Exam
Instructions:
Each question should be answered within 3-4 paragraphs. The answers are to be brief, concise
and demonstrate your knowledge and understanding of the principles and practices of project
management
1. Managing a project is an integrative process. Recalling the discussions in class and the work
performed to manage the Alliance Prototype Project (SIM Project), identify and discuss the
integrative actions and processes required to assure project success.
2. Why is the implementation of projects important to the success of the organization?
3. What is more important for successfully completing a project – a formal project management
structure or the culture of the organization? Why?
4. What is a Project Priority Matrix and how is it used?
5. Why are accurate cost estimates critical to Project Management?
6. Why is slack important to the project manager?
7. Can project risks be eliminated if the project is planned carefully, explain?
8. What are the primary reasons for crashing a project?
Cross Reference of Project Management Body
of Knowledge (PMBOK) Concepts to Text Topics
Chapter 1
Chapter 8
Modern Project Management
1.2 Project defined
1.3 Project management defined
1.4 Projects and programs (.2)
2.1 The project life cycle (.2.3)
App. G.1 The project manager
App. G.7 Political and social environments
F.1 Integration of project management processes [3.1]
Chapter 2 Organization Strategy and Project Selection
1.4 Projects and programs (.2)
1.4.1 Managing the portfolio
1.4.3 Strategy and projects
2.3 Stakeholders and review boards
12.1 RFP’s and vendor selection (.3.4.5)
11.2.2.6 SWAT analysis
Chapter 3
Chapter 4
Defining the Project
4.1 Project charter
5.1 Gather requirements
5.2 Defining scope
5.3 Creating a WBS
5.4 Tools and techniques
6.1 Define activities
9.1.2. Responsibility matrixes
10.1 Communication planning (.2.3.4) [App. G-4]
Chapter 5
Estimating Times and Costs
6.4 Activity duration estimates (.3)
6.4.2 Estimating tools (.1.3.4)
6.3.1 Identifying resources
7.1 Activity cost estimates (.2.3.4.5)
5.1.2.4 Delphi method
Chapter 6
Developing a Project Plan
4.2.2 Planning tools
6.2 Sequence activities [1.2]
6.5.1 Bar and milestone charts
6.5.2 Critical path method (.2)
6.5.2.6 Lead and lag activities [6.2.3]
F.3 Project duration
Chapter 7
Managing Risk
11.1 Risk management process [F.8]
11.2 Identifying risks
11.3.2.2 Impact matrix
11.4 Risk assessment
11.5 Risk responses (.2–.1.2)
11.6 Risk register
7.1.2.5 PERT analysis
7.1.2.6.3 Contingency reserves
7.3.3.4 Change control management
ISBN: 0073403342
Author: Erik W. Larson, Clifford F. Gray
Title: Project Management
Chapter 9
Reducing Project Duration
6.5.2.7 Schedule compression
Chapter 10
Leadership
9.4.2.5 Leadership skills
G.1 Project leadership
10.1 Stakeholder management
Chapter 11
Organization: Structure and Culture
2.4.1 Organization cultures [G.7]
2.4.2 Organization structure [9.1.3]
9.1.1 Organization charts
1.4.4 Project offices
Scheduling resources and cost
6.5.2 Setting a schedule baseline [8.1.4]
6.5.3.1 Setting a resource schedule
6.5.2.4 Resource leveling
7.2 Setting a cost and time baseline schedule (1.3.5) [8.1.3]
6.5.2.3 Critical chain method
Teams
9.2 Building the team (.1.3) & [3.5.3] [App G.2 Building teams]
9.4 Managing the team
9.3.2 Team building activities
9.2.4 Virtual teams
9.3.3.1 Team performance [9.4.2.2]
9.4.2.3 Conflict management
9.3.2.6 Recognition and awards
Chapter 12
Outsourcing
12.1.1 Procurement requirements [G.8]
12.1.2.3 Contract types
9.4.2.3 Conflict management
12.2.7 The art of negotiating
12.2.3.5 Change requests
Chapter 13
Monitoring Progress
10.5.3 Cost/schedule system (.1)
6.6 .2.1 Time performance
7.2.3.1 Cost baseline development
7.3.2.1 Earned value system (F.4)
7.3.2.4 E.V., performance status report
7.3.2.2 E.V., forecasts
7.3.2.3 EV., to complete index (EAC)
7.3.2.5 Schedule and cost variance
Chapter 14
Project closure
Closure report
4.5.1.4 Organization processes (.5) & [4.5.3 & 4.6.3.2]
4.6.1 Administrative tasks (.3) & [3.7.1, & 12.4]
10.3.3.1 Lessons learned [8.3.3.4]
9.4.2.2 Individual performance appraisals
Chapter 15
International Projects
G.7 Culture awareness
Chapter 16
Oversight
1.4.4 Project offices
8.1.2 Continuous improvement
5.1 Requirements vs. actual [5.3]
Chapter 17
Agile PM
6.1.2.2 Rolling wave
Front endsheets
Color: 2
Pages: 2,3
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Project
Management
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Project
Management
The Managerial Process
Fifth Edition
Erik W. Larson
Oregon State University
Clifford F. Gray
Oregon State University
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PROJECT MANAGEMENT: THE MANAGERIAL PROCESS
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue
of the Americas, New York, NY, 10020. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights
reserved. No part of this publication may be reproduced or distributed in any form or by any means, or
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Some ancillaries, including electronic and print components, may not be available to customers outside the
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This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 WVR/WVR 0 9 8 7
ISBN
978-0-07-340334-2
MHID 0-07-340334-2
Editorial director: Stewart Mattson
Publisher: Tim Vertovec
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Cover image: © Veer Images
Typeface: 10.5/12 Times Roman
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Printer: Worldcolor
Library of Congress Cataloging-in-Publication Data
Larson, Erik W., 1952Project management: the managerial process / Erik W. Larson, Clifford F. Gray. —5th ed.
p. cm. —(The McGraw-Hill/Irwin series, operations and decision sciences)
Gray’s name appears first on the earlier editions.
Includes index.
ISBN-13: 978-0-07-340334-2 (alk. paper)
ISBN-10: 0-07-340334-2 (alk. paper)
1. Project management. 2. Time management. 3. Risk management. I. Gray, Clifford F.
II. Gray, Clifford F. Project management. III. Title.
HD69.P75G72 2011
658.4904—dc22
2009054318
www.mhhe.com
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About the Authors
Erik W. Larson
ERIK W. LARSON is professor of project management at the College of Business, Oregon State University. He teaches executive, graduate, and undergraduate
courses on project management, organizational behavior, and leadership. His
research and consulting activities focus on project management. He has published
numerous articles on matrix management, product development, and project partnering. He has been honored with teaching awards from both the Oregon State
University MBA program and the University of Oregon Executive MBA program.
He has been a member of the Portland, Oregon, chapter of the Project Management Institute since 1984. In 1995 he worked as a Fulbright scholar with faculty at
the Krakow Academy of Economics on modernizing Polish business education.
In 2005 he was a visiting professor at Chulalongkorn University in Bangkok,
Thailand. He received a B.A. in psychology from Claremont McKenna College
and a Ph.D. in management from State University of New York at Buffalo. He is
a certified project management professional (PMP) and Scrum Master.
Clifford F. Gray
CLIFFORD F. GRAY is professor emeritus of management at the College of
Business, Oregon State University. He continues to teach undergraduate and graduate project management courses overseas and in the United States; he has personally taught more than 100 executive development seminars and workshops.
His research and consulting interests have been divided equally between operations management and project management; he has published numerous articles
in these areas, plus a text on project management. He has also conducted research
with colleagues in the International Project Management Association. Cliff has
been a member of the Project Management Institute since 1976 and was one of the
founders of the Portland, Oregon, chapter. He was a visiting professor at Kasetsart
University in Bangkok, Thailand in 2005. He was the president of Project Management International, Inc. (a training and consulting firm specializing in project
management) 1977–2005. He received his B.A. in economics and management
from Millikin University, M.B.A. from Indiana University, and doctorate in operations management from the College of Business, University of Oregon. He is
certified Scrum Master.
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“Man’s mind, once stretched by a new idea, never
regains its original dimensions.”
Oliver Wendell Holmes, Jr.
To my family who have always encircled me with
love and encouragement—my parents (Samuel
and Charlotte), my wife (Mary), my sons and their
wives (Kevin and Dawn, Robert and Sally) and
their children (Ryan, Carly, Connor and Lauren).
C.F.G.
“We must not cease from exploration and the end of all
exploring will be to arrive where we begin and to know
the place for the first time.”
T. S. Eliot
To Ann whose love and support has brought out
the best in me. And, to our girls Mary, Rachel, and
Tor-Tor for the joy and pride they give me. Finally,
to my muse, Neil, for the faith and inspiration he
instills.
E.W.L
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Preface
Since you are reading this text, you have made a decision that learning more about
project management will have a positive impact for you. You are absolutely right!
Project management has become an organization-wide core competency; nearly
every manager, regardless of discipline is involved in managing one or more projects. This text is designed to provide project managers and prospective project
managers with the knowledge and skills that are transferable across industries and
countries.
Our motivation for writing this text was to provide students with a holistic,
integrative view of project management. A holistic view focuses on how projects
contribute to the strategic goals of the organization. The linkages for integration
include the process of selecting projects that best support the strategy of a particular organization and that in turn can be supported by the technical and managerial processes made available by the organization to bring projects to completion.
The goals for prospective project managers are to understand the role of a project
in their organizations and to master the project management tools, techniques,
and interpersonal skills necessary to orchestrate projects from start to finish.
The role of projects in organizations is receiving increasing attention. Projects
are the major tool for implementing and achieving the strategic goals of the organization. In the face of intense, worldwide competition, many organizations have
reorganized around a philosophy of innovation, renewal, and organizational
learning to survive. This philosophy suggests an organization that is flexible and
project driven. Project management has developed to the point where it is a professional discipline having its own body of knowledge and skills. Today it is nearly
impossible to imagine anyone at any level in the organization who would not benefit from some degree of expertise in the process of managing projects.
Audience
This text is written for a wide audience. It covers concepts and skills that are used
by managers to propose, plan, secure resources, budget, and lead project teams to
successful completions of their projects. The text should prove useful to students
and prospective project managers in helping them understand why organizations
have developed a formal project management process to gain a competitive advantage. Readers will find the concepts and techniques discussed in enough detail to be
immediately useful in new-project situations. Practicing project managers will find
the text to be a valuable guide and reference when dealing with typical problems
that arise in the course of a project. Managers will also find the text useful in
understanding the role of projects in the missions of their organizations. Analysts
will find the text useful in helping to explain the data needed for project implementation as well as the operations of inherited or purchased software. Members of the
Project Management Institute will find the text is well structured to meet the needs
of those wishing to prepare for PMP (Project Management Professional) or CAPM
(Certified Associate in Project Management) certification exams. The text has indepth coverage of the most critical topics found in PMI’s Project Management
vii
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Preface
Body of Knowledge (PMBOK). People at all levels in the organization assigned to
work on projects will find the text useful not only in providing them with a rationale for the use of project management tools and techniques but also because of
the insights they will gain on how to enhance their contributions to project
success.
Our emphasis is not only on how the management process works, but more
importantly, on why it works. The concepts, principles, and techniques are universally applicable. That is, the text does not specialize by industry type or project
scope. Instead, the text is written for the individual who will be required to manage a variety of projects in a variety of different organizational settings. In the
case of some small projects, a few of the steps of the techniques can be omitted,
but the conceptual framework applies to all organizations in which projects are
important to survival. The approach can be used in pure project organizations
such as construction, research organizations, and engineering consultancy firms.
At the same time, this approach will benefit organizations that carry out many
small projects while the daily effort of delivering products or services continues.
Content
In this latest edition of the book, we have responded to feedback received from
both students and teachers, which is deeply appreciated. As a result of the this
feedback, the following changes have been made to the fifth edition:
• Restructuring of text to include four supplemental chapters that cover topics
beyond the project management core.
• Inclusion of a supplemental chapter on agile project management which has
enjoyed success on new product and software development projects.
• Terms and concepts have been updated to be consistent with the fourth edition
of the Project Management Body of Knowledge (2008).
• Revised Chapter 14 to include project retrospectives. Chapters 2, 4, 6, 7, and 12,
have been updated.
• New student exercises and cases have been added to most chapters.
• Answers to selected exercises are now available in Appendix 1
• A third major computer exercise has been added to the Appendix 2;
• The “Snapshot from Practice” boxes feature a number of new examples of
project management in action as well as new research highlights that continue
to promote practical application of project management.
Overall the text addresses the major questions and issues the authors have encountered over their 60 combined years of teaching project management and consulting with practicing project managers in domestic and foreign environments. The
following questions represent the issues and problems practicing project managers
find consuming most of their effort: What is the strategic role of projects in contemporary organizations? How are projects prioritized? What organizational and
managerial styles will improve chances of project success? How do project managers orchestrate the complex network of relationships involving vendors, subcontractors, project team members, senior management, functional managers, and
customers that affect project success? What factors contribute to the development
of a high-performance project team? What project management system can be set
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Preface
ix
up to gain some measure of control? How do managers prepare for a new international project in a foreign culture? How does one pursue a career in project
management?
Project managers must deal with all these concerns to be effective. All of these
issues and problems represent linkages to an integrative project management view.
The chapter content of the text has been placed within an overall framework that
integrates these topics in a holistic manner. Cases and snapshots are included from
the experiences of practicing managers. The future for project managers appears
to be promising. Careers will be determined by success in managing projects.
Student Learning Aids
The text Web site (www.mhhe.com/larsongray5e) includes study outlines, online
quizzes, PowerPoint slides, videos, Microsoft Project Video Tutorials and Web
links. The trial version of Microsoft Project software is included on its own
CD-ROM free with the text.
Acknowledgments
We would like to thank Richard Bruce, Ottawa University for updating the Test
Bank and Online Quizzes; Charlie Cook, University of West Alabama for revising
the PowerPoint slides; Oliver F. Lehmann for providing access to PMBOK study
questions; and Mink for accuracy checking the text and Instructor’s Resource
Manual content.
Next, it is important to note that the text includes contributions from numerous
students, colleagues, friends, and managers gleaned from professional conversations. We want them to know we sincerely appreciate their counsel and suggestions.
Almost every exercise, case, and example in the text is drawn from a real-world
project. Special thanks to managers who graciously shared their current project as
ideas for exercises, subjects for cases, and examples for the text. Shlomo Cohen,
John A. Drexler, Jim Moran, John Sloan, Pat Taylor, and John Wold, whose work
is printed, are gratefully acknowledged. Special gratitude is due Robert Breitbarth
of Interact Management, who shared invaluable insights on prioritizing projects.
University students and managers deserve special accolades for identifying problems with earlier drafts of the text and exercises.
We are indebted to the reviewers of past editions who shared our commitment to
elevating the instruction of project management. The reviewers include Paul S.
Allen, Rice University; Denis F. Cioffi, George Washington University; Joseph
D. DeVoss, DeVry University; Edward J. Glantz, Pennsylvania State University;
Michael Godfrey, University of Wisconsin–Oshkosh; Robert Key, University of
Phoenix; Dennis Krumwiede, Idaho State University; Nicholas C. Petruzzi,
University of Illinois–Urbana/Champaign; William R. Sherrard, San Diego State
University; S. Narayan Bodapati, Southern Illinois University at Edwardsville;
Warren J. Boe, University of Iowa; Burton Dean, San Jose State University;
Kwasi Amoako-Gyampah, University of North Carolina–Greensboro; Owen P.
Hall, Pepperdine University; Bruce C. Hartman, University of Arizona; Richard Irving, York University; Robert T. Jones, DePaul University; Richard L.
Luebbe, Miami University of Ohio; William Moylan, Lawrence Technological
College of Business; Edward Pascal, University of Ottawa; James H. Patterson,
Indiana University; Art Rogers, City University; Christy Strbiak, U.S. Air Force
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Academy; David A. Vaughan, City University; and Ronald W. Witzel, Keller
Graduate School of Management. Nabil Bedewi, Georgetown University; Scott
Bailey, Troy University; Michael Ensby, Clarkson University; Eldon Larsen, Marshall University; Steve Machon, DeVry University–Tinley Park; William Matthews, William Patterson University; Erin Sims, DeVry University–Pomona;
Kenneth Solheim, DeVry University–Federal Way; and Oya Tukel, Cleveland
State University.
In the fifth edition we continue to commit to improving the text content and
improving instruction of project management. We are grateful to those reviewers
who provided helpful critiques and insights on the fourth edition, which helped us
prepare this revision. The reviewers for the fifth edition include. Gregory Anderson,
Weber State University; Dana Bachman, Colorado Christian University; Alan
Cannon, University of Texas, Arlington; Susan Cholette, San Francisco State;
Michael Ensby, Clarkson University; Charles Franz, University of Missouri,
Columbia; Raouf Ghattas, DeVry University; Robert Groff, Westwood College;
Raffael Guidone, New York City College of Technology; George Kenyon, Lamar
University; Elias Konwufine, Keiser University; Rafael Landaeta, Old Dominion
University; Muhammad Obeidat, Southern Polytechnic State University; Linda
Rose, Westwood College; Oya Tukel, Cleveland State University; and Mahmoud
Watad, William Paterson University. We thank you for your many thoughtful
suggestions and for making our book better. Of course we accept responsibility
for the final version of the text.
In addition, we would like to thank our colleagues in the College of Business at
Oregon State University for their support and help in completing this project. In
particular, we recognize Ray Brooks, Jim Moran and Ping-Hung Hsieh for their
helpful advice and suggestions. We also wish to thank the many students who
helped us at different stages of this project, most notably Neil Young, Rebecca
Keepers, Katherine Knox, Dat Nguyen, Lacey McNeely and Amanda Bosworth.
Mary Gray deserves special credit for editing and working under tight deadlines
on earlier editions. Special thanks go to Pinyarat Sirisomboonsuk for her help in
preparing the last two editions.
Finally, we want to extend our thanks to all the people at McGraw-Hill/Irwin
for their efforts and support. First, we would like to thank Dick Hercher for continuing to champion and provide editorial direction and guidance, and Gail
Korosa, who took over management of the book’s development fifth edition. And
we would also like to thank Denise Showers, Carol Blelski, Mary Sander, Jeremy
Cheshareck, Grey Bates, and Harvey Yep for managing the final production,
design, supplement, and media phases of the fifth edition.
Erik W. Larson
Clifford F. Gray
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Note to Student
You will find the content of this text highly practical, relevant, and current. The
concepts discussed are relatively simple and intuitive. As you study each chapter
we suggest you try to grasp not only how things work, but why things work. You
are encouraged to use the text as a handbook as you move through the three levels
of competency:
I know.
I can do.
I can adapt to new situations.
Project management is both people and technical oriented. Project management involves understanding the cause-effect relationships and interactions among
the sociotechnical dimensions of projects. Improved competency in these dimensions will greatly enhance your competitive edge as a project manager.
The field of project management is growing in importance and at an exponential rate. It is nearly impossible to imagine a future management career that does
not include management of projects. Résumés of managers will soon be primarily
a description of the individual’s participation in and contributions to projects.
Good luck on your journey through the text and on your future projects.
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Brief Contents
Preface
13. Progress and Performance
Measurement and Evaluation
vii
1. Modern Project Management
2
14. Project Closure
2. Organization Strategy and Project
Selection 22
4. Defining the Project
5. Estimating Project Times and
Costs 126
7. Managing Risk
156
APPENDIX
One Solutions to Selected Exercises
8. Scheduling Resources and Costs
9. Reducing Project Duration
252
Two Computer Project Exercises
304
10. Leadership: Being an Effective Project
Manager 338
374
12. Outsourcing: Managing
Interorganizational Relations
xii
564
18. Project Management Career Paths 602
210
11. Managing Project Teams
16. Oversight
532
17. An Introduction to Agile Project
Management 582
100
6. Developing a Project Plan
504
15. International Projects
3. Organization: Structure and Culture 64
452
418
GLOSSARY 642
ACRONYMS 651
PROJECT MANAGEMENT
EQUATIONS 652
INDEX 653
611
625
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Contents
Chapter 3
Organization: Structure and Culture
Preface vii
Chapter 1
Modern Project Management
What Is a Project?
Project Management Structures
2
5
The Importance of Project Management 10
Project Management Today—An Integrative
Approach 13
Integration of Projects with Organizational Strategy 13
Integration of Projects through Portfolio
Management 14
Integration of the Process of Implementing Actual
Projects 15
16
Four Activities of the Strategic Management
Process 26
79
What Is Organizational Culture? 79
Identifying Cultural Characteristics 82
100
Employing a Project Scope Checklist
Problem 1: The Implementation Gap 32
Problem 2: Organization Politics 33
Problem 3: Resource Conflicts and Multitasking
34
36
36
Applying a Selection Model 42
Sources and Solicitation of Project Proposals 43
Ranking Proposals and Selection of Projects 44
47
Balancing the Portfolio for Risks and Types of
Projects 48
Summary 49
Appendix 2.1: Request for Proposal (RFP)
Organizational Culture
77
Step 1: Defining the Project Scope 102
Scenario Planning: A Supplement to Traditional
Strategic Planning 30
The Need for an Effective Project Portfolio
Management System 32
Managing the Portfolio System
Organization Considerations
Project Considerations 77
Chapter 4
Defining the Project
The Strategic Management Process: An
Overview 24
Classification of the Project
Financial Criteria 37
Nonfinancial Criteria 39
What Is the Right Project Management
Structure? 77
Implications of Organizational Culture for
Organizing Projects 84
Summary 87
Chapter 2
Organization Strategy and Project
Selection 22
A Portfolio Management System
65
Organizing Projects within the Functional
Organization 66
Organizing Projects as Dedicated Teams 69
Organizing Projects within a Matrix
Arrangement 72
Different Matrix Forms 73
The Project Life Cycle 7
The Project Manager 10
Summary
64
60
102
Step 2: Establishing Project Priorities 106
Step 3: Creating the Work Breakdown Structure 108
Major Groupings Found in a WBS 108
How WBS Helps the Project Manager 109
WBS Development 109
Step 4: Integrating the WBS with the
Organization 113
Step 5: Coding the WBS for the Information
System 114
Responsibility Matrices 116
Project Communication Plan 119
Summary 121
Chapter 5
Estimating Project Times and Costs
126
Factors Influencing the Quality of Estimates
Estimating Guidelines for Times, Costs, and
Resources 129
128
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Top-Down Versus Bottom-Up Estimating 131
Methods for Estimating Project Times and
Costs 133
Top-Down Approaches for Estimating Project Times
and Costs 133
Bottom-Up Approaches for Estimating Project Times
and Costs 137
A Hybrid: Phase Estimating 139
Level of Detail 141
Types of Costs 142
Refining Estimates 144
Creating a Database for Estimating
Summary 147
Appendix 5.1: Learning Curves for
Estimating 151
Chapter 6
Developing a Project Plan
146
156
Developing the Project Network 157
From Work Package to Network 158
Constructing a Project Network 160
Terminology 160
Two Approaches 160
Basic Rules to Follow in Developing Project
Networks 161
Activity-on-Node (AON) Fundamentals 161
Network Computation Process 164
Forward Pass—Earliest Times 166
Backward Pass—Latest Times 168
Determining Slack (or Float) 169
Free Slack (Float) 171
Using the Forward and Backward Pass
Information 172
Level of Detail for Activities 173
Practical Considerations 173
Network Logic Errors 173
Activity Numbering 174
Use of Computers to Develop Networks 174
Calendar Dates 174
Multiple Starts and Multiple Projects 177
Extended Network Techniques to Come Closer to
Reality 177
Laddering 177
Use of Lags 178
An Example Using Lag Relationships—The Forward
and Backward Pass 181
Hammock Activities 183
Summary 184
Appendix 6.1: Activity-on-Arrow
Method 199
Chapter 7
Managing Risk
210
Risk Management Process 211
Step 1: Risk Identification 213
Step 2: Risk Assessment 216
Probability Analysis
219
Step 3: Risk Response Development
219
Mitigating Risk 219
Avoiding Risk 220
Transferring Risk 221
Retaining Risk 222
Contingency Planning 223
Technical Risks 224
Schedule Risks 225
Cost Risks 226
Funding Risks 226
Opportunity Management 227
Contingency Funding and Time Buffers
Budget Reserves 228
Management Reserves
Time Buffers 229
227
228
Step 4: Risk Response Control 229
Change Control Management 230
Summary 234
Appendix 7.1: PERT and PERT Simulation
Chapter 8
Scheduling Resources and Costs
242
252
Overview of the Resource Scheduling Problem 253
Types of Resource Constraints 255
Classification of a Scheduling Problem 257
Resource Allocation Methods 257
Assumptions 257
Time-Constrained Project: Smoothing Resource
Demand 257
Resource-Constrained Projects 259
Computer Demonstration of ResourceConstrained Scheduling 264
The Impacts of Resource-Constrained Scheduling
270
Splitting Activities 270
Benefits of Scheduling Resources 272
Assigning Project Work 272
Multiproject Resource Schedules 273
Using the Resource Schedule to Develop a Project
Cost Baseline 275
Why a Time-Phased Budget Baseline Is Needed
Creating a Time-Phased Budget 276
Summary 281
Appendix 8.1: The Critical-Chain Approach
275
295
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Chapter 9
Reducing Project Duration
Building High-Performance Project Teams
304
Rationale for Reducing Project Duration
Options for Accelerating Project
Completion 307
305
Options When Resources Are Not Constrained 308
Options When Resources Are Constrained 310
Project Cost–Duration Graph
Explanation of Project Costs
313
313
Constructing a Project Cost–Duration Graph
Determining the Activities to Shorten
A Simplified Example 316
Practical Considerations
314
314
Using the Project Cost–Duration Graph 318
Crash Times 319
Linearity Assumption 319
Choice of Activities to Crash Revisited 319
Time Reduction Decisions and Sensitivity 320
What if Cost, Not Time, Is the Issue?
Summary 323
The Art of Negotiating
347
349
423
431
1. Separate the People from the
Problem 432
2. Focus on Interests, Not Positions 433
3. Invent Options for Mutual Gain 434
4. When Possible, Use Objective Criteria 434
Dealing with Unreasonable People 435
A Note on Managing Customer Relations 436
Summary 438
Appendix 12.1: Contract Management 446
359
Chapter 13
Progress and Performance Measurement and
Evaluation 452
374
The Five-Stage Team Development Model
Situational Factors Affecting Team
Development 378
406
Well-Defined Requirements and Procedures 423
Extensive Training and Team-Building Activities 424
Well-Established Conflict Management Processes
in Place 426
Frequent Review and Status Updates 426
Co-Location When Needed 428
Fair and Incentive-Laden Contracts 429
Long-Term Outsourcing Relationships 430
Task-Related Currencies 345
Position-Related Currencies 346
Inspiration-Related Currencies 346
Relationship-Related Currencies 346
Personal-Related Currencies 347
Chapter 11
Managing Project Teams
405
Outsourcing Project Work 419
Best Practices in Outsourcing Project Work
Managing versus Leading a Project 339
Managing Project Stakeholders 340
Influence as Exchange 344
Ethics and Project Management 355
Building Trust: The Key to Exercising
Influence 357
Qualities of an Effective Project Manager
Summary 362
400
Chapter 12
Outsourcing: Managing Interorganizational
Relations 418
321
Mapping Dependencies 347
Management by Wandering Around (MBWA)
Managing Upward Relations 350
Leading by Example 352
Managing Virtual Project Teams
Project Team Pitfalls 404
Summary
Chapter 10
Leadership: Being an Effective Project
Manager 338
Social Network Building
380
Recruiting Project Members 381
Conducting Project Meetings 383
Establishing a Team Identity 387
Creating a Shared Vision 389
Managing Project Reward Systems 391
Orchestrating the Decision-Making
Process 393
Managing Conflict within the Project 396
Rejuvenating the Project Team 399
Groupthink 404
Bureaucratic Bypass Syndrome 404
Team Spirit Becomes Team Infatuation
Going Native 405
318
xv
377
Structure of a Project Monitoring Information
System 453
The Project Control Process 454
Monitoring Time Performance 455
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Development of an Earned Value Cost/Schedule
System 458
What Costs Are Included in Baselines?
Methods of Variance Analysis 461
461
Environmental Factors
Developing a Status Report: A Hypothetical
Example 463
Assumptions 463
Baseline Development 463
Development of the Status Report
Indexes to Monitor Progress
464
469
Performance Indexes 469
Project Percent Complete Index 469
Technical Performance Measurement 471
Software for Project Cost/Schedule Systems
Additional Earned Value Rules 471
Chapter 15
International Projects
532
534
Legal/Political 534
Security 535
Geography 536
Economic 536
Infrastructure 538
Culture 538
Project Site Selection 540
Cross-Cultural Considerations:
A Closer Look 541
471
Forecasting Final Project Cost 472
Other Control Issues 475
Scope Creep 475
Baseline Changes 477
The Costs and Problems of Data
Acquisition 478
Adjustments 542
Working in Mexico 545
Working in France 546
Working in Saudi Arabia 547
Working in China 549
Working in the United States 550
Summary Comments about Working in Different
Cultures 552
Culture Shock 553
Coping with Culture Shock 554
Summary 479
Appendix 13.1: The Application of Additional
Earned Value Rules 495
Appendix 13.2: Obtaining Project Performance
Information from MS Project 501
Selection and Training for International
Projects 555
Summary 558
Chapter 14
Project Closure
Chapter 16
Oversight 564
504
Types of Project Closure 506
Wrap-up Closure Activities 507
Creating the Final Report
Project Oversight
510
Post-Implementation Evaluation
511
Team Evaluation 511
Individual, Team Member, and Project Manager
Performance Reviews 514
Retrospectives
516
Why Retrospectives? 516
Initiating the Retrospective Review 517
Use of an Independent Facilitator 518
Roles of a Facilitator 518
Managing a Retrospective 519
Overseeing a Post-Project Retrospective 520
Utilization of Retrospectives 523
Archiving Retrospectives 523
Concluding Retrospective Notes 524
Summary 524
Appendix 14.1: Project Closeout Checklist 526
Appendix 14.2: Euro Conversion—Project Closure
Checklist 529
565
Importance of Oversight to the Project Manager
Portfolio Project Management 566
Project Office 566
Phase Gate Methodology 568
Organization Project Management in the
Long Run 574
Organization Project Management Maturity
The Balanced Scorecard Model 578
Summary
579
Chapter 17
An Introduction to Agile Project
Management 582
Traditional versus Agile Methods 583
Agile PM 585
Agile PM in Action: Scrum 585
Roles and Responsibilities 589
Scrum Meetings 590
Product and Sprint Backlogs 591
574
566
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Applying Agile PM to Large Projects
Limitations and Concerns 593
Summary 595
Chapter 18
Project Management Career Paths
Career Paths 603
Temporary Assignments 604
Pursuing a Career 605
Professional Training and Certification
Gaining Visibility 606
Mentors 607
Success in Key Projects 608
Summary 608
592
602
Appendix 1: Solutions to Selected
Exercises 611
Appendix 2: Computer Project
Exercises 625
Glossary
642
Acronyms
651
Project Management Equations
605
Index
653
652
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Modern Project Management
Estimate
5
Schedule
resources & costs
8
Project
networks
6
l
iona
rnat
Inte ojects
pr
15
Reducing
duration
9
Define
project
4
ht
Introduction
1
Strategy
2
Managing
risk
7
Organization
3
Leadership
10
Teams
11
Monitoring
progress
13
Project
closure
14
Outsourcing
12
Modern Project Management
What Is a Project?
The Importance of Project Management
Project Management Today—An Integrative Approach
Summary
Text Overview
2
16
17
Oversig
Agile
PM
18 Career
p
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All of mankind’s greatest accomplishments—from building the great pyramids to discovering a cure for polio to putting a man on the moon—began
as a project.
This is a good time to be reading a book about project management. Business leaders and experts have proclaimed that project management is a strategic imperative.
Project management provides people with a powerful set of tools that improves
their ability to plan, implement, and manage activities to accomplish specific organizational objectives. But project management is more than just a set of tools; it is
a results-oriented management style that places a premium on building collaborative relationships among a diverse cast of characters. Exciting opportunities await
people skilled in project management.
The project approach has long been the style of doing business in the construction
industry, U.S. Department of Defense contracts, and Hollywood as well as big consulting firms. Now project management has spread to all avenues of work. Today,
project teams carry out everything from port expansions to hospital restructuring to
upgrading information systems. They are creating next generation, fuel efficient vehicles, developing sustainable sources of energy, and exploring the farthest reaches of
outer space. The impact of project management is most profound in the electronics
industry, where the new folk heroes are young professionals whose Herculean efforts
lead to the constant flow of new hardware and software products.
Project management is not limited to the private sector. Project management is
also a vehicle for doing good deeds and solving social problems. Endeavors such
as providing emergency aid to the Gulf Coast devastated by hurricane Katrina,
devising a strategy for reducing crime and drug abuse within a city, or organizing
a community effort to renovate a public playground would and do benefit from
the application of modern project management skills and techniques.
Perhaps the best indicator of demand for project management can be seen in
the rapid expansion of the Project Management Institute (PMI), a professional
organization for project managers. PMI membership has grown from 93,000 in
2002 to more than 270,000 currently. See the PMI Snapshot from Practice for
information regarding professional certification in project management.
It’s nearly impossible to pick up a newspaper or business periodical and not
find something about projects. This is no surprise! Approximately $2.5 trillion
(about 25 percent of the U.S. gross national product) are spent on projects each
year in the United States alone. Other countries are increasingly spending more
on projects. Millions of people around the world consider project management
the major task in their profession.
Project management is not without problems. The Standish Group has tracked
the management of information technology (IT) projects since 1994. This firm’s
periodic landmark reports summarize the continued need for improved project
management. For over a decade the Standish Reports of management of IT
projects showed improvements. In 1994 approximately 16 percent of IT projects
were completed on time, on budget; in 2004 the success rate moved up to 29 percent.
3
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SNAPSHOT FROM PRACTICE
The Project Management Institute (PMI) was
founded in 1969 as an international society for
project managers. Today PMI has members from
more than 125 countries and more than 270,000
members. PMI professionals come from virtually every major industry, including aerospace, automotive, business management,
construction, engineering, financial services, information technology, pharmaceuticals, health care, and telecommunications.
PMI provides certification as a Project Management Professional (PMP)—someone who has documented sufficient
project experience, agreed to follow the PMI code of professional conduct, and demonstrated mastery of the field of project management by passing a comprehensive examination.
The number of people earning PMP status has grown dramatically in recent years. In 1996 there were fewer than 3,000 certified project management professionals. By the end of 2009
there were more than 350,000 PMPs!
The Project Management Institute
Just as the CPA exam is a standard for accountants,
passing the PMP exam may become the standard for project
managers. Some companies are requiring that all their
project managers be PMP certified. Moreover, many job
postings are restricted to PMPs. Job seekers, in general, are
finding that being PMP certified is an advantage in the
marketplace.
PMI recently added a certification as a Certified Associate in Project Management (CAPM). CAPM is designed for
project team members and entry-level project managers, as
well as qualified undergraduate and graduate students who
want a credential to recognize their mastery of the project
management body of knowledge. CAPM does not require
the extensive project management experience associated
with the PMP. For more details on PMP and CAPM, “google”
PMI to find the current Web site for the Project Management Institute.
Failed projects also declined from 31 percent in 1994 to 18 percent in 2004. However, the CHAOS Summary 2009 report shows a small decrease in the numbers.
This survey report shows only 32 percent of IT projects were delivered on time
and within budget. However, 44 percent were “challenged,” which means they
were late, over budget, and/or missed meeting performance requirements. In addition, 24 percent failed, were cancelled, or never used. Jim Crear, Standish Group
CIO, notes this is the highest failure rate in over a decade.
The need for elevating performance continues to challenge the project management profession. The waste on failed projects and cost overruns is estimated in the
neighborhood of over $150 billion!
Most of the people who excel at managing projects never have the title of project
manager. They include accountants, lawyers, administrators, scientists, contractors,
public health officials, teachers, and community advocates whose success depends
upon being able to lead and manage project work. For them project management
is not a title but a critical job requirement. It is hard to think of a profession or a
career path that would not benefit from being good at managing projects.
Not only is project management critical to most careers, the skill set is transferable across most businesses and professions. At its core, project management
fundamentals are universal. The same project management methodology that is
used to develop a new product can be adapted to create new services, organize
events, refurbish aging operations, and so forth. In a world where it is estimated
that each person is likely to experience three to four career changes, managing
projects is a talent worthy of development.
The significance of project management can also be seen in the classroom. Twenty
years ago major universities offered one or two classes in project management,
primarily for engineers. Today, most universities offer multiple sections of project
management classes, with the core group of engineers being supplemented by
business students majoring in marketing, management information systems (MIS),
and finance, as well as students from other disciplines such as oceanography, health
sciences, computer sciences, and liberal arts. These students are finding that their
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Modern Project Management 5
exposure to project management is providing them with distinct advantages when
it comes time to look for jobs. More and more employers are looking for graduates
with project management skills. The logical starting point for developing these
skills is understanding the uniqueness of a project and of project managers.
What Is a Project?
What do the following headlines have in common?
Superbowl half-time show scores a touchdown
Citywide WiFi system set to go live
1000 acre Wind Farm turns on the juice
Apple’s new iPhone hits the market
City receives stimulus funds to expand light rail system
All of these events represent projects.
Photo by: Paul Drinkwater/NBCU Photobank via AP Images
The Project Management Institute provides the following definition of a project:
A project is a temporary endeavor undertaken to create a unique product, service, or result.
Like most organizational effort, the major goal of a project is to satisfy a customer’s
need. Beyond this fundamental similarity, the characteristics of a project help
differentiate it from other endeavors of the organization. The major characteristics
of a project are as follows:
1.
2.
3.
4.
5.
An established objective.
A defined life span with a beginning and an end.
Usually, the involvement of several departments and professionals.
Typically, doing something that has never been done before.
Specific time, cost, and performance requirements.
First, projects have a defined objective—whether it is constructing a 12-story
apartment complex by January 1 or releasing version 2.0 of a specific software
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Modern Project Management
package as quickly as possible. This singular purpose is often lacking in daily organizational life in which workers perform repetitive operations each day.
Second, because there is a specified objective, projects have a defined endpoint,
which is contrary to the ongoing duties and responsibilities of traditional jobs. In
many cases, individuals move from one project to the next as opposed to staying in
one job. After helping to install a security system, an IT engineer may be assigned
to develop a database for a different client.
Third, unlike much organizational work that is segmented according to functional specialty, projects typically require the combined efforts of a variety of specialists. Instead of working in separate offices under separate managers, project
participants, whether they be engineers, financial analysts, marketing professionals, or quality control specialists, work closely together under the guidance of a
project manager to complete a project.
The fourth characteristic of a project is that it is nonroutine and has some
unique elements. This is not an either/or issue but a matter of degree. Obviously,
accomplishing something that has never been done before, such as building a
hybrid (electric/gas) automobile or landing two mechanical rovers on Mars, requires
solving previously unsolved problems and breakthrough technology. On the other
hand, even basic construction projects that involve established sets of routines and
procedures require some degree of customization that makes them unique.
Finally, specific time, cost, and performance requirements bind projects. Projects are evaluated according to accomplishment, cost, and time spent. These triple
constraints impose a higher degree of accountability than you typically find in
most jobs. These three also highlight one of the primary functions of project management, which is balancing the trade-offs between time, cost, and performance
while ultimately satisfying the customer.
What a Project Is Not Projects should not be confused with everyday work. A project is not routine, repetitive work! Ordinary daily work typically requires doing the
same or similar work over and over, while a project is done only once; a new product
or service exists when the project is completed. Examine the list in Table 1.1 that compares routine, repetitive work and projects. Recognizing the difference is important
because too often resources can be used up on daily operations which may not contribute to longer range organization strategies that require innovative new products.
Program versus Project In practice the terms project and program cause confusion.
They are often used synonymously. A program is a group of related projects designed
to accomplish a common goal over an extended period of time. Each project within a
program has a project manager. The major differences lie in scale and time span.
Program management is the process of managing a group of ongoing, interdependent, related projects in a coordinated way to achieve strategic objectives. For
TABLE 1.1
Comparison of
Routine Work with
Projects
Routine, Repetitive Work
Projects
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
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 3 4 inches, interfaces with PC, and
stores 10,000 songs
Wire-tag projects for GE and Wal-Mart
Attaching tags on a manufactured product
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Modern Project Management 7
example, a pharmaceutical organization could have a program for curing cancer. The
cancer program includes and coordinates all cancer projects that continue over an extended time horizon. Coordinating all cancer projects under the oversight of a cancer
team provides benefits not available from managing them individually. This cancer
team also oversees the selection and prioritizing of cancer projects that are included
in their special “Cancer” portfolio. Although each project retains its own goals and
scope, the project manager and team are also motivated by the higher program goal.
Program goals are closely related to broad strategic organization goals.
The Project Life Cycle
Another way of illustrating the unique nature of project work is in terms of the
project life cycle. Some project managers find it useful to use the project life cycle
as the cornerstone for managing projects. The life cycle recognizes that projects
have a limited life span and that there are predictable changes in level of effort and
focus over the life of the project. There are a number of different life-cycle models
in project management literature. Many are unique to a specific industry or type
of project. For example, a new software development project may consist of five
phases: definition, design, code, integration/test, and maintenance. A generic cycle
is depicted in Figure 1.1.
The project life cycle typically passes sequentially through four stages: defining,
planning, executing, and delivering. The starting point begins the moment the
project is given the go-ahead. Project effort starts slowly, builds to a peak, and
then declines to delivery of the project to the customer.
1. Defining stage: Specifications of the project are defined; project objectives are
established; teams are formed; major responsibilities are assigned.
2. Planning stage: The level of effort increases, and plans are developed to determine what the project will entail, when it will be scheduled, whom it will benefit, what quality level should be maintained, and what the budget will be.
FIGURE 1.1
Project Life Cycle
Level of effort
Executing
Planning
Closing
Defining
Start
Defining
1. Goals
2. Specifications
3. Tasks
4. Responsibilities
Time
Planning
1. Schedules
2. Budgets
3. Resources
4. Risks
5. Staffing
Executing
1. Status reports
2. Changes
3. Quality
4. Forecasts
End
Closing
1. Train customer
2. Transfer documents
3. Release resources
4. Evaluation
5. Lessons learned
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Project Management in Action: 2009
© The McGraw-Hill Companies, Inc./Jill Braaten, photographer.
Businesses thrive and survive based on their ability to manage
projects that produce products and services that meet market
needs. Below is a small sample of projects that are important
to their company’s future.
COMPANY: OAKLAND A’s BASEBALL TEAM
Project: Cisco Stadium
According to Internet rumors, the new console will be based
on entirely new hardware that will pump out HD visuals, contain expanded storage, and run using digitally distributed
content rather than physical discs. The new console will
expand the capability of Wii’s revolutionary handheld pointer
device that detects movement in three dimensions. At
stake is Nintendo’s position in the $10 billion plus gaming
industry.
In November 2006, the future of the Oakland A’s looked bright as
the team announced plans to build a new ballpark in Fremont,
CA. Upon announcing plans to build a ballpark, the Oakland
A’s sold the naming rights to the ballpark to Cisco Systems for
$4 million/year over 30 years. The ballpark design mimicked classic ballparks of the past, while combining the most advanced
technology in the world. Those plans have since been derailed as
opposition increased from major retailers and homeowners near
the stadium site. It now appears that the A’s will have to develop
a plan that may lead the team to building the ballpark in Oakland,
near the coliseum, or possibly in San Jose, CA. The A’s need the
new stadium to turn around lagging attendance, which has been
at or near the bottom among major league baseball clubs.
—C. Faylor, 2008
—BBoA, 2009
COMPANY: NINTENDO
Project: Next Generation Nintendo Wii Game Console
3. Executing stage: A major portion of the project work takes place—both
physical and mental. The physical product is produced (a bridge, a report, a
software program). Time, cost, and specification measures are used for control. Is the project on schedule, on budget, and meeting specifications? What
are the forecasts of each of these measures? What revisions/changes are
necessary?
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COMPANY: GENERAL MOTORS
Project: Chevrolet Volt
The Chevrolet Volt is a plug-in hybrid electric vehicle to go on
sale in 2011. Unlike most currently available hybrids, the actual
propulsion of the Volt is accomplished exclusively by the electric motor, and the internal combustion engine is used as another charging method. What’s at stake is the future of GM.
With the company’s recent emergence from bankruptcy protection, the chief of GM product development, Tom Stephens,
pronounced, “We cannot afford to have anything but a hit . . .
every launch . . . has to be a home-run.”
—T. Krisher, 2009
COMPANY: KOREAN MIDLAND POWER CO
Project: World’s Largest Tidal Turbine Farm
Korean Midland Power Co. has signed an agreement with
Lunar Energy, Britain’s leading tidal power company, to build a
colossal 300 turbine field in the Wando Hoenggan WaterWay
off the South Korean coast by 2015. The $800 million plus project is expected to provide 300MW of renewable energy, enough
to power 200,000 homes. The project entails installing a series
of 60 ft-high tidal turbines in deep ocean water. A 1MW pilot
plant would be installed first to evaluate the environmental impact before the full-blown is allowed. If successful, the ecological impact is expected to be much less than conventional
tidal barges which destroy bird habitats and hinder the passage of migratory fish such as salmon and eels.
—Lunar Energy, 2008
COMPANY: MOTOROLA
Project: Google Android Smart Phones
Motorola is set to release multiple Google Android smart
phones at several different price points. According to chief
executive Sanjay Jha, Android has over 3,000 third-party
Modern Project Management 9
applications available and “significant developer interest”
making it a “large enough eco-system” to become a successful platform. Motorola has seen its phone sales plummet in recent years. The company’s global market share has declined
to 6 percent after commanding 23 percent in 2006. The new
phones are seen as a key to Motorola re-establishing itself in
the booming smart phone business.
—S. Segan, 2009
COMPANY: WARNER BROTHERS
Project: Harry Potter and the Deathly Hallows Part I and
Part II
The Harry Potter film franchise is the second highest grossing
film franchise of all time, with the five films released to date only
slightly behind the 22 James Bond films. The adaption of the final
novel in the series, Harry Potter and the Deathly Hallows, will be
split into two films, with Part I scheduled to be released in 2010
and Part II in 2011. The Harry Potter franchise is seen by movie insiders as critical to staving off the general decline in movie attendance due to economic woes and home entertainment systems.
—J. Kay, 2009
COMPANY: HUMAN GENOMIC SCIENCES
Project: Benlysta
The new drug, Benlysta, is the first treatment for lupus in decades to show potential far into the testing phase. Lupus is a
chronic autoimmune disease in which the body attacks its
own healthy tissue. Symptoms include fatigue, headaches,
joint pain, light sensitivity, and rashes. Benlysta targets the
specific protein that becomes overactive, causing the body to
attack its own organs. At stake is relief for the millions of sufferers of lupus worldwide.
—C. Rothman, 2009
4. Closing stage: Closing includes three activities: delivering the project product to
the customer, redeploying project resources, and post-project review. Delivery of
the project might include customer training and transferring documents. Redeployment usually involves releasing project equipment/materials to other projects
and finding new assignments for team members. Post-project reviews include not
only assessing performance but also capturing lessons learned.
In practice, the project life cycle is used by some project groups to depict the
timing of major tasks over the life of the project. For example, the design team
might plan a major commitment of resources in the defining stage, while the quality team would expect their major effort to increase in the latter stages of the project life cycle. Because most organizations have a portfolio of projects going on
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concurrently, each at a different stage of each project’s life cycle, careful planning
and management at the organization and project levels are imperative.
The Project Manager
In a small sense project managers perform the same functions as other managers.
That is, they plan, schedule, motivate, and control. However, what makes them
unique is that they manage temporary, nonrepetitive activities, to complete a fixed
life project. Unlike functional managers, who take over existing operations, project
managers create a project team and organization where none existed before. They
must decide what and how things should be done instead of simply managing set
processes. They must meet the challenges of each phase of the project life cycle,
and even oversee the dissolution of their operation when the project is completed.
Project managers must work with a diverse troupe of characters to complete
projects. They are typically the direct link to the customer and must manage
the tension between customer expectations and what is feasible and reasonable.
Project managers provide direction, coordination, and integration to the project
team, which is often made up of part-time participants loyal to their functional
departments. They often must work with a cadre of outsiders—vendors, suppliers,
subcontractors—who do not necessarily share their project allegience.
Project managers are ultimately responsible for performance (frequently with
too little authority). They must ensure that appropriate trade-offs are made between the time, cost, and performance requirements of the project. At the same
time, unlike their functional counterparts, project managers generally possess only
rudimentary technical knowledge to make such decisions. Instead, they must orchestrate the completion of the project by inducing the right people, at the right
time, to address the right issues and make the right decisions.
While project management is not for the timid, working on projects can be an
extremely rewarding experience. Life on projects is rarely boring; each day is different from the last. Since most projects are directed at solving some tangible
problem or pursuing some useful opportunity, project managers find their work
personally meaningful and satisfying. They enjoy the act of creating something
new and innovative. Project managers and team members can feel immense pride
in their accomplishment, whether it is a new bridge, a new product, or needed service. Project managers are often stars in their organization and well compensated.
Good project managers are always in demand. Every industry is looking for effective people who can get the right things done on time. Clearly, project management is
a challenging and exciting profession. This text is intended to provide the necessary
knowledge, perspective, and tools to enable students to accept the challenge.
The Importance of Project Management
Project management is no longer a special-need management. It is rapidly becoming a standard way of doing business. See Snapshot from Practice: Project Management in Action: 2009. An increasing percentage of the typical firm’s effort is
being devoted to projects. The future promises an increase in the importance and
the role of projects in contributing to the strategic direction of organizations. Several reasons why this is the case are briefly discussed below.
Compression of the Product Life Cycle
One of the most significant driving forces behind the demand for project management is the shortening of the product life cycle. For example, today in high-tech
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industries the product life cycle is averaging 1 to 3 years. Only 30 years ago, life
cycles of 10 to 15 years were not uncommon. Time to market for new products with
short life cycles has become increasingly important. A common rule of thumb in the
world of high-tech product development is that a six-month project delay can result
in a 33 percent loss in product revenue share. Speed, therefore, becomes a competitive advantage; more and more organizations are relying on cross-functional project
teams to get new products and services to the market as quickly as possible.
Knowledge Explosion
The growth in new knowledge has increased the complexity of projects because projects encompass the latest advances. For example, building a road 30 years ago was a
somewhat simple process. Today, each area has increased in complexity, including
materials, specifications, codes, aesthetics, equipment, and required specialists. Similarly, in today’s digital, electronic age it is becoming hard to find a new product that
does not contain at least one microchip. Product complexity has increased the need to
integrate divergent technologies. Project management has emerged as an important
discipline for achieving this task.
Triple Bottom Line (planet, people, profit)
The threat of global warming has brought sustainable business practices to the forefront. Businesses can no longer simply focus on maximizing profit to the detriment of
the environment and society. Efforts to reduce carbon imprint and utilize renewable
resources are realized through effective project management. The impact of this movement towards sustainability can be seen in changes in the objectives and techniques
used to complete projects. See Snapshot from Practice: Dell’s Children Becomes
World’s First “Green” Hospital.
Corporate Downsizing
The last decade has seen a dramatic restructuring of organizational life. Downsizing (or rightsizing if you are still employed) and sticking to core competencies
have become necessary for survival for many firms. Middle management is a mere
skeleton of the past. In today’s flatter and leaner organizations, where change is a
constant, project management is replacing middle management as a way of ensuring that things get done. Corporate downsizing has also led to a change in the way
organizations approach projects. Companies outsource significant segments of
project work, and project managers have to manage not only their own people but
also their counterparts in different organizations.
Increased Customer Focus
Increased competition has placed a premium on customer satisfaction. Customers
no longer simply settle for generic products and services. They want customized
products and services that cater to their specific needs. This mandate requires a much
closer working relationship between the provider and the receiver. Account executives and sales representatives are assuming more of a project manager’s role as they
work with their organization to satisfy the unique needs and requests of clients.
Increased customer attention has also prompted the development of customized
products and services. For example, 10 years ago buying a set of golf clubs was a relatively simple process: You picked out a set based on price and feel. Today, there are
golf clubs for tall players and short players, clubs for players who tend to slice the
ball and clubs for those who hook the ball, high-tech clubs with the latest metallurgic
discovery guaranteed to add distance, and so forth. Project management is critical
both to development of customized products and services and to sustaining lucrative
relationships with customers.
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SNAPSHOT FROM PRACTICE
Dateline 1/7/2009, Austin Texas: Dell Children’s
Medical Center becomes the first hospital in
the world to receive platinum LEED (Leadership in Energy & Environmental Design) certification. Platinum certification is the highest award granted by
the U.S. Green Building Council.
Dell Children’s occupies nearly one-half million square feet
on 32 acres that were once part of Austin’s old Mueller Airport.
Its environmentally sensitive design not only conserves water
and electricity, but positively impacts the hospital’s clinical
environment by improving air quality, making natural sunlight
readily available, and reducing a wide range of pollutants.
In order to receive LEED certification, buildings are rated in
five key areas: sustainable site development, water savings,
energy efficiency, materials selection, and environmental
quality. Listed below are some of the accomplishments in each
LEED category:
Sustainable Site
•
47,000 tons of Mueller Airport runway material was reused
on site.
•
About 40 percent fly ash instead of Portland cement in concrete yields a drop in carbon dioxide emissions equivalent
to taking 450 cars off the road.
•
925 tons of construction waste was recycled on site.
Water Efficiency and Water Conservation
•
Reclaimed water is used for irrigation; xeriscaped landscaping uses native plants, which require less water.
•
Low-flow plumbing fixtures.
Dell Children’s Becomes World’s First
“Green” Hospital*
Energy Efficiency and Energy Conservation
•
An on-site natural gas turbine supplies all electricity, which
is 75 percent more efficient than coal-fired plants.
•
Converted steam energy from a heating/cooling plant supplies all chilled water needs.
Indoor Environment Quality and Lighting
•
Most interior spaces are within 32 feet of a window.
•
Motion and natural light sensors shut off unneeded lights.
Conservation of Materials and Resources
•
Use of local and regional materials saves fuel for
shipping.
•
Special paints and flooring emit low levels of volatile organic compounds (VOCs).
“Even before the first plans were drawn up, we set our sight
on creating a world-class children’s hospital, and becoming
the first LEED Platinum hospital in the world was definitely part
of that,” said Robert Bonar, president and CEO, Dell Children’s
Medical Center of Central Texas. “Our motivation to pursue
LEED Platinum was not just environmental. Being a ‘green’
hospital has profound, measurable effect on healing. What’s
good for the environment and good for our neighbors is also
good for our patients.”
* Austin Business Journal, 1-11-2009; www.dellchildrens.net/about_us/
news/2009/01/08
Small Projects Represent Big Problems
The velocity of change required to remain competitive or simply keep up has created an organizational climate in which hundreds of projects are implemented
concurrently. This climate has created a multiproject environment and a plethora of new problems. Sharing and prioritizing resources across a portfolio of
projects is a major challenge for senior management. Many firms have no idea
of the problems involved with inefficient management of small projects. Small
projects typically carry the same or more risk as do large projects. Small projects
are perceived as having little impact on the bottom line because they do not demand large amounts of scarce resources and/or money. Because so many small
projects are going on concurrently and because the perception of the inefficiency
impact is small, measuring inefficiency is usually nonexistent. Unfortunately,
many small projects soon add up to large sums of money. Many customers and
millions of dollars are lost each year on small projects in product and service
organizations. Small projects can represent hidden costs not measured in the
accounting system.
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Organizations with many small projects going on concurrently face the most
difficult project management problems. A key question becomes one of how to
create an organizational environment that supports multiproject management. A
process is needed to prioritize and develop a portfolio of small projects that supports the mission of the organization.
In summary, there are a variety of environmental forces interacting in today’s
business world that contribute to the increased demand for good project management across all industries and sectors. Project management appears to be ideally
suited for a business environment requiring accountability, flexibility, innovation,
speed, and continuous improvement.
Project Management Today—An Integrative Approach
Competing in a global market influenced by rapid change, innovation, and time
to market means organizations manage more and more projects. Some means for
coordinating and managing projects in this changing environment is needed.
Centralization of project management processes and practices has been the practical outcome. For example, Dell, IBM, Hewlett-Packard, and Intel all have over
1,000 projects being implemented concurrently every day of the year across borders and differing cultures. Questions: How do these organizations oversee the
management of all these projects? How were these projects selected? How do they
ensure performance measurement and accountability? How can project management
continually improve? Centralization entails integration of all project processes and
practices to improve project management.
Integration is designed to improve project management in the whole organization over the long haul. The rationale for integration of project management was
to provide senior management with:
•
•
•
•
An overview of all project management activities;
A big picture of how organizational resources are being used;
An assessment of the risk their portfolio of projects represents;
A rough metric for measuring the improvement of managing projects relative
to others in the industry;
• Linkages of senior management with actual project execution management.
Full insight of all components of the organization is crucial for aligning internal
business resources with the requirements of the changing environment. Integration
enables management to have greater flexibility and better control of all project
management activities.
Operationally, what does project management integration mean? It necessitates
combining all of the major dimensions of project management under one umbrella.
Each dimension is connected in one seamless, integrated domain. Integration means
applying a set of knowledge, skills, tools, and techniques to a collection of projects
in order to move the organization toward its strategic goals. This integration movement represents a major thrust of project driven organizations across all industries.
See Figure 1.2, Integrated Management of Projects.
Integration of Projects with Organizational Strategy
Today, projects are the modus operandi for implementing strategy. Yet in some organizations, selection and management of projects often fail to support the strategic
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FIGURE 1.2
Organizational Culture
Environment
Integrated
Management of
Projects
Strategic
Alignment
Portfolio
Management
Project
Management
plan of the organization. Strategic plans are written by one group of managers, projects selected by another group, and projects implemented by another. These independent decisions by different groups of managers create a set of conditions leading to
conflict, confusion, and frequently an unsatisfied customer. Under these conditions,
resources of the organization are wasted in non-value-added activities/projects.
Since projects are the modus operandi, strategic alignment of projects is of major
importance to conserving and effective use of organization resources. Selection
criteria need to ensure each project is prioritized and contributes to strategic goals.
Anything less is a waste of scarce organizational resources—people, capital, and
equipment. Ensuring alignment requires a selection process that is systematic,
open, consistent, and balanced. All of the projects selected become part of a project portfolio that balances the total risk for the organization. Management of the
project portfolio ensures that only the most valuable projects are approved and
managed across the entire organization.
Integration of Projects through Portfolio Management
The portfolio management domain encompasses project management oversight
at the organization level through the project level. Management has the capability to zoom to a wide-angle view or zoom in to a very specific element of a specific project activity or process. Full insight of all components of the organization
is crucial for aligning internal business resources with the requirements of the
changing environment. Project portfolios are frequently managed by a project office that serves as a bridge between senior management and project managers
and teams. The major functions of portfolio management are to
•
•
•
•
Oversee project selection.
Monitor aggregate resource levels and skills.
Encourage use of best practices.
Balance projects in the portfolio in order to represent a risk level appropriate to
the organization.
• Improve communication among all stakeholders.
• Create a total organization perspective that goes beyond silo thinking.
• Improve the overall management of projects over time.
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Portfolio management manages the integration of elements of organizational
strategy with projects, along with their interdependencies. At the project level, the
management of the portfolio is directed toward creation and use of best
practices.
Integration of the Processes of Implementing Actual Projects
Senior management is often involved in selecting projects but seldom involved in
implementing them. Implementing the project is the challenge.
There are two dimensions within the actual execution of projects (see Figure 1.3,
The Technical and Sociocultural Dimensions of the Project Management Process). The first dimension is the technical side of the management process, which
consists of the formal, disciplined, purely logical parts of the process. This technical dimension includes planning, scheduling, and controlling projects. Clear
project scope statements are written to link the project and customer and to facilitate planning and control. Creation of the deliverables and work breakdown
structures facilitates planning and monitoring the progress of the project. The
work breakdown structure serves as a database that links all levels in the organization, major deliverables, and all work—right down to the tasks in a work package. Effects of project changes are documented and traceable. Thus, any change
in one part of the project is traceable to the source by the integrated linkages of
the system. This integrated information approach can provide all project managers and the customer with decision information appropriate to their level and
needs. A successful project manager will be well trained in the technical side of
managing projects.
The second and opposing dimension is the sociocultural side of project management. In contrast to the orderly world of project planning, this dimension involves
the much messier, often contradictory and paradoxical world of implementation. It
centers on creating a temporary social system within a larger organizational environment that combines the talents of a divergent set of professionals working to
FIGURE 1.3
The Technical and
Sociocultural
Dimensions of the
Project Management
Process
Sociocultural
Leadership
Problem solving
Teamwork
Negotiation
Politics
Customer expectations
Technical
Scope
WBS
Schedules
Resource allocation
Baseline budgets
Status reports
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Research Highlight
The phrase “works well with others” has long
been a staple on grade school report cards; now,
in the IT world, it’s the No. 1 criterion for management candidates. In a nationwide survey conducted in 1999, 27 percent of chief information
officers (CIOs) cited strong interpersonal skills as
the single most important quality for reaching management
levels. Advanced technical skills came in second, receiving
23 percent of the response.
The project was sponsored by RHI Consulting, which provides information technology professionals on a project basis. An independent research firm was hired to administer the
survey. Over 1,400 CIOs responded to the questionnaire.
Survey respondents were also asked:
In 2005, how frequently will employees in your IT department work on project-based teams with members of other
departments throughout the company?
Works Well with Others*
Their responses:
Very frequently
Somewhat frequently
Somewhat infrequently
Very infrequently
Never
57%
26%
10%
6%
1%
Greg Scileppi, RHI Consulting’s executive director, recommends that IT professionals develop their interpersonal skills.
“The predominance of project teams has created a corresponding need for strong communication and team-player
abilities. Technical staff put these skills to test daily as they
work with employees at all levels to create and implement IT
solutions ranging from simple troubleshooting to corporate
web initiatives and system wide upgrades.”
* Joanita M. Nellenbach, “People Skills Top Technical Knowledge, CIOs
Insist,” PMNetwork (August 1999), pp. 7–8.
complete the project. See Research Highlight: Works Well with Others. Project
managers must shape a project culture that stimulates teamwork and high levels
of personal motivation as well as a capacity to quickly identify and resolve problems that threaten project work. This dimension also involves managing the interface between the project and external environment. Project managers have to
assuage and shape expectations of customers, sustain the political support of top
management, negotiate with their functional counterparts, monitor subcontractors, and so on. Overall, the manager must build a cooperative social network
among a divergent set of allies with different standards, commitments, and
perspectives.
Some suggest that the technical dimension represents the “science” of project
management while the sociocultural dimension represents the “art” of managing a
project. To be successful, a manager must be a master of both. Unfortunately, some
project managers become preoccupied with the planning and technical dimension
of project management. Often their first real exposure to project management is
through project management software, and they become infatuated with network
charts, Gantt diagrams, and performance variances; they attempt to manage a
project from a distance. Conversely, there are other managers who manage projects
by the “seat of their pants,” relying heavily on team dynamics and organizational
politics to complete a project. Good project managers balance their attention to
both the technical and sociocultural aspects of project management.
Summary
16
There are powerful environmental forces contributing to the rapid expansion of
project management approaches to business problems and opportunities. A project
is defined as a nonroutine, one-time effort limited by time, resources, and performance specifications designed to meet customer needs. One of the distinguishing
characteristics of project management is that it has both a beginning and an end
and typically consists of four phases: defining, planning, executing, and closing.
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Effective project management begins with selecting and prioritizing projects that
support the firm’s mission and strategy. Successful implementation requires both
technical and social skills. Project managers have to plan and budget projects as
well as orchestrate the contributions of others.
Text Overview
This text is written to provide the reader with a comprehensive, integrative understanding of the project management process. The text focuses both on the science
of project management and the art of managing projects. Following this introductory chapter, Chapter 2 focuses on how organizations go about evaluating
and selecting projects. Special attention is devoted to the importance of linking
project selection to the mission and strategy of the firm. The organizational
environment in which projects are implemented is the focus of Chapter 3. The
discussion of matrix management and other organizational forms is augmented
by a discussion of the role the culture of an organization plays in the implementation of projects.
The next six chapters focus on developing a plan for the project; after all, project success begins with a good plan. Chapter 4 deals with defining the scope of the
project and developing a work breakdown structure (WBS). The challenge of
formulating cost and time estimates is the subject of Chapter 5. Chapter 6 focuses
on utilizing the information from the WBS to create a project plan in the form of
a timed and sequenced network of activities.
Risks are a potential threat to project management, and Chapter 7 examines
how organizations and managers identify and manage risks associated with project work. Resource allocation is added to the plan in Chapter 8 with special attention devoted to how resource limitations impact the project schedule. After a
resource schedule is established, a project time-phased budget is developed. Finally, Chapter 9 examines strategies for reducing (“crashing”) project time either
prior to the initiation of the project or in response to problems or new demands
placed on the project.
Chapters 10 through 12 focus on project implementation and the sociocultural
side of project management, beginning with Chapter 10, which focuses on the
role of the project manager as a leader and stresses the importance of managing
project stakeholders within the organization. Chapter 11 focuses on the core
project team; it combines the latest information on team dynamics with leadership
skills/techniques for developing a high-performance project team. Chapter 12
continues the theme of managing project stakeholders by discussing how to outsource project work and negotiate with contractors, customers, and suppliers.
Chapter 13 focuses on the kinds of information managers use to monitor project progress, with special attention devoted to the key concept of earned value.
The project life cycle is completed with Chapter 14, which covers closing out a
project and the important assessment of performance and lessons learned. Four
“supplemental” chapters are included to augment the project management core.
Implementation of project management in multicultural, international environments is the subject of Chapter 15. Chapter 16 focuses the need for organizational
oversight and how it impacts the management of projects. The emergence of agile
project management, a more flexible approach to managing complex projects, is
the subject of Chapter 17. Finally, Chapter 18 concludes with coverage of career
issues in the field of project management.
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Throughout this text you will be exposed to the major aspects of the project
management system. However, a true understanding of project management
comes not from knowing what a scope statement is, or the critical path, or partnering with contractors, but from comprehending how the different elements of
the project management system interact to determine the fate of a project. If, by
the end of this text, you come to appreciate and begin to master both the technical
and sociocultural dimensions of project management, you should have a distinct
competitive advantage over others aspiring to work in the field of project
management.
Key Terms
Program, 6
Project, 5
Project life cycle, 6
Review
Questions
1. Define a project. What are five characteristics that help differentiate projects
from other functions carried out in the daily operations of the organization?
2. What are some of the key environmental forces that have changed the way projects are managed? What has been the effect of these forces on the management
of projects?
3. Why is the implementation of projects important to strategic planning and the
project manager?
4. The technical and sociocultural dimensions of project management are two
sides to the same coin. Explain.
5. What is meant by an integrative approach to project management? Why is this
approach important in today’s environment?
Exercises
1. Review the front page of your local newspaper, and try to identify all the projects contained in the articles. How many were you able to find?
2. Individually identify what you consider to be the greatest achievements accomplished by mankind in the last five decades. Now share your list with three to
five other students in the class, and come up with an expanded list. Review
these accomplishments in terms of the definition of a project. What does your
review suggest about the importance of project management?
3. Individually identify projects assigned in previous terms. Were both sociocultural and technical elements factors in the success or difficulties in the
projects?
4. Check out the Project Management Institute’s home page at www.pmi.org.
Project Management
Professional (PMP), 4
a. Review general information about PMI as well as membership
information.
b. See if there is a PMI chapter in your state. If not, where is the closest one?
c. Use the search function at the PMI home page to find information on Project Management Body of Knowledge (PMBOK). What are the major knowledge areas of PMBOK?
d. Explore other links that PMI provides. What do these links tell you about
the nature and future of project management?
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Note: If you have any difficulty accessing any of the Web addresses listed here
or elsewhere in the text, you can find up-to-date addresses on the home page of
Dr. Erik Larson, coauthor of this text: http://www.bus.oregonstate.edu/faculty/bio
.htm?UserName=Larson
References
Ball Parks of Baseball, “Cisco Field,” http://www.ballparksofbaseball.com/future/
CiscoField.htm (accessed June 2, 2009).
Benko, C., and F. W. McFarlan, Connecting the Dots (Boston: HBS Press, 2003).
Cohen, D. J., and R. J. Graham, The Project Manager’s MBA (San Francisco:
Jossey-Bass, 2001).
Faylor, C., “Next Generation Wii Is Rumored to Hit the Market in 2011,”
Shacknews.com (Oct. 1, 2008).
Kay, J., “US Box Office Spellbound by Harry Potter and the Half-Blood Prince,”
www.guardian.uk.co.filmblog (accessed July 15, 2009).
Krisher, T., “GM Product Chief Says New Vehicles Must be Hits,” www.
businessweek.com (accessed July 20, 2009).
Larkowski, K., “Standish Group Report Shows Project Success Improves 50 Percent,” www.standishgroup.com, 2004, Third Quarter.
Lunar Energy, “British Firm Announces World’s Largest Tidal Power Development,” Lunarenergy.co.uk (March 11, 2008).
Peters, T., PM Network, January 2004, Vol. 18, No. 1, p. 19.
Project Management Institute, Leadership in Project Management Annual
(Newton Square, PA: PMI Publishing, 2006).
Project Management Institute, A Guide to the Project Management Body of
Knowledge (PMBOK), (Newton Square, PA: PMI Publishing 2008).
Rothman, C., “Promising New Lupus Drug Stirs Hope for Millions,” The StarLedger (July 21, 2009), www.nj.com/news/ledger/jersey/index.ssf?/base (accessed
July 25, 2009).
Sagan, Sascha, “Motorola Hangs Smartphone Future on Android,” PCMag.com
(April 20, 2009).
The Standish Group, CHAOS Summary 2009, pp. 1–4.
Stewart, T. A., “The Corporate Jungle Spawns a New Species: The Project Manager,” Fortune (September 1996), pp. 14–15.
Case
A Day in the Life
Rachel, the project manager of a large information systems project, arrives at her office early to get caught up with work before her co-workers and project team arrive.
However, as she enters the office she meets Neil, one of her fellow project managers,
who also wants to get an early start on the day. Neil has just completed a project
overseas. They spend 10 minutes socializing and catching up on personal news.
It takes Rachel 10 minutes to get to her office and settle in. She then checks
her voice mail and turns on her computer. She was at her client’s site the day
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before until 7:30 P.M. and has not checked her e-mail or voice mail since 3:30 P.M.
the previous day. There are 7 phone messages, 16 e-mails, and 4 notes left on her
desk. She spends 15 minutes reviewing her schedule and “to do” lists for the day
before responding to messages that require immediate attention.
Rachel spends the next 25 minutes going over project reports and preparing for
the weekly status meeting. Her boss, who just arrived at the office, interrupts her.
They spend 20 minutes discussing the project. He shares a rumor that a team
member is using stimulants on the job. She tells him that she has not seen anything suspicious but will keep an eye on the team member.
The 9:00 A.M. project status meeting starts 15 minutes late because two of the
team members have to finish a job for a client. Several people go to the cafeteria
to get coffee and doughnuts while others discuss last night’s baseball game. The
team members arrive, and the remaining 45 minutes of the progress review meeting
surface project issues that have to be addressed and assigned for action.
After the meeting Rachel goes down the hallway to meet with Victoria, another
IS project manager. They spend 30 minutes reviewing project assignments since
the two of them share personnel. Victoria’s project is behind schedule and in need
of help. They broker a deal that should get Victoria’s project back on track.
She returns to her office and makes several phone calls and returns several
e-mails before walking downstairs to visit with members of her project team. Her
intent is to follow up on an issue that had surfaced in the status report meeting.
However, her simple, “Hi guys, how are things going?” elicits a stream of disgruntled responses from the “troops.” After listening patiently for over 20 minutes, she
realizes that among other things several of the client’s managers are beginning to
request features that were not in the original project scope statement. She tells her
people that she will get on this right away.
Returning to her office she tries to call her counterpart John at the client firm
but is told that he is not expected back from lunch for another hour. At this time,
Eddie drops by and says, “How about lunch?” Eddie works in the finance office
and they spend the next half hour in the company cafeteria gossiping about internal politics. She is surprised to hear that Jonah Johnson, the director of systems
projects, may join another firm. Jonah has always been a powerful ally.
She returns to her office, answers a few more e-mails, and finally gets through
to John. They spend 30 minutes going over the problem. The conversation ends
with John promising to do some investigating and to get back to her as soon as
possible.
Rachel puts a “Do not disturb” sign on her door, and lies down in her office.
She listens to the third and fourth movement of Ravel’s string quartet in F on
headphones.
Rachel then takes the elevator down to the third floor and talks to the purchasing agent assigned to her project. They spend the next 30 minutes exploring ways
of getting necessary equipment to the project site earlier than planned. She finally
authorizes express delivery.
When she returns to her office, her calendar reminds her that she is scheduled
to participate in a conference call at 2:30. It takes 15 minutes for everyone to get
online. During this time, Rachel catches up on some e-mail. The next hour is spent
exchanging information about the technical requirements associated with a new
version of a software package they are using on systems projects like hers.
Rachel decides to stretch her legs and goes on a walk down the hallway where
she engages in brief conversations with various co-workers. She goes out of her
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