Project Management Courseware

CHAPTER 1
1 Project Management Certification Program

Congratulations on making the decision to enter one of the fastest growing

occupations in the world today — the management occupation! According to the
U.S. Bureau of Labor Statistics, the employment in this area is expected to grow by
17 percent through 2018, which is faster than the average for all occupations. The
Bureau notes that the reason for this projected growth lies in the fact that the
amount of work being carried out over computer networks has increased manifold
and security has become an important issue, thereby creating the need for more
computer managers. Similarly, construction managers will be needed as the level
and variety of construction activity expands. With job prospects looking bright for
project managers both in computer and information systems and in the
construction industry, this is indeed an opportune time to become a project
manager and reap the benefits that a well-directed and dedicated effort can bring.

The ExpertRating Project Management Certification Program has been developed

by ExpertRating Ltd, a leader in online testing and certification, having certified over
2,700,000 professionals in more than 160 countries across more than 100 different
skill areas. This certification program is one of the most comprehensive programs
available till date and can successfully guide you toward your goal of becoming a
project manager.

You have made the right decision!

Not only have you chosen a Project Management Certification Program that is well
recognized, but you have also made an important and wise decision to enter the
management occupation as a project manager. New applications of technology are
being developed, thus increasing the demand for more computer managers to
oversee. The construction activity which is presently experiencing a slump is
expected to pick up soon with the growth in business and an increase in the
demand to make buildings that are more energy efficient. Thus, construction
managers can also look forward to a bright future. Just to get an idea of the
amazing opportunity that you are going to be taking advantage of, read what the
U.S. Department of Labor, Bureau of Labor Statistics has to say about this industry.

"Employment of project managers is expected to grow by 17 percent from 2008 through

2018 as new applications of technology in the workplace will continue to drive demand
for workers, fueling the need for more managers. To remain competitive, firms will
continue to install sophisticated computer networks and set up more complex intranets
and websites. They will need to adopt the most efficient software and systems and
troubleshoot problems when they occur. Computer and information systems managers
will be needed to oversee these functions. Construction managers will be needed as
construction activity expands, but at a slower rate than in the past. Modest population
and business growth will result in new and renovated construction of residential
dwellings, office buildings, retail outlets, hospitals, schools, restaurants, and other
structures that require construction managers."

1.1 The Final Certification Test

After you have gone through the complete program material and revised it, you can
appear for the final test. You must appear for the test without referring to the text
material, and it is advisable that you should be well prepared for the test. The
specifications of the test are mentioned below:

The ExpertRating Exam Format

Type of Exam - Multiple choice with one or more correct answers

Duration - 45 minutes to 75 minutes

Number of Questions - 40-60

Question Weightage - All questions carry equal marks.

Navigation - You can go back and answer unanswered questions.

Answer Reviews - You can review the questions at the end of the exam by
going back and answering marked questions.

Exhibits - Some exams will require you to answer a question based upon an
exhibit.

Retake Policy - You can retake the test any number of times by paying the
required retake fee.

Note: Some exams may follow a different format. Please read the exam details
carefully before registering.

All successful candidates will receive a hardcopy Certificate of

Accomplishment stating that they have completed all the requirements of
the Project Management Certification Program process. This certificate can
be used as an instrument for marketing your project management services as
well as for seeking a job. It will take about 3 weeks to get your certificate
through registered post. You will also get an online transcript that you can
immediately use to display your test marks and highlight the areas you are
proficient in. You can link to the online transcript from your website or ask
friends, relatives or business associates to look it up on the internet.
1.2 Fundamentals of Project Management

Project Management plays a key role in helping a Project Manager complete their
projects successfully. It is a holistic process that involves a variety of engrossing
concepts. But, before you dig deep into the concepts of Project Management, it's
important for you to understand the fundamentals of Project Management, which
have been lucidly explained in this chapter.

What is a Project?

According to, A GUIDE TO THE PMBOK (Project Management Body of Knowledge.)

Well, instead of confusing you with complex definitions, let us illustrate the term
'Project' with an example:

A car company is going to initiate a project 'Z' on July 1, 2012. The project is
required to be successfully completed by June1, 2013. The project entails
developing a new technology with the help of which the car manufacturers will be
able to propel the cars by a mixture of two gases - hydrogen and oxygen.

The company would hand over the newly created technology to its manufacturing
division. The manufacturing division will use it to develop a prototype of a new car.

The project team would comprise of ten engineers who will report to the Project
Manager. The Project Manager would be reporting directly to the company's CEO.
Everything has been judiciously planned. It is a path breaking project and therefore
the company puts a high value on its success. The company's share holders are
keenly awaiting this novel technology, which will boost the future car sales.

Project Characteristics
The example cited above is considered a "Project" because it has certain
characteristics, which every project is laced with. These characteristics are listed
below:

Project has a Life Cycle

Every project has a life cycle with definite start and end dates. A project comes
into existence to accomplish a specific objective. Once that objective has been
accomplished, the project comes to an end. In the example given above, once the
car company has developed the new technology, project "Z" will come to an end.

Project is Unique in Nature

Every work comprises different important tasks. In Project Management jargon, the
important tasks within a work are called Projects. Thus, projects differ from
on-going operations, as they come into existence for a unique activity. This activity
could be design, development, or any other one-off task. In the example given
above, the new technology, which the car company is going to develop will be a
project within the company's on-going car manufacturing operations.

An operation consists of several projects, but no two projects can be exactly the
same. Even if the nature of work involved in the two projects is alike, there would
be some difference in other factors, such as team composition, objectives, or the
project deliverable.

Project has an Objective

In the above example, the objective is to develop a new technology within the time
schedule, resources, and budget earmarked for the purpose. Once that objective
has been achieved, the project will be deemed successful. A project is deemed
successful only if:

 It is completed
 The completion is within the budget
 The completion is within the scheduled time
 The completion satisfies the stakeholders

Project Involves Risks

There are certain risks associated with all kinds of projects.

In the example given above, project "Z" runs the risk of getting halted because of
delays in the supply of gases required for developing the new technology.
Such risks are part and parcel of any project.

Project is an Amalgam of Different Activities

There are different activities involved in a Project. All such activities are to be
completed to complete the project.

In the example given above, project "Z" involves hordes of different activities like
procuring the gases required to develop the new technology and hiring the
technical experts. Thus, a wide array of activities combine together to make a
project.
Project is a Single Entity

A project might be an amalgam of various activities, resources, and inputs, but it is

treated as a single entity. This single entity called project is a responsibility of one
Project Manager.

Project Involves Sub-contracted Work

Almost every project entails the involvement of various external agencies, vendors,
or contractors. A project can have as much as 70-80% of its work being sub-
contracted to external agencies. The degree of subcontracting varies according to
the nature of the project.

Project is a Collaborative Effort

In the context of Project Management, a project is a team effort. The size of a team
can vary according to the nature of the project and the structure of the
organization.

Project Grows in Stages

A project moves on step-by-step. Once the project has been initiated, everything
seems to fall into place. The team starts understanding the concepts better and
there is an influx of new ideas, as more and more information starts pouring in.
This enables the project to move smoothly from one stage to the next.

How do Projects Differ from One Another?

Projects differ from one another on various counts. The key factors that distinguish
one project from another are:
 Speed
 Location
 Size
 Scope
 Technology

The example given below shows two projects that are completely different
from each other. This would enable you to clearly understand the distinct
nature of the different projects:

Flood Relief Project

For this project, speed is of utmost importance, as lives must be saved.

Location is coastal. Size of the team is really big, as hundreds of aid workers
are involved. The scope entails saving lives and rehabilitating the flood-
stricken people. The project is low on technology, but high on human
resource inputs.

In-house Gas Turbine Project

This is an in-house project. The project has been allocated lavish time
schedules. Location is the company's own factory. Size of the team is not that
big, it's a team of ten people. The scope entails designing and developing the
turbine. The project is high on technology.
1.3 Types of Projects

As mentioned earlier, projects are of different types. Interior decoration that one
might be planning for one's two room flat is also a project, and developing a new
software by a big company like Microsoft is also a project. Some of the different
types of projects are listed below:

Construction Projects

Involve building structures like offices, factories, schools, and mansions.

Research Projects
Involve studying, testing, and examining a given subject, product, or service.

Re-engineering Projects

Involve making additions and alterations in a given system, task, or process.

Procurement Projects

Involve purchasing the required resources or commodities.

Software Development Projects

Involve creating new computer programs or software, or customizing the existing

programs or software as per the needs and demands.

Planning Projects

Involve planning for an organization, society, club, institute, etc.

Installation Projects

Involve installing an equipment, machine, device, instrument, etc.

Event Management Projects

Involve managing an event like a fashion show, talent show, corporate party, press
conference, pleasure trip, etc.

Product/Service Projects

Involve creating a tangible product or an intangible service.

Maintenance Projects

Involve maintenance of a factory, office, industrial unit, etc.

By now, you must have understood the meaning of the term "Project" and its
various aspects. It's time now for you to move ahead to know the key aspects of
Project Management.

What is Project Management?

Project Management is all about managing costs, time, scope, risks, and quality
of the project. It is a systematic way of managing a whole project.

Project Management acts as a tool which enables a Project Manager to streamline

the various processes involved in the project. This in turn helps them
accomplish their objective of producing a quality deliverable.

A deliverable is reckoned as a quality deliverable if it has been created within the

resources the organization has earmarked for it, and satisfies the expectations of
the stakeholders. According to, A GUIDE TO THE PMBOK,

Importance of Project Management

Project Management is as important as winning. Nothing more. Nothing less.

This sums up the value of Project Management. If any Project Manager wants their
project to win — win profits the organization expects from it and win hearts of the
other stakeholders, they will have to weave their project around the concepts of
Project Management.
Project Management spells out the techniques required to take a project
toward its destination in the prescribed time duration and approved budget.
Thus, Project Management enables a Project Manager to successfully complete a
project.

Not that a project can't be completed without following the principles of Project
Management. But, such a completion blatantly ignores the two most crucial factors
responsible for the success of any project, i.e., Time and Costs. This would spell
disaster for the project as the costs involved are high and the time consumed is
more.

Thus, it's the Project Management, which equips a Project Manager with the
requisite tools and techniques to achieve the project objectives within the confines
of time and costs.

Who is a Project Manager?

As mentioned earlier, a project involves hordes of activities, which are carried out
by a group of people called a Team. A Project Manager is the Captain of the
team. They guide the team, plan the strategies, track the progress of the
activities, and monitor the whole work. In short, a Project Manager is a person
who manages the whole project and translates all the plans into action.

As a captain, they are responsible for the successful completion of the project.
When the project concludes successfully, it's the Project Manager who gets the
accolades for that success, and if they fail to deliver the desired results, they are the
one who are held accountable for that.

A Project Manager needs to be an intelligent person, who plans well, thinks

astutely, and does not flap at the sight of daunting situations. Apart form being
endowed with these three attributes, a Project Manager should be:

Good Communicator
Skillful Team Manager
Judicious Planner
Friendly Guide
Domain Expert
Inspiring Leader
Stirring Motivator
Smart at Problem Solving
Good at Calculations
Shrewd Negotiator

What's meant by the term "Stakeholders ?"

The term "Stakeholders" is extensively used in Project Management. It refers to the

persons who are involved in the project and the individuals who are directly or
indirectly related to it. For a project to be deemed successful, it's imperative that it
satisfies its stakeholders.

Therefore, it is essential to identify the stakeholders of the project and determine

their expectations, so that there is no ambiguity with regard to the project
objectives. There can be slight variations in the stakeholders according to the
nature of a project, but all the projects generally have the following stakeholders:

The Organization that is carrying out the project

The Project Manager who manages the project

The Customers for whom the project deliverable is produced

The Project Sponsor who provides the funds or resources for the project

What is a Project Deliverable?

Every project has an objective. The objective is to produce a good or service as per
the expectations of the stakeholders. The product or service to be
produced through a project is called the Project Deliverable.
Thus, a Project Deliverable is a measurable output of a project.

For example: In a car manufacturing unit, producing a new car is the project
deliverable.
In fact, deliverables exist at all levels of the project, so each phase of the project can
have several deliverables.

For example: In the car-manufacturing example, the forging unit works on raw
steel to manufacture an engine block for the turbo diesel car. The engine
block would conform to specific requirements in terms of weight, height, capacity,
etc. Thus, it would be a deliverable of the forging unit.

Project Management Phases

Every project comprises Five Phases. These five phases happen one after the
other, from the beginning till the end. They constitute a project's life cycle.

The Five Phases of a project are:

Initiating

Project Initiating is the beginning or the launching of a project. This process gives a
formal confirmation to the necessity of undertaking a particular
project. Besides, this phase defines the scope of the project and marks down the
resources allocated to it. There is a famous saying, "Well begun is half done." It
aptly fits in the context of Project Management. Properly Initiating or starting a
project is very important for its success. A project is started by weighing its pros
and cons and assessing all its aspects. Such an approach streamlines all the
further project processes and helps reach the desired end in the form of a quality
deliverable.

Planning
As the name suggests, this process involves comprehensive planning with regard to
the various aspects of the project. A project comprises a multitude of processes
and activities, all of which have to be properly planned. The Planning
phase includes all the factors associated with a project, whether major or
minor; internal or external. During the Project Planning Process, there are
exhaustive discussions on the course of action to be adopted for the different
activities involved in the project. On the basis of the comparative analysis, the best
suited action plan is carved out for each activity.

Project Planning Process is central to the whole process of project management. It

plays a key role in every project, whether big or small. A well-planned project ends
in a well-developed deliverable.

Some of the key activities involved in the Planning phase are listed below:

Defining the scope of the project and its objectives.

Planning the budget.
Planning the time schedules for the project activities.
Planning the procurement.
Planning the project team requirements and recruitment.
Planning the risks involved in the project.

Executing

A good plan minus proper execution is like a beautiful rose minus fragrance. In
short, it is worthless. Good plans need to be well executed to make a project
successful. Planning and execution go hand in hand. One cannot survive without
the other. A quality deliverable is possible only if all the processes are
qualitatively executed. Every activity within a process must be a quality activity.
The Execution phase is the longest process of the project life cycle. All the plans
designed in the Planning Process are translated into action. Each plan is wisely
implemented, so that the resources, men, material, and finances allocated to the
project are properly harnessed to complete the project activities as per the project
plan.

Controlling

The Controlling phase keeps tabs on different phases of the project and
analyzes the qualitative and quantitative worth of all the activities that are
carried out to successfully complete the project. In short, this phase monitors and
controls the project and ensures that nothing halts the growth of the project.

Controlling is an ongoing process that ferrets out and plugs the loopholes, so that
the project can move smoothly toward a quality finish.

The role of Controlling Phase can be summed up in the following points:

 It measures the project performance.

 It compares the actual performance with the expected performance, as laid down
in the project plan.
 In case of any discrepancy, it takes corrective measures to put the project back on
track, as per the plan.

Closing
In the Closing phase, there is an official announcement of the project
closure. The final deliverable is ready, and it’s time to reap the benefits of all
those earnest endeavors that went into producing it. But, Closing is not a
mere wait and watch affair. It's a complete process in itself.

It involves important activities like Conducting the Project Audit, Holding the
Final Meetings, Filing and submitting all the project related documents and
reports, Presenting the Project Closure Report and getting it endorsed by the
Steering Committee or the Management.
1.4 Review Questions

1. Explain the term "Project" with an example.

2. Explain the Project Characteristics.

3. Define Project Management.

4. Explain the term "Stakeholder".

CHAPTER 2

2 Project Initiation

A project is initiated only when it has been selected. Therefore, before apprising
you of the details of the Initiation Process, it will be appropriate to first explain how
a project is selected and zeroed in on.

What is the Project Selection Process?

Every organization has its own criteria and reasons for selecting a particular project.
In smaller organizations, one or two persons decide how and why a project would
be taken. While in big organizations, various departments within the organization
present the project proposals to the Steering Committee, which then decides
whether or not those projects should be taken.

How is a Project Selected?

A company does not undertake a project just because it has been offered that. It
will not accept the offer heedlessly. The company first examines the offer from
different perspectives, weighs its pros and cons, and measures it up against
other projects that the company might be having in the pipeline. Then, it
decides whether or not to go ahead with that project.

Herein lies the importance of the Project Selection Process. This process analyzes
the various aspects of a project and helps determine the utility or futility of
undertaking that project

Project Selection Methods

Payback Period (PP)

The Payback Period refers to the time required to recover the costs on
investment.
Payback Period Method is based on the principle that every capital expenditure is
recovered within a certain period of time. The investment that has a shorter
Payback Period is considered to be a better one, as it recovers the costs quicker.
Following is the illustration of the formulae used to calculate the PP.

For Projects that Generate Constant Cash Inflows

Payback Period (PP) = Project Costs/Annual Cash Inflows

For example:

Investment on a Project = $50,000

Return from Investment = $10,000 every year.

Therefore, PP = $50000 / 10000 = 5 years

For Projects that Generate Unequal Cash Inflows

The PP for the projects that generate unequal cash inflows can be calculated by
adding the periodic cash inflows, till the time when the whole investment costs
have been recovered.

For example:

Investment on a Project = $30,000

Yearly Inflows from Investment (for first five years) = $2,000, $4,000, $6,000, $8,000
and $10,000 respectively

Total returns after five years = $30,000

Therefore, PP = 5 years

In Chart A, illustrated below, the pink line, which depicts the Costs Recovered,
constantly moves up. This shows a periodic inflow of the return on investment.

Chart A
This PP method is simple and discards the need of any complex analysis. But, the
main disadvantage of this method is that it does not take into account the time
value of money.

According to this method, all the inflows are on a par with one another. It ignores
the fact that the money received today has more importance than the money
received next month or next year.

For example:

Consider two projects, Project A and Project B, which have the same Payback Period
of 5 years.

But, the pattern of the inflow of the return is completely different.

Yearly Inflows from Project A = $5,000, $6,000, $6,000, $4,000, $11,000 = $32,000.

In Chart B, illustrated below, the pink line, which depicts the Costs Recovered,
initially moves up bit by bit, with a sudden rise towards the end. This shows that
initially there are steady returns in the form of smaller amounts. But, in the fifth
year, the amount of returns increases a great deal.

Chart B
Yearly Inflows from Project B = $15,000, $13,000, $2,000, $1,000, $1,000 = $32,000

In Chart C, illustrated below, the pink line, which depicts the Costs Recovered,
shoots up initially and then creeps through steadily. This shows that the larger
chunk of the returns come in the very first year. After that the return inflow drops
off.

Chart C

Therefore, Project B is financially more fruitful than Project A, as it gives more

inflows within the first 2 years. Any entrepreneur would love to have such inflows in
the very beginning.
2.1 Discounted Cash Flow (DCF)

The Discounted Cash Flow method takes into account the present and future
value of cash inflows. As stated earlier, the time value of money is important.
Money creates Money. The statement connotes that money always earns an
interest over a period of time.

For example,

A bank lends to a client an amount = X

(for a period of 5 years)

Interest charged (on the amount) by the bank = I

Thus, Amount received by the bank ( after 5 years) = X+I Hence,

Future Value (after 5 years) of X = X+I

Formula for calculating the Future Value of money is (FV) = PV(1 + i)n

FV = Future Value

PV = Present Value

i = Interest rate in percentage

n = Number of periods for which the interest is paid

For example

Future Value of $5000 after 3 years at an interest rate of 2% per annum will be
$5306, as calculated below:

FV = 5000(1 + 2/100)3

FV = 5000(1.02)3
FV = 5000 (1.061) = $5306

How to calculate project profitability using the Discounted Cash Flow method

When you reverse the principle for calculating the future value of money, you
can measure the Present Value of the Money or the Cash Flow.

The formula for calculating the Present Value of money is:

Present Value = FV / (1 + i)n

This formula can be applied to the earlier example (of 2 projects) to get the
net present value of the cash inflows of the project in the context of the two
projects, assuming that the Cost of capital = 9% & Total Investment on the
project = $25,000.

Yearly Inflows of Project A = $5,000, $6,000, $6,000, $4,000, $11,000 = $32,000

Yearly Inflows of Project B = $15,000, $13,000, $2,000, $1,000, $1,000 = $32,000

According to the Payback Period method, both the projects look equally
profitable, as they both generate $32,000 each, at the end of 5 years.

But, if the Net Present Value of the Inflows is calculated, Project B will emerge
as a better project.

The formula, Present Value = FV / (1 + i)n

Can be used for calculating the present value of all the cash inflows.

Here are the calculations.

Yearly Inflows of Project A = $5,000, $6,000, $6,000, $4,000, $11,000 = $32,000

Yearly Inflows of Project B = $15,000, $13,000, $2,000, $1,000, $1,000 = $32,000

Net Present Value of the Yearly Inflows of Project A = (5000 / (1 + 9/100) 1),
(6000/(1+9/100)2), (6000/(1+9/100)3), (4000/(1+9/100)4), (11000/(1+9/100)5) = 4587
+ 5050 + 4633 + 2833 + 7149 = 24252
Net Present Value of the Yearly Inflows of Project B = (15000 / (1 + 9/100) 1),
(13000/(1+9/100)2), (2000/(1+9/100)3), (1000/(1+9/100)4), (1000/(1+9/100)5) =
13761 + 10941 + 1544 + 708 + 649 = 27603

These calculations show that the Net Present Value of the inflows of Project B
is more than that of Project A. Moreover, the total inflows of Project B cover
the project investment of $25,000. Therefore, Project A should be dropped, as
it does not cover the project expenditure.
2.2 Internal Rate of Return (IRR)

The Internal Rate of Return method is a slightly complex method. This method
takes into account the time value of money, that's why it is also referred to as
the Time Adjusted Rate of Return or Discounted Rate of Return method.

In this method, the cash flows of a project are discounted at a suitable rate of
return by trial and error process, which equates the Net Present Value (as
calculated) to the amount of investment in the project.

This method requires that the discount rate be fixed internally, hence the name
Internal Rate of Return.

The Internal Rate of Return can be defined as the rate of discount at which the net
present value of cash inflows is equal to the net present value of cash outflows.

How to calculate the Internal Rate of Return (IRR)

Calculating the IRR involves two steps:

1) Determining the future net cash inflows for the entire economic life of the
project.

2) Determining the rate of discount at which the present value of cash inflows is
equal to the present value of cash outflows.

There can be two different scenarios for calculating the IRR, based on whether or
not the annual cash inflows are equal throughout the life of the project.
i) IRR on Equal Cash Inflows

The first step for calculating the IRR is to calculate the Present Value Factor, which is
based on the following formula:

Present Value Factor = Initial Project Investment / Annual Cash Inflow

Then, refer to the Present Value Annuity Tables by choosing the years as equivalent
to the life of the project. Find out the rate at which the present value factor is equal
to the present value given in the Present Value Annuity Table.

Present Value Annuity Tables are freely available and save a lot of time while
making Present Value Calculations.

Table of Present Value Factors

For example

If a project has an initial outlay of $20,000, an asset life of 3 years, & an annual cash
inflow of $7,000, what will be the IRR?

The Present Value Factor = 20000/7000 = 2.8

Now, if we refer to the Annuity Table to choose 3 years and match the rate of return
for a Present Value Factor of 2.8, it comes out to be 2% approximately (as shown in
the table above.)

Therefore,
RR of the project = 2%.

ii) IRR on Unequal Cash Inflows:

In case the cash flows are unequal over the life of the asset, the IRR is calculated by
trial and error process. This starts by assuming any discount rate and calculating
the total Present Value for all the cash flows, using the Present Value Annuity
Tables.

The rate at which the total Present Value of cash inflows is equal to the initial
investment is the IRR.

For example:

Let's calculate the IRR for a Project with an initial investment of $95,000

The life of the project will be 4 years, and the net cash inflows are:

Year 1 = 20,000

Year 2 = 30,000

Year 3 = 20,000

Year 4 = 50,000
(PVF (Present Value Factor) has been taken from the Present Value Tables.)

The steps involved are:

1) Prepare a cash flow table using an assumed discount rate to discount the
net cash flow to the present value.

2) Find out the net present value of all the cash inflows for the lifetime of the
project (in the case above, it is 4 years.)

3) Using trial and error process, try to match the total cash inflow over the
lifetime of the project with the project investment (in the case here, it's
$95000.) A higher discount rate can be applied to reduce the Net Present
Value. You may have to try the calculation with several discount rates until
you reach the required total cash inflow figure for the lifetime of the project.

In the example given above, discount rates of 5%, 8%, and 10% were tried.
Finally, the total cash inflow figure at a discount rate of 8% approximately
matched the project investment of $95,000, so, the IRR of the project is 8%.

Profitability Index Method/Cost Benefit Ratio Method

The Profitability Index Method is also called the Cost Benefit Ratio method as
well as the Time Adjusted method. This method calculates the project
profitability as a ratio of the Present Value of the cash inflows and the
Present Value of the cash outflows of the project.

Profitability Index (PI) = Present Value of Cash inflows / Present Value of Cash
Outflows

Profitability Index (PI) = Present Value of Cash Inflows / Initial Investment in

the project

A good rule of thumb is that the project is accepted if the PI > 1 and rejected if
the PI < 1. PI can be used to compare different projects. A project with a
higher PI is ranked higher than the one with a lower PI.

Cost Benefit Analysis

This is a simple method to assess whether or not a project is good enough to
be selected. Cost Benefit Analysis compares the costs of undertaking the
project with the benefits of implementing it. If the benefits of the project
outweigh the costs, the project can be considered viable.

Different companies have different parameters for making these

comparisons. Therefore, the Cost Benefit Analysis must include the subjective
benefits of the project.
2.3 What is Project Initiation?

Project Initiation means beginning or kicking-off a new project by formally

accepting its existence. Apart from referring to the beginning of a new project,
the Initiation Process can also imply a formal recognition of the continuation of an
existing project into its next phase. But, the Initiation Process is usually associated
with the beginning of a new project.

This beginning doesn't mean starting on the first activity with regard to
producing the project deliverable.

For example: A furniture company that is going to undertake a project of making

500 computer tables for an IT group will begin the project not by purchasing the
wood, but by deliberating on the pros and cons of the project.

A company has the option to undertake hordes of projects, but it does not take all
of them. A company wisely picks the projects that best suit its interests, objectives,
capabilities, and resources. The process of rightly choosing the projects and aptly
prioritizing them is called Project Selection Process.

What does the Project Initiation Process Involve?

Project Initiation is the first process of the project life cycle. It's an important
process, as it involves a formal acceptance and approval of a project. In simple
terms, the Initiation Process establishes the identity of the project.

A project starts existing officially after this process. However, the process is not
restricted to mere acceptance and approval of the project. It's a holistic process
which involves the whole gamut of activities, as mentioned below:

Defining the Project Scope

Setting the Project Objectives

Marking down the responsibilities

Planning the different processes

Allocating the funds and resources

Identifying the risks

Assessing the gains

Determining the needs and expectations

Calculating the organizational capabilities

Assigning the roles

Selecting the Project Manager

Finalizing the Reporting System

How is a Project Initiated?

As stated above, Project Initiation is a crucial phase on which hinges the future of
the project. Therefore, it's important to start this phase in the right manner. The
Initiation Process has to be craftily carved out to set the tone for the whole
project.

This is done through a vital document called PID. The exact meaning and
components of PID have been discussed below.

What's PID?

The Initiation Process, as mentioned above, delineates the scope of the project. The
scope is defined through a document called Project Initiation Document (PID) or
Project Charter. It is a vital document of the Project Initiation Process. It not only
defines the scope of the project, but also spells out various other important details
pertaining to the project.

PID is not necessarily a single document report. It can comprise a set of

documents explaining different aspects of the project. Also, it's not a static
unchangeable draft. In fact, as the project moves on, there can be additions and
alterations in this document, according to the needs and requirements of the
project. The main objective of this document is to clearly mark down the right
path for the project.

The important areas that a PID covers are:

Project Background

Elucidates the points that led to the existence of a particular project.

Project Definition
Gives complete information about the project by explaining the following:

Project Scope

Project Objectives

Project Approach

Project Deliverable Specifications

Project Exclusions

Project Constraints

Project Precinct

Project Assumptions

Quality Control

Explains the tools and techniques that help control the project.

Organizational Structure

Depicts the organizational structure and assigns the roles and responsibilities vis-à-
vis the project activities.

Project Control

Defines the ways to control the project processes.

Risk Control

Explains the ways to manage the anticipated risks.

Project Justification

Justifies the needs and benefits of the project.

Inputs to Initiation Process

A project cannot be initiated unless the organization is aware of its vital facts and
figures. This information unravels the complex constituents of the project,
and presents a clear picture of the internal and external factors, which can
have a bearing on the project.

Following is a list of inputs that enable an organization to put things into

perspective while Initiating a project.

Product Description

Project Initiation requires information in the form of a product

description, which clearly specifies the kind and nature of the deliverable to be
produced by the project.

This information also depicts the correlation between the product deliverable
and the business requirements, which can be used as a means of pricing the
contract and as a tool to measure the results of the various project processes.
Therefore, it is essential to specify every detail of the deliverable in the Project
Description Report.

Strategic Plan

What are the goals of the organization?

This is the question that needs to be answered before undertaking any project. The
answer to this question answers many other questions related to the Project
Initiation Process.

Project Selection Criteria

Project Selection Criteria act as a vital input to the Project Initiation

Process, as they elucidate various factors like the financial gains, market share, and
product specifications.

Historical Information

Historical Information refers to the previous projects undertaken by the

organization. It's a vital input to the Project Initiation Process, as it sheds light on
the previous projects in the context of the effects of the various decisions regarding
those projects.

Outputs from Initiation Process

PID

As described earlier, PID is the Project Initiation Document, which formally

recognizes the existence of a project. Besides, it portrays the vital aspects of the
project like Project Background, Project Scope, and Project Objectives.

Project Manager Identification

Project Manager is a key figure in a project's scheme of things. That's why it is

essential to identify the Project Manager for a project as early as possible. Ideally, a
Project Manager should be brought in, while the project planning process is on.

Constraints

When the project is on, a lot of factors tend to impede its progress. Such
impediments are called constraints.

For example:

A furniture company, which has undertaken a project of making 500 computer

tables can have procurement constraints emerging from the delays in the supply of
the wood required for the project.

Some of the most common constraints are:

Financial Constraints

Time Constraints

Quality Constraints

Technological Constraints

Procurement Constraints
Management Constraints

Assumptions

Every project is based on certain calculated assumptions. These assumptions are

made with reference to the different processes or activities of the project.

For example: The furniture company aiming to deliver 500 computer tables will
have to assume that all its workers would be putting in the required number of
hours for the project. Although, there are risks involved in this assumption, as there
can be an unanticipated workers' strike or any other such unforeseen situation can
arise. Yet, such assumptions are mandatory for planning the project.

Tools and Techniques for Initiation

Project Selection Methods Project Selection Methods assess the prospective

gains from the project.
According to A GUIDE TO THE PMBOK,Project selection methods generally fall
into one of two broad categories:

Benefit Measurement Methods

Comparative approaches, scoring models, benefit contribution, or economic

models.

Constrained Optimization Methods

Mathematical models using linear, nonlinear, dynamic, integer, and multi-

objective programming algorithms.

Expert Judgment

A project is a huge task, which calls for strenuous efforts and wise decision
making. To ensure that the decisions made with regard to the different
processes and activities of the project are judicious, there arises a need for
expert judgment.

The experts calculate and evaluate the inputs to the Project Initiation
process. The experts can be identified from within the organization or from
any outside source like customers, consultants, and other professionals.
2.4 Review Questions

1. Explain the Project Initiation Process in 4 lines.

2. Explain the Inputs to Project Initiation Process.

3. Describe the PID in 4 lines.

4. Explain the various Project Selection Methods.

CHAPTER 3

3 Planning the Project

The Initiation Process apprised you of the various ways and means to select a
particular project. The process of initiating is followed by a key process called the
Planning Process.

What is Planning?

What is Scope Planning?

Scope of a project refers to the boundaries within which it has to confine

itself and accomplish its objectives. Scope is the first thing planned in a project,
and the process of planning the scope is referred to as Scope Planning.

The main objective of Scope Planning is to determine the path as well as the
destination of the project. It acts as a tool, which helps measure the output of the
project. Therefore, Scope Planning is the crux of a project, so it needs to be astutely
planned to ensure that the project culminates in success.

What is Scope Statement?

Scope Statement is a key constituent of Scope Planning. Scope Statement is a draft

that defines the Project Scope. It gives a definite direction to the project and acts
as a pivot on which all the further project processes revolve.

Writing a Scope Statement calls for in-depth knowledge of the project deliverables.
The process of gathering the requisite knowledge about the product is called
the Product Analysis. One of the main sources of information the Product Analysis
Process relies on is the Project Identification Document or Project Charter.

Importance of Scope Statement

As mentioned earlier, the Scope Statement plays a key role in shaping up a project.
The importance of Scope Statement can be understood from the following points:

Components of Scope Statement

The Scope Statement is a vital document that throws light on the important aspects
of a project.

Following is the list of the components of a Scope Statement:

3.1 What is Scope Management Plan?

This is yet another important aspect of the planning process. Sometimes, when the
process of creating the WBS (Work Breakdown Structure) is on, it comes to light
that the project scope needs a change. Change is an inevitable part of any project.

The Scope Management Plan is a document which is prepared along with the scope
statement. It states how changes to the scope can be made. In short, this document
defines the complete process of making changes.

Project Scope Statement Approval

Once the Scope Statement has been finalized, it has to be signed by the
stakeholders as a formal acknowledgement and approval of the scope of the
project. A signed Scope Statement becomes an authentic document, which serves
as a formal agreement on the project requirements and project deliverables.

What is Work Breakdown Structure?

After the approval of the Scope Statement, the project moves on to the next level
which entails chopping up of the project work into smaller tasks.

Work Breakdown Structure or WBS is the hierarchical decomposition of the project

work into tasks, of the tasks into smaller activities, and of the deliverables into sub-
deliverables.

WBS organizes the work and streamlines all the processes of a project. It delineates
the chronological sequence of the work as well as the hierarchy of the project
deliverables. WBS is usually illustrated graphically, but it can also be demonstrated
in a tabular form.

WBS acts as an agreement between the stakeholders with regard to the scope and
deliverables of the project. Therefore, it is important that all the project deliverables
and project activities are defined and specified correctly.

WBS Features

Following are the advantages of WBS:

How to Create a WBS?

Now that you are well aware of the the various aspects of the Work Breakdown
Structure, it's time now for you to learn how to create a Work Breakdown Structure.

WBS has to be astutely designed and properly structured, so that it delineates all
the project activities. At the same time, it has to be kept flexible to accommodate
any prospective changes. WBS must identify all the project deliverables and
project activities.

The WBS levels are determined according to the complexity of the project. The first
level is the project itself. This is followed by the main deliverables...other
deliverables, and... then the last level of deliverables.

As the levels go down, the project deliverables present themselves more vividly and
more explicitly. The last level of WBS lists the project activities, which can be easily
assigned to the respective team members. The activities at the lowest level of the
project are called the work packages.

The work packages implicitly depict everyone's role, responsibility, and

accountability. In larger projects, the term "work packages" is referred to as "sub-
projects."

Example: A cigarette manufacturing company keeps the cigarette packaging work

for the last stage and gets it done through an outside vendor. The company would
mark this last stage activity down in the WBS as a work package. On the contrary,
another cigarette manufacturing company does the packaging task on its own, and
therefore, recognizes it as a sub-project.

There is yet another scenario. If a project activity is to be carried out by a different

department of the same company, the activity would be a work package for that
department, but the company considers it as a sub-project.

Following is an illustration of the WBS of a car manufacturer which is planning to

design a new car. This WBS comprises 5 levels, work package being the 5th one.
This chart clearly depicts that the First Level of the WBS is the project itself followed
by various other levels of deliverables. The last level consists of clearly defined
activities which constitue the work packages.
WBS Checklist

3.2 Review Questions

1. What is Scope Statement?

2. How is a Scope Statement important?

3. List the components of the Scope Statement.

4. What is Work Breakdown Structure?

5. How is a WBS created?

CHAPTER 4

4 Resource Planning

What are Resources?

Types of Resources

Consumable Resources

As the name suggests, these resources get gobbled up or consumed at one or

the other stage of the project.

For example:

A chocolate making process requires milk, which is going to be used up while

making the chocolate. That milk can't be used again, so it's a consumable resource.

Non-consumable Resources

Non-consumable resources are the ones that don't get consumed during the
project processes, and can be used again.
For example:

The team members who carried out a particular project can be used again for
another project.

What is Resource Planning?

Simple. Planning the resources.

Well, actually it's not that simple. Resource Planning involves a multitude of detailed
and tricky processes. Resource Planning entails identifying all the resources
required to complete a project. It isa mechanism that helps control and manage
the project resources, keeping in view the cost and time constraints, along with
the resource availability, quality, and viability.

The key constituents of Resource Planning are time, men, and money. Very
obviously, Resource Planning lays great emphasis on these three constituents and
elucidates the best ways to manage each of these resources.

While the monetary planning is discussed in this chapter, the man management
and time management topics would be dealt with in detail in the chapters that
follow the one you are currently reading.

Importance of Resource Planning

Resource Planning is of great importance, as it affects the project right from the
beginning till the end. The main objective of Resource Planning is to keep meeting
the resource requirements of the project throughout its life cycle.

Following are some of the points that show how Resource Planning is important:
Planning the Expenditure

Every project has a definite budget, and the costs cannot exceed that. Thus, finance
is one of the key constituents of Project Resources, so its imperative to wisely
plan the project expenditure. This calls for accurate estimate of the costs
involved in carrying-out the different project activities.

The project costs estimation process is closely related to the WBS, since it
identifies and delineates the minutest details of the project. This helps figure out all
the operations and activities to which the costs can be attributed. There are
different techniques for estimating the costs of a project. The same has been
discussed next.
4.1 Cost Estimation Techniques

Top-down Estimating Model

This Cost Estimating Technique involves comparing the current project with a
similar previous project.

This technique is quite handy when the project is in its initial development stages,
as the precise details with regard to the future project costs are not available.

Therefore, a WBS Template of a similar previous project is used in order to get a fair
idea of the prospective project costs.

Mathematical Framework Model

This Cost Estimating Technique entails defining the parameters within which
a project has to confine itself.

Example:
The Project Manager of a software development project can make use of the going
rates for high technology software development professionals.

If a project is using Java Technologies and the going rate is $100 per hour for an
experienced programmer, the project manager will know that a 10,000 hour project
will cost $1,000,000.

Bottom-up Estimating Model

This Cost Estimating Technique involves calculating the cost of each

identifiable deliverable starting with the one that is listed at the bottom of
WBS, and then gradually moving upwards.

It's a more accurate way of estimating the project costs as it takes into account all
the work components separately.

Other Estimating Methods

Cost Estimation can be done by using some other methods as well, like with the
help of computer software tools, as they can save both time and energy. The most
popular of these tools is Microsoft Project.

Importance of Cost Estimation

Cost Estimation is a pre-requisite for the financial analysis of any project. The
success of a project hinges on how the money allocated to it is utilized. Therefore,
the first step to ensure optimum utilization of money is to correctly gauge the costs
involved in a project.
The Cost Estimation Process helps in the following ways:

Estimates the Capital Goods Costs

The Cost Estimating process helps deduce the capital expenditures of the
project. The term Capital Expenditure refers to the initial costs required to start a
project, i.e., the costs incurred on the site, furniture, machinery, computers, etc.

Estimates the Working Capital Costs

The Cost Estimating process calculates the Working Capital Costs. Working
Capital refers to the excess of short term assets over short term liabilities.

The working capital requirements include the costs incurred on raw material,
inventories, salaries of the permanent staff, etc.

The requirement of working capital also depends upon the project business model,
as the terms of payment with the clients and suppliers will determine the total
requirement for working capital.

Estimates the Operating Costs

The Cost Estimating process estimates the Operating Costs. These costs allude
to the secondary expenses of the project such as expenses incurred on utilities,
repair, maintenance, sales, and marketing.

Optimizes Resource Usage

Cost Estimation process clearly determines the quantity and quality of the
resources required for a project. This ensures optimum usage of the resources as
the work has to be carried out within the resources earmarked for the project.

What is Cost Estimation Document?

Cost Estimation Document is a written draft that delineates all the project
costs. The main output of the Cost Estimation process is the actual estimate of all
the costs to be incurred by the company to produce the project deliverable. This
actual estimate has to be produced in the form of a Cost Estimation Document.
The Cost Estimation Document has to be correctly and comprehensively
prepared. This document proves to be extremely useful at all the project
stages. The Cost Estimation Document gives the details of the kind and nature
of work to be undertaken for a project. It also elucidates the Cost Estimation
Techniques along with the assumptions.

Another important feature of this document is that it defines the top and
bottom margins of the costs involved in a particular activity.

For example: If a Java Programmer is required for a particular project, the

Cost Estimation Document will prescribe the range within which the costs of
hiring that professional should fall, e.g., $90-$120 per hour.

It's important to note that Cost Estimation Document only gives the
estimates based on certain assumptions. Therefore, there may arise a need to
incorporate certain changes in that document, as the project moves ahead.
4.2 Review Questions

1. Explain the term 'Resources' in 4 lines.

2. List the points that show the importance of Resource Planning.
3. Explain how Cost Estimation Techniques are important.
4. Explain Bottom-up and Top-down Cost Estimation Techniques.
5. What is a Cost Estimation Document?
CHAPTER 5
5 Planning Time

Why Plan Time?

Time plays a key role in Project Management. It needs to be well defined and well
planned during the planning phase itself. All the projects are limited by time
frames. The success or failure of a project depends upon whether or not it is
successfully completed within the given time frame.

Time ticks away at the same speed as it has been doing for ages, but ask any
Project Manager - they will disagree with the statement. For them, time always runs
faster. This is what they feel when they have everything under control, with all their
projects planned astutely. Think, what it would be like for them, when their plans go
awry. In that case, their time will just zip past at lightening speed.

Thus, the biggest challenge for a Project Manager is to be adept at finishing projects
on time. This calls for prudent time planning and deft understanding of Time
Estimation Techniques.

What are Time Estimation Techniques?

Every project has a deadline. Therefore, every process involved in a project is

allotted a specific time duration within which it ought to be completed. This calls for
correct estimation of the time required to complete various project processes.
There are certain techniques that help estimate time. These techniques are called
Time Estimation Techniques.

Time Estimation Techniques help determine the time to be assigned to

different major and minor activities of a project. Besides, Time Estimation
Techniques act as tools to gauge the progress of a project, right from the
beginning till the end.

5.1 Keys to Time Estimation Techniques

The important processes that constitute Time Estimation Techniques are discussed
below :

(A) Activity Definition Process

There should be a clear idea of the activities to be performed to complete a project.

The successful completion of a project is an outcome of the successful completion
of different activities.These activities combine together to give a project its final
shape.

The precise method of identifying and defining various project activities is

called Activity Definition Process.

For example:

A project to lay the roof of a building would involve activities such as sourcing tiles,
hiring the labor, planning the work, and laying the roof.
Activity Definition Process is a complete catalogue of all the project activities. It
plays a significant role, particularly in the large drawn-out projects which call for
extended Activity Definition. It not only delineates all the project activities, but
also presents explicit explanations for each activity, as well as the exact roles,
targets, and duties of all the team members.

In short, the Activity Definition Process covers even the minutest parts of the
project, which makes it a complete process. It would not be wrong to state
that Activity Definition Process is an extension of the Work Breakdown
Structure.

(B) Activity Sequencing Process

This process is all about marking down the sequence of various major and
minor activities as classified in the Activity Definition Process. The various defined
activities are chain-stitched.

The precise method of sequencing various defined project activities is called

Activity Sequencing Process.

For example: The project of laying the roof, as mentioned earlier, involves various
activities. These activities would be carried out in a sequence. Every project has a
unique sequence of operations and activities, which results in the production of the
final project deliverable.
The Activity Sequencing Process emphasizes the "First Things First" axiom. The
logical arrangement of various activities helps the project move ahead without any
snags and barriers. The Activity Sequencing Process arranges the activities keeping
in view the dependencies. The dependencies are of three types, as cited below:

Mandatory Dependencies: These are indispensable for the project, as they are
directly related to the project.

Discretionary Dependencies: These dependencies are optional.

External Dependencies: These dependencies allude to a non-project activity,

which has a conspicuous bearing on the project.

Activity Sequencing Process Methods

Before explaining the Activity Sequencing Tools, it's important to apprise you of a
few key terms and processes.

Activity - Every project entails certain activities. These activities need to be

completed to proceed to the next stage.

Precedence - Before any activity can begin, the activity preceding it must be
completed. If activity A has not been completed, activity B cannot begin.

Milestones - Milestones are the events marking the beginning and end of the
various activities.

Now, we shall elucidate the Activity Sequencing Tools. There are two popular
methods of Sequencing the Project Activities:

Arrow Diagramming Method (ADM)

Precedence Diagramming Method (PDM)

Steps included in ADM and PDM

Arrow Diagramming Method (ADM)

The figure illustrated below depicts an Arrow Diagram using the Arrow
Diagramming Method. In the figure, 1, 2, and 3 are the Project Milestones, while A
and B depict the Project Activities. The Activity A leads to the Milestone 2 and the
Activity
Activity A leads to Milestone 2 and the Activity B leads to Milestone 3. The Time for
the accomplishment of each activity is mentioned along with each Activity. It must
be kept in mind that Activity B can commence only after the completion of Activity
A. The Arrow Diagramming Method is the most commonly used method of
depicting Arrow Diagrams, and very appropriately, this is the method we are
going to deliberate on in this chapter.

Precedence Diagramming Method (PDM)

The figure given below depicts an Arrow Diagram using the Precedence
Diagramming Method. In the figure, A and B are the Activities. There is no depiction
of the Milestones. The Time for the accomplishment of each Activity is mentioned
along with each activity. It must be kept in mind that Activity B can be commenced
only after the completion of Activity A.

Arrow Diagramming Method in Detail

The Arrow Diagramming Method depicts the Project Activities and Project
Milestones using the Arrows and Nodes respectively. The tail of the Arrow depicts
the start of an activity and the Head depicts the end of an activity.
The Milestones are generally numbered so that the ending Node of an activity
has a higher number than the beginning Node. It is a good idea to increment
the Node numbers by 10, so that there is enough space to insert new Milestones
into the diagram at a later stage. In most Network Diagrams, the time required to
complete an activity is mentioned along with the activity name. Network Diagrams
easily depict the sequence of Project Activities. The Network Diagram illustrated
abovedepicts that activity A must be completed before commencing Activity B. The
time required to complete the activity is mentioned along with the activity. In the
above example, A requires 20 units of time and B requires 30 units of time for
completion.

Depiction of Activity Schedules using the Arrow Diagramming Method:

We will now study some more Network Diagrams to see how they depict the flow of
the Project Activities.

The Network Diagram illustrated above shows that Activities C and D must be
completed before commencing Activity E.
The Network Diagram illustrated above shows that Activity F must be completed
before commencing activities G and H.

The Network Diagram illustrated above shows that Activity N must be completed
before commencing Activity P, and Activities M and N must be completed before
commencing Activity O.

The Network Diagram illustrated above shows Activities A, B, C, C', D, and E along
with their respective Time durations, i.e., 3, 4,1 ,0 ,6 , and 1. A time unit such as
days, weeks or months should be defined for the Network Diagram and adhered to
throughout the diagram. Dummy activity C' indicates D cannot be started until C is
finished.

The Network Diagram illustrated above will help explain the meaning of a few
terms related to sequencing of activities.

Precedence

A precedes B or C ( an activity that is required to be completed before another

activity)

Concurrence

B & C may be accomplished concurrently (two or more activities that can be

completed together)

Succession

D must follow both B & C ( an activity that is required to be completed after another
activity)

Project Activity Bar Charts

The Project Activities can also be depicted with the help of the Activity Bar Chart
(also called Gantt Chart), which shows the Activities on the Y-axis and the Time
elapsed on the X axis. Gantt Chart is a useful tool that puts all the Project Activities
into perspective. It also helps assess whether or not the project is going according
to the plan.

Example: Following is an illustration of the Network Diagram, which shows

Activities A, B, C, D, E, & F as well as their corresponding Time durations, i.e., 1 day,
2 days, 3 days, 2 days, 1 day, and 2 days respectively.
We will now make a Gantt Chart using the information as highlighted in the
Network Diagram illustrated above. The Activities are listed on the Y-axis and the
Time durations on the X-axis. As depicted in the figure, A requires 1 day to get
completed, B requires 2 days to get completed (but it can be commenced only
when A has been completed), C requires 3 days to get completed (but it can be
started only when A has been completed). (It's important to note here that Activities
B and C are performed parallel, and the time consumed by them (from day 2 to day
4) is only three days, Activity D can start only after the completion of Activity C,
Activity E can start when activity B has been completed. (Notice that activity E and
the last day of activity C run parallel. This has come to light only after we have made
the Gantt Chart), and Activity F can start only when Activity D has been completed.

Illustration of Project Activity Bar Chart with regard to the above example:
Determining the Critical Path

The Critical Path Method (CPM) and Project Evaluation and Review Technique
(PERT) were both devised independently in the 1950s. The CPM helps recognize the
activities that lie on the "Critical Path", i.e., those activities for which any setback or
rushing will affect the overall time for the project. This streamlines the process of
managing different tasks and helps complete them within the time frames
stipulated for them.

The Critical Path is determined by adding the Time durations for the Activities in
each sequence and determining the longest path in the project. The CPM analyzes
the activities that have the least scheduling flexibility (i.e., the activities that are the
most mission-critical), and then predicts the project duration schedule based on the
activities that lie along the critical path. Such activities cannot be delayed without
delaying the finish time for the entire project. Critical paths of the projects planned
with CPM are graphically represented with a Network Diagram as illustrated below.
You have already read how to make a Network Diagram earlier in the chapter. We
will use the following network diagram in our example:

The above diagram clearly shows that Activity F is the last activity and can only be
completed when both the Activity paths A, C, D and A, B, E have been completed.
The paths for the completion of the project are:

A, C, D, F and A, B, E ,F
A Project Manager should know which of two paths given above is the Critical Path
for the project. The Critical Path is A, C, D, F as it requires 8 days, whereas the path
A, B, E, F requires 6 days. Since, A, C, D, F is the longer path, it doesn't provide any
flexibility for delays. Thus, any delay would extend the duration of the project.

The reason for A, B, E, F not being critical is that even if 2 days are wasted in the
completion of this path of activities, it will not add to the overall duration of the
project, as A, C, D, F path will take 2 days more anyway.

The amount of time by which a non-critical path activity can be delayed

without delaying the project is referred to as Slack Time.

In the example we have cited, the Slack Time is 2 days for the A, B, E, F path.

While determining the Critical Path, it's a good idea to use PERT to assign unbiased
time durations to all the project activities. You will read about PERT later in this
chapter.

(C) Activity Duration Estimating Process

The assessment of time required to complete the various project activities is

essential to determine the time required to complete the whole project. The precise
method of sequencing the various defined project activities is called Activity
Duration Estimating Process. Every project is defined in work periods. The
term "work periods" refer to the number of hours, days, weeks, or months
anticipated to be consumed in completing a project.

For example:

In the project of laying the roof, as mentioned earlier, all the activities would be
assigned definite Time Estimates.

For example:

Time Estimated for sourcing tiles = 2 days

Time Estimated for hiring labor = 1 day

Time Estimated for laying the roof = 10 days.

The Time Estimation of a project entails all the project activities, right from its
commencement till the conclusion. This also includes the rest days as well as
the reserve time, which might be required for any unforeseen situation.

PERT (Program Evaluation and Review Technique)

PERT is a system that can be used to make the time durations more accurate. To
use PERT, you must estimate the shortest possible time (optimistic view) each
activity will take, the most likely length of time (most likely view), and the longest
time (pessimistic view) that might be taken if each activity takes longer than
expected.

Use the formula below to calculate the time for each project stage:

This allows time estimates to be biased away from the unrealistically short
time-scales normally assumed.

The PERT table shown below will help you understand how the PERT estimate
calculations are done.

When the Time durations are mentioned along with the activities in the Network
Diagrams, they can be adjusted with the help of
Tools for Estimating Activity Duration

Expert Judgment

People who are actually going to undertake an activity can come up with an
accurate Activity Duration Estimate. They are experts in their domain, and
know the kind and nature of activities involved therein. Their expertise and
intelligence can be relied upon to get a correct estimation.

Nevertheless, it has to be ensured that they are well aware of different

factors that can have a bearing on the estimates. Besides, it needs to be
checked that their estimation is a fair one and devoid of any preconceptions.

Analogous Estimating

Analogous means similar, corresponding, or comparable. Thus, Analogous

Estimation for an activity is done on the basis of a similar previous
activity. This gives a clear assessment of the various aspects to be taken into
account while estimating the time duration for the present activity.

It also helps in discarding the needless ambiguities that might have been
experienced before while doing a similar activity. Analogous Estimating is also
referred to as Top-down Estimating, as it gives a top to bottom and an inside-
out view of the different phases of an activity by providing a corresponding
case study of a previous activity.

In fact, this process not only gives the duration estimate, but also offers other
imperative details of the activity.

Quantitatively Based Durations

Quantitatively Based Durations connote estimating the duration via another

tangible source.

For example:

A timber dealer has been asked to make wooden planks (in varying numbers
and different sizes) by three different gyms.

Instead of estimating the time that would be required to fix the wooden
planks in the different gyms, the dealer would first deduce the time generally
required to fix the amount of wood that is going to be used in making the
wooden planks. This will give him a fair estimation of the time required to
complete the current activity.

Reserve Time

Reserve Time refers to cushioning a project by allotting it some extra time for
an unforeseen situation. That is why, it is also called Contingency Time. At
times, some external forces halt the progress of an activity.

For example:

The imported currency counting machines that a bank is awaiting might get
delayed because of the deferred flights or customs hassles. The Reserve Time
allotted to an activity makes it possible to get that activity completed, even if
there is any delay due to an unanticipated situation. Therefore, it is
important to take the Reserve Time into account during the duration
estimation process
5.2 Review Questions
1. What is Activity Definition Process?

2. List the inputs to the Activity Sequencing Process.

3. Explain the Arrow Diagramming Method.

4. Explain PERT.

5. What are the different tools for Estimating Activity Duration?

CHAPTER 6

6 Planning Project Quality

What is Quality?

What is Quality Management?

In simple words, Quality Management is all about managing quality. This entails
managing all the project processes, as each one of them has an effect on the
quality of the project deliverable.

Quality Management calls for skillful arrangement of the various project activities. It
is an ongoing process, which enables a company to produce quality deliverables as
per the set standards, specifications, and requirements.
Furthermore, Quality Management defines the organizational structure,
responsibilities, policies, procedures, processes, standards, and resources needed
to deliver quality deliverables.

Quality Management Aspects

Quality Management has two vital aspects, which have been discussed as follows:

The Quality Deliverable

The objective of every project is to produce a quality deliverable, and the

accomplishment of this objective is the sole reason for which a particular project is
on.

Thus, all the project planning hovers around the quality deliverable that is to be
produced.

There are two kinds of deliverables:

Deliverable in the Form of Quality Service

Producing a service as a deliverable means creating utilities, conveniences, or

benefits that are intangible.

For Example:

BPO Services, Consultancy Services, Hospitality Services etc.

The process of producing a quality service as a deliverable calls for exhaustive

research and persistent efforts.
There are certain tools that help determine whether or not the deliverable
produced is a quality deliverable.

These tools come in the form of several values, which are explained as under:

Value of Execution –It refers to thecosts involved in producing a deliverable in

the form of a quality service. Different plans are devised to carry out different
project activities.

Executing all such plans involves certain costs that need to be calculated to figure
out the quality of the service delivered.

Value of Execution delineates the measurable results with respect to the

costs incurred.

The quality of a service is ascertained by calculating the actual costs and benefits of
execution.

Value of Actual Service – It refers to the recognition, status, and usage of the
actual service that a project has produced.

The quality of a particular service establishes its credentials if there is a discernible

increase in its usage, which connotes its success and profitability.

Value of Utility & Efficacy – Value of Utility and Efficacy refers to the success
of the deliverable in terms of expectations associated with it.

If a service lacks utility and efficacy, it will fail to satisfy its users. This makes the
service insignificant and all the efforts that went into producing it worthless.

Value of Durability – It refers to the period of time for which a service will be
in vogue.

A service is regarded as a quality service only if it stays stays put for long and excels
in the competition.

Value of Dependability – It refers to the reliability and consistency of the

service produced.
The service produced must deliver the desired results and run smoothly without
hassling its users.

Deliverable in the Form of Quality Product

Producing a product as a deliverable meanscreating an object, a good, or any

other physical entity.

For Example:

Laptops, Skin-care Products, Books etc.

Producing a quality product is quite similar to producing a quality service, however,

the physical nature of the product makes it look quite different. The quality of the
product is measured keeping in perspective its kind and nature.

As in the case of a service, there are some measurable values that can determine
the value of the product. The same are as under:

Value of Actual Product –It refers tothe recognition, status, and usage of the
actual product that a project has produced.

The quality of a particular product establishes its credentials if there is a discernible

increase in its usage, which connotes its success and profitability.

Value of Functionality – It refers to the functions a product is expected to

perform.

The quality of a product lies in its compatibility.

It has to click with its prospective users to establish itself as a quality product.

Value of Durability – As in the case of a service, Value of Durability refers to the

period of time for which a product will be in vogue.

A product is regarded as a quality product only if it stays put for long and excels in
the competition.
Value of Dependability – As in the case of a service, Value of Dependability
refers to thereliability of the product developed.

The product should cater to the needs of its prospective users and must show
consistency in its functions. It must keep delivering the desired results.

Quality Process that leads to Quality Deliverable

The bottom-line to produce a quality deliverable, whether in the form of a

service or a product, is to design a quality process and abidingly follow it. A
quality process is designed by taking into account the different aspects of a project,
right from its commencement to conclusion.

The different facets of a project like Planning, Budgeting, Team Management, and
Time Management combine together to build a quality process that yields a quality
deliverable. Thus, Quality Process is a result of wholesome project
management. That is why, it necessitates shrewd management skills at all the
project levels.

Following is a list of the factors that combine together to turn a process into a
Quality Process:

6.1 Quality Planning Tools

There are five Quality Planning Tools, which enable the Project Manager to ensure
the quality of a project. The same are discussed as under:

Benefit/Cost Analysis

It evaluates the costs involved in meeting the quality standards and

also examines the benefits of producing that quality.
It eliminates any wrong concepts pertaining to the quality of the deliverables.
A Guide to the PMBOK outlines the following benefits of ensuring quality:

Benchmarking

Benchmarking provides some set measures based on the previous

activities. These measures help guide the current activity.

Benchmarking enables the whole process to move in the right direction at the right
pace. It also helps in plugging the loopholes that might have cropped up in the
previous such activities.

Benchmarking presents the metrics of the previous different projects, which help in
gauging the simple and the complex components of different project processes.

Thus, Benchmarking equips a Project Manager with certain facts and figures, which
they can refer while devising a strategy for their current assignment.

Flowcharting

Flowcharting gives an inside view of the steps or activities of a particular

process. It also provides the inter-connection between the different segments or
components of a project process.

Since flowcharts describe the whole process very clearly, the Project Manager can
use them to identify the problem areas in a given activity. This helps them in taking
necessary corrective measures to steer clear of those gray areas.

There are two types of flowcharts used in Quality Management Planning:

Cause-and -Effect Diagram

It specifies the connection between the causes and effects of different problems of
a process.

Process Flowchart

This is a general flowchart that depicts the various steps of an activity or a process.

It also reveals the inter- relationship of the various components of a process.

Design of Experiments

Design of Experiments is a tool, which is used to identify those variables

within a project that can make a positive effect on it.

This tool is primarily used in the context of the product and not the process. It is
also used to decipher the off-beam variables, which can lead to failure.

Cost of Quality
Cost of Quality is the aggregate of all the costs involved in producing a
deliverable. These costs include every penny spent while ensuring the quality of a
project.

Therefore, even the costs incurred on some discrepancies and non-conformities

are included while calculating the Cost of Quality.

These discrepancies and non-conformities can come in the form of the project
activities that went awry, or tasks that went barren, or unanticipated snags that
crept in, or delays in the supplies etc.

There are three costs that constitute Cost of Quality. The same are as under:

Prevention Costs

Prevention Costs refer to the costs involved in keeping the project deliverable
free from any defects.

The project deliverable should be flawless and must satisfy its users. A variety of
activities are undertaken to produce a defect-free deliverable.

These activities include Research, Planning, Training etc. The costs involved in
completing all such activities constitute Prevention Costs.

Appraisal Costs

Appraisal Costs refer to the costs that are incurred to analyze the credibility
and quality of the deliverable.

When a deliverable is ready, it needs to be ensured whether or not it meets the

stipulated standards and fulfils the prescribed requirements.

All such costs that go into ensuring the credibility and the quality of a deliverable
come under the purview of Appraisal Costs.

Failure Costs

Failure Costs refer to the costs incurred because of internal or external

failure.

Internal failure refers to the fault that crept in while creating the deliverable. This
fault can be a result of non-conformance to the prescribed standards or
specifications, or due to any other failure.

On the other hand, when a deliverable has been made available to its users, but
fails to satisfy their expectation expectations, the failure is termed as External
Failure

The costs involved in taking corrective measures for such Internal and External
Failures constitute Failure Costs.

Famous Quality Management Theories

Philip B. Crosby Theory

Philip B. Crosby Theory can be explained in the following points:

There should be quality planning right from the word go

Weigh all the pros and cons before chalking out the project strategy.

Prevention is better than cure, so get rid of all the unnecessary hassles like
reworking and fault removing. This is done by wisely anticipating the defects. Thus,
there would not be any major failure costs. .

Joseph M. Juran Theory

Joseph M. Juran Theory can be explained in the following points:

W. Edwards Deming Theory

W. Edwards Deming Theory can be explained in the following points:

Kaizen Theory

Kaizen Theory can be explained in the following points:

6.2 Review Questions

1. Explain the term Value of Execution in 3-4 lines.

2. Explain the term Benchmarking in 3-4 lines.

3. Explain the terms Internal Failure and External failure.

4. The W. Edwards Deming Theory states that 85% of the Cost of Quality is a
Management issue. Give a real life project example to prove the truth of the
statement.

CHAPTER 7

7 Building and Managing Team

What is a Team?

A Team is a group of two or more people who work together towards a common
goal.According to Katzenbach and Smith,
How to Build a Team?

Building a team is an onerous task. It calls for earnest efforts, smart judgment, and
swift decision-making. A lot of thought process goes into building a team that is
capable of delivering the desired results.

Building a team is a systematic process, which needs to be meticulously carried out

by following the requisite steps, as explained below: Identifying the Team
Members

The first task of a Project Manager is to identify the people required to be on the
team for a particular project. There are two ways to carry out this task.

One way is to identify the team members within the organization and build a team
internally. The other way is to identify and recruit the team members from outside.
Read on to know how this is done.

Building a Team Internally

Picking People from Previous Teams

Considering the requirements of the current project, a Project Manager can pick
their team from amongst the people they worked with earlier on different projects.

Their past experience of working with the different team members will enable them
to identify the right men for their current assignment.
Picking People Recommended by Peer Groups

A Project Manager can also pick the people recommended by those who are or
were a part of their team. They can trust their word for they are aware of the
skills and commitment of the people they are recommending.

Working with the People Chosen by the Management

Sometimes a Project Manager is given a team by the management. The

management identifies the people who would be on the team for a particular
project. But, even in such a case, the Project Manager needs to apprise
themselves of the skills and expertise of all their team members. Only then
they will be able to define the roles and build a team that clicks.

Building a Team Externally

Recruiting People

New candidates are recruited when people who have the requisite skills and
expertise to work on a particular project are not found internally, or when such
people are there in the company, but they are all engrossed in some other
projects.
Recruiting a team is not just advertising the posts, taking interviews, negotiating the
pay packages, and offering the appointment letters.

Recruitment is a project in itself. It involves a variety of activities like determining

the number of vacancies, modes of recruitment, selection criteria; and
defining the skill set required as well as the salary slabs.

Different Modes of Recruiting

While recruiting people, the Project Manager needs to ensure that the candidates
they zero in on should not only have the requisite skills and experience, but also
the credibility, commitment, and integrity. Besides, they have to see that all this
comes within the salary slabs proposed by the company.

Assessing Skills

Once the team members have been identified, the process of analyzing their skills
and expertise begins. The Project Manager has to figure out "who is capable of
what." A quick study of the education, experience, training, and the nature of
projects handled by different team members would reveal their respective
strengths and weaknesses.

Defining Roles

Defining Roles means deciding "who will fit in where?" After assessing the skills,
the Project Manager moves a step further and starts defining the role of each
member of the team.
While defining the roles, the Project Manager should look beyond the personal
profiles of the team members. They should try to understand their
attitudes. This would help them identify the people who can slog away for long
periods, in tough situations, and under tight time schedules.

Similarly, they have to identify the "take it easy" types in their team, so that they
can maneuver their roles accordingly. They should also try to spot the groups
within a team that gel well. All these factors help the Project Manager in correctly
defining the roles.

Imparting Training

Training is also an important part of team building. A trained team can work well
without any halts and jams,however, it needs to be ensured that training will help
the team members produce better results.

Training can be both an expense as well as an investment. Therefore, it's important

that the Project Manager justifies what necessitates training.

Delivering the Goods

What for a team is created ? Of course, to accomplish a specific goal called

project. Building a team will not be of any use if does not yield success for the
project.

Hence the Project Manager must ensure that they build a team that can work
against all odds.

Four Phases of Team Building

7.1 How to Manage a Team?

Managing a team or leading a team is a tricky affair. It's not everybody's cup of tea.
One can be a genius in their domain area, but it's a different proposition to guide,
manage, and lead people. This is because, a team comprises of people. It is easier
to manage convoluted work, complex machines, and complicated
technologies, but it's a daunting task to manage people.

Different individuals have different mindsets, varied attitudes, assorted

ambitions, diverse skill-sets, distinct aptitudes, contrasting approach, and
disparate work capacity. Therefore, it's an intriguing task to bring all such people
together, make them share an objective, and exhort them to work to achieve that
objective.

Needless to say, managing a team calls for a skillful Project Manager. They should
be wise enough to understand the minds of different people, kind enough to
empathize with throbbing emotions, shrewd enough to maneuver their skills as per
the requirements, and smart enough to resolve the conflicts within a team.

Successfully managing a team involves a multitude of factors. All such important

factors that enable a Project Manager to efficiently manage their team are
discussed as under:

Exhibiting Leadership
Qualities

Only a good leader can be a good Manager. Managing a project in a broader

sense is managing people. Although, it's the Project Manager who chalks out the
plans and strategies for a project, but most of their plans are to be carried out by
the people working in their team.

Therefore, a Project Manager must know how to lead. They should lead by example
by exhibiting determination, discipline, enthusiasm, composure, and a never-say-
die spirit.

Building Team Spirit

Another significant aspect of team management is to create a synergy within the

team by infusing team spirit into the mind of every team member. A team should
work with the motto "All for one and one for all." Managing a team is not just
bringing a few individuals together. It's more about making them feel together,
think together, and work together.

The best of the organizations in the world boast of having the best of the teams.
Their teams are tailor-made for their ventures. These teams were not fetched
ready-made by them from somewhere, but were passionately built over a period of
time.
This emphasizes the fact that a Project Manager should doggedly strive to build a
team that exudes team spirit. It will make their task easier and at the same time
enables the organization to scale greater heights. There are different ways to build
team spirit. Following are a few examples:

Ensuring Discipline

Discipline is an important ingredient of team management. No individual is bigger

than the organization. Therefore, a Project Manager must ensure that each
member of their team adheres to the rules and regulations marked down by the
organization and follows the instructions given by them from time to time.
Those who do not abide by the rules should be penalized, however, the penalties
should not be disparaging in nature. The objective is to correct a wrong habit and
not insult the errant.

Conflict Management

A team consists of different individuals, so there's bound to be some conflicts here

and there. The reasons for conflicts can be as general as a difference of opinion, a
disagreement on a course of action, or a divergence on a particular issue; and as
complex as personality clashes, hostility, jealousy, or suspicion.

Types of Conflicts

Simple Conflicts - Conflicts that arise out of simple reasons like the clash of
opinions are called Simple Conflicts. These conflicts are simple in nature and
therefore, easy to resolve.

In such conflicts, a Project Manager should follow a middle path by adopting

a "Take in. Give in" policy. This means that the Project Manager would take in
some suggestions of the conflicting parties, and ask them to give in a little. Thus, no
party party feels to be a loser.

Complex Conflicts - Conflicts that arise out of complex reasons like hostility or
jealousy are called Complex Conflicts. These conflicts are complex in nature and
hard to deal with, as the minds of the conflicting parties are clogged with bad
feelings.

It's difficult, and at times, impossible to wipe out such feelings. Even if the Project
Manager tries to ease their resentment, it can take a long time, but they cannot
afford that. The project has to be completed on time; therefore, the Project
Manager has to take immediate steps for damage control so that work is not
affected.
Such a situation is a tricky one for any Project Manager, and they have to take
some unpleasant decisions like separating the conflicting parties by shifting
one or both of them to some other projects.

In fact, there are no ready-made solutions for such situations. Each conflict
needs a different treatment. The Project Manager has to use his wisdom,
expertise, and gut feeling to resolve such situations.

How to deal with conflicts

There are five approaches that a Project Manager can make use of to resolve
different types of conflicts. The same are discussed below:

Problem Solving - Problem Solving is one of the most favored ways of

resolving a conflict. This approach deals with the problem in a full-blooded
manner. It delves deep into the cause of the problem to eliminate it forever.

This approach aims for a win-win solution, which helps build team spirit.
Problem solving calls for ample time to resolve the issue.

Forcing - This is an Act Fast approach. There's no time to waste, so a swift

decision is taken, which might be right or wrong. The aim is to move on with
the project. This creates a win-lose situation, which does not augur well for
team spirit.

Compromising- As the word suggests, this approach is all about

compromising. Both the parties are asked to give in a little. This approach
works in the situations where no party can win. It is considered as a lose-lose
situation, as both the parties have to compromise on a few things.
Smoothing - This approach is all about smoothing the conflict by underplaying
the issue. The Project Manager deliberately makes light of issue to give an
impression as if the conflicting parties are fighting over a frivolous issue.

Although, this approach is considered to yield a lose-lose solution, it helps in

maintaining the relationships, as the focus shifts from the problem to the
project.

Withdrawal - This approach is reckoned as an awful one. It makes one of the

conflicting parties feel aggrieved and hard done by. It is used as a simmering
down tactic, which can have negative repercussions. This approach gives
a yield-lose solution.

Motivation

Motivation connotes inspiration. It acts as a stimulant and encourages people

to excel in their activities. A Project Manager should be able to consistently
inspire their men.

Whether a project is simple or complex, the team needs inspiration to keep

feeling the thrill and excitement throughout the project life cycle.

There are different ways to motivate a team. The same are as under:

Work Appreciation - Every employee gets stirred up when their boss

appreciates their good work, of course in their presence. Even the best of the
workers who know that their work is of top quality crave for that little pat on
the back by the boss.

A pat on the back might appear to be a small act of genuine acknowledgment

of an employee's good work by their boss. But, for an employee, this small act
turns into large volumes of a tonic called motivation. This tonic reconfirms
the employee's faith in leadership, re-vitalizes their enthusiasm, rekindles
their skills, and reinforces their commitment to the organization.

Evoking Self-Interest -People feel motivated if they sense that what they are
doing will help them. Team members should be acquainted with those
aspects of the project that would augment their learning process and
enhance their skills. This spurs them on and keeps them motivated.
Showing Company's Interests -Most of the employees like to prove to be asset
to the company. If they are told that their work is directly going to add to the
company's turn over and the company would be proud of them if they
complete the project successfully - it's reason enough for them to put in their
best efforts.

Demonstrating Project's Worth - A Project Manager should explain the

project's worth to their team. People love to be associated with something
that is unique, something that has not been done so far, or something with a
surprise element.

The Project Manager should be crafty enough to detect the factors that can
make a project look unique. This is one of the best ways to motivate the
team.

Understanding Employees - According to Fred Herzberg's Motivation-Hygiene

Theory, there are two types of employees. Hygiene Seekers and Motivation
Seekers. Hygiene Seekers are the kind of employees who believe in "Self-
Safety" theory. They are more concerned in the job security, safe and sound
work place, hassle free environment, smooth administration, cordial
professional relationships, and easy going work culture. Growth, learning,
and challenges are not their priority.

On the other hand, Motivation Seekers are "Fire in the belly" types. They are
constantly striving for growth opportunities. They seek challenging
assignments to prove their worth. They vie for professional glory.

Motivating Individually - As mentioned above, there are different kinds of

employees with different attitudes, aspirations, and goals. What motivates
one might fail to motivate others. Therefore, a Project Manager should try to
understand the mindset of their team members and motivate each one of
them accordingly.

Job Rotation

A Project Manager must keep close tabs on the kind of activities each team
member has been performing over a period of time. If they find that some
people have been engaged in similar kinds of activities for far too long, they
should be assigned some different tasks.

Interchanging the tasks with the other team members is a good way to ward
off the boredom of doing same tasks time and again.

Such a Job Rotation can be done at regular intervals. It adds to one's

repertoire and also acquaints one with the challenges faced by their
teammates.

Job Enrichment

Job Enrichment is all about making the job more exciting. This can be done by
imparting new training, sprucing-up the profile by some additions and
lterations, and by giving more authority and responsibility to the team
members. This is a fine way of keeping the motivation levels of the team high
all the time.
7.2 Review Questions

1. Explain the term 'Team' in 3-4 lines.

2. Describe how a team is built internally.

3. Explain how conflicts are managed.

4. How is a team motivated?

5. Explain Fred Herzberg's Motivation-Hygiene Theory.

CHAPTER 8

8 Planning Risks

What is Risk?
Risk has a lot of positive connotations as well. We hear about the great
entrepreneurs taking risks. Their risks are more of a reaction to a challenging
situation or a calculated plan to increase their gains, or an attempt to defy
adversity. This indicates that risk is not all that haphazard a thing as it is often made
out to be.

Can Risks be Planned?

Yes. Apart from the rigors of nature there is hardly anything in the world that
cannot be planned. A project is kicked-off only after proper planning. A project
plan clearly spells out the various risks associated with it and the ways and means
to manage them. A plan without a proper strategy on the project risks is reckoned
as a plan in vain.

There are certain techniques that help identify and rectify the risks associated with
a project. You will get to know about all such techniques later in the chapter.

Categories of Risks

Risk can be divided into four categories:

Technical, Quality, or Performance Risks

These risks are associated either with the intricacies of the technology or with
impractical performance goals.

Project Management Risks

These risks are associated with lapses in planning or errors in executing the plans.

Organizational Risks

These risks are associated with the faults in the system of operations in the
company.
For example:

Frequent chopping and changing of the personnel, structural discrepancies,

financial dilemma etc.

External Risks

These risks are associated with external factors like changes in the company's laws,
amendments in the government's political, economic, or foreign policies.

How are Risks Planned?

Risk Planning is a complex task. It involves dealing with the issues that are
anticipated or foreseen, but this element of uncertainty makes the activity exciting
as well. Since, Risk Planning involves dealing with the problems that are vague and
uncertain, there can't be any clear-cut solutions. The solutions suggested can at
best be the "hopeful" ones or the "most likely" ones.

Conjecturing the "hopeful" or the "most likely" solutions is not a child's play
either. It's a demanding task that calls for in-depth research, quick decision
making ability, and a knack of guessing right. The process of Planning Risks
comprises of a variety of techniques and methods, which are discussed as under:

Identifying Risks

The first step towards planning risks is to identify the kind of risks involved in a
particular project. Every project has some risks associated with it. These risks can
be divided into two categories
Definite Risks

These risks are not difficult to imagine.

For example:

A building contractor knows that he runs a risk of getting all his budgetary plans
tormented due to a sudden increase in the prices of building material like cement
and bricks. He therefore plans in advance for such anticipated risks and gears
himself up to respond to such a situation.

Indefinite Risks

These risks are difficult to imagine.

For example:

A building contractor cannot foresee a flood, any other natural calamity, or a

political insurgency. Such situations can leave him baffled. Although, such risks are
unlikely to crop-up; yet they exist. It's hard to plan for such risks.

Nevertheless, the planning process should provide some cushioning for the
project, so that it could absorb some of the risk shocks.

Risks can emanate from a variety of sources, which are listed as under:
Inputs to Identify Risks

8.1 Risk Identifying Tools & Techniques

There are five tools and techniques that can be used to identify risks. The same are
discussed below:

Documentation Reviews - Documentation Reviews refer to evaluation of

different aspects of the project viz. analyzing all the individual activities,
appraising the complete project, and judging various theories and assumptions
crafted for the project.

Information-Gathering Techniques - There are five Information Gathering

Techniques, and the same are discussed below :

Brain Storming - This is one of the most favored techniques employed to identify
risks.

It involves engrossing everyone concerned in the risk identifying

discussions. Experts, seniors, juniors, and even trainees are asked to present their
viewpoints and identify the risks they anticipate for a particular project.

This process can produce new ideas and theories. Besides, with the participation of
people working at different levels, the risks involved at all the stages of the project
come to light.

Delphi Technique

Delphi Technique is one of the most remarkable techniques for identifying the risks
involved in a project.

According to this technique, people can participate in the risk identifying

process, no matter where they are located.

Their assessments of the anticipated risks are gathered by way of a

questionnaire, either directly or through a process facilitator. After that, the
information gathered from different sources/quarters is organized and sent back to
the same people for their further suggestions, comments, additions, and
alterations. Afterward, a final list of the potential risks involved in a particular
project, as marked down by different participants is prepared.

This is a very fine technique, as it eliminates the chances of any direct or indirect
influence on the opinions of the participants.

Nominal Group Technique

In this technique, all the participants sit together and each one of them jots
down the potential risks involved in a project, as per their opinion.

Only one risk is mentioned on each piece of paper. The facilitator of the process
then displays all the risks, as listed by different participants. This is followed by
exhaustive discussions on each of the mentioned risks.

Interviewing

As the name suggests, this technique involves interviewing people who have the
experience of working in similar projects or have the expertise in the key
areas of the project.

Thus, the Interviewing process might involve a whole variety of people such as
Project Manager, Team Members, Stakeholders and Subject-matter Experts.

SWOT

SWOT (Strengths, Weaknesses, Opportunities, and Threats) refers to analyzing

the strengths, weaknesses, opportunities, and threat aspects associated with a
project and its different phases.

Checklists - Checklists include the various Dos and Don'ts of a

project. Checklists are carved out on the basis of historic information available
from the projects similar to the one that is currently on.

Assumption Analysis - A lot of assumptions are made while planning the risks.
These assumptions need to be clear-cut, consistent, and reliable.
Assumption Analysis is a technique that checks the authenticity of all such
assumptions and plugs any existing loopholes.

Diagramming Techniques-Cause-and-effect Diagrams and Process Flowcharts

illustrate the relationships of the different project variables. Thus, Diagramming
Techniques help identify the risks involved at the various stages of the
project.

Detecting the Causes of Risks

Risk Planning is all about trimmingthe uncertainty factors, which in turn minimizes
the losses. One of the best ways to do this is to identify the causes of the
various risks involved in a project. A Project Manager should have an idea about
what goes behind the risks, so that they could try to eliminate the causes of the
risks as much as possible.

Perceiving the Effects of Risks

Once the causes of the risks involved in a project have been detected, the Project
Manager should try to fathom the ramifications of such risks. This will help
them identify the risks that are more fatal than the others. Thus, they can fine-tune
their plans accordingly.

Deciphering Risk Taking Capacity

Another noteworthy facet of Risk Planning is to exactly determine the amount of

risks that a project can bear. This entails enormous calculations and
permutations.

Every project has its own risk taking capacity, which depends upon the
stakeholders, customers, resources, infrastructure, manpower, budget etc. A
Project Manager has to work within certain limitations and therefore, their risk
planning must clearly recognize such confines.

Figuring-out the Win-Loss Quotient

Planning risks entails astute understanding of the gains and losses that a risk
comprises of. Taking risks is neither a brash activity emerging out of an
overconfident mind nor a timid run away from the risks. Risk Planning is all about
taking calculated risks and bravely resisting the risks.

Therefore, a Project Manager has to show a right blend of caution, conviction, and
courage. They need to figure out the gains and losses included in taking or dealing
with certain risks associated with a project. Only then they will be able to ascertain
the amount and gravity of the risks involved.

Caution with Aggression

Some Project Managers show a tendency to always "Play It Safe," and never dare
to take any risks, while there are others who have a snobbish way of dealing with
the risks and display a "Who Cares" attitude. Neither of the two approaches is
right.

The best strategy while dealing with risks is the "Caution with
Aggression" strategy. A Project Manager needs to avoid some risks and take others
head-on.

Studying Similar Previous Projects

There's a famous saying - "History repeats itself." Whether or not history does that
is a debatable issue, but one thing is for sure that history is a very good subject to
turn to for not repeating the mistakes made in the past. Hence, history can be of
great importance to a Project Manager also, particularly while planning risks.

A Project Manager should study the course of the previous projects similar to
the one they are currently handling. This will apprise them of the various risks
associated with the project. At the same time, it gives them some important clues
and hints on dealing with such risks.

Avoiding Pitfalls

While planning risks, a Project Manager should guard themselves against any
misjudgments and miscalculations. At times, the historical information that they
might be referring to could be misleading or inappropriate in the context of the
current scenario.

A Project Manager should put the things in perspective. They should also ensure
that the data they have collected is free from any technical glitches.

Training for Handling Risks

A Project Manager needs to ensure that their team is ready to face the risks
associated with a project. A team meeting and a stimulating pep talk are not
enough to make a team know how to handle the risks. The best way is to train
every team member.

This training can come in different forms and ways. It might include constant up-
gradation of the skills of the team members, frequent brainstorming
sessions, seminars etc. Training the team on how to handle the risks makes it
more able, more responsible, and more accountable.

Drawing the Actual Plan

After all the research and deliberations, a Project Manager has to create the actual
plan on risk management. This plan comes in the form of a document, which
delineates the course of action to deal with the risks. The plan therefore, has to
be an accurate one. It should cover all the vital components.
A Guide to the PMBOK enlists the following components that a risk management
plan should include:

Roles and Responsibilities

This refers to the roles of the people who would be shouldering the responsibility
of managing the risks.

Budgeting

It's the financial part of planning wherein the allocations for various
processes and phases are listed.

Timing

It's the scheduling of the various activities of the plan.

Scoring and Interpretation

It refers to the kind, nature, and timing of the analysis to be used in planning
risks.

Thresholds

It refers to the risk tolerance capacity of the company and stakeholders. It

further connotes the competence and intelligence of the people who would
be executing the risk plans.

Reporting Formats

It refers to the content of the risk plan and also to the manner in which risk
management information would be maintained.

Tracking

It refers to the method of recording various details pertaining to Risk

Planning. Tracking also connotes the method of auditing the risk planning
process.
8.2 Review Questions

1. Define Risk.

2. How do Definite Risks differ from Indefinite Risks?

3. Explain Information-Gathering Techniques.

4. Enlist the components that a Risk Management Plan should include.

5. Explain the "Caution With Aggression" strategy with an example.

CHAPTER 9

9 Procurement Planning

What is Procurement Planning?

Is Procurement Planning Important?

Yes. A great deal of planning is involved even when someone intends to buy a
mobile phone. One considers the need, budget, comparative rates, features,
weight, looks etc. of the different cell phones before zeroing in on to one. This is the
case when someone intends to buy only one mobile phone.

Think of a company that requires hundreds of PCs for its new project. Can it
afford to go about purchasing so many PCs without properly planning the
procurement? Yes, it can, only if the company doesn't care about its money and
work. But, can you name one such company? Of course not. This emphasizes the
essence of Procurement Planning.

Different organizations need to procure different types of goods, products, or

services at different times. In order to get the optimum value for the procurements
made, they have to wisely plan the procurements.

Procurement Planning streamlines the procurement process. It analyzes the

procurement needs of a particular project or activity and strategically designs the
course of action to be followed while purchasing the requisite products or services.
Furthermore, a Procurement Plan enables a project to move ahead smoothly,
without hassling the project team about the resource and supply issues.

How is Procurement Planning Done?

Procurement Planning is a systematic process. It calls for precise identification of
the procurement needs, exhaustive market research, complex calculations, smart
understanding of the demand and supply factors, proficiency in maintaining quality
standards, and correct decision-making ability.

Procurement Planning comprises of various important components. All these

components are discussed as under:

Need Identification

What, When, and How much? These are the three questions that need to be
answered before one picks up the brush to sketch a procurement plan.

For example:

While dining out in a restaurant, you place an order only when the dishes to be
ordered have been decided upon.

Need Identification entails recognizing the exact goods, products, or services that
are required to complete a particular project.

Needs should be identified correctly. There should be no doubts or qualms

whatsoever, regarding the kind, nature, quality, quantity, and the timing of the
purchases to be made.

Justification of the Demands

The demands or needs have to justify themselves. The demands can be fulfilled
only if the responses to all the following questions sound convincing:
9.1 Procurement Objectives

Procurement Objectives means ascertaining the objectives of the demands

made. What are the gains that would emanate from investment in those
demands?

Besides, the objectives of the project or activity for which the demands have been
made should be in line with the objectives of the company.

Procurement Profile

Procurement Profile refers to theinformation about various similar products

or services procured in the past by the company.

Procurement Profile gives the necessary historic information about the costs
incurred for securing a particular product or service, modes of transactions,
suppliers or vendors engaged etc. This information can be very useful in
understanding the procurement trends as well as the company's procurement
policies.

Specifications of the Needs

The needs have to be clearly specified.

For example:

If a company wants to procure laptops, it needs to spell out the specifications for
the same viz. brand, design, configuration, features etc. This will help the company
make the right purchases At times, there can be problems in figuring out the
specifications of a particular product or service. In such cases, the prospective
vendors can be asked to advise on the issue.

Expenditure Assessment

Expenditure involved in making the purchases is to be computed by collecting

information from vendors or other reliable sources. Expenditure Assessment is
then matched with the budgetary allocations for those purchases.
It's important to ensure that the information gathered and assessments made are
accurate, as all the subsequent financial steps would be based on them.

Following the Systems

Every company has a system in place. All its activities are carried out following
that system. Procurement Planning is no exception, and it has to adhere to the
company's rules and regulations.

A Project Manager should know how the company decides on its vendors or
suppliers. Does the company select them on the basis of the goodwill established
over the years, does it opt for an open bidding, or does it finalize its vendors on the
basis of competitive negotiations?

A Project Manager must ensure that the Procurement Plan they chalk out is in line
with the company's policies and systems.
Besides, the transaction issues such as the mode, timing, and volume of
transactions; the banks and financial institutes involved in the transactions
too need to be as per the company's policies.

Market Survey

Before settling on one or more vendors, an exhaustive market survey needs to be

conducted. This survey should have a detailed analysis of the following components
9.2 Review Questions

1. Is Procurement Planning important? Illustrate with an example.

2. What are the questions that need to be answered to justify the demands?

3. What does the term 'Procurement Profile' refer to?

4. List the factors that need to be looked at before settling on a vendor.

CHAPTER 10

10 Project Plan Execution

After planning the different aspects of a project viz. Quality, Budget, Time, Risks,
Procurement, and Team, it's time now to execute all that has been planned. All the
exhaustive deliberations and precise estimations need to be translated into action
now.

How to Execute the Project Plan?

"Welcome to the real world of action" - the phrase epitomizes the essence of
Plan Execution process. Plan Execution is one of the most intricate facets of Project
Management.

It's one thing to think wisely, make judicious plans, and advise others, but

it is a different proposition altogether to make all such thoughts and plans

materialize into reality. A project plan is like a dream. It's the execution of that
plan, which turns the dream into reality. Thus, Plan Execution is a decisive phase of
Project Management.

Plan Execution comprises of several key factors. The same are elucidated as under:

Interpreting the Plan

This is a vital aspect of the plan execution process. It will be difficult to execute a
plan if different team members construe it differently.

A Project Manager needs to guard against any such anomalies. They should
ensure that a plan is crystal-clear without any ifs and buts, and there is no
more than one interpretation of the plan.

This will eliminate the chances of any misunderstandings or confusions and allows
the Plan Execution process to move ahead without any holdups.

Effectively Using the Work Plan

A plan is as good as its execution. Therefore, a good plan needs to be well

executed to enable the project to deliver a quality deliverable.

To effectively use the work plan, the Project Manager must study the Project Plan
Document carefully, and derive the following information from it.
10.1 Implementing the Plan

All the plans chalked out in the planning process need to be intelligently
implemented to complete the project successfully.

Implementing the plans entails arranging the different project activities in the
correct sequence, so that the project activities are in sync with one another. This
enables the Plan Execution process to get a move on.

Stirring-up the Project Team

All the people on the team for a particular project are apprised of the plans for that
project. They all know their jobs, roles, and responsibilities, but that's not enough.
They need to be stirred up and it's the responsibility of a Project Manager to get
them all into action.
Furthermore, a Project Manager must ensure that there is no complacency,
negligence, or slackness in the team at any stage of the project. This is a pre-
requisite for the plans to be executed without any hitch 'n' glitch. Setting the
Tempo

The end is an extension of the beginning. This adage holds its worth in the
different contexts. A runner who does not get off to a good start, seldom wins the
race. Similarly, a project that doesn't begin well, hardly ever yields success.

That's why Project Managers strive for a swift, accurate, and serious beginning to
their projects.

Successful Plan Execution calls for nothing less than a consistent proactive
approach by every member of the project team.

Fragmenting the Activities

A Project Plan outlines the different activities involved in a project. It also spells out
the detailed strategies to carry out the various project activities, but it's the
responsibility of a Project Manager to employ the techniques that optimize
the plan objectives by enhancing the performance of the team.

They can achieve this by fragmenting the activities into sub-activities. This will
simplify the complex looking tasks. Besides, the team starts responding to the
challenging situations by clearly comprehending the concepts.

Similarly, the Project Manager can set mini targets or targets within a target to
make things easy for their team. This keeps the team focused and enable it to
produce tangible results at a quick pace.

Working Against All Odds

One of the biggest challenges faced by a Project Manager while executing the
plans is to effectively manage the work halting factors. This challenge becomes
all the more intriguing if the project is a lengthy one.

There always exists a danger of the project shuddering to a halt or slowing

down due to various reasons like the absence of one or more of the team
members due to ill health etc., technical snags, procurement delays, or other
factors.

A Project Manager has no control over such issues, but they have to somehow
execute the plans and complete the project on time.

That's why it is said that the Plan Execution process is a test of a Project Manager's
management skills and willpower.

First Things First

Executing a project plan also requires a plan. A project plan cannot list the
minuscule aspects of a project. That's why the planning process continues even
while the Plan Execution phase is underway.

One of the most important things that a Project Managerneeds to do in the

Plan Execution phase is setting the priorities right.

Their approach should be based on the "First things First" theory. The most
important activities should be completed first followed by the next most important
ones, and so on.

There should be no jumbling up of the activities. This ensures proper Plan

Execution and enables the project to produce the desired results in terms of quality
deliverables.

Measuring the Results

Successful completion of a project is an outcome of the successful completion of

different activities involved in that project. This emphasizes the importance of
completing each activity qualitatively. Whether or not an activity has been carried
out qualitatively can only be gauged by measuring its results.
To ensure quality Plan Execution, the Project Manager has to keep measuring
the results of various project activities. If every activity yields positive results,
there is every likelihood that the project will end on a positive note.

Taking Corrective Measures

There might creep in certain discrepancies while carrying out the project activities.
This can happen due to various reasons like an error made by a team member,
conceptual misunderstanding, or miscommunication among the team members.

The reasons can be different, so a Project Manager has to take corrective measures
accordingly. They should be smart enough to spot the errors quickly and wise
enough to correct them aptly. The Plan Execution process can be badly affected if
the Project Manager is not alert to such nagging situations.

Ensuring Plan Success

The success of any plan lies in the success of its execution. There are hordes of
important factors that contribute to effective Plan Execution. Some of these factors
are listed below:
Garnering Management Support

The success of every project, whether big or small; interesting or boring, hinges
on the support it gets from the management. People can argue over the truth of
this statement by saying that the existence of a project is itself a testimony to the
management's support to it. This is true, but sometimes there are some
inconspicuous factors at play.

There may be instances when the same project that spurred the management
initially, suddenly becomes "not-so-interesting" for them. This can happen due
to various reasons like a shift in the management's interest onto some other more
lucrative project, but for a Project Manager, the project is as important as it was in
the beginning.

Therefore, they are the one who have to plug awayto garner management's
support.
Following is a list of some useful tips that can help a Project Manager execute the
project plans effectively by keeping the management interested in the project:

Change of Plans

A lot of thoughts and efforts go into making an effective project plan. Despite that
some of those plans don't work well at times.

In such a scenario, instead of letting the team whine about the faults in the plan, a
Project Manager should promptly craft some new plans. The new plans should be
devoid of the erroneous elements that existed in the original plan.

Following is a list of the key points that a Project Manager must keep in mind while
chalking out a new flawless plan:
10.2 Review Questions

1. How is Plan Interpretation important?

2. What kind of information should a Project Manager try to derive from the Project
Plan Document to effectively use the work plan?

3. List the important factors that contribute to effective Plan Execution?

4. Why is a good start important to a project? What are the likely repercussions if a
project does not get off to a good start?

CHAPTER 11

11 Monitoring Project Plan

What is Monitoring?

When the plan execution process begins, the project priorities rivet the attention of
the project team members. With deadlines looming large on them, their minds are
engrossed in their respective tasks. The whole environment becomes so work
obsessed that the people who are carrying out the project activities, at times, fail to
ferret out the goof-ups that might have crept in their work. Here in comes the role
of Monitoring Process. The Monitoring Process detects and irons out all such
faults.

How is Monitoring Process Important?

Hard work doesn’t work. It’s the smartly done hard work that works. There is
no point plodding away without appraising the qualitative and quantitative value of
the work which is being carried out. The Monitoring Process judges the
qualitative and quantitative worth of all the activities involved in a project.

The Monitoring Process plays a dual role – one role is of a referee who points
out every fault and the other one is that of a coach who endeavors to correct
every fault.

A project moves ahead only when the plans chalked out in the planning phase are
properly executed. Therefore, it’s important to check the effectiveness of the
execution of the different plans. While the plan execution process translates the
plans into action, the Monitoring process checks the authenticity, quality,
suitability, and viability of all such actions.

One of the main objectives of the Monitoring Process is to customize the design of
the plan according to the real action that is taking place in the plan execution
phase. That's why a Project Manager should not pursue a plan blindly; instead
they should smartly follow it. They should use their wisdom and craft while
executing the plans. The aim of the plan is to produce a quality deliverable, so a
Project Manager should try to optimize the plan by fine-tuning it as per the project
activities.

How does the Monitoring Process Work?

The Monitoring Process works ingeniously. It dissects every aspect of the plan
execution process and examines it for its effectiveness.In case, it detects any
discrepancies with regard to the effectiveness of activities carried out in the
execution phase, the same are chucked out right away.

The Monitoring Process entails taking requisite corrective measures to ensure that
the plans are executed in the right way and at the right pace. It's an ongoing
process, as the task of detecting the errors, correcting them, and improving the
work quality goes on till the deliverable has been produced.

Tools to Monitor Project Progress

Monitoring Process comprises of various tools, which make it work. A lot of these
tools are cross-functional, which enable the process to take care of a multitude of
activities at the same time, without compromising on quality. The different Tools
that constitute Monitoring Process are discussed below:

Examining the Key Elements of Monitoring Process

The first step towards Monitoring is to examine the various key elements that a
Monitoring Process comprises of. These elements throw light on the strategic tenor
of the project and unwraps its different modules. This in turn helps assess and
maintain the quality of the plan execution process.
The key elements of the Monitoring Process are listed as under:

11.1 Tracking and Analyzing Issues

Monitoring is a constant process of tracking and analyzing the various issues

pertaining to the plan execution process. Thus, monitoring is actually a method that
delineates"What works well and what doesn't?"

The Monitoring process simplifies the difficult situations and fortifies the execution
process by removing everything faulty from it.

The bottom-line is that a good Monitoring process ensures a good finish to the
project.

Following are some points that vividly illustrate how the Monitoring Process can
spell success for the plan execution process:
Understanding Tasks, Resources, and Time

The Monitoring process is all about making the execution process simple and
effective. All the activities should be carried out without any ifs and buts. This can
be possible only if the Project Manager understands the essence and relevance of
the three important components of Project Management – Tasks, Resources,
and Time.

These components have a significant functional correlation between them. If the

Monitoring process is carried out by ascertaining the effectiveness and status of the
different project activities on the basis of these three components, a quality finish
to the project is a surety.

Monitoring Constraints

Every project has its own cost, scope, and time constraints. To carry out the
Monitoring Process effectively, a Project Manager needs to recognize such
constraints. Sometimes, the constraints that never seemed to exist during the
planning phase suddenly emerge from nowhere during the execution phase.

In such a scenario, proper Monitoring helps the plan execution process move
ahead swiftly. The Project Manager has to promptly carve out different techniques
for different modules of the project, according to the constraints. Proper
Monitoring of constraints can enable the project to positively respond to the
challenging situations.

Monitoring Competencies

A Project Manager has to keep close tabs on the competencies of the various team
members. Monitoring Competencies enables them to gauge "How every one is
performing?" This helps them take quick corrective measures, in case they find
that someone's performance is below par.

A Project Manager should be very vigilant while monitoring the competency level of
the different team members via their performances. They need to set different
standards to measure different activities and thus, different team
members.An activity that has been carried out under tight time schedules with
stringent resource constraints has to be judged differently from an activity that
enjoyed bountiful of resources and considerate time schedules. This crucial factor
must be taken into account by a Project Manager.

A Project Manager must remember that it’s important to evaluate the situations
under which the different team members performed.

Such an effectual Monitoring can present glaring disparities in the performance

outputs, which a Project Manager generally thinks to be of identical nature.

Nuances of Project Plan Execution

A Project Manager has to be adept in understanding the nuances of plan execution

process. Only then they will be able to decide on the line of action to be followed in
the Monitoring Process. They need to observe the plan execution process very
closely.

Even those activities that don’t require their direct participation have to be
monitored by them. Sometimes the plan execution process tends to get affected
due to some glitches in the activities that seem to be very general in nature. Such
problems don’t get noticed till they have done the damage. Such a situation can be
avoided if the Project Manager is aware of the nuances of the execution process
and monitors every activity discretely.

Delivering the Desired Results

The plan execution is Monitored to produce the desired results. Monitoring

guarantees project success by ensuring quality deliverables.

Apart from producing the quality deliverables, the Monitoring process perceives a
big picture and tries to accomplish some other goals as well. Some of these goals
are mentioned below:
Reporting

Monitoring calls for proper documentation of the various activities and processes
carried out to complete a project. To Monitor a plan execution process properly, it's
imperative to document "What, When, and How” of every activity involved in
the project.
The process of keeping a track on the various project activities by
documenting them is called Reporting.

Project Managers strive to get their Reporting system right. This makes their task of
Monitoring easy. Every Project Manager can chalk out their own Reporting format,
but they must keep in mind the following points:

What is Earned Value Analysis?

There are certain industry standard techniques for monitoring costs and time
schedule. The most common of these technique is called Earned Value Analysis. It
gives a simple way to accurately gauge the progress of a project by answering the
following three questions:
Earned Value Analysis involves using simple mathematical calculations to assess the
project performance at any given point of time. It also forecasts the project's
completion date and its final costs.

Earned Value Analysis uses 3 measurements, which are discussed as under:

Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV)

It refers to the amount that was planned to be spent on the project till date.

Actual Cost of Work Performed (ACWP) or Actual Cost (AC)

It refers to the actual costs incurred on all the project activities that have been
carried out till date.

Budgeted Cost of Work Performed (BCWP) or Earned Value (EV)

It refers to the estimated cost (as per the project plan) of the actual project work
that has been carried till date.

Following is an example that illustrates how PV, AC, and EV are calculated:

Example:

A project is underway to build a tennis court. The planned duration of the project is
12 months and the planned cost is $100,000. After six months in to the project, the
Project Manager conducts a Project Review to see whether or not the work is
proceeding as per the cost and time schedules. According to the project plan, 60%
of the work should have been completed and not more than $70,000 should have
been spent in the first 6 months of the project. But, the Project Manager finds that
only 45% of the work has been done and $65,000 have been spent. As per the plan,
for 45% of the work the costs incurred should have been $50,000.
In this scenario, the values of PV, AC and EV would be as follows:

PV=$70,000

AC=$65,000

EV=$50,000

Here is a graphical representation of the above example:

The graph clearly illustrates that by the month of June, which is the six-month-mark
for the project, Actual Cost is somewhat less than the Planned Value, and the
Earned Value is substantially lower. Another noticeable thing is that the PV curve is
S-shaped, because the spending starts off slowly, peaks towards the middle of the
project, and tapers off towards the end.

The values PV, AC, and EV can be analyzed using the different formulae as shown
below:

Cost Variance (CV)

Variance is a statistical term that basically means 'difference.' Thus,Cost

Variance is the difference between budgeted costs and actual costs for a given
quantum of work. The formula is as follows:
CV = EV - AC

In the Tennis Court example given above,CV would be worked out as follows:

50,000 - 65,000 = -15,000

Since the result is a negative value, it means that the amount spent on the work
that has actually been completed till date is more than what it ought to be.
Therefore, the project is over budget. Had the result been a positive value, it would
have meant that the project is within the budgetary limits.

Schedule Variance (SV)

Schedule Variance denotes the difference between the time consumed by the work
completed till date and the time schedule proposed (in the plan) for that amount of
work.

The formula is as follows:

SV = EV - PV

In the Tennis Court example given above,

CV would be worked out as follows:

50,000 - 70,000 = -20,000

Since the result is a negative value, it means that the value of the work
carried out in the first six months is less than what it ought to be. Therefore,
the project is behind schedule. Had the result been a positive value, it would
have meant that the project is being completed ahead of schedule.

Cost Performance Index (CPI)

This is similar to Cost Variance. Both are based upon EV and AC. Both measure
the same thing. The only difference between them is that of the ratio of EV
and AC. The formula is as follows:

CPI = EV / AC

In the Tennis Court example given above, CPI would be worked out as follows:

50,000 / 65,000 = 0.77

Since the result is less than 1, it means that the project is currently over
budget. Had the result been 1, it would have meant that the project is going
on as per the budget. A value greater than 1 would have meant that the
project is within the budget.

CPI is considered to be an accurate measure of the performance of a project.

If a project is 20% complete, then going forward, the CPI will not vary by more
than 10% from its current value.

Schedule Performance Index (SPI)

This is similar to Schedule Variance. Both are based upon EV and PV. Both
measure the same thing. The only difference between them is that of the
ratio of EV and PV. The formula is as follows:

SPI = EV / PV

In the Tennis Court example given above, SPI would be worked out as follows:

50,000 / 70,000 = 0.71

Since the result is a value less than 1, it means that the project is currently
behind schedule. Had the result been 1, it would have meant that the project
is going on as per the schedule. A value greater than 1 would have meant that
the project is ahead of schedule.

Cost Schedule Index (CSI)

This is used to measure the performance of the project with regard to the
cost as well as time. The formula is:

CSI = CPI x SPI

In the Tennis Court example given above, CSI would be worked out as follows:

0.77 x 0.71 = 0.55

Ideally, this value should be equal to or greater than 1. In this case, it is

awfully low, which means that the time overruns, cost overruns, or both are
inevitable.

Making Projections About Project Completion

As explained above, Earned Value Analysis can be used to evaluate the

current state of a project in terms of cost and time. It can also be used to
make projections about the time and cost required to complete a project
based on the current performance of the project

Based upon the current status, the Project Manager can make projections
about the final time and cost that the project will require to get completed.
This can be done by making a fresh estimate of the cost for the pending work
(Estimate to Completion or ETC) and adding it to the cost that has already
been incurred (AC). The resultant is known as Estimate at Completion (EAC).
The formula is:

EAC = AC + ETC

In the Tennis Court example given above,

The Project Manager evaluated the progress of the project after six months.
Now, they make fresh calculations, which reveal that the project will require
another $80,000 to get completed. Therefore, EAC will be calculated as
follows:

65,000 + 80,000 = 1,45,000

Similarly, the Estimate to Complete can also be obtained by calculating the

time required to complete the pending tasks.
11.2 Review Questions

1. Define Project Monitoring in 4 lines.

2. How is Monitoring Process Important?

3. List the key elements of the Monitoring process.

4. What are the important points that a Project Manager should keep in mind while
chalking out a Reporting format?

5. Consider the following scenario:

A project is underway to implement a new computer network to connect the

different branches of a company. The project is to be completed in 4 months, out of
which 3 months have elapsed. The total project cost is $1,000,000. The Table given
below shows the PV, AC, and EV.

Calculate the CV, SV, CPI, SPI, and CSI for March, April, and May. Also write down
your assessment about the progress of the project in each of these months. Will
the project get completed within the planned time and cost?

CHAPTER 12

12 Controlling Change

What Necessitates Change?

This is a million dollar question, and the answer to this question is an

uncomplicated one. It's the project itself that necessitates change. Various
reasons like change in the project scope, alteration in the time schedules, variations
in the proposed costs, divergence in the design, pattern, quality, or specifications of
the deliverables, and modification in the technology necessitate changes.

Although, every process of the project is planned during the planning phase, but
there can be many fluctuations and variations in a project’s scheme of things. To
deal with such fluctuations and variations, the project has to undergo certain
changes.

Following is an example that illustrates the change scenario:

This manifests that a plan is important, as it gives a definite direction, but there can
be instances when it needs to be changed to get better results. Thus, change is an
inevitable aspect of any project. What matters is how the change is controlled and
managed.

What can the Change Control Process do?

In simple terms, Controlling the change is called Change Control and the
manner in which the change is controlled is called the Change Control
Process. Scores of projects fail to succeedbecause they lack proper Change Control
management. This emphasizes the significance of managing the change through an
effective Change Control Process.
Changes can emanate from different situations, both positive and
negative. Whatever the changes are and whatever the source of their origin is, they
have to be controlled properly. If the changes are not controlled timely and aptly,
the culmination of a project in a quality finish would become highly unlikely.
Change Control plays a decisive role in Project Management. A Project Manager
must understand that the project plan and project activities need to be
reviewed at every step. This will help them incorporate the necessary changes if
and when required. Change Control is a continuous process and it has a life span
identical to that of the project.

Furthermore, the Change Control process has to be definite and productive. A

change in any project activity is to be made and controlled by taking into
account its impact on various other aspects of the project viz. costs, benefits,
timescales, and quality.

How to make Changes?

There should be sound logic behind every change. Before making any change, a
Project Manager must validate its authenticity. The changes can only be made if the
responses to all the following questions sound convincing:
12.1 Key Components of the Change Control Process

Change Control is an absorbing process, which comprises of various components

that are deliberated on below:

Scope defines the range, extent or purview of the project. Every project exists
to achieve something, and this achievement has to come within the scope, the
organization has defined for the project.

Therefore, making a change in the scope of the project is a complex issue. Besides,
it encompasses time and cost implications. That's why, a change in the scope of the
project has to be emphatically justified.

Once the scope change has been justified and agreed to, it’s the duty of the Project
Manager to control and manage the scope change effectively. Scope change must
deliver what it claims.

There are two types of scope changes, both of which are explained below. A Project
Manager should clearly understand both the types, so that they can control them
properly:

Scope Change Made to Optimize the Benefits

Sometimes, a Project Manager notices that there are certain elements in the
existing project scope, which constricts the expanse of the project.

They feel that the project has a lot more to offer than what is depicted in the
project plan. They, therefore, solicit a scope change.

Such a change will optimize the benefits from the project. These benefits can come
in different forms viz. reduced costs, increased productivity, high quality, lower
risks, and speedy delivery.

Scope Change Made as a Corrective Measure

Sometimes, a Project Manager comes across some niggles when the plan execution
phase is underway. These niggles can be the outcome of different factors such
as performance flaws, untrained manpower, resource scarcity, and funds
paucity.

Whatever the factors might be, they impede the scope of the project and
prove to be menacing for its growth. To obliterate the chances of the project
getting halted due to such niggles, a Project Manager seeks a change in the
project scope

Such a scope change is made as a corrective measure.

We discussed EVA (Earned Value Analysis) in the preceding chapter (Monitoring the
Plan Execution Process). EVA precisely evaluates the progress of the project in
terms of cost and time. The whole project is fragmented into different processes
and these processes are assigned different time frames within which they are
required to be completed. After that, all such processes are appraised frequently by
using the EVA technique.

If the results of EVA allude to any violation of the budgetary restrictions as

laid downin the project plan, the Project Manager has to swiftly take
corrective measures. They have to control the cost change by devising a new
strategy for the pending processes. This is done by identifying the causes of the
cost-overrun. Such lapses are then eradicated to keep the costs under control.

While controlling the costs, a Project Manager must ensure that the cost-cutting
measures taken by them do not diminish the quality of the work.

Controlling Schedule Change

Every project has a deadline. This entails that every process and activity involved
in a project has a deadline. A Project Manager knows the importance of these
deadlines and is well aware of the ramifications of not adhering to these deadlines.
That’s why a Project Manager needs to work hard to complete the various project
related activities on time.
Yet, the truth of the matter is that the deadlines are often crossed and there are
delays. Thus, it all boils down to how the Project Manager controls the delays and
manages the changed time schedules.

Before a Project Manager starts managing the changed time schedules, they have
to analyze the progress of different project activities.

One of the best techniques that enables a Project Manager to track the
progress of project activities is EVA technique. As mentioned earlier, this
technique evaluates the progress of a project in terms of cost and time. EVA
analyzes the progress of the project over a period of time.

If the EVA results in a negative value, it signifies that the project is running behind
schedules. There can be several reasons for that and the Project Manager has to
spot all of them. This will enable them to take necessary corrective measures to
control the time schedules and bring the project back on track.

Controlling the Change Dummy Run

A change can not be applied directly to the project. One of the most important
aspects of the Change Control process is to test the effectiveness and viability
of a change in a simulated situation before applying it to the live situation.

If a change proves its effectiveness in a simulated situation, only then it can be

applied to the live situation.

A Project Manager must remember that a change can’t be allowed to be a faulty

one, because that will spell doom for the project. Therefore, they need to control
the effectiveness of the change and prove it, before it is actually made.

While carrying out a dummy run of a change, the Project Manager needs to keep
close tabs on the following points:

Change Control Accountability & Authority

Change Control is a process that entails huge responsibility and

accountability. A great deal of expectations are attachedto the outcome of
the Change Control process. Therefore, anyone who manages this process has
to shoulder the responsibility for its outcome.

Furthermore, there should be clarity on the authoritative issues pertaining to

Change Control. The management has to clearly define the real Change
Control authority. It also needs to draw the boundaries for the people
involved in the Change Control process. This is very important, as there
should be no administrative complications or supervisory complexities while
managing the Change Control process.

Project Review Meetings

Controlling Change is a comprehensive process. It can make or mar a project.

That’s why, it calls for some exhaustive discussions and intensive meetings.
The Change Control Board, Project Manager, Project Coordinators, and other
Subject Matter Experts hold meetings to derive the strategies for Controlling
Change. The pros and cons are weighed; and the challenges and risks are
examined before they reach a consensus on the proposed changes.

These meetings and discussions can be both formal and informal. Whatever
the form of the meetings and discussions might be, the participants must
ensure that they track the developments, prepare the status reports, and
keep the management posted.

Analyzing the Change Control Result

Results of the Change Control process must be analyzed. This is vital to

ascertain the usefulness of the process. The Change Control mechanism must
produce what it promised.

The Change Control process can have visible or invisible subsidiary effects on
some of the other processes as well. These effects can be both positive and
negative.

Therefore, it’s important to analyze the Change Control process for its
counter reactions. This analysis should be done keeping in mind the different
important factors like marketing trends, customers, stakeholders, personnel,
timescales, costs, benefits, quality, and risks.

Such an analysis helps determine the quality of the changes proposed as well
as their long term and short-term effects on the project and organization.

Making a Change Request

Every organization has a set procedure for making a Change

Request. Changes can be internal or external.

Internal Changes are those, which can be effected within the

organization.While External Changes are the ones, which rely on the sources
outside the organization.

The first step to make a change is to make a Change Request, no matter what
the nature or category of the change is. A change is requested via a Change
Request Form. This Form provides a simple format to script the various
details viz. cause and need of the change, details of the proposed change, and
effectiveness of the proposed change.The duly filled in Change Request Form
is submitted to the concerned person or directly to the CCB (Change Control
Board), as per the company rules. This request is then analyzed in detail by
the concerned authority. It’s the prerogative of that authority to accede to or
reject the request.
12.2 Review Questions

1. What are the questions that need to be answered before making a Change?

2. What's the difference between Scope Change Made to Optimize the Benefits
and Scope Change Made as a Corrective Measure?

3. What could be the repercussions if a change is made without a proper dummy

run?

4. Explain how a Change Request is made.

5. What role does Earned Value Analysis play in Cost Change and Schedule
Change?

CHAPTER 13

13 Closing the Project

How Important is Closing the Project?

Closing a Project is as important as initiating it. Perhaps even more important,

because this is the time when all the toil that went into engineering a project is
going to take a tangible shape. This is the time when all the people associated with
the project await its success with rapt attention.

It’s important to note here that Closing a project is not the end of it. Closing is
a comprehensive process, which needs to be completed before a project is actually
declared closed. If there’s any laxity or negligence in this process, the project will
not see the success dawn on it.

Many Project Managers make the mistake of losing the intensity when the project is
in its closing stages. This instills a feeling of complacency in the team as well.
Everyone starts to relax, which can prove to be devastating for the project. This
accentuates the significance of Closing process.

When Should a Project be Closed?

This is a critical question. When and how the Closing of a project should take place
must be clearly understood by a Project Manager. Closing is not just performing
the final task as scripted in the plan and winding the things up. In fact, a lot of
factors like producing the project deliverable as per the expectations, confirming its
final status, its acceptance by the management, and ensuring that there are no
subsidiary issues to be looked upon by the Project Manager before declaring a
project closed.

The bottom line is that Closing can happen only when the project has produced the
deliverables expected of it, there is no outstanding work, and there are no loose
ends. The project has to be full and final before it is closed. A Project Manager
should declare a project closed only when they can assertively say, “I am ready to
commence my next project.”

Before Closing a project, a Project Manager must check over the following points:
Does a Project Need to be Closed Formally?

Closing a project can’t be a hidden or a subdued affair. Closing has to be

announced formally and emphatically. The idea is to let the team members,
stakeholders, and everyone else associated with the project know that the project is
deemed closed.
Besides, closing a project is a serious matter. In a way, Closing the project connotes
the real beginning. It’s a beginning of the performance of a new deliverable and
with that, a beginning of a new chapter for the organization. If the Closing is not
announced officially, a lot of discrepancies can creep in.

Another aspect to be clarified here is - who should declare the closure of the
project? Well, there can’t be any set rule for it. Different organizations have a
different system and a distinct chain of command. Accordingly, a project can be
declared closed either by the Project Manager, Steering Committee, or by any other
authority, as officially approved by the organization.

13.1 Holding the Final Meetings

A project cannot be closed without holding the final meetings with the team and
the clients. The objectives of these meetings are listed below:

Objectives of the Meeting With the Client

Conducting the Project Audit

Project Audit refers to reviewing of different processes, activities, and

performances involved in the project. Audits are a part of the project Closing
process, as they help examine the effectiveness of different project processes.

An audit should examine the following elements of a project:

Presenting the Project Closure Report

Project Closure Report is an important document. This report actually becomes a

historic document for the organization.It elucidates how a project has been
carried out and throws light on its various other aspects. The Project Manager
should try to make the Project Closure Report simple, as it will have a varied
audience in the form of the Management, Stakeholders, Steering Committee,
Administrative and Technical Support Staff, Project Team, and other Project
Participants. The following ingredients should constitute a A Project Closure
Report:

Final Project Status Report

A project comprises of hordes of reports. The Project Closure Report succeeds all
such reports. This report depicts the various important aspects of the project viz.
objectives of the plan, accomplishment of those objectives, activities undertaken to
materialize the project, performance of the people involved in the project,
resources used, and time schedules.

In short, the Project Closure Report gives an overview of what, how, why, and
when of the different project related processes.

Details of the Deliverable

A Project Closure Report explains the design, pattern, and specifications of

the deliverable produced. This report and the deliverable itself will enable the
Steering Committee to ascertain whether or not the expectations have been met.

One thing that a Project Manager must keep in mind while delineating the
deliverable is to clearly state what the deliverable is capable of doing and what
it can’t do i.e. its advantages as well as the limitations.

Lessons Learnt From the Project

Every project teaches some new lessons. In their Project Closure Report, a
Project Manager must portray the challenges involved in the project, lessons the
team learnt while responding to those challenges, and the way in which these
lessons will help the team in future.

They should also state the errors made by the team while executing the plan and
correspondingly, the lessons learnt from those errors. A Project Closure Report
should clearly describe all the knowledge gains that emerged from the
project.

Feedback

Every Project Closure Report should have a detailed analysis of the

performances of the people associated with the project. The term ‘people’ here
refers to not only the team members, but also to the external parties associated
with the project. The feedback should be very explicit and it should throw light on
everyone’s attitude and performance, without any favor or prejudice

Celebrating the Closure

Before a project team is disbanded, it’s important to have a celebration. A good

organization never forgets to compliment its people, who made a project
possible. This admiration can come in the form of a Project Closure Celebration.
Such a celebration is much more than a fun bash. In fact, it’s a way of making team
members feel important. An official Project Closure party demonstrates an
organization’s respect for its people.

On the contrary, Closing a project without a celebration can inconspicuously

dent the morale of the team members. The same team members who plugged
away to make the project successful will start thinking as if they are mere
pawns in the organization’s scheme of things – the organization uses them to
achieve its objectives, pockets huge amounts of profits, pays them their
monthly salaries, and ask them to initiate the next project, without even
complimenting them for their good work.

That’s why, it’s so important to admire the team members for their good
work. Yes, they are paid for what they do, but that price is their work’s worth.
Their passion for the interests of the organization, their determination to
make the organization succeed, and their happiness when that success is
achieved can’t be paid for. Such feelings are of sentimental value, which can
only be reciprocated. And, an organization must know how to reciprocate.
The best of the organizations of the world are best because they value their
men and know the worth of a saying a "Well Done."
13.2 Review Questions

1. What are the points that a Project Manager must check before Closing a project?

2. What are the major objectives of conducting a Project Audit?

3. Why is it important to hold the Project Closure Meetings with the Team and
Client?

4. List the ingredients of the Project Closure Report.