2. Resource Management in the Corporate Project Management Systems Vladimir Liberzon Victoria Shavyrina Liubov Guzhova Spider Project Team

3. Introduction In this presentation we will discuss proven resource management methodologies, tools and techniques that are used in the corporate project management systems in Russia, Eastern Europe, Brazil. The questions during the presentation are welcomed!

4. Introduction We will discuss the following topics: 1.Project Schedule Model Data Structure 2.Corporate Project Management System Requirements 3.Project Resource Constrained Scheduling 4.Project Success Criteria 5.Portfolio Resource Constrained Scheduling 6.Project Performance Measurement

5. Part 1 Project Schedule Model Data Structure

6. Data Structure The main elements of any project schedule model are: –project activities, –activity dependencies, –resources, –resource assignments, –calendars, –costs, –Work, Resource and Cost Breakdown Structures.

7. 7 Activities In the majority of well-known PM software packages project activities are characterized by their duration or effort. But in most projects it is necessary to set the activity’s physical volume of work. Activity volume can be measured in physical units (meters, tons, etc.), planned work hours, percents or any other units.

8. 8 Activities Activity volume is often used as an initial activity information instead of duration. If assigned resource productivity is defined in volume units per hour then activity duration may be calculated during project scheduling. Unlike activity duration activity volume does not depend on assigned resources.

9. 9 Dependencies Special Requirements: It is necessary to be able to set more than one link between two activities. Besides the positive and negative time lags, it is useful to set volume lags, that is preferable in many cases. One of the potential problems with time lags is that slower performance of the preceding activity may lead to time lag too early completion when expected volume of work was not done. The time lags call for special attention and regular adjustments.

10. 10 Resources Resources are divided into two classes: renewable (human resources and mechanisms) and consumable (materials, equipment). In our software they are not just resource types, but different objects (Resources and Materials). It makes possible to define that renewable resources consume materials during their work (car consumes gas, etc.).

11. 11 Complex Resources Besides the individual resources it is useful to set resource crews (we call them multi-resources) and resource skills (roles). Multi-resource is the settled group of resources working together (e.g. a team, a crew, a car with a driver, etc.). Multi-resource can be assigned to activity which means assignment of all resources comprising the multi-resource.

12. 12 Resource Skills Resources belong to the same Skill set If they can do the same types of work (share the same skill). Resources belonging to the same Resource Assignment Skill are interchangeable though individual resources may have the same skills but different productivities performing the same activities.

13. 13 Calendars The calendars can be set for all activities, resources and time lags. Availability of all these calendars is important for the proper project simulation.

14. 14 Resource Assignments Assigning resources to activities implies the notion of a team - a group of resources working on an activity together. The team can include individual resources, multi-resources and skills. Resources belonging to different teams can work at different time periods. Teams work independently of each other. An example: resources that work in different shifts belong to different teams.

15. 15 Resource Assignments If activity’s initial information is work volume, one should set the productivity of at least one of assigned resources to enable the calculation of the activity duration. It should be noted that when the skills are assigned, activity duration can be calculated only in the process of scheduling when assigned resources are selected from the skill set.

16. 16 Resource Assignments When assigning resource skills, one should either set a total number of resources necessary for activity execution or their total productivity. Example: a skill set consists of the trucks with different carrying capacity. One may set a number of trucks necessary for the activity execution or the total productivity (dependent on capacities) of all assigned trucks.

17. 17 Resource Assignments Resources can be assigned to activities part time. In this case one shall set percentage of assigned resources utilization (resource workload) together with resource quantity (not just the total percentage calculated by multiplying percents and quantities, that leaves the necessary amount of resources unclear - two resource units with 50% utilization are equivalent to one resource unit used to its full capacity).

18. 18 Resource Assignments Another useful option – variable resource assignments. Example: You may define that the number of resources that may be used at some work is between 2 and 4, and their workload should be not less than 40% and not more than 80%. In this case an activity will start if two units of assigned resource are available not less than 40% of their work time, and the team may be increased if additional resources become available. Finishing other assignments resources may apply more of their time to the specified assignment but not more than 80%.

19. 19 Material assignments Resources can consume materials in the process of their work, so materials may be applied to resources. Besides materials can be assigned to activities or resource assignments directly. Material assignments may be defined as fixed quantities, or quantities per hour or volume unit. In some projects it is necessary to simulate not only material consumption but also production of resources and materials on activities and assignments.

20. 20 Cost Usually it is not enough just to define activity and resource costs. It is necessary to know project expenses and revenues, what will be spent on wages, on machinery and equipment, on taxes, etc. Sometimes it is necessary to allow for multiple currencies. So there is a need to define and assign cost components. Besides setting the cost of an hour of renewable resource work and the cost of material unit, it is necessary to be able to set the cost directly for activities and assignments.

21. 21 Cost People may be paid not only for the hours spent on the task but also by the quantity of work they have done. It means that labour resource cost that is usually defined by the cost of work hour is not enough. Frequently it is necessary to set costs for resource assignments (fixed or per unit of volume). Assignment cost is an example of setting contract costs for the project activities.

22. 22 Centres It may be necessary to get different reports on the groups of cost components, materials and resources. That is why Cost, Material and Resource Breakdown Structures and Centres are created and used. Material centre can include any group of materials. Resource centre can include any group of resources. Cost centre includes selected cost components.

23. Part 2 Corporate Project Management System Requirements

24. Organizing corporate data Corporate project management systems have specific requirements that are vital for successful implementation. It is necessary to be sure that: –Project costs have the same structure in all projects (same cost components are used) –Cost Accounts are the same in all projects –The same Project, Phase, Activity, Resource, and Department coding structures are used in all projects –Activities of the same type have the same characteristics in all projects (like unit cost, material requirements per work volume unit, etc.)

25. Organizing corporate data –Resources that are used in all projects belong to the corporate resource pool –Resources of the same type share the same characteristics (like production rates, material consumption per work hour) –Typical resource assignments have the same characteristics in all projects (like productivity, cost, and material requirements) –Typical processes are modeled in the same way in all projects.

26. Corporate PM System Requirements  Project Management in the Corporate Project Management System sets certain requirements to the project schedule models development and decision making.  Project schedule models shall be created with the use of:  Corporate methodology,  WBS templates,  Resource, Cost, Material dictionaries,  Corporate production norms, unit costs and material requirements.

27. Corporate PM System Requirements

28. Program Databases (Reference-Books)

29. Typical Fragment Library

30. Project Management Guidelines

31. WBS Template

32. Multiple WBS

33. Contract Breakdown Structure

34. Cost Breakdown Structure

35. Project Archives

36. Project/Program Resource Constrained Scheduling Part 3

37. Project Scheduling Tasks

38. Resource constrained scheduling Resource constrained schedules produced by different PM software are different. The software that calculates shorter resource constrained schedules may save a fortune to its users. Simple heuristics used by most PM software does not guarantee satisfactory resource constrained scheduling results. That is why we pay most attention to resource-constrained schedule optimization.

39. Resource constrained scheduling This is an example of the simple project but resource constrained schedules created by most PM software for this project are at least two weeks late.

40. Resource constrained scheduling The schedule stability is no less important, especially at the project execution phase. That is why our project management software Spider Project features an additional option - the support of the earlier project version schedule (keeping the order of activity execution the same as in selected earlier project schedule).

41. Sample Project before leveling Traditional notion of Critical Path works only in case of unlimited resources availability. Let’s consider a simple project consisting of five activities, presented at the next slide: Activities 2 and 4 are performed by the same resource.

42. Sample Project after leveling Please pay attention to activities that became critical. Now delaying each of the activities 3, 4 and 5 delays project finish date. We call these activities Resource Critical and their sequence comprises Resource Critical Path.

43. Resource Critical Path In many projects it is necessary to simulate financing and production, and calculate project schedules taking into account all limitations (including availability of renewable resources, material supply and financing schedules). True critical path should account for all schedule constraints including resource and financial limitations. We call it Resource Critical Path (RCP) to distinguish it from the traditional interpretation of the critical path definition.

44. Resource Critical Path The calculation of RCP is similar to the calculation of the traditional critical path with the exception that both early and late dates (and corresponding activity floats) are calculated during forward and backward resource (and material, and cost) levelling. This technique permits to obtain resource constrained floats. Activity resource constrained float shows the period for which activity execution may be delayed without postponing project finish within the current schedule with the set of resources available in this project.

45. Super Float

46. Resource Dependencies

47. RCP and Critical Chain

48. Portfolio Scheduling

49. Project Success Criteria Part 4

50. Project Success Criteria If project success criteria are set as finishing project on time and under budget then proper decision making will be complicated. Project managers will not be able to estimate if it is reasonable to spend more money but to finish the project earlier. We suggest to set one integrated criterion of the project/program success or failure. For this it is necessary to estimate the cost of time for current project.

51. The delay of project finish date usually increases project cost, and acceleration means saving some money. So each day of project delay means some money losses and finishing project earlier means additional profit. Estimating these profits and losses we can define the cost of the project day (maybe separate and different for acceleration and delay). Project Success Criteria

52. Another option – to set the profit (NPV) that should be achieved at some point in time basing on the forecast of the revenues that will be obtained after the project will deliver its results. Such success criterion permits to weight time and money making managerial decisions for project investors. At the next slide you may see the project schedule that is calculated without allowing for project financial restrictions. There are periods when project has no money to proceed. Project Success Criteria

53. This schedule was calculated without considering financial limitations. Expected profit to the specified date is $231,141. Project Success Criteria

54. This schedule of the same project was calculated considering financial and supply limitations. The profit to the same date is $196,692, approximately $35,000 lower. Project Success Criteria

55. Project Manager may analyze different options like borrowing money or delaying payments. To be able to weight options and to select the best it is necessary to consider not only expenses but also revenues and financing. Proper project (program, portfolio) schedule model is the powerful tool that helps to select the best decisions. Project Success Criteria

56. Portfolio Resource Constrained Scheduling Part 5

57. Portfolio Success Criterion Project Portfolio shall be planned to maximize the benefits for the organization. Usually the benefits mean maximizing portfolio NPV that looks similar to the project success criterion. For projects it is clear that shorter schedule means smaller expenses and faster payback. If resource-constrained schedule has minimal duration it means minimal expenses or maximal profit. It is not that simple for project portfolio.

58. Portfolio Success Criterion Minimizing total portfolio duration does not mean maximizing NPV. Though total duration become shorter some projects may finish later than possible thus postponing receiving project revenues. Overall NPV may become lower than for longer portfolio duration but faster achievement of first projects results. Let’s look at the sample portfolio that consists of 6 projects. At the next slide portfolio schedule was calculated without considering resource constraints.

59. Portfolio Success Criterion

60. Resource Constrained schedule calculated without setting project priorities makes NPV (that is calculated at the same moment) much lower because resource limitations delay project performance and achieving expected profits. Spider Project permits to create any number of parallel WBS for projects and portfolios. Next slide shows full structure and then we will look at the structure that shows only investment phases of all projects. At this structure we will see project finish dates.

61. Portfolio Success Criterion

63. After resource leveling: Last project will finish on 18 November 2015 Expected NPV=14,413,316 Now let’s calculate the resource-constrained portfolio schedule applying project priorities. The result is on the next slide.

64. Portfolio Success Criterion

65. After resource leveling with project priorities: Last project will finish on 14 January 2016 Expected NPV=17,093,327 Last project finished two months later but NPV increased by 2.6 millions. Conclusion: always set project priorities. In this example any set of priorities lead to better results than multitasking. Next priority option is the worst but still better than leveling without applying project priorities,

66. Portfolio Success Criterion

67. After resource leveling with these priorities: Last project will finish on 31 December 2015 Expected NPV=15,014,726 Now let’s delete multi-project 6 from our portfolio. The multi-project 6 looked attractive but we have limited resources and without project 6 we will accelerate the execution of other projects. The result is on the next slide

68. Portfolio Success Criterion

69. After resource leveling with the same priorities but without multi-project 6: Last project will finish on 26 May 2014 Expected NPV=16,674,013 Deleting profitable project from the portfolio we accelerated other projects for 1.5 years and will earn additional 1.65mln. Conclusion: project selection for including into corporate portfolio shall be confirmed by the whole portfolio leveling. Even most profitable project may lead to large losses if the resources are limited and shared by portfolio projects.

70. Performance Management Part 6

71. Performance Measurement Project activities have volumes, durations, require materials and have costs. Measuring activity performance it is necessary to measure all these parameters. Estimating % complete is not clear - % of what? If 70% of volume was done, 50% of activity duration was passed, 80% of money and all materials were spent then what is % complete?

72. Performance Measurement Project status information is not sufficient for decision making. If project is 10 days behind the schedule is it good or bad? If a month ago project was 25 days behind the schedule, two months ago project was 40 days behind the schedule, then only 10 days delay now is very good achievement. Project trend information is much more useful for decision making than the information on project status.

73. Trend Analysis Project Performance Management shall be based on trend analysis. It is necessary to discover problems as soon as possible and, by analyzing trends of the major project parameters, the project manager can quickly understand if there are problems with project performance.

74. Trend Analysis It is natural to analyze trends of those data that are used in the success criterion definition. If we defined that the project performance will be considered successful if cash flow forecast for the specific date exceeds the target value then we will analyze if this forecast is growing or not. Negative trend shows problems in project performance and requires consideration of corrective actions.

75. Project Archives It is necessary to be able to restore and analyze trends of any project parameter. It is possible only if project archives are properly stored and can be analyzed. Spider Project keeps project archives and can restore trends of any user selected parameter from the project start to the current date.

76. What is missed We have no sufficient time for discussing risk management methods and tools. Without risk management even most accurate project scheduling is not reliable, Any schedule model requires time and cost contingency reserves (project time and cost buffers) that shall be calculated and added to the deterministic project goals. Calculating necessary contingency reserves is Risk simulation task.

77. Conclusions

78. Tips for Corporate Project Management 1.Corporate Project Management requires common methodology, templates, reference-books that are used in all corporate projects. 2.Most norms and standards are applied to the activity volume physical units (m, t, m3, piece, etc.). So it is necessary to create project schedule and to monitor project performance basing on physical quantities (volumes of work) measurement. 3.It is necessary to create a library of project fragments that may be used for fast and reliable development of the detailed project computer models.

79. 4.There is a need for Project Management Office – organizational unit that develops corporate project management norms and standards, manages corporate databases and libraries, and manages Project Portfolio, creating and updating portfolio schedule and analyzing portfolio performance. 5.Portfolio and Program Schedule Models includes the models of individual projects and shall be resource and cost loaded. Tips for Corporate Project Management

80. 6.It is necessary to set integrated project and portfolio success criteria. 7.It is necessary to be able to calculate project and portfolio schedules considering not only resource but also financial and supply constraints. 8.The choice of projects for their inclusion in the Project Portfolio shall be justified by scheduling the portfolio model that includes project schedules and analyzing their impact on the portfolio success criteria. Tips for Corporate Project Management

81. 9.It is necessary to avoid multitasking and always apply priorities to the portfolio projects. 10.It is necessary to keep project and portfolio archives and to analyze trends of project and portfolio parameters. 11.If trends are negative then corrective actions shall be considered even if the project/portfolio status is good. 12.Risk simulation shall be applied basing on the solid resource management foundation and corporate standards for scheduling. Applied to the simplified models, without considering resource constraints, it is not only useless but dangerous – creates wrong illusions. Tips for Corporate Project Management

82. Thank You For Attending!