"Enterpise Environmental Factors:

People: The skills and organizational culture where you work.

Risk Tolerance: Some companies are highly tolerant of risk and some are really r
isk averse.
Market: The way your company is performing in the market can affect the way you
manage your project.
Databases: Where your company stores its data can make a big difference in the d
ecisions you make on your project.
Standards: Some companies depend on government standards to run their business a
nd when they change, it can have a big impact
Organisational culture, infrastructure,
PMIS (an automated tool, a config mgmt system...)"
"Portfolio: A portfolio
is a group of projects or programs that are linked together by a business goal.
Program: A program is a group of projects that are closely linked, to the point
where managing them together provides some benefit.
Project: A project is any work that produces a specific result and is temporary.
Projects always have a beginning and an end. But they are never ongoing.
Operations: are ongoing. If you re building cars on an assembly line, that s a proce
ss. If you re designing and building a prototype of a specific car model, that s a p
roject.
A project may or may not be part of a program, but a program will always have pr
ojects.
Portfolios are organized around business goals and Programs are organized around
a shared benefit in managing them together."
"Deal with project constraints: Sometimes there will be constraints on the proje
ct that you ll need to deal with. You might start a project and be told that it ca
n t cost more than $200,000. Or it absolutely MUST be done by the trade show in Ma
y. Or you can only do it if you can get one specific programmer to do the work.
Or there s a good chance that a competitor will beat you to it if you don t plan it
well. It s constraints like that that make the job more challenging, but it s all in
day s work for a project manager."
"Stakeholder: Anyone who will be affecte
d by the outcome of your project is a stakeholder.
- sponsor who s paying for the project
- the team who s building it
- people in management who gave the project the green light are all good example
s.
Constraints: Cost, Time, Scope, Quality, Risk, and Resources
Qs. A project coordinator is having trouble securing programmers for her project
. Every time she asks her boss to give a resource to the project he says that th
ey are too busy to help out with her project. Which type of organization is she
working in?
Ans: Since the project manager has to ask permission from the functional manager
and can t overrule him, she s working in a functional organization.
Qs. A project manager is having trouble securing programmers for her project. Ev
ery time she asks the programming manager for resources for her project, he says
they re all assigned to other work. So she is constantly having to go over his he
ad to overrule him. Which type of organization is she working for?
Ans: The Project Manager in this scenario can overrule the functional manager, s
o she s working in a Strong Matrix organization. If it were a projectized organiza
tion, she wouldn t have to get permission from the functional manager at all becau
se she d be the person with authority to assign resources to projects."
"In a FUNCTIONAL Organization, the teams working on the project don t report direc
tly to the PM. Instead, the teams are in departments, and the project manager ne
eds to borrow them for the project. Project team members always report to a functi
onal manager.
In PROJECTIZED Organization, the team reports to the project manager, who has a
lot more authority.
-- Teams are organized around projects. When a project is done, the team is rel

eased, and the team members move to another project.

-- The project manager makes all of the decisions about a project s budget, sched
ule, quality, and resources.
-- The PM is responsible for the success or failure of their project.
WEAK MATRIX:
-- PMs have some authority but they aren t in charge of the resources on a project
.
-- Major decisions still need to be made with the functional manager s cooperation
or approval.
BALANCED MATRIX: Folks who work in a balanced matrix organization report to a PM
AND a functional manager equally.
STRONG MATRIX: Project managers have more authority than functional managers, bu
t the team still reports to both managers.
Exam Tip: If a question on the exam doesn t state an organization type, assume it s
referring to a matrix organization. That means the PM is responsible for making
budgets, assigning tasks to resources, and resolving conflicts."
" -- Costs and staffing levels are lowest early in the life cycle, peak while th
e project work is underway, and then drop off as the project nears completion.
-- Risk is highest early in the project since uncertainty is high about the pro
ject s deliverables, resource needs, and work required. and all this uncertainty m
eans that a project is most likely to fail early in its life cycle.
-- Stakeholder influence in the project and its deliverables is highest early i
n the life cycle but diminishes as the project proceeds because the cost of inco
rporating changes increases the further the project is into its life cycle. So o
ne way of controlling unexpected project cost is to engage stakeholders early to
prevent unnecessary and costly changes later in the project.
Payback Period:
The payback period tells us how long it will take to recoup the expense of the p
roject, so a shorter payback period is better. It s often used in conjunction with
other sophisticated formulas, but at its simplest, the payback period is calcul
ated using the project costs plus any ongoing costs as a result of the project c
ompared to any savings or increase in profits the project s product will provide.
For example, a project to replace an outmoded process is expected to cost $80,00
0 and require $10,000 a year to maintain. But it s expected to result in a $50,000
annual savings. The payback period for this project will be two years. When cal
culating a payback period, keep in mind how long the project will take. In the e
xample below, if the project requires one year to be completed, the payback peri
od would be three years instead of two.
Opportunity Cost:
Opportunity cost is the monetary value that is forgone when one action is chosen
over another. For us, it simply reflects what money is lost by choosing one proj
ect over another, and it s the entire value of the opportunity not chosen. For exa
mple, if project A was valued at $50,000 and project B was valued at $80,000:
Choosing project A results in a lost opportunity cost of $80,000 (the entire valu
e of project B)
Choosing project B results in a lost opportunity cost of $50,000 (the entire valu
e of project A)"
"Benefit/Cost Ratio Formulas:
Benefit/cost formulas are used by nearly every organization to assist in making
project selection decisions. Below is an overview of common formulas.
Return on Investment (ROI): ROI is attractive for its simplicity, but it doesn t r
eflect the time value of money or profitability. A larger ROI is the better choi
ce.
ROI = (Benefit Cost)/Cost
Example: The ROI of a project that will cost $100,000 but resu
lt in a $250,000 benefit or increase in profits is 1.5.
ROI=(250,000-100,000)/100,000
ROI=150,000/100,000
ROI=1.5

Future Value (FV): We all know that $1 today will not have the same purchasing p
ower in the future, so the future value formula accounts for this time value of
money. It uses the interest rate and the number of periods to calculate what the
future value of money will be. A higher future value is preferred. Using futur
e value, if the interest rate is 5 percent, $1 today will be worth $1.05 next ye
ar.
FV = Current Value x (1 + I)^n where I is the interest rate and
n is the number of periods.
Example: The future value of $100,000 in two years at an avera
ge interest rate of 5% is $110,250.
FV = 100,000 x (1 + .05)^2
FV=100,000 x (1.05)^2
FV=100,000 x 1.1025
FV=110,250
Present Value (PV): If a project will return $1 next year, what is that dollar w
orth in today s value? The present value formula is the inverse of the future valu
e formula, and it converts future money to reflect what its present value is by
using the interest rate.
PV = Future Value / (1 + I)^n where I is the interest rate and
n is the number of periods.
Example: The present value of $125,000 earned five years from n
ow at an average interest rate of 7% is worth only $89,123.38 today.
PV=125,000 / (1 + .07)^5
PV=125,000 / (1.07)^5
PV=125,000 / 1.40255
PV=89,123.38"