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CHAPTER-1 PROJECT & PROJECT MANAGEMENT

1. Definition of Project:
 A project is a planned investment undertaken to deliver a unique product as output.
 It is one-time only set of activities.
 As per Project Management Institute of USA, Project is a temporary endeavor (effort) undertaken
to create a unique product, service or results
 It has definite starting and ending points.
 It has a life cycle.
 It integrates human and non-human resources.
 It has specific group of beneficiaries.
 All projects operates within the constraints of time, cost and quality performance.
 They are unique, uncertain and accomplish temporary tasks.
 Organization must grow to survive.
 They should continuously search for growth-generating ideas.
 Economically viable, technically feasible and politically suitable and socially acceptable ideas
results in projects.
 So, for our purpose, the definition of project can be:
A Project is a set of one-time-only activities designed to attain:

 Specific objectives within the constraints of time, cost and quality performance in a
dynamic environment,
 Through the planning, use and control of variety of resources,
 To create a unique product or service within a temporary life span,
 In a dynamic environment.

 Every project has specific objectives.

 It is project people who make or break project.
 It works within the constraints of time, cost and quality performance.

2. Characteristics of Project
i. Specific objective:
 Objectives are project deliverables.
 A project clearly defines specific objectives.
 It is focused on end results.
 It ceases to exist when objective is met.
 A project without objective is unthinkable.
 Its output is measurable.
 The objectives are predetermined.
ii. Life span:
 All projects have a life span
 Projects cannot continue endlessly.
 A project is one time only set of activities.
 It is a temporary endeavor.
 It has beginning and end.
 Its life span can be sort or long depending on its nature and scope.
 It has a life cycle consisting of formulation, planning, implementation and termination phases.
iii. Constraints:
 All projects have constraints.
 A project operates within the constraints of time, cost and quality performance.
 It has a time schedule for various activities and a completion date as deadline.
 It has its own budget

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iv. Unique
 Each project is different
 Every project is unique in some elements.
 No two projects are exactly similar.
 Each project is made to order.
 It consists of customized non-repetitive activities.
 It cannot be routinized.
v. Team work:
 Projects works through team.
 A project consists of multi-functional team.
 Team member are temporarily assigned from other functional departments.
 They come from various disciplines with varied experiences.
 The project manager is the leader of the team.
 He coordinates project activities.
 He builds and maintain a cohesive team.
 He achieves unity in diversity.
 He effectively manages conflicts.
vi. Flexibility:
 Projects have flexibility.
 They are not rigid.
 A project operates in a dynamic environment.
 It needs flexibility to provide rapid response to changing environmental forces.
 The project complexity produces risks.
 Flexibility is essential to control and manage project risks at different stages of product life cycle.
vii. Resource Integration
 Projects consume and coordinate resources
 A project integrates physical, financial, human and information resources.
viii. Planning and Control:
 Projects work to a plan.
 Standards are set for project activities through planning.
ix. Contracting and sub-contracting

3. What is Project Management?

 Project management is a new way of thinking about management.
 It is a systematic approach for efficient and effective achievement of project objectives through:
 Assignment of total project responsibility and accountability to a single project manager
from inception to completion.
 Coordination across functional lines.
 Proper utilization of planning and control tools for better resource use within the constraints
of time, cost and quality.
 Project management is much like a task force approach to achieve project objectives through
better resource use within time, cost and quality constraints with the customer focused.
 As per PM Institute of USA:
 PM is the art of directing and coordinating human and non-human resources throughout the
life of the project by using modern management techniques to achieve predetermined
objectives of scope, cost, time, quality and participant satisfaction.
 It is planning, implementing and controlling of complex and unique activities through project
team to achieve results within the constraints with customer satisfaction.
 PM consists of knowledge, tools and techniques for managing a project.
 It utilizes resources efficiently.
 It achieves project objectives effectively with customer satisfaction.

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 Planning:
 PM defines in advance the who, what, when, where and how before the project begins.
This is planning.
 Organizing:
 It assembles project team for the project structure.
 It allocates resources for various activities.
 This is organizing.
Controlling:
 It tracts and monitors performance to get feedback to assess how well the project
objectives have been achieved.
 This is controlling
Leading:
 It manages and motivates people to excel.
 This is leading

4. Benefits of Project Management:

i. Change Management:
 PM serves as a vehicle for introducing and managing change.
 It facilitates introduction of new technologies.
 It breaks down functional barriers which reduce resistance to change.
ii. Environmental Adaption:
 PM operates in a dynamic and risky environment.
 It has flexibility in operations.
 Adjustments can be made to adapt to changing requirements during the life cycle phases of a
period.
 PM facilitates management of complexity related to organization, resources and technology.
iii. Result-oriented:
 PM is results-oriented.
 It gets the job done.
 It aims at continuous improvement of performance.
 It achieves project objectives within the constraints of time, cost and quality.
 It promotes efficiency and eliminates waste.
 There is greater accountability.
iv. Co-ordination:
 The project manager has total responsibility and accountability for project results.
 The project manager serves as a single responsibility and accountability center.
 There is minimal hierarchy.
 This facilitates coordination across functional lines.
 The resources are efficiently utilized with focus.
 Decision making is faster.
 Conflicts are managed effectively.
v. Team Development:
 A project has a multi-disciplinary team drawn from various departments.
 Project management creates conditions for good team work by building trust and respect.
 It encourages development and creativity of team members through participation.
 Moreover, team members can be changed as needed.
vi. Timely Correction:
 Project management requires integrated planning and control.
 Actual performance is measured against plan.
 Identification of deviations is done to take corrective actions.
 Problems are solved as and when they arise.
 This improves capacity for future planning.
 This also ensures adherence to objectives and to time-cost-quality constraints.

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vii. Customer Satisfaction

 Project management is customer focused.
 The results are achieved within the constraints of time, cost and quality.
 The needs of customer are satisfied.
 Satisfied customers tend to be lifelong customers.

5. Project life cycle

 A project has fixed life span.
 It has beginning and end points.
 The life span of project is divided into phases.
 Each phase defines specific deliverables.
 The phases are arranged in a sequence.
 The phases are collectively known as project life cycle.
 The various phases are:
a. Formulation Phase
b. Planning Phase
c. Implementation Phase &
d. Termination Phase

A. Formulation Phase:
 This is the conception (start) phase.
 It identifies the project.
 It involves preliminary planning of the project.
 The basic tasks in this phase consists of:
i. Project Identification
ii. Project Formulation
i. Project Identification
 It is the conception stage.
 It identifies the project.
 Projects are born with creative ideas.
 The sources of ideas can be:
 Situation Survey:
 Changes and development in PEST forces in the environment are surveyed.
 Internal Sources:
 They can be vision, mission, goals, strategies and plans of the organization.
 Opportunities and threats identified by the management and employee can also
provide project ideas.
 External Sources:
 They can be client requirements, donor priorities, competitor’s activities, legal
provisions and interest of the politicians.
 They can provide project ideas.

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 Ideas are carefully screened in terms of objectives, constraints and resource capabilities
before they are selected as project.

ii. Project Formulation:

 The project formulation task defines the parameters of the identified project.
 It is concerned with statement of work and project proposal.
 It develops:
 Objectives and outputs of the project.
 Preliminary estimates of schedule, costs and other resources required.

Statement of Work (SOW) (Project Charter)

 The parameter of the identified project are incorporated in the SOW.
 It defines the scope and objectives of project, roles and responsibilities of project participants and
other parameters such as schedule, cost and quality.
 It is a mechanism to identify points of agreement among project participants.
Project Proposal
 It is a blueprint of project activities.
 It is generally divided in technical and financial parts.
 It forms a part of competitive bidding through tender.
 It portrays organizational capability to carry out the project work and the technical and financial
aspects of the project.
 It is based on:
 Pre-feasibility of the project and
 Preliminary design of the project
 A project manager is appointed during the formulation phase of the project.

B. Planning Phase (Development Phase)

 This phase plans resource utilization, prepares detailed plans and estimates time, cost and quality.
 The basic tasks in the planning phase of the project are:
i. Feasibility study.
ii. Appraisal
iii. Detailed design
i. Feasibility Study:
 This determines the implement ability of the project.
 The areas for which analysis is done are:
a. Technical analysis:
 It studies the feasibility of meeting technical specifications.
 It also examines the availability of alternative technical solutions.
b. Financial analysis:
 It studies the financial sustainability of the project in terms of capital requirements and capacity
for meeting financial obligations.
c. Management Analysis:
 It studies the adequacy of the management system to implement and control the project.
d. Marketing analysis:
 It studies customers, market demand, competition and sales forecast.
 The project should be acceptable to the society.
e. Economic Analysis:
 It studies net contribution of the project to the economy and to the society.
 Benefit/cost analysis is done for this purpose.
f. Environmental analysis:
 It studies the impact of the project on the environment.
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 Legal compliance of environment matters is considered.

 Environment Impact Analysis is done.
 Feasibility studies should be based on accurate information.

ii. Appraisal:
 It is evaluation of the project’s ability to succeed.
 It is based on revisiting the findings of the feasibility analysis.
 It addresses:
 Ability of the project to achieve its objectives.
 Comparability of the project with other projects in terms of investment, costs/benefits,
job creation, profit etc.
Project Appraisal
 The project selected through appraisal should be formally approved by the competent
authorities.
 Approval involves:
 Finalization of funding proposals, agreements and contract documents.
 Allocation of resources to the project and appropriate regulations for the project.
iii. Design:
 It is concerned with:
 Preparation of blueprints of engineering design and specifications for construction,
facilities, equipment etc.
 Preparation of detail implementation plan and work schedules.
 The design task:
 Establishes operating plans and performance standards.
 Allocates roles and responsibilities,
 Determines activities and resources,
 Sets down work schedules.
C. Implementation Phase:
 This is the implementation phase of the project.
 The basic tasks in the phase are:
i. Implementation &
ii. Control
i. Implementation:
 Lion’s share of project’s actual work is done during this phase.
 It is concerned with mobilization.
 It involves setting up of project organization and getting together a project team.
 The activity are:
a. Tasks are allocated to team members.
b. Decisions are made about the procurement of equipment resources and services.
c. Management Information System is set up.
d. The project manager motivates and leads the project team. Problems are solved.
e. A time-sequence schedule for implementation is followed.
f. Construction work starts.
g. Project plans are pursued and adjustments are made as needed.

ii. Control
 It involves supervision and control of project performance to provide feedback for corrections.
 Supervision:
Various techniques such as CPM (Critical Path Method), PERT (Program Evaluation and Review
Technique) and other network analysis techniques are used for control purpose.
 Monitoring:
 Monitoring of project performance is done.

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 Monitoring refers to timely gathering of information to measure project performance during

project implementation.
 It is a means to improve implementation through the identification of problems and taking
of possible corrective actions.
D. Termination Phase:
 The project is completed and handed over to the customer during this phase.
 The basic tasks in this phase are:
a. Project Evaluation
b. Project Handover
a. Project Evaluation:
 Evaluation measures the effects and impacts of the project.
 It can be carried out during the project implementation.
 It can also be carried out after project completion to improve future project planning and
management.
b. Project Handover:
 Project handover begins when the project work is finished.
 It involves:
 Handing over the completed project to the client or to another organization.
 The project organization is dismantled.
 Resources are reallocated to other projects or departments.
 Permanent project records are finalized.
 Project accounts are closed.
 Project is terminated.
 Most project life cycle tend to progress slowly at the start, quicken their momentum towards
the middle and drop their momentum towards end.

CHAPTER-2 PROJECT SELECTION CRITERIA AND MODULES

2.1 Concept:
 Project selection is the process of evaluating proposed projects or groups of projects and
then choosing to implement some set of them so that the objectives of the parent
organization will be achieved.
 This same systematic process can be applied to any area of the organization’s business in
which choices must be made between competing alternatives.
 For eg, a manufacturing firm can use evaluation/selection techniques to choose which
machine to adopt in a part-fabrication process, a construction firm can select the best subset
of a large group of potential projects on which to bid.
 For this project appraisal is done.
 Appraisal is done systematically to provide an overall assessment of the project’s likelihood
for success.
 It answers the following questions:
 Will the project as designed meet its objectives?
 How does the project compare with other competing projects?
 The primary function of appraisal is to evaluate a project’s ability to achieve its objectives.
 For a private project, the objective is profitability.
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 For a public project, the objective is socio-economic development of the country through
economic growth, employment, poverty reduction etc.
 When a firm chooses a project selection model, the following criteria based on Souder are
most important:
1. Realism:
 The model should take into account the realities of the firm’s limitations on facilities,
capital, personnel and so forth
2. Capability:
 The model should be sophisticated enough to deal with multiple time period,
stimulate various situations both internal and external to the projects (e.g. strikes,
interest rate changes) and optimize the decision.
3. Flexibility:
 The model should have the ability to be easily modified, or to be self-adjusting in
response to changes in the firm’s environment (e.g. tax laws change, new
technological advancements alter risk levels, and above all the organization’s goal
change)
4. Ease of Use:
 The model should be reasonably convenient, not take a long time to execute, and be
easy to use and understand.
5. Cost:
 Data-gathering and modeling costs should be low relative to the cost of the project
6. Easy Computerization:
 It must be easy and convenient to gather, store and manipulate data in the model.
2.2 Types of Project Selection Models;
i. Non-numeric :
 These models are older and simpler.
 Various non-numeric models are:
a. The Sacred cow
 In this case project is suggested by a senior and powerful official in the organization.
 The project is “sacred” in the sense that it will be maintained until successfully
concluded or until the boss, personally recognizes the idea as a failure and
terminate it.
 Often the project is initiated with a simple comment such as “If you have a chance, why
don’t you look into..” and there follows an undeveloped idea for a new product, for
the development of new market.
 The immediate of this band (weak) statement is the creation of a project to investigate
whatever the boss has suggested.
b. The Operating Necessity:
 The project is required to keep the system running.
 If the project is required in order to keep the system operating, the primary question
becomes: Is the system worth saving at the estimated cost of the project?
 If the answer is yes, project cost will be examined to make sure that they are kept as
low as is consistent with project success, but the project will be funded.
c. The Competitive Necessity:
 Project is necessary to sustain a competitive position.
 Although the planning process for the project was quite sophisticated, the decision to
undertake the project was based on a desire to maintain the company’s competitive
position in the market.

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 Competitive threat, a quick and decisive response can bypass more independent
evaluation processes.
 Response is entirely reactive, makes project difficult to align with the strategic goals
of the organization.
 Project’s organization may spend all its project investment on playing “competitive
catch-up”
d. Product line extension:
 In this model, projects are judged on how they fit with current product line, fill a gap,
strengthen a weak link, or extend the line in a new desirable way.
 Products and services appeal ultimately starts to diminish over time.
 Marketing try ‘product extensions’ ‘product modifications’ to reposition the product
or service favorably with the customer.
e. Comparative Benefit Model:
 In this model, the project manager has many projects to be considered.
 He selects that project which is most beneficial to the firm.

ii. Numeric Models:

a. Payback period:
 It measures the period of time required for the cost of a project to be recovered form
the earnings of the project.
 Main concern is the recovery of initial outlay.
 PBB= initial investment/estimated annual net cash inflow
b. Average rate of return (ARR)
 Does not take into account of time value of money.
c. Discounted CF (NPV)
 Determines NPV of all CFs by discounting them by required rate of return.
d. IRR
 It is the discount rate that equals the PV of cash inflows and outflows.
e. Profitability index:
 It is known as benefit-cost ratio.
 PI is the NPV of all future expected CFs divided by initial cash investment.

2.3 Risk Considerations in Project selection:

 Risk management and project selection usually go hand-in-hand.
 A project may be successfully implemented and deployed, but need not necessarily lead
to financial gain.
 Project selection is usually based on several decision-making points, such as the project’s
potential for profitability and its life cycle.
 As the inflow of funds is usually limited, project selection is critical.
 Another key decision making point that is usually left out is the level of risk.
 During the project selection process, risk management needs to be conducted.
 Suppose a project is implemented that increase a manufacturing plant’s capacity. The
project involves installing new equipment and building workforce capacity. After
months of careful project execution and risk management, the project was closed
successfully. This is when theoretically the project should provide value to the project
sponsor. However, what if, during project selection, the stakeholders did not consider
the risk of low demand for the manufactured product? The extra plant capacity provided
by the new project would be an absolute waste. The money spent on the new project

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could have been used on another project that would have given greater return. Hence, it
is necessary to conduct Risk Management and Project Selection simultaneously.
 Generally, people perceive risk with a negative connotation.
 There are positive risks in every project and we should know how to respond to them.
 Risk Management and Project selection should also account for positive risks.
2.4 Project Portfolio Process (PPP):
 Project portfolio means a group of various portfolio.
 An organization has various projects in hand. Among them it should select those best
projects and programs that support the goals of the organization and can be performed
using the available resources such as people, money, facilities and equipment.
 In reality, organizations typically maintain a portfolio of projects, and trying to keep a
proper balance among this portfolio is the real task of upper management.
 Within limited resources management must choose between long term and short-term
projects, risky and safe projects, manufacturing and marketing projects, and so on.
 The PPP attempts to link organization’s projects directly to the goals and strategy of the
organization.
 This occurs not only in the project’s formulation and planning phase, but also throughout
the life of the projects as they are managed and eventually brought to completion.
 Thus, PPP is also a means for monitoring and controlling the organization’s strategic
projects.
 There are various steps in PPP:

Step-1 Establish a Project Council:

 The main purpose of the council is to establish and articulate (make clear) a strategic
direction for those projects spanning internal or external boundaries of the
organization.
 Senior managers mush play a major role in this council.
 Without the commitment of senior management, PPP will be incapable of achieving its
main objectives.
 The council will also be responsible for allocating funds to those projects that support
the organization’s goals and controlling the allocation of resources and skills to the
projects.
Step-2 Identify Project Categories and Criteria
 In this step, various project categories are identified so the mix of projects funded by
the organization will be spread appropriately across those areas making major
contributions to the organization’s goals.
 In addition, within each category, criteria are established to discriminate between very
good and even better projects.
 The criteria are weighted to reflect relative importance.
Step-3 Collect Project Data
 For each existing and proposed project, data should be collected appropriate to that
category’s criteria.
 We should update the data for ongoing projects and not just use the data from the
previous evaluation.
 For cost data, we use “Activity Based Cost” rather than Incremental cost.
 We include timing, both date and duration for expected benefits and resource needs.

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 We use proper plan and strategy, past experience, expert opinion whatever is available
to get a good estimate of data.
Step-4 Assess Resource Availability
 Next step is to assess the availability of both internal and external resources by type,
department and timing.
 Find the sources of the resources if not available internally and select the most
preferable ones.
Step-5 Reduce the project and criteria set
 In this step, multiple screens are employed to try to narrow down the number of
competing projects.
 The first screen is each project’s support of the organization’s goals.
 Other screens might be:
 Whether the required competence exists in the organization.
 Whether there is a market for the offering.
 How risky the project is
 How profitable the offering is
 If there is potential partner to help the project
 If the right resources available at right time. Etc.
Step-6 Prioritize the projects within categories
 Apply the score and criterion weights to rank the projects within each category.
 Various techniques can be used like Delphi techniques, intuition, Brain storming and
other more.
 Risk factors are also considered.
 Sensitivity analysis is done.
 Through analysis each projects return is measured.
Step-7 Select the Project to be funded and held in reserve
 The first task in this step is an important one: determining the mix of projects across
the various categories and time periods.
 Then we should allocate the resources to the selected projects.
 If there are more than one project, then we should apply ranking of each project and
allocate the resources as ranked.
Step-8 Implement the process:
 The first task in this final step is to make the results of PPP widely known, including the
documented reasons for project cancellations, deferrals and non-selection as was
mentioned earlier.
 Top management must now make their commitment to the project portfolio process
totally clear by supporting the process and the results.

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CHAPTER-3 PROJECT MANAGEMENT AND PROJECT MANAGER

3.1 Selecting the right Project Manager:

 Before the project actually gets underway, it’s critical that the right project manager be selected
to run the engagement.
 Whether this is a PMO director selecting this individual or someone else in senior management,
there are many things to consider.
 Experience with the customer, experience with the proposed solution, expertise in a particular
technology, and even experience working with the proposed project team may all be factors that
need to be considered when selecting the project manager who is going to run the show.
 This is a very important step as even the qualities of this particular individual can have a direct
impact on the outcome of the engagement.
 After all, many qualified people can do the mechanics of project management, but not everyone
is a project leader.
 The technically competent person is not necessarily a competent project leader.
 A person may have the best logical and analytical mind in the group and yet lack the qualities
that lead a project to a successful conclusion because the project manager must interact with
many people (such as sponsors, senior management, client, and team members), it is important
that that person have good “people skills.”
 These skills includes:
i. Technical Skills
 They should be able to perform a specialized task.
 The project manager need not be a technical expert, however he should be able to :
o Understand technology involved in the project
o Evaluate technical concepts and solutions.
o Communicate in technical terms with project team
o Assess technical risks, trends and innovations.
ii. Managerial Skills:
 They are ability to practice management concepts, tools and techniques. The specific skills are:
 Planning and control skills:
o Planning is ability to set targets and decide actions to achieve targets.
o Control is to measure performance to take corrective actions.
 Organization skills:
It is getting the project team together and assigning authority and responsibility to each member.
 Decision making skills:
It is to understand the problem, identify and evaluate alternatives and make a choice and
implement the decision.

 Active listening
 Business orientation
 Coaching
 Communication
 Conflict resolution
 Cross-functional thinking
 Customer orientation
 Delegation
 Facilitation
 Mediation
 Meetings management
 Negotiation
 Networking
 Political savvy
 Power of persuasion
 Priority setting
 Successful delivery of product
 Team building

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 Time management
 Knowledge of human resource management, procurement, and quality
Organizational

CHAPTER-4 PROJECT ORGANIZATION

4.1 Project Organization:
 An organization is a network of structure and relationships.
 Organization is the essence of project implementation.
 Project organization consists of:
a. Designing a structure
 Organization chart reflects the structure.
 Group of project activities are assigned to positions.
 It defines project hierarchy.
 It deals with differentiation.
 It focuses on specialization.
b. Pulling together project team:
 It is drawn from functional departments for a specific purpose.
 Integration is done through coordination mechanism.
c. Establishing Project Office:
 A project office is established to serve as home for the project.

 Project organization is the ‘engine’ of project management.

 It coordinates and integrates human and non-human resources of the project.
 It lays down rules and regulations for the project’s operations and administration.
2.1 Types of Project Organization:
 The design of project organization structure depends on the nature, objective, size,
technology, complexity and constraints of each project.
 The types are:
a. Part of functional organization structure:
 One of the most popular organization structure where the company is divided into
separate units based on role, functions & duties and so on.
 The project tasks are performed as part of functional departments.
 The functional organization structure consists of different functional departments such
as production, marketing, finance and human resource.
 It is hierarchical.
 Authority is divided into line and staff.
 Persons with line authority decide.
 Persons with staff authority advise.
 It is suitable for small projects.
 Advantages:
i. Flexibility:
 This structure facilitates flexibility in the use of existing human resources.
 Individual experts can be utilized by different projects.
ii. Specialization:

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 This structure develops expertise and specialization in human resources.

iii. Efficiency & Productivity:
 A worker who is an expert in his functional area can perform tasks with a high level of
speed and efficiency, which enhances productivity.
 Workers who know their jobs well can proceed with confidence and with a minimum
amount of mistakes.
 Disadvantages:
i. Lack of project focus:
 There is no clear cut responsibility for the project.
 There is no mechanism for effective coordination and integration of resources for
effective coordination and integration of resources for the project.
 Functional divisions focus on functional activities.
ii. Decision delays:
 Decision delays result because of hierarchy.
 Project performance is adversely affected by such delays.
 No individual has full responsibility for project.
iii. Poor communication:
 It is mostly top-down. Bottom-up communication is virtually non-existence.
 Motivation of project people tends to be poor.
iv. Difficult management control
 Another potential disadvantage of the functional organization structure is that it can
pose a challenge for top management to maintain control as the organization expands.
 As organizations get larger and top management needs to delegate more decision-
making responsibilities to each functional area, the degree of autonomy may also
increase, making coordination of activities more difficult.
 If a company expands into new geographical areas, maintaining control of and
managing the separate functions can be even more of a challenge.
b. Pure Project Organization Structure:
 A pure project organization is a model of a business where project managers have total
control over the project they oversee.
 Central control at the managerial level must be weak for this to occur.
 This type of organization is proposed when an organization has less number of projects
but with longer duration.
 For each project manager is appointed and he is responsible to conduct all the activities
associated with the project.
 The project manager is in turn responsible to the program manager.
 The project manager has full authority for the execution of the project and he reports
to the program manager in the parent organization.
 The lines of communication are shortened as the project manager directly
communicates with the parent project organization members.
 Advantages:
i. Focus on project objectives:
 There is effective coordination and control of project resources by project manager.
 There is unity of command.
 Project objectives are focused.

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ii. Clear Authority:

 Project manager has full line authority for the project.
 Project team is responsible to project manager.
iii. Effective communication:
 The communication is vertical, horizontal and diagonal.
 Decision making is fast in the project.
iv. Flexible labour force:
 Labour can be attracted as and when necessary.
 They leave after the completion of the project.
 Disadvantages:
i. Duplication of facilities and efforts:
 This structure leads to inefficient use of resources.
 All projects need to be staffed separately.
ii. Lack of job security:
 There is no job security for the project employee.
 They feel uncertain future.
 There is poor commitment to the project.
iii. Conflicts between employees:
 Extra incentives in project may crate conflicts between parent organization employees
and project employees.
 Project people tend to feel themselves “special” with strong attachment to project.
iv. Others:
 Organization goals and policies are ignored.
 Team members have no functional area home.
 Difficult to share individuals across projects.
 Project personnel limited to a single project effort.
 Tendency to retain personnel longer than needed.
 Difficult to assign individuals to new projects on project completion.
 Lack of career development and opportunities for project personnel.

c. Matrix Organization structure:

 The matrix project attempts to blend properties of functional and pure project structure.
 If the matrix form is chosen, different projects (row of matrix) borrows resources from
functional areas (column).
 Senior management must then decide whether a weak, balanced or strong form of a matrix
is to be used.
 The design superimposes pure project structure on functional structure.
 The basic organizational design is functional.
 Temporary project structure is imposed over functional design.
 Project team is assigned from the functional departments.
 The project manager leads the project.
 He has overall responsibility for achieving project objectives.
 Advantages:
i. Focus on project objectives:
 This structure focuses on project objectives.
 The project manager has responsibility for managing the project.
 It is project-driven.

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ii. Coordination:
 The interface between project manager and functional managers facilitates coordination
across department lines.
 Resources are effectively shared.
 Cross-functional team work is facilitated.
iii. Flexibility:
 It fosters flexibility.
 It is able to adapt to changes in the environment during project implementation.
iv. Efficiency:
 It facilitates efficient utilization of organizational resources.
 Projects share specialized resources with departments.
 Cross functional activities are facilitated.
v. Team Identity:
 The project team forms a temporary partnership of professionals.
 They develop commitment and loyalty to project.
 Project identity develops.
vi. Motivation:
 Participative management and project deadlines motivate project personnel.
 There is of feeling of job insecurity.
vii. Employee Development:
 Employees develop their skills and knowledge through interdisciplinary interactions.
viii. Free time for top management:
 The authority for day-to-day decisions in the project is delegated to project manager.
 This frees time of top management for planning and control.
 Disadvantages:
i. Dual boss problem:
 The project employees report to departmental managers on technical matters.
 They report to the project manager on administrative matters.
 This results to multiple command structure.
 It leads to conflicts, confusion and frustration.
 There is no unity of command.
ii. Duplication:
 Project can duplicate the efforts of line departments.
 Resources get inefficiently used.
iii. Power Struggle:
 This structure can lead to power struggle between the functional manager and project
manager for allocation of resources.
 It can create delays, conflicts and confusion in decision making.
iv. Interpersonal skills:
 This structure demands high level of interpersonal skills in project management.
 The project manager needs to constantly interface, negotiate and communicate with
functional managers to obtain project resources and get the jobs done.
v. High Cost:
 This structure is costly to implement and maintain.
 Overheads are heavy.
 Complexity is high.

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CHAPTER-6 CONFLICT AND NEGOTIATION

6.1 Dealing with conflict on the project:
 Conflict on a project is almost always a certainty.
 A project manager who goes says they never have conflicts to deal with on their projects just
isn’t paying close enough attention to what’s going on or they’re in denial.
 Conflict is going to happen and it’s the Project Manager’s responsibility to help team
managers and customers control to resolve these conflicts.
6.2 Controlling conflict on the project:
 On almost every project, the potential for conflict arises at same point.
 This is a natural trend.
 The PM should work proactively with all staff to avoid possible conflicts that may arise.
 In the event of a conflict, the PM should be aware that talking can only resolve so much.
 For situations where conflict cannot be resolved through negotiations or arbitration, it is
recommended that the identified individuals be separated or be removed from the project
 It is important to understand that project staff react differently to daily situations and that
during the project lifecycle, these members all experience various emotions such as joy,
sadness, jealous, anger, frustration and stress-to name but a few.
 Few conflicts can be reduced or eliminated by constantly communicating the project
objectives to the project team members.
 Some of the most common conflicts are:
 Conflict over project priorities.
 Conflict over administrative procedures
 Personality conflicts
 Lack of respect for one another
 Conflict over technical opinions and performance
 Conflict over staffing resources
 Conflict over cost
 Conflict over schedules
 When conflicts do arise, there are several methods to try to resolve them:
 Compromise: Parties consent to agree; each side wins or loses a few points.
 Confrontation: Parties work together to find a solution to the problem.
 Forcing: Power is used to direct the solution. One side gets what the other does
not.
 Smoothing: This technique plays down the differences between two groups and
give
strong attention to the points of agreement.
 Withdrawal: This technique involve one party removing him-or herself from the
conflict.
6.3 Conflict and project life cycle
 Certain patterns of conflicts are associated with the different periods in the life of a project.
 Conflict appears to fall into three fundamentally different categories:
1. Groups working on the project may have different goals and expectations.
2. There is considerable uncertainty about who has the authority to make decisions.
3. There are interpersonal conflicts between people who are parties-at-interest in the
project.

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6.4 The Nature of Negotiation

 The favored technique for resolving conflict is negotiation.
 Negotiation is “the process through which two or more parties seek an acceptable rate of
exchange for items they own or control”
 Firm should view conflicts within the organization as conflicts between allies, not
opponents.
 Negotiation can take place at any time in a project, program or portfolio and may be formal
or informal in nature.
 Formal negotiations are typically with providers on such issues as agreeing contracts.
 Informal negotiations include discussions to resolve conflict, or discussions to obtain
internal resources.
 Negotiation skills are used in the conflicts. Good negotiation skills include:
 An ability to set goals and limits;
 Emotional control;
 Excellent listing skills;
 Knowledge of when and how to close the negotiation.
 Negotiation falls within two categories:
i. Competitive negotiation:
 Competitive negotiation implies getting the best deal regardless of the needs and interests
of the other party.
 This form of negotiation can easily become a battle where the winner takes all
 While competitive negotiation should be avoided, it may not always be possible.
ii. Collaborative negotiation:
 It seeks to create ‘win-win’ scenario where all parties involved get part or all of what they
were looking for from the negotiation.
 This approach tends to produce the best results, helps build long-term relationships and
minimizes the opportunity for conflicts.
6.5 Partnering, Chartering and scope change
 Three situations commonly arise during projects that requires the highest level of
negotiation skill of PM are:
 The use of sub-contractors.
 The use of input from two or more functional units to design and develop the project’s
mission.
 The management of changes ordered in the project’s deliverables and/or priorities after
the project is underway.

Partnering
 It is an arrangement of establishing a long term win-win relationship based on mutual trust
and team work and on sharing of both risks and rewards.
 The objective is to focus on what each party does best, by sharing financial and other
resources and establishing specific roles for each participant.
 In recent years there has been a steady growth in the frequency of outsourcing parts of
projects.
 There are many reasons for this trend:
 Avoidance of litigation
 Diversification of technical risk
 Avoidance of capital investment

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 Reducing political risk on multinational projects

 In such partnering agreement is essential.
 But the conflicting interests tend to lead both parties to work in an atmosphere of mutual
suspicion and antagonism (dislike).
 To reduce this conflict, a process for building partnered projects can be used.
 Steps to project partnering:
 Project firm must commit to partnering.
 All parties must implement the process
 Joint review when finished.

Chartering:
 A project charter is simply a written agreement between the PM, senior management and
the functional managers who are committing resources and/or people to the project.
 Typically, it details the expected project deliverables, including the project’s schedule and
budget.
 It provides a preliminary description of roles and responsibilities, outlines the project
objectives, identifies the main stakeholders and defines the authority of the project
manager.

Scope Change
 No matter how carefully a project is planned, it is almost certain to be changed before
completion.
 The reason for scope change may be
 The initial assessment was wrong.
 Project team learns more about the project.
 Change is mandated
 Client ask for changes
6.6 Principle of negotiation:
1. Separate the people from problem:
 Conflicting parties are highly emotional.
 They perceive things differently and feel strongly about the differences.
 Conflicting parties tend to attack one another rather than the problem.
2. Focus on interests, not positions
 Generally, positioning bargaining occurs to dominate the subordinates. This creates
hierarchical conflicts and try to benefit to one position.
 The conflicting parties should focus on the interest rather than positions to have mutual
gain.
3. Before trying to reach agreement, invent options for mutual gain,
 The parties in conflict usually enter negotiations knowing the outcome they would like.
 As a result they are blind to other outcomes and are not particularly creative.
 The parties should make options as many as possible to have win-win position.
4. Insist on using objective criteria
 Rather than bargaining of positions, attention should be given to finding standards (eg.
Market value, expert opinion, law company policy) that can be used to determine the quality
of an outcome.

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CHAPTER-8 SCHEDULING
8.1 Scheduling:
 A schedule is the conversion of a project Work Break down Structure (WBS) into an
operating timetable.
 As such it serves as the basis for monitoring and controlling project activity and taken
together with the plan and budget.
 It is probably a major tool for the management of projects.
8.2 Techniques of scheduling:
1. Network Analysis
 Network analysis is a technique for scheduling of projects.
 It provides a framework for:
 Defining activities to be done in the project,
 Integrating the activities in a logical time sequence,
 Dynamic control over the progress of the project plan,
 Network analysis develops a project schedule to show the interrelationships among all the
activities in a project.
 The best known techniques for the network analysis are:
i. PERT
ii. CPM
i. PERT (Programme Evaluation and Review Technique)
 This technique is used to plan, schedule and control the activities of complex projects.
 The steps involved are:
a. Various activities needed for the project completion are identified. WBS is used for this
purpose
b. An order of precedence is determined. The identified activities need to be done first before
starting others.
c. The estimates for each activity are prepared.
 Three time estimates are made:
i. Pessimistic ii. Optimistic iii. Most likely
Earliest occurrence time for finishing the project is estimated.
d. Resources are shifted from non-critical activities to critical activities to minimize trouble
spots.
e. All activities are connected sequentially to form a network. Critical paths is determined.

 PERT provides answer to the following:

 Finish time of the project.
 Start and finish time for each individual activity of the project,
 Activities that need to be done first before starting others,
 Possibility of shifting resources from non-critical activities to critical activities.
 Activities that need concentration of management efforts at one time.
 Uncertainty reduction in a project.

ii. Critical Path Method (CPM)

 This technique is used for project planning, sequencing and control where the emphasis is
on optimizing resource allocation and minimizing overall cost for a given execution time.

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CHAPTER-8 RESOURCE ALLOCATION

8.1 Resource allocation
 Resource allocation is the process of assigning and scheduling available resources in
the most effective and economic manner.
 Projects will always need resources and resources are scare.
 The task therefore lies with the project manager is to determine the proper timing of
those resources within the project schedule.
8.2 Resource loading:
 Resource loading is assigning resources to activities.
 It is the same as budget but broken down in terms of activities.
 The money, men, materials and machines as given in the budget would be re-
distributed in terms of activities.
 It describes the amount of individual resources an existing schedule requires during
specific time periods.
 Resource loading gives a general understanding of the demands a project or set of
projects will make on a firm’s resources.
 It is an excellent guide for early rough project planning.
 It is also a first step in attempting to reduce the demand.
 Hence, resource loading is the process of assigning resources for each and every
activity required for the project.
8.2 Resource Leveling:
 It is a technique in which start and finish dates are adjusted based on resource
constraints with the goal of balancing demand for resources with the available supply.
 It is a sort of adjustment.
 If resources are provided as per schedule, then there would be no need for resource
leveling.
 But when there is a mismatch between what is required and what is made available,
we need to give priority to some activities, postpone some activities or do the job in
small lots.
 The ultimate objective would be to complete the project within the small cost and time
constraints.
 For this purpose we split the activities within margin.

CHAPTER-10 PROJECT CONTROL

10.1 Concept of Control:
 Control is an essential function of management.
 It ensures that the right things are done in the right manner and at the right time.
 Control is measuring, evaluating and correcting actual performance to achieve
planned targets.
10.2. Purposes of control
 There are two objectives of control:
 The regulation of results through the alteration of activities.
 The stewardship (care) of organizational assets.
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 Control is mostly focused on regulation.

 The PM needs to be equally attentive to both regulation and conservation.
10.3 Control Process:
i. Setting standards
ii. Measuring performance
iii. Finding deviation
iv. Corrective actions
 Do nothing
 Correct deviation
 Change standard
10.4 Project control system:
 A project is a unique group of activities designed to attain specific objectives within
the constraints of time, cost and quality performance.
 Control is measuring, evaluating and correcting actual performance to achieve
planned performance.
 It uses data supplied by monitoring and evaluation.
 Project control system consists of setting standards of performance in terms of time,
cost and quality; measuring actual project implementation performance; finding and
analyzing deviations between standards and actual performance and taking
corrective actions to achieve project objectives. Generally it is done at the activity
level of the project. It is the process of overseeing the implementation of project plan.
10.4 Types of Project Control:
i. Pre-control (feed-forward control)
 It is initiated before the start of project activity.
 It anticipates project problems in advance and takes necessary actions to prevent
them.
ii. Concurrent Control:
 It is initiated during the implementation activity of the project.
 It consists of actions by project control team to ensure that project operations are
being conducted according to project plan.
 Problem are corrected as and when they arise.
iii. Post Control (Feedback Control)
 It is initiated after the completion of project activity.
 It is based on feedback information about the project performance.
 The actual performance of each activity is compared with the targets to identify and
evaluate deviations.
 Corrective actions are taken to improve future project performance.

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CHAPTER-11 PROJECT TERMINATION

11.1 Varieties of Project Termination:
 There are various business, technical and political reasons to terminate a project.
 They are:
i.Termination by extinction:
 The project has successfully completed scope and the client has accepted it.
 It has been superseded by the external development like technological advancement,
market crises etc.
 It has failed to achieve it’s goal.
 It has no longer support from the Senior Management.
 This type of termination is also called as “termination by murder” which may range
from political assassination to accidental projecticide.

ii. Termination by addition:

 Most projects are in-house that is carried by the project team for use in the parent
organization.
 If the project is a major success, it may be terminated by institutionalizing it as a
formal part of the parent organization.
 Project personnel, property and equipment are often simply transferred from the
dying projects to the newly born division.
 This transition poses a difficult time for the PM who must see to it that the shift is
made smoothly because it demands a superior level of political sensitivity for
successful accomplishment.

iii. Termination by Integration:

 This method of terminating a project is the most common way of dealing with
successful projects, and the most complex.
 The property, equipment, material, personnel and functions of the project are
distributed among the existing elements of the parent organization.
iv. Termination by starvation
 The project is terminated by budget decrement.
 It is also known as withdrawal of “life support”

BY: SANTOSH GHIMIRE