Project Management Part 1 Projects and Project Goals

Topic Outline: Projects and Project Goals Why organize an activity or job as a project Project goals and performance tradeoffs Examples of projects and goals Project life cycles How are projects selected Organizational structures and projects Project selection exercise

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)

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

Project Performance Goals 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 Unfortunately, tradeoffs among these goals exist

Project Goal Tradeoffs

Project Performance 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?

Examples of Projects and Goals What are examples of non-project activities? 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?

Project Life Cycles The pace of project progress throughout the project 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

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

A 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

A Different Project Life Cycle Time % Project completion

Resources & Project Life Cycle Start Time Finish Resources ConceptPlanning Execution Wrap-up Required Resources

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

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

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

Some Numeric Selection Methods Common Financial Assessment Methods –Payback Period Simple to use and easy to understand Ignores returns beyond payback period and time value of money –Discounted Cash Flow (NPV) Considers time value of money and all returns Favors short-term projects Ignores all non-monetary factors except risk

Payback Period Example Expected project costs are $700,000 Expected returns are $200,000 per year Payback period = 700,000 ÷ 200,000 = 3.5 years Revenues would cover investment costs in 3.5 yrs.

Discounted Cash Flow Net Present Value where I 0 = initial cash investment F t = net cash inflow in period t k = 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/(1.15) ,000/(1.15) ,000/(1.15) ,000/(1.15) 4 NPV = -700, , , , ,351 NPV = $-129,004 Should they do this project?

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

Organizational Structures Organizational structure describes the management reporting relationships in the org. Organization charts show these relationships. How do projects fit within an organization? Traditional functional organization Functional project organization Pure project organization Matrix project organization

Traditional Functional Organization Company President Marketing Vice President Customer Service Manager Domestic Sales Manager International Sales Manager Engineering Vice President Systems Engineering Manager Electronics Engineering Manager Software Engineering Manager Mechanical Engineering Manager Technical Documentation Manager Human Resources Vice President Finance & Administration Vice President Manufacturing Vice President Fabrication Manager Assembly Manager Testing Manager Production Scheduling Manager Shipping Manager Procurement Vice President Purchasing Manager Receiving & Inspection Manager

Functional Project Organization Project organized and controlled within a functional unit or department Usually for smaller projects with a narrower focus What are the advantages of this structure? What are the disadvantages?

Functional Project Organization Company President Marketing Vice President Customer Service Manager Domestic Sales Manager International Sales Manager Engineering Vice President Systems Engineering Manager Electronics Engineering Manager Software Engineering Manager Engineering Project A Engineering Project B Human Resources Vice President Finance & Administration Vice President Manufacturing Vice President Fabrication Manager Assembly Manager Testing Manager Shipping Manager Manufacturing Project 1 Procurement Vice President Purchasing Manager Receiving & Inspection Manager

Pure Project Organization Each project is organized as a separate division reporting to senior management Effective for large projects, not small. Why? Each project owns its resources/personnel Each project may not have much depth of technical expertise, but it should have breadth

Pure Project Organization Company President Project A Project Manager Engineering Manager Manufacturing Manager Procurement Manager Consultants Project B Project Manager Engineering Manager Manufacturing Manager Procurement Manager Subcontractors Marketing Vice President Human Resources Vice President Finance & Administration Vice President Legal Vice President

Matrix Project Organization Most common organizational structure Has many advantages of functional project and pure project structures Project team members have two bosses Team members may be assigned part-time to project and may have less loyalty to the project

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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?