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List of Cases by Chapter
Chapter 1
Chapter 7
Development Projects that are Transforming Africa 1
President Obama Signs the Program Management
Improvement and Accountability Act 8
London’s Crossrail: Europe’s Largest Construction Project
MegaTech, Inc. 30
The IT Department at Hamelin Hospital 30
Disney’s Expedition Everest 31
“Throwing Good Money after Bad”: the BBC’s Digital
Media Initiative 32
10
Chapter 8
Chapter 2
The Airbus A 380: A Failure of Strategy? 38
Electronic Arts and the Power of Strong Culture in Design
Teams 67
Rolls-Royce Corporation 71
Classic Case: Paradise Lost—The Xerox Alto 72
Project Task Estimation and the Culture of “Gotcha!” 73
Widgets ’R Us 73
Chapter 3
Project Selection Procedures: A Cross-Industry Sampler
Project Selection and Screening at GE: The Tollgate Process
Keflavik Paper Company 115
Project Selection at Nova Western, Inc. 116
80
100
NASA Taps a Leader with the Right Stuff to Run Their Mars
2020 Project 120
Leading by Example for the London Olympics—Sir John
Armitt 131
The Challenge of Managing Internationally 138
Brazilian Construction Giant Caught in Wide-Spread
Corruption Scandal 143
In Search of Effective Project Managers 146
Finding the Emotional Intelligence to Be a Real Leader 147
Volkswagen and It’s Project to Cheat Emissions Tests 147
Problems with John 149
Berlin’s Brandenburg Willy Brandt International Airport
Statements of Work: Then and Now 164
Defining a Project Work Package 174
Nicaragua’s Canal and Sustainability Challenges 185
Boeing’s Virtual Fence 188
California’s High-Speed Rail Project 190
Project Management at Dotcom.com 192
The Expeditionary Fighting Vehicle 193
Chapter 6
Team-Building Events – Heli-skiing and Zombie
Apocalypses 203
Tele-Immersion Technology Eases the Use of Virtual
Teams 220
Engineers Without Borders: Project Teams Impacting
Lives 225
Columbus Instruments 232
The Bean Counter and the Cowboy 233
Johnson & Rogers Software Engineering, Inc. 234
New York City’s Second Avenue Subway—Two Miles
Completed for Only $5 Billion Spent 274
The Hidden Costs of Infrastructure Projects—The Case of
Building Dams 303
Sochi Olympics—What’s the Cost of National Prestige? 305
Chapter 9
Preparing for a Major Golf Tournament—It’s a Long Road to
the First Tee 313
Moving the Historic Capen House 345
Chapter 10
Kiruna, Sweden—A Town on the Move! 350
Project Scheduling at Blanque Cheque Construction (A)
Project Scheduling at Blanque Cheque Construction (B)
Chapter 4
Chapter 5
Samsung’s Galaxy Note 7 – Failure to Manage a New
Product for Risk 241
Japan Decommissions a $9 Billion Nuclear Reactor That was
Hardly Used 248
Collapse of Shanghai Apartment Building 257
Classic Case: de Havilland’s Falling Comet 263
The Building that Melted Cars 266
Classic Case: Tacoma Narrows Suspension Bridge 267
156
379
380
Chapter 11
General Electric—Using Agile Methods to Speed New
Product Delivery 387
Eli Lilly Pharmaceuticals and Its Commitment to Critical
Chain Project Management 405
It’s an Agile World 416
Ramstein Products, Inc. 417
Chapter 12
Environmental Concerns and Political Leadership Impact
Fossil Fuel Project Cancellations 420
The Problems of Multitasking 446
“First Come, First Served”: Resource Challenges For Sunrise
Restoration 447
Chapter 13
U.S. Army Can’t Track Spending on its Spending Tracker
Project 452
Earned Value at Northrop Grumman 471
The IT Department at Kimble College 483
The Superconducting Supercollider 484
“Dear Mr. President—Please Cancel our Project!”: The
Honolulu Elevated Rail Project 485
Chapter 14
Amazon’s Golden Touch Fails with a High-Tech Gadget 496
Aftermath of a “Feeding Frenzy”: Dubai and Cancelled
Construction Projects 508
New Jersey Kills Hudson River Tunnel Project 516
The Project That Wouldn’t Die 517
The Navy Struggles to Avoid Cancellation of its Littoral
Combat Ship Program 518
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Fifth Edition
Project Management
Achieving Competitive Advantage
Jeffrey K. Pinto
Pennsylvania State University
New York, NY
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To Mary Beth, my wife and best friend, with the most profound thanks and love for her
unwavering support. And, to our children, Emily, AJ, and Joseph—three “projects” that are
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Library of Congress Cataloging-in-Publication Data on File
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ISBN 10:
0-134-73033-X
ISBN 13: 978-0-134-73033-2
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BRIEF CONTENTS
Preface xiii
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Introduction: Why Project Management? 1
The Organizational Context: Strategy, Structure, and Culture 38
Project Selection and Portfolio Management 80
Leadership and the Project Manager 120
Scope Management 156
Project Team Building, Conflict, and Negotiation 203
Risk Management 241
Cost Estimation and Budgeting 274
Project Scheduling: Networks, Duration Estimation, and Critical
Path 313
Project Scheduling: Lagging, Crashing, and Activity Networks 350
Advanced Topics in Planning and Scheduling: Agile and Critical
Chain 386
Resource Management 420
Project Evaluation and Control 452
Project Closeout and Termination 496
Appendix A The Cumulative Standard Normal Distribution
Appendix B Tutorial for MS Project 2016 529
Appendix C Project Plan Template 539
Glossary 543
Company Index 553
Name Index 555
Subject Index 559
528
iii
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CONTENTS
Preface
xiii
Chapter 1 INTRODUCTION: WHY PROJECT MANAGEMENT?
1
PROJECT PROFILE: Development Projects that are Transforming Africa
The Need for Projects 3
What is a Project? 3
General Project Characteristics
1
5
PROJECT PROFILE: President Obama Signs the Program Management Improvement
and Accountability Act 8
Why are Projects Important?
9
PROJECT PROFILE: London’s Crossrail: Europe’s Largest Construction Project 10
Project Life Cycles
12
◾◾ BOX 1.1: Project Managers in Practice
Determinants of Project Success
14
15
◾◾ BOX 1.2: Project Management Research in Brief 18
Developing Project Management Maturity 19
Employability Skills 23
Communication 23
Critical Thinking 23
Collaboration 23
Knowledge Application And Analysis 23
Business Ethics And Social Responsibility 23
Information Technology Application And Computing Skills
Data Literacy 24
Project Elements and Text Organization 24
24
Summary 28 • Key Terms 29 • Discussion Questions 29
Case Study 1.1 MegaTech, Inc. 30 • Case Study 1.2 The IT Department at
Hamelin Hospital 30 • Case Study 1.3 Disney’s Expedition Everest 31
• Case Study 1.4 “Throwing Good Money after Bad”: the BBC’s Digital
Media Initiative 32 • Internet Exercises 35 • PMP Certification Sample
Questions 35 • Answers 35 • Notes 35
Chapter 2 THE ORGANIZATIONAL CONTEXT: STRATEGY, STRUCTURE,
AND CULTURE 38
PROJECT PROFILE: The Airbus A 380: A Failure of Strategy?
Implementing Strategy Through Projects 40
Projects and Organizational Strategy 41
Stakeholder Management 43
Identifying Project Stakeholders 44
Managing Stakeholders 47
Organizational Structure 49
Forms of Organizational Structure 50
Functional Organizations 50
Project Organizations 53
Matrix Organizations 54
Moving to Heavyweight Project Organizations
iv
◾◾ BOX 2.1: Project Management Research in Brief
Project Management Offices 59
38
57
58
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Organizational Culture 62
How Do Cultures Form? 64
Organizational Culture and Project Management
66
PROJECT PROFILE: Electronic Arts and the Power of Strong Culture in Design Teams 67
Summary 68 • Key Terms 70 • Discussion Questions 70
• Case Study 2.1 Rolls-Royce Corporation 71 • Case Study 2.2 Classic
Case: Paradise Lost—The Xerox Alto 72 • Case Study 2.3 Project Task Estimation and the Culture of “Gotcha!” 73 • Case Study 2.4 Widgets
’R Us 73 • Internet Exercises 74 • PMP Certification Sample
Questions 74 • Answers 75 • Integrated Project—Building Your
Project Plan 76 • Notes 78
Chapter 3 PROJECT SELECTION AND PORTFOLIO MANAGEMENT
PROJECT PROFILE: Project Selection Procedures: A Cross-Industry Sampler
Introduction: Project Selection 81
Approaches to Project Screening and Selection 84
Method One: Checklist Model 84
Method Two: Simplified Scoring Models 85
Limitations of Scoring Models 87
Method Three: The Analytical Hierarchy Process
Method Four: Profile Models 91
Financial Models 93
Payback Period 94
Net Present Value 95
Discounted Payback 97
Internal Rate of Return 97
Choosing a Project Selection Approach 99
80
80
88
PROJECT PROFILE: Project Selection and Screening at GE: The Tollgate Process
Project Portfolio Management 101
Objectives and Initiatives 102
The Portfolio Selection Process 103
Developing a Proactive Portfolio 105
Keys to Successful Project Portfolio Management 108
Problems in Implementing Portfolio Management 108
100
Summary 110 • Key Terms 111 • Solved Problems 111
• Discussion Questions 112 • Problems 112 • Case Study 3.1 Keflavik
Paper
Company 115 • Case Study 3.2 Project Selection at Nova Western,
Inc. 116 • Internet Exercises 118 • Notes 118
Chapter 4 LEADERSHIP AND THE PROJECT MANAGER
120
PROJECT PROFILE: NASA Taps a Leader with the Right Stuff to Run Their Mars
2020 Project 120
Introduction: Successful Projects Need Leaders
Leaders Versus Managers 122
How the Project Manager Leads 124
Acquiring Project Resources 124
Motivating and Building Teams 125
Having a Vision and Fighting Fires 125
Communicating 126
122
◾◾ BOX 4.1: Project Management Research in Brief
Traits of Effective Project Leaders 129
Conclusions about Project Leaders 130
129
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Contents
PROJECT PROFILE: Leading by Example for the London Olympics—Sir John Armitt
131
Project Champions 132
Champions—Who Are They? 133
What Do Champions Do? 134
How to Make a Champion 135
The New Project Leadership 136
◾◾ BOX 4.2: Project Managers in Practice 137
PROJECT PROFILE: The Challenge of Managing Internationally
Project Management Professionalism 138
Project Management and Ethics 140
Unethical Behaviors in Project Management
138
142
PROJECT PROFILE: Brazilian Construction Giant Caught in Wide-Spread
Corruption Scandal 143
Summary 144 • Key Terms 145 • Discussion Questions 146
• Case Study 4.1 In Search of Effective Project Managers 146
• Case Study 4.2 Finding the Emotional Intelligence to Be a Real
Leader 147 • Case Study 4.3 Volkswagen and Its Project to Cheat
Emissions Tests 147 • Case Study 4.4 Problems with John 149
• Internet Exercises 152 • PMP Certification Sample Questions 152
• Answers 153 • Notes 153
Chapter 5 SCOPE MANAGEMENT
156
PROJECT PROFILE: Berlin’s Brandenburg Willy Brandt International Airport
Introduction: The Importance of Scope Management
Conceptual Development 158
The Statement of Work 161
The Project Charter 164
PROJECT PROFILE: Statements of Work: Then and Now
156
158
164
The Scope Statement 164
The Work Breakdown Structure 165
Purposes of the Work Breakdown Structure 165
The Organization Breakdown Structure 170
The Responsibility Assignment Matrix 173
PROJECT PROFILE: Defining a Project Work Package
174
Work Authorization 175
Scope Reporting 176
◾◾ BOX 5.1: Project Management Research in Brief
177
Control Systems 178
Configuration Management 179
Project Closeout 180
Project Management and Sustainability 181
Managing Projects for Sustainability 183
PROJECT PROFILE: Nicaragua’s Canal and Sustainability Challenges 185
Summary 186 • Key Terms 187 • Discussion Questions 188
• Problems 188 • Case Study 5.1 Boeing’s Virtual Fence 188
• Case Study 5.2 California’s High-Speed Rail Project 190 • Case
Study 5.3 Project Management at Dotcom.com 192 • Case Study 5.4 The
Expeditionary Fighting Vehicle 193 • Internet Exercises 195
• PMP Certification Sample Questions 195 • Answers 196
• MS Project Exercises 196 • Appendix 5.1: Sample Project Charter 196
• Integrated Project—Developing the Work Breakdown
Structure 199 • Notes 200
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Chapter 6 PROJECT TEAM BUILDING, CONFLICT, AND NEGOTIATION
PROJECT PROFILE: Team-Building Events – Heli-skiing and Zombie Apocalypses
203
203
Introduction 205
Building the Project Team 205
Identify Necessary Skill Sets 205
Identify People Who have the required Skills 206
Talk to Potential Team Members and Negotiate with Functional
Heads 207
Build in Fallback Positions 207
Assemble the Team 208
Characteristics of Effective Project Teams 208
A Clear Sense of Mission 208
A Productive Interdependency 209
Cohesiveness 209
Trust 209
Enthusiasm 210
Results Orientation 210
Reasons Why Teams Fail 210
Poorly Developed or Unclear Goals 211
Poorly Defined Project Team Roles and Interdependencies 211
Lack of Project Team Motivation 211
Poor Communication 212
Poor Leadership 212
Turnover Among Project Team Members 212
Dysfunctional Behavior 212
Stages in Group Development 213
Stage One: Forming 213
Stage Two: Storming 214
Stage Three: Norming 214
Stage Four: Performing 214
Stage Five: Adjourning 214
Punctuated Equilibrium 215
Achieving Cross-Functional Cooperation 216
Superordinate Goals 216
Rules and Procedures 217
Physical Proximity 217
Accessibility 217
Outcomes of Cooperation: Task and Psychosocial Results 218
Virtual Project Teams 218
PROJECT PROFILE: Tele-Immersion Technology Eases the Use of Virtual Teams
Conflict Management 221
What Is Conflict? 221
Sources of Conflict 222
Methods for Resolving Conflict
220
224
PROJECT PROFILE: Engineers Without Borders: Project Teams Impacting Lives 225
Negotiation 226
Questions to Ask Prior to the Negotiation
Principled Negotiation 227
Invent Options for Mutual Gain 229
226
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Contents
Insist on Using Objective Criteria
230
Summary 231 • Key Terms 232 • Discussion Questions 232
Case Study 6.1 Columbus Instruments 232 • Case Study 6.2 The Bean
Counter and the Cowboy 233 • Case Study 6.3 Johnson & Rogers
Software Engineering, Inc. 234 • Exercise in Negotiation 236
• Internet Exercises 237 • PMP Certification Sample Questions 237
• Answers 238 • Notes 238
Chapter 7 RISK MANAGEMENT
241
PROJECT PROFILE: Samsung’s Galaxy Note 7—Failure to Manage a New Product for Risk 241
Introduction: What is Project Risk?
243
◾◾ BOX 7.1: Project Managers in Practice
Risk Management: A Four-Stage Process
Risk Identification 246
245
246
PROJECT PROFILE: Japan Decommissions a $9 Billion Nuclear Reactor that
was Hardly Used 248
Risk Breakdown Structures 249
Analysis of Probability and Consequences
Risk Mitigation Strategies 252
Use of Contingency Reserves 254
Other Mitigation Strategies 255
Control and Documentation 255
249
PROJECT PROFILE: Collapse of Shanghai Apartment Building
Project Risk Management: An Integrated Approach
257
259
Summary 261 • Key Terms 262 • Solved Problem 262 •
Discussion
Questions 262 • Problems 262 • Case Study 7.1 Classic Case: de
Havilland’s Falling Comet 263 • Case Study 7.2 The Building that Melted
Cars 266 • Case Study 7.3 Classic Case: Tacoma Narrows Suspension
Bridge 267 • Internet Exercises 269 • PMP Certification Sample
Questions 269 • Answers 270 • Integrated Project—Project Risk
Assessment 271 • Notes 273
Chapter 8 COST ESTIMATION AND BUDGETING
274
PROJECT PROFILE: New York City’s Second Avenue Subway – Two Miles Completed for
Only $5 Billion Spent 274
Cost Management 276
Direct Versus Indirect Costs 277
Recurring Versus Nonrecurring Costs 278
Fixed Versus Variable Costs 279
Normal Versus Expedited Costs 279
Cost Estimation 279
Learning Curves in Cost Estimation 283
Software Project Estimation—Function Points
286
◾◾ BOX 8.1: Project Management Research in Brief
Problems with Cost Estimation
287
289
◾◾ BOX 8.2: Project Management Research in Brief
Creating a Project Budget 291
Top-Down Budgeting 292
Bottom-Up Budgeting 293
Activity-Based Costing 293
Developing Budget Contingencies 295
290
Summary 297 • Key Terms 298 • Solved Problems 298 •
Discussion
Questions 299 • Problems 300 • Case Study 8.1 The Hidden Costs of
Contents
Infrastructure Projects—The Case of Building Dams 303
• Case Study 8.2 Sochi Olympics—What’s the Cost of National Prestige? 305
• Internet Exercises 307 • PMP Certification Sample
Questions 307 • Answers 308 • Integrated Project—Developing the Cost
Estimates and Budget 309 • Notes 311
Chapter 9 PROJECT SCHEDULING: NETWORKS, DURATION ESTIMATION,
AND CRITICAL PATH 313
PROJECT PROFILE: Preparing for a Major Golf Tournament – It’s a Long Road to the
First Tee 313
Introduction 315
Project Scheduling 315
Key Scheduling Terminology 317
Developing A Network 319
Labeling Nodes 319
Serial Activities 320
Concurrent Activities 320
Merge Activities 321
Burst Activities 321
Duration Estimation 324
Constructing the Critical Path 328
Calculating the Network 328
The Forward Pass 329
The Backward Pass 331
Probability of Project Completion 333
Laddering Activities 335
Hammock Activities 336
Options for Reducing the Critical Path 337
◾◾ BOX 9.1: Project Management Research in Brief 338
Summary 339 • Key Terms 340 • Solved Problems 340
• Discussion Questions 342 • Problems 342 • Case Study 9.1 Moving
the Historic Capen House 345 • Internet Exercises 347
• MS Project Exercises 347 • Answers 348 • PMP Certification Sample
Questions 348 • Notes 349
Chapter 10 PROJECT SCHEDULING: LAGGING, CRASHING, AND ACTIVITY
NETWORKS 350
PROJECT PROFILE: Kiruna, Sweden – A Town on the Move!
Introduction 352
Lags in Precedence Relationships 352
Finish to Start 352
Finish to Finish 353
Start to Start 353
Start to Finish 354
Gantt Charts 355
Adding Resources to Gantt Charts 356
Incorporating Lags in Gantt Charts 357
◾◾ BOX 10.1: Project Managers in Practice
357
Crashing Projects 359
Options for Accelerating Projects 359
Crashing the Project: Budget Effects 364
350
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Contents
Activity-On-Arrow Networks 367
How Are They Different? 367
AOA Versus AON 372
Controversies in the Use of Networks
Conclusions 374
373
Summary 375 • Key Terms 375 • Solved Problems 376 •
Discussion
Questions 377 • Problems 377 • Case Study 10.1 Project Scheduling
at Blanque Cheque Construction (A) 379 • Case Study 10.2 Project
Scheduling at Blanque Cheque Construction (B) 380 • MS Project
Exercises 380 • PMP Certification Sample Questions 381
• Answers 382 • Integrated Project—Developing the Project
Schedule 383 • Notes 384
Chapter 11 ADVANCED TOPICS IN PLANNING AND SCHEDULING:
AGILE AND CRITICAL CHAIN 386
PROJECT PROFILE: General Electric – Using Agile Methods to Speed New Project Delivery 387
Introduction 387
Agile Project Management 388
What Is Unique About Agile PM?
Tasks Versus Stories 391
Key Terms in Agile PM 391
Steps in Agile 393
Sprint Planning 393
Daily Scrums 393
The Development Work 394
Sprint Reviews 394
Sprint Retrospective 395
Keys to Success with Agile 395
Problems with Agile 396
389
◾◾ BOX 11.1: Project Management Research in Brief
397
Extreme Programming (XP) 397
Theory of Constraints and Critical Chain Project Scheduling 398
Theory of Constraints 398
The Critical Chain Solution to Project Scheduling 399
Developing the Critical Chain Activity Network 402
Critical Chain Solutions Versus Critical Path Solutions 404
PROJECT PROFILE: Eli Lilly Pharmaceuticals and Its Commitment to Critical Chain Project
Management 405
Critical Chain Solutions to Resource Conflicts 406
Critical Chain Project Portfolio Management 407
◾◾ BOX 11.2: Project Management Research in Brief
Critiques of CCPM
410
411
Summary 411
Questions 414
World 416 •
Exercises 418
• Key Terms 413 • Solved Problem 413 • D
iscussion
• Problems 414 • Case Study 11.1 It’s an Agile
Case Study 11.2 Ramstein Products, Inc. 417 • Internet
• Notes 418
Chapter 12 RESOURCE MANAGEMENT
420
PROJECT PROFILE: Environmental Concerns and Political Leadership Impact Fossil Fuel
Project Cancellations 420
Introduction 422
The Basics of Resource Constraints 422
Time and Resource Scarcity 423
Contents
Resource Loading 425
Resource Leveling 426
Step One: Develop the Resource-Loading Table 430
Step Two: Determine Activity Late Finish Dates 430
Step Three: Identify Resource Overallocation 432
Step Four: Level the Resource-Loading Table 432
Resource-Loading Charts 435
◾◾ BOX 12.1: Project Managers in Practice
438
Managing Resources in Multiproject Environments 439
Schedule Slippage 439
Resource Utilization 439
In-Process Inventory 440
Resolving Resource Decisions in Multiproject Environments
440
Summary 442 • Key Terms 443 • Solved Problem 443 • Discussion
Questions 444 • Problems 444 • Case Study 12.1 The Problems of
Multitasking 446 • Case Study 12.2 “First Come, First Served”: Resource
Challenges for Sunrise Restoration† 447 • Internet Exercises 448
MS Project Exercises 448 • PMP Certification Sample Questions 449
• Answers 450 • Integrated Project—Managing Your Project’s
Resources 451 • Notes 451
Chapter 13 PROJECT EVALUATION AND CONTROL
452
PROJECT PROFILE: U.S. Army Can’t Track Spending on its Spending Tracker Project
452
Introduction 453
Control Cycles—A General Model 454
Monitoring Project Performance 454
The Project S-Curve: A Basic Tool 455
S-Curve Drawbacks 457
Milestone Analysis 457
Problems with Milestones 459
The Tracking Gantt Chart 459
Benefits and Drawbacks of Tracking Gantt Charts 460
Earned Value Management 460
Terminology for Earned Value 461
Creating Project Baselines 462
Why Use Earned Value? 462
Steps in Earned Value Management 464
Assessing a Project’s Earned Value 465
Using Earned Value to Manage a Portfolio of Projects 470
Flow of Earned Value System 470
PROJECT PROFILE: Earned Value at Northrop Grumman 471
Issues in the Effective Use of Earned Value Management
Human Factors in Project Evaluation and Control 474
Critical Success Factor Definitions 476
Conclusions 477
472
Summary 478 • Key Terms 479 • Solved Problem 479 • Discussion
Questions 480 • Problems 481 • Case Study 13.1 The IT Department
at Kimble College 483 • Case Study 13.2 The Superconducting
Supercollider 484 • Case Study 13.3 “Dear Mr. President—Please
cancel our project!”: The Honolulu Elevated Rail Project 485 • Internet
Exercises 487 • MS Project Exercises 487 • PMP Certification Sample
Questions 488 • Answers 489 • Appendix 13.1: Earned
Schedule 489 • Notes 494
xi
xii
Contents
Chapter 14 PROJECT CLOSEOUT AND TERMINATION
496
PROJECT PROFILE: Amazon’s Golden Touch Fails with a High-Tech Gadget
Introduction 497
Types of Project Termination
496
498
◾◾ BOX 14.1: Project Managers in Practice 498
Natural Termination—the Closeout Process 500
Finishing the Work 500
Handing Over the Project 500
Gaining Acceptance for the Project 501
Harvesting the Benefits 501
Reviewing How It All Went 502
Putting It All to Bed 504
Disbanding the Team 504
What Prevents Effective Project Closeouts? 505
Early Termination for Projects 505
Making the Early Termination Decision 507
PROJECT PROFILE: Aftermath of a “Feeding Frenzy”: Dubai and Canceled Construction
Projects 508
Shutting Down the Project 509
Allowing for Claims and Disputes
510
◾◾ BOX 14.2: Project Management Research in Brief
Preparing the Final Project Report 513
Conclusion 514
511
Summary 514 • Key Terms 515 • Discussion Questions 515
• Case Study 14.1 New Jersey Kills Hudson River Tunnel Project 516
• Case Study 14.2 The Project That Wouldn’t Die 517
• Case Study 14.3 The Navy Struggles to Avoid Cancellation of its Littoral
Combat Ship Program 518 • Internet Exercises 519 • PMP Certification
Sample Questions 520 • Answers 521 • Appendix 14.1: Sample Pages
from Project Sign-off Document 522 • Notes 526
Appendix A The Cumulative Standard Normal Distribution 528
Appendix B Tutorial for MS Project 2016 529
Appendix C Project Plan Template 539
Glossary
543
Company Index
Name Index
Subject Index
553
555
559
PREFACE
Project management has become central to operations in industries as diverse as construction and
information technology, architecture and hospitality, and engineering and new product development; therefore, this text simultaneously embraces the general principles of project management while addressing specific examples across the wide assortment of its applications. This text
approaches each chapter from the perspective of both the material that is general to all disciplines
and project types and that which is more specific to alternative forms of projects. One way this is
accomplished is through the use of specific, discipline-based examples to illustrate general principles as well as the inclusion of cases and Project Profiles that focus on more specific topics, such
as, Chapter 5’s treatment of IT “death march” projects (see Box 5.1 below).
Scope Reporting 177
BOX 5.1
Project Management Research in Brief
Information Technology (IT) Project “Death Marches”: What Is Happening Here?
Every year, billions of dollars are spent on thousands of information technology (IT) projects worldwide. With the huge emphasis on
IT products and advances in software and hardware systems, it is no surprise that interest in this field is exploding. Under the circumstances, we would naturally expect that, given the importance of IT projects in both our corporate and everyday lives, we are doing a
reasonably good job of implementing these critical projects, right? Unfortunately, the answer is a clear “no.” In fact, IT projects have
a terrible track record for delivery, as numerous studies have shown. How bad? The average IT project is likely to be 6 to 12 months
behind schedule and 50% to 100% over budget. Of course, the numbers vary with the size of the project, but the results still suggest
that companies should expect their IT projects to lead to wasted effort, enormous delays, burnout, and many lost weekends while
laboring for success with the cards stacked the other way.
What we are referring to here are “death march” projects. The death march project is typically one in which the project is set
up for failure through the demands or expectations that the company places on it, leaving the intention that the project team will pull
off a miracle. The term death march invokes images of team members wearily trudging along mile after mile, with no possibility of
successful conclusion in sight. Death march projects are defined as projects “whose parameters exceed the norm by at least 50%.” In
practical terms, this can mean:
• The schedule has been compressed to less than half the amount estimated by a rational estimating process (e.g., the schedule
suggests it should take one year to complete the project, but top management shrinks the schedule to six months).
• The project team staffing has been reduced to half the number that normally would be assigned to a project of this size and
scope (e.g., a project manager needing 10 resources is instead given only 5).
• The budget and other necessary resources are cut in half (e.g., as a result of downsizing and other cost-cutting exercises in the
company, everyone is expected to “do more with less”, or competitive bidding to win the contract was so intense that when
the smoke cleared the company that won the project did so at such a cut-rate price that it cannot possibly hire enough people
to make it work).
The result of any or all of these starting conditions is a virtual guarantee that the project will fail. The prevalence of death march projects
begs the question: Why are death march projects so common, and why do they continue to occur? According to the research, there
are a number of reasons:
1. Politics—the project may be the result of a power struggle between two ambitious senior executives, or it may have been set up
to fail as a form of revenge upon some manager. In these cases, the project manager just gets caught in the blast zone.
2. Naïve promises made by marketing executives or inexperienced project managers—inexperience can result in all sorts of promises made, including those that are impossible to fulfill. In order to impress the boss, a new project manager may promise more
than he can deliver. Marketing managers who are concerned with sales and how to improve them may think, “what’s a little
exaggerated promise if it closes the deal?”
3. Naïve optimism of youth—a technical hotshot who is ambitious and feeling particularly cocky one day may make exaggerated
promises that quickly result in the project team getting in over its head. Optimism is no substitute for careful planning.
4. The “start-up” mentality of fledgling entrepreneurial companies—start-up firms come loaded with energy, enthusiasm, and an
aggressive, get-it-going attitude. When that mentality translates into projects, however, problems can occur. Entrepreneurial
approaches to managing projects may ignore critical planning and detailed advance preparation that no experienced project
Students
in sacrifice.
project management classes come from a wide and diverse cross section of unimanager would
versity
and career
tracks.
Schools
of health,
administration,
business,
5. Themajors
“Marine Corps”
mentality,
aka “real
programmers
don’t needpublic
sleep”—this
attitude emphasizes
bravado as aarchitecture
substitute for
evaluation.
The hyperoptimistic
schedule or budget
is not an accident,
it is a deliberate
manifestation
of all
an aggressive
and the
built environment,
engineering,
information
systems,
and hospitality
are
adding attitude
project
that says, “If you can’t handle it, you don’t belong here”.
management
courses
to
their
catalogs
in
response
to
the
demands
from
organizations
and
profes6. Intense competition caused by globalization—the appearance of new, international competitors often comes as a rude awakensionaling
groups
their value
for students’
careers.
Whyforhas
become
when it that
is firstsee
experienced.
Many firms
respond withfuture
radical moves
that push
rapidproject
technicalmanagement
advances or “catching
up”
behaviors,
in numerous newinterest
death march
projects.
a discipline
ofresulting
such tremendous
and
application? The simple truth is that we live in a “pro7. Intense competition caused by the appearance of new technologies—as new opportunities emerge through new technologies,
jectized”
world. Everywhere we look, we see people engaged in project management. In fact, project
some firms jump into them eagerly without first understanding their capacities, scalability for larger projects, and limitations.
management
become
anofintegral
part of practically
every
firm’s business
model.
The result ishas
an endless
game
exploiting “opportunities”
without fully
comprehending
them or the
learning curve for using
new technologies.
This
text takes a holistic, integrated approach to managing projects, exploring both technical
Intense pressure caused by unexpected government regulations—government-mandated death march projects occur through a
and8.managerial
challenges. It not only emphasizes individual project execution, but also provides a
failure of top management to anticipate new regulations or mandates, or worse, to put off any efforts to comply with them until
strategic
perspective,
withNew
which
to or
manage
projects
at laws,
bothforthe
program
deadlines
have alreadydemonstrating
been set, even if theythe
see means
them coming.
pollution
carbon-energy
controls
example,
may
lead to huge
projects with looming deadlines because the company put off any efforts to self-regulate until the last minute.
and portfolio
levels.
9. Unexpected and/or unplanned crises—any number of crises can be anticipated with sufficient advance planning. Examples of
crises that can severely affect project delivery are the loss of key project team personnel midway through the project’s development or the bankruptcy of a key supplier. Some crises, of course, are unpredictable by definition, but all too often the crisis that
xiii
xiv
Preface
At one time, project management was almost exclusively the property of civil and construction engineering programs where it was taught in a highly quantitative, technical manner. “Master
the science of project management,” we once argued, “and the ‘art’ of project management will be
equally clear to you.” Project management today is a complex “management” challenge requiring
not only technical skills but a broad-based set of people skills as well. Project management has
become the management of technology, people, culture, stakeholders, and other diverse elements
necessary to successfully complete a project. It requires knowledge of leadership, team building,
conflict resolution, negotiation, and influence in equal measure with the traditional, technical skill
set. Thus, this textbook broadens our focus beyond the traditional project management activities of
planning and scheduling, project control, and termination, to a more general, inclusive, and, hence,
more valuable perspective of the project management process.
NEW TO THIS EDITION
New Features
•
•
•
•
•
•
•
•
•
•
•
•
Sustainability in Project Management
Employability Skills
Project Management Ethics
MS Project 2016 Step-by-Step Tutorials
New Project Managers in Practice Profiles
Project Portfolio selection
Expanded discussion of Agile project management
Updated problems in chapters
Updated Internet Exercises
Expanded PMP Certification Exam sample questions
New project management cases
All MS Project examples and screen captures updated to MS Project 2016
Updated Project Profiles and Cases
Chapter 1: Introduction: Why Project Management?
• Development Projects that are Transforming Africa
• President Obama Signs the Program Management Improvement and Accountability Act
• London’s Crossrail: Europe’s Largest Construction Project
Chapter 2: The Organizational Context: Strategy, Structure, and Culture
• The Airbus A-380: A Failure of Strategy?
• Electronic Arts and the Power of Strong Culture in Design Teams
Chapter 3: Project Selection and Portfolio Management
• Project Selection Procedures: A Cross-Industry Sampler
Chapter 4: Leadership and the Project Manager
• NASA Taps a Leader with the Right Stuff to Run Their Mars 2020 Project
• Leading by Example for the London Olympics—Sir John Armitt
• Brazilian Construction Giant Caught in Wide-Spread Corruption Scandal
Chapter 5: Scope Management
• Berlin’s Brandenburg Willy Brandt International Airport
• Nicaragua’s Canal and Sustainability Challenges
• Boeing’s Virtual Fence
• California’s High-Speed Rail Project
• The Expeditionary Fighting Vehicle
Chapter 6: Project Team Building, Conflict, and Negotiation
• Team Building Events – Heli-Skiing and Zombie Apocalypses
• Engineers Without Borders: Project Teams Impacting Lives
Preface
Chapter 7: Risk Management
• Samsung’s Galaxy Note 7 – Failure to Manage a New Product for Risk
• Japan Decommissions a $9 Billion Nuclear Reactor that was Hardly Used
• Collapse of Shanghai Apartment Building
• The Building That Melted Cars
Chapter 8: Cost Estimation and Budgeting
• New York City’s Second Avenue Subway – Two Miles Completed for Only $5 Billion Spent
• Sochi Olympics—What’s the Cost of National Prestige?
• The Hidden Costs of Infrastructure Projects: The Case of Building Dams
Chapter 9: Project Scheduling: Networks, Duration Estimation, and Critical Path
• Preparing for a Major Golf Tournament – It’s a Long Road to the First Tee
• Moving the Historic Capen House
Chapter 10: Project Scheduling: Lagging, Crashing, and Activity Networks
• Kiruna, Sweden – A Town on the Move!
Chapter 11: Critical Chain Project Scheduling
• General Electric – Using Agile Methods to Speed New Project Delivery
• Eli Lilly Pharmaceutical’s Commitment to Critical Chain Project Scheduling
Chapter 12: Resource Management
• Environmental Concerns and Political Leadership Impact Fossil Fuel Project Cancellations
• “First Come, First Served”: Resource Challenges for Sunrise Restoration
Chapter 13: Project Evaluation and Control
• U.S. Army Can’t Track Spending on its Spending Tracker Project
• Earned Value Management at Northrop Grumman
• Dear Mr. President—Please cancel our project!: The Honolulu Elevated Rail Project
Chapter 14: Project Closeout and Termination
• Amazon’s Golden Touch Fails with a High-Tech Gadget
• Aftermath of a “Feeding Frenzy”—Dubai and Cancelled Construction Projects
• New Jersey Kills Hudson River Tunnel Project
• The Navy Struggles to Avoid Cancellation of its Littoral Combat Ship Program
SOLVING TEACHING AND LEARNING CHALLENGES
Projects continue to drive innovation and advances in human development globally. Evidence from
businesses, government offices, public and private organizations, and volunteer groups all point
to the way in which project-based work has become central to the challenges new generations
of college graduates will face. Many students initially have a difficult time understanding why
projects form such a central theme in their current academic undertakings and how these project
challenges will continue to grow as they move into the workforce. In project management courses
in business, engineering, health administration, hospitality, and science programs, the challenge
faculty and students often face is to personalize these ideas to the roles their students are preparing
to undertake. Moreover, one of the principal challenges of effectively teaching project management
is to understand that project management duties are broad and diverse; most particularly, they
require computational, software, and organizational/behavioral knowledge. Some of our students
are quickly able to understand the computational elements of using mathematical models to select
projects, developing schedules and networks, using Microsoft Project and other software packages,
and tracking projects, while finding the “people” skills in leading a project team daunting. Alternatively, other students are comfortable with financial and managerial concepts but experience more
difficulty in transitioning to statistical, software, or arithmetic challenges. The fascinating nature
of project management is that it requires students to develop a mastery of both the “people” and
“numbers” sides of the discipline. Short of the CEO’s office, in no other position in an organization are the duties as broad and diverse as those found in the project manager role—developing
xv
xvi
Preface
strategies, financing, planning, budgeting, negotiating, leading, controlling, and motivating—these
are all routine responsibilities of project managers.
To illustrate the computational challenges of project management, we provide many chapters,
cases, and examples of how to use financial models to select a project portfolio, how to develop
project networks and identify the critical path, how to use MS Project to engage its planning and
tracking tools, and how to employ earned value and other methods for accurately determining
the status of projects. Managerial challenges are addressed through chapters, profiles, and cases
that highlight leadership, stakeholder management, team development, conflict and negotiation,
ethical challenges, and project sustainability. Project management is a dynamic undertaking. We
employ a simple visual device (see Figure 1.12 below) to demonstrate the manner in which technical and managerial challenges intermingle, as the project moves through its development cycle.
Referring to this visual can help students understand the project life cycle and project manager
duties across its development.
Foundation
Planning
Implementation
Termination
FIGURE 1.12
To support these teaching initiatives, the text employs a wide variety of pedagogical
approaches, including tutorials and screen captures of Microsoft Project for scheduling and project
status updating, problems, an integrated project plan to show students how to develop and plan
their own projects, templates for planning and project charters, and other devices to support student
learning and computational skills. Additionally, the text uses cases and profiles of current examples
of projects from a wide variety of industries. Just as projects are ubiquitous across a wide variety of
industries, the cases and examples in this text cover new product development, construction and
infrastructure, hospitality, software and programming, as well as many other project examples. The
cases and profiles were deliberately created to demonstrate the breadth of project challenges in order
to reinforce for students that regardless of their undergraduate degree or career aspirations, they
will be heavily involved in project-based work.
• Project Profiles—Each chapter contains one or more
Project Profiles that highlight current examples of project management in action. Some of the profiles reflect
on significant achievements; others detail famous (and
not-so-famous) examples of project failures. Because
they cover diverse ground (IT projects, construction,
new product development, and so forth), there should
be at least one profile per chapter that is meaningful
to the class’s focus. There is a deliberate effort made
to offer a combination of project success stories and
project failures. While successful projects can be
Preface xvii
instructive, we often learn far more from examining the variety of reasons why projects fail.
As much as possible, these stories of success and failure are intended to match up with the
chapters to which they are attached. For example, as we study the uses of projects to implement corporate strategy, it is useful to consider the current status of Airbus’s A380, the massively expensive, double-decker aircraft that appears to be ripe for early cancellation because
of mediocre sales.
• Cases—At the end of each chapter are some final cases that take specific examples of the material covered in the chapter and apply them in the alternate format of case studies. Some of the
cases are fictitious, but the majority of them are based on real situations, even where aliases
mask the real names of organizations. These cases include discussion questions that can be
used either for homework or to facilitate classroom discussions. There are several “classic”
project cases as well, highlighting some famous (and infamous) examples of projects whose
experiences have shaped our understanding of the discipline and its best practices.
Project
Termination
Issues
Emotional
Intellectual
Staff
Client
Fear of no future work
Change in attitude
Loss of interest in
remaining tasks
Loss of interest
in project
Loss of project–derived
motivation
Change in personnel
dealing with project
Loss of team identity
Unavailability of
key personnel
Selection of personnel
to be reassigned
Diversion of effort
Internal
External
Identification of
remaining
deliverables
Agreement with
client on remaining
deliverables
Certification needs
Agreement with
suppliers on outstanding
commitments
Identification of
outstanding
commitments
Communicating closure
Control of charges
to project
Closing down facilities
Screening of partially
completed tasks
Determination of
requirements for audit
trail data
Closure of work
orders and work
packages
Disposal of unused
material
• Integrated Project Exercises—Many of the chapters include an end-of-chapter feature that
is unique to this text: the opportunity to develop a detailed project plan. A very beneficial
exercise in project management classes is to require students, either in teams or individually,
to learn the mechanics of developing a detailed and comprehensive project plan, including
scope, scheduling, risk assessment, budgeting, and cost estimation. The Integrated Project
exercises afford students the opportunity to develop such a plan by assigning these activities and illustrating a completed project (ABCups, Inc.) in each chapter. Thus, students are
assigned their project planning activities and have a template that helps them complete these
exercises.
Lastly, this text supports the employability skills goal that Pearson actively promotes in its
publications by linking to important materials and knowledge from the Project Management Institute, the world’s largest professional project management association. The text uses terminology
for their Project Management Body of Knowledge (PMBoK), employs the PMBoK glossary of terms,
and includes an expanded set of sample Project Management Professional (PMP) certification exam
questions at the end of most chapters. Faculty can demonstrate that these chapters highlight critical
wbs/ and
ve Work
ally warn
es? What
eakdown
ctively?
nical%20
creating a
gy Sector
the critihat would
considerployment
ult/files/
cumentaement for
is project
n?
xviii Preface
project management duties but also point to the professionalism opportunities from project management careers.
Internet Exercises 195
c.
5.19
5.20
5.21
EPT:
anager for
nd wants
in. How
5.22
5.23
WBS)
t of Work
roceeding
ope for his
e doing?
y have all
scope reporting methods
• Inclusion of Sample PMP Certification Exam Questions—The
d. Identifying all necessary vendors for any outsourcing
that must be done
Project Management Professional (PMP) certification represents
A hospital expansion is being planned for a community.
the highest standard of professional qualification for a practicAs part of the scope of this project, it will be necessary to
close down the access routes into the emergency room for
ing project manager and is administered by the Project Managemajor remodeling. However, because this is the only hosment Institute. As of 2017, there were more than 775,000 PMPs
pital for trauma cases within 50 miles, it is not possible to
worldwide. In order to attain PMP certification, it is necessary
completely shut down the emergency room. The project
team will have to find a means to remodel the emergency
for candidates to undergo a comprehensive exam that tests their
room while allowing for continuous operation of the unit.
knowledge of all components of the PMBOK. This text includes
This is an example of what?
an expanded set of sample PMP certification exam questions at
a. Negotiation points with the owner
b. Constraints
the end of most of the chapters, in order to give readers an idea of
c. Initial assumptions
the types of questions typically asked on the exam and how those
d. Milestone development
topics are treated in this book.
A Responsibility Assignment Matrix (RAM) does NOT
include:
a. Who does what activity on the project
b. Job roles and responsibilities for groups
c. Job roles for team members
d. Project reporting relationships
The work authorization
system ensures
that: management are in high demand, and those numbers continue to grow draCareers
in project
a. All the work and only the work gets performed
matically.
Data
collected in 2016 by the U.S. Bureau of Labor Statistics and the Anderson Economic
b. Work gets performed in the right order and at the
Group assessed the popularity of jobs in project-based industries and concluded that there are
right time
c. Work is done completely
and according
to specifications for jobs and career growth in the discipline of project management.
outstanding
opportunities
d. Project managers are allowed total control over project
Moreover, it is expected that future demand for project managers will continue to grow faster than
budgets and resource assignments
demand
workers
in other professions. Further, this demand for trained project managers is curThe project plan should
be all thefor
following
EXCEPT:
a. Approved by all stakeholders
rently expected to far outstrip the current supply of qualified individuals capable of performing
b. A formal document
these roles.
Thistoinformation
all points to one critical conclusion: project management careers are
c. Distributed to stakeholders
according
the project’s
communications in
planexceptionally high demand and are expected to remain that way for the next decade (at least,
d. Used to manage project
execution
through
2027). Eleven countries studied by the Anderson Economic Group, including the United
The process for reviewing and accepting project deliverStates and Canada, Brazil, Germany, China, India, and Japan, are all projecting millions of project
ables is called:
a. Scope verificationmanagement jobs available in the next decade, spanning a diverse set of industries, including conb. Scope definition
struction, healthcare, new product development, services and hospitality, and Information Technolc. Work Breakdown Structure (WBS)
ogy (IT). Finally, two critical pieces of information highlight this accelerating demand for project
d. Scope authorization
A project charter should
always include:professionals: first, the percentage of those in project-oriented occupations will become
management
a. The scope management plan
a larger proportion of total employment, with anticipated growth from 5.6% in 2006 to 8.3% in 2017.
b. Stakeholder sign-offs
Second,
c. The business need
behind thewages
project in 2017 for project management-oriented professionals reflect far higher average
d. The Work Authorization
documentation
salaries
than non-project-oriented professionals, with a premium of 82% over non-project workers.
DEVELOPING EMPLOYABILITY SKILLS
the Work
t in itself
nes
d regardcultural
• Integration with the PMBOK—As a means to demonstrate the coverage of the critical
PMBOK elements, readers will find that the chapters in this text identify and cross-list the
corresponding knowledge areas from the latest, fifth edition of PMBOK. Further, all terms
(including
the Glossary)
are taken directly from the most recent edition of the PMBOK.
Moving as quickly as possible
to the determination
of
5.24
Clearly, the data make a strong case that project management skills are a critical means by which
students can enhance their employability.
This text reinforces Pearson’s commitment to producing not only innovative educational content but ensuring that the material covered in their products addresses the critical skills that employers are looking for. As part of a recent, large-scale study, involving hundreds of respondents from
universities and public and private organizations, Pearson identified a set of “employability skills,”
those abilities that businesses deem crucial for their new hires. These skills include: 1) communication, 2) critical thinking, 3) collaboration, 4) knowledge application and analysis, 5) business ethics
and social responsibility, 6) information technology application and computer skills, and 7) data
literacy. We have modeled the text material, exercises, tutorials, and case material to address each
of these seven employability skills in order to provide students with the maximum advantage when
transitioning from the classroom to the business enterprise. With this textbook, Project Management:
Achieving Competitive Advantage, students receive the dual benefit of acquiring the latest information
PM
and employability skills10/25/17
in a 1:26
discipline
that is in extraordinarily high demand.
Preface
INSTRUCTOR TEACHING RESOURCES
At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can easily register to
gain access to a variety of instructor resources available with this text in downloadable format. If
assistance is needed, our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit https://support.pearson.com/getsupport for answers to frequently
asked questions and toll-free user support phone numbers.
This program comes with the following teaching resources:
Supplements available to instructors
at www.pearsonhighered.com/irc
Features of the Supplement
Instructor’s Solution Manual
authored by Jeffrey Pinto
• Chapter-by-chapter summaries
• Teaching outlines
• Solutions to all questions and problems in the book
Test Bank
authored by Jennifer Morin from
University of Central Florida
1400 multiple-choice, true/false, short answer, and graphing
questions with these annotations:
• Difficulty level (1 for straight recall, 2 for some analysis, 3 for
complex analysis)
• Section number and name
• Learning outcome
• Application type
• AACSB learning standard (Ethical Understanding and Reasoning;
Analytical Thinking; Information Technology; Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge)
Computerized TestGen®
TestGen allows instructors to
• Customize, save, and generate classroom tests
• Edit, add, or delete questions from the test item files
• Analyze test results
• Organize a database of tests and student results.
PowerPoint Presentations
authored by Jennifer Morin from
University of Central Florida
Slides include all the graphs, tables, and equations in the textbook.
PowerPoints meet accessibility standards for students with
disabilities. Features include, but are not limited to:
• Keyboard and screen reader access
• Alternative text for images
• High color contrast between background and foreground colors
ACKNOWLEDGMENTS
In acknowledging the contributions of past and present colleagues to the creation of this text, I
must first convey my deepest thanks and appreciation for the 30-year association with my original mentor, Dr. Dennis Slevin of the University of Pittsburgh’s Katz Graduate School of Business.
My collaboration with Denny on numerous projects has been fruitful and extremely gratifying,
both professionally and personally. In addition, Dr. David Cleland’s friendship and partnership in
several ventures has been a great source of satisfaction through the years. A frequent collaborator
who has had a massive influence on my thinking and approach to understanding project management is Professor Peter W. G. Morris, lately of University College London. Working with him has
been a genuine joy and constant source of inspiration. Additional mentors and colleagues who
have strongly influenced my thinking include Rodney Turner, Janice Thomas, David Frame, Nuno
Gil, Ralf Müller, Andrew Davies, Jonas Soderlund, Young Kwak, Rolf Lundin, Lynn Crawford,
Christophe Bredillet, Graham Winch, Terry Williams, Terry Cooke-Davies, and Karlos Artto. Each
of these individuals has had a profound impact on the manner in which I view, study, and write
about project management. I am also grateful for the collaboration with Jennifer Morin and Gada
Baz, who contributed cases to this edition of the text. I have enjoyed very much working with them
and appreciate their commitment to the book.
xix
xx
Preface
Over the years, I have also been fortunate to develop friendships with some professional
project managers whose work I admire enormously. They are genuine examples of the best type of
project manager: one who makes it all seem effortless while consistently performing minor miracles.
In particular, I wish to thank Mike Brown of Rolls-Royce for his friendship and example. I would
also like to thank friends and colleagues from the Project Management Institute, including Lew
Gedansky, Harry Stephanou, and Eva Goldman, for their support for and impact on this work.
I am indebted to the reviewers of this text whose numerous suggestions and critiques have
been an invaluable aid in shaping its content. Among them, I would like to especially thank the
following:
Kwasi Amoako-Gyampah— University of North Carolina, Greensboro
Ravi Behara—George Mason University
Jeffrey L. Brewer—Purdue University
Dennis Cioffi—George Washington University
David Clapp—Florida Institute of Technology
Bruce DeRuntz—Southern Illinois University at Carbondale
Ike Ehie—Kansas State University
Michael H. Ensby—Clarkson University
Lynn Fish—Canisius College
Linda Fried—University of Colorado, Denver
Mario Guimaraes—Kennesaw State University
Richard Gunther—California State University, Northridge
Brian Gurney—Montana State University, Billings
Gary Hackbarth—Iowa State University
Mamoon M. Hammad—George Washington University
Scott Robert Homan—Purdue University
John Hoxmeier—Colorado State University
Alex Hutchins—ITT Technical Institute
Richard Jensen—Hofstra University
Robert Key—University of Phoenix
Homayoun Khamooshi—George Washington University
Dennis Krumwiede—Idaho State University
George Mechling—Western Carolina University
Julia Miyaoka—San Francisco State University
LaWanda Morant—ITT Technical Institute
Robert Morris—Florida State College at Jacksonville
James Muller—Cleveland State University
Kenneth E. Murphy—Willamette University
John Nazemetz—Oklahoma State University
Patrick Penfield—Syracuse University
Ronald Price—ITT Technical Institute
Ronny Richardson—Southern Polytechnic State University
John Sherlock—Iona College
Gregory Shreve—Kent State University
Randall G. Sleeth—Virginia Commonwealth University
Kimberlee Snyder—Winona State University
Jeff Trailer—California State University, Chico
Leo Trudel—University of Maine
Preface
Oya Tukel—Cleveland State University
Darien Unger—Howard University
Amy Valente—Cayuga Community College
Stephen Whitehead—Hilbert College
I would also like to thank my colleagues in the Samuel Black School of Business at Penn
State, the Behrend College. Extra-special thanks go to Kerri Tomasso for her help in preparing the
final manuscript and for her integral role in permissions research and acquisitions. I am especially
indebted to Khurrum Bhutta, who checked this edition for accuracy. I am very grateful for his time
and effort, and any errors that may remain are entirely my own.
In developing the cases for this edition of the textbook, I was truly fortunate to develop wonderful professional relationships with a number of individuals. Andrea Finger and Kathleen Prihoda of Disney were wonderfully helpful and made time in their busy schedules to assist me in
developing the Expedition Everest case for this text. Theresa Hinkler, Bill Mowery, Mathew Paul,
Christopher Fultz, Robert Tanner, and James Devine provided me with invaluable information on
their job responsibilities and what it takes to be a successful project manager.
Finally, I wish to extend my sincere thanks to the people at Pearson for their support for the
text during its development, including Neeraj Bhalla, editor, and Sugandh Juneja, content producer.
I also would like to thank the Pearson editorial, production, and marketing staffs.
FEEDBACK
The textbook team and I would appreciate hearing from you. Let us know what you think about
this textbook by writing to college.marketing@pearson.com. Please include “Feedback about Pinto”
in the subject line.
If you have questions related to this product, please contact our customer service department
online at https://support.pearson.com/getsupport.
Finally, it is important to reflect on an additional salient issue as you begin your study of
project management; most of you will be running a project long before you are given wider management
responsibilities in your organizations. Successful project managers are the lifeblood of organizations
and bear the imprint of the fast track. I wish you great success!
Jeffrey K. Pinto, Ph.D.
Andrew Morrow and Elizabeth Lee Black Chair
Management of Technology
Samuel Black School of Business
Penn State, the Behrend College
jkp4@psu.edu
xxi
ABOUT THE AUTHOR
Dr. Jeffrey K. Pinto is the Andrew Morrow and Elizabeth Lee
Black chair in the Management of Technology in the Sam and
Irene School of Business at Penn State, the Behrend College.
Dr. Pinto held previous academic appointments at the University of Cincinnati and the University of Maine. In 2016, he
was a visiting scholar at the Kemmy School of Business, University of Limerick, Ireland. He is the program chair for Penn
State’s Master of Project Management program. The author
or editor of 28 books and over 150 scientific papers that have
appeared in a variety of academic and practitioner journals,
books, conference proceedings, video lessons, and technical
reports, Dr. Pinto’s work has been translated into nine languages. He served as editor of the Project Management Journal,
is past department editor for R&D and engineering projects
with IEEE Transactions on Engineering Management, and serves
on several other journal editorial boards. With over 30 years’
experience in the field of project management, Dr. Pinto is a two-time recipient of the Distinguished
Contribution Award from the Project Management Institute for outstanding service to the project
management profession. He received PMI’s Research Achievement Award in 2009 for outstanding contributions to project management research. In 2017, he received the Research Achievement
Award from the International Project Management Association in recognition of his career research
contributions to the field of project management.
Dr. Pinto has taught and consulted widely in North America, South America, and Europe
on a variety of topics, including project management, new product development, supply chain
management, information systems implementation, organization development, leadership, and
conflict resolution.
xxii
1
■ ■ ■
Introduction
Why Project Management?
Chapter Objectives
After completing this chapter, you should be able to:
1.1 Understand why project management is becoming such a powerful and popular practice in
business.
1.2 Recognize the basic properties of projects, including their definition.
1.3 Understand why effective project management is such a challenge.
1.4 Understand and explain the project life cycle, its stages, and the activities that typically occur
at each stage in the project.
1.5 Understand the concept of project “success,” including various definitions of success, as well
as the alternative models of success.
1.6 Understand the purpose of project management maturity models and the process of benchmarking in organizations.
1.7 Recognize how mastery of the discipline of project management enhances critical employability skills for university graduates.
PROJECT MANAGEMENT BODY OF KNOWLEDGE CORE CONCEPTS COVERED IN
THIS CHAPTER
1.
2.
3.
4.
Definition of a Project (PMBoK sec. 1.2)
Definition of Project Management (PMBoK sec. 1.3)
Relationship to Other Management Disciplines (PMBoK sec. 1.4)
Project Phases and the Project Life Cycle (PMBoK sec. 2.1)
The world acquires value only through its extremes and endures only through moderation; extremists make
the world great, the moderates give it stability.1
PROJECT PROFILE
Development Projects that are Transforming Africa
The African continent is on the verge of massive changes, and projects are helping to raise the standard of living for its
inhabitants. The current population of 1.2 billion is expected to double by 2050, growing at some 42 million people per
year. Managing the means to accommodate this expansion is the goal of a number of governmental agencies, non-governmental organizations (NGOs), and international bodies. In order to bring prosperity to a continent that has suffered
through decades of misrule, colonial exploitation, and regional conflicts, dozens of important infrastructure projects
are being undertaken to improve standards of living and accommodate the needs of this rapidly-increasing population.
Among the major infrastructure projects that offer great promise are:
1. The North-South Corridor – In 2009, the Common Market of Eastern and Southern Africa began work on a series of
road and railways designed to link seven countries and covering more than 6,000 miles. At a cost of over $1 billion,
1
2
Chapter 1 • Introduction
FIGURE 1.1
South Africa’s Jasper Solar Farm
Source: Mikeledray/Shutterstock
2.
3.
4.
5.
6.
7.
the North-South Corridor is expected to improve the flow of people and goods across national boundaries, generating
commerce and trade.
Technology Hubs – A Chinese development firm, Zendai Property, announced in 2013 the investment of $8 billion to
build a hub for Chinese firms investing in African infrastructure. This hub, named Modderfontein New City, is being
constructed outside of Johannesburg, South Africa. Kenya is getting its own technology hub, a $14.5 billion software
center named Konza Technology City, which is situated outside Nairobi, the Kenyan capital. The Kenyan government
refers to Konza as the start of the “silicon savannah.”
Tanzania’s Bagamoyo Port is slated to become Africa’s largest port, with a capability of handling more than 20 million
containers each year. The Chinese construction firm that has invested $11 billion in the project expects to have the
port completed and operational by 2045.
Giant Dams – The Grand Ethiopian Renaissance Dam (budgeted at $4.8 billion) is intended to provide hydroelectric
power to Ethiopia and several neighboring countries. Congo’s Grand Inga Dam, with its expected cost of over $100
billion, will become the largest energy-generating dam in the world and is slated for completion in 2025.
South Africa’s Jasper Solar Farm – Opened in 2015, the solar farm produces enough energy to power 80,000 homes.
It is the largest solar power project on the African continent.
The “New Suez Canal” – Construction started on the expansion of the existing Suez Canal in 2014, with the goal
of adding a new 22-mile shipping lane. The expansion is expected to double Egypt’s annual revenue from canal
traffic.
Expansion of Cement Production – Dangote Cement, headquartered in Lagos, Nigeria, in 2015 signed contracts with
a Chinese firm to increase its cement manufacturing capacity across 15 countries to 100 million tons by 2020. This
huge increase in cement production will fuel additional infrastructure projects on the African continent for decades
to come.
Raising the standard of living for an entire continent with a large expected population increase is a challenging goal.
In order to accommodate the needs of these population changes, as well as improve the living standards for the entire
continent, it is vital that projects be undertaken that can provide value both commercially and environmentally. Successful project management offers the means to get the best out of “good intentions” by ensuring that these and other
funded projects are implemented as efficiently and effectively as possible. When development projects are viewed as the
roots for future expansion, it is easy to understand their importance. Future improvements in living standards depend on
the current projects being done right, as the success of these projects will spawn the need and support the willingness
of firms and governments to invest in subsequent projects.2
What is a Project?
The Need for Projects
LO 1.1
nderstand why project management is becoming such a powerful and popular practice
U
in business.
Projects are one of the principal means by which we change our world. Whether the goal is to
split the atom, tunnel under the English Channel, introduce Windows 10, or plan the 2018 Winter
Olympic Games in Pyeongchang, South Korea, the means through which to achieve these challenges
remains the same: project management. Project management has become one of the most popular
tools for organizations, both public and private, to improve internal operations, respond rapidly to
external opportunities, achieve technological breakthroughs, streamline new product development,
and more robustly manage the challenges arising from the business environment. Consider what
Tom Peters, best-selling author and management consultant, has to say about project management
and its place in business: “Projects, rather than repetitive tasks, are now the basis for most valueadded in business.”3 Project management has become a critical component of successful business
operations in worldwide organizations.
One of the key features of modern business is the nature of the opportunities and threats
posed by external events. As never before, companies face international competition and the need
to rapidly pursue commercial opportunities. They must modify and introduce products constantly,
respond to customers as fast as possible, and maintain competitive cost and operating levels. Does
performing all these tasks seem impossible? At one time, it was. Conventional wisdom held that
a company could compete using a low-cost strategy or as a product innovator or with a focus on
customer service. In short, companies had to pick their competitive niches and concede others their
claim to market share. In the past 20 years, however, everything turned upside down. Companies
such as General Electric, Apple, Ericsson, Boeing, and Oracle became increasingly effective at realizing all of these goals rather than settling for just one. These companies seemed to be successful in
every aspect of the competitive model: They were fast to market and efficient, cost-conscious, and
customer-focused. How were they performing the impossible?
Obviously, there is no one answer to this complex question. There is no doubt, however, that
these companies shared at least one characteristic: They had developed and committed themselves
to project management as a competitive tool. Old middle managers, reported Fortune magazine,
are dinosaurs, [and] a new class of manager mammal is evolving to fill the niche they once
ruled: project managers. Unlike his biological counterpart, the project manager is more agile
and adaptable than the beast he’s displacing, more likely to live by his wits than throwing his
weight around.4
Effective project managers will remain an indispensable commodity for successful organizations in the coming years. More and more companies are coming to this conclusion and adopting
project management as a way of life. Indeed, companies in such diverse industries as construction,
heavy manufacturing, insurance, health care, finance, public utilities, and software are becoming
project savvy and expecting their employees to do the same.
What is a Project?
LO 1.2
Recognize the basic properties of projects, including their definition.
Although there are a number of general definitions of the term project, we must recognize at the
outset that projects are distinct from other organizational processes. As a rule, a process refers to
ongoing, day-to-day activities in which an organization engages while producing goods or services.
Processes use existing systems, properties, and capabilities in a continuous, fairly repetitive m
anner.5
Projects, on the other hand, take place outside the normal, process-oriented world of the firm.
Certainly, in some organizations, such as construction, day-to-day processes center on the creation
3
4
Chapter 1 • Introduction
and development of projects. Nevertheless, for the majority of organizations project management
activities remain unique and separate from the manner in which more routine, process-driven work
is performed. Project work is continuously evolving, establishes its own work rules, and is the
antithesis of repetition in the workplace. As a result, it represents an exciting alternative to “business
as usual” for many companies. The challenges are great, but so are the rewards of success.
First, we need a clear understanding of the properties that make projects and project management so unique. Consider the following definitions of projects:
A project is a unique venture with a beginning and end, conducted by people to meet established goals within parameters of cost, schedule, and quality.6
Projects [are] goal-oriented, involve the coordinated undertaking of interrelated activities, are
of finite duration, and are all, to a degree, unique.7
A project can be considered to be any series of activities and tasks that:
•
•
•
•
•
Have a specific objective to be completed within certain specifications
Have defined start and end dates
Have funding limits, if applicable
Consume human and nonhuman resources, such as money, people, equipment
Are multifunctional (i.e., cut across several functional lines)8
[A project is] [o]rganized work toward a predefined goal or objective that requires resources
and effort, a unique (and therefore risky) venture having a budget and schedule.9
Probably the simplest definition is found in the Project Management Body of Knowledge (PMBoK)
guide of the Project Management Institute (PMI). The PMI is the world’s largest professional project
management association, with more than 475,000 members worldwide as of 2017. In the PMBoK
guide, a project is defined as “a temporary endeavor undertaken to create a unique product, service,
or result” (p. 553).10
Let us examine the various elements of projects, as identified by this set of definitions.
• Projects are complex, one-time processes. A project arises for a specific purpose or to meet
a stated goal. It is complex because it typically requires the coordinated input of n
umerous
members of the organization. Project members may be from different departments, other
organizational units, or one functional area. For example, a project to develop a new software
application for a retail company may require only the output of members of the information
systems group working with the marketing staff. On the other hand, some projects, such as
new product introductions, work best with representation from many functions, including
marketing, engineering, production, and design. Because a project is intended to fulfill a
stated goal, it is temporary. It exists only until its goal has been met, and at that point it is
dissolved.
• Projects are limited by budget, schedule, and resources. Project work requires that members
work with limited financial and human resources for a specified time period. They do not run
indefinitely. Once the assignment is completed, the project team disbands. Until that point, all
its activities are constrained by limitations on budget and personnel availability. Projects are
“resource-constrained” activities.
• Projects are developed to resolve a clear goal or set of goals. There is no such thing as a project
team with an ongoing, nonspecific purpose. The project’s goals, or deliverables, define the
nature of both the project and its team. Projects are designed to yield a tangible result, either
as a new product or service. Whether the goal is to build a bridge, implement a new accounts
receivable system, or win a presidential election, the goal must be specific and the project
organized to achieve a stated aim.
• Projects are customer-focused. Whether the project is responding to the needs of an internal
organizational unit (e.g., accounting) or intended to exploit a market opportunity external to
the organization, the underlying purpose of any project is to satisfy customer needs. In the
past, this goal was sometimes overlooked. Projects were considered successful if they attained
technical, budgetary, and scheduling goals. More and more, however, companies have realized that the primary goal of a project is customer satisfaction. If that goal is neglected, a firm
runs the risk of “doing the wrong things well”—pursuing projects that may be done efficiently
but that ignore customer needs or fail commercially.
What is a Project?
GENERAL PROJECT CHARACTERISTICS
Using these definitional elements, we can create a sense of the key attributes that all projects share.
These characteristics are not only useful for better understanding projects, but also offer the basis
for seeing how project-based work differs from other activities most organizations undertake. Projects represent a special type of undertaking by any organization. Not surprisingly, the challenges
in performing them right are sometimes daunting. Nevertheless, given the manner in which business continues to evolve on a worldwide scale, becoming “project savvy” is no longer a luxury: it
is rapidly becoming a necessity.
Projects are characterized by the following properties:11
1. Projects are ad hoc endeavors with a clear life cycle. Projects are nontraditional; they are
activities that are initiated as needed, operate for a specified time period over a fairly well
understood development cycle, and are then disbanded. They are temporary operations.
2. Projects are building blocks in the design and execution of organizational strategies. As we
will see in later chapters, projects allow organizations to implement companywide strategies.
They are the principal means by which companies operationalize corporate-level objectives.
In effect, projects are the vehicles for realizing company goals. For example, Intel’s strategy for
market penetration with ever newer, smaller, and faster computer chips is realized through its
commitment to a steady stream of research and development projects that allows the company
to continually explore the technological boundaries of electrical and computer engineering.
3. Projects are responsible for the newest and most improved products, services, and organizational processes. Projects are tools for innovation. Because they complement (and often
transform) traditional process-oriented activities, many companies rely on projects as vehicles
for going beyond conventional activities. Projects are the stepping-stones by which we move
forward.
4. Projects provide a philosophy and strategy for the management of change. “Change” is an
abstract concept until we establish the means by which we can make real alterations in the
things we do and produce. Projects allow organizations to go beyond simple statements of
intent and to achieve actual innovation. For example, whether it is Chevrolet’s Volt electric
car or Samsung’s newest smartphone upgrade, successful organizations routinely ask for
customers’ input and feedback to better understand their likes and dislikes. As the vehicle of
change, the manner in which a company develops its projects has much to say about its ability
to innovate and its commitment to change.
5. Project management entails crossing functional and organizational boundaries. Projects
epitomize internal organizational collaboration by bringing together people from various
functions across the company. A project aimed at new product development may require
the combined work of engineering, finance, marketing, design, and so forth. Likewise, in the
global business environment many companies have crossed organizational boundaries by
forming long-term partnerships with other firms in order to maximize opportunities while
emphasizing efficiency and keeping a lid on costs. Projects are among the most common means
of promoting collaboration, both across functions and across organizations.
6. The traditional management functions of planning, organizing, motivation, directing, and
control apply to project management. Project managers must be technically well versed, proficient at administrative functions, willing and able to assume leadership roles, and above all,
goal-oriented: The project manager is the person most responsible for keeping track of the big
picture. The nature of project management responsibilities should never be underestimated,
because these responsibilities are both diverse and critical to project success.
7. The principal outcomes of a project are the satisfaction of customer requirements within the
constraints of technical, cost, and schedule objectives. Projects are defined by their limitations. They have finite budgets, definite schedules, and carefully stated specifications for
completion. For example, a term paper assignment in a college class might include details
regarding form, length, number of primary and secondary sources to cite, and so forth. Likewise, in the Disney’s Expedition Everest case example at the end of this chapter the executive
leading the change process established clear guidelines regarding performance expectations.
All these constraints both limit and narrowly define the focus of the project and the options
available to the project team. It is the very task of managing successful project development
within such specific constraints that makes the field so challenging.
5
6
Chapter 1 • Introduction
8. Projects are terminated upon successful completion of performance objectives or earlier in
their life cycle, if results no longer promise an operational or strategic advantage. As we have
seen, projects differ from conventional processes in that they are defined by limited life cycles.
They are initiated, completed, and dissolved. As important alternatives to conventional organizational activities, they are sometimes called “temporary organizations.”12
Projects, then, differ from better-known organizational activities, which often involve repetitive
processes. The traditional model of most firms views organizational activities as consistently
performing a discrete set of activities. For example, a retail-clothing establishment buys, stocks,
and sells clothes in a continuous cycle. A steel plant orders raw materials, makes steel, and ships
finished products, again in a recurring cycle. The nature of these operations focuses our attention
on a p
rocess orientation; that is, the need to perform work as efficiently as possible in an ongoing
manner. When its processes are well understood, the organization always seeks better, more efficient
ways of doing the same essential tasks. Projects, because they are discrete activities, violate the idea
of repetition. They are temporary activities that operate outside formal channels. They may bring
together a disparate collection of team members with different kinds of functional expertise. Projects
function under conditions of uncertainty, and usually have the effect of shaking up normal corporate
activities. Because of their unique characteristics, they do not conform to common standards of operations; they do things differently and often reveal new and better ways of doing things. Table 1.1 offers
some other distinctions between project-based work and the more traditional, process-based activities. Note a recurring theme: projects operate in radical ways that consistently violate the standard,
process-based view of organizations.
Consider Apple’s use of projects to push the development of a constantly-changing range of
product and service offerings. When it was first introduced in 2003, the iPod was Apple’s portable
MP3 player that could be integrated with Apple’s popular iTunes site to record and play music
downloads. From its introduction in 2003 to 2015, when Apple stopped reporting sales of the product, consumers had bought more than 400 million iPods, generating $65 billion in revenue for the
firm. Customers have also purchased more than 45 billion songs through Apple’s iTunes online
store. In fact, Apple’s iTunes division became the largest U.S. market for music sales; by 2015 it
was accounting for 29% of all music sold in the United States and 64% of the digital music market.
More recently, as steadily declining sales raised concern that the music downloads market has
become saturated and less profitable, Apple introduced its Apple Music site to attract fans of music
streaming, competing directly with Spotify and Pandora, among other music streaming services. By
2017 Apple Music had enrolled over 20 million subscribers, making it the second-largest streaming
service in the world. Each of these steps demonstrates Apple’s commitment to using new project
ventures as a means of avoiding a business as usual mentality, as it seeks to remain on the leading
edge of the industry.13
TABLE 1.1 Differences Between Process and Project Management14
Process
Project
Repeat process or product
New process or product
Several objectives
One objective
Ongoing
One shot—limited life
People are homogenous
More heterogeneous
Well-established systems in place to integrate
efforts
Systems must be created to integrate efforts
Greater certainty of performance, cost, schedule
Greater uncertainty of performance, cost, schedule
Part of line organization
Outside of line organization
Bastions of established practice
Violates established practice
Supports status quo
Upsets status quo
Source: R. J. Graham. (1992). “A Survival Guide for the Accidental Project Manager,” Proceedings of the Annual Project
Management Institute Symposium. Drexel Hill, PA: Project Management Institute, pp. 355–61. Copyright and all rights
reserved. Material from this publication has been reproduced with the permission of PMI.
What is a Project?
A similar set of events is currently unfolding, centered on Apple’s successive upgrades of its
iPad tablet. Among the numerous features offered by the iPad is the ability to download books,
including college textbooks, directly from publishers, effectively eliminating the traditional middlemen—bookstores—from the process. So radical are the implications of the iPad and competing
tablets like Microsoft’s Surface Pro and Samsung’s Galaxy to capture a share of this market that
large bookstores have been forced to adapt their business models to the new electronic reality of
book purchases by offering their own readers; for example, Kindle for Amazon. Some experts are
suggesting that within a decade tablets and other electronic readers will make traditional books
obsolete, capturing the majority of the publishing market. These are just some examples of the
way that project-driven technological change, such as that at Apple, is reshaping the competitive
landscape.
Given the enthusiasm with which project management is being embraced by so many organizations, we should note that the same factors that make project management a unique undertaking
are also among the main reasons why successful project management is so difficult. The track record
of project management is by no means one of uninterrupted success, in part because many companies encounter deep-rooted resistance to the kinds of changes needed to accommodate a project
philosophy. Indeed, recent research into the success rates for projects offers some grim conclusions:
• A study of more than 300 large companies conducted by the consulting firm KPMG found that
software and/or hardware development projects fail at the rate of 65%. Of companies studied,
65% reported projects that went grossly over budget, fell behind schedule, did not perform as
expected, or all of the above. Half of the managers responding indicated that these findings
were considered “normal.”15
• A study by the META Group found that “more than half of all (information technology) IT
projects become runaways—overshooting their budgets and timetables while failing to deliver
fully on their goals.” According to the Gallup Business Review, the U.S. economy loses somewhere between $50 and $150 billion every year because of failed IT projects.16
• Joe Harley, the Chief Information Officer at the Department for Work and Pensions for the
UK government, stated that “only 30%” of technology-based projects and programs are a
success—at a time when taxes are funding an annual budget of £14 billion (over $22 billion)
on public sector IT, equivalent to building 7,000 new primary schools or 75 hospitals a year.17
• The United States National Nuclear Security Administration has racked up $16 billion in cost
overruns on 10 major projects that are a combined 38 years behind schedule, the Government
Accountability Office reports. For example, at Los Alamos National Laboratory a seven-year,
$213 million upgrade to the security system that protects the lab’s most sensitive nuclear
bomb-making facilities did not work. A party familiar with the organization cites a “pervasive
culture of tolerating the intolerable and accepting the unacceptable.”18
• One out of six IT projects has an average cost overrun of 200% and a schedule overrun of
70%. Around 45% of companies admit that they are unclear about the business objectives
of their IT projects. The Chaos Summary 2015 survey of 50,000 projects worldwide by The
Standish Group reported similar findings: The majority of all projects were rated either as
“challenged” due to late delivery, being over budget, or delivering less than required features,
or “failed” when they were canceled prior to completion or the product developed was never
used. Researchers have concluded that the average success rate of business-critical application
development projects is 29%. Their statistics have remained remarkably steady since 1994.19
• The Special Inspector General for Afghanistan Reconstruction (SIGAR) reported that the U.S.
spent more than $110 billion on postwar reconstruction projects, with some estimates suggesting that over one-third of the costs of these projects was lost due to waste, fraud, and
poor planning or project execution. In a recent interview, John Sopko, the Special Investigator
General, noted that because of project waste along with contracting and performance errors,
“We’ve built an Afghanistan they can’t afford.” As one example, he cites the $400 million purchase of aircraft for an Afghanistan Air Force; aircraft the government couldn’t use that were
ultimately scrapped for a near total loss.20
These findings underscore an important point: although project management is becoming
popular, it is not easy to assimilate into the conventional processes of most firms. For every firm
discovering the benefits of projects, many more underestimate the problems involved in becoming
project savvy.
7
8
Chapter 1 • Introduction
These studies also point to a core truth about project management: we should not overestimate
the benefits to be gained from project management while underestimating the commitment required
to make a project work. There are no magic bullets or quick fixes in the discipline. Like any other
valuable activity, project management requires preparation, knowledge, training, and commitment
to basic principles. Organizations wanting to make use of project-based work must recognize, as
Table 1.1 demonstrates, that its very strength often causes it to operate in direct contradiction to
standard, process-oriented business practices.
PROJECT PROFILE
President Obama Signs the Program Management Improvement and Accountability Act
For those who ever wondered just how seriously the U.S. federal government takes project management, it is interesting
to discover that they are making a law to regulate it. In one of the final acts of President Obama’s administration, he
signed into law the Program Management Improvement and Accountability Act (PMIAA) in December, 2016. This act of
Congress is intended to enhance both accountability and best practices in project and program management throughout
the federal government. The legislation, strongly endorsed by the Project Management Institute (PMI), was approved
by both chambers of Congress with overwhelming bi-partisan support.
The PMIAA reforms federal program management policy in four important ways:
1. Creating a formal job series and career path for program managers in the federal government.
2. Developing a standards-based program management policy across the federal government.
3. Recognizing the essential role of executive sponsorship and engagement by designating a senior executive in federal
agencies to be responsible for program management policy and strategy.
4. Sharing knowledge of successful approaches to program management through an interagency council on program
management.
Among the reasons cited for formalizing the importance of project/program management is that only 64 percent of
government strategic initiatives ever meet their goals and business intent, while government entities waste $101 million for every $1 billion spent on project and programs. Research also shows that developing best practices can result in
improved efficiency and less money being wasted. Most importantly, organizations see more projects delivering expected
value to stakeholders on time and within budget.21
FIGURE 1.2
President Obama signing the PMIAA into Law
Source: REX/Shutterstock
Why are Projects Important?
Why are Projects Important?
LO 1.3
Understand why effective project management is such a challenge.
There are a number of reasons why projects and project management can be crucial in helping an
organization achieve its strategic goals. David Cleland, a noted project management researcher, suggests that many of these reasons arise from the very pressures that organizations find themselves
facing.22
1. Shortened product life cycles. The days when a company could offer a new product and
depend on having years of competitive domination are gone. Increasingly, the life cycle of
new products is measured in terms of months or even weeks, rather than years. One has only
to look at new products in electronics or computer hardware and software to observe this
trend. Interestingly, we are seeing similar signs in traditional service-sector firms, which also
have recognized the need for agility in offering and upgrading new services at an increasingly
rapid pace.
2. Narrow product launch windows. Another time-related issue concerns the nature of opportunity. Organizations are aware of the dangers of missing the optimum point at which to launch
a new product and must take a proactive view toward the timing of product introductions.
For example, while reaping the profits from the successful sale of Product A, smart firms are
already plotting the best point at which to launch Product B, either as a product upgrade or a
new offering. Because of fierce competition, these optimal launch opportunities are measured
in terms of months. Miss your launch window, even by a matter of weeks, and you run the
risk of rolling out an also-ran.
3. Increasingly complex and technical products. It has been well-documented that the average
automobile today has more computing power than the Apollo 11 space capsule that allowed
astronauts to walk on the moon. This illustrates a clear point: the world today is complex.
Products are complicated, technically sophisticated, and difficult to produce efficiently. The
public’s appetite for the next big thing continues unabated and substantially unsatisfied. We
want the new models of our consumer goods to be better, bigger (or smaller), faster, and more
complex than the old ones. Firms constantly upgrade product and service lines to feed this
demand. This causes multiple problems in design and production as we continually seek to
push the technical limits. Furthermore, in anticipating future demand many firms embark
on expensive programs of research and development while attempting to discern consumer
tastes. The effect can be to erroneously create expensive and technically sophisticated projects
that we assume the customer will want. For example, Rauma Corporation of Finland developed a state-of-the-art loader for the logging industry. Rauma’s engineers loade...
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