PROJECT MANAGEMENT THE MANAGERIAL PROCESS 7E ERIK W. LARSON CLIFFORD F. GRAY ® Required=Results ©Getty Images/iStockphoto McGraw-Hill Connect® Learn Without Limits Connect is a teaching and learning platform that is proven to deliver better results for students and instructors. Connect empowers students by continually adapting to deliver precisely what they need, when they need it, and how they need it, so your class time is more engaging and effective. 73% of instructors who use Connect require it; instructor satisfaction increases by 28% when Connect is required. Using Connect improves retention rates by 19.8%, passing rates by 12.7%, and exam scores by 9.1%. Analytics Connect Insight® Connect Insight is Connect’s new one-of-a-kind visual analytics dashboard—now available for both instructors and students—that provides at-a-glance information regarding student performance, which is immediately actionable. By presenting assignment, assessment, and topical performance results together with a time metric that is easily visible for aggregate or individual results, Connect Insight gives the user the ability to take a just-in-time approach to teaching and learning, which was never before available. Connect Insight presents data that empowers students and helps instructors improve class performance in a way that is efficient and effective. Mobile Connect’s new, intuitive mobile interface gives students and instructors flexible and convenient, anytime–anywhere access to all components of the Connect platform. Students can view their results for any Connect course. Adaptive THE ADAPTIVE READING EXPERIENCE DESIGNED TO TRANSFORM THE WAY STUDENTS READ More students earn A’s and B’s when they use McGraw-Hill Education Adaptive products. SmartBook® Proven to help students improve grades and study more efficiently, SmartBook contains the same content within the print book, but actively tailors that content to the needs of the individual. SmartBook’s adaptive technology provides precise, personalized instruction on what the student should do next, guiding the student to master and remember key concepts, targeting gaps in knowledge and offering customized feedback, and driving the student toward comprehension and retention of the subject matter. Available on tablets, SmartBook puts learning at the student’s fingertips—anywhere, anytime. Over 8 billion questions have been answered, making McGraw-Hill Education products more intelligent, reliable, and precise. www.mheducation.com The McGraw-Hill Series Operations and Decision Sciences OPERATIONS MANAGEMENT Beckman and Rosenfield, Operations, Strategy: Competing in the 21st Century, First Edition Benton, Purchasing and Supply Chain Management, Second Edition Bowersox, Closs, Cooper, and Bowersox, Supply Chain Logistics Management, Fourth Edition Brown and Hyer, Managing Projects: A Team-Based Approach, First Edition Burt, Petcavage, and Pinkerton, Supply Management, Eighth Edition Cachon and Terwiesch, Operations Management First Edition Cachon and Terwiesch, Matching Supply with Demand: An Introduction to Operations Management, Third Edition Cooper and Schindler, Business Research Methods, Twelfth Edition Finch, Interactive Models for Operations and Supply Chain Management, First Edition Fitzsimmons, Fitzsimmons, and Bordoloi, Service Management: Operations, Strategy, Information Technology, Eighth Edition Gehrlein, Operations Management Cases, First Edition Harrison and Samson, Technology Management, First Edition Hayen, SAP R/3 Enterprise Software: An Introduction, First Edition Hill, Manufacturing Strategy: Text & Cases, Third Edition Hopp, Supply Chain Science, First Edition Hopp and Spearman, Factory Physics, Third Edition Jacobs, Berry, Whybark, and Vollmann, Manufacturing Planning & Control for Supply Chain Management, Sixth Edition Jacobs and Chase, Operations and Supply Management: The Core, Fourth Edition Seppanen, Kumar, and Chandra, Process Analysis and Improvement, First Edition Simchi-Levi, Kaminsky, and Simchi-Levi, Designing and Managing the Supply Chain: Concepts, Strategies, Case Studies, Third Edition Sterman, Business Dynamics: Systems Thinking and Modeling for Complex World, First Edition Stevenson, Operations Management, Thirteenth Edition Swink, Melnyk, Cooper, and Hartley, Managing Operations Across the Supply Chain, Third Edition Jacobs and Chase, Operations and Supply Management, Fifteenth Edition Thomke, Managing Product and Service Development: Text and Cases, First Edition Jacobs and Whybark, Why ERP? First Edition Ulrich and Eppinger, Product Design and Development, Fourth Edition Larson and Gray, Project Management: The Managerial Process, Seventh Edition Zipkin, Foundations of Inventory Management, First Edition Leenders, Johnson, and Flynn, Purchasing and Supply Management, Fourteenth Edition QUANTITATIVE METHODS AND MANAGEMENT SCIENCE Nahmias, Production and Operations Analysis, Sixth Edition Hillier and Hillier, Introduction to Management Science: A Modeling and Case Studies Approach with Spreadsheets, Fifth Edition Olson, Introduction to Information Systems Project Management, Second Edition Stevenson and Ozgur, Introduction to Management Science with Spreadsheets, First Edition Schroeder, Goldstein, Rungtusanatham, Operations Management: Contemporary Concepts and Cases, Seventh Edition Project Management: The Managerial Process Seventh Edition Erik W. Larson Clifford F. Gray Oregon State University PROJECT MANAGEMENT: THE MANAGERIAL PROCESS, SEVENTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2014 and 2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 LWI 21 20 19 18 17 ISBN MHID 978-1-259-66609-4 1-259-66609-3 Chief Product Officer, SVP Products & Markets: G. Scott Virkler Vice President, General Manager, Products & Markets: Marty Lange Managing Director: James Heine Brand Manager: Dolly Womack Product Developer: Christina Holt Marketing Manager: Britney Hermsen Director, Content Design & Delivery: Linda Avenarius Program Manager: Mark Christianson Content Project Managers: Melissa M. Leick, Bruce Gin, Karen Jozefowicz Buyer: Jennifer Pickel Design: Egzon Shaqiri Content Licensing Specialists: Melissa Homer, Beth Thole Cover Design: Jessica Cuevas Cover Image: © Getty Images/Georgijevic Compositor: Aptara®, Inc. Printer: LSC Communications All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. Library of Congress Cataloging-in-Publication Data Names: Gray, Clifford F., author. | Larson, Erik W., 1952 author. Title: Project management : the managerial process / Erik W. Larson, Oregon State University, Clifford F. Gray, Oregon State University. Description: Seventh edition. | New York, NY : McGraw-Hill Education, [2018] | Clifford F. Gray is the first named author on the earlier editions. Identifiers: LCCN 2016040029 | ISBN 9781259666094 | ISBN 1259666093 (alk. paper) Subjects: LCSH: Project management. | Time management. | Risk management. Classification: LCC HD69.P75 G72 2018 | DDC 658.4/04—dc23 LC record available at https://lccn.loc.gov/ 2016040029 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites. mheducation.com/highered About the Authors Erik W. Larson ERIK W. LARSON is professor of project management at the College of Business, Oregon State University. He teaches executive, graduate, and undergraduate courses on project management and leadership. His research and consulting activities focus on project management. He has published numerous articles on matrix management, product development, and project partnering. He has been honored with teaching awards from both the Oregon State University MBA program and the University of Oregon Executive MBA program. He has been a member of the Portland, Oregon, chapter of the Project Management Institute since 1984. In 1995 he worked as a Fulbright scholar with faculty at the Krakow Academy of Economics on modernizing Polish business education. He was a visiting professor at Chulalongkorn University in Bangkok, Thailand, and at Baden-Wuerttemberg Cooperative State University in Bad Mergentheim, Germany. He received a B.A. in psychology from Claremont McKenna College and a Ph.D. in management from State University of New York at Buffalo. He is a certified project management professional (PMP) and Scrum Master. Clifford F. Gray CLIFFORD F. GRAY is professor emeritus of management at the College of Business, Oregon State University. He has personally taught more than 100 executive development seminars and workshops. Cliff has been a member of the Project Management Institute since 1976 and was one of the founders of the Portland, Oregon, chapter. He was a visiting professor at Kasetsart University in Bangkok, Thailand, in 2005. He was the president of Project Management International, Inc. (a training and consulting firm specializing in project management) 1977–2005. He received his B.A. in economics and management from Millikin University, M.B.A. from Indiana University, and doctorate in operations management from the College of Business, University of Oregon. He is certified Scrum Master. vii “Man’s mind, once stretched by a new idea, never regains its original dimensions.” Oliver Wendell Holmes, Jr. To my family, who have always encircled me with love and encouragement—my parents (Samuel and Charlotte), my wife (Mary), my sons and their wives (Kevin and Dawn, Robert and Sally) and their children (Ryan, Carly, Connor and Lauren). C.F.G. “We must not cease from exploration and the end of all exploring will be to arrive where we began and to know the place for the first time.” T. S. Eliot To Ann, whose love and support have brought out the best in me. To our girls Mary, Rachel, and Tor-Tor for the joy and pride they give me. And to our grandkids, Mr. B, Livvy, and Xmo, whose future depends upon effective project management. Finally, to my muse, Neil—Walk on! E.W.L viii Preface Our motivation in writing this text continues to be to provide a realistic, socio-technical view of project management. In the past, textbooks on project management focused almost exclusively on the tools and processes used to manage projects and not the human dimension. This baffled us since people not tools complete projects! While we firmly believe that mastering tools and processes is essential to successful project management, we also believe that the effectiveness of these tools and methods is shaped and determined by the prevailing culture of the organization and interpersonal dynamics of the people involved. Thus, we try to provide a holistic view that focuses on both of these dimensions and how they interact to determine the fate of projects. The role of projects in organizations is receiving increasing attention. Projects are the major tool for implementing and achieving the strategic goals of the organization. In the face of intense, worldwide competition, many organizations have reorganized around a philosophy of innovation, renewal, and organizational learning to survive. This philosophy suggests an organization that is flexible and project driven. Project management has developed to the point where it is a professional discipline having its own body of knowledge and skills. Today it is nearly impossible to imagine anyone at any level in the organization who would not benefit from some degree of expertise in the process of managing projects. Audience This text is written for a wide audience. It covers concepts and skills that are used by managers to propose, plan, secure resources, budget, and lead project teams to successful completions of their projects. The text should prove useful to students and prospective project managers in helping them understand why organizations have developed a formal project management process to gain a competitive advantage. Readers will find the concepts and techniques discussed in enough detail to be immediately useful in new-project situations. Practicing project managers will find the text to be a valuable guide and reference when dealing with typical problems that arise in the course of a project. Managers will also find the text useful in understanding the role of projects in the missions of their organizations. Analysts will find the text useful in helping to explain the data needed for project implementation as well as the operations of inherited or purchased software. Members of the Project Management Institute will find the text is well structured to meet the needs of those wishing to prepare for PMP (Project Management Professional) or CAPM (Certified Associate in Project Management) certification exams. The text has in-depth coverage of the most critical topics found in PMI’s Project Management Body of Knowledge (PMBOK). People at all levels in the organization assigned to work on projects will find the text useful not only in providing them with a rationale for the use of project management processes but also because of the insights they will gain on how to enhance their contributions to project success. Our emphasis is not only on how the management process works, but more importantly, on why it works. The concepts, principles, and techniques are universally ix x Preface applicable. That is, the text does not specialize by industry type or project scope. Instead, the text is written for the individual who will be required to manage a variety of projects in a variety of different organizational settings. In the case of some small projects, a few of the steps of the techniques can be omitted, but the conceptual framework applies to all organizations in which projects are important to survival. The approach can be used in pure project organizations such as construction, research organizations, and engineering consultancy firms. At the same time, this approach will benefit organizations that carry out many small projects while the daily effort of delivering products or services continues. Content In this and other editions we continue to try to resist the forces that engender scope creep and focus only on essential tools and concepts that are being used in the real world. We have been guided by feedback from practitioners, teachers, and students. Some changes are minor and incremental, designed to clarify and reduce confusion. Other changes are significant. They represent new developments in the field or better ways of teaching project management principles. Below are major changes to the seventh edition. ∙ Learning objectives have been established for each chapter and the corresponding segment has been marked in the text. ∙ Chapter 16 Oversight has been eliminated and critical information on project maturity models is now part of Chapter 14. ∙ Chapter 18 Project Management Career Paths has been eliminated and essential information from this chapter is now in Chapter 1. ∙ A new set of network exercises have been developed for Chapter 6. ∙ A new set of crashing exercises have been developed for Chapter 9 which introduce crashing concepts in a developmental way. ∙ The Chapter 2 Appendix on Request for Proposal is now part of Chapter 12. ∙ Terms and concepts have been updated to be consistent with the sixth edition of the Project Management Body of Knowledge (2015). ∙ New student exercises and cases have been added to chapters. ∙ The Snapshot from Practice boxes feature a number of new examples of project management in action as well as new Research Highlights that continue to promote practical application of project management. ∙ The Instructor’s Manual contains a listing of current YouTube videos that correspond to key concepts and Snapshots from Practice. Overall the text addresses the major questions and challenges the authors have encountered over their 60 combined years of teaching project management and consulting with practicing project managers in domestic and foreign environments. These questions include: What is the strategic role of projects in contemporary organizations? How are projects prioritized? What organizational and managerial styles will improve chances of project success? How do project managers orchestrate the complex network of relationships involving vendors, subcontractors, project team members, senior management, functional managers, and customers that affect project success? What factors contribute to the development of a high-performance project team? What project management system can be set up to gain some measure of control? How do managers prepare for a new international project in a foreign culture? Preface xi Project managers must deal with all these concerns to be effective. All of these issues and problems represent linkages to an integrative project management view. The chapter content of the text has been placed within an overall framework that integrates these topics in a holistic manner. Cases and snapshots are included from the experiences of practicing managers. The future for project managers appears to be promising. Careers will be determined by success in managing projects. Student Learning Aids Student resources include study outlines, online quizzes, PowerPoint slides, videos, Microsoft Project Video Tutorials and web links. These can be found in Connect. Acknowledgments We would like to thank Scott Bailey for building the end-of-chapter exercises for Connect and Tracie Lee for reviewing them; Pinyarat Sirisomboonsuk for revising the PowerPoint slides; Oliver F. Lehmann for providing access to PMBOK study questions; Ronny Richardson for updating the Instructor’s Manual; Angelo Serra for updating the Test Bank; and Pinyarat Sirisomboonsuk for providing new Snapshot from Practice questions. Next, it is important to note that the text includes contributions from numerous students, colleagues, friends, and managers gleaned from professional conversations. We want them to know we sincerely appreciate their counsel and suggestions. Almost every exercise, case, and example in the text is drawn from a real-world project. Special thanks to managers who graciously shared their current project as ideas for exercises, subjects for cases, and examples for the text. Shlomo Cohen, John A. Drexler, Jim Moran, John Sloan, Pat Taylor, and John Wold, whose work is printed, are gratefully acknowledged. Special gratitude is due Robert Breitbarth of Interact Management, who shared invaluable insights on prioritizing projects. University students and managers deserve special accolades for identifying problems with earlier drafts of the text and exercises. We are indebted to the reviewers of past editions who shared our commitment to elevating the instruction of project management. The reviewers include Paul S. Allen, Rice University; Denis F. Cioffi, George Washington University; Joseph D. DeVoss, DeVry University; Edward J. Glantz, Pennsylvania State University; Michael Godfrey, University of Wisconsin–Oshkosh; Robert Key, University of Phoenix; Dennis Krumwiede, Idaho State University; Nicholas C. Petruzzi, University of Illinois–Urbana/ Champaign; William R. Sherrard, San Diego State University; S. Narayan Bodapati, Southern Illinois University at Edwardsville; Warren J. Boe, University of Iowa; Burton Dean, San Jose State University; Kwasi Amoako-Gyampah, University of North Carolina–Greensboro; Owen P. Hall, Pepperdine University; Bruce C. Hartman, University of Arizona; Richard Irving, York University; Robert T. Jones, DePaul University; Richard L. Luebbe, Miami University of Ohio; William Moylan, Lawrence Technological College of Business; Edward Pascal, University of Ottawa; James H. Patterson, Indiana University; Art Rogers, City University; Christy Strbiak, U.S. Air Force Academy; David A. Vaughan, City University; and Ronald W. Witzel, Keller Graduate School of Management. Nabil Bedewi, Georgetown University; Scott Bailey, Troy University; Michael Ensby, Clarkson University; Eldon Larsen, Marshall University; Steve Machon, DeVry University–Tinley Park; William Matthews, William Patterson xii Preface University; Erin Sims, DeVry University–Pomona; Kenneth Solheim, DeVry University–Federal Way; and Oya Tukel, Cleveland State University. Gregory Anderson, Weber State University; Dana Bachman, Colorado Christian University; Alan Cannon, University of Texas, Arlington; Susan Cholette, San Francisco State; Michael Ensby, Clarkson University; Charles Franz, University of Missouri, Columbia; Raouf Ghattas, DeVry University; Robert Groff, Westwood College; Raffael Guidone, New York City College of Technology; George Kenyon, Lamar University; Elias Konwufine, Keiser University; Rafael Landaeta, Old Dominion University; Muhammad Obeidat, Southern Polytechnic State University; Linda Rose, Westwood College; Oya Tukel, Cleveland State University; and Mahmoud Watad, William Paterson University. Victor Allen, Lawrence Technological University; Mark Angolia, East Carolina University; Alan Cannon, University of Texas at Arlington; Robert Cope, Southeastern Louisiana University; Kenneth DaRin, Clarkson University; Ron Darnell, Amberton University; Jay Goldberg, Marquette University; Mark Huber, University of Georgia; Marshall Issen, Clarkson University; Charles Lesko, East Carolina University; Lacey McNeely, Oregon State University; Donald Smith, Texas A&M University; Peter Sutanto, Prairie View A&M University; Jon Tomlinson, University of Northwestern Ohio. We thank you for your many thoughtful suggestions and for making our book better. Of course we accept responsibility for the final version of the text. In addition, we would like to thank our colleagues in the College of Business at Oregon State University for their support and help in completing this project. In particular, we recognize Lacey McNeely, Prem Mathew, Keith Leavitt and Pauline Schlipzand for their helpful advice and suggestions. We also wish to thank the many students who helped us at different stages of this project, most notably Neil Young, Saajan Patel, Katherine Knox, Dat Nguyen, and David Dempsey. Mary Gray deserves special credit for editing and working under tight deadlines on earlier editions. Special thanks go to Pinyarat (“Minkster”) Sirisomboonsuk for her help in preparing the last four editions. Finally, we want to extend our thanks to all the people at McGraw-Hill Education for their efforts and support. First, we would like to thank Dolly Womack, and Christina Holt, for providing editorial direction, guidance, and management of the book’s development for the seventh edition. And we would also like to thank Melissa Leick, Jennifer Pickel, Egzon Shaqiri, Bruce Gin, and Karen Jozefowicz for managing the final production, design, supplement, and media phases of the seventh edition. Erik W. Larson Clifford F. Gray 28 Chapter 2 Organization Strategy and Project Selection alignment even more essential for success. Ensuring a strong link between the strategic plan and projects is a difficult task that demands constant attention from top and middle management. The larger and more diverse an organization, the more difficult it is to create and maintain this strong link. Companies today are under enormous pressure to manage a process that clearly aligns projects to organization strategy. Ample evidence still suggests that many organizations have not developed a process that clearly aligns project selection to the strategic plan. The result is poor utilization of the organization’s resources—people, money, equipment, and core competencies. Conversely, organizations that have a coherent link of projects to strategy have more cooperation across the organization, perform better on projects, and have fewer projects. How can an organization ensure this link and alignment? The answer requires integration of projects with the strategic plan. Integration assumes the existence of a strategic plan and a process for prioritizing projects by their contribution to the plan. A crucial factor to ensure the success of integrating the plan with projects lies in the creation of a process that is open and transparent for all participants to review. This chapter presents an overview of the importance of strategic planning and the process for developing a strategic plan. Typical problems encountered when strategy and projects are not linked are noted. A generic methodology that ensures integration by creating very strong linkages of project selection and priority to the strategic plan is then discussed. The intended outcomes are clear organization focus, best use of scarce organization resources (people, equipment, capital), and improved communication across projects and departments. Guided Tour C H A P T E R 2 Established Learning Objectives Learning objectives have been added to this edition to help students target key areas of learning. Learning objectives are listed both at the beginning of each chapter and are called out as marginal elements throughout the narrative in each chapter. LO 2-1 Explain why it is important for project managers to understand their organization’s strategy. T W O Organization Strategy and Project Selection LEARNING OBJECTIVES OUTLINE Why Project Managers Need to Understand Strategy After reading this chapter you should be able to: 2.1 Project management historically has been preoccupied solely with the planning and execution of projects. Strategy was considered to be under the purview of senior management. This is old-school thinking. New-school thinking recognizes that project management is at the apex of strategy and operations. Aaron Shenhar speaks to this issue when he states, “. . . it is time to expand the traditional role of the project manager from an operational to a more strategic perspective. In the modern evolving organization, project managers will be focused on business aspects, and their role will expand from getting the job done to achieving the business results and winning in the marketplace.”1 There are two main reasons why project managers need to understand their organization’s mission and strategy. The first reason is so they can make appropriate decisions and adjustments. For example, how a project manager would respond to a suggestion to modify the design of a product to enhance performance will vary depending upon whether his company strives to be a product leader through innovation or to achieve operational excellence through low cost solutions. Similarly, how a project manager would respond to delays may vary depending upon strategic concerns. A project manager will authorize overtime if her firm places a premium on getting to the market first. Another project manager will accept the delay if speed is not essential. The second reason project managers need to understand their organization’s strategy is so they can be effective project advocates. Project managers have to be able to demonstrate to senior management how their project contributes to their firm’s mission. Protection and continued support come from being aligned with corporate objectives. Project managers also need to be able to explain to team members and other 2-1 Explain why it is important for project managers to understand their organization’s strategy. 2.2 The Need for a Project Priority System 2-2 Identify the significant role projects contribute to the strategic direction of the organization. 2-3 Understand the need for a project priority system. 2-4 Apply financial and nonfinancial criteria to assess the value of projects. 2-5 Understand how multi-criteria models can be used to select projects. The Strategic Management Process: An Overview 2.3 A Portfolio Management System 2.4 Selection Criteria 2.5 Applying a Selection Model 2.6 Managing the Portfolio System Summary 2-6 Apply an objective priority system to project selection. 2-7 Understand the need to manage the project portfolio. End-of-Chapter Content Both static andShenhar, algorithmic end-of-chapter content, including Review Questions and Exercises, are now A., and Dov Dvie, Reinventing Project Management (Harvard Business School, 2007), p. 5. assignable in Connect. 84 Chapter 3 Organization: Structure and Culture 1 SmartBook The SmartBook has been updated with new highlights and probes for optimal student learning. Lar66093_ch02_026-065.indd 28 Snapshots The Snapshot from Practice boxes have been updated to include a number of new examples of project management in action. New questions based on the Snapshots are also now assignable in Connect. New and Updated Cases SNAPSHOT FROM PRACTICE 3.4 26 In 2016 Google Inc. topped Fortune magazine’s list of best companies to work at for the seventh time in the past ten years. When one enters the Lar66093_ch02_026-065.indd 26 24-hour Googleplex located in Mountain View, California, you feel that you are walking through a new-age college campus rather than the corporate office of a billion-dollar business. The collection of interconnected low-rise buildings with colorful, glass-encased offices feature upscale trappings—free gourmet meals three times a day, free use of an outdoor wave pool, indoor gym and large child care facility, private shuttle bus service to and from San Francisco and other residential areas— that are the envy of workers across the Bay area. These perks and others reflect Google’s culture of keeping people happy and thinking in unconventional ways. The importance of corporate culture is no more evident than in the fact that the head of Human Resources, Stacy Savides Sullivan, also has the title of Chief Culture Officer. Her task is to try to preserve the innovative culture of a start-up as Google quickly evolves into a mammoth international corporation. Sullivan characterizes Google culture as “team-oriented, very collaborative and encouraging people to think nontraditionally, different from where they ever worked before—work with integrity and for the good of the company and for the good of the world, which is tied to our overall mission of making information accessible to the world.” Google goes to great lengths to screen new employees to not only make sure that they have outstanding technical capabilities but also that they are going to fit Google’s culture. Sullivan goes on to define a Google-y employee as somebody who is “flexible, adaptable, and not focusing on titles and hierarchy, and just gets stuff done.” Google’s culture is rich with customs and traditions not found in corporate America. For example, project Google-y* 10/4/16 4:52 PM © Caiaimage/Glow Images teams typically have daily “stand-up” meetings seven minutes after the hour. Why seven minutes after the hour? Because Google cofounder Sergey Brin once estimated that it took seven minutes to walk across the Google campus. Everybody stands to make sure no one gets too comfortable and no time is wasted during the rapid-fire update. As one manager noted, “The whole concept of the stand-up is to talk through what everyone’s doing, so if someone is working on what you’re working on, you can discover and collaborate not duplicate.” Another custom is “dogfooding.” This is when a project team releases the functional prototype of a future product to Google employees for them to test drive. There is a strong norm within Google to test new products and provide feedback to the developers. The project team receives feedback from thousands of Google-ys. The internal focus group can log bugs or simply comment on design or functionality. Fellow Google-ys do not hold back on their feedback and are quick to point out things they don’t like. This often leads to significant product improvements. Included at the end of each chapter are between one and five cases which demonstrate key ideas from the text and help students understand how Project Management comes into play in the real world. New cases have been added across several chapters in the 7th edition. * Walters, H., “How Google Got Its New Look,” BusinessWeek, May 10, 2010; Goo, S. K., “Building a ‘Googley’ Workforce,“ Washington Post, October 21, 2006; Mills, E., “Meet Google’s Culture Czar,” CNET News.com, April 27, 2007. xiii simply rely on what people report about their culture. The physical environment in which people work, as well as how people act and respond to different events that occur, must be examined. Figure 3.6 contains a worksheet for diagnosing the culture of an organization. Although by no means exhaustive, the checklist often yields clues Note to Student You will find the content of this text highly practical, relevant, and current. The concepts discussed are relatively simple and intuitive. As you study each chapter we suggest you try to grasp not only how things work, but why things work. You are encouraged to use the text as a handbook as you move through the three levels of competency: I know. I can do. I can adapt to new situations. Project management is both people and technical oriented. Project management involves understanding the cause-effect relationships and interactions among the sociotechnical dimensions of projects. Improved competency in these dimensions will greatly enhance your competitive edge as a project manager. The field of project management is growing in importance and at an exponential rate. It is nearly impossible to imagine a future management career that does not include management of projects. Résumés of managers will soon be primarily a description of the individual’s participation in and contributions to projects. Good luck on your journey through the text and on your future projects. Chapter-by-Chapter Revisions for the Seventh Edition Chapter 1: Modern Project Management ∙ ∙ ∙ ∙ New Snapshot: Project Management in Action 2016. Information updated. New Snapshot: Ron Parker replaced Research Highlight: Works well with others. New case: The Hokie Lunch Group. Chapter 2: Organization Strategy and Project Selection ∙ New Snapshot: Project Code Names replaced HP’s Strategy Revision. Chapter 3: Organization: Structure and Culture ∙ Learning objectives established. ∙ Snapshot: Google-y updated. ∙ Snapshot: Skunk Works at Lockheed Martin updated. Chapter 4: Defining the Project ∙ Learning objectives established. ∙ New case: Home Improvement Project. xiv Note to Student xv Chapter 5: Estimating Project Times and Costs ∙ Learning objectives established. ∙ New Snapshot: London 2012 Olympics: Avoiding White Elephant curse. ∙ Expanded discussion of Mega Projects including the emergence of white elephants. Chapter 6: Developing a Project Schedule ∙ Learning objectives established. ∙ New Exercises 2-15 and Lag Exercises 18-21. ∙ Shoreline Stadium case replaces Greendale Stadium case. Chapter 7: Managing Risk ∙ Learning objectives established. Chapter 8 Appendix 1: The Critical-Chain Approach ∙ Learning objectives established. Chapter 9: Reducing Project Duration ∙ Learning objectives established. ∙ Snapshot: Smartphone Wars updated. ∙ New exercises 1-7. Chapter 10: Leadership: Being an Effective Project Manager ∙ Learning objectives established. ∙ New Research Highlight: Give and Take. ∙ Ethics discussion expanded. Chapter 11: Managing Project Teams ∙ Learning objectives established. ∙ Expanded discussion on project vision. Chapter 12: Outsourcing: Managing Interorganizational Relations ∙ Learning objectives established. ∙ Discussion of RFP process. ∙ New Snapshot: U.S. Department of Defense’s Value Engineering Awards 2015. Chapter 13 Progress and Performance Measurement and Evaluation ∙ ∙ ∙ ∙ ∙ Learning Objectives established. Discussion of milestone schedules. New Snapshot: Guidelines for Setting Milestones. Discussion of Management Reserve Index. New case: Shoreline Stadium Status Report. xvi Note to Student Chapter 14: Project Closure ∙ Major Revision of chapter with more attention to project audit and closing activities. ∙ New Snapshot: The Wake. ∙ New Snapshot: 2015 PMO of the Year. ∙ New Snapshot: Operation Eagle Claw. ∙ Project Management Maturity model introduced. Chapter 15: International Projects ∙ Learning Objectives established. Chapter 16: An Introduction to Agile Project Management ∙ Learning Objectives established. ∙ New Snapshot: Kanban. Brief Contents Preface ix 1. Modern Project Management 13. Progress and Performance Measurement and Evaluation 458 2 14. Project Closure 2. Organization Strategy and Project Selection 26 15. International Projects 3. Organization: Structure and Culture 4. Defining the Project 514 66 100 544 16. An Introduction to Agile Project Management 578 5. Estimating Project Times and Costs 128 APPENDIX 6. Developing a Project Plan One Solutions to Selected Exercises 7. Managing Risk 162 Two Computer Project Exercises 206 8. Scheduling Resources and Costs 9. Reducing Project Duration 250 304 10. Being an Effective Project Manager 11. Managing Project Teams 374 12. Outsourcing: Managing Interorganizational Relations 418 338 603 616 GLOSSARY 633 ACRONYMS 640 PROJECT MANAGEMENT EQUATIONS 641 CROSS REFERENCE OF PROJECT MANAGEMENT 642 SOCIO-TECHNICAL APPROACH TO PROJECT MANAGEMENT 643 INDEX 644 xvii Contents Preface ix 2.6 Managing the Portfolio System Chapter 1 Modern Project Management 1.1 What Is a Project? 2 6 Summary What a Project Is Not 7 Program versus Project 7 The Project Life Cycle 8 The Project Manager 9 Being Part of a Project Team 11 Compression of the Product Life Cycle 12 Knowledge Explosion 12 Triple Bottom Line (Planet, People, Profit) 12 Increased Customer Focus 12 Small Projects Represent Big Problems 15 15 Alignment of Projects with Organizational Strategy 16 1.4 Project Management Today: A Socio-Technical Approach 17 Summary 18 Chapter 2 Organization Strategy and Project Selection 26 2.1 The Strategic Management Process: An Overview 29 Four Activities of the Strategic Management Process 29 2.2 The Need for a Project Priority System 34 Problem 1: The Implementation Gap 34 Problem 2: Organization Politics 35 Problem 3: Resource Conflicts and Multitasking 36 2.3 A Portfolio Management System 37 Classification of the Project 37 2.4 Selection Criteria 38 Financial Criteria 38 Nonfinancial Criteria 40 2.5 Applying a Selection Model 43 Project Classification 43 Sources and Solicitation of Project Proposals 44 Ranking Proposals and Selection of Projects 46 xviii 51 Chapter 3 Organization: Structure and Culture 66 1.2 Current Drivers of Project Management 12 1.3 Project Governance 48 Senior Management Input 48 The Governance Team Responsibilities 49 Balancing the Portfolio for Risks and Types of Projects 50 3.1 Project Management Structures 68 Organizing Projects within the Functional Organization 68 Organizing Projects as Dedicated Teams Organizing Projects within a Matrix Arrangement 75 Different Matrix Forms 76 71 3.2 What Is the Right Project Management Structure? 79 Organization Considerations Project Considerations 79 3.3 Organizational Culture 79 81 What Is Organizational Culture? 81 Identifying Cultural Characteristics 83 3.4 Implications of Organizational Culture for Organizing Projects 86 Summary 89 Chapter 4 Defining the Project 100 4.1 Step 1: Defining the Project Scope Employing a Project Scope Checklist 102 103 4.2 Step 2: Establishing Project Priorities 106 4.3 Step 3: Creating the Work Breakdown Structure 108 Major Groupings Found in a WBS 108 How WBS Helps the Project Manager 108 A Simple WBS Development 109 4.4 Step 4: Integrating the WBS with the Organization 113 4.5 Step 5: Coding the WBS for the Information System 113 4.6 Process Breakdown Structure 116 Contents xix 4.7 Responsibility Matrices 117 4.8 Project Communication Plan 119 Summary 121 Chapter 5 Estimating Project Times and Costs 128 5.1 Factors Influencing the Quality of Estimates 130 Planning Horizon 130 Project Complexity 130 People 131 Project Structure and Organization 131 Padding Estimates 131 Organization Culture 131 Other Factors 131 5.2 Estimating Guidelines for Times, Costs, and Resources 132 5.3 Top-Down versus Bottom-Up Estimating 134 5.4 Methods for Estimating Project Times and Costs 136 Top-Down Approaches for Estimating Project Times and Costs 136 Bottom-Up Approaches for Estimating Project Times and Costs 140 A Hybrid: Phase Estimating 141 5.5 Level of Detail 143 5.6 Types of Costs 144 Direct Costs 145 Direct Project Overhead Costs 145 General and Administrative (G&A) Overhead Costs 145 5.7 Refining Estimates 146 5.8 Creating a Database for Estimating 148 5.9 Mega Projects: A Special Case 149 Summary 151 Appendix 5.1: Learning Curves for Estimating 157 Chapter 6 Developing a Project Plan 162 6.1 Developing the Project Network 163 6.2 From Work Package to Network 164 6.3 Constructing a Project Network 166 Terminology 166 Basic Rules to Follow in Developing Project Networks 166 6.4 Activity-on-Node (AON) Fundamentals 6.5 Network Computation Process 171 167 Forward Pass—Earliest Times 171 Backward Pass—Latest Times 173 Determining Slack (or Float) 175 6.6 Using the Forward and Backward Pass Information 177 6.7 Level of Detail for Activities 178 6.8 Practical Considerations 178 Network Logic Errors 178 Activity Numbering 179 Use of Computers to Develop Networks 179 Calendar Dates 182 Multiple Starts and Multiple Projects 182 6.9 Extended Network Techniques to Come Closer to Reality 182 Laddering 182 Use of Lags to Reduce Schedule Detail and Project Duration 183 An Example Using Lag Relationships—The Forward and Backward Pass 186 Hammock Activities 188 Summary 189 Chapter 7 Managing Risk 206 7.1 Risk Management Process 208 7.2 Step 1: Risk Identification 210 7.3 Step 2: Risk Assessment 212 Probability Analysis 215 7.4 Step 3: Risk Response Development 216 Mitigating Risk 216 Avoiding Risk 217 Transferring Risk 217 Accept Risk 218 7.5 Contingency Planning 219 Technical Risks 220 Schedule Risks 222 Cost Risks 222 Funding Risks 222 7.6 Opportunity Management 223 7.7 Contingency Funding and Time Buffers 223 Budget Reserves 224 Management Reserves 224 Time Buffers 225 7.8 Step 4: Risk Response Control 225 7.9 Change Control Management 226 Summary 230 Appendix 7.1: PERT and PERT Simulation 240 xx Contents Chapter 8 Scheduling Resources and Costs 250 8.1 8.2 8.3 8.4 Overview of the Resource Scheduling Problem 252 Types of Resource Constraints 254 Classification of a Scheduling Problem 255 Resource Allocation Methods 255 Assumptions 255 Time-Constrained Project: Smoothing Resource Demand 256 Resource-Constrained Projects 257 8.5 Computer Demonstration of ResourceConstrained Scheduling 262 The Impacts of Resource-Constrained Scheduling 266 8.6 8.7 8.8 8.9 8.10 Splitting Activities 269 Benefits of Scheduling Resources 270 Assigning Project Work 271 Multiproject Resource Schedules 272 Using the Resource Schedule to Develop a Project Cost Baseline 273 Why a Time-Phased Budget Baseline Is Needed 273 Creating a Time-Phased Budget 274 Summary 279 Appendix 8.1: The Critical-Chain Approach 294 Chapter 9 Reducing Project Duration 9.1 9.2 304 Rationale for Reducing Project Duration 306 Options for Accelerating Project Completion 307 Options When Resources Are Not Constrained 308 Options When Resources Are Constrained 310 9.3 Project Cost–Duration Graph 313 Explanation of Project Costs 313 9.4 Constructing a Project Cost–Duration Graph 314 Determining the Activities to Shorten 314 A Simplified Example 316 9.5 Practical Considerations 318 Using the Project Cost–Duration Graph 318 Crash Times 319 Linearity Assumption 319 Choice of Activities to Crash Revisited 319 Time Reduction Decisions and Sensitivity 320 9.6 What If Cost, Not Time, Is the Issue? 321 Reduce Project Scope 322 Have Owner Take on More Responsibility 322 Outsourcing Project Activities or Even the Entire Project 322 Brainstorming Cost Savings Options 322 Summary 323 Chapter 10 Being an Effective Project Manager 338 10.1 Managing versus Leading a Project 340 10.2 Managing Project Stakeholders 341 10.3 Influence as Exchange 345 Task-Related Currencies 345 Position-Related Currencies 346 Inspiration-Related Currencies 347 Relationship-Related Currencies 347 Personal-Related Currencies 348 10.4 Social Network Building 348 Mapping Stakeholder Dependencies 348 Management by Wandering Around (MBWA) 350 Managing Upward Relations 351 Leading by Example 353 10.5 Ethics and Project Management 356 10.6 Building Trust: The Key to Exercising Influence 357 10.7 Qualities of an Effective Project Manager Summary 362 359 Chapter 11 Managing Project Teams 374 11.1 The Five-Stage Team Development Model 377 11.2 Situational Factors Affecting Team Development 379 11.3 Building High-Performance Project Teams 381 Recruiting Project Members 381 Conducting Project Meetings 383 Establishing Team Norms 385 Establishing a Team Identity 387 Creating a Shared Vision 388 Managing Project Reward Systems 391 Orchestrating the Decision-Making Process Managing Conflict within the Project 394 Rejuvenating the Project Team 398 11.4 Managing Virtual Project Teams 11.5 Project Team Pitfalls 403 Groupthink 403 Bureaucratic Bypass Syndrome 404 399 392 Contents xxi Team Spirit Becomes Team Infatuation 404 Going Native 404 Percent Complete Rule 467 What Costs Are Included in Baselines? 467 Methods of Variance Analysis 468 Summary 405 Chapter 12 Outsourcing: Managing Interorganizational Relations 418 Selection of Contractor from Bid Proposals 425 12.3 Best Practices in Outsourcing Project Work 426 Well-Defined Requirements and Procedures 426 Extensive Training and Team-Building Activities 428 Well-Established Conflict Management Processes in Place 429 Frequent Review and Status Updates 431 Co-Location When Needed 432 Fair and Incentive-Laden Contracts 432 Long-Term Outsourcing Relationships 433 434 1. Separate the People from the Problem 435 2. Focus on Interests, Not Positions 436 3. Invent Options for Mutual Gain 437 4. When Possible, Use Objective Criteria 138 Dealing with Unreasonable People 438 12.5 A Note on Managing Customer Relations Summary 442 Appendix 12.1: Contract Management 451 439 Chapter 13 Progress and Performance Measurement and Evaluation 458 13.1 Structure of a Project Monitoring Information System 460 What Data Are Collected? 460 Collecting Data and Analysis 460 Reports and Reporting 460 13.2 The Project Control Process Assumptions 470 Baseline Development 470 Development of the Status Report 13.6 Indexes to Monitor Progress 12.1 Outsourcing Project Work 420 12.2 Request for Proposal (RFP) 424 12.4 The Art of Negotiating 13.5 Developing a Status Report: A Hypothetical Example 470 461 Step 1: Setting a Baseline Plan 461 Step 2: Measuring Progress and Performance 461 Step 3: Comparing Plan against Actual 462 Step 4: Taking Action 462 13.3 Monitoring Time Performance 462 Tracking Gantt Chart 463 Control Chart 463 Milestone Schedules 464 13.4 Development of an Earned Value Cost/Schedule System 467 471 475 Performance Indexes 477 Project Percent Complete Indexes 474 Software for Project Cost/Schedule Systems Additional Earned Value Rules 478 13.7 Forecasting Final Project Cost 13.8 Other Control Issues 481 477 476 Technical Performance Measurement 481 Scope Creep 483 Baseline Changes 483 The Costs and Problems of Data Acquisition 485 Summary 486 Appendix 13.1: The Application of Additional Earned Value Rules 505 Appendix 13.2: Obtaining Project Performance Information from MS Project 2010 or 2015 511 Chapter 14 Project Closure 514 14.1 Types of Project Closure 516 14.2 Wrap-up Closure Activities 518 14.3 Project Audits 521 The Project Audit Process 522 Project Retrospectives 525 Project Audits: The Bigger Picture 14.4 Post-Implementation Evaluation 529 532 Team Evaluation 532 Individual, Team Member, and Project Manager Performance Reviews 534 Summary 537 Appendix 14.1: Project Closeout Checklist 539 Appendix 14.2: Euro Conversion—Project Closure Checklist 541 Chapter 15 International Projects 544 15.1 Environmental Factors 546 Legal/Political 546 Security 547 Geography 548 xxii Contents 16.3 Agile PM in Action: Scrum Economic 549 Infrastructure 550 Culture 551 15.2 Project Site Selection 553 15.3 Cross-Cultural Considerations: A Closer Look 554 Adjustments 555 Working in Mexico 556 Working in France 559 Working in Saudi Arabia 560 Working in China 562 Working in the United States 563 Summary Comments about Working in Different Cultures 565 Culture Shock 565 Coping with Culture Shock 567 15.4 Selection and Training for International Projects 568 Summary 571 Chapter 16 An Introduction to Agile Project Management 578 16.1 Traditional versus Agile Methods 16.2 Agile PM 582 585 Roles and Responsibilities 586 Scrum Meetings 587 Product and Sprint Backlogs 588 Sprint and Release Burndown Charts 580 589 16.4 Applying Agile PM to Large Projects 16.5 Limitations and Concerns 593 Summary 595 592 Appendix One: Solutions to Selected Exercise 603 Appendix Two: Computer Project Exercises 616 Glossary 633 Acronyms 640 Project Management Equations 641 Cross Reference of Project Management 642 Socio-Technical Approach to Project Management 643 Index 644 Project Management: The Managerial Process C H A P T E R 1 O N E Modern Project Management LEARNING OBJECTIVES OUTLINE After reading this chapter you should be able to: 1.1 1-1 1.2 Current Drivers of Project Management Understand why project management is crucial in today’s world. 1-2 Distinguish a project from routine operations. 1-3 Identify the different stages of project life cycle. 1-4 Understand the importance of projects in implementing organization strategy. 1-5 Understand that managing projects involves balancing the technical and sociocultural dimensions of the project. 2 What Is a Project? 1.3 Project Governance 1.4 Project Management Today—A Socio-Technical Approach Summary Text Overview Estimate 5 Project networks 6 Schedule resources & costs 8 Reducing duration 9 Define project 4 Introduction 1 Managing risk 7 Organization 3 Strategy 2 Project manager 10 Teams 11 Monitoring progress 13 l iona rnat Inte ojects pr 15 Project closure 14 16 Agile PM Outsourcing 12 All of mankind’s greatest accomplishments—from building the great pyramids to discovering a cure for polio to putting a man on the moon—began as a project. LO 1-1 Understand why project management is crucial in today’s world. This is a good time to be reading a book about project management. Business leaders and experts have proclaimed that project management is critical to sustainable economic growth. New jobs and competitive advantage are achieved by constant innovation, developing new products and services, and improving both productivity and quality of work. This is the world of project management. Project management provides people with a powerful set of tools that improves their ability to plan, implement, and manage activities to accomplish specific objectives. But project management is more than just a set of tools; it is a results-oriented management style that places a premium on building collaborative relationships among a diverse cast of characters. Exciting opportunities await people skilled in project management. The project approach has long been the style of doing business in the construction industry, U.S. Department of Defense contracts, and Hollywood, as well as big consulting firms. Now project management has spread to all avenues of work. Today, 3 4 Chapter 1 Modern Project Management project teams carry out everything from port expansions to hospital restructuring to upgrading information systems. They are creating next-generation fuel-efficient vehicles, developing sustainable sources of energy, and exploring the farthest reaches of outer space. The impact of project management is most profound in the electronics industry, where the new folk heroes are young professionals whose Herculean efforts lead to the constant flow of new hardware and software products. Project management is not limited to the private sector. Project management is also a vehicle for doing good deeds and solving social problems. Endeavors such as providing emergency aid to areas hit by natural disasters, devising a strategy for reducing crime and drug abuse within a city, or organizing a community effort to renovate a public playground would and do benefit from the application of modern project management skills and techniques. Perhaps the best indicator of demand for project management can be seen in the rapid expansion of the Project Management Institute (PMI), a professional organization for project managers. PMI membership has grown from 93,000 in 2002 to more than 478,000 currently. See Snapshot from Practice 1.1 for information regarding professional certification in project management. It’s nearly impossible to pick up a newspaper or business periodical and not find something about projects. This is no surprise! Approximately $2.5 trillion (about 25 percent of the U.S. gross national product) is spent on projects each year in the United States alone. Other countries are increasingly spending more on projects. Millions of people around the world consider project management the major task in their profession. Most of the people who excel at managing projects never have the title of project manager. They include accountants, lawyers, administrators, scientists, contractors, public health officials, teachers, and community advocates whose success depends upon being able to lead and manage project work. For some, the very nature of their work is project driven. Projects may be cases for lawyers, audits for accountants, events for S N A P S H O T F R O M P R A C T I C E 1 .1 The Project Management Institute (PMI) was founded in 1969 as an international society for project managers. Today PMI has members from more than 180 countries and more than 478,500 members. PMI professionals come from virtually every major industry, including aerospace, automotive, business management, construction, engineering, financial services, information technology, pharmaceuticals, health care, and telecommunications. PMI provides certification as a Project Management Professional (PMP)—someone who has documented sufficient project experience, agreed to follow the PMI code of professional conduct, and demonstrated mastery of the field of project management by passing a comprehensive examination. The number of people earning PMP status has grown dramatically in recent years. In 1996 there were fewer than 3,000 certified project management professionals. By 2016 there were more than 695,000 Professional credential holders. The Project Management Institute* Just as the CPA exam is a standard for accountants, passing the PMP exam may become the standard for project managers. Some companies are requiring that all their project managers be PMP certified. Moreover, many job postings are restricted to PMPs. Job seekers, in general, are finding that being PMP certified is an advantage in the marketplace. PMI added a certification as a Certified Associate in Project Management (CAPM). CAPM is designed for project team members and entry-level project managers, as well as qualified undergraduate and graduate students who want a credential to recognize their mastery of the project management body of knowledge. CAPM does not require the extensive project management experience associated with the PMP. For more details on PMP and CAPM, google PMI to find the current website for the Project Management Institute. *PMI Today, March 2016, p. 4. Chapter 1 Modern Project Management 5 artists, and renovations for contractors. For others, projects may be a small, but critical part of their work. For example, a high school teacher who teaches four classes a day is responsible for coaching a group of students to compete in a national debate competition. A store manager who oversees daily operations is charged with developing an employee retention program. A sales account executive is given the additional assignment of team lead to launch daily deals into a new city. A public health official who manages a clinic is also responsible for organizing a Homeless Youth Connect event. For these and others, project management is not a title, but a critical job requirement. It is hard to think of a profession or a career path that would not benefit from being good at managing projects. Not only is project management critical to most careers, the skill set is transferable across most businesses and professions. At its core, project management fundamentals are universal. The same project management methodology that is used to develop a new product can be adapted to create new services, organize events, refurbish aging operations, and so forth. In a world where it is estimated that each person is likely to experience three to four career changes, managing projects is a talent worthy of development. The significance of project management can also be seen in the classroom. Twenty years ago major universities offered one or two classes in project management, primarily for engineers. Today, most universities offer multiple sections of project management classes, with the core group of engineers being supplemented by business students majoring in marketing, management information systems (MIS), and finance, as well as students from other disciplines such as oceanography, health sciences, computer sciences, and liberal arts. These students are finding that their exposure to project management is providing them with distinct advantages when it comes time to look for jobs. More and more employers are looking for graduates with project management skills. SNAPSHOT FROM PRACTICE 1.2 1. Business information: Join a project team charged with installing new data security system. 2. Physical education: Design and develop a new fitness program for senior citizens that combines principles of yoga and aerobics. 3. Marketing: Execute a sales program for new home air purifier. A Dozen Examples of Projects Given to Recent College Graduates " 9. Systems engineer: Become a project team member of a project to develop data mining of medical papers and studies related to drug efficacy. 10. Accounting: Work on an audit of a major client. 11. Public health: Research and design a medical marijuana educational program. 12. English: Create a web-based user manual for new electronics product. 4. Industrial engineering: Manage a team to create a value chain report for every aspect of key product from design to customer delivery. 5. Chemistry: Develop a quality control program for organization’s drug production facilities. 6. Management: Implement a new store layout design. 7. Pre-med neurology student: Join project team linking mind mapping to an imbedded prosthetic that will allow blind people to function near normally. 8. Sports communication: Join Olympic project team that will promote women’s sports products for the 2016 Games in Rio de Janeiro, Brazil. © John Fedele/Blend Images LLC, RF 6 Chapter 1 Modern Project Management See the nearby Snapshot from Practice 1.2 for examples of projects given to recent college graduates. The logical starting point for developing these skills is understanding the uniqueness of a project and of project managers. 1.1 What Is a Project? LO 1-2 Distinguish a project from routine operations. What do the following headlines have in common? Millions watch Olympic Opening Ceremony Citywide WiFi System Set to Go Live Hospitals Respond to New Healthcare Reforms Apple’s New iPhone Hits the Market City Receives Stimulus Funds to Expand Light Rail System All of these events represent projects. © McGraw-Hill Education The Project Management Institute provides the following definition of a project: A project is a temporary endeavor undertaken to create a unique product, service, or result. Like most organizational efforts, the major goal of a project is to satisfy a customer’s need. Beyond this fundamental similarity, the characteristics of a project help Chapter 1 Modern Project Management 7 differentiate it from other endeavors of the organization. The major characteristics of a project are as follows: 1. 2. 3. 4. 5. An established objective. A defined life span with a beginning and an end. Usually, the involvement of several departments and professionals. Typically, doing something that has never been done before. Specific time, cost, and performance requirements. First, projects have a defined objective—whether it is constructing a 12-story apartment complex by January 1 or releasing version 2.0 of a specific software package as quickly as possible. This singular purpose is often lacking in daily organizational life in which workers perform repetitive operations each day. Second, because there is a specified objective, projects have a defined endpoint, which is contrary to the ongoing duties and responsibilities of traditional jobs. In many cases, individuals move from one project to the next as opposed to staying in one job. After helping to install a security system, an IT engineer may be assigned to develop a database for a different client. Third, unlike much organizational work that is segmented according to functional specialty, projects typically require the combined efforts of a variety of specialists. Instead of working in separate offices under separate managers, project participants, whether they be engineers, financial analysts, marketing professionals, or quality control specialists, work closely together under the guidance of a project manager to complete a project. The fourth characteristic of a project is that it is nonroutine and has some unique elements. This is not an either/or issue but a matter of degree. Obviously, accomplishing something that has never been done before, such as building an electric automobile or landing two mechanical rovers on Mars, requires solving previously unsolved problems and using breakthrough technology. On the other hand, even basic construction projects that involve established sets of routines and procedures require some degree of customization that makes them unique. Finally, specific time, cost, and performance requirements bind projects. Projects are evaluated according to accomplishment, cost, and time spent. These triple constraints impose a higher degree of accountability than you typically find in most jobs. These three also highlight one of the primary functions of project management, which is balancing the trade-offs among time, cost, and performance while ultimately satisfying the customer. What a Project Is Not Projects should not be confused with everyday work. A project is not routine, repetitive work! Ordinary daily work typically requires doing the same or similar work over and over, while a project is done only once; a new product or service exists when the project is completed. Examine the list in Table 1.1 that compares routine, repetitive work and projects. Recognizing the difference is important because too often resources can be used up on daily operations which may not contribute to longer range organization strategies that require innovative new products. Program versus Project In practice the terms project and program cause confusion. They are often used synonymously. A program is a group of related projects designed to accomplish a 8 Chapter 1 Modern Project Management TABLE 1.1 Comparison of Routine Work with Projects Routine, Repetitive Work Projects Taking class notes Daily entering sales receipts into the accounting ledger Responding to a supply-chain request Practicing scales on the piano Routine manufacture of an Apple iPod Writing a term paper Setting up a sales kiosk for a professional accounting meeting Developing a supply-chain information system Writing a new piano piece Designing an iPod that is approximately 2 × 4 inches, interfaces with PC, and stores 10,000 songs Wire-tag projects for GE and Walmart Attaching tags on a manufactured product common goal over an extended period of time. Each project within a program has a project manager. The major differences lie in scale and time span. Program management is the process of managing a group of ongoing, interdependent, related projects in a coordinated way to achieve strategic objectives. For example, a pharmaceutical organization could have a program for curing cancer. The cancer program includes and coordinates all cancer projects that continue over an extended time horizon (Gray, 2011). Coordinating all cancer projects under the oversight of a cancer team provides benefits not available from managing them individually. This cancer team also oversees the selection and prioritizing of cancer projects that are included in their special “Cancer” portfolio. Although each project retains its own goals and scope, the project manager and team are also motivated by the higher program goal. Program goals are closely related to broad strategic organization goals. The Project Life Cycle LO 1-3 Identify the different stages of project life cycle. Another way of illustrating the unique nature of project work is in terms of the project life cycle. Some project managers find it useful to use the project life cycle as the cornerstone for managing projects. The life cycle recognizes that projects have a limited life span and that there are predictable changes in level of effort and focus over the life of the project. There are a number of different life-cycle models in project management literature. Many are unique to a specific industry or type of project. For example, a new software development project may consist of five phases: definition, design, code, integration/test, and maintenance. A generic cycle is depicted in Figure 1.1. The project life cycle typically passes sequentially through four stages: defining, planning, executing, and delivering. The starting point begins the moment the project is given the go-ahead. Project effort starts slowly, builds to a peak, and then declines to delivery of the project to the customer. 1. Defining stage: Specifications of the project are defined; project objectives are established; teams are formed; major responsibilities are assigned. 2. Planning stage: The level of effort increases, and plans are developed to determine what the project will entail, when it will be scheduled, whom it will benefit, what quality level should be maintained, and what the budget will be. 3. Executing stage: A major portion of the project work takes place—both physical and mental. The physical product is produced (a bridge, a report, a software program). Time, cost, and specification measures are used for control. Is the project on schedule, on budget, and meeting specifications? What are the forecasts of each of these measures? What revisions/changes are necessary? 4. Closing stage: Closing includes three activities: delivering the project product to the customer, redeploying project resources, and post-project review. Delivery of Chapter 1 Modern Project Management 9 FIGURE 1.1 Project Life Cycle Level of effort Executing Planning Closing Defining Start Defining 1. Goals 2. Specifications 3. Tasks 4. Responsibilities Time Planning 1. Schedules 2. Budgets 3. Resources 4. Risks 5. Staffing Executing 1. Status reports 2. Changes 3. Quality 4. Forecasts End Closing 1. Train customer 2. Transfer documents 3. Release resources 4. Evaluation 5. Lessons learned the project might include customer training and transferring documents. Redeployment usually involves releasing project equipment/materials to other projects and finding new assignments for team members. Post-project reviews include not only assessing performance but also capturing lessons learned. In practice, the project life cycle is used by some project groups to depict the timing of major tasks over the life of the project. For example, the design team might plan a major commitment of resources in the defining stage, while the quality team would expect their major effort to increase in the latter stages of the project life cycle. Because most organizations have a portfolio of projects going on concurrently, each at a different stage of each project’s life cycle, careful planning and management at the organization and project levels are imperative. The Project Manager At first glance project managers perform the same functions as other managers. That is, they plan, schedule, motivate, and control. However, what makes them unique is that they manage temporary, nonrepetitive activities, to complete a fixed life project. Unlike functional managers, who take over existing operations, project managers create a project team and organization where none existed before. They must decide what and how things should be done instead of simply managing set processes. They must meet the challenges of each phase of the project life cycle, and even oversee the dissolution of their operation when the project is completed. Project managers must work with a diverse troupe of characters to complete projects. They are typically the direct link to the customer and must manage the tension between customer expectations and what is feasible and reasonable. Project managers provide direction, coordination, and integration to the project team, which is often made up of part-time participants loyal to their functional departments. They often must work with a cadre of outsiders—vendors, suppliers, subcontractors—who do not necessarily share their project allegience. 10 Chapter 1 Modern Project Management SNAPSHOT FROM PRACTICE 1.3 1986 1990–1994 1994–Current B.S. Business Administration–Oregon State University 1986–1990 Food Products Manufacturing Wood Products Manufacturing Glass Products Manufacturing Upon completion of my business degree at OSU, I was recruited by a Fortune 100 food products company for a first line production supervisor position. In that role, an opportunity came up for me to manage a project that involved rolling out a new statistical package-weightcontrol program throughout the factory. Successfully completing that project was instrumental in accelerating my career within the company, advancing from supervisor to product manager in less than three years. After four years in food products I accepted an offer to join a wood products manufacturing company. Initially my role in this company was Human Resources Manager. My HR responsibilities included managing several projects to improve safety and employee retention. Successful completion of these projects led to a promotion to Plant Manager. In the Plant Manager role, I was tasked with building and managing a new wood door manufacturing factory. After successfully taking that factory to full production, I was promoted again to Corporate Manager of Continuous Improvement. This “culture change” project involved Ron Parker implementing Total Quality Management throughout 13 different manufacturing factories as well as all the indirect and support functions within the corporation. Shortly after we successfully ingrained this new culture in the company, the owner passed away, leading me to look for other employment. I was able to leverage my previous experience and success to convince the owner of a struggling glass fabrication company to hire me. In this new role as General Manager, I was tasked with turning the company around. This was my largest project yet. Turning a company around involves a myriad of smaller improvement projects spanning from facilities and equipment improvements to product line additions and deletions to sales and marketing strategy and everything in between. In four years, we successfully turned the company around to the extent that the owner was able to sell the company and comfortably retire. Successfully turning that glass company around got the attention of a much larger competitor of ours, resulting in an offer of employment. This new offer involved the start-up of a $30M high-tech glass manufacturing facility in another state. We were able to take that facility from a dirt field to the highest volume manufacturing facility of its kind in the world in just three years. After building and operating this factory at a world-class benchmark level for eight years, I came across a new and exciting opportunity to help expand a strong glass fabrication company in Project managers are ultimately responsible for performance (frequently with too little authority). They must ensure that appropriate trade-offs are made among the time, cost, and performance requirements of the project. At the same time, unlike their functional counterparts, project managers generally possess only rudimentary technical knowledge to make such decisions. Instead, they must orchestrate the completion of the project by inducing the right people, at the right time, to address the right issues and make the right decisions. While project management is not for the timid, working on projects can be an extremely rewarding experience. Life on projects is rarely boring; each day is different from the last. Since most projects are directed at solving some tangible problem or pursuing some useful opportunity, project managers find their work personally meaningful and satisfying. They enjoy the act of creating something new and innovative. Project managers and team members can feel immense pride in their accomplishment, whether it is a new bridge, a new product, or needed service. Project managers are often stars in their organization and well compensated. Good project managers are always in demand. Every industry is looking for effective people who can get the right things done on time. See Snapshot from Practice 1.3: Ron Parker for an example of a former student who leveraged his ability to manage Chapter 1 Modern Project Management 11 Canada. I spent four years successfully transitioning this Canadian company from a medium-size glass fabrication facility to one of the largest and most successful of its kind in North America. After tiring of the “Great White North,” I found an opportunity to tackle the largest and most impactful project of my career. I’m currently VP of Operations in a venture-funded high-tech start-up company. In this role, I’m overseeing the construction and start-up of the first full-scale, high-volume electrochromic glass fabrication factory in the world. This new project Courtesy of Ron Parker involves building a company from the ground up and taking an exciting new technology from the lab to fullscale commercialization. Success in this role, although still far from being certain, will eventually revolutionize the glass industry through the introduction of a product that dramatically improves the energy efficiency and occupant comfort of buildings around the world. Looking back on my career, it is apparent that my degree of success has largely been the result of taking on and successfully completing successively larger and increasingly impactful projects. There’s a saying that’s always resonated with me: “If your only tool is a hammer, all your problems look like nails.” Good tools are hard to come by and heavy to carry around. I like my tool bag filled with generalist tools; things like communication skills, leadership, common sense, judgment, reasoning, logic and a strong sense of urgency. I often wonder how much more I could have accomplished had I actually studied project management and had more of that toolset in my bag. With a bag full of strong generalist tools, you can tackle any problem in any business. Project management is clearly one of those skills where the better you are at it, the higher your chances of success in any business environment. Having the tools is only part of the equation though. To be successful, you must also be willing to run at problems/opportunities when everyone else is running away from them. projects to build a successful career in the glass products industry. Clearly, project management is a challenging and exciting profession. This text is intended to provide the necessary knowledge, perspective, and tools to enable students to accept the challenge. Being Part of a Project Team Most people’s first exposure to project management occurs while working as part of a team assigned to complete a specific project. Sometimes this work is full-time, but in most cases, people work part-time on one or more projects. They must learn how to juggle their day-today commitments with additional project responsibilities. They may join a team with a long history of working together, in which case roles and norms are firmly established. Alternatively, their team may consist of strangers from different departments and organizations. As such, they endure the growing pains of a group evolving into a team. They need to be a positive force in helping the team coalesce into an effective project team. Not only are there people issues, but project members are also expected to use project management tools and concepts. They develop or are given a project charter or scope statement that defines the objectives and parameters of the project. They work with others to create a project schedule and budget that will guide project execution. They need to understand project priorities so they can make independent decisions. 12 Chapter 1 Modern Project Management They must know how to monitor and report project progress. Although much of this book is written from the perspective of a project manager, the tools, concepts, and methods are critical to everyone working on a project. Project members need to know how to avoid the dangers of scope creep, manage the critical path, engage in timely risk management, negotiate, and utilize virtual tools to communicate. 1.2 Current Drivers of Project Management LO 1-4 Understand the importance of projects in implementing organization strategy. Project management is no longer a special-need management. It is rapidly becoming a standard way of doing business. See Snapshot from Practice 1.4: Project Management in Action: 2016. An increasing percentage of the typical firm’s effort is being devoted to projects. The future promises an increase in the importance and the role of projects in contributing to the strategic direction of organizations. Several reasons why this is the case are briefly discussed below. Compression of the Product Life Cycle One of the most significant driving forces behind the demand for project management is the shortening of the product life cycle. For example, today in high-tech industries the product life cycle is averaging six months to three years. Only 30 years ago, life cycles of 10 to 15 years were not uncommon. Time to market for new products with short life cycles has become increasingly important. A common rule of thumb in the world of high-tech product development is that a six-month project delay can result in a 33 percent loss in product revenue share. Speed, therefore, becomes a competitive advantage; more and more organizations are relying on cross-functional project teams to get new products and services to the market as quickly as possible. Knowledge Explosion The growth in new knowledge has increased the complexity of projects because projects encompass the latest advances. For example, building a road 30 years ago was a somewhat simple process. Today, each area has increased in complexity, including materials, specifications, codes, aesthetics, equipment, and required specialists. Similarly, in today’s digital, electronic age it is becoming hard to find a new product that does not contain at least one microchip. Product complexity has increased the need to integrate divergent technologies. Project management has emerged as an important discipline for achieving this task. Triple Bottom Line (Planet, People, Profit) The threat of global warming has brought sustainable business practices to the forefront. Businesses can no longer simply focus on maximizing profit to the detriment of the environment and society. Efforts to reduce carbon imprint and utilize renewable resources are realized through effective project management. The impact of this movement toward sustainability can be seen in changes in the objectives and techniques used to complete projects. See Snapshot from Practice 1.5: Dell Children’s Becomes World’s First “Green” Hospital. Increased Customer Focus Increased competition has placed a premium on customer satisfaction. Customers no longer simply settle for generic products and services. They want customized products Chapter 1 Modern Project Management 13 SNAPSHOT FROM PRACTICE 1.4 Project Management in Action: 2016 Businesses thrive and survive based on their ability to manage projects that produce products and services that meet market needs. Below is a small sample of projects that are important to their company’s future. Panama: The Third Set of Locks Project The expansion of the Panama Canal is scheduled to be operational in 2016. The project doubles the capac- © Asif Islam/Shutterstock ity of the Panama Canal by creating a in 2016. Video games will spur early sales of Rift, but new lane of traffic and allowing more and larger ships, mass adoption is likely to depend upon Hollywood. the new Panamax size, which are about one and a half Lions Gate Entertainment and 21st Century Fox have times bigger than the current size and can carry over agreed to sell movies via Oculus’s online store and twice as much cargo. With the third sets of locks, the Netflix will make its streaming service available on canal will be able to manage traffic demand beyond VR headsets. 2025 with a predicted inflationary adjusted revenue of over $6.2 billion per year. Shaw, L., “Virtual Reality Goes to the Movies,” Bloomberg BusinessWeek, Special Issue: Year Ahead 2016, Molinski, D., “Panama Canal, Consortium Reach Deal to p. 74. Complete Work,” The Wall Street Journal, February 28, 2014. CogniToys: Dino Project Rather than repeating catchphrases, as “talking” toys Google: Autonomous-Vehicle Project have done in the past, this dinosaur taps IBM’s Watson Google has contracted Roush Enterprises of Detroit, technology to engage kids ages 5 to 9 in a more meanMichigan, to build 150 self-driving car prototypes. With ingful way. The wi-fi-enabled figurine talks back and more than 90 percent of U.S. road collisions caused learns from kids’ responses, helping them hone their by human error, self-driving cars could prevent over math skills by asking harder questions. The trick, $190 billion in annual damages and health costs as well according to CogniToys CEO Donald Coolidge, is to as greatly reduce fuel consumption. make education seem like a “cool, fun experience.” Parsi, N., “No Driver Necessary,” PM Network, August “The Toy That Talks Back,” Time, November 30/Decem2015, pp. 7–9. ber 7, 2015, p. 81. Studio Roosegaarde: Smog Free Tower The Smog Free tower, which stands 23 feet tall, sucks and cleans 1 million cubic feet of polluted air an hour. Innovator Daan Roosegaarde began working on outdoor air purification after a particularly smoggy 2013 trip to China. Karif, O., “Innovation: Smog Eater,” Bloomberg BusinessWeek, October 15, 2015, p. 22. Facebook: Oculus Rift Virtual Reality Project Facebook paid over $2 billion for virtual-reality start-up Oculus, which will release its Rift virtual reality headset Coca-Cola Co.: Replenish Africa Initiative (RAIN) The global beverage company aims to provide at least 2 million people with safe water by the end of 2020. The firm is investing over $30 million in communitybased water projects across Africa. Greg Koch, senior director of global water stewardship says, “We know that to do business we need water. And when communities have access to safe water, you have the foundation of a thriving community, which is a better place for everyone to do business.” “Water Works,” PMNetwork, September, 2015, p. 53. 14 Chapter 1 Modern Project Management SNAPSHOT FROM PRACTICE 1.5 Dateline 1/7/2009, Austin Texas: Dell Children’s Medical Center becomes the first hospital in the world to receive platinum LEED (Leadership in Energy & Environmental Design) certification. Platinum certification is the highest award granted by the U.S. Green Building Council. Dell Children’s occupies nearly one-half-million square feet on 32 acres that were once part of Austin’s old Mueller Airport. Its environmentally sensitive design not only conserves water and electricity, but positively impacts the hospital’s clinical environment by improving air quality, making natural sunlight readily available, and reducing a wide range of pollutants. In order to receive LEED certification, buildings are rated in five key areas: sustainable site development, water savings, energy efficiency, materials selection, and environmental quality. Listed below are some of the accomplishments in each LEED category: Sustainable Site ΄ 47,000 tons of Mueller Airport runway material was reused on site. ΄ About 40 percent fly ash instead of Portland cement in concrete yields a drop in carbon dioxide emissions equivalent to taking 450 cars off the road. ΄ 925 tons of construction waste was recycled on site. Water Efficiency and Water Conservation ΄ Reclaimed water is used for irrigation; xeriscaped landscaping uses native plants, which require less water. ΄ Low-flow plumbing fixtures. Dell Children’s Becomes World’s First “Green” Hospital* Energy Efficiency and Energy Conservation ΄ An on-site natural gas turbine supplies all electricity, which is 75 percent more efficient than coalfired plants. ΄ Converted steam energy from a heating/cooling plant supplies all chilled water needs. Indoor Environment Quality and Lighting ΄ Most interior spaces are within 32 feet of a window. ΄ Motion and natural light sensors shut off unneeded lights. Conservation of Materials and Resources ΄ Use of local and regional materials saves fuel for shipping. ΄ Special paints and flooring emit low levels of volatile organic compounds (VOCs). “Even before the first plans were drawn up, we set our sight on creating a world-class children’s hospital, and becoming the first LEED Platinum hospital in the world was definitely part of that,” said Robert Bonar, president and CEO, Dell Children’s Medical Center of Central Texas. “Our motivation to pursue LEED Platinum was not just environmental. Being a ‘green’ hospital has a profound, measurable effect on healing. What’s good for the environment and good for our neighbors is also good for our patients.” *Austin Business Journal, January 11, 2009, www.dellchildrens.net/about_us/news/2009/01/08. and services that cater to their specific needs. This mandate requires a much closer working relationship between the provider and the receiver. Account executives and sales representatives are assuming more of a project manager’s role as they work with their organization to satisfy the unique needs and requests of clients. Increased customer attention has also prompted the development of customized products and services. For example, 15 years ago buying a set of golf clubs was a relatively simple process: You picked out a set based on price and feel. Today, there are golf clubs for tall players and short players, clubs for players who tend to slice the ball and clubs for those who hook the ball, high-tech clubs with the latest metallurgic discovery guaranteed to add distance, and so forth. Project management is critical both to development of customized products and services and to sustaining lucrative relationships with customers. Chapter 1 Modern Project Management 15 Small Projects Represent Big Problems The velocity of change required to remain competitive or simply keep up has created an organizational climate in which hundreds of projects are implemented concurrently. This climate has created a multiproject environment and a plethora of new problems. Sharing and prioritizing resources across a portfolio of projects is a major challenge for senior management. Many firms have no idea of the problems involved with inefficient management of small projects. Small projects typically carry the same or more risk as do large projects. Small projects are perceived as having little impact on the bottom line because they do not demand large amounts of scarce resources and/or money. Because so many small projects are going on concurrently and because the perception of the inefficiency impact is small, measuring inefficiency is usually nonexistent. Unfortunately, many small projects soon add up to large sums of money. Many customers and millions of dollars are lost each year on small projects in product and service organizations. Small projects can represent hidden costs not measured in the accounting system. Organizations with many small projects going on concurrently face the most difficult project management problems. A key question becomes one of how to create an organizational environment that supports multiproject management. A process is needed to prioritize and develop a portfolio of small projects that supports the mission of the organization. In summary, there are a variety of environmental forces interacting in today’s business world that contribute to the increased demand for good project management across all industries and sectors. Project management appears to be ideally suited for a business environment requiring accountability, flexibility, innovation, speed, and continuous improvement. These environmental and other factors have created the necessity for major oversight of all organization projects. 1.3 Project Governance Competing in a global market influenced by rapid change, innovation, and time to market means organizations manage more and more projects. Some means for coordinating and managing projects in this changing environment is needed. Centralization of project management processes and practices has been the practical outcome. For example, Google, Apple, General Electric, and Sony all have over 1,000 projects being implemented concurrently every day of the year across borders and differing cultures. Questions: How do these organizations oversee the management of all these projects? How were these projects selected? How do they ensure performance measurement and accountability? How can project management continually improve? Centralization entails governance of all project processes and practices to improve project management. Governance is designed to improve project management in the whole organization over the long haul. The rationale for integration of project management was to provide senior management with: ∙ ∙ ∙ ∙ An overview of all project management activities; A big picture of how organizational resources are being used; An assessment of the risk their portfolio of projects represents; A rough metric for measuring the improvement of managing projects relative to others in the industry; ∙ Linkages of senior management with actual project execution management. 16 Chapter 1 Modern Project Management FIGURE 1.2 Integrated Management of Projects Organizational Culture Environment Strategic Alignment Portfolio Management Project Management Full insight of all components of the organization is crucial for aligning internal business resources with the requirements of the changing environment. Governance enables management to have greater flexibility and better control of all project management activities. Operationally, what does project management integration mean? It necessitates combining all of the major dimensions of project management under one umbrella. Each dimension is connected in one seamless, integrated domain. Governance means applying a set of knowledge, skills, tools, and techniques to a collection of projects in order to move the organization toward its strategic goals. This integrative movement represents a major thrust of project-driven organizations across all industries. See Figure 1.2, Integrated Management of Projects. Alignment of Projects with Organizational Strategy Today, projects are the modus operandi for implementing strategy. Yet in some organizations, selection and management of projects often fail to support the strategic plan of the organization. Strategic plans are written by one group of managers, projects selected by another group, and projects implemented by another. These independent decisions by different groups of managers create a set of conditions leading to conflict, confusion, and frequently an unsatisfied customer. Under these conditions, resources of the organization are wasted in non-value-added activities/ projects. Since projects are the modus operandi, strategic alignment of projects is of major importance to conserving and effective use of organization resources. Selection criteria need to ensure each project is prioritized and contributes to strategic goals. Anything less is a waste of scarce organizational resources—people, capital, and equipment. Ensuring alignment requires a selection process that is systematic, open, consistent, and balanced. All of the projects selected become part of a project portfolio that balances the total risk for the organization. Management of the project portfolio ensures that only the most valuable projects are approved and managed across the entire organization. Chapter 1 Modern Project Management 17 1.4 Project Management Today: A Socio-Technical Approach LO 1-5 Understand that managing projects involves balancing the technical and sociocultural dimensions of the project. Senior management is often involved in selecting projects but seldom involved in implementing them. Implementing the project is the challenge. Managing a project is a multidimensional process (see Figure 1.3, A Socio-Technical Approach to Project Management). The first dimension is the technical side of the management process, which consists of the formal, disciplined, purely logical parts of the process. This technical dimension includes planning, scheduling, and controlling projects. Clear project scope statements are written to link the project and customer and to facilitate planning and control. Creation of the deliverables and work breakdown structures facilitates planning and monitoring the progress of the project. The work breakdown structure serves as a database that links all levels in the organization, major deliverables, and all work—right down to the tasks in a work package. Effects of project changes are documented and traceable. Thus, any change in one part of the project is traceable to the source by the integrated linkages of the system. This integrated information approach can provide all project managers and the customer with decision information appropriate to their level and needs. A successful project manager will be well trained in the technical side of managing projects. The second and opposing dimension is the sociocultural side of project management. In contrast to the orderly world of project planning, this dimension involves the much messier, often contradictory and paradoxical world of implementation. It centers on creating a temporary social system within a larger organizational environment that combines the talents of a divergent set of professionals working to complete the project. Project managers must shape a project culture that stimulates teamwork and high levels of personal motivation as well as a capacity to quickly identify and resolve problems that threaten project work. Things rarely go as planned and project managers must be able to steer the project back on track or alter directions when necessary. The sociocultural dimension also involves managing the interface between the project and external environment. Project managers have to assuage and shape FIGURE 1.3 A Socio-Technical Approach to Project Management Sociocultural Leadership Problem solving Teamwork Negotiation Politics Customer expectations Technical Scope WBS Schedules Resource allocation Baseline budgets Status reports 18 Chapter 1 Modern Project Management expectations of customers, sustain the political support of top management, negotiate with their functional counterparts, monitor subcontractors, and so on. Overall, the manager must build a cooperative social network among a divergent set of allies with different standards, commitments, and perspectives. Some suggest that the technical dimension represents the “science” of project management while the sociocultural dimension represents the “art” of managing a project. To be successful, a manager must be a master of both. Unfortunately, some project managers become preoccupied with the planning and technical dimension of project management. Often their first real exposure to project management is through project management software, and they become infatuated with network charts, Gantt diagrams, and performance variances; they attempt to manage a project from a distance. Conversely, there are other managers who manage projects by the “seat of their pants,” relying heavily on team dynamics and organizational politics to complete a project. Good project managers balance their attention to both the technical and sociocultural aspects of project management. Summary Text Overview Project management is a critical skill set in today’s world. A project is defined as a nonroutine, one-time effort limited by time, resources, and performance specifications designed to meet customer needs. One of the distinguishing characteristics of project management is that it has both a beginning and an end and typically consists of four phases: defining, planning, executing, and closing. Effective project management begins with selecting and prioritizing projects that support the firm’s mission and strategy. Successful implementation requires both technical and social skills. Project managers have to plan and budget projects as well as orchestrate the contributions of others. This text is written to provide the reader with a comprehensive, integrative understanding of the project management process. The text focuses both on the science of project management and the art of managing projects. Following this introductory chapter, Chapter 2 focuses on how organizations go about evaluating and selecting projects. Special attention is devoted to the importance of aligning project selection to the mission and strategy of the firm. The organizational environment in which projects are implemented is the focus ...
Purchase answer to see full attachment