The World of Project Management Chapter 1 The World of Project Management EUT443 – Engineering Management

EUT443 – Engineering Management WHAT IS A PROJECT? EUT443 – Engineering Management

Why the emphasis on project management? Many tasks do not fit neatly into business-as-usual. Need to assign responsibility and authority for achievement of organizational goals.

Characteristics of Projects Unique Specific Deliverable Specific Due Date S.M.A.R.T. Objective(s) Scope / Boundary

Additional Characteristics of Projects Multidisciplinary – input from different kinds of knowledge & expertise Complex – many interconnected problem, input from group outside the project Conflict ridden – schedule, budget etc. Part of Programs Resources Limitation

PMI Definition “A temporary endeavor undertaken to create a unique product or service” Project Management Institute, 2000 Achieving strategic goals Achieving routine goals Improving project effectiveness Virtual projects Quasi-projects

PROJECT MANAGEMENT VS. GENERAL MANAGEMENT More detailed project planning Different project budgeting Globalization issue Managerial hierarchy EUT443 – Engineering Management

Why Projects? 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

Skill Requirements for Effective Project Management Conflict Resolution Creativity and Flexibility Ability to Adjust to Change Good Planning Negotiation win-win versus win-lose

WHAT IS MANAGED? THE THREE GOALS OF A PROJECT EUT443 – Engineering Management

Figure 1-1: Performance, Cost, and Time Project Targets

Project Goals Performance (Outcomes/Quality) deliverables and quality exactly what needs to be accomplished at what quality level Time doing it quickly or on schedule Cost doing it cheaply or on budget

Project Goals Which goal is more important: time, cost, or outcomes? Who decides which goal is more important? Why is it important for the Project Manager (PM) to know which goal is more important?

THE LIFE CYCLES OF PROJECTS EUT443 – Engineering Management

Figure 1-2 The Project Life Cycle

Common Project Life Cycle Slow Start manager is selected team is assembled initial resources are allocated work program is organized Quick Momentum work progresses momentum builds Slow Finish many loose ends to tie up

Figure 1-3 An Alternate Project Life Cycle

Figure 1-4 Resources & Project Life Cycle Start Time Finish Resources Concept Planning Execution Wrap-up Required Resources

Implications of Project Life Cycle 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

EUT443 – Engineering Management SELECTING PROJECTS EUT443 – Engineering Management

Project Selection Project selection is the process of evaluating individual projects or groups of projects, and then choosing to implement some set of them so that the objectives of the parent organization will be achieved Managers often use decision-aiding models to extract the relevant issues of a problem from the details in which the problem is embedded Models represent the problem’s structure and can be useful in selecting and evaluating projects

Criteria For Project Selection Realism - reality of manager’s decision Capability- able to simulate different scenarios and optimize the decision Flexibility - provide valid results within the range of conditions Ease of Use - reasonably convenient, easy execution, and easily understood Cost - Data gathering and modeling costs should be low relative to the cost of the project Easy Computerization - must be easy and convenient to gather, store and manipulate data in the model

Nonnumeric Selection Methods Sacred Cow (president’s pet project) Do you want to keep your job? Examples Operating or Competitive Necessity You must do this project to stay in business Comparative Benefits Examine +/- of each potential project

Figure 1-5 The Q-Sort Method

Numeric Selection Methods Scoring Methods unweighted 0-1 factor method weighted factor scoring method Financial Assessment Methods payback period discounted cash flow

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

Factor Scoring Method Example: 3 projects; 4 factors; 1-5 scale (5=best) Factor ProjectA ProjectB ProjectC Cost 2 4 3 Risk 4 3 1 Suitable 4 2 5 Skills 2 2 5 Total Score: 12 11 14

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

Payback Period Expected project costs are $700,000 Expected returns are $200,000 per year How long is the payback period?

Discounted Cash Flow Net Present Value 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 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 NPV = $-129,004 Should they do this project?

Discounted Cash Flow If NPV > 0, the investment would add value to the firm/organization, thus project is accepted. If NPV < 0, the investment would substract value from the firm/organization, thus project is rejected. If NPV = 0, the investment neither gain nor lose value for the firm/organization, decision is made on other criteria.

Confronting Uncertainty – The Management of Risk EUT443 – Engineering Management

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

Can uncertainty surrounding projects ever be eliminated? No, but it can be managed

Risk Analysis Estimate probabilities or distributions associated with key parameters Develop analytic or simulation model Analyze distribution of outcomes generated by model

Risk Analysis with Crystal Ball Assumption Cells Distribution Gallery Forecast Cells

THE PROJECT PORTFOLIO PROCESS EUT443 – Engineering Management

The Project Portfolio Process Step 1: Establish a Project Council Step 2: Identify Project Categories and Criteria Step 3: Collect Project Data Step 4: Assess Resource Availability Step 5: Reduce the Project and Criteria Set Step 6: Prioritize the Projects within Categories Step 7: Select the Projects to be Funded and Held in Reserve Step 8: Implement the Process

The Aggregate Project Plan

Figure 1-12 An Example Aggregate Project Plan

Copyright Copyright 2005John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information herein.