Unit I

INTRODUCTION TO PROJECT MANAGEMENT

 The world as a whole spends nearly $10 trillion of its $40.7 trillion gross product on
projects of all kinds.
 More than sixteen million people regard project management as their profession; on
average, a project manager earns more than $82,000 per year.*
 The total cost of project overruns alone is put at several billions of dollars.

A project is “a temporary endeavor undertaken to accomplish a unique product or service”

Unique process consisting of a set of inter-related jobs or activities governed by precedence
relationships, undertaken to achieve an objective conforming to specific requirements, including
constraints of time, cost, quality and resources
A project is a temporary endeavor, having a defined beginning and end (usually constrained by
date, but can be by funding or deliverables), undertaken to meet unique goals and objectives,
usually to bring about beneficial change or added value. The temporary nature of projects stands
in contrast to business as usual (or operations), which are repetitive, permanent or semi-
permanent functional work to produce products or services.
Every project has two phases basically; the first is preparation and construction, and the second,
its operation. Project planning deals with specified tasks, operations or activities which must be
performed to achieved the project goals. Implementation of projects needs resources or inputs.
Every project converts the given inputs into outputs through a process of implementation
Project: “an organized undertaking”
– MBA Thesis Project
– Finding a job
– Building a house
– Buying a house
– Design and manufacture a car (Large Program)
– Put a man on the moon (Huge Program)
Features of a Project
 unique purpose (CMRL, computerized reservation)
 Temporary, non-repetitive, one time effort
 Defined start and finish (???)
 Consumes time and resources, often from various areas
 Coordination needed between individuals, groups and organizations
 involve uncertainty (80% of project overruns)
 Constant pressure of conformance to time/cost/performance goals
Volume vs Variety and Project
Triple constraints of project management
Scope goals: What is the project trying to accomplish?
Time goals: How long should it take to complete?
Cost goals: What should it cost?

What is project management?

• Project management is “the application of knowledge, skills, tools, and techniques to
project activities in order to meet project requirements” *
• The art of organising, leading, reporting and completing a project through people

Goal of project management

 Setting clear objectives,
 performance and quality,
 budget,
 time of completion.

Project management framework

Project stakeholders
• Stakeholders are the people involved in or affected by project activities
• Stakeholders include
– the project sponsor and project team, support staff, customers, users, suppliers,
opponents to the project

Project Life cycle

The Project Life Cycle refers to a series of activities which are necessary to fulfill project goals
or objectives. Projects vary in size and complexity, but, no matter how large or small, all projects
can be mapped to the following life cycle structure:

 Project Initiation: In this stage, the specifications of the project are defined along with the
clear cut project objectives. Project teams are formed and their major responsibilities are
assigned. More specifically, this stage defines the goals, specifications, tasks and
responsibilities.

 Project Planning: In this stage, the effort level increases and plans are developed to
determine what the project will entail, when it will be scheduled, whom it will benefit,
what quality level should be maintained and what the budget will be. More specifically,
this stage will include planning schedules, budgets, resources, risks and staffing.
 Scope of work & network development
 Basic scheduling
 Time cost tradeoffs
 Resource considerations
 Project Implementation (Project Execution): In this stage, a major portion of the project
work takes place. The physical product is produced (For eg., house, bridge, software
program, report, etc). Time, cost and specification measures are used for control. More
specifically, this stage will take care of status reports, changes, quality and forecasts.
 Project completion and audit (Project Closure): This is the final stage which includes two
activities, viz., delivering the outcome of the project to the customer and redeploying the
project resources. Delivery of the project might include customer training and
transferring documents. Redeployment usually involves releasing project equipment/
materials to other projects and finding new assignments for team members. More
specially, this stage will undertake activities relating to training the customer, transfer of
documents, releasing resources, releasing staff and learning lessons.
Project Initiation
 Project Identification
 Receptive to new ideas
 Vision for future
 Long term objectives
 SWOT analysis
 Preliminary project analysis
 Project Appraisal
 Market Appraisal
 Technical Appraisal
 Financial Appraisal
 Economic Appraisal
 Ecological Appraisal
 Feasibility report considers all these issues prior to project adoption
 Project Selection
 Investment
 Rate of return
 Likely profit
 Payback period
 Risk
 Similarity of existing business
 Expected life
 Flexibility
 Competition
  Environmental impact

Market appraisal
 Aggregate future demand
 Market share
 Current and future competition
 Location and accessibility of consumers
 Technological scenario/obsolescence
 Future pricing options
Technical appraisal
 Engineering aspect
 Location
 Size
 Production process
Financial appraisal
 Cash flow over time
 Profitability
 Breakeven point
 Net Present Value
 Internal Rate of Return
 Payback period
 Risk
Economic appraisal
 Cost benefit analysis
 Distribution of income
 Level of savings and investment
 Self-sufficiency, employment and social order
Ecological appraisal
 Environment damage
 Air
 Water
 Noise, etc.
 Restoration measures and cost

Project Planning
 Forming a project team with a leader
 Defining scope and terms of reference
 Work breakdown structure
 Basic scheduling
 Time cost tradeoff
 Resource considerations

Basic scheduling
 Project representation as a network
 Estimation of activity durations
 Forward and backward pass
  Determination of activity floats
 Critical path for selective control and minimum project duration
Time cost tradeoffs
 Normal and crash times
 Linear/non-linear/discontinuous/discrete time-cost relationships
 Total project (direct and indirect cost)
Resource leveling is the process of distributing the resources used in a project with the aim of
completing the project with the minimum possible utilization of the resource.
 Shifting the slack jobs in the project schedule to obtain balanced resource profile
 Project duration kept fixed
Resource allocation:
 Minimum duration schedule satisfying the limited resource availability
 Delaying some critical jobs to keep the resource profile within available limits

Project Implementation
 Organizing team and work
 Clear cost/time/performance goals
 Project monitoring in terms of cost, value of work and time
 Project control
Project Completion
 Disbanding of team
 Handing over of project to user
 Accounting and report writing
 Learning from experience

Advantages of using formal project management

• Better control of financial, physical, and human resources
• Improved customer relations
• Shorter development times
• Lower costs
• Higher quality and increased reliability
• Higher profit margins
• Improved productivity
• Better internal coordination
• Higher worker morale

Problems in project execution

 Organizational/behavioural
 Financial
 Legal
 Engineering
 Construction/installation
 Site evacuation/development
 Labour unrest/unavailability
 Non-availability of resources
 Weather conditions
Project Selection
 Project selection is the process of evaluating individual 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.
 The proper choice of investment projects is crucial to the long-run survival of every firm.
 Daily we witness the results of both good and bad investment choices.
A Multi-Criteria Analysis (MCA) is when a project is evaluated by more than just monetary
terms. It is a form of appraisal that, in addition to monetary impacts, measures variable such as
material costs, time savings and project sustainability as well as the social and environmental
impacts that may be quantified but not so easily valued.

Model criteria
 Realism
 Capability
 Flexibility
 Ease of use
 Cost
 Easy computerization
Types of project selection models:
 Nonnumeric models
 Numeric models
Non-numeric Models:
Models that do not return a numeric value for a project to be compared with other projects. These
are really not “models” but rather justifications for projects. Just because they are not true
models does not make them all “bad”
Types
 Sacred Cow
– A project, often suggested by the top management, that has taken on a life of its
own
 Operating Necessity
– A project that is required in order to protect lives or property or to keep the
company in operation
 Competitive Necessity
– A project that is required in order to maintain the company’s position in the
marketplace
 Product Line Extension
A project to develop and distribute new products judged on the degree to
which it fits the firm’s existing product line, fills a gap, strengthens a weak link, or extends the
line in a new, desirable direction.
 Comparative Benefit
– Projects are subjectively rank ordered based on their perceived benefit to the
company
Numeric Models:
Models that return a numeric value for a project that can be easily compared with other projects
 Two major categories:
– Profit/profitability, Scoring
Profit/profitability Models
 A large majority of all firms using project evaluation and selection models use
profitability as the sole measure of acceptability.
 Models that look at costs and revenues
– Payback period
– Discounted cash flow (NPV)
– Internal rate of return (IRR)
– Profitability index
 NPV and IRR are the more common methods
Scoring Models:
In an attempt to overcome some of the disadvantages of profitability models, particularly their
focus on a single decision criterion, a number of evaluation/selection models that use multiple
criteria to evaluate a project have been developed. Such models vary widely in their complexity
and information requirements. The examples discussed illustrate some of the different types of
numeric scoring models.
 Unweighted 0–1 factor model
 U
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factor model
  Weighted factor model

Unweighted 0-1 Factor Model

 Factors selected
– Listed on a preprinted form
 Raters score the project on each factor
 Each project gets a total score
 Main advantage is that the model uses multiple criteria
 Major disadvantages are that it assumes all criteria are of equal importance

Unweighted Factor Scoring Model

 Replaces X’s with factor score
– Typically a 1-5 scale
 Column of scores is summed
 Projects with high scores are selected
Weighted Factor Model
 Each factor is weighted the same
 Less important factors are weighted the same as important ones
 Easy to compute
 Just total or average the scores
 Each factor is weighted relative to its importance
  Weighting allows important factors to stand out
 A good way to include nonnumeric data in the analysis
 Factors need to sum to one
 All weights must be set up, so higher values mean more desirable
 Small differences in totals are not meaningful

Advantages of scoring models

 Allow multiple criteria
 Structurally simple
 Direct reflection of managerial policy
 Easily altered
 Allow for more important factors
 Allow easy sensitivity analysis
Disadvantages of scoring models
 Relative measure
 Linear in form
 Can have large number of criteria
 Unweighted models assume equal importance

Project Portfolio Management

Project Portfolio Management System (PPM) is a term used by project managers and project
management (PM) organizations, (or PMO’s), to describe methods for analyzing and collectively
managing a group of current or proposed projects based on numerous key characteristics.
The fundamental objective of PPM is to determine the optimal mix and sequencing of proposed
projects to best achieve the organization’s overall goals - typically expressed in terms of hard
economic measures, business strategy goals, or technical strategy goals - while honoring
constraints imposed by management or external real-world factors.
Typical attributes of projects being analyzed in a PPM process include each project’s total
expected cost, consumption of scarce resources (human or otherwise) expected timeline and
schedule of investment, expected nature, magnitude and timing of benefits to be realized, and
relationship or interdependencies with other projects in the portfolio.

Project Portfolio Process (PPP)

The project portfolio management (PPM) process is an ongoing enterprise activity that ensures
projects across the portfolio are aligned with overall organizational strategy and ROI
expectations. Without an effective PPM process, enterprises can quickly find themselves
“chasing” projects rather keeping up, or staying ahead of them. This behavior ultimately
undermines the organization’s long-term success and survival.

Purpose
 Identify nonprojects
 Prioritize list of projects
 Limit number of projects
 Identify the real options for each project
 Identify projects with good fit
 Identify co-dependent projects
 Eliminate risky projects
 Eliminate projects that skip the formal selection process
 Keep from overloading the organization
 To balance the resources with needs
 To balance returns
 To balance short-, medium-, and long-term returns
PPP process:
1. Establish a project council
 Senior management
 The project managers of major projects
 The head of the Project Management Office
 Particularly relevant general managers
 Those who can identify key opportunities and risks facing the organization
 Anyone who can derail the PPP later on
2. Identify project categories and criteria
 Derivate projects
 Platform projects
 Breakthrough projects
 R&D projects
3. Collect project data
 Assemble the data
 Document assumptions
 Screen out weaker projects
 The fewer projects that need to be compared and analyzed, the easier the work of the
council
4. Assess resource availability
 Assess both internal and external resources
 Assess labor conservatively
 Timing is particularly important
5. Reduce the project and criteria set
 Organization’s goals
 Have competence
  Market for offering
 How risky the project is
 Potential partner
 Right resources
 Good fit
6. Prioritize the projects within categories
 Apply the scores and criterion weights
 Consider in terms of benefits first and resource costs second
 Summarize the returns from the projects
7. Select the projects to be funded and held in reserve
 Determine the mix of projects across the categories
 Leave some resources free for new opportunities
 Allocate the categorized projects in rank order
8. Implement the process
 Communicate results
 Repeat regularly
 Improve process

Project Manager

The Functional Manager vs. The Project Manager

Functional managers are usually specialists, analytically oriented and they know the details of
each operation for which they are responsible
y Analytical Approach
y Direct, technical supervisor

Project managers must be generalists that can oversee many functional areas and have the
ability to put the pieces of a task together to form a coherent whole
y Systems Approach
y Facilitator and generalist
Three major questions face the project manager:
1. What needs to be done?
2. When must it be done?
3. How are the resources required to do this jobgoing to be obtained?
Project manager is responsible for organizing, staffing, budgeting, directing, planning, and
controlling the project.
Responsibility to the Parent Organization
z Conservation of resources
z Timely and accurate project communications
z Careful, competent management of the project
z Protect the firm from high risk
z Accurate reporting of project status with regard to budget and schedule
Responsibility to the Client
y Preserve integrity of project and client
y Resolve conflict among interested parties
y Ensure performance, budgets, and deadlines are met
Responsibility to project team members
y Fairness, respect, honesty
y Concern for members’ future after project

PM Career Paths:
Most Project Managers get their training in one or more of three ways:
1. On-the-job
2. Project management seminars and workshops
3. Active participation in the programs of the local chapters of the Project
Management Institute
4. Formal education in degreed programs
z Experience as a project manager serves to teach the importance of:
1. An organized plan for reaching an objective
2. Negotiation with one’s co-workers
3. Follow through
4. Sensitivity to the political realities of organizational life
z The career path often starts with participation in small projects, and later in larger
projects, until the person is given control over small, then larger projects
A number of demands are critical to the management of projects:
1. Acquiring adequate resources
z Resources initially budgeted for projects are frequently insufficient
z Sometimes resource trade-offs are required
z Subcontracting is an option
z Project and functional managers perceive availability of resources to be
strictly limited
z Competition for resources often turns into “win-lose” propositions
between project and functional managers
2. Acquiring and motivating personnel
z A major problem for the project manager is that most people required for a
project must be “borrowed”
z At times, functional managers may become jealous if they perceive a
project as more glamorous than their own functional area
z Typically, the functional manager retains control of personnel evaluation,
salary, and promotion for those people lent out to projects
z Because the functional manager controls pay and promotion, the project
manager cannot promise much beyond the challenge of the work itself
3. Dealing with obstacles
One characteristic of any project is its uniqueness and with that come a series of crises:
y At the inception of a project, the “fires” tend to be associated with resources
y As a project nears completion, obstacles tend to be clustered around two
issues:
x 1. Last minute schedule and technical changes
x 2. Uncertainty surrounding what happens to members of the project
team when the project is completed
4. Making project goal trade offs
The project manager must make trade offs between the project goals of cost, time and
performance
y During the design or formation stage of the project life cycle, there is no
significant difference in the importance project managers place on the three
goals
y Schedule is the primary goal during the build up stage, being more important
than performance, which is in turn significantly more important than cost
y During the final stage, phaseout, performance is significantly more important
than cost
 5. Dealing with failure and the risk and fear of failure
It is difficult, at times, to distinguish between project failure, partial failure, and success.
What appears to be a failure at one point in the life of a project may look like a
success at another
By dividing all projects into two general categories, interesting differences in the nature and
timing of perceived difficulties can be found. Two general types of projects:
Type 1 - these projects are generally well-understood, routine construction projects
z Appear simple at the beginning of the project
z Rarely fail because they are late or over budget, though commonly are
both
z They fail because they are not organized to handle unexpected crises and
deviations from the plan
z These projects often lack the appropriate technical expertise to handle
such crises
Type 2 - these are not well understood, and there may be considerable uncertainty about
specifically what must be done
z Many difficulties early in the life of the project
z Often considered planning problems
z Most of these problems result from a failure to define the mission
carefully
z Often fail to get the client’s acceptance on the project mission

6. Maintaining breadth of communication

z Most of the project manager’s time is spent communicating with the many groups
interested in the project
y Considerable time must be spent selling, reselling, and explaining the project
y Interested parties include:
x Top management
x Functional departments
x Clients
x Members of the project team
z To effectively deal with the demands, a project manager must understand and deal with
certain fundamental issues:
y Must understand why the project exists
y Critical to have the support of top management
y Build and maintain a solid information network
 y Must be flexible in many ways, with as many people, and about as many activities
as possible throughout the life of the project

7. Negotiation

Some of the most popular attributes, skills, and qualities that have been sought in project
managers are:
y Strong technical background
y Hard-nosed manager
y A mature individual
y Someone who is currently available
y Someone on good terms with senior executives
y A person who can keep the project team happy
y One who has worked in several different departments
y A person who can walk on (or part) the waters

Four major categories of skills that are required for the project manager and serve as the key
criteria for selection:
1. Credibility
y Technical credibility - perceived by the client, senior executives, the functional
departments, and the project team as possessing sufficient technical knowledge to
direct the project
Administrative credibility - keeping the project on schedule and within costs
and making sure reports are accurate and timely. Must also make sure the project
team has material, equipment, and labor when needed
2. Sensitivity
There are several ways for project managers to display sensitivity:
a. Understanding the organization’s political structure
b. Sense interpersonal conflict on the project team or between team members and
outsiders
c. Does not avoid conflict, but confronts it and deals with it before it escalates
d. Keeps team members “cool”
e. Sensitive set of technical sensors - ability to sense when team members may try to
“sweep things under the rug”
3. Leadership and management style
Leadership has been defined as: “interpersonal influence, exercised in situation and
directed through the communication process, toward the attainment of a specified goal or
goals.”
z Other attributes may include:
y enthusiasm
y optimism
y energy
y tenacity
y courage
y personal maturity
z A project manager must also have a strong sense of ethics. Some common ethical
missteps are listed below:
y “wired” bids and contracts (the winner has been predetermined)
y “buy-in” (bidding low with the intention of cutting corners or forcing subsequent
contract changes)
y “kickbacks”
y “covering” for team members (group cohesiveness)
y taking “shortcuts” (to meet deadlines or budgets)
y using marginal (substandard) materials
y compromising on safety
y violating standards
y consultant (e.g., auditors) loyalties (to employer or to client or to public)
4. Ability to handle stress
z Four major causes of stress associated with the management of projects:
y 1. Never developing a consistent set of procedures and techniques with which to
manage their work
y 2. Many project managers have “too much on their plates”
y 3. Some project managers have a high need to achievethat is consistently
frustrated
y 4. The parent organization is in the middle of major change
Project Teams
A team is defined as “an interdependent collection of individuals who work together towards a
common goal and who share responsibility for specific outcomes of their organizations.
A project team is a team whose members usually belong to different groups, functions and are
assigned to activities for the same project. A team can be divided into sub-teams according to
need. Usually project teams are only used for a defined period of time. They are disbanded after
the project is deemed complete. Due to the nature of the specific formation and disbandment,
project teams are usually in organizations.
Most project teams require involvement from more than one department, therefore most project
teams can be classified as cross functional team. The project team usually consists of a variety of
members often working under the direction of a project manager or a senior member of the
organization. Projects that may not receive strong support initially often have the backing of
a project champion. Individual team members can either be involved on a part-time or full-time
basis. Their time commitment can change throughout the project depending on the project
development stage.
Project teams need to have the right combination of skills, abilities and personality types to
achieve collaborative tension. Teams can be formulated in a variety of ways. The most common
method is at the discretion of a senior member of the organization.
There are many components to becoming a top performing team, but the key is working on
highly cooperative relationship. The job of management is to create relaxed and comfortable
atmosphere where members are allowed to be themselves and are engaged and invested in the
project work. All team members are encourage for relationship building. Each member is
responsible to give constructive feedback, recognize,value and utilize unique strengths of each
other. The whole team is tuned on trust and cooperation.

Project team roles and responsibilities

* Project Manager
The project manager plays a primary role in the project, and is responsible for its successful
completion. The manager’s job is to ensure that the project proceeds within the specified time
frame and under the established budget, while achieving its objectives. Project managers make
sure that projects are given sufficient resources, while managing relationships with contributors
and stakeholders.
Project manager duties:
Develop a project plan
Manage deliverables according to the plan
Recruit project staff
Lead and manage the project team
Determine the methodology used on the project
Establish a project schedule and determine each phase
Assign tasks to project team members
Provide regular updates to upper management
* Project Team Member
Project team members are the individuals who actively work on one or more phases of the
project. They may be in-house staff or external consultants, working on the project on a full-time
or part-time basis. Team member roles can vary according to each project.
Project team member duties may include:
Contributing to overall project objectives
Completing individual deliverables
Providing expertise
Working with users to establish and meet business needs
Documenting the process
* Project Sponsor
The project sponsor is the driver and in-house champion of the project. They are typically
members of senior management – those with a stake in the project’s outcome. Project sponsors
work closely with the project manager. They legitimize the project’s objectives and participate
in high-level project planning. In addition, they often help resolve conflicts and remove obstacles
that occur throughout the project, and they sign off on approvals needed to advance each phase.
Project sponsor duties:
Make key business decisions for the project
Approve the project budget
Ensure availability of resources
Communicate the project’s goals througout the organization
* Executive Sponsor
The executive sponsor is ideally a high-ranking member of management. He or she is the visible
champion of the project with the management team and is the ultimate decision-maker, with final
approval on all phases, deliverables and scope changes.  
Executive sponsor duties typically include:
Carry ultimate responsibility for the project
Approve all changes to the project scope
Provide additional funds for scope changes
Approve project deliverables
* Business Analyst
The business analyst defines needs and recommends solutions to make an organization better.
When part of a project team, they ensure that the project’s objectives solve existing problems or
enhance performance, and add value to the organization. They can also help maximize the value
of the project deliverables.
Business analyst duties:
Assist in defining the project
Gather requirements from business units or users
Document technical and business requirements
Verify that project deliverables meet the requirements
Test solutions to validate objectives