MANAGING BUSINESS OPERATION

Chapter 9: Project Management

 Learning Objectives

1. Explain what projects are and how projects are organized.

2. Analyze projects using network-planning models.
3. Evaluate projects using earned value management.
4. Exemplify how network-planning models and earned value
management are implemented in commercial software packages.
What is a project?
• Project: A series of related jobs usually directed toward
some major output and requiring a significant period of
time to perform.
• Project management: Planning, directing, and controlling
resources (people, equipment, material) to meet the
technical, cost, and time constraints of a project.
What is a project?

A Sample Project Organization

 Kinds of projects

Projects can also be categorized based on the

amount of change that is planned. The three
categories based on the amount of change are:

1. Derivative (incremental changes such as new

packaging or no-frills versions),

2. Platform (fundamental improvements to

existing products),

3. Breakthrough (major changes that create

entirely new markets)
 Organizing the Project Team
• Pure Project : A structure for organizing a project where a
self-contained team works full time on the project.
 Organizing the Project Team
• Functional Project: In this structure, team members are assigned from
the functional units of the organization. The team members remain a
part of their functional units and typically are not dedicated to the
project.
 Organizing the Project Team
Matrix Project: A structure that blends the functional and pure project structures. Each project
uses people from different functional areas. A dedicated project manager decides what tasks
need to be performed and when, but the functional managers control which people to use.
 Organizing the Project Team
• Pure Project : A structure for organizing a project where a
self-contained team works full time on the project.
Advantages
 The project manager has full authority over the
project.
 Team members report to one boss. They do not
have to worry about dividing loyalty with a
functional-area manager.
 Lines of communication are shortened. Decisions
are made quickly.
 Team pride, motivation, and commitment are high.
Disadvantages
 Duplication of resources. Equipment and people are
not shared across projects.
 Organizational goals and policies are ignored, as
team members are often both physically and
psychologically removed from headquarters.
 The organization falls behind in its knowledge of
new technology due to weakened functional
divisions.
 Because team members have no functional area
home, they worry about life-after-project, and
project termination is delayed.
Organizing the Project Team
Functional Project:
Advantages Disadvantages

 A team member can work on several projects.  Aspects of the project that are not directly related to
the functional area get shortchanged.
 Technical expertise is maintained within the
functional area even if individuals leave the project  Motivation of team members is often weak.
or organization.
 Needs of the client are secondary and are
 The functional area is a home after the project is responded to slowly.
completed. Functional specialists can advance
vertically.
 A critical mass of specialized functional-area
experts creates synergistic solutions to a
 project’s technical problems.
Organizing the Project Team
Matrix Project:
Advantages
 Communication between functional divisions is
enhanced.
 A project manager is held responsible for
successful completion of the project.
 Duplication of resources is minimized.
 Team members have a functional “home” after
project completion, so they are less worried about
life-after-project than if they were a pure project
organization.
 Policies of the parent organization are followed.
This increases support for the project
Disadvantages
 There are two bosses. Often the functional
manager will be listened to before the project
manager. After all, who can promote you or give
you a raise?
 It is doomed to failure unless the PM has strong
negotiating skills.
 Suboptimization is a danger, because PMs hoard
resources for their own project, thus harming other
projects.
Project management
• 3 phases: Planning, Scheduling, Controlling
1. Planning:
Project management
• 3 phases: Planning, Scheduling, Controlling
2. Scheduling:
Project management
• 3 phases: Planning, Scheduling, Controlling
3. Controlling:
NETWORK-PLANNING MODELS
• The Critical Path Method (CPM): A project management
technique that uses only one time factor per activity.
• The Program Evaluation and Review Technique
(PERT): A project management technique that employs
three time estimates for each activity.
 Critical Path Method (CPM)

• Critical path: The sequence(s) of activities in a project that form the longest
chain in terms of their time to complete. This path contains zero slack time. It
is possible for there to be multiple critical paths in a project. Techniques used
to find the critical path are called CPM, or critical path method, techniques.
Critical Path Method (CPM)

Step 1: Identify each activity to be done in the project and

estimate how long it will take to complete each activity.
Step 2: Determine the required sequence of activities and
construct a network reflecting the precedence relationships.
Critical Path Method (CPM)
• Step 2: Determine the required sequence of activities and construct
a network reflecting the precedence relationships.
An easy way to do this is to first identify the immediate predecessors
associated with an activity
 Critical Path Method (CPM)
Step 3: Determine the critical path.
- Consider each sequence of activities
that runs from the beginning to the
end of the project.
- The critical path is the path where
the sum of the activity times is the
longest
- If any activity along the critical path
is delayed, then the entire project will
be delayed
Critical Path Method (CPM)
Step 4: Determine the early start/finish and late
start/finish schedule
- The early start (ET) and early finish (EF) are the
earliest times that the activity can start and be
finished
- The late start (LT) and late finish (LF) are the
latest times the activities can start and finish
without delaying the project

- Slack time: The time that an activity can be

delayed without delaying the entire project; the
difference between the late and early start times of
an activity.
 Critical Path Method (CPM)
Earliest Start Time Rule: Before an activity can start, all its immediate predecessors must be finished:
• If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor.
• If an activity has multiple immediate predecessors, its ES is the maximum of all EF values of its predecessors

EF = ES + Activity time
Slack = LS − ES
or Slack = LF − EF
Critical Path Method (CPM)
• Early start schedule: A project schedule that lists all activities by their early
start times.
• Late start schedule: A project schedule that lists all activities by their late
start times. This schedule may create savings by postponing purchases of
material and other costs associated with the project.
Problem 1: Roger Ginde is developing a
program in supply chain management
certification for managers. Ginde has listed a
number of activities that must be completed
before a training program of this nature could
be conducted. The activities, immediate
predecessors, and times appear in the
accompanying table:

a) Develop a project network for this problem.

b) What is the critical path?
c) What is the total project completion time?
d) What is the slack time for each individual
activity
Problem 1: Solution
Ex2:
Ex3:

a) Develop a project network for this problem.

b) What is the critical path?
c) What is the total project completion time?
d) What is the slack time for each individual activity