Project Management in Practice The World of Project Management

Outline: Projects and their characteristics. Project life cycle. Selection methods. Exercise. Homework: 21, 22, 25, 26

What are Projects? A temporary endeavor undertaken to create a unique product, service or result (PMI-PMBOK) Specific, timely, usually multidisciplinary, and always conflict ridden (Mantel et al.) Series of activities or tasks, specific objectives, defined start and end dates, funding limits, consumes resources, multifunctional (Kerzner)

Characteristics of Projects Unique Specific Deliverable Specific Due Date Multidisciplinary Complex Conflict Part of Programs

PMI Definition “A project is a unique temporary endeavor, with a set beginning and end ” PMI defines project management as “the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of a particular project “

Why Projects? Why organize an activity or job as a project? It allows you to better structure and organize the tasks that need to be performed Well developed approaches and tools are available for managing projects Easy-to-use software is available for scheduling and budgeting projects Experience has shown that the work/job can be done faster, cheaper, and better when managed as a project

Three Goals / Objectives Time/Schedule Budget Results / Performance Objectives

Projects and Operations

Examples of Projects and Goals What are some examples of projects you’ve worked on? What were the desired deliverables/outcomes? What was the project time frame? What was the biggest challenge during the project? Which goals were more important? Were all goals fully met?

Abilities Needed For Effective Project Management Conflict Resolution Creativity and Flexibility Ability to Adjust to Change Good Planning Negotiation

Project Life Cycles There are many patterns that project life cycles can follow, but the following chart depicts a fairly common pattern: slow start quick momentum slow finish Initiate Plan Execute Monitor And Control Close Stages or Process Groups in the Project Life Cycle

A Common Project Life Cycle Time 100 Slow start Quick momentum Slow finish % Project completion

A Different Project Life Cycle Time 100 % Project completion

Implications of Project Life Cycles Project life cycle shape will affect the timing of resource and funding needs. Understanding the general project life cycle may help the stakeholders better understand and accept the current status of the project. Understanding the general project life cycle may also help the PM make better goal tradeoff decisions at particular times during the project.

Selecting Projects Who decides which projects will be undertaken by an organization? What are some examples of criteria that might be used in selecting projects? Why should the PM be made aware of why a project was selected?

Some Nonnumeric Selection Methods Sacred Cow Operating/Competitive Necessity Comparative Benefits

Numeric Selection Methods Financial Assessment Methods payback period discounted cash flow Scoring Methods Unweighted factor method weighted factor scoring method

Payback Period

Payback Period Example Expected project costs are $700,000 Expected returns are $200,000 per year

Discounted Cash Flow where I0 = the initial investment Ft = the net cash flow in period t k = the required rate of return or hurdle rate

Discounted Cash Flow

Discounted Cash Flow Initial cost = $700,000; 4-year annual cash flow = $200,000; required rate of return = 15% NPV = -700,000 + 200,000/(1.15)1 + 200,000/(1.15)2 + 200,000/(1.15)3 + 200,000/(1.15)4 NPV = -700,000 + 173,913 + 151,229 + 131,503 + 114,351=-129,004

Risk & Uncertainties

Risk & Uncertainties Outcome Prob Pay 3H 100 2H 75 1H 10 0H   EV

Risk & Uncertainties Define Assumption Define Forecast

Risk & Uncertainties

Risk & Uncertainties Distribution Means

Risk & Uncertainties

The Weighted Scoring Model where Si = the total score of the ith project sij = the score of the ith project on the jth criterion wj = the weight or importance of the jth criterion

Weighted Factor Scoring Method Example: 3 projects, 4 factors, 1-5 (5=best) Factor Wt. ProjectA ProjectB ProjectC Cost .4 2 4 3 Risk .3 1 Suitable .1 5 Skills .2 Wtd. Score 1.0 2.8 3.1 3.0

What uncertainties are encountered in project management What uncertainties are encountered in project management? Can they be eliminated? Time required to complete a project Availability of key resources Cost of resources Timing of solutions to technological problems Actions taken by competitors

Mix of Projects The mix of projects undertaken should support the firm’s corporate strategy. Derivative projects—small improvements Platform projects—develop new line of products using existing technology Breakthrough projects—new generation of products using new technology R&D projects—develop new knowledge

Project Selection Exercise Quality Fleet Ads case Divide into small groups Read case (5 min.) Assignment: (25 min.) Discuss the advantages of each project Discuss the cost and budget implications Rank the projects from most important to least Which set of projects do you recommend? What is your proposed budget?