7th Lecture Project Management

Project Management
Project management is the management of the work to;
1. Develop and implement an innovation or
2. Change in an existing operation.
Therefore all operational activities that arenon-repetitive and unique,
occurring only once within a specified time frame, such unique, onetime activities are referred to as Projects.
Project Management encompasses planning the project and controlling
the project activities, subject to resource and budget constraints, and
to keep the project on schedule. Examples of projects include constructing
buildings, such as factories, a shopping mall, an athletic stadium; developing a
military weapons system, planning a rock concert, or introducing new products
into the market.
The nature of the global business environment is such that new machinery and
equipment, as well as new production processes and computer support systems,
are constantly evolving. This provides the capability of developing new products
and services, which generates consumer demand for even greaterproduct
diversity. As a result, a larger proportion of total organizational effort
now goes toward project-oriented activities than in the past. Thus, the
planning and management of projects has taken on a more crucial role
in operations management.

PROJECT PLANNING
A project has a unique purpose, it is temporary, and it draws resources
from various areas in the organization; as a result, it is subject to more
uncertainty than the normal management process. Thus, the features and
characteristics of the project management process tend to be unique.
Figure provides an overview of the project management process, which
encompasses three other major processesplanning, scheduling, and control. It
also includes a number of the moreprominent elements of these processes.
Activities that come under Planning.

7th Lecture Project Management

ELEMENTS OF A PROJECT PLAN

Project plans generally include the following basic elements.
Objectivesa detailed statement of what the project is to accomplish and how
it will achievethe companys goals and meet the strategic plan; and an estimate
of when it needs to becompleted, the cost and the return.
Project scopea discussion of how to approach the project, the technological
and resourcefeasibility, the major tasks involved, and a preliminary schedule;
includes a justification of theproject and what constitutes project success.
Contract requirementsa general structure of managerial, reporting, and
performance responsibilities,including a detailed list of staff, suppliers,
subcontractors, managerial requirements
and agreements, reporting requirements, and a projected organizational
structure.
Schedulesa list of all major events, tasks, and subschedules, from which a
master scheduleis developed.
Resourcesthe overall project budget for all resource requirements and
procedures for budgetry
control.
Personnelidentification and recruitment of personnel required for the project
team, including special skills and training.

7th Lecture Project Management

Controlprocedures for monitoring and evaluating progress and performance
includingschedules and cost.
Risk and problem analysisanticipating and assessing uncertainties, problems
and potential difficultiesthat might increase the risk of project delays and/or
failure and threaten project success.

PROJECT RETURN
In order for a project to be selected to be undertaken it typically has to
have some kind of positivegain or benefit for the organization that is
considering it. In a business one of the most popularmeasures of benefit
is return on investment (ROI). ROI is a performance measure that is oftenused
to evaluate the expected outcome of a project or to compare a number of
different projects.
To calculate ROI, the benefit (return) of a project is divided by the cost of the
project; the result is
expressed as a percentage or a ratio:

If a project does not have a positive ROI, or if there are other projects
with a higher ROI, then theproject might not be undertaken. ROI is a very
popular metric for project planning because of its
versatility and simplicity.
However, projects sometimes have benefits that cannot be measured in a
tangible way withsomething like an ROI, whats referred to as a soft return.
For example, a project that has raisingemployee satisfaction as its goal
can result in real benefitsincreased productivity, improvedquality, and
lower costswhich are difficult to measure monetarily in the short run. A
project byan Internet online retailer to install backup power generators to keep
orders coming in and customershappy during a power outage is like insurance for
something that may never happen, makingan ROI difficult to determine. In
general, it maybe more appropriate to measure a projects benefit not just in
terms of financial return, but also interms of the positive impact it may have on a
companys employees and customers, that is, qualityimprovement.

THE PROJECT TEAM

The project team is typically cross-functional, consisting of a group of
individuals selected from other areas in the organization or from outside
the organization because of their special skills, expertise, and
experience related to the project activities. Members of the engineering
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7th Lecture Project Management

staff are oftenassigned to project work because of their technical skills, especially
if the project is related to productionprocesses or equipment. The project team
may also include managers and staff personnelfrom specific areas related to the
project. Workers can also be involved on the project team if theirjob is a function
of the project activity. For example, a project team for the construction of a
newloading dock facility might include truck drivers, forklift operators, dock
workers, and staff personneland managers from purchasing, shipping, receiving,
and packaging, as well as engineers toassess vehicle flow, routes, and space
considerations.
The term matrix organization refers to a team approach to special
projects. The team is developedfrom members of different functional areas or
departments in the company. For example, team members might come from
engineering, production, marketing, or human resources, depending on
the specialized skills required by the project. The team members are, in
effect, on loan from their home departments to work on a project.
Assignment to a project team is usually temporary, which can have both
positive and negative repercussions. The temporary loss of workers and staff
from their permanent jobs can be disruptivefor both the employee and the work
area. The employee must sometimes serve two masters, reporting to
both the project manager and a regular supervisor. Since projects are
usually exciting,they provide an opportunity to do work that is new and
innovative, making the employee reluctantto report back to a more mundane,
regular job after the project is completed.

THE PROJECT MANAGER

The most important member of the project team is the project manager.
Managing a project issubject to lots of uncertainty and the distinct
possibility of failure. Since a project is unique andusually has not been
attempted previously, the outcome is not as certain as the outcome of
an ongoingprocess would be..The project is subject to time and budgetary
constraintsthat are not the same as normal work schedules and resource
consumption in an ongoing process.
There is usually more perceived and real pressure associated with
project management than in anormal management position. However,
there are potential opportunities, including demonstrating
management abilities in a difficult situation, the challenge of working on a unique
project, and the
excitement of doing something new.

SCOPE STATEMENT
The scope statementis a document that provides a common
understanding of a project. It includes ajustification for the project that

7th Lecture Project Management

describes which factors created a need within the company for the
project. It also includes an indication of what the expected results of the
project will be and what will constitute project success. The scope
statement might also include a list of the types of planning reports and
documents that are part of the project management process.
A similar planning document is the statement of work. In a large project,
the statement of work is often prepared for individual team members,
groups, departments, subcontractors, and suppliers. This statement
describes the work in sufficient detail so that the team members
responsible for it know what is required and if they have sufficient
resources to accomplish the work successfully and on time. For suppliers
and subcontractors it is often the basis for determining whether theycan perform
the work and for bidding on it. Some companies require that a statement of work
bepart of an official contract with a supplier or subcontractor.

WORK BREAKDOWN STRUCTURE

The work breakdown structure (WBS)is a tool used for project planning. The
WBS organizes the work to be done on a project. In a WBS, a project is
broken down into its major components, referred to as modules. These
components are then subdivided into detailed subcomponents, which
are furtherbroken down into activities and, finally, individual tasks. The
end result is a project hierarchical organizational structure made up of
different levels, with the overall project at the top of the structure and
the individual tasks for each activity at the bottom level. The WBS format
is a goodway to identify activities and to determine the individual task, module,
and project workloads andresources required. It also helps to identify
relationships between modules and activities as well as unnecessary
duplication of activities. Finally, it provides the basis for developing and
managing the project schedule, resources, and modifications.
There is no specific model to follow for the development of a WBS. It can be in the
form of achart or a table. There are two good ways for a project team to developa
WBS.
One way is to start at the top and work ones way down asking, What
components constitutethis level? until the WBS is developed in sufficient detail.
The other way is simply tobrainstorm the entire project, writing down each item
on a sticky note and then organizing themtogether into the branches of a WBS.
The upper levels of the WBS hierarchy tend to indicate thesummary activities,
major components, or functional areas involved in the project. They are
typicallydescribed by nouns that indicate what is to be done. The lower levels of
the WBS tend todescribe the detailed work activities of the project required under
the major components or areas.

7th Lecture Project Management

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

RESPONSIBILITY ASSIGNMENT MATRIX

After the work breakdown structure is developed, which organizes the project work into smaller,
manageable elements, the project manager assigns the work elements to organizational units
departments, groups, individuals, or subcontractorsusing an organizational breakdown structure
(OBS).
The OBS is an organizational chart that shows which organizational units are responsible for
work items. After the OBS is developed, the project manager can then develop a responsibility

7th Lecture Project Management

assignment matrix (RAM). The RAM shows who in the organization is responsible for doing the
work in the project. Figure below shows a RAM for the Hardware/Installation category from the
work breakdown structure for the computerized order processing project shown inFigure. Notice that
there are three levels of work assignment in the matrix reflecting who is responsible for the work, who
actually performs the work, and those who perform support activities.
As with the WBS, both the OBS and RAM can take many different forms depending on the
needs and preferences of the company, project team, and project manager.
A Responsibility Assignment Matrix

PROJECT SCHEDULING
The project schedule evolves from the planning documentsdiscussed above. It is typically the
most critical element in the project management process, especially during the implementation
phase (i.e., the actual project work), and it is the source of most conflict and problems.
One reason is that frequently the single most important criterion for the success of a project is
that it be finished on time. If a shopping mall isnot completed on time, there will be a lot of angry
tenants; and if a new military weapon is notcompleted on time, it could affect national security. Time
is also a measure of progress that is absolute with little flexibility; you can spend less money or
use fewer people, but you cannot slow down or stop the passage of time.
Activities that come under Scheduling.

7th Lecture Project Management

Developing a schedule encompasses the following basic steps.

1.
2.
3.
4.

First, define the activities that must be performed to complete the project;
Second, sequence the activities in the order in which they must be completed;
Estimate the time required to complete each activity; and finally,
Develop the schedule based on this sequencing and time estimates of the activities. Because
scheduling involves a quantifiable measure, time.
Several quantitative techniques, including the Gantt chart and CPM/PERT networks, are available
that can be used to develop a project schedule.

THE GANTT CHART

A Gantt chart(also called a bar chart) was developed by Henry Gantt, a pioneer in the field of
industrialengineering, at the artillery ammunition shops of the Frankford Arsenal in 1914.
The Gantt chart is a graph with a bar representing time for each activity in the project being
analyzed.Figure below illustrates a Gantt chart of a simplified project description for building ahouse.
The project contains only seven primary activities, such as designing the house, laying thefoundation,
ordering materials, and so forth. The first activity is design house and obtain financing,and it
requires three months to complete, shown by the bar from left to right across the chart. Afterthe first
activity is finished, the next two activities, lay foundation and order and receive materials,can start
simultaneously. This set of activities demonstrates how aprecedence relationship works; the
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design of the house and the financing must precede the next two activities.
The activity lay foundation requires two months to complete, so it will be finished, at the earliest,at
the end of month 5. Order and receive materials requires one month to complete, and itcould be
finished after month 4. However, observe that it is possible to delay the start of this activityone month
until month 4. This delay would still enable the activity to be completed by the end ofmonth 5, when
the next activity, build house, is scheduled to start. This extra time for the activityorder materials is
called slack. Slack is the amount by which an activity can be delayed without delaying any of the
activities that follow it or the project as a whole. The remainder of the Gantt chart isconstructed in a
similar manner, and the project is scheduled to be completed at the end of month 9.
The Gantt chart provides a visual display of the project schedule, indicating when activitiesare
scheduled to start, when they will be finished, and where extra time is available and activitiescan be
delayed. The project manager can use the chart to monitor the progress of the activities and see
which ones are ahead of schedule and which ones are behind schedule. The Gantt chart also
indicates the precedence relationships between activities; however, these relationships are not
always easily apparent. This problem is one of the disadvantages of the Gantt chart method, and
it sometimes limits the charts use to smaller projects with relatively few activities.
Gnatt Chart is a precursor of The CPM/PERT network technique which is a bettertool for big projects.

7th Lecture Project Management

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

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

b. QUALITY MANAGEMENT
Quality management and control are an integral part of the project management process. Tasks and
activities must be monitored to make sure that work is done correctly.If the work on an activity or
task is flawed, subsequent activities may be affected, requiring rework, delaying the project, and
threatening project success. Poor-quality work increases the risk of project failure, just as a
defective part can result in a defective final product if not corrected. As such, the principles of
quality management can also be applied to the project management process.

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

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7th Lecture Project Management

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

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