1-1 McGraw-Hill/Irwin© 2008 The McGraw-Hill Companies, All Rights Reserved Modern Project Management Chapter 1

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1-5 What Is a Project?  Project Defined  A complex, nonroutine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs.  Major Characteristics of a Project  Has an established objective.  Has a defined life span with a beginning and an end.  Typically requires across-the-organizational participation.  Involves doing something never been done before.  Has specific time, cost, and performance requirements.

1-6 Definition of a Project “A project is a temporary endeavor undertaken to create a unique product or service.” Project Management Institute,

1-7 Project Attributes  A project:  Has a unique purpose.  Is temporary.  Is developed using progressive elaboration.  Requires resources, often from various areas.  Should have a primary customer or sponsor. oThe project sponsor usually provides the direction and funding for the project.  Involves uncertainty.

1-8 Definition of Project Management 1- 8 “The application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project.”

1-9 Scope, Cost, and Time Project Performance Targets

1-10 Abilities Needed For Effective Project Management  Ability to resolve conflicts  Creativity and flexibility  Ability to adjust to change  Good planning skills  Negotiation skills  Win-win versus win-lose

1-11 The Life Cycle of Projects  All organisms have a life cycle (i.e., they are born, grow, wane, and die) … and so do projects  Some projects follow an S-shaped curve … they start slowly, develop momentum, and then finish slowly  Other project follow a J-shaped curve … they start slowly, proceed slowly, and then finish rapidly

1-12 Numeric Selection Methods  Financial assessment methods  payback period  discounted cash flow  future opportunity analysis  Scoring methods  unweighted 0-1 factor method  weighted factor scoring method

1-13 Payback Period 1- 13

1-14 Discounted Cash Flow where I 0 = the initial investment F t = the net cash flow in period t k = the required rate of return or hurdle rate

1-15 Net Present Value Example Note that totals are equal, but NPVs are not because of the time value of money.

1-16 Return on Investment  Return on investment (ROI) is calculated by subtracting the project costs from the benefits and then dividing by the costs. ROI = (total discounted benefits - total discounted costs) / discounted costs  The higher the ROI, the better.  Many organizations have a required rate of return or minimum acceptable rate of return on investment for projects.  Internal rate of return (IRR) can by calculated by setting the NPV to zero.

1-17 Payback Analysis  Another important financial consideration is payback analysis.  The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project.  Payback occurs when the cumulative discounted benefits and costs are greater than zero.

Charting the Payback Period

1-19 Weighted Scoring Model  A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria.  Steps in identifying a weighted scoring model: 1.Identify criteria important to the project selection process. 2.Assign weights (percentages) to each criterion so they add up to 100 percent. 3.Assign scores to each criterion for each project. 4.Multiply the scores by the weights to get the total weighted scores.  The higher the weighted score, the better.

1-20 Sample Weighted Scoring Model for Project Selection

1-21 Programs versus Projects  Program Defined  A series of coordinated, related, multiple projects that continue over an extended time and are intended to achieve a goal.  A higher-level group of projects targeted at a common goal.  Example: oProject: completion of a required course in project management. oProgram: completion of all courses required for a business major.

1-22 Comparison of Routine Work with Projects TABLE 1.1 Routine, Repetitive Work Taking class notes Daily entering sales receipts into the accounting ledger Responding to a supply-chain request Practicing scales on the piano Routine manufacture of an Apple iPod Attaching tags on a manufactured product Projects Writing a term paper Setting up a sales kiosk for a professional accounting meeting Developing a supply-chain information system Writing a new piano piece Designing an iPod that is approximately 2 X 4 inches, interfaces with PC, and stores 10,000 songs Wire-tag projects for GE and Wal-Mart

1-23 Project Life Cycle

1-24 The Challenge of Project Management  The Project Manager  Manages temporary, non-repetitive activities and frequently acts independently of the formal organization. oMarshals resources for the project oProvides direction, coordination, and integration to the project team oManages a diverse set of project stakeholders oDependent upon others for technical answers oIs responsible for performance and success of the project  Must induce the right people at the right time to address the right issues and make the right decisions.

Rules for Project Managers 1. Understand the problems, opportunities, and expectations of a project manager. 2. Recognize that project teams will have conflicts, but this is a natural part of group development. 3. Understand who the stakeholders are and their agendas. 4. Realize that organizations are very political and use politics to your advantage. 5. Realize that project management is “leader intensive” but that you must be flexible.

Rules for Project Managers 6. Understand that project success is defined by four components: budget, schedule, performance criteria, and customer satisfaction. 7. Realize that you must build a cohesive team by being a motivator, coach, cheerleader, peacemaker, and conflict resolver. 8. Notice that your team will develop attitudes based on the emotions you exhibit—both positive and negative.

Rules for Project Managers 9. Always ask “what-if” questions and avoid becoming comfortable with the status of the project. 10. Don’t get bogged down in minutiae and lose sight of the purpose of the project. 11. Manage your time efficiently. 12. Above all, plan, plan, plan.

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1-29 The Importance of Project Management  Factors Leading to the Increased Use of Project Management:  Compression of the product life cycle  Global competition  Knowledge explosion  Corporate downsizing  Increased customer focus  Small projects that represent big problems

1-30 Growth in PMP Certification

1-31 Integrated Project Management Systems  Problems Resulting from the Use of Piecemeal Project Management Systems:  Do not tie together the overall strategies of the firm.  Fail to prioritize selection of projects by their importance of their contribution to the firm.  Are not integrated throughout the project life cycle.  Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors.

1-32 Integrated Management of Projects

1-33 The Technical and Sociocultural Dimensions of the Project Management Process

1-34 PMBOK  Project Management Book of Knowledge  Framework that defines the areas that require management attention.  9 knowledge areas  5 types of processes  It does not tell what areas need more attention than others under what circumstances – so there’s a tremendous amount of managerial attention spent on items that may not need it

1-35 PMBOK and Critical Chain  Of the 9 knowledge areas.  Integration  Scope  Time  Cost  Quality  Human Resources  Communications  Risk (no common-cause special-cause differentiation)  Procurement

Nine Project Management Knowledge Areas  Knowledge areas describe the key competencies that project managers must develop.  Four core knowledge areas lead to specific project objectives (scope, time, cost, and quality).  Four facilitating knowledge areas are the means through which the project objectives are achieved (human resources, communication, risk, and procurement management).  One knowledge area (project integration management) affects and is affected by all of the other knowledge areas.  All knowledge areas are important!

1-37 Project Management Knowledge Areas Project Management Project Integration Management Project Plan Development Project Plan Execution Integrated Change Control Project Scope Management Initiation Scope Planning Scope Definition Scope Verification Scope Change Control Project Time Management Activity Definition Activity Sequencing Activity Duration Estimating Schedule Development Schedule Control Project Cost Management Resource Planning Cost Estimating Cost Budgeting Cost Control Project Quality Management Quality Planning Quality Assurance Quality Control Project Human Resource Management Organizational Planning Staff Acquisition Team Development Project Communications Management Communications Planning Information Distribution Performance Reporting Administrative Closure Project Risk Management Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control Project Procurement Management Procurement Planning Solicitation Planning Solicitation Source Selection Contract Administration Contract Closeout

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1-40 Project Basics - Project Management Successful project management means meeting all three goals (scope, time, and cost) – and satisfying the project’s sponsor! The Triple Constraint of Project Management

1-41 Project Basics - Project Management The Triple Constraint  Every project is constrained in different ways by its:  SCOPE goals: What will be done?  TIME goals: How long will it take to do it?  COST goals: How much should it cost?  It is the PM’s duty to balance these 3 often- competing goals.

1-42 Project Basics - Project Management Project Management Framework

1-43 Lecture 1 [33]IS Spring Project Basics - Project Management 9 Project Management Knowledge Areas  Describe the key competencies that PMs must develop  4 core knowledge areas lead to specific project objectives (scope, time, cost, and quality).  4 facilitating knowledge areas are the means through which the project objectives are achieved (human resources, communication, risk, and procurement management).  1 integrating knowledge area (project integration management) affects and is affected by all of the other knowledge areas.  All knowledge areas are important!

1-44 Traditional Project Life Cycle Phases

1-45 Project Management Process Groups  A process is a series of actions directed toward a particular result.  Project management = interlinked processes.  The project management process groups include:  Initiating processes  Planning processes  Executing processes  Monitoring and controlling processes  Closing processes

1-46 Level of Activity and Overlap of Process Groups Over Time

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1-51 Mapping the Process Groups to the Knowledge Areas  You can map the main activities of each PM process group into the nine knowledge areas by using the PMBOK® Guide  Note that there are activities from each knowledge area under the planning process group.  All initiating activities are part of the project integration management knowledge area.

1-52 Relationships Among Process Groups and Knowledge Areas

1-53 Relationships Among Process Groups and Knowledge Areas (cont’d)

1-54 Relationships Among Process Groups and Knowledge Areas

1-55 Relationships Among Process Groups and Knowledge Areas

1-56 Project Basics - Project Management Tools and Techniques  assist project managers and their teams in various aspects of project management.  Specific tools and techniques include:  Project charters, scope statements, and WBS (scope).  Gantt charts, network diagrams, critical path analyses, critical chain scheduling (time).  Cost estimates and earned value management (cost).

1-57 Project Basics - Program Management Projects and Program Managers  Project Managers work with project sponsors, project teams, and other people involved in projects to meet project goals.  Program: “A group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually.”*  Program managers oversee programs and often act as bosses for project managers. *PMI, A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (2004), p. 16.

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1-60 Project Charter

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1-62 Preliminary Project Statement

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1-64 Project Scope Management Plan

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1-66 WBS

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