control charts and the seven run rule to look for patterns in data. The seven run rule states that if seven data points in a row lie below the mean, above the mean, or are all increasing or decreasing, then the process needs to be examined for non-random problems. In Exhibit 6-3, data points that violate the seven run rule are starred. In the ruler manufacturing process, these data points might indicate that a calibration device needs to be adjusted. For example, the machine that cuts the wood for the rulers might need to be adjusted or the blades on the machine might need to be replaced. Testing Many IT professionals assume testing is a stage toward the end of IT product development. Instead of putting serious effort into proper planning, analysis, and design of IT projects, some companies rely heavily on testing their products just before dispatch to ensure quality. Contrary to popular belief, testing must be performed during every phase of the product development life cycle and not just before product delivery. Exhibit 6-5 shows one way of portraying the software development project life cycle. This example includes 17 main phases involved in a software development project and shows their interrelationships. For example, every project should start by initiation, then by performing a feasibility study, and then by planning for the project. The exhibit shows that the work involved in detailing requirements and the architecture for the system can be performed simultaneously. The oval-shaped phases represent areas where you should test the product to help ensure quality on software development projects. 2[25-Apr-13 03:07:19 PM]

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Exhibit 6-5: Testing tasks in the software development life cycle

Several phases shown in Exhibit 6-5 include specific work related to testing. A unit test is performed to test each individual component (often a program) to ensure it is defect-free. Unit tests are performed before moving on to the integration test. Integration testing occurs between unit and system testing to test functionally-grouped components. It ensures that each subset of the system works together. System testing tests the entire system as an entity. It focuses on the big picture to ensure that the entire system works properly. User acceptance testing is an independent test performed by the end user prior to accepting the delivered system. It focuses on the business fit of the system to the organization, rather than on technical issues. Do it!                    C-2:    Discussing quality control techniques

   1  Seven run rule applies to which quality control tool? A    Checklist B    Pareto analysis C    Control charts D    Inspection    2  A project’s process is “out of control” when the data points on a control chart are: A    In a periodic pattern B    Not random around the mean C    Random around the mean D    Hugging the control limit    3  Do you agree with the following statement? “Quality cannot be infused in a project or a product by inspection.”


Improving IT project quality
Explanation In addition to some of the suggestions provided for using good quality planning, quality assurance, and quality control, several other important factors help improve the quality of IT projects. Understanding the cost of quality, providing a good workplace to enhance quality, and working toward improving the organization’s overall maturity level in software development and project management can assist in improving quality. The cost of quality The cost of quality is the total of the cost of conformance and the cost of nonconformance. Conformance means delivering products that meet requirements and fitness standards. Examples of cost of conformance include the costs associated with developing a quality plan, analyzing and managing product requirements, and testing. Nonconformance means accepting responsibility for failures or for not meeting quality expectations. The following table, generated by Contingency Planning Research in 1995, summarizes the net bottom-line costs per hour of downtime caused by software defects for different businesses. Both American Airlines and United Airlines estimated that reservation system downtime costs them over $20,000 per minute in lost income. This table—which highlights the costs per hour of downtime caused by software defects—illustrates more examples of the cost of nonconformance.[25-Apr-13 03:07:19 PM]

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Automated teller machines (medium-sized bank) Package shipping service Telephone ticket sales Catalog sales center Airline reservation center (small airline)

Cost per hour of downtime
$14,500 $28,250 $69,000 $90,000 $89,500

The five major cost categories related to quality include: 1   Prevention cost. This is the cost of planning and executing a project so that it is error-free or within an acceptable error range. Preventive actions such as training, detailed studies related to quality, and quality surveys of suppliers and subcontractors fall under this category. The cost of 100 dollars spent for refining user requirements can save millions by detecting defects before implementing a large system. The Year 2000 issue, commonly called Y2K, provides a good example of these costs. If companies had decided during the 1960s, 1970s, and 1980s that all dates would need four characters to represent the year instead of two characters, they could have saved billions of dollars. 2   Appraisal cost. This is the cost of evaluating processes and their output to ensure that a project is error-free or within an acceptable error range. Activities such as inspection and testing of products, maintenance of inspection and test equipment, and processing and reporting inspection data contribute to the appraisal costs of quality. 3   Internal failure cost. This is the cost incurred to correct an identified defect before the customer receives the product. Items such as scrap and rework, charges related to late payment of bills, inventory costs incurred as a result of defects, costs of engineering changes related to correcting a design error, premature failure of products, and correcting documentation contribute to the internal failure cost. 4   External failure cost. This is the cost that relates to all errors not detected and corrected before delivery to the customer. Examples of external failure cost include warranty cost, field service personnel training cost, product liability suits, complaint handling, and future business losses. 5   Measurement and test equipment costs. This is the capital cost of equipment used to perform prevention and appraisal activities. Senior management is primarily responsible for the high cost of nonconformance in IT. Senior managers often rush their organizations to develop new systems and do not give project teams enough time or resources to do a project right the first time. To correct these quality problems, senior management must create a culture that embraces quality. Organizational influences, workplace factors, and quality A study done by Tom DeMarco and Timothy Lister, which was published in Peopleware: Productive Projects and Teams , produced interesting results related to organizations and relative productivity. Starting in 1984, DeMarco and Lister conducted “Coding War Games” over several years. Over the years, more than 600 software developers from 92 organizations have participated in these games. The games are designed to examine programming quality and productivity over a wide range of organizations, technical environments, and programming languages. The study demonstrated that organizational issues influenced productivity in a larger way than the technical environment or programming languages. DeMarco and Lister found that productivity varied by a factor of about 1 to 10 across participants. This means that one team might have completed a coding project in one day while another team took 10 days to complete the same project. In contrast, productivity varied by an average of only 21 percent between pairs of software developers from the same organization. If one team from a specific organization finished the coding project in one day, the longest time that another team from the same[25-Apr-13 03:07:19 PM]

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organization took to finish the project was 1.21 days. DeMarco and Lister also found no correlation between productivity and programming language, years of experience, or salary. Moreover, the study showed that providing a dedicated workspace and a quiet work environment were key factors in improving productivity. The results of the study suggest that senior managers must focus on work-place factors to improve productivity and quality. 3 Maturity models Another approach to improving quality in software development projects and project management, in general, is the use of maturity models —frameworks for helping organizations improve their processes and systems. Three popular maturity models include the Software Quality Function Deployment (SQFD) model, the Capability Maturity Model (CMM), and the Project Management Maturity Model. The SQFD model is an adaptation of the quality function deployment model suggested in 1986 as an implementation vehicle for total quality management. SQFD focuses on defining user requirements and planning software projects. The result of SQFD is a set of measurable technical product specifications and their priorities. Defining clear requirements can lead to fewer design changes, increased productivity, and, ultimately, software products that meet stakeholder requirements. Another popular maturity model, the CMM, is in continuous development at the Software Engineering Institute at Carnegie Mellon University. The Software Engineering Institute (SEI) is a federally funded research and development center established in 1984 by the U.S. Department of Defense with a broad mandate to address the transition of software engineering technology. The CMM is a five-level model that lays out a generic path for process improvement for software development in organizations. The five levels of the CMM model are: 1   Initial. The software development processes for organizations at this maturity level are ad hoc and occasionally even chaotic. Few processes are defined, and success often depends on individual effort. 2   Repeatable. Organizations at this maturity level have established basic project management processes to track cost, schedule, and functionality for software projects. Process discipline is defined to repeat earlier successes on similar projects. 3   Defined. At this level, software processes for both management and software engineering activities are documented, standardized, and integrated into a standard software process for the organization. All projects use an approved, tailored version of the standard process in the organization. 4   Managed. At this maturity level, organizations collect detailed measures of the software process and product quality. Both software processes and products are quantitatively interpreted and controlled. 5   Optimizing. Operating at the highest level of the maturity model, organizations can enable continuous process improvement by using quantitative feedback from the processes and from piloting innovative ideas and technologies.4 In the late 1990s, several organizations began developing project management maturity models based on the Capability Maturity Model. Just as organizations realized the need to improve their software development processes and systems, they also realized the need to enhance their project management processes and systems. The third maturity model is the Project Management Maturity Model . The PMI Standards Development Program made substantial progress on an Organizational Project Management Maturity Model (OPM3) Standard in 1998. PMI has worked with several companies to prepare guidelines for a maturity model for project management. The OPM3 includes a method for assessing organizations’ project management maturity levels and a step-by-step method for increasing and maintaining an organization’s ability to deliver projects as committed. One sample project management maturity model developed by Micro-Frame Technologies, Inc. and Project Management Technologies, Inc. in 1997 has the following basic levels.[25-Apr-13 03:07:19 PM]

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·    Ad-Hoc. The project management process is described as disorganized and, occasionally, even chaotic. The organization does not follow defined systems and processes, and project success depends on individual effort. There are chronic cost and schedule problems. ·    Abbreviated. Some project management processes and systems are defined to track cost, schedule, and scope. Project success is largely unpredictable and cost and schedule problems are common. ·    Organized. Standardized, documented project management processes and systems are integrated into the rest of the organization. Project success is more predictable, and cost and schedule performance is improved. ·    Managed. Management collects and uses detailed measures of effectiveness of project management. Project success is uniform, and cost and schedule performance conforms to plans. ·    Adaptive. Feedback from the project management process and from piloting innovative ideas and technologies enables continuous improvement. Project success is the norm, and cost and schedule performance shows continuous improvement.5 Many organizations are assessing where they are in terms of project management maturity, just as they did for software development maturity. Organizations are recognizing that they must make a commitment to the discipline of project management to improve project quality. Do it!                    C-3:    Improving IT project quality

Questions and answers
   1  How can you improve understanding of customer requirements, the cost of quality, and improved testing?

   2  Suggest some ways for improving IT project quality.


Unit summary: Quality management
Topic A                      In this topic, you learned about quality management and its main processes. Then, you learned that quality planning includes identifying and meeting the quality standards relevant to a project. Next, you learned about important scope aspects of IT projects that affect quality. Finally, you learned about quality plans and the quality planning techniques . Topic B                      In this topic, you learned that quality assurance refers to project activities that are planned and executed to ensure quality products and services. Then, you learned that quality audits are one of the main techniques for establishing quality assurance. Next, you learned about the responsibilities of a project auditor. Finally, you learned about the audit report and its components. Topic C                     In this topic, you learned that quality control measures are used throughout a project’s life cycle to make sure work is completed properly and that the actual project results match the expectations. Then, you learned the basic statistical terms used in quality monitoring. You also learned about the tools and techniques for quality control, including Pareto charts, statistical sampling , standard deviation , control charts, six sigma , and testing . Next, you learned about the methods to improve IT project quality. You also learned about the three popular maturity models: the Software Quality Function Deployment (SQFD) model, the Capability Maturity Model (CMM), and the Project[25-Apr-13 03:07:19 PM]

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Management Maturity Model.

Independent practice activity
  1  Recall projects in which you have participated. What quality management techniques were used? Were they effective? What changes could be made to improve the quality of your organization’s IT projects?
Answers might vary.

  2  To illustrate a normal distribution, shake and roll a pair of dice 30 times and plot the results on a graph or draw a grid. It is more likely for someone to roll a six, seven, or eight than a two or twelve, so these numbers should come up more often. On the graph, label the x-axis with the numbers 2 through 12. Label the y-axis with the numbers 1 through 8. Fill in the appropriate grid for each roll of the dice. Do your results resemble a normal distribution? Why or why not?
Answers might vary.

  3  Which quality control tool uses a graphic display of data that illustrates the results of a process over a period of time to prevent defects, rather than to detect or reject defects? A  Trend analysis B  Pareto analysis C  Control chart D  Flowchart

  # 1 Reference Ireland, Lewis R. Quality Management for Projects and Programs. PMI, 1991, cover page illustration and comments. Hollstadt & Associates, Inc. Software Development Project Life Cycle Testing Methodology User’s Manual. Burnsville: MN, August 1998, 13. DeMarco, Tom and Timothy Lister. Peopleware: Productive Projects and Teams. New York: Dorset House, 1987. Paulk, Mark C., Bill Curtis, Mary Beth Chrissis, and Charles V. Weber. Capability Maturity Model for Software, Version 1.1, Technical Report, CMU/SEI-93-TR-024, ESC-TR-93-177 (February 1993). Enterprise Planning Associates. Project Management Maturity Model, Interactive Quick Look (1998).






Unit 7 Human resource management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:[25-Apr-13 03:07:19 PM]

IT Project Management:

A  Define the elements of organizational planning. B  Discuss staff acquisition and explain how to negotiate

C  Discuss the development of successful teams and how to

motivate them.
D  Use software to assist in human resource management.

Topic A:   Organizational fundamentals
Explanation                 Human resource management involves using project resources effectively. Human resource management includes managing all project stakeholders: sponsors, customers, project team members, support staff, vendors, and supporting staff. The major processes involved in human resource management include: ·    Organizational planning, which involves identifying, assigning, and documenting project roles, responsibilities, and reporting relationships. Key output of this process includes roles and responsibility assignments, often shown in a matrix form, and an organizational chart for the project. ·    Staff acquisition , which involves arranging for the required personnel to work on the project. Finding personnel with the required skill and expertise is one of the crucial challenges of information technology (IT) projects. ·    Team development, which involves building individual and group skills to enhance performance. Team development and skill enhancement are also challenges for many IT projects. The project managers can follow the steps given below to create a project team: 1   Investigate the parent company’s internal culture, its inclination toward taking risks, and how much money it is budgeting for the project. 2   Ascertain whether or not the parent company has already established the project’s completion date. The less time allowed for project execution, the more authority the project manager needs to make project-related decisions and shift resources so the project can be completed on time. 3   Clearly define project roles and responsibilities. 4   Outline the channels of communication that will be used throughout the project. 5   Determine the type of project organizational structure that will work best for the parent company, the team members, and for project execution. 6   Acquire personnel for the project team. 7   Develop a team culture that fits within the bounds of the parent company’s culture. A project manager must make the best decisions possible at any time, based on time and resource constraints. Situations change and factors are unpredictable, so what might have been a good decision ten minutes ago can now be less than desirable. Therefore, the project manager and team must be flexible and work together to handle changes in a project’s course.

Organizational planning
Organizational planning for a project involves identifying, documenting, and assigning project roles, responsibilities, and reporting relationships. This process generates an organizational chart for the project team, as well as roles and responsibility assignments, which are often shown in a matrix form called a responsibility assignment matrix (RAM). It also generates a staffing management plan. Before creating an organizational chart for a project, senior managers and the project manager must identify the resources they need to ensure the project’s success. If the project requires Java programmers or a top-notch project manager and experienced team leaders, then this must be[25-Apr-13 03:07:19 PM]

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included in organizational planning. Do it!                    A-1:    Discussing organizational planning

Questions and answers
   1  What are the main processes involved in human resource management?

   2  What are the components of organizational planning?


Elements of organizational planning
Explanation                 Organizational planning includes the following: ·    Clearly defining roles and responsibilities ·    Developing a staff management plan ·    Creating an organizational chart ·    Writing detailed job descriptions ·    Clearly defining roles and responsibilities After identifying the skills and resources for a project, the project manager should work with senior managers and team members to create an organizational chart. Exhibit 7-1 provides a sample organizational chart for a large IT project. Note that the project personnel include a deputy project manager, subproject managers, and team members. Deputy project managers fill in for project managers in their absence and assist them when required; their role is similar to that of a vice president. Subproject managers manage subprojects that constitute a large project. This structure is typical for large projects. With many resources working on a project, clearly defining and allocating project work is essential. Small IT projects usually do not require deputy project managers or subproject managers, and the project managers work directly with team leaders and other team members. Exhibit 7-1: Sample organizational chart for a large IT project Organizational planning provides a framework for defining and assigning work. This process consists of four steps: 1   Finalizing the project requirements. 2   Defining how to accomplish the task. 3   Breaking down the work into manageable elements. 4   Assigning work responsibilities.   Work definition and assignment process The work definition and assignment process is carried out during the proposal and startup phases of a project and is shown in Exhibit 7-2. The process is iterative, which means that it often takes more than one pass through the process to refine it. A Request for Proposal (RFP) or draft contract often provides the basis for defining and finalizing work requirements, which are then documented in a final contract. If a project does not use an RFP, then the internal project charter and scope statement[25-Apr-13 03:07:19 PM]

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can provide the basis for defining and finalizing work requirements. The project team leaders then decide a technical approach for work. They also decide if work should be broken down using a product-oriented approach or a phased approach. In addition, they decide if part of the work can be outsourced or subcontracted. After the project team decides a technical approach, they develop a work breakdown structure (WBS) to establish manageable elements of work. They then develop activity definitions to further define the work involved in each activity on the WBS. The last step in the process is assigning the work. Exhibit 7-2: Work definition and assignment process After the project manager and project team split the work into manageable elements, the project manager assigns the work to organizational units of the project. The project manager often bases these work assignments on where the work fits in the organization and uses an organizational breakdown structure to conceptualize the process. An organizational breakdown structure (OBS) is a specific type of organizational chart that shows the organizational units and their corresponding work items. The OBS can be based on a general organizational chart and then broken down into detail based on specific units within departments in the company or units in any subcontracted companies. After developing an OBS, the project manager can create a responsibility assignment matrix (RAM). A responsibility assignment matrix (RAM) maps the work of the project as described in the WBS to the human resources responsible for performing the work, as described in the OBS. Exhibit 7-3 shows an example of a RAM. The RAM allocates work to responsible and performing organizations, teams, or individuals, depending on the required level of detail. For small projects, it is best to assign individual resources to WBS activities. For large projects, it is effective to assign the work to organizational units or teams.

Exhibit 7-3: Sample responsibility assignment matrix In addition to using the RAM to assign detailed work activities, you can use it to define general roles and responsibilities for projects. This type of RAM can include the project stakeholders. Exhibit 7-4 provides a RAM that shows whether stakeholders are accountable or participants in part of a project, and whether they are required to provide input, review, or sign off on parts of a project. This simple tool can be an effective way for the project manager to communicate the roles and expectations of important stakeholders on projects. Exhibit 7-4: RAM showing stakeholder roles Another output of organizational planning is a staffing management plan. This plan describes when and how resources will be allocated to the project team. It can be a formal or an informal plan; the level of detail will vary based on the type of project. For example, if an IT project is estimated to need an average of 100 team members for over a year, the staffing management plan describes the types of resources needed to work on the project, such as Java programmers, business analysts, and technical writers, and the number of each type of resource. The staffing management plan often includes a resource histogram—a column chart that shows the number of resources assigned to a project over time. Exhibit 7-5 provides an example of a histogram used for a large, one-year IT project. The columns represent the number of people needed in each area—Java programmers, business analysts, technical writers, managers, administrative staff, database analysts, and testing specialists. After determining the project staffing needs, the next few steps in project human resource management are to acquire the necessary staff and develop the project team. Exhibit 7-5: Sample resource histogram for a large IT project Do it!                    A-2:    Identifying the elements of organizational planning

   1  Which of the following is an element of organizational planning?[25-Apr-13 03:07:19 PM]

IT Project Management:

A    Adoption of quality control techniques B    Rough ideas for a staff management plan C    Clearly defining roles and responsibilities D    Greater independence from contractors    2  What is RAM?

   3  A staffing management plan often includes a resource histogram. Describe this tool.


Topic B:   Staff acquisition
Explanation                 Staff acquisition, especially of qualified IT professionals, is critical and so is assigning the appropriate type and number of resources to work on projects at the appropriate time. Resource loading and leveling are human resource management techniques that address these concerns. Once acquired, it’s paramount that the skilled and motivated professionals work as part of a team for the project to be successful. Therefore, after hiring professionals for a project, team development is the next important activity. After developing a staffing management plan, project managers must work with their colleagues in other departments to assign human resources to their projects. Project managers with strong persuasion and negotiation skills often succeed in arranging for resources from other departments to work on their projects. However, the organization must ensure that skilled resources that best fit in the profile required for a project are assigned to that project. The main outputs of the staff acquisition process are project staff assignments and a project team directory. Organizations using good staffing plans are successful in their staff acquisition procedures. These plans describe the number and type of human resources currently working with the organization and to be acquired by the organization based on the current and upcoming projects. An important component of staffing plans is maintaining a complete and accurate inventory of employees’ skills. If there is a mismatch between the skills of the existing employees and the organization’s needs, then the project manager must work with senior managers, human resource managers, and others in the organization to address staffing and training needs. It is also important to define procedures for hiring subcontractors and recruiting new employees. The Personnel department is responsible for hiring; however, project managers must work with human resource managers to ensure resources with the required skills and expertise are hired. It is also important to address retention issues, especially for IT professionals. One innovative approach to hiring and retaining IT staff is to offer existing employees incentives for helping recruit and retain personnel. For example, several consulting companies pay their employees one dollar for every hour of work by new members of staff that the employees helped hire. This provides an incentive for current employees to help recruit skilled resources and keep them working with the organization. Another approach adopted by several companies is to provide benefits based on the personal needs of its employees. For example, some employees might want to work only four days a week or might want to work from home a couple of days a week. With increasing competition for hiring good IT professionals, organizations are becoming innovative and proactive in evolving strategies to retain their employees.

Resource loading and leveling
Scheduling processes often do not address the issues of resource utilization and availability. Schedules tend to focus exclusively on time rather than on both time and resources, including human[25-Apr-13 03:07:19 PM]

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resources. An important measure of a project manager’s success is how well he or she balances the tradeoffs among performance, time, and cost. During crises, it is occasionally possible to add additional resources—such as additional team members—without adding to the project’s cost. On most occasions, however, resolving performance, time, and cost tradeoffs entails additional costs to the organization. The project manager’s goal must be to achieve success without increasing the costs or time required to complete the project. The key to accomplish this goal is to manage the human resources assigned to the project effectively. After human resources are assigned to projects, project managers can use two techniques to use project staff most effectively, resource loading and resource leveling. Resource loading refers to the number of resources the project requires during specific time periods according to the existing schedule. This technique helps project managers understand the demands a project will make on the organization’s resources. Project managers often use histograms to depict period-by-period variations in resource loading. A histogram helps determine staffing needs or identify staffing problems. A resource loading histogram can also show the period when work is over-allocated to a specific team member or group. Over-allocation means more resources than are available are assigned to perform work at a given time. Resource leveling is a technique for resolving resource conflicts by delaying tasks. It is a form of schedule development technique in which resource management concerns drive scheduling decisions (start and finish dates). The main purpose of resource leveling is to ensure uniform resource usage in a project. Project managers examine the network diagram to identify areas of slack or float and those of resource conflicts. Over-allocation is a type of resource conflict. If a resource is over-allocated or under-allocated, the project manager can modify the schedule to change the workload of the resource. Resource leveling, therefore, aims to minimize period-by-period variations in resource loading by shifting tasks within their slack allowances. Exhibit 7-6 illustrates a simple example of leveling resources. The network diagram at the top in this exhibit shows that activities A, B, and C can start at the same time. Activity A requires two resources to complete it in two days; Activity B requires four resources to complete it in five days; and Activity C requires two resources to complete it in three days. The histogram on the lower left in this exhibit shows the resource usage if all activities start on the first day. The histogram on the lower right in Exhibit 7-6 shows the resource usage if Activity C is delayed by two days, which is its total slack allowance. Notice that the lower right histogram is flat or leveled, which means that its pieces (activities) are arranged to take up the least space (saving days and numbers of workers). You might recognize this strategy from the computer game Tetris, in which you earn points for keeping the falling shapes as level as possible. The player with the maximum points (and the maximum level shape allocation) wins. Resources are also used best when they are leveled.

Exhibit 7-6: Resource leveling example Resource leveling has several benefits. First, when resources are used regularly, they require less management. For example, it is easier to manage a part-time team member who works 20 hours a week for 3 months than a team member who works 10 hours the first week, 40 hours the next, and 5 hours the next. Second, resource leveling enables project managers to use a just-in-time inventory type of policy for using subcontractors or other expensive resources. For example, a project manager might want to level resources related to work performed by specific subcontractors, such as testing consultants. This leveling might allow the project to use four external consultants full time to test the deliverables for four months, instead of using more time or more resources. The latter approach is more expensive. Third, resource leveling results in smooth operations for project personnel and accounting departments. Increasing and decreasing labor levels and particular human resources often require additional work and causes confusion. For example, if a team member with expertise in a particular domain works two days a week and another member works two different days, it will be impossible to get the two team members to work together on the project. In addition, the accounting department might need to handle subcontractors’ requests for a higher rate for billing less than 20 hours a week[25-Apr-13 03:07:19 PM]

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or any other such condition. However, the accountants, along with project managers, will strive to get work done at the lowest possible rates. Finally, resource leveling improves morale. Human resources prefer stability in their jobs and might find it difficult to work during periods of uncertainty or lack of information about their project assignments. Project management software can automatically level resources. However, the project manager must be careful in using the results of the software. Automatic leveling often modifies the project’s completion date. Resources might be reallocated to work at time periods that are inappropriate, given other constraints. A wise project manager should ensure that leveling is appropriate by proficient use of the project management software. Do it!                    B-1:    Discussing resource loading and resource leveling

Questions and answers
   1  What is the main problem in scheduling resources? How can this problem be resolved?

   2  Differentiate between resource loading and resource leveling.

   3  What are the benefits of resource leveling?


Successful negotiation
Explanation                 Depending on the nature of the project and that of the project’s parent organization, negotiations can play a major role in staffing for a project. For example, a project manager might negotiate with a functional manager to assign specialized personnel from a particular department. Negotiating for project personnel can be a difficult task. However, as a project manager, you can alleviate some of the stress by following these suggestions: 1   Develop a plan. 2   Adjust your approach. 3   Compromise. Developing a plan A critical element of successful negotiations is preparation. When preparing to negotiate for project personnel, a project manager should follow these steps: 1   Determine the human resource skills necessary to complete each activity listed on the project’s work breakdown structure. 2   Write clear and concise job descriptions.[25-Apr-13 03:07:19 PM]

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3   Set goals for staff acquisition. 4   Assess the party with whom you’ll negotiate. This step involves referring to records from previous negotiations, verifying the authority of the party with whom you’ll negotiate, and discerning their needs. 5   Set limits that coincide with the staff acquisition goals and identify the options available. When you know the decisions that might or might not be acceptable, you’ll know when to abandon an unproductive negotiation. 6   Create an agenda for the negotiation. This step involves prioritizing issues according to your goals. Prioritizing issues prevents you from wasting time debating unnecessary points and keeping the negotiation focused on your goals for staff acquisition. Never start a negotiation unless you are thoroughly prepared. If the other party is ready to negotiate, but you are not, establish a date when you’ll be ready to negotiate. Adjusting your approach While negotiating for project staff, tension might arise. If the negotiation gets intense, you might want to take a break to allow yourself and the other party to regroup and, perhaps, gain a different perspective. It is helpful to understand that an individual’s negotiation style is influenced by personality, experience, and attitudes. You might need to adjust your negotiating style to encourage a nonconfrontational atmosphere during negotiations. Compromising Sometimes, the skilled personnel required for your project might not be available. In such situations, you need to work out the feasibility of training the existing team members and determine whether the project can allow the time, resources, and capacity to do the same. It is important that you do not reject your staff acquisition goals but work on alternative measures. Do it!                    B-2:    Developing a negotiation plan

   1  As a project manager, what can you do to alleviate stress when negotiating for personnel?

   2  When developing a negotiation plan, which of the following should you do first? A    Set goals for staff acquisition. B    Create an agenda for the negotiations. C    Determine necessary skills for activity completion. D    Assess the party with whom you’ll negotiate.    3  Never start a negotiation unless you are thoroughly prepared. True or false?


Personnel problems that can arise during a project
Explanation                 Two personnel problems that can arise during a project are: ·    Performance-based problems. A team member’s performance is influenced by factors such as the work environment, relationships with co-workers, and changes to a project. It is important to understand that team members need to[25-Apr-13 03:07:19 PM]

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adapt quickly to changes. During adaptation periods, a team member’s performance might be adversely impacted before it stabilizes. ·    Policy-based problems. A parent company’s policies influence team members’ motivation levels and behavior. For example, the team members working at a project office might have a better opportunity to earn bonuses based on their performance than team members who work in other project areas. Such discrepancies can lead to jealousy and arguments among team members. Do it!                    B-3:    Resolving personnel problems

   1  Which of the following can influence a project team member’s performance? A    Budget constraints B    Project scope C    Project changes D    Resource procurement    2  What are the two types of personnel problems?


Topic C:   Team development
Explanation                 Team development is an important factor contributing to the success of a team and that of the team’s project. Many IT projects engage talented team members, but teamwork is important for successfully completing most projects. All team members assigned to a project must be able to work together to achieve the project goals. Team development is a vital part of human resource management. Team development helps team members to work together effectively as a cohesive team to improve project performance and ensure project success with minimum interpersonal conflict. A project manager should consider the following factors and how they affect team development: ·    Individual team members. Individual team members are the building blocks for team building. Team members must be dedicated to a project, understand their roles and responsibilities, and be willing to work with others. ·    Stakeholder feedback. The project manager and team members should use feedback from stakeholders to gauge the performance of team members. ·    Training programs. Problems arise when team members cannot perform their assigned activities. Therefore, the project manager should take on skilled team members or be willing to train the team, when necessary. A project manager conducts reviews as part of the team development process. Reviews are useful because they help a project manager to ·    Assess the quality of team members’ work ·    Determine team members’ level of job satisfaction ·    Ascertain team members’ competency ·    Establish goals for future performance

Requirements for successful team development
Several factors contribute to the successful development of a project team: ·    Team-building activities. Incorporate team-building activities into regular project activities. For example, start meetings with a short team exercise, such as allocating time for team members to give one another positive feedback on recent job performance.[25-Apr-13 03:07:19 PM]

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·    Special occasions. Celebrate special occasions, such as successful achievement of project milestones. ·    Rewards and recognition. Use rewards and recognition to show gratitude for team members’ hard work. ·    Collocation. When possible, have team members work at the same location. Working in close proximity fosters team unity and helps build trust among members. ·    Training. Make sure team members are adequately trained to perform their assigned activities. This helps avoid frustration that can arise from the inability to perform specific tasks. ·    Meetings. Meet team members both as a group and individually to discuss project issues. Including them in meetings and decision-making encourages them to commit to a project.   Reviews are beneficial to team development because they highlight the areas of improvement. When a review reveals a problem, the project manager can take corrective action. The frequency of reviews depends on factors such as the size and duration of a project and the morale of team members. Effective team development improves communication, team members’ skill levels, and teamwork. Most importantly, effective team development improves a project’s overall performance. Do it!                    C-1:    Developing successful teams

   1  Which of the following indicates why reviews are useful to a project manager? A    Highlight areas of improvement and reveal problems. B    Determine stakeholders’ level of satisfaction. C    Ascertain the project manager’s competence. D    Re-evaluate goals for future performance.    2  During project team building, a project manager must exercise good interpersonal and conflict resolution skills. True or false?

   3  Write about an instance when your performance was excellent and the reasons that led to your peak performance.


Motivational theories
Explanation                 Understanding the key factors that motivate team members can help a project manager during human resource management. There are several human-behavior theories that a project manager must know when determining how to motivate team members. These theories include: ·    Maslow’s Hierarchy of Needs ·    McGregor’s Theory X and Theory Y ·    Herzberg’s Theory Maslow’s Hierarchy of Needs According to Maslow’s Hierarchy of Needs, individuals have the following five kinds of needs: 1   Survival needs, which include food, water, and sleep.[25-Apr-13 03:07:19 PM]

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2   Safety needs, which are fulfilled when individuals feel safe. 3   Social needs, which are fulfilled when individuals interact with each other. 4   Esteem needs, which are fulfilled when individuals are empowered and praised. 5   Self-actualization needs, which are fulfilled when individuals seek knowledge, peace, esthetic experiences, self-fulfillment, oneness with God, etc. Maslow theorized that individuals are driven to satisfy survival needs first, followed by safety needs, and then social needs. Maslow’s theory includes the supposition that individuals are driven to meet these needs. After the needs are met, the drive to meet them is lost until the needs arise again. The application to human resource management is that specific needs must be met for individuals to function at their peak physical and mental levels, enabling them to fulfill their project responsibilities. McGregor’s Theory X and Theory Y According to McGregor’s Theory X, the average individual is lazy, avoiding work and responsibility whenever possible, needs constant supervision, and is motivated to work only when threatened. McGregor’s Theory Y suggests that the average individual is willing to work without requiring constant supervision. A project manager who agrees with Theory X is strict with team members, threatening them with undesirable consequences. This kind of project manager does not allow team members to participate in making project decisions. A project manager who agrees with Theory Y motivates team members by allowing them to work with little supervision and encourages participation in making project decisions. Allowing team members to work independently helps build their confidence. Listening to their input before making decisions can strengthen team members’ commitment to a project. During human resource management, project managers should recognize whether Theory X or Theory Y applies best to their individual team members. Herzberg’s Theory Herzberg’s Theory has two notable characteristics. First, there are three levels of sentiment: satisfaction, dissatisfaction, and neutral. According to Herzberg’s Theory, individuals usually try to be in the neutral zone, which is a state of neither satisfaction nor dissatisfaction. Second, there are two main factors that influence a person’s level of satisfaction: hygiene factors and motivators. Hygiene factors relate to the work environment and the presence of these factors prevents dissatisfaction. Motivators relate to the work itself, and their presence increases satisfaction. Examples of hygiene factors include a team member’s salary and relationships among project team members. Examples of motivators include opportunities for professional growth and the feeling of importance to a project. During human resource management, a project manager can provide both hygiene factors and motivators for team members. Ways of motivating team members There are several different approaches to motivating reluctant team members. For example, a project manager can motivate by setting a positive example for team members. A project manager must never make empty promises or disparaging remarks about senior managers or other employees. Another approach to motivating team members is to offer incentives, such as bonuses, overtime wages, or extra vacation days. When team members are appreciated and rewarded for hard work, they perform better than if their efforts go unrecognized. Finally, some team members are motivated by challenges. Some individuals prefer challenging work because they derive satisfaction from overcoming difficulties, while others prefer less-stressful activities. Do it!                    C-2:    Motivating teams

   1  Which motivational theory asserts that individuals feel satisfied, dissatisfied,[25-Apr-13 03:07:19 PM]

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or neutral? A    Maslow’s Hierarchy of Needs B    McGregor’s Theory X and Theory Y C    Herzberg’s Theory D    Relative Needs Theory    2  What are some ways of motivating team members? What motivates you the most in a work environment?

   3  Which motivational theory do you use to handle your team? Give reasons for your answer.


Topic D:   Using software to assist in human resource management
Explanation                 A simple responsibility assignment matrix and a histogram are useful tools that can help you effectively manage human resources on projects. You can use several software packages, including spreadsheets or project management software, such as Microsoft Project 2003, to create matrixes and histograms. Many individuals do not realize that Project 2003 provides a variety of human resource management tools, including assigning and tracking resources, resource leveling, resource usage reports, over-allocated resource reports, and to-do lists.

Using Project 2003
You can use Project 2003 to assign resources—including equipment, materials, facilities, and personnel—to tasks. Project 2003 enables you to allocate resources separately to projects or to pool resources and share them across multiple projects. By defining and assigning resources in Project 2003, you can: ·    Keep track of the whereabouts of resources through stored information and reports on resource assignments. ·    Identify potential resource shortages that can lead a project to miss scheduled deadlines and, possibly, to extend a project’s duration. ·    Identify underutilized resources and reassign them, which might enable you to shorten a project’s schedule and reduce costs. ·    Use automated leveling to make resources easier to manage. Two helpful features of Project 2003 are the Resource Usage view and the Resource Usage report. Both these features help a project manager to see the personnel, the project activities assigned, and the time allocated to complete the activities. Exhibit 7-7 shows an example of a Resource Usage view, and Exhibit 7-8 shows an example of a Resource Usage report. The Resource Usage view shows the names of the team members or resources working on the project, the total number of hours they are scheduled to work, and a calendar indicating how many hours of work are scheduled each month for each task. If a human resource is scheduled to work more than the permitted hours, Project 2003 automatically displays a warning symbol (an exclamation point) in the column to the left of that resource name. Note the exclamation point next to Joe Franklin’s name in the first row of Exhibit 77. On closely reviewing the number of hours, you can see that Joe Franklin is over-allocated from February through May. These numbers are displayed in red in Project 2003. You can adjust the calendar by clicking an icon to see hours scheduled by months, days, and so on.

Exhibit 7-7: A resource usage view from Microsoft Project[25-Apr-13 03:07:19 PM]

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Exhibit 7-8 is a Resource Usage report based on the same file. This standard report shows similar information, but the data is automatically formatted to show the number of hours each resource is scheduled to work each week during the project. In this exhibit, you can see that Joe Franklin is scheduled to work 120 hours during the weeks of March 16 to the last week in April. He is also scheduled to work 104 hours during the week of May 4. If a standard workweek is 40 hours or even 60 hours, the project manager can easily see in the report that Joe Franklin will be unable to complete the work assigned to him. Exhibit 7-8: A resource usage report from Microsoft Project Several project management professionals might not be aware of the powerful cost-management features of Microsoft Project 2003, and many others might be unaware of its powerful human resource management features. With the aid of the software, project managers can obtain information in useful formats to help them decide how to most effectively manage human resources. Project resource management involves much more than using software to assess and track resource loading, level resources, and other associated tasks. Human resources are the most important assets for most projects, and this category of resources needs to be managed much differently. Human resources need to be trained, skilled, motivated, and encouraged. They also need to coordinate with other resources to be able to work together for the benefit of the project. Good project managers not only require skills for using tools and equipment, but also need to be able to manage and encourage teams to deliver their best on a project. Do it!                    D-1:    Using software to manage human resources

Questions and answers
   1  How is Microsoft Project 2003 helpful in managing resources?

   2  What information does Resource Usage view provide?

   3  What features of Microsoft Project 2003 might be unknown to many project management professionals?


Unit summary: Human resource management
Topic A                      In this topic, you learned that the major processes of project human resource management include organizational planning, staff acquisition , and team development. You also learned about the responsibility assignment matrix (RAM), a key tool for defining roles and responsibilities on projects. Topic B                      In this topic, you learned about staff acquisition and negotiating for project personnel. You also learned that resource loading shows the number of individual resources an existing schedule requires during specific time frames, and that histograms are often used to show resource loading and identify the over-allocation of resources. Finally, you learned that resource leveling is used to resolve resource conflicts by delaying tasks. Topic C                     In this topic, you learned about team development and various motivational theories. You also learned about the various ways to motivate team members. Topic D                     In this topic, you learned about the use of software to aid human resource management. You also[25-Apr-13 03:07:19 PM]

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learned that using software can be helpful in cost management.

Independent practice activity
  1  In your observations, what motivates workers, especially in IT?
Answers might vary.

  2  Does your organization have recruiting and retention strategies? What distinguishes your organization from another in this area? What strategies most appeal to you?
Answers might vary.

  3  Which theory argues that individuals are naturally lazy and avoid work and responsibility whenever possible? A  Mc Gregor’s Theory X B  Murphy’s Law C  Herzberg’s Theory D  McGregor’s Theory of Y   4  Which theory argues that individuals are willing to work hard without constant supervision? A  Herzberg’s Theory B  McGregor’s Theory of Z C  Johnson’s Theory of Management D  McGregor’s Theory of Y

Unit 8 Communications management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Identify the key aspects of project communications

B  Evaluate and measure the performance of a project.

Topic A:   Communications planning
Explanation                 The project communications variable consists of the following components: communications planning, distributing information, performance reporting, and concluding a project. Project communication is orchestrating timely distribution of project data and updates to the appropriate personnel. The goal of project communication is to ensure all the concerned people involved in a project are informed about their key responsibilities. A project’s success or failure depends largely on the quality of communication within the project team, within the organization, and with contractors and vendors. Lack of communication can result in project failure. Therefore, project communication should be a priority during project planning and[25-Apr-13 03:07:19 PM]

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throughout the project life cycle. Before beginning a project, it is important for you to understand project communications, its components, and their integration into the project management process.

Main parts of a communications management plan
The type of communications management plan varies with the needs of the project, but it is important for the plan to be prepared. The main parts of a communications management plan include: ·    Description of a collection and filing structure for gathering and storing various types of information. For example, if a project team member attends a conference and collects valuable information, where should it be filed and stored? If a supplier sends a new product brochure, where should it be filed and stored? If the same supplier sends a new product brochure six months later, how should the new brochure and the old brochure be handled? If a new product might affect other areas, such as accounting or engineering, how will the new product information be communicated to the areas? It can be difficult to organize work-related information, so it is imperative to develop and follow a system for filing such important documents for all team members. In addition, several government agencies require a detailed filing system and conduct inspections to ensure their instructions for filing are followed. ·    A distribution structure describing what information goes to whom, when, and how. For example, is it important to specify whether all status reports are written or some are oral? Does every stakeholder receive every master schedule update? Do executives receive different status reports than team members? ·    A format for communicating key project information. Is there a template for project team members to follow in preparing written and oral status reports? Is there a master list of all acronyms and definitions? Confusion in a project can be avoided by providing templates and examples of key project reports. ·    A production schedule for obtaining the information. Have resources been assigned to create, assemble, and disseminate key project information? Do stakeholders know when to expect different information and when they need to attend key meetings? Has time been allowed for review and approval of key project documentation? It is important to allow time for creating key project information and ensuring its quality.   ·    Access methods for obtaining the information. Who is allowed to access a draft document? Can all team members and stakeholders access all project documentation? Which information is available online and which is available only as printed copy or other formats? Who can access the printed copies of documents? Who must attend which meetings? ·    A method for updating the communications management plans as the project progresses and develops . Who will update the communications management plan when changes are made? How will the new plan be distributed? ·    A stakeholder communications analysis. It is important to know the types of information to be distributed to each stakeholder. By analyzing stakeholder communications, you can prevent wasting time or money in creating or disseminating unnecessary information. The project’s organizational chart is a starting point for identifying internal stakeholders. You must also include key stakeholders outside the project organization, such as the customer, the customer’s senior management, and subcontractors. The following table provides a sample stakeholder analysis that shows the stakeholders who will receive the written communication. Note that the analysis includes information, such as the contact person for the information, the due date for the information, and the preferred format for the information. You can create a similar table to show the stakeholders who should attend specific project meetings. It is always a good idea to include a comments section with these types of tables to[25-Apr-13 03:07:19 PM]

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record special considerations or details related to each stakeholder, document, and meeting.
  Stakeholders Customer Management Document name Monthly Status Report Monthly Status Report Monthly Status Report Monthly Status Report Monthly Status Report Training Plan Software Implementation Plan Document format Printed copy Contact person Gail Feldman, Tony Silva Julie Grant, Jeff Martin Evan Dodge, Nancy Michaels Bob Thompson Due First of every month First of every month First of every month First of every month First of every month 11/1/2003 6/1/2003

Customer Business Staff Customer Technical Staff Internal Management

Printed copy


Printed copy

Internal Business and Technical Staff Training Subcontractor Software Subcontractor


Angie Liu

Printed copy E-mail

Jonathan Kraus Barbara Gates


Many projects do not include enough information on communications. Project managers, senior managers, and team members assume the use of existing communications channels to relay project information. However, the problem with using these channels is that each group, as well as other stakeholders, has different communication needs. Creating a communications management plan and reviewing it with project stakeholders early in a project helps prevent potential communication problems. If organizations work on many projects, ensuring consistency in handling project communications helps the organization run smoothly.

Steps for planning communications
When planning communications for a project, a project manager should complete the following steps: 1   Conduct stakeholder analysis. 2   Determine information requirements. 3   Decide on the means of communication. 4   Identify communication constraints. Do it!                    A-1:    Planning communications

Questions and answers
   1  Which of the following is a component of project communications planning? A    Concluding a project B    Defining quality standards C    Acquiring project staff D    Planning for change    2  What is the first step to take during communications planning? A    Decide the means of communication. B    Identify communication constraints. C    Conduct stakeholder analysis. D    Develop a communications management plan.[25-Apr-13 03:07:19 PM]

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Suggestions for improving project communications
Explanation                 You learned how good communication is vital to the management and success of IT projects. This section highlights a few areas that all project managers and team members should consider in their quests to improve project communication. Developing good communication skills Some people might be born with great communication skills, and others easily acquire technical skills. However, it is rare to find someone with a natural ability for both. Fortunately, communication and technical skills can be developed. Most IT professionals enter the field because of their technical skills. Most find, however, that communication skills are the key to advancing their careers, especially if they want to become good project managers. Most companies spend a lot of money on technical training for their employees, even when employees might benefit more from communications training. A minimal investment in communications and presentation training can tremendously impact individuals, their projects, and their organizations. These skills also have a much longer shelf life than many of the skills acquired in technical training courses. Improving communication is a task for the leadership of a company. If senior management allows employees to give horrible presentations, write sloppy reports, or behave poorly at meetings, then employees will not want to improve their communication skills. Senior management must set high expectations and lead by example. Some organizations send all IT professionals to training that includes development of technical and communication skills. Some organizations allocate time in project schedules for preparing drafts of important reports and presentations and incorporating feedback on these drafts. Other organizations include time for informal meetings with customers to help develop relationships. As with any other goal, communication can be improved with proper planning, support, and leadership from senior management. Most importantly, communication is not simply about talking, it is about listening too. Running effective meetings A well-run meeting can be a vehicle for fostering team building and reinforcing expectations, roles, relationships, and commitment to projects. However, a poorly run meeting can be detrimental to a project. For example, a terrible kickoff meeting—a meeting held at the beginning of a project or a project phase where all major project stakeholders discuss project objectives and plans—might cause some important stakeholders to decide not to support the project. Following are some guidelines to help make your meetings more effective and time efficient: ·    Determine if a meeting can be avoided. Do not have meetings if there is a better way of achieving the objective at hand. For example, a project manager might know that he or she needs approval from a senior manager to engage another team member on the project. It might take a week or longer to schedule even a 10-minute meeting on the senior manager’s calendar. Instead, an e-mail message or a phone call describing the situation and justifying the request is a faster, more effective approach than holding a meeting. ·    Define the purpose and the intended outcome of the meeting. Be specific about the result of the meeting. Is the purpose to brainstorm ideas, provide status information, or solve a problem? Make the purpose of meetings clear to all planners and participants. All meetings should have a purpose and an intended outcome. ·    Determine who should attend the meeting. Do certain stakeholders have to attend a meeting to make it effective? Should only the project team leaders attend a meeting, or should the entire project team be involved? Many meetings are most effective with the minimum number of participants possible, especially if decisions must be made. It is important to determine who should attend a meeting based on the meeting’s purpose and intended outcome. ·    Provide an agenda to participants before the meeting. Meetings are most effective when[25-Apr-13 03:07:19 PM]

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the participants are prepared for it. Ensure that participants read reports before the meeting and collect necessary information. Insist on an agenda so that the meeting is directed towards achieving an outcome and the attendees get a chance to decide whether they really need to attend. ·    Prepare handouts, visual aids, and make logistic arrangements ahead of time. Creating handouts and visual aids requires meeting organizers to sort out their thoughts and ideas. This usually helps the entire meeting run effectively. Making logistical arrangements by booking an appropriate room, making necessary equipment available, and providing refreshments or entire meals, if appropriate, also improves a meeting’s effectiveness. Project managers and their team members should take the necessary time to prepare for meetings, especially important ones with key stakeholders. ·    Run the meeting professionally . Introduce people, restate the meeting’s purpose, and state any ground rules that should be followed. Assign facilitators to make sure important items are discussed, watch the time, encourage participation, summarize key issues, and clarify decisions and action items. Designate a team member to take minutes and send them out soon after the meeting is over. Minutes should be short and should focus on crucial decisions and action items. ·    Build relationships . Depending on the culture of the organization and project, it might help to build relationships by making meetings fun experiences. For example, it might be appropriate to use humor, refreshments, or prizes for good ideas to keep the participants actively involved. If used effectively, meetings are a good way to build relationships. Do it!                    A-2:    Improving project communications

   1  What are the areas that should be considered to improve project communication?    2  Which of the following is a guideline to help make your meetings more effective? A    Decide who should attend the meeting. B    Develop better communication skills. C    Acquire technical skills.    3  As a project manager, what guidelines would you follow to run an effective meeting?


Distributing information
Explanation                 Information distribution is vital to a project’s success. For example, people need information to carry out their responsibilities toward the completion of a project. If project team members do not have access to the information they need, then they cannot complete their activities effectively. In addition, distributing information allows stakeholders to monitor the project progress as well as record the changes made to the project.[25-Apr-13 03:07:19 PM]

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Means of distributing information There are a number of ways information is distributed during project execution. The following are some common means of information distribution. ·    Written, which includes reports, memos, spreadsheets, business letters, faxes, and files. ·    Oral, which includes presentations, meetings, and conference calls. ·    Multimedia, which includes videoconferencing and teleconferencing. ·    Internet or intranet, which includes e-mail, Web sites, and online bulletin boards. The form of communication you use depends on three factors: ·    Who is the recipient? ·    What is the information? ·    When does the recipient need the information? Informal communication Informal communication between a project manager and team members can build trust and strong working relationships. As a project manager, you should encourage informal communication. This strengthens your working relationships with team members, which can increase their willingness to communicate with you informally. Team members who are uncomfortable talking to their project managers are likely to withhold information about problems, jeopardizing the project’s success. You can encourage informal communication by making yourself available to team members. Being available to team members includes visiting them in their work areas, having lunch with them, and listening to their ideas and complaints. Using templates for project communications Many find it difficult to write a performance report or prepare a 10-minute technical presentation for a customer review. To simplify preparing project communication, project managers need to provide examples and templates for common project communication items, such as project descriptions, project charters, monthly performance reports and oral status reports. Good documentation from earlier projects can be used as examples. Samples and templates of both written and oral reports are particularly helpful for team members who need to write project documents or prepare project presentations. A one-page project description can be used to show a “snapshot” of an entire project on one page. For example, senior managers might require all project managers to provide a brief project description as part of a quarterly management review meeting. A project description should include the project objective, scope, assumptions, cost information, and schedule information. You can also include information from the project’s Gantt chart to highlight key deliverables and other milestones. The following table further describes the elements of a project description.

Objective Scope Assumptions Cost

Describe the objective of the project in one or two sentences. Focus on the business benefits of doing the project. Briefly describe the scope of the project. Include the business functions involved and the main products the project will produce. Summarize the most critical assumptions for the project. Provide the total estimated cost of the project. If desired, list the total cost for each year.[25-Apr-13 03:07:19 PM]

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Provide summary information from the project’s Gantt chart as shown in Exhibit 8-1. Focus on summary tasks and milestones.

Exhibit 8-1: Sample template for a project description Exhibit 8-2 provides an example of a template file created in Project 2003. Team members can develop and follow a similar template for their projects. Notice the main tasks in this template follow the project management process of project initiating, planning, executing, controlling, and closing. The template includes milestones to highlight significant events, such as signing the letter of agreement or the dispatch of major deliverables. It also includes hyperlinks that link users to template files they can use to create a letter of agreement, a progress report, or a final report. Hyperlinks to other project documentation—such as meeting minutes, product information, and presentations—can also be included. Exhibit 8-2: Gantt chart template When the members of a project team develop their communications management plan, they should also decide the templates to be used for key documentation. To simplify using templates, an organization can make project templates readily available online. The project team should also understand the documentation expected by senior management and customers for each particular project. For example, if a project sponsor or customer wants a one-page monthly progress report for a specific project, but the project team delivers a 20-page report, there are communication problems. In addition, if particular customers or senior managers want specific items in all final project reports, they must ensure the project team is aware of those expectations and modify any templates to take these requirements into account. Developing a communications infrastructure A communications infrastructure is a set of tools, techniques, and principles that provide a foundation for the effective transfer of information. Tools include e-mail, project management software, groupware, fax machines, telephones, teleconferencing systems, document management systems, and word processors. Techniques include reporting guidelines and templates, meeting ground rules and procedures, decision-making processes, problem-solving approaches, and conflict resolution and negotiation techniques. Principles include providing an environment for open dialogue using “straight talk” and following an agreed upon work ethic. Because the defense industry has been involved in project management for a long time, many government agencies and defense contractors use formal communications infrastructure that is already set up. For example, in the early 1980s—before personal computers were commonly used—the U.S. Air Force created standard forms for reporting project progress information, outlines for developing project final reports, regulations describing the progression of major projects, inspections of project archives, and forms and procedures for creating project Gantt charts. Today, some organizations have designed customized systems for collecting and reporting project information and most use several forms of IT as part of their project communications infrastructure. Some organizations use intranets to keep track of all project information and others use Lotus Notes or other groupware to maintain consistent and complete project information. Do it!                    A-3:    Distributing information

Questions and answers
   1  Why does a project manager need to be concerned about information distribution?[25-Apr-13 03:07:19 PM]

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   2  What are the different ways in which information can be distributed?


Topic B:   Performance reporting
Explanation Performance reporting is part of a project’s communication system. The purpose of performance reporting is to collect and distribute information to project stakeholders about the effective use of a project’s resources. Performance reporting can affect project costs when time for writing the reports is not allocated in a project’s schedule. The time between one performance report and the next is called a reporting period . A reporting period might coincide with the beginning and end of a project phase. When reporting periods do not coincide with project phases, it might be helpful to team members if the project manager includes dates for reporting periods on the project’s schedule. Including reporting periods on the schedule helps team members know when they need to write performance reports.

Measuring project performance
Controlling a project involves measuring progress toward project objectives and taking corrective action when requested. Performance reports and performance reviews are two methods of measuring the performance of a project. Running status meetings with employees is also an effective method to measure performance. Performance reviews Performance reviews are meetings conducted to discuss a project’s status. A project manager should hold performance reviews throughout the project to make sure team members and project activities progress as planned. During performance reviews, a project manager should: ·    Ensure every project team member is included. ·    Inform the project team about any changes to the project. ·    Identify problems and encourage team members to brainstorm solutions. ·    Motivate team members. ·    Reaffirm the project’s goals. ·    Ask team members to put forth their questions regarding the project. Performance reviews are important because they bring the project team members together, which can help build a sense of teamwork. In addition, performance reviews give team members the opportunity to voice concerns about a project. The frequency of performance reviews depends on how the project progresses. Frequency might also depend on the size of the project because large projects are more likely to get off track than small projects. Performance reports If any part of a project varies from the project’s plan, then the variation must be included in a performance report. Performance reports include both progress and status reports. A progress report is a detailed summary of the accomplishments of a project team and the methods they used to accomplish them. Progress reports should include the resources that worked to complete an activity versus the planned resources that were scheduled to work on it.[25-Apr-13 03:07:19 PM]

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Some frequent problems with progress reporting include: ·    Too much information or the wrong kind of information ·    Information not distributed in a timely manner To avoid these problems when reporting progress, it is important to: ·    Make sure information is current and relevant. ·    Create reminders for the due dates of progress reports. A status report covers a broader range of information than a progress report. A status report is a detailed account of a project’s status at a specific phase. The focus of a status report is on tasks such as activity completion, resource consumption, and budget expenditure. Status reports must include the current status of all activities completed during a reporting period so that the project manager can determine whether there are any problems and the corrective action that can be taken. Performance reports can be classified by frequency and/or purpose. The following are common classifications of performance reports: ·    Routine ·    Exception ·    Special analysis Routine Routine, or regular performance reports, are not necessarily scheduled, but might be distributed at intervals that coincide with project phases or milestones. The frequency of performance reports depends on how smoothly the project functions. Exception Exception performance reports provide project team members with information they need to make a decision or notify them of a change that affects their work. Exception performance reports are also distributed to stakeholders to inform them that a decision has been made. Special analysis Special analysis performance reports contain information about the results of a special study. Special studies might be conducted as part of a project or to determine a solution to a problem encountered during a project. Special analysis reports are useful not only to a current project but are valuable documentation of lessons learned for future projects. Individual status meetings Individual status meetings are important to project communication. One-on-one status meetings with members of a project’s team can be more informative than performance reviews because some members of the project team might not feel comfortable voicing opinions or concerns in a large group. Individual status meetings are also great opportunities for a project manager to offer constructive feedback, receive feedback, and know project team members. Do it!                    B-1:    Evaluating performance

   1  During performance reviews, a project manager should do which of the following. A    Reaffirm the project’s goals. B    Test a new product’s functionality. C    Discuss changes in processes. D    Estimate the project’s remaining duration.[25-Apr-13 03:07:19 PM]

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   2  What are the classifications of performance reports?

   3  Explain the importance of performance reviews.

   4  What is the importance of individual status meetings?


Tools for measuring performance
Explanation                 The tools and techniques used to measure the performance of an employee are: ·    Variance and trend analysis ·    Earned value analysis Variance and trend analysis Variance analysis is used to gauge how closely a project adheres to its schedule, resource use, and budget provisions. Variance analysis can also be used to determine whether or not a project’s quality standards are met. Trend analysis is used to evaluate a project’s progress over time. For example, trend analysis can be used to determine whether a solution to a problem is effective by determining whether or not the problem exists after its solution is implemented. Trend analysis can also be used to show patterns of resource consumption across a project. Earned value analysis Overall project performance is measured by completing an earned value analysis, which involves calculating a dollar amount for every project activity. These dollar amounts are calculated using the following values: ·    Budgeted Cost of Work Scheduled, or BCWS (or PV, Planned Value), is a portion of the project budget expected to be spent during a specific time period. For example, $1,000 is assigned to Activity A, which takes 6 days to complete. ·    Budgeted Cost of Work Performed, or BCWP (or EV, Earned Value), is the total budgeted cost of all work completed to date on a project. For example, imagine that Activity A is allotted $1,000. Activity A is only 40% complete at the time that BCWP is calculated. Therefore, only $400 of the $1,000 allotted for Activity A is included in the BCWP. ·    Actual Cost of Work Performed, or ACWP (or AC, Actual Cost), is the amount of money spent on completing a specific activity within a specific time period. For example, if the 6 days worth of work completed on Activity A actually cost $5,000, then $5,000 is your ACWP. Earned value analysis is important to performance reporting because it can give the project manager and team members the most accurate measure of whether or not a project’s activities are being completed as planned. Calculations used during earned value analysis The following calculations are used during earned value analysis:[25-Apr-13 03:07:19 PM]

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·    Cost variance ·    Schedule variance ·    Cost performance index ·    Schedule performance index Do it!                    B-2:    Using tools to measure performance

   1  Which of these calculations is used during earned value analysis? A    Schedule variance B    Actual Cost of Work Performed C    Budgeted Cost of Work Performed    2  What are the tools and techniques used to measure the performance of an employee?


Unit summary: Communications management
Topic A                      In this topic, you learned about the importance of communications planning and stakeholder analysis in determining the communications needs for all those involved in a project. Topic B                      In this topic, you learned that a project manager must determine the most appropriate means for distributing various types of project information. You also learned about performance reporting.

Independent practice activity
  1  What are the steps for planning communications?
a.   Conduct stakeholder analysis. b.   Determine information requirements. c.   Decide on the means of communication. d.   Identify communication constraints.

  2  List some ways you can encourage the use of good communication skills?
Answers might vary, but can include: provide communications training, senior management must set high communications expectations and lead by example, and allocate time in project schedules for preparing drafts of important reports and presentations.

  3  In your experience, how has project information been distributed? Can this process be improved? If so, how?
Answers might vary.  

Unit 9[25-Apr-13 03:07:19 PM]

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Risk management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Discuss and classify project risks. B  Identify risks and explain the use of risk identification

C  Define and discuss qualitative risk analysis. D  Discuss the steps involved in quantitative risk analysis. E  Discuss risk response planning. F    Describe how to monitor and control risks.

Topic A:   Risk management planning
Explanation                 Risk management is a project variable that involves identifying and measuring the risks associated with a project. To manage project risks successfully, you must understand the components of risk management. These are: ·    Risk management planning ·    Risk identification ·    Qualitative risk analysis ·    Quantitative risk analysis ·    Risk response planning ·    Risk monitoring and control

Planning for risk management
Risk management planning is a process that decides how to approach and plan the risk management activities for a project. The main output of this process is a risk management plan, which documents the procedures for handling risk throughout the project life cycle. It summarizes the results of the risk identification, qualitative analysis, quantitative analysis, response planning, and monitoring and control processes. Project teams hold planning meetings to help create the risk management plan. The project team must review project documents, such as the project charter, WBS, and definitions of roles and responsibilities, and organizational documents, such as corporate risk management policies and templates, when creating a risk management plan. It is also important to review the risk tolerances of various stakeholders. For example, if the project sponsor is risk-averse, the project might require a different approach to risk management than if the project sponsor were a risk seeker. Project teams also need to define specific deliverables for the project according to potential risks, assign resources and personnel to work on those deliverables, and evaluate milestones associated with the risk mitigation approach. Risk mitigation is reducing the impact of a risk event by reducing the probability of its occurrence. The level of detail included in the risk management plan varies with the needs of the project. The following list provides the questions that a risk management plan should address: ·    Why is it important to take or not take this risk in relation to project objectives?[25-Apr-13 03:07:19 PM]

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·    What is the specific risk, and what are the risk mitigation deliverables? ·    How will the risk be mitigated? (Which risk mitigation approach will be used?) ·    Who is responsible for implementing the risk management plan? ·    When will the milestones associated with the mitigation approach occur? ·    Which resources are required to mitigate the risk? The risk management plan can include a methodology for risk management, roles and responsibilities for activities involved in risk management, budgets and schedules for the risk management activities, descriptions of scoring and interpretation methods used for the qualitative and quantitative analyses of risk, threshold criteria for risks, reporting formats for risk management activities, and procedures for tracking and documenting risk activities. In addition to a risk management plan, many projects include contingency plans, fallback plans, and contingency reserves. Contingency plans are predefined actions that the project team takes if an identified risk event occurs. For example, if the project team is aware that a new release of a software package might not be available in time for use in their project, they might have a contingency plan to use the existing, older version of the software. Fallback plans are developed for risks with a high impact on meeting project objectives, and are used if attempts to reduce the risk are not effective. Contingency reserves or contingency allowances are provisions made available by the project sponsor and used to mitigate cost or schedule risks if changes in project scope or quality occur. For example, if a project runs behind schedule because team members are inexperienced with a new technology, the project sponsor may provide funds from contingency reserves to train the project members in using the new technology. Do it!                    A-1:    Discussing risk management

Questions and answers
   1  What is a risk management plan?

   2  List the components of risk management.


Project risk
Explanation                 To manage project risks, you must first understand what constitutes a risk: ·    Risks are associated with uncertain outcomes or lack of knowledge of future events. ·    Risks are measured in terms of the probability of their occurrence and the consequences of not achieving project goals. ·    Deviations from the project’s quality standards, as detected in the products, also constitute risks. Classifications for project risks You can classify project risks in three ways: ·    Knowns are situations that the project team is certain will occur. For example,[25-Apr-13 03:07:19 PM]

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the project team is aware that to complete a project they need specific resources. ·    Known-unknowns are identifiable uncertainties. For example, the team is aware that the project will bear expenses related to the utilities used during the project, but is not aware of the exact cost. ·    Unknown-unknowns are situations that the project team cannot anticipate. For example, an unforeseen incident or a mishap may adversely impact the project operations. Although you can classify risks in several ways, the most common classifications are business risks or insurable risks. Business risks result in opportunities for profits or losses. For example, if a snowstorm damages the structure of a facility under construction, this is considered a business risk. Insurable risks , also called pure risks, result only in losses. For example, if a project team member is injured on the job, this is considered an insurable risk. It is important to understand that if insurance is purchased, a project manager does not have to manage insurable risks. In this example, the team member’s compensation would cover the injured employee. Other broad categories of risk include: ·    Market risk . If an information technology (IT) project develops a new product or service, will that product or service be useful to the organization or marketable to others? Will users accept and use the product or service? Will competitors be able to create a better product or service faster, making the current project a waste of time and money? ·    Financial risk . Can the organization afford to undertake the project? How confident are stakeholders in the project’s financial projections? Will the project meet NPV, ROI, and payback estimates? If not, can the organization afford to continue the project? Is this project the best way to use the organization’s financial resources? ·    Technological risk . Is the project technically feasible? Will hardware, software, and networks function properly? Will the technology be available in time to meet project objectives? Could the technology be obsolete before a useful product can be developed?   Several studies show that IT projects share some common sources of risk. For example, the Standish Group did a follow-up study to the 1995 CHAOS research, which was called Unfinished Voyages. This study brought together 60 IT professionals to elaborate on how to evaluate a project’s probability of success. The following table lists the Standish Group’s success potential scoring sheet and shows project success criteria.
Success criterion User involvement Executive management support Clear statement of requirements Proper planning Realistic expectations Smaller project milestones Competent staff Ownership Clear visions and objectives Weights 19 16 15 11 10 9 8 6 3[25-Apr-13 03:07:19 PM]

IT Project Management: Hard-working, focused staff Total 3 100


The Standish Group lists questions under each criterion of success to help decide the number of points to assign to a project. For example, you assign a value to the user involvement criterion by adding 3.8 points to the score for each of the following questions you answer in the affirmative: ·    Do I have the right user(s)? ·    Did I involve the user(s) early and often during a project? ·    Do I have a quality user(s) relationship? ·    Do I make involvement easy? ·    Did I find out what the user(s) need(s)? You can use data from research to identify the scope of software project failures, the major factors that cause software projects to fail, and the key ingredients that can reduce project failures. Do it!                    A-2:    Classifying project risks

   1  What constitutes a risk?

   2  _______ risks always result in losses.

   3  Situations that the project team cannot anticipate are classified as_______ risks. A    Known B    Known-unknown C    Unknown-unknown D    Market

Topic B:   Risk identification
Explanation Risk identification is a process of gaining an understanding of the potential unsatisfactory outcomes associated with a project. After understanding the potential sources of risks, you can proceed to use checklists, flowcharts, or interviews to help identify them. Identifying sources of risks helps you identify potential risk events and risk symptoms for your project. Risk identification checklists based on risks encountered in previous projects provide a meaningful template for understanding risks in a current project. You can use checklists, such as those developed by the Standish Group or other groups, to help identify risks associated with IT projects. In addition to identifying risks based on the nature of the project or products developed, it is also important to identify potential risks in project management knowledge areas, such as scope, time, cost, and quality. The following table lists potential risk conditions that can exist within each knowledge area.1 Using risk identification checklists, combined with this approach, helps you identify and analyze risks.[25-Apr-13 03:07:19 PM]

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Knowledge area
Integration Scope Time Cost Quality Human Resources Communications Risk Procurement

Risk conditions
Inadequate planning; poor resource allocation, poor integration management, and lack of post-project review Poor definition of scope or work packages, incomplete definition of quality requirements, and inadequate scope control Errors in estimating time or resource availability, poor allocation and management of float, and early release of competitive products Estimating errors; inadequate productivity, cost, change, or contingency control; poor maintenance, security, and purchasing Poor attitude toward quality; substandard design, materials, or workmanship; and inadequate quality assurance program Poor conflict management, poor project organization and definition of responsibilities, and absence of leadership Carelessness in planning or communicating and improper or no consultation with key stakeholders Ignoring risk, unclear assignment of risk, and poor insurance management Unenforceable conditions or contract clauses and adversarial relations

Identifying project risks
Project risks can be classified: ·    According to the type of risk being faced. Classifying risks in low, medium, or high-level categories helps stakeholders and project team members understand the level of risk they will face. ·    According to whether they are internal or external. The project team has more influence over internal risks, making them easier to manage. ·    Based on their source. Frequently, the source of risk can be controlled. The project team can gain an understanding of common sources of risk by reviewing a historical database of information on earlier projects. In addition, the project team can learn about risks specific to its project by talking to subject matter experts. The risks identified for a specific project are driven by the nature of the product being created. For example, if the product is based on a proven template, there will be less risk involved than if the project is developing a new product. The probable risks to be considered for these two scenarios are very different. Therefore, an understanding of the project deliverables and overall project objectives is critical to risk identification. Do it!                    B-1:    Identifying risks for a project

   1  Risk identification involves determining whether or not to take risks associated with a particular project. True or false?

   2  Which of the following is a manner in which project stakeholders can classify risks? A    According to the source of the risks, internal or external to the[25-Apr-13 03:07:19 PM]

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organization B    According to the time at which risks occur C    According to the activities they will affect D    According to stakeholders’ desire to accept or reject a project

Tools for identifying risks
Explanation                 Several tools and techniques are available for identifying risks. Project teams often begin the risk identification process by reviewing project documentation, analyzing project assumptions, and gathering risk-related information. For example, after reviewing project documents and assumptions, project team members and external experts discuss these documents and assumptions and ask important questions about them. After broadly identifying the potential risks at an initial meeting, the project team might then use different information-gathering techniques to further identify risks. Four common information-gathering techniques include: ·    Brainstorming ·    The Delphi Technique ·    Interviewing ·    SWOT analysis Brainstorming Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. This approach can be used to create a comprehensive list of risks that can be addressed later in the qualitative and quantitative risk analysis processes. Teams must take care not to overuse or misuse brainstorming. Although businesses use brainstorming widely to generate new ideas, psychological studies show that individuals working alone produce a greater number of ideas than the same individuals produce through brainstorming in small face-to-face groups. Group effects, such as fear of social disapproval, the effects of authoritative hierarchy, and domination of the session by those more vocal and expressive than others often inhibit idea generation. 2 The Delphi Technique One common approach to gather information from experts is the Delphi Technique. The basic concept of the Delphi Technique is to derive a consensus among a panel of experts who make predictions about future developments. Developed by the Rand Corporation for the U.S. Air Force in the late 1960s, the Delphi Technique is a systematic, interactive forecasting procedure based on independent and anonymous input regarding future events. It uses repeated rounds of questioning and written responses, including feedback to earlier-round responses, to take advantage of group input, while avoiding the biasing effects possible in oral panel deliberations. To use the Delphi Technique, you must select a panel of experts in specific area. For example, a company president can use the Delphi Technique to help her understand why that company is no longer winning many contracts. The president can consult experts in the business area. Each expert answers questions related to the president’s scenario, then the president or a facilitator evaluates the responses, together with opinions and justifications and provides the feedback to each expert in the next iteration. The president then continues this process until the group responses converge to a specific solution. If the responses vary, the facilitator of the Delphi Technique needs to determine if there is a problem with the process. Interviewing Interviewing is a fact-finding technique for collecting information in face-to-face or telephone discussions. Some interviews are conducted over e-mail and instant messaging. Interviewing personnel with experience on similar projects is an important tool for identifying potential project risks. For example, if a new project involves using a particular type of hardware or software, a person with a recent experience on that product can describe the problems encountered on a past project.[25-Apr-13 03:07:19 PM]

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SWOT analysis Strengths, weaknesses, opportunities, and threats (SWOT) analysis is often used in strategic planning. It can also assist in risk identification by having project teams focus on the broad perspectives of potential risks for a project. For example, before writing a proposal, a president can ask a group of employees to discuss the company’s strengths, weaknesses in relation to the project, and the opportunities and threats. In addition, the president can discuss with the team information about competing firms and their probability of winning a contract as well as the impact of winning a contract on future awards and possible expansion of the company’s business. Applying SWOT to potential projects can help identify the broad risks and opportunities. Other risk identification techniques Two other techniques for risk identification include the use of checklists and diagramming. Checklists based on risks encountered in previous projects provide a meaningful template for understanding risks in a current project. You can use checklists to help identify risks in IT projects. Diagramming techniques include using cause-and-effect diagrams, flow charts, and influence diagrams. System or process flow charts are diagrams that show how different parts of a system interrelate. For example, many programmers create flow charts to show programming logic. An influence diagram represents decision problems by displaying essential elements, including decisions, uncertainties, and objectives, and how they influence each other.3

Output of risk identification
The main outputs of the risk identification process are risk events identified for your project, triggers or risk symptoms, and input to other processes, such as updates to the WBS or schedule based on identified risks. Risk events are specific effects that might adversely impact a project. Examples of risk events are significant changes in scope, the performance failure of products developed as part of a project, specific delays in the project due to rejection of work or labor unavailability, supply shortages, and other events such as, litigation against your company and strikes. Triggers, or risk symptoms , are indicators of actual risk events. For example, cost overruns on early activities may be symptoms of poor cost estimates. Defective products may be indicators of a low-quality supplier. Documenting potential risk symptoms for projects also helps the project team identify potential risk events and determine corrective actions. Do it!                    B-2:    Discussing risk identification tools

   1  What are the four common information-gathering techniques?

   2  When brainstorming possible project risks, the project team should: A    Organize ideas into logical groups. B    Use the work breakdown structure (WBS) to generate ideas. C    Evaluate each idea as it is suggested. D    Keep an open mind as ideas are suggested.

Topic C:   Qualitative risk analysis
Explanation Qualitative risk analysis involves assessing the probability and impact of identified risks to determine their magnitude and priority. This section describes examples of using a probability/impact matrix to produce a prioritized list of risks, and using the Top 10 Risk Item Tracking technique to create a ranking for project risks and to track trends in qualitative risk analysis. It also discusses the importance of expert judgment[25-Apr-13 03:07:19 PM]

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in performing risk analysis.

Calculating risk factors using probability/impact matrixes
You can describe a risk probability or consequence as high, moderate, or low. For example, a meteorologist might predict high probability of heavy showers on a day. If you are planning an outdoor event on the same day, the consequences of the showers will be adverse. To quantify risk probability and consequence, the Defense Systems Management College (DSMC) developed a technique for calculating risk factors—representing the overall risk of specific events based on their probability of occurrence and the consequences on the project. The technique uses a probability/impact matrix that shows the probability, or likelihood, of risks and the impact or consequences of the risks. You can estimate the probability of a risk occurrence based on several factors, as determined by the unique nature of each project. For example, factors evaluated for potential hardware or software technology risks could include the technology not being mature, the technology being too complex, and an inadequate support for developing the technology. The impact of a risk might include the nonavailability of fallback solutions or the consequences of not meeting planned performance, cost, and schedule estimates. Exhibit 9-1 provides an example of a probability/impact matrix used in assessing the risk of various technologies developed to make aircrafts reliable. Aircrafts were declared unfit to fly because of reliability problems with their various components and problems with their maintenance. The Air Force sponsored a multimillion-dollar research project, called the High Reliability Fighter study, in the mid-1980s, to evaluate potential technologies for improving the reliability of fighter aircrafts. The purpose of the High Reliability Fighter study was to help the Air Force decide the technologies in which to invest to make its planes more reliable and maintainable, thereby decreasing their downtime.

Exhibit 9-1: Sample probability/impact matrixes for qualitative risk assessment The Air Force used the matrix shown in Exhibit 9-1 to assess the risk of proposed technologies, such as providing radial tires for planes, using a more efficient fuel system, or developing a sophisticated onboard computer system to monitor and adjust various systems on the aircraft. The top matrix in Exhibit 9-1 was used to assign a Probability of Failure (Pf) value to each proposed technology, and the bottom matrix was used to assign a Consequence of Failure (Cf) value. Experts used their judgment to assign a value for both the probability of failure and impact of each proposed technology. For example, an expert assigned a Pf value of 0.1 for the radial tires technology because the hardware existed, had a simple design, and multiple programs and services used it. Likewise, the expert assigned a Cf value of 0.9 to a risk with no acceptable alternatives, an impact on increasing life cycle costs, and low probability of meeting schedule dates and reducing the aircraft downtime factor. The expert then used these values in a formula to calculate an overall risk factor. A risk factor is defined as the probability of failure (Pf) plus the consequence of failure (Cf) minus the product of the two. 4 For example, a technology with a Pf of 0.1 and a Cf of 0.9 will have a risk factor of .01, or (.1 + .9) - (.1 * .9) = .01. Exhibit 9-2 provides an example of how the risk factors were used to graph the probability and consequence of failure for proposed technologies in the Air Force study. The figure classifies potential technologies (dots on the chart) as high-, medium-, or low-risk, based on the probability and consequences of failure. The researchers for this study highly recommended that the Air Force invest in the low- to medium-risk technologies and suggested that they not pursue the high-risk technologies.5 You can see that the rigor behind using the probability/impact matrix and risk factors provides a much stronger argument than simply stating that risk probabilities or consequences are high, medium, or low. Exhibit 9-2: Chart showing high-, medium-, and low-risk technologies Do it!                    C-1:    Using probability/impact matrices

Questions and answers[25-Apr-13 03:07:19 PM]

IT Project Management:

   1  Why would you use a qualitative risk analysis?

   2  What does a probability/impact matrix do?

   3  Discuss the chart shown in Exhibit 9-2. What does it depict?


Top 10 Risk Item Tracking
Explanation Top 10 Risk Item Tracking is a qualitative risk analysis tool. In addition to identifying risks, it ensures awareness of risks throughout the life cycle of a project. This tool helps establish a periodic review of the project’s most significant risk items with the organization’s management and, optionally, with the customer. The review begins with a summary of the status of the top ten sources of risk for the project. The summary includes each item’s current ranking, previous ranking, the number of times it appears on the list over a period, and a summary of progress made in resolving the risk item since the previous review. The Microsoft Solution Framework (MSF) contains a risk management model that includes developing and monitoring a Top 10 master list of risks. The following table provides an example of a Top 10 Risk Item Tracking chart that you can use at a management review meeting for a project. This example includes only the top five risk items. Each risk item is ranked on the basis of the current month, previous month, and the number of months the risk was listed in the top ten risks. The second column briefly describes the progress for resolving each particular risk item.

Risk item
Inadequate planning Poor definition

Risk resolution progress
Working on revising the entire project plan. In the current month, this risk item has been ranked at 1, and in the previous month it was ranked at 2. This risk item has been in the Top 10 list for 4 months. Holding meetings with the project customer and sponsor to clarify scope. In the current month, this risk item has been ranked at 2, and in the previous month it was ranked at 3. This risk item has been in the Top 10 list for 3 months. After the previous project manager quit, a new manager was assigned to lead the project. In the current month, this risk item has been ranked at 3, and in the previous month it was ranked at 1. This risk item has been in the Top 10 list for 2 months. Revising cost estimates. In the current month, this risk item has been ranked at 4, and in the previous month also it was ranked at 4. This risk item has been in the Top 10 list for 3 months. Revising schedule estimates. In the current month, this risk item has been ranked at 5, and in the previous month also it was ranked at 5. This risk item has been in the Top 10 list for 3 months.

Absence of leadership

Poor cost estimates Poor time estimates

A risk management review accomplishes several objectives. First, it keeps management and the customer (if included) informed of the major influences that can pose problems for the project. Second, by involving the customer, the project team might be able to consider alternatives that can mitigate the risk, such as reducing the scope of a project by postponing some work for a later project in order to meet cost and schedule goals. Third, it promotes confidence in the project team by[25-Apr-13 03:07:19 PM]

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demonstrating to management and the customer that the team is aware of the significant risks, has a well-defined mitigation strategy, and is effectively implementing the strategy.

Expert judgment
Many organizations rely on the intuitive feelings and past experience of experts in performing qualitative risk analyses. Organizations might use expert judgment in lieu of or in addition to other techniques for analyzing risks. For example, experts can categorize risks as high, medium, or low by using or not using sophisticated techniques, such as identifying risk factors. Using sophisticated risk analysis tools has a number of disadvantages. For example, the output is only as good as the input, and the team using the tools might be using poor assumptions. The math and statistics used in various techniques might confuse the team. Because of these disadvantages, it is important to include expert opinion when using both qualitative and quantitative risk assessment techniques. Do it!                    C-2:    Discussing Risk Item Tracking and expert judgment

Questions and answers
   1  Why would you use Risk Item Tracking?

   2  Why is expert judgment needed in risk management?


Topic D:   Quantitative risk analysis
Explanation The quantitative risk analysis process analyzes the probability of each risk, its consequence on project objectives, and the overall project risks. It often follows qualitative risk analysis; yet, both processes can be performed together or separately. On some projects, the team might perform only qualitative risk analysis. The nature of the project and the availability of time and money affect the type of risk analysis techniques to be used. Large, complex projects involving leading-edge technologies often require extensive quantitative risk analysis. The main techniques for this type of analysis include decision tree analysis and simulation, as described in the following sections. Teams can also use simple approaches, such as interviewing and sensitivity analysis, to assist in quantitative risk analysis.

Decision trees and expected monetary value
A decision tree is a diagramming method used to help select the best course of action in situations where the future outcome is uncertain. A common application of decision tree analysis involves calculating expected monetary value (EMV). EMV is the product of a risk event probability and the risk event’s monetary value.   Exhibit 9-3 illustrates this concept using a decision about the project(s) that an organization might pursue. Suppose a company is deciding whether to submit a proposal for Project 1, Project 2, both the projects, or neither project. It can draw a decision tree with two branches, one for Project 1 and one for Project 2. The company can then calculate the EMV to make this decision.[25-Apr-13 03:07:19 PM]

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Exhibit 9-3: Expected monetary value (EMV) example To use EMV, you must estimate the probability, or chances, of events occurring. For example, in Exhibit 9-3, there is a 20 percent probability or chance (P=.20) that a hypothetical firm will win Project 1, which is worth $300,000 in profits, the outcome of the top branch in the exhibit. There is an 80 percent probability (P=.80) that the company will not win the competition for Project 1, and the outcome is estimated to be –$40,000, which means that the company will need to invest $40,000 into Project 1, with no reimbursement if it does not win the award. The sum of the probabilities for outcomes for each project must equal 1 (for Project 1, 20 percent plus 80 percent). Probabilities are determined based on expert judgment. The president or other employees of the company should have some idea of the company’s probability of winning the projects. Exhibit 9-3 also shows probability and outcomes for Project 2. There is a 20 percent probability that the company will lose $50,000 on Project 2, a 10 percent probability the company will lose $20,000, and a 70 percent probability that the company will earn $60,000. To calculate the EMV for each project, you multiply the probability by the outcome for each potential outcome for each project. To calculate EMV for Project 1, moving from the left to the right, multiply the probability with the outcome for each branch. In this example, the EMV for Project 1 is $28,000.
0.2($300,000) + 0.8(–$40,000) = $60,000 – $32,000 = $28,000

The EMV for Project 2 is $30,000.
0.2(–$50,000) + .1(–$20,000) + .7($60,000).= –$10,000 –$2,000 + $42,000 = $30,000

Because the EMV provides an estimate for a decision’s total dollar value, you want to obtain a positive number; the higher the EMV, the better. Because the EMV is positive for both Projects 1 and 2, the company would expect a positive outcome from each and can bid on both projects. If the company had to choose between the two projects, perhaps because of limited resources, the company should bid on Project 2 because it has a higher EMV. Notice that in Exhibit 9-3, if you look at the potential outcome of the two projects, Project 1 looks more appealing. You can earn $300,000 in profits from Project 1, but you can only earn $60,000 for Project 2. If the president were a risk seeker, he or she will naturally want to bid on Project 1. However, there is only a 20 percent chance of winning $300,000 on Project 1, and there is a 70 percent chance of earning $60,000 on Project 2. Using EMV helps account for all possible outcomes and their probabilities of occurrence, thereby reducing the tendency to seek overly aggressive or conservative risk strategies. Do it!                    D-1:    Discussing decision trees and EMV

Questions and answers
   1  What is a decision tree?

   2  What is EMV?

   3  If projects A and B have an EMV of $40,000 and $35,000, respectively, which project would you choose?


Explanation A sophisticated quantitative risk analysis technique is simulation. Simulation uses a[25-Apr-13 03:07:19 PM]

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representation or a model of a system to analyze that system’s expected behavior or performance. Most simulations are based on some form of Monte Carlo analysis. Monte Carlo analysis simulates a model’s outcome many times to provide a statistical distribution of the calculated results. For example, a Monte Carlo simulation can determine if a project will meet its schedule or cost goals given a 10 percent, 50 percent, or 90 percent probability. The basic steps of a Monte Carlo simulation are: 1   Assess the range for the variables being considered and determine the probability distribution for each. In other words, collect the most likely, optimistic, and pessimistic estimates for the variables in the model and determine the probability of each variable falling between the optimistic and most likely estimates. 2   For each variable, select a random value based on the probability distribution for the occurrence of the variable. For example, suppose an optimistic estimate is 10 (units can be days, dollars, labor hours, or any other unit that the model uses). In addition, suppose the most likely estimate is 20, and the pessimistic estimate is 50. If there is a 30 percent probability of being between 10 and 20 (the optimistic and most likely estimates), then 30 percent of the time, select a random number between 10 and 20, and 70 percent of the time, select a number between 20 and 50 (the pessimistic estimate). 3   Run a deterministic analysis or one pass through the model using the combination of values selected for each variable. 4   Repeat steps 2 and 3 several times to obtain the probability distribution of the results. The required number of iterations depends on the number of variables and the degree of confidence needed in the results, but it typically lies between 100 and 1,000. You can use software to perform the steps required for a Monte Carlo simulation. Several PC-based software packages are available that perform Monte Carlo simulations. Another technique for quantifying risk is Program Evaluation and Review Technique (PERT) analysis. PERT analysis involves making three estimates of each activity’s duration. The three estimates represent a pessimistic or worst case estimate, an optimistic or best case estimate, and a most likely estimate, similar to those described in a Monte Carlo simulation. However, the PERT formula weights the most likely estimate four times more than the pessimistic or optimistic estimates, instead of assigning a probability for the estimate falling between the optimistic and most likely estimates and then running a simulation of the model. Although this approach can be better than using a discrete estimate, it does not provide the flexibility or accuracy of a Monte Carlo simulation. Do it!                    D-2:    Discussing simulation

   1  What does simulation do?

   2  Which of the following is one of the steps of Monte Carlo simulation? A    Run a deterministic analysis. B    Simulate the process. C    Calculate the EMV. D    Select the best course.

Topic E:   Risk response planning
Explanation                 After risks are identified and quantified, an organization must develop a response to them. Doing so involves defining steps for enhancing opportunities and developing plans for handling risks or threats to project success. After the project team completes the three-step process for risk assessment, it must[25-Apr-13 03:07:19 PM]

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develop responses to the risks. To develop effective risk responses, take the following actions: ·    Plan appropriate responses. ·    Present recommendations to stakeholders.

Planning responses
Risk response consists of planning the appropriate actions for responding to project risks. Risk response is not only a component of the risk management variable, but also a part of the second step of the project management process—project planning. After the project team determines that a risk warrants a response, the team must develop a strategy to minimize the extent of damage that the risk can cause. After the most important risks are identified, the project team must plan appropriate responses to these risks or determine ways to minimize the probability of occurrence of these risks. The project’s risk management policies regulate the actions a project team can take in response to high-impact risks. Before completing this step, the project team might need to gather more information about the nature of the possible risks. There are four basic categories for possible risk response plans: ·    Risk avoidance ·    Risk acceptance ·    Risk transference ·    Risk mitigation Risk avoidance Risk avoidance involves eliminating a specific threat or a risk, usually by eliminating its causes. It might not be possible to eliminate all risks, but specific risk events can be eliminated. For example, a project team might decide to continue using specific hardware or software for a project because it is familiar with its functioning. Other products might be available, but if the team is not familiar with them, the products might pose significant risks. Using familiar hardware or software eliminates this risk. Risk acceptance Risk acceptance means accepting the consequences should a risk occur. For example, a project team plans for a big project review meeting, the venue for which is undecided. The team can adopt an active approach to risk by developing a contingency or a backup plan if the specific meeting site is unavailable. Alternatively, the team can adopt a passive approach and use the facility their organization provides them. Risk transference Risk transference is shifting the consequence, responsibility, and management of a risk to a third party. For example, risk transference is often used in dealing with financial risk exposure. A project team may purchase special insurance or warranty protection for specific hardware needed for a project. If the hardware fails, the insurer must replace it within an agreed-upon period. Risk mitigation Risk mitigation involves reducing the impact of a risk event by minimizing the probability of its occurrence. Examples of risk mitigation include using proven technology, engaging competent project personnel, using various analysis and validation techniques, and purchasing maintenance or service agreements from subcontractors. The following table provides general mitigation strategies for technical, cost, and schedule risks on projects. 6 Note that increasing the frequency of project monitoring and using a WBS and PERT/CPM are strategies for all three areas. Increasing the project manager’s authority is a strategy for mitigating technical and cost risks, and selecting the most experienced project manager is recommended for reducing schedule risks. Improving communication is also an effective strategy for mitigating risks.[25-Apr-13 03:07:19 PM]

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Technical risks
Emphasize team support and avoid stand-alone project structures Increase project manager authority Improve problem handling and communication Increase frequency of project monitoring

Cost risks
Increase the frequency of project monitoring.

Schedule risks
Increase the frequency of project monitoring.



Improve communication, project goals understanding and team support. Increase project manager authority.

Select the most experienced project manager.


Important output from risk response planning includes development of a risk response plan, analysis of residual risks, and analysis of secondary risks. The risk response plan describes identified risks, personnel assigned responsibilities for managing risks, results of risk analyses, response strategies, budget and schedule estimates for responses, and contingency and fallback plans. Residual risks continue to impact the project even after the team implements all the response strategies. For example, even though the team might use a stable hardware product on a project, the risk that the product may fail to functional properly still exists. Secondary risks are a direct result of implementing a risk response. For example, using the more stable hardware might cause a risk of peripheral devices failing to function properly. Other outputs of risk response planning include contractual agreements, estimates of needed contingency reserve, and input to other processes and the project plan.

Presenting recommendations to stakeholders
After appropriate risk responses are developed, the project team should create a “Conclusions and Recommendations” document that outlines the results of risk assessments. These suggestions should be presented to the project stakeholders so project decisions can be made with consideration of possible risks. This information enables stakeholders to determine if they want to accept the project’s risks or abandon the project entirely. In addition, once they choose to accept the risks, it helps them understand how to convert the risks into opportunities. Understanding stakeholders’ needs and risk tolerance levels help the project team to decide the four risk response plans, or combination of plans, that it wants to implement. The project manager should gain insight into stakeholders’ needs by interacting frequently with the stakeholders who maximally impact the project. Learning the nature of each stakeholder’s interest in a project, understanding their motivation and behavior, and assessing how they react to various approaches help the project team make the best possible risk decisions. Do it!                    E-1:    Responding to risks

Questions and answers
   1  What is a risk response?

   2  What is risk mitigation?

   3  List some expected outputs of risk response planning.[25-Apr-13 03:07:19 PM]

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   4  Which of the following is one of the basic categories for possible risk response plans? A    Acceptance of risks B    Understanding stakeholders’ needs C    Occurrence of these risks

Topic F:   Risk monitoring and control
Explanation Risk monitoring and control involves executing the risk management processes and the risk management plan to respond to risk events. Executing the risk management processes means ensuring that risk awareness is an ongoing activity that the entire project team performs throughout the entire project. Project risk management does not end with the initial risk analysis. Identified risks may not materialize, or their probability of occurrence or loss may diminish. Conversely, the project team might determine that previously identified risks have a high probability of occurrence or a high estimated loss value. The team might identify new risks as the project progresses. Newly identified risks need to go through the same process as those identified during the initial risk assessment. A redistribution of resources devoted to risk management might be necessary because of relative changes in risk exposure.

Developing project standards for risk management
Some standards that can be applied to most projects include: ·    Risk management plan ·    Procurement ·    Contingency reserves ·    Alternative strategies ·    Insurance Risk management plan A risk management plan is developed before a project begins and is used to guide a project team’s responses to risks throughout a project. A project’s risk management plan should outline the procedures a team must follow to manage project risks. For example, a risk management plan can include guidelines, such as the procedures to identify risks, the persons responsible for managing specific risks, and the contingency plans to be implemented. Risk management plans are part of the overall project plan and can be formal, containing a lot of detailed information, or informal, containing only the basic information. Procurement Procurement involves acquiring goods from a supplier external to the organization running the project. Procurement is a beneficial way to respond to project risks, because it transfers risks to a contractor. For example, if a project requires use of heavy equipment that can cause damage to the project site, the project manager can hire an operator from the company that leases the equipment so that the risk of any damage caused by the machine operator is transferred to the leasing company. Contingency reserves Contingency reserves are provisions in a project’s plan, which are used to minimize cost or schedule risks. Reserves are developed to cover unexpected needs or risk damages that can occur throughout a project.[25-Apr-13 03:07:19 PM]

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It is important to develop contingency reserves before a project begins because neither the project team nor the stakeholders want to make changes to the project’s scope after the project begins. If contingency reserves are negotiated into the cost and time allowances from the beginning, they provide the project manager with some flexibility. Alternative strategies When a project team identifies a potential risk, it develops alternative strategies to respond to that risk before it occurs. Use of alternative strategies can enable the team to prevent or avoid the risk by changing the planned approach to the part of the project at risk. For example, additional quality checkpoints might simplify the problems with the project’s end product, resulting in high overall revenues. Insurance Sometimes, the best response to project risks is to insure them. The type and cost of insurance coverage available depends on the type of project being completed and the type of risks to be covered. Types of project reserves There are two types of project reserves, management reserves and contingency reserves. Key stakeholders control management reserves, which are created to account for risks in the category of “unknown-unknowns.” For example, a key component of a project’s product is unavailable when it is most required, but a slightly more expensive alternative is available. In this situation, stakeholders can use their management reserves to purchase the more expensive component without exceeding the budget. The project manager controls contingency reserves, which are created to account for risks in the category of “known-unknowns.” For example, a “known-unknown” situation can occur if the project manager knows that during the first phase of the project the team will need to work overtime, but the amount of overtime is unknown because it is dependent upon the availability of resources. Contingency reserves can be used if the amount of overtime exceeds the amount allotted in the budget. Do it!                    F-1:    Developing project standards

   1  What are the ways of developing project standards?

   2  What are the two types of project reserves?

   3  Which of the following project standards is developed to cover unexpected needs or risk damages that can occur throughout a project? A    A risk management plan B    Procurement contracts C    Alternative strategies D    Contingency reserves[25-Apr-13 03:07:19 PM]

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Risk control
Explanation The final step in project risk management is risk control. Risk control entails executing the risk management plan to minimize the effects of project risks. It is important to document risks and their effects in a database for reference during subsequent projects. Risk control is a continuous process that requires monitoring the project’s condition and taking action to minimize the adverse affects of risks on projects. Risk control is not only a component of the risk management variable, but also a part of the fourth step of the project management process—project controlling. In addition, any time a new project risk occurs, the project manager must return to the planning step of the process to identify and assess the risk. Carrying out separate risk management plans involves monitoring risks on the basis of defined milestones and making decisions regarding risks and mitigation strategies. It might be necessary to alter a mitigation strategy if it becomes ineffective, implement a planned contingency activity, or eliminate a risk that no longer exists from the list of potential risks. Project teams, sometimes, use workarounds—unplanned responses to risk events—when contingency plans are not defined. A workaround is an unplanned response, or an alternative solution, developed to account for a problem created by taking a risk. Workarounds are considered unplanned because the response to the problem is not defined before the risk occurs. During project execution, if a risk is accepted, its negative impact on the project goals might not be immediately apparent. However, if the product of a project fails to perform as expected, the quality is compromised by accepting the risk. For example, if a product is expected to generate returns of $80,000 per year for ten years, but it has a major defect, customers will not buy the product. Therefore, the product will not generate the expected rate of return. You can use several tools and techniques to monitor and control risks. These include project risk audits, periodic risk reviews such as the Top 10 Risk Item Tracking method, earned value management, technical performance measurement, and additional risk response planning. Outputs of this process include corrective action, project change requests, and updates to other plans. Do it!                    F-2:    Controlling risks

   1  Risk control is a part of which project management process?

   2  A workaround is a generic response developed before a project begins to account for problems created by taking risks. True or false?


Using software to assist in project risk management
Explanation You can use software tools to help you with various risk management processes. You can use databases to record risks, spreadsheets to aid in tracking and quantifying risks, and sophisticated risk management software to help you develop models and use simulations to analyze and respond to various risks. You can use Microsoft Project to perform PERT analysis and add-on software to perform Monte Carlo simulations. For example, Risk+ (by C/S Solutions, Inc.) is a comprehensive risk analysis tool that integrates with Project to quantify the cost and schedule uncertainties associated with projects. This tool uses Monte-Carlo-based simulation techniques to answer questions such as: What are the chances of completing the project by December 1, 2005? How confident are we that project costs will remain below $10 million? What are the chances that this task will end up on the critical path? To use a Monte Carlo simulation to estimate the probability of meeting specific schedule goals, you[25-Apr-13 03:07:19 PM]

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collect optimistic, pessimistic, and most likely duration estimates for project tasks on a project network diagram, which is similar to the PERT technique. You must also collect estimates for the probability of completing each task between the optimistic and most likely times. You can use the same approach for cost estimates. You can collect optimistic, pessimistic, and most likely estimates for factors that determine project costs and establish the probability of the cost factors ranging between the optimistic and most likely values. For example, an expert might estimate that a task will most likely take three months to complete, but it can take as little as one month or as much as nine months to complete. When asked the probability of completing the task between one and three months, the expert might report the probability as only 20 percent. Another expert might estimate that the project task will take five months to complete, but it can take as little as two months, or as much as seven months to complete. This expert might estimate that the probability of completing that task between two and five months is 80 percent. Estimating the probability of completing tasks between the optimistic and most likely times helps to account for estimating bias. Compared with a PERT calculation, the Monte Carlo approach simulates various probability distributions for each estimate instead of applying the same simple PERT variation for all estimated durations. Unlike PERT, which focuses on schedule estimates, Monte Carlo simulation can also be used to estimate cost risks. Exhibit 9-4 illustrates the results from a Monte Carlo simulation of a project schedule. The simulation was created using Microsoft Project and the Risk+ add-on software. On the left side of Exhibit 9-4, a chart displays columns and an S-shaped curve. The height of each column, read by the scale on the left of the chart, indicates how many times the project was completed within the specified time interval during the simulation run, which is the sample count. In this example, the time interval is two working days, and the simulation was run 250 times. The first column shows that the project was completed by 1/29/05 only two times during the simulation. The S-shaped curve, read from the scale on the right of the chart, shows the cumulative probability of completing the project on or before a specific date. The information is also shown in tabular form on the right side in Exhibit 9-4. For example, there is a 10 percent probability that the project will be completed by 2/8/05, a 50 percent chance of completion by 2/17/05, and a 90 percent chance of completion by 2/25/05.

Exhibit 9-4: Sample Monte Carlo simulation results for a project schedule You can also use Monte Carlo simulations to help estimate project costs. First, you develop a model for estimating the total project cost. Suppose project costs can be estimated based on the number of pounds of material, the cost per pound, the number of hours for specific workers, and the cost per hour for each category of worker (such as managers, programmers, and electrical engineers). You can run a Monte Carlo simulation of the total project cost based on estimates of the optimistic, pessimistic, and most likely values for all the four variables. Exhibit 9-5 shows the results of a Monte Carlo simulation to estimate total project cost. These simulation results show that there is a 20 percent chance of the project costing less than $175,693, a 65 percent chance of it costing less than $180,015, and a 95 percent chance of the total project cost being under $184,528. Given the risk tolerance, you can use this information to decide how much to bid on a project if you are the seller, or how much to budget for the project if you are the buyer. For example, if you are a risk-averse seller, you might want to bid $185,000 to be extremely confident that you will not exceed the budget. Exhibit 9-5: Sample Monte Carlo simulation results for project cost In addition to estimating overall probabilities for project goals, such as completion dates or cost estimates, you can use Monte Carlo simulations to find top sources of risk (risk drivers). For example, a cost simulation might show that the number of labor hours budgeted for the electrical engineers was the main source of cost risk for a project. Simulations are powerful tools, and it is important that the team members who use them understand all the variables, inputs, and outputs involved. As with any software product, the information that is obtained is only as good as the information provided. Therefore, it is important to collect data from sources who understand the project or specific tasks involved. It is also important to test the model used in simulations to ensure that it provides realistic results.[25-Apr-13 03:07:19 PM]

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Do it!                    F-3:    Using software to manage risks

Questions and answers
   1  How can you manage risks using Microsoft Project 2003?

   2  Discuss Monte Carlo simulations and explain their significance in managing risks.

Unit summary: Risk management
Topic A                      In this topic, you learned that a risk management plan documents the procedures for handling risk throughout a project life cycle. Then, you learned the multiple ways you can classify risks including knowns , known-unknowns, unknown-unknowns, business , market, financial, technological and insurable risks. Topic B                      In this topic, you understood the potential sources of risks and how to identify risks. Then, you learned about the four common techniques used for identifying risk: brainstorming, the Delphi Technique , interviewing, and SWOT analysis. Finally, you identified the output of the risk identification process. Topic C                     In this topic, you learned about qualitative risk analysis. You also learned the techniques you can use to perform qualitative risk analysis including the probability/impact matrix and the Top 10 Risk Item Tracking technique. Topic D                     In this topic, you learned about quantitative risk analysis. You also learned the techniques you can use to perform quantitative risk analysis including decision tree analysis and simulation . Topic E                      In this topic, you learned about risk response planning. You identified the four basic categories of risk response plans: risk avoidance , risk acceptance, risk transference, and risk mitigation. Topic F                      In this topic, you learned about risk monitoring and control. You learned that the project standards for risk management include: risk management plan , procurement , contingency reserves , alternative strategies, and insurance . Finally, you learned that risk control entails executing the risk management plan to minimize the effects of project risks. You also learned the techniques that you can use to monitor and control risks.

Independent practice activity
  1  Suppose your organization is considering a new project that involves developing an information system so that all employees, students, or customers can access and maintain their own human resource-related information, such as address, marital status, and tax information. The main benefits of the system are reduction in human resources personnel and accuracy of information. For example, if an employee, student, or customer uses a new telephone number or e-mail address, he or she is responsible for adding the new data in the system. The new system also allows employees to change their tax withholdings or pension plan contributions. Identify five potential risks for this new project. Provide a detailed description of each risk and propose strategies for mitigating each risk.
Answers might vary.

  2  When should project risks be managed?
Risks should be managed throughout the project life cycle.

  3  Describe the Delphi Technique of information gathering.
The basic concept of the Delphi Technique is to derive a consensus among a panel of experts who make predictions about future developments.

  4  Should risk management be viewed proactively?[25-Apr-13 03:07:19 PM]

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  5  When should a risk be avoided?
When eliminating a specific threat or a risk is feasible, usually by eliminating a risk’s causes. It might not be possible to eliminate all risks, but specific risk events can be eliminated. For example, a project team might decide to continue using specific hardware or software for a project because it is familiar with its functioning. Other products might be available, but if the team is not familiar with them, the products might pose significant risks. Using familiar hardware or software eliminates this risk.

  6  In your experience, which method(s) have you used to determine project risks that require the maximum attention?
Answers might vary.

  # 1 Reference Wideman, R. Max. Project and Program Risk Management: A Guide to Managing Project Risks and Opportunities, Upper Darby, PA: Project Management Institute, 1992, II-4. Couger, J. Daniel. Creative Problem Solving and Opportunity Finding, Boyd & Fraser Publishing Company, 1995. Lumina, Influence Diagrams. (2003) Defense Systems Management College. Systems Engineering Management Guide, Washington, DC, 1989. McDonnell Douglas Corporation. “Hi-Rel Fighter Concept,” Report MDC B0642, 1988. Couillard, Jean. “The Role of Project Risk in Determining Project Management Approach,” Project Management Journal, Project Management Institute (December 1995).


3 4

5 6


Unit 10 Procurement management
Unit time: 60 Minutes Complete this unit, and you’ll know how to:
A  Describe procurement planning, identify the tools and

techniques used for procurement planning, and describe solicitation planning.
B  Perform source selection, identify types of contracts, and

describe contract administration and close-out.[25-Apr-13 03:07:19 PM]

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Topic A:   Procurement planning and solicitation
Explanation                 Project procurement management includes the processes required to acquire goods and services for a project from sources external to the performing organization. The processes involved in procurement management are: ·    Procurement planning. Involves identifying the materials to procure and when to procure them. ·    Solicitation planning. Involves preparing the documents needed for solicitation and determining the evaluation criteria for the contract award. ·    Solicitation. Involves receiving proposals, quotations, bids, or offers. ·    Source selection. Involves choosing from among potential vendors. ·    Contract administration. Involves managing relationships with vendors. ·    Contract close-out. Involves completion and settlement of the contract. Exhibit 10-1 summarizes these processes and shows the important milestones at each stage of the process.1 Exhibit 10-1: Project procurement management processes and key output

Project procurement planning
Procurement planning is the process of identifying the project needs that can be best met by using products or services from sources external to the organization. It involves deciding: ·    Whether to procure? ·    How to procure? ·    What to procure? ·    How much to procure? ·    When to procure? It is important to be thorough and efficient in the procurement planning process. Input needed for procurement planning includes the project scope statement, product descriptions, market conditions, constraints, and assumptions. For example, a large company might consider outsourcing the delivery, maintenance, and basic user training and support for laptops supplied to its international sales and marketing personnel. The company makes this decision according to the procurement planning input. If the suppliers can provide these services at a reasonable cost, the company can decide to outsource these services. Doing so reduces fixed and recurring costs for the company and enables it to focus on its core business. You must understand the need to procure goods or services and the input required for procurement planning. However, you must also clearly define the scope of the project, the products, market conditions, and constraints and assumptions before undertaking procurement planning.

Tools and techniques for procurement planning
Tools and techniques of procurement management include: ·    Performing make-or-buy analysis ·    Consulting internal experts Make-or-buy analysis Make-or-buy analysis is a management technique used to determine whether a particular product or service should be developed by the organization or purchased from a vendor. The analysis involves estimating the internal costs of providing a product or service and comparing the estimate with the cost of outsourcing. Consider a company with an international sales-force of 1,000 personnel who[25-Apr-13 03:07:19 PM]

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require laptops and need to be provided maintenance, training, and user support. Using make-or-buy analysis, the company estimates its cost as an initial investment of $3 million and annual support costs of $2 million. The estimate includes costs for hardware and software, travel, shipping, and technical support. (Note that a make-or-buy analysis must include the life cycle cost.) The company can outsource this service if vendors quote less than the company’s cost estimates. Internal experts Internal experts must be consulted as part of procurement planning. Considering the same example again, experts might suggest that the company will be unable to provide quality maintenance, training, and service for laptops because the company will be unable to station personnel with the required skills at different locations. Experts within the company might also be aware of the competitors outsourcing this type of work and might help identify vendors that can undertake this work. Experts external to the company, including potential vendors, can also provide expert judgment. For example, vendors might suggest an option for salespeople to purchase the laptops themselves at a reduced cost. This option would solve problems of employee turnover—exiting employees would own their laptops and new employees would purchase a laptop through the program. An internal expert might then suggest that employees receive a technology bonus to help offset what they might view as an added expense. Expert judgment, both internal and external, is important in making procurement decisions. Do it!                    A-1:    Discussing procurement planning

   1  What is procurement planning?

   2  What input is needed for procurement planning?

   3  Which of the following are the tools and techniques of procurement management? A    Internal experts B    Market conditions C    Project scope statement D    Make-or-buy analysis

Solicitation planning
Explanation Solicitation planning involves preparing the documents required for solicitation and determining the evaluation criteria for the contract award. Two common examples of solicitation documents include: ·    Requests for Proposal (RFPs) ·    Requests for Quotes (RFQs) Requests for Proposal Request for Proposal (RFP ) is a document used to solicit proposals from prospective vendors. Organizations issue RFPs to potential vendors. For example, if a government department wants to automate its work practices, it issues an RFP so that vendors can respond with proposals. Vendors might propose various hardware, software, and[25-Apr-13 03:07:19 PM]

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networking solutions to meet the government’s needs. Writing a good RFP is a critical part of project procurement management. To generate a good RFP, expertise is invaluable. Several examples of RFPs are available within different companies, from potential contractors, and from government agencies. Legal requirements are often involved in issuing RFPs and reviewing proposals, especially for government projects. It is important to consult experts familiar with the solicitation planning process for a particular organization. To make sure the RFP contains the required information to provide the basis for a good proposal, the buying organization should ask the following questions: ·    Can you develop a good proposal based on the information in the RFP? ·    Can you determine detailed pricing and schedule information based on the RFP? Exhibit 10-2 provides a basic outline for creating an RFP. Its main sections include a statement of the purpose, background information about the organization issuing the RFP, the basic requirements for the products and/or services being proposed, the hardware and software environment (which constitutes important information for IT-related proposals), a description of the RFP process, the statement of work and schedule information, and appendices, if required. A simple RFP may be three to five pages long, while an RFP for a larger, more complicated procurement might be hundreds of pages long.

Exhibit 10-2: Outline for a Request for Proposal (RFP) Request for Quote A Request for Quote (RFQ ) is a document used to solicit quotes or bids from prospective sellers. Organizations often use an RFQ for solicitations that involve specific items. For example, if the government wants to purchase 100 personal computers with specific features, it issues an RFQ to potential vendors. RFQs usually do not take as long to prepare as RFPs, nor do responses to them. Other solicitation documents Other documents used in solicitation planning include invitations for bid, invitations for negotiation, and initial contractor responses. All solicitation documents must be written to facilitate accurate and complete responses from prospective sellers. They should include background information about the organization and the project, the relevant statement of work, a schedule, a description of the desired form of response, evaluation criteria, pricing forms, and any required contractual provisions. They should also be comprehensive enough to ensure consistent, comparable responses, but flexible enough to allow consideration of seller suggestions for improved ways to meet the requirements. It is essential for organizations to prepare a form of evaluation criteria, preferably before they issue a formal RFP or RFQ. Organizations use criteria to rate or score proposals, and they often assign a weight to each criterion to indicate its importance. Some examples of criteria include the technical approach (30 percent weight), management approach (30 percent weight), past performance (20 percent weight), and price (20 percent weight). The criteria should be specific and objective. For example, if the buyer wants the seller’s project manager to be a certified Project Management Professional (PMP), this requirement must be stated clearly in the procurement documents and followed during the award process. Losing bidders may pursue legal recourse if the buyer does not follow a fair and consistent evaluation process. INPUT, a Web-based IT market research and marketing services firm, provides market reports and buyer guides to assist organizations in IT outsourcing. One buyer guide offers suggestions on selection criteria, which includes reputation and past performance, industry knowledge, strategic partnership, and ability to meet needs. INPUT’s research shows that most contracts include provisions to safeguard against unsatisfactory partnering, but most companies hesitate to exercise the provisions. Therefore, buyers should look for a supplier with a proven record of excellence and reputation for quality. 2 Organizations should heed the saying, “Let the buyer beware.” It is critical to evaluate proposals on more than the appearance of the paperwork. A key factor in evaluating bids, particularly for projects involving IT, is the bidders’ past performance record. The RFP should require bidders to list other[25-Apr-13 03:07:19 PM]

IT Project Management:

similar projects they have worked on and provide customer references for those projects. Reviewing performance records and references helps reduce the risk of selecting a vendor with a poor track record. Vendors should also demonstrate their understanding of the buyer’s needs, their technical and financial capabilities, their management approach to the project, and their price for delivering the desired goods and services. Some IT projects also require potential sellers to deliver a technical presentation as part of their proposal. The proposed project manager should lead the potential seller’s presentation team. When the external project manager leads the proposal presentation, the organization can build a relationship with the potential provider. Visits to contractor sites can also help the buyer get information about the seller’s capabilities and management style.

Solicitation involves obtaining proposals or bids from prospective sellers. Prospective sellers complete most of the work in this process, at no cost to the buyer or the project. The buying organization is responsible for advertising the solicitation, and might hold a bidders’ conference to answer questions about the solicitation. The main output of this process is receipt of proposals or bids. Organizations can advertise in many different ways to procure goods and services. Sometimes, a specific seller might be the buyer’s preferred vendor. In this case, the buyer provides solicitation information to only that vendor. If the preferred vendor responds favorably, both organizations proceed to work together. In many cases, however, several sellers may be qualified to provide the desired goods and services. Solicitation with several potential vendors often provides the buyer advantage of the competitive business environment and allows the development of competitive bidding strategies. As a result, the buyer is able to procure goods and services at low cost. A bidders’ conference, also called a vendor conference or pre-bid conference, is a meeting with prospective sellers prior to preparation of a proposal. These conferences help ensure that everyone involved shares a clear and common understanding of the products or services that the buyer desires. The buyer may incorporate responses to questions as amendments to the procurement documents before, during, or after the conference. Do it!                    A-2:    Discussing solicitation planning

   1  What is an RFP?

   2  What is solicitation?

   3  You are planning to install 150 computers in your organization. Design an RFP that you will send to prospective sellers.


Topic B:   Source selection and contract management
Explanation After buyers receive proposals, they select a vendor or decide to cancel the procurement. Source selection involves evaluating bidders’ proposals, choosing the best proposal, negotiating the contract, and awarding the contract. This process is often long and tedious. Stakeholders in the procurement process should be involved in selecting the best vendor for the project. Often, different teams evaluate different[25-Apr-13 03:07:19 PM]

IT Project Management:

sections of the proposals. There might be a technical team, a management team, and a cost team to focus on their respective fields. Buyers frequently develop a short list of the top three to five vendors to reduce the work involved in selecting a source.

Making source selection
Experts in source selection recommend that buyers use formal proposal evaluation sheets during source selection. Exhibit 10-3 provides a sample proposal evaluation sheet that the project team can use to help create a short list of the best three to five proposals. Experts also recommend that technical criteria should not be weighted more than management or cost criteria. Many organizations suffer the consequences of paying too much attention to the technical aspects of proposals, which applies to IT projects. For example, a project may cost much more than expected or take too long to complete because the source selection team focused on only the technical aspects of proposals. However, it is often the seller’s management team —not the technical team —that makes procurement successful. Exhibit 10-3: Sample proposal evaluation sheet After developing a short list of possible sellers, organizations often follow a detailed proposal evaluation process. Exhibit 10-4 lists items that might be part of an evaluation of the top three vendors for a large IT project. This list focuses on the project management capabilities of each vendor. The criteria include the project manager’s educational background and PMP certification, the presentation that is part of the evaluation process, and the organization’s project management methodologies. The project team members and other stakeholders performing the evaluation assign points for all criteria to each vendor finalist. In the example in Exhibit 10-4, Vendor 3 scores the highest (28 out of 30 points) based on the management approach criteria for the award. Similar scores are assigned for the selection criteria. The vendor scoring the maximum points (the total of points awarded on each criterion for all categories) should be offered the award.

Exhibit 10-4: Detailed criteria for selecting vendors It is customary to negotiate contracts during the source selection process. Selected vendors prepare a best and final offer (BAFO). In addition, senior managers from both the buying and selling organizations meet before making final decisions. The final output from the source selection is a contract that obligates the seller to provide the specified products or services and the buyer to pay for them.

Types of contracts
Contract type is an important consideration. Different types of contracts might be used by an organization. The different categories of contracts are: ·    Fixed price or lump sum ·    Cost reimbursable ·    Time and material ·    Unit price Fixed price or lump sum Fixed price or lump sum contracts involve a fixed total price for a well-defined product or service. The buyer incurs little risk in this situation. For example, a company can award a fixed price contract to purchase 100 laser printers of the desired specifications to be delivered at a location within two months. In this example, the product and delivery date are well defined. Fixed price contracts might also include incentives for meeting or exceeding selected project objectives. For example, the contract can include an incentive fee paid if the laser printers are delivered within one month. A firm-fixed price (FFP) contract poses the minimum risk to the buyer, followed by a fixed price incentive (FPI) contract. Cost reimbursable[25-Apr-13 03:07:19 PM]

IT Project Management:

Cost reimbursable contracts involve payment to the seller for direct and indirect actual costs. Direct costs are costs related to a project that can be traced back in a cost-effective way. Indirect costs are costs related to the project that cannot be traced back in a cost-effective way. For example, the salaries of team members working on a project and hardware or software purchased for a specific project are direct costs, while the cost of providing a workspace constitutes an indirect cost. Indirect costs are often calculated as a percentage of direct costs. Cost reimbursable contracts often include fees, such as a profit percentage or incentives for meeting or exceeding selected project objectives. These contracts are often used for projects that include providing goods and services involving new technologies. The buyer absorbs more risk with cost reimbursable contracts than with fixed price contracts. Three types of cost reimbursable contracts, in order of lowest to highest risk to the buyer, include: ·    Cost plus incentive fee (CPIF) contract. The buyer pays the seller for allowable performance costs along with a predetermined fee and an incentive bonus. If the final cost is less than the expected cost, both the buyer and the seller benefit from the cost savings based on a negotiated share formula. For example, suppose the expected cost of a project is $100,000, the fee to the seller is $10,000, and the share formula is 85/15, which means that the buyer absorbs 85 percent of the uncertainty and the seller absorbs 15 percent. If the final price is $80,000, the cost savings are $20,000. The seller is paid the final cost and the fee plus an incentive of $3,000 (15 percent of $20,000), for a total reimbursement of $93,000. ·    Cost plus fixed fee (CPFF) contract. The buyer pays the seller for allowable performance costs plus a fixed fee payment, usually based on a percentage of estimated costs. This fee does not vary, however, unless the scope of the contract changes. For example, suppose the expected cost of a project is $100,000, and the fixed fee is $10,000. If the actual cost of the contract rises to $120,000 but the scope of the contract remains the same, the contractor will receive the fee of $10,000. ·    Cost plus percentage of costs (CPPC) contract. The buyer pays the seller for allowable performance costs along with a predetermined percentage based on total costs. From the buyer’s perspective, this is the least desirable type of contract because the seller has no incentive to decrease costs. In fact, the seller might be motivated to increase costs because that will automatically increase profits based on the percentage of costs. This type of contract is prohibited for federal government use, but is sometimes used by organizations that are part of the construction industry. All the risk is borne by the buyer. Time and material Time and material contracts are a hybrid of both fixed price and cost reimbursable contracts. For example, an independent computer consultant might be contracted based on a fee of $80 per hour for the services and a fixed price of $10,000 for providing specific material for the project. The materials fee might also be based on approved receipts for purchasing items, with a maximum limit of $10,000. The consultant sends an invoice to the company each week or month, listing the materials fee, the number of hours worked, and a description of the work produced. This type of contract is often used for services required when the work cannot be clearly specified and total costs cannot be estimated in a contract. Generally, contract programmers and consultants prefer time and material contracts. Unit price Unit price contracts require the buyer to pay the supplier a predetermined amount per unit of service, and the total value of the contract is a function of the quantities needed to complete the work. For example, an IT department might use a unit price contract for purchasing computer hardware. If the company purchases only one unit, the cost might be $1,000. If the company purchases 10 units, the cost will be $10,000. This type of contract often involves volume discounts. For example, if the company purchases 10 to 50 units, the contracted cost might be $900 per unit. If the company purchases more than 50 units, the cost might go down to $800 per unit. Any type of contract should include specific clauses that take into account issues unique to the project. For example, if a company uses a unit price contract for consulting services, the contract should stipulate different hourly rates based on the level of experience of individual contractors. The services of a junior programmer with no bachelor’s degree and less than three years’ experience might be billed at $40 per hour, but the services of a senior programmer holding a bachelor’s degree[25-Apr-13 03:07:19 PM]

IT Project Management:

and more than 10 years of experience might be billed at $80 per hour. Contract types versus risk Exhibit 10-5 summarizes the spectrum of risks to the buyers and sellers for different types of contracts. Buyers face the minimum risks with FFP contracts because they are aware of the payment to be made to the seller. Buyers face the maximum risks with cost plus percentage of costs contracts because they are unaware of the seller’s costs in advance and the sellers might increase costs randomly. The seller’s face minimum risks with a cost plus percentage of costs contract and the maximum risks with the FFP contract. Exhibit 10-5: Contract types versus risk

Time and material and unit price contracts can be viewed as high- or low-risk, depending on the nature of the project and other contract clauses. For example, if an organization is unclear on the nature of work to be done, it cannot expect a supplier to sign a FFP contract. However, the buyer can engage a consultant or group of consultants to work on specific tasks based on a predetermined hourly rate. The buying organization can evaluate the work produced every day or every week to decide if consultants should continue. In this case, the contract includes a termination clause —a contract clause that allows the buyer or supplier to end the contract. Some termination clauses state that the buyer can terminate a contract for any reason and by serving the supplier only 24 hours’ notice. Suppliers must often serve a one-week notice to terminate a contract and must provide sufficient reasons for the termination. The buyer can also include a contract clause specifying hourly rates based on the education and experience of the consultants. These contract clauses reduce the risk incurred by the buyer while providing flexibility for accomplishing the work. Statement of work Many contracts include a statement of work (SOW). The SOW is a description of the work required for procurement. The SOW describes the work in detail to allow prospective sellers to determine if they can provide the required goods and services and to determine an appropriate price. A SOW should be clear, concise, and complete. It must describe all the required services and include performance reporting. It is important to use appropriate words in a SOW such as must instead of may. For example, must implies that something is obligatory or necessary; may implies a choice in doing or not doing something. The SOW should specify the product of the project, use industry terms, and refer to industry standards. Many organizations use samples and templates to generate SOWs. Exhibit 10-6 provides a template for a SOW that an organization can use when hiring outside consultants or purchasing goods or services. For example, for an operating system conversion project, a company should specify information, such as the specific manufacturer and model number for the hardware, the operating systems in use and the operating systems required for the conversion, and the number of units of each type of hardware involved (mainframes, midrange computers, or PCs). The SOW should also specify the location of the work, the expected period of performance, specific deliverables and their due dates, standards, acceptance criteria, and special requirements. A comprehensive SOW gives bidders a better understanding of the buyer’s expectations. A SOW can and should become part of the official contract to ensure that the buyer gets what the supplier bid on.

Exhibit 10-6: Statement of work (SOW) template

Do it!                    B-1:    Discussing types of contracts

   1  Which of the following are the types of contracts used in different situations? A    Cost reimbursable B    Unit price[25-Apr-13 03:07:19 PM]

IT Project Management:

C    Time and material D    Termination clause    2  What is an SOW?

   3  What are the three types of cost reimbursable contracts?

   4  Identify the contract type if the buyer pays the seller for allowable performance costs along with a predetermined percentage based on total costs.

   5  In your experience, before starting work on a project, have you signed an SOW with the clients? What features did it have?


Contract administration
Explanation Contract administration ensures that the seller’s performance meets contractual requirements. The contractual relationship is a legal relationship and is subject to state and federal contract laws. Therefore, appropriate legal and contracting professionals must be involved in writing and administering contracts. It might be possible that project managers have limited knowledge about contract administration. Several project managers and technical professionals might prefer not to be involved in the contract process or might face problems due to their lack of understanding about the contracts. Ideally, the project manager and his or her team should be actively involved in writing and administering the contract so that everyone understands the importance of good procurement management. The project team should also seek expert advice in working with contractual issues. Project members must be aware of potential legal problems they might cause by not understanding a contract. For example, most projects involve changes for items under contract, and these changes must be handled properly. If the project manager does not understand the provisions of the contract, it might inadvertently lead to authorizing the contractor to do additional work at additional cost. Change control is essential to the contract administration process. Following are suggestions to ensure adequate change control on projects that involve contracts:[25-Apr-13 03:07:19 PM]

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