Beginning Project
Management
v. 1.1
This is the book Beginning Project Management (v. 1.1).
This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/
3.0/) license. See the license for more details, but that basically means you can share this book as long as you
credit the author (but see below), don't make money from it, and do make it available to everyone else under the
same terms.
This book was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz
(http://lardbucket.org) in an effort to preserve the availability of this book.
Normally, the author and publisher would be credited here. However, the publisher has asked for the customary
Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally,
per the publisher's request, their name has been removed in some passages. More information is available on this
project's attribution page (http://2012books.lardbucket.org/attribution.html?utm_source=header).
For more information on the source of this book, or why it is available for free, please see the project's home page
(http://2012books.lardbucket.org/). You can browse or download additional books there.
ii
Table of Contents
About the Authors................................................................................................................. 1
Project Management in a Complex World ....................................................................... 2
Chapter 1: Introduction to Project Management........................................................... 7
Project Management Defined ....................................................................................................................... 8
Project Defined............................................................................................................................................. 12
Project Context............................................................................................................................................. 16
Key Skills of the Project Manager .............................................................................................................. 22
Introduction to the Project Management Knowledge Areas...................................................................26
Exercises........................................................................................................................................................ 40
Web Exercise................................................................................................................................................. 42
Software and Technology Exercises........................................................................................................... 44
Chapter 2: Project Profiling.............................................................................................. 77
Using a Project Profile................................................................................................................................. 78
Project Profiling Models.............................................................................................................................. 81
Complex Systems and the Darnall-Preston Complexity Index ...............................................................83
Darnall-Preston Complexity Index Structure ...........................................................................................91
Exercises...................................................................................................................................................... 108
Software and Technology Exercise .......................................................................................................... 109
Chapter 3: Project Phases and Organization............................................................... 118
Project Phases............................................................................................................................................. 119
Project Organization.................................................................................................................................. 125
Using the Darnall-Preston Complexity Index to Measure Organizational Complexity......................141
Exercises...................................................................................................................................................... 147
Web Exercise............................................................................................................................................... 149
Chapter 4: Understanding and Meeting Client Expectations .................................. 153
Including the Client ................................................................................................................................... 154
Understanding Values and Expectations ................................................................................................157
Dealing with Problems .............................................................................................................................. 162
Nurturing a Feeling of Satisfaction.......................................................................................................... 170
Exercises...................................................................................................................................................... 176
Web Exercises............................................................................................................................................. 178
iii
Chapter 5: Working with People on Projects .............................................................. 183
Working with Individuals.......................................................................................................................... 184
Working with Groups and Teams............................................................................................................. 204
Creating a Project Culture......................................................................................................................... 221
Exercises...................................................................................................................................................... 229
Web Exercises............................................................................................................................................. 230
Chapter 6: Communication Technologies .................................................................... 237
Types of Communication .......................................................................................................................... 238
Selecting Software ..................................................................................................................................... 248
Exercises...................................................................................................................................................... 268
Web Exercise............................................................................................................................................... 270
Software and Technology Exercises......................................................................................................... 273
Chapter 7: Starting a Project.......................................................................................... 280
Project Selection ........................................................................................................................................ 281
Project Scope .............................................................................................................................................. 291
Project Start-Up ......................................................................................................................................... 297
Alignment Process ..................................................................................................................................... 300
Communications Planning........................................................................................................................ 307
Exercises...................................................................................................................................................... 314
Software and Technology Exercise .......................................................................................................... 316
Chapter 8: Project Time Management.......................................................................... 321
Types of Schedules..................................................................................................................................... 323
Elements of Time Management................................................................................................................ 325
Critical Path and Float............................................................................................................................... 340
Managing the Schedule ............................................................................................................................. 345
Project Scheduling Software..................................................................................................................... 352
Exercises...................................................................................................................................................... 355
Software and Technology Exercises......................................................................................................... 357
Chapter 9: Estimating and Managing Costs ................................................................ 375
Estimating Costs......................................................................................................................................... 376
Managing the Budget................................................................................................................................. 385
Exercises...................................................................................................................................................... 397
Software and Technology Exercise .......................................................................................................... 400
iv
Chapter 10: Managing Project Quality ......................................................................... 411
Quality and Statistics................................................................................................................................. 412
Development of Quality as a Competitive Advantage............................................................................421
Relevance of Quality Programs to Project Quality .................................................................................432
Planning and Controlling Project Quality ...............................................................................................437
Assuring Quality......................................................................................................................................... 447
Exercises...................................................................................................................................................... 450
Software and Technology Exercises......................................................................................................... 452
Chapter 11: Managing Project Risk............................................................................... 464
Defining Risk............................................................................................................................................... 465
Risk Management Process......................................................................................................................... 469
Project Risk by Phases ............................................................................................................................... 480
Project Risk and the Project Complexity Profile ....................................................................................487
Exercises...................................................................................................................................................... 490
Web Exercise............................................................................................................................................... 492
Chapter 12: Project Procurement and Closure........................................................... 498
Identifying the Need for Resources Outside the Organization .............................................................499
Procurement Plan ...................................................................................................................................... 503
Selecting the Type of Contract ................................................................................................................. 510
Procurement Process................................................................................................................................. 523
Project Closure ........................................................................................................................................... 532
Exercises...................................................................................................................................................... 539
Web Exercises............................................................................................................................................. 540
v
About the Authors
Russell W. Darnall
Russell W. Darnall has more than twenty-five years of
project management experience with some of the
largest international companies, and he is an expert in
the human and organizational dynamics of projects.
Darnall began his career in social work and became the
director of the Cherokee Children’s Home on the
Cherokee Indian Boundary in North Carolina. His
educational background in sociology and his experience
dealing with people from another culture served him
well when his career shifted to project management.
Darnall has a doctorate of management in
Organizational Leadership, which has helped him
combine practical knowledge with academic research. Darnall is the author of two
books and several articles on project management, including The World’s Greatest
Project, which was published by the Project Management Institute in 1996. Darnall
provided the keynote address at the South Latin America Project Management
Conference in Santiago, Chile, and Poland’s Project Management Conference in
Gdansk in 2004 and Warsaw in 2008. From his wealth of knowledge, he has chosen
the most fundamentally important concepts and skills that project managers must
have at the foundation of their education.
John M. Preston
John M. Preston is an associate professor who has been teaching
and utilizing new technologies in the College of Technology at
Eastern Michigan University for more than twenty-five years.
He has written or coauthored more than thirty books, including
Computers in a Changing Society (2005) and Computer Literacy for
IC3 Unit 3: Living Online (2009). Preston takes advantage of the
connected learning environment that is available in Unnamed
Publisher to create learning experiences that are not possible in
a printed textbook. His experience in the classroom is
transferred to the structure of this book in the form of learning outcomes and
assessment tools that allow instructors to conveniently meet emerging
requirements for outcomes-based instruction and to use this text in online teaching
environments.
1
Project Management in a Complex World
Faster, cheaper, and better has become the mantra of not only profit-making
organizations seeking to increase market share and profits but also nonprofits and
governmental organizations seeking to increase their value to clients.
Organizations are increasingly using projects to meet these goals. Projects are goal
directed and time framed, and when managed well, projects deliver on time and
within budget. This book is about how to manage projects well.
All projects have common characteristics: every project has a scope, budget, and
schedule. Projects also differ. Understanding how projects differ and what that
difference means to the management of the project is critical to successfully
managing a project. Large, complex projects need project management tools,
systems, and processes that are very different from the small and less complex
project. Within this text, we provide a tool for profiling a project based on the
complexity of the project and describe the different project management
approaches needed for the difference in project profiles.
Project management is complicated. In some ways, this is a good thing because
students who learn how to manage projects well will find it a rewarding career, and
there will always be a demand for their services. Project management is
complicated because projects consist of many activities that are interrelated, and
the actions taken in one activity affect several other aspects of the project. Project
management is complex because project managers must understand several
knowledge areas and develop a variety of tools and techniques to successfully
manage a project. This complexity makes it challenging to learn about project
management because regardless of which activity you begin to study, you need to
know something about the other activities to which it is related.
Organization of the Book
This text addresses the challenges posed by various levels of project complexity by
introducing an approach to profiling projects and discussing the implications to
project management. The text provides an overview of project management and
uses the industry standard definitions of the divisions of project management
knowledge as described by the Project Management Institute (PMI) to provide
grounding in traditional project management concepts. Additionally, students learn
a technique developed by the authors to assess the complexity level of a project.
This overview and complexity profile provides a cognitive map to which the student
2
can refer when they proceed to the second part of the book and learn more about
the specific areas of project management knowledge.
Students learn more about specific topics in chapters devoted to scope, planning,
budgeting, cost management, quality, risk management, procurement, and
closeout. They learn about the knowledge, skills, and tools used in each of these
areas. They learn that different subsets of this knowledge, skills, and tools are
needed depending on the complexity of the project and how to make the
appropriate selection based on a project’s complexity profile. They also learn that
different subsets of knowledge, skills, and tools are used depending on the phase of
the project. Because they already have an overview, students can appreciate how
the topics in each chapter in this section relate to other topics.
Students also learn about the most complex part of project management—dealing
with people. The project manager is often the factor that makes the difference
between success and failure of a project and whether or not a project manager
enjoys his or her job. Students learn about managing meetings, team development,
and driving innovation in the project environment. Students also learn about
managing client expectations, developing an appropriate project culture, and
motivating the project team. Additionally, students learn about the different
management approaches the project manager must use at different times in the
project, including authoritarian, facilitator, counselor, collaborator, and partner.
Students assess their own leadership abilities and identify which aspects of a
project they are most likely to manage well and where they need to improve their
skills or team with someone else who has those skills.
This text presents the core concepts of project management within the versatile
online environment of Unnamed Publisher. It provides a practical, case-enriched
learning experience that will help students go from learners to competent project
managers.
Why the Authors Wrote This Book
As a professor who is responsible for teaching and developing a course in project
management to be offered online, Preston wanted a textbook that was designed
from the ground up to take advantage of the online environment. He also was
interested in the new publishing paradigm typified by FWK and decided to explore
the option of writing the kind of book that he needed. One of the founding partners
of FWK—Jeff Shelstad—introduced Preston to Russ Darnall, who was interested in
writing about methods he had developed for dealing with complex projects. Preston
and Darnall formed a partnership that produced this text, which draws on both of
their strengths. Writing a book is a project in itself. Darnall and Preston applied the
Project Management in a Complex World
3
skills and tools described in this book to form a productive team that used the
background and skills of both of them.
The Darnall-Preston Complexity Index (DPCI™)
For the first time in print, Darnall shares with the wider public a proprietary
project profiling technique that he developed over many years for his own use as a
consultant. Preston has added a standardized format to make it possible to use a
subset of Darnall’s method to do a preliminary profile that is useful for allocating
resources based on the project’s complexity in four major categories: external
factors, internal factors, technology, and project environment. The DPCI is used as a
teaching tool in the text to help students make decisions on where resources should
be allocated and which parts of the complex project are most likely to be the biggest
challenges. During the closeout phase, students learn how to archive the project
documents using the DPCI index so they can create a resource they can use when
they start future projects that have similar complexity profiles.
Online Supplements
The concepts taught in the textbook are reinforced using traditional questions,
essay assignments, and discussion questions. For instructors who want to teach
computer skills that are related to the concepts and to reinforce the concepts with
current articles and Web-based student activity, the FWK Web site contains a rich
variety of online exercises and activities that are designed by Preston to improve
understanding, retention, and ability to transfer knowledge to less familiar
situations and new projects.
Examples of these activities are as follows:
• Step-by-step instructions on how to use software to accomplish project
management tasks:
◦ Using collapsible outlines in MS Word 2003 and 2007 and MS Word
for Mac 2008 to create a work breakdown structure
◦ Using Excel and OpenOffice Calc to create an activity list with
precedents, durations, and a Gantt chart
◦ Using Google Docs and Office Live to prepare project scope
statements and work breakdown structure documents in an online
shared work environment where team members each do a portion
of the task
Project Management in a Complex World
4
◦ Using OpenProject (a free, open source project management
software that is similar to MS Project) or Microsoft Project trial
software to create an activity list with durations and precedents to
create a PERT (program evaluation and review technique) chart
and identify the critical path and project float
◦ Using Project On Demand to work with a team to create a similar
activity list in an online environment where each team member is
responsible for a portion of the activities
• Project management resources located online—URLs of online
resources, such as the following:
◦ Project management definitions
◦ Pronunciations of key terms
◦ Project management forms used by government agencies
• Screen captures to record visits to sites for grading purposes
• A bookmark folder for project management sites that can be added to,
to develop a resource library of Web addresses
• Exploration and reporting
◦ Instructions on how to use advanced search features in Google to
limit results using keywords, phrases, recent pages, domain names,
and exclusion terms
◦ Searches for information on issues and events in project
management that can be reported upon in class or in online
discussions
• Team activities
◦ Determining international time zones and dates
◦ Dialing international calls
◦ Using Internet-based voice and video conferencing software
Other Online Activities
• Self-assessment, in which students rate their grasp of each learning
objective at the beginning of their study of the chapter and at the end
to demonstrate that learning has occurred on these objectives and to
provide the instructor with quantitative data to prove learning has
occurred for assessment purposes
• Audio interviews with project management experts, including Russ
Darnall, in which they relate insights to managing real projects
• Case studies depicting examples of the concepts in the text that are
drawn primarily from the authors’ consulting experience and
Project Management in a Complex World
5
supplemented with links to sites online where current project cases are
described
FWK’s Community of Learning
The FWK approach recognizes the potential of involving the larger community of
students and experts and has invited them to participate. To include participation
by a wider community while maintaining consistency of process and outcomes,
templates are provided that contributors can use to add instructional options.
Participants in the learning community can choose to provide the exercises for free
or for a fee. Instructors are welcome to participate in this community.
Compatibility with Industry Standards
PMI has identified a body of knowledge and published A Guide to the Project
Management Body of Knowledge (PMBOK Guide) that is used to certify project
management professionals. Darnall was a contributor to this guide when it was
created. This book includes the PMBOK Guide concepts and uses its terminology to
assure that project managers share a common body of knowledge. While this book
is not a study guide that is intended to prepare students to take PMI certification
tests, students who choose to prepare for those certifications after using this text
will find the concepts and terminology familiar and much easier to master. This
text goes beyond the PMI standard by including content on client satisfaction and
human factors related to stakeholder alignment and managing teams—Darnall’s
specialty.
Project Management in a Complex World
6
Chapter 1
Introduction to Project Management
This chapter provides an overview of project management, defining both projects
and project management and exploring the difference between project
management and operations management. Advances in technology are driving the
speed of innovation and the ability of organizations to shorten the time needed to
develop and deliver new products and services that increase an organization’s
competitive advantage. This drive to develop new and unique products or services
creates a perfect environment for the application of project management
methodologies and skills. We also provide a brief overview of the knowledge areas
of project management and the skills needed to be a successful project manager.
7
1.1 Project Management Defined
LEARNING OBJECTIVES
1. Identify the Project Management Institute’s definition of project
management. 1.1.1
2. Analyze and evaluate the role of client expectations in a project. 1.1.2
3. Define project scope. 1.1.3
“Project management is the application of knowledge, skills, tools, and techniques
to project activities to meet the project requirements.”Project Management
Institute, Inc., A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th
ed. (Newtown Square, PA: Project Management Institute, Inc., 2008), 6. This simple
definition represents a compromise that resulted from intense discussions within
the Project Management Institute (PMI)1
during the 1980s. One of the priorities of
PMI during this time was the development of project management as a profession.
Although debate continues on whether project management is a profession with an
enforceable code of conduct and other traditional criteria for recognition as a
profession, the development of A Guide to the Project Management Body of Knowledge
(PMBOK Guide) and the project management certifications that derived from these
efforts helped promote the understanding and development of the project
management field.
The discussion about what should be in the definition of project management
included debates about the purpose of project management. Is the main purpose to
meet client expectations or is the main purpose to meet the written specifications
and requirements? This discussion around meeting project requirements was not
easily settled. If it is assumed that the project client is the one who defines project
requirements, then maybe project management is the application of knowledge,
skills, tools, and techniques to meet client requirements or client expectations.
PMI’s definition of project management does provide a good understanding of
project management, but it does not help us understand project success. For that,
we must include the client.
1. Organization of professional
project managers that
publishes A Guide to the Project
Management Body of Knowledge
(PMBOK Guide).
Chapter 1 Introduction to Project Management
8
Figure 1.1
Project discussions include
clients.
© 2010 Jupiterimages
Corporation
Jack Meredith and Samuel MantelJack R. Meredith and
Samuel J. Mantel, Jr., Project Management: A Managerial
Approach (Hoboken, NJ: Wiley, 2006), 8. discussed project
management in terms of producing project outcomes
within the three objectives of cost, schedule, and
specifications. Project managers are then expected to
develop and execute a project plan that meets cost,
schedule, and specification parameters. According to
this view, project management is the application of
everything a project manager does to meet these
parameters. This approach to defining project
management shares PMI’s focus on the project
outcomes in terms of requirements.
Meredith and Mantel added a fourth aspect of project
management—the expectations of the client. One clientcentered
definition of project management is the
application of knowledge, skills, tools, and techniques to meet or exceed the
expectations of the client. This definition focuses on delivering a product or service
to the client that meets expectations rather than project specifications. It is
possible to meet all project specifications and not meet client expectations or fail to
meet one or more specifications and still meet or exceed a client’s
expectation.Russell W. Darnall, The World’s Greatest Project (Newtown Square, PA:
Project Management Institute, Inc., 1996), 48–54.
Meredith and Mantel discussed a tendency noted by DarnallRussell W. Darnall, The
World’s Greatest Project (Newtown Square, PA: Project Management Institute, Inc.,
1996), 48–54. that expectations often increase during the life of a project. Meredith
and Mantel suggest that this is a form of scope increase. A project scope2
is a
carefully crafted document that reflects the performance specifications of the
project deliverables. Defining the project scope and managing scope change is a
very different process from developing an understanding of a client’s expectations
and managing those expectations. Darnall focused on defining and managing client
expectations as a critical project management skill that is distinct from scope
development and management.
Client expectations encompass an emotional component that includes many client
desires that are not easily captured within a specification document. Although
closely correlated with project specifications, client expectations are driven by
different needs. It is possible for a project team to exceed every project
specification and end up with an unsatisfied client.
2. Document that reflects the
performance specifications of
the project deliverables. See
scope of work (SOW).
Chapter 1 Introduction to Project Management
1.1 Project Management Defined 9
Highway Project
The Department of Highways in South Carolina was exploring ways to reduce
the road construction costs and developed new contracting processes to allow
the road builders to bring new ideas for cutting costs. On one project, the
contractor proposed cost-cutting ideas throughout the life of the project. At
each phase, the client accepted many of the ideas and then revised the budget.
The client promoted the revised cost target of the project as an example of the
success of the new process. By the end of the project, the final cost was less
than 1 percent over the newest target. Although the total cost of the project
was almost 10 percent less than the original cost projections and contract
obligations, the success of the project was connected to the new expectations
that developed during the life of the project. Even though this project
performance exceeded the original goal, the client was disappointed.
The reverse is also true. A project can be late and over budget and the client can be
satisfied. Although this may be counterintuitive, the response of a client to the
events of a project is complex and goes beyond the data related in project
specifications.
Biotech Project
A biotechnology company developed a new drug that proved to have a large
market demand, and the team that developed the drug was assigned to build a
new manufacturing facility to produce the drug. The project manager for the
construction company that was awarded the contract to build the
manufacturing facility managed the project effectively. Every request for a
change in scope was approved, and the result was a 20 percent increase to the
total cost of the project. On most projects, a 20 percent increase in the project
cost would be considered poor performance. For the client’s project team, who
were accustomed to complex projects with a large number of unknown issues
that increase the final cost of the project, a 20 percent overrun in cost was not
unusual. Even though the project was 20 percent over budget, the client was
happy. Client satisfaction is often tied to expectations about project
performance. Identifying and managing those expectations is a primary
responsibility of the project manager.
Chapter 1 Introduction to Project Management
1.1 Project Management Defined 10
KEY TAKEAWAYS
• According to PMI, project management is the application of knowledge,
skills, tools, and techniques to meet project requirements.
• The role of the client is controversial. Some clients include meeting or
exceeding their expectations as part of project management.
• Project scope is a document that defines the work required to complete
the project successfully.
EXERCISES
1. According to PMI, project management is the application of knowledge,
________, tools, and techniques to meet project requirements.
2. According to Meredith and Mantel, a project should ____ __ ______
(three words) the expectations of the client.
3. If someone had asked you to define project management before you read
this section, how would you have defined it? How did your definition
differ from the PMI definition?
4. What aspect of project management was omitted from the PMI
definition that is included in the definition proposed by Meredith and
Mantel? If you were on the PMI decision-making body, would you vote
to include it? Explain your choice.
5. What is meant by the statement “The response of the client to the
events of the project may be counterintuitive”?
Client Expectations
Compare and contrast the highway and biotech examples previously
described. Suggest an approach that might have prevented client
disappointment in the highway project. Include the following in your
answer:
• What are the differences between the two projects? Provide a bulleted
list.
• Identify the single most important difference between the two projects
that affected client satisfaction.
• Suggest an approach to managing client expectations in the highway
project that might have resulted in meeting or exceeding expectations
rather than disappointment.
Chapter 1 Introduction to Project Management
1.1 Project Management Defined 11
1.2 Project Defined
LEARNING OBJECTIVES
1. Describe two defining characteristics of a project.
2. Organize projects within projects.
The Project Management Institute (PMI) defines a project3
by its two key
characteristics. All projects are temporary and undertaken to create a product,
service, or result that is unique.Project Management Institute, Inc., A Guide to the
Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA:
Project Management Institute, Inc., 2008), 5. These two simple concepts create a
work environment that mandates different management approach from that used
by an operations manager, whose work is oriented toward continuous improvement
of existing processes over longer periods of time. A project manager needs a
different set of skills to both define and successfully execute temporary projects.
Because projects are temporary, they have a defined beginning and end. Project
managers must manage start-up activities and project closeout activities. The
processes for developing teams, organizing work, and establishing priorities require
a different set of knowledge and skills because members of the project management
team recognize that it is temporary. They seldom report directly to the project
manager and the effect of success or failure of the project might not affect their
reputations or careers the same way that the success or failure of one of their other
job responsibilities would.
3. A temporary activity
undertaken to create a
product, service, or result that
is unique.
Chapter 1 Introduction to Project Management
12
Figure 1.2
Projects are temporary.
© 2010 Jupiterimages
Corporation
The second characteristic of a project, the delivery of a
unique product, service, or result, also changes the
management approach to the work. A project manager
must take time to understand the deliverables of a
project, develop a plan for producing the deliverables in
the time available, and then execute that plan.
Projects are also defined within the context of larger
projects as the following example illustrates.
Chapter 1 Introduction to Project Management
1.2 Project Defined 13
National Energy Plan
The National Energy Technology Laboratory laid out a plan for a national
energy policy that had a clear and identifiable outcome—providing reliable,
affordable, and environmentally sound energy.National Energy Technology
Laboratory, “Reliable, Affordable, and Environmentally Sound Energy for
America’s Future,” The Energy Lab, 2001, http://www.netl.doe.gov/
publications/press/2001/nep/nep.html (accessed June 18, 2009). The details of
this plan will be revised and updated, but the general goals are likely to remain
unchanged. To accomplish these goals, the project requires the development of
new technologies, complex scheduling and cost control, coordination of a large
number of subcontractors, and skillful stakeholder management. Development
of each of the major components became a project for the winning contractors
within the larger project of providing reliable, affordable, and environmentally
sound energy. Contractors for cleaner use of fossil fuels, conservation efforts,
and development of renewable energy sources would manage major projects.
Each project has to develop new technologies, manage a large number of
subcontractors, and manage the stakeholders at the Department of Energy.
Each subcontractor or work unit becomes a project for that organization. The
project is defined by the scope of work. In the energy policy, the scope of work
included all activities associated with reducing use of fossil fuels and reliance
on imported energy. Using our definition that a project is a temporary
endeavor that creates a unique product or service, implementation of the
energy policy would be a project that consists of other projects, such as
development of the following:
• Wind power
• Solar power
• Electricity transmission
• Electricity storage
• New nuclear reactor design and installation
• Other renewable energy sources
• Biofuels
• Electric vehicles
• Nonpolluting use of coal and natural gas
• Environmental protection
Chapter 1 Introduction to Project Management
1.2 Project Defined 14
KEY TAKEAWAYS
• All projects are temporary and undertaken to create a product, service,
or result.
• Projects can contain smaller projects.
EXERCISES
1. The project scope is the _____ required to complete the project
successfully.
2. According to PMI, all projects are ________ and undertaken to create a
product or service that is unique.
3. Projects can contain ___________ projects.
4. What are two defining characteristics of a project that distinguish it
from a process?
5. If you were planning to move from your current apartment or home to
another location, would this qualify as a project? Explain your answer.
Projects within Projects
Choose a large public works project such as the construction of a new high
school. Identify at least five phases to this project that could be treated as
projects within a project. Specifically state how each project meets the
definition of a project, and describe the product, service, or result of each
project and why it is temporary.
Chapter 1 Introduction to Project Management
1.2 Project Defined 15
1.3 Project Context
LEARNING OBJECTIVES
1. Identify the effect of organization type on time horizons.
2. Compare project management and operations management.
3. Describe the organizational options for managing projects.
The project is affected by the type of organization in which the project is conducted
and how the organization is organized to manage projects.
Organizational Priorities
Organizations fulfill a societal role to meet economic, religious, and governance
functions. Local factories, churches, and hospitals are all organizations that provide
some social or community need. Factories create wealth and jobs, churches provide
spiritual and common social needs for communities, and government organizations
provide regulations and services that allow for an orderly society. These
organizations have different views of time and each organization develops an
operational approach to accomplishing the purpose of the organization over that
time horizon. For example, a religious group might begin construction of a
cathedral that would take several lifetimes to complete, government performance is
reviewed at election time, and a publicly owned company must justify its use of
money each year in the annual report.
Organizations operate to effectively and efficiently produce the product or service
that achieves the organization’s purpose and goals as defined by the key
stakeholders4
—those who have a share or interest. An organization seeks to
develop stable and predictable work processes and then improve those work
processes over time through increased quality, reduced costs, and shorter delivery
times. Total quality management, lean manufacturing, and several other
management philosophies and methodologies have focused on providing the tools
and processes for increasing the effectiveness and efficiency of the organization.
Historically, these methodologies focused on creating incremental and continuous
improvement in work processes. More recently, organizations are increasingly
focused on step changes5
that take advantage of new technologies to create a
significant improvement in the effectiveness or efficiency of the organization.
4. One who has a share or interest
in a project.
5. Significant rather than
incremental improvements in
effectiveness or efficiency that
take advantage of new
technologies.
Chapter 1 Introduction to Project Management
16
Often, these initiatives to increase organizational effectiveness or efficiency are
identified as projects. Economic organizations will initiate a project to produce a
new product, to introduce or revamp work processes to significantly reduce
product costs, or to merge with other organizations to reduce competition or lower
costs and generate additional profits. A social organization, such as a hospital, may
build a new wing, introduce a new service, or design new work processes to reduce
costs. A government organization may introduce a new software program that
handles public records more efficiently, build a new road to reduce congestion, or
combine departments to reduce costs.
Each of the initiatives meets our definition of a project. Each is a temporary
endeavor and produces a unique product or service. Managing these projects
effectively entails applying project management knowledge, skills, and tools.
Operations Management versus Project Management
One way to improve understanding of project management is to contrast project
management with operations management. Whether in an economic,
socioreligious, or government organization, managers are charged with effectively
and efficiently achieving the purpose of the organization. Typically, a manager of
an economic organization focuses on maximizing profits and stockholder value.
Leaders with socioreligious organizations focus on effective and efficient delivery of
a service to a community or constituency, and governmental managers are focused
on meeting goals established by governmental leaders.
Operations managers focus on the work processes of the operation. More effective
work processes will produce a better product or service, and a more efficient work
process will reduce costs. Operations managers analyze work processes and explore
opportunities to make improvements. Total quality management, continuous
process improvement, lean manufacturing, and other aspects of the quality
movement provide tools and techniques for examining organizational culture and
work processes to create a more effective and efficient organization. Operations
managers are process focused, oriented toward capturing and standardizing
improvement to work processes and creating an organizational culture focused on
the long-term goals of the organization.
Chapter 1 Introduction to Project Management
1.3 Project Context 17
Figure 1.3
Managing operations focuses on
improving repetitive processes.
© 2010 Jupiterimages
Corporation
Project managers focus on the goals of the project.
Project success is connected to achieving the project
goals within the project timeline. Project managers are
goal directed and time sensitive. Project managers apply
project management tools and techniques to clearly
define the project goals, develop an execution plan to
meet those goals, and meet the milestones and end date
of the project.
An operations manager may invest $10,000 to improve a
work process that saves $3,000 a year. Over a five-year
period, the operations manager improved the
profitability of the operations by $5,000 and will
continue to save $3,000 every year. The project manager
of a one-year project could not generate the savings to
justify this kind of process improvement and would not
invest resources to explore this type of savings.
An operations manager creates a culture to focus on the long-term health of the
organization. Operations managers build teams over time that focus on
standardizing and improving work processes, that search for and nurture team
members who will “fit in,” and that contribute to both the effectiveness of the team
and the team culture. Project managers create a team that is goal focused and
energized around the success of the project. Project team members know that the
project assignment is temporary because the project, by definition, is temporary.
Project team members are often members of organizational teams that have a
larger potential to affect long-term advancement potential. Project managers
create clear goals and clear expectations for team members and tie project success
to the overall success of the organization. Operations managers are long-term
focused and process oriented. Project managers are goal directed and milestone
oriented.
Organizing to Manage Projects
Because project management is different from operations management, projects
are handled best by people who are trained in project management. This expertise
can be obtained by hiring an outside consulting firm that specializes in project
management or by developing an in-house group.
Some organizations are designed to execute projects. Often entities contract with
engineering and construction companies to design and build their facilities or hire
software companies to develop a software solution. The major work processes
Chapter 1 Introduction to Project Management
1.3 Project Context 18
within these organizations are designed to support the acquisition and execution of
projects. Functional departments such as estimating, scheduling, and procurement
create and maintain core competencies designed to support projects. The ability of
these types of organizations to successfully manage projects becomes a competitive
advantage in the marketplace.
Organizations designed to produce products or services also use projects. Major
activities outside the normal work of the organization’s department or functional
units or major activities that cross functional boundaries become a project (a
temporary task undertaken to create a product or service that is unique). As
economic pressures increase the speed in which organizations must change and
adapt to new environmental conditions, leaders are increasingly chartering
projects to enable the organization to more quickly adapt. The application of a
project management approach increases the likelihood of success as organizations
charter a project to facilitate organizational change, to increase the development
and introduction of new products or support the merger or divesture of
organizational units.
Project management offices (PMOs)6
have emerged to facilitate development of
organizational knowledge, skills, and tools to internally charter and manage
projects within the organization. The PMO varies in structure and responsibility
depending on the project management approach of the parent organization. On one
end of the spectrum, the PMO has complete responsibility for projects within an
organization from the criteria and selection of appropriate projects to
accountability for project performance. In organizations that make a large
investment in the PMO, a large number of new product or process improvement
projects are submitted, and the project office develops a portfolio of projects to
manage over a given period that maximizes the use of organizational resources and
provides the greatest return to the organization.
PMOs can provide various functions for an organization. Some possible functions
include the following:
• Project management. Some organizations maintain the project manager
within the PMO, assign project managers from other departments,
procure contract project managers, or practice a combination of all
three.
• Center of excellence. The project office can maintain the organization’s
project management policies and procedures, maintain a historical
database, maintain best practices, and provide training and specialized
expertise when needed.6. Group within an organization
that manages the
organization’s projects.
Chapter 1 Introduction to Project Management
1.3 Project Context 19
• Portfolio management. The project office actually supervises the project
managers and monitors project performance. Portfolio management
also includes prioritizing projects on the basis of value to the
organization and maintains an inventory of projects. Portfolio
management balances the number and type of projects to create the
greatest return from the entire portfolio of projects.
• Functional support. The project office maintains project management
expertise to support the project. Estimating, project scheduling, and
project cost analysis are examples of functional support.
KEY TAKEAWAYS
• The purpose of an organization can affect its view of the time allowed
for projects.
• In an organization, project management can be used to make step
changes to take advantage of new technologies or make significant
improvements in effectiveness or efficiency.
• Operations managers are long-term focused and process oriented.
Project managers are goal directed and milestone oriented.
• Projects can be handled by outside contractors or by an internal group
in a PMO.
Chapter 1 Introduction to Project Management
1.3 Project Context 20
EXERCISES
1. The type of organization can influence the ____ frame allowed for
projects.
2. Operations managers are focused on __________, while project managers
are focused on the goals of the project.
3. If projects are routinely handled internally, the group that manages the
projects might be called the ______ ______ _____ (three words).
4. A friend of yours has a forty-five-minute commute to work. She decides
to spend some time evaluating the different options she has for routes
and possible carpooling to reduce the cost or time it takes to get to
work. Is this task an example of something that uses the skills of an
operations manager, or does it need the additional skills of a project
manager? Explain your answer and refer to the definitions provided.
5. Business managers focus on improving efficiency and effectiveness, but
sometimes they use a project management approach to make significant
changes. What often prompts them to use the project management
approach? What would be an example?
Operations versus Project Management
The manager of a sales department must meet annual sales goals, manage
personnel in the department, and develop and deliver product training for
clients. How is this type of operations management different from project
management? Address each of the following issues in your answer:
• How is the relationship between the operations manager and the sales
staff different from the relationship between a project manager and the
project team members?
• Which of the duties described above is most like project management
and might be contracted to an outside firm?
• What is the biggest difference between project management and the
sales manager’s job?
Chapter 1 Introduction to Project Management
1.3 Project Context 21
1.4 Key Skills of the Project Manager
LEARNING OBJECTIVES
1. Identify necessary operational leadership skills.
2. Identify additional leadership skills required of a project manager.
Every project is unique, and most projects will encounter unexpected technical
challenges. Each project management team is a group of individuals who need
motivation and coordination. Planning is vital, but the ability to adapt to changes
and work with people to overcome challenges is just as necessary. A project
manager must master the skills that are necessary to be successful in this
environment.
Operational Management Skills
Often the difference between the project that succeeds and the project that fails is
the leadership of the project manager. The leadership skills needed by the
successful project manager include all the skills needed by operations managers of
organizations. These skills include:
• Good communication
• Team building
• Planning
• Expediting7
• Motivating
• Political sensitivity
Project Management Skills
Because project managers generally operate in a project environment that is more
time sensitive and goal driven, the successful project manager requires additional
knowledge, skills, and abilities.
7. The work processes associated
with shortening the time of
delivering a product or service.
Chapter 1 Introduction to Project Management
22
Figure 1.4
Project managers must have
additional skills.
© 2010 Jupiterimages
Corporation
Albert EinsiedelAlbert A. Einsiedel, “Profile of Effective
Project Managers,” Project Management Journal 18 (1987):
5. discussed leader-sensitive projects and defined five
characteristics of an effective project leader. These
characteristics were chosen based on some assumptions
about projects. These characteristics include the project
environment, which is often a matrix organization that
results in role ambiguity, role conflict, and role erosion.
The project environment is often a fluid environment
where decisions are made with little information. In this
environment, the five characteristics of an effective
project leader include the following:
• Credibility
• Creativity as a problem solver
• Tolerance for ambiguity
• Flexibility in management style
• Effectiveness in communicating
Hans ThamhainHans J. Thamhain, “Developing Project
Management Skills,” Project Management Journal 22
(1991): 3. researched the training of project managers
and, based on the finding, categorized project
management into interpersonal, technical, and administrative skills:
• Interpersonal skills. These skills include providing direction,
communicating, assisting with problem solving, and dealing effectively
with people without having authority.
• Technical expertise. Technical knowledge gives the project manager the
creditability to provide leadership on a technically based project, the
ability to understand important aspects of the project, and the ability
to communicate in the language of the technicians.
• Administrative skills. These skills include planning, organizing, and
controlling the work.
Thamhain’s work provides a taxonomy for better understanding the skills needed
by project managers.
Traditionally, the project manager has been trained in skills such as developing and
managing the project scope, estimating, scheduling, decision making, and team
building. Although the level of skills needed by the project manager depends largely
on the project profile, increasingly the people skills of the project manager are
Chapter 1 Introduction to Project Management
1.4 Key Skills of the Project Manager 23
becoming more important. The skills to build a high-performing team, manage
client expectations, and develop a clear vision of project success are the type of
skills needed by project managers on more complex projects. “To say Joe is a good
project manager except he lacks good people skills is like saying he’s a good
electrical engineer but doesn’t really understand electricity.”Russell W. Darnall,
“The Emerging Role of the Project Manager,” PMI Journal (1997): 64.
KEY TAKEAWAYS
• Project managers need the same skills as an operations manager, such as
good communications, team building, planning, expediting, motivating,
and political sensitivity.
• Project managers need additional skills in establishing credibility,
creative problem solving, tolerance for ambiguity, flexible management,
and very good people skills.
Chapter 1 Introduction to Project Management
1.4 Key Skills of the Project Manager 24
EXERCISES
1. Project managers need the same skills as an operations manager,
including communications, team building, planning, expediting, and
_______ sensitivity.
2. In addition to the skills needed by an operations manager, a project
manager needs to establish credibility, solve problems creatively, have a
tolerance for ____________, be flexible, and have good people skills.
Personal Leadership Inventory
Rate your personal project management skills using the following scale:
• S Strong
• M Moderate
• I Improvement needed
Operational management skills:
1. Good communication
2. Team building
3. Planning
4. Expediting
5. Motivating others
6. Sensitive to the politics of a situation
Additional project management skills:
7. Establish credibility with others
8. Find creative solutions to problems
9. Tolerate ambiguity
10. Use a flexible management style—adapt your management style to
changing situations
Chapter 1 Introduction to Project Management
1.4 Key Skills of the Project Manager 25
1.5 Introduction to the Project Management Knowledge Areas
LEARNING OBJECTIVES
1. Identify the tasks performed in a project start-up.
2. Describe the areas of project management knowledge as defined by the
Project Management Institute.
Projects are divided into components, and a project manager must be
knowledgeable in each area. Each of these areas of knowledge will be explored in
more depth in subsequent chapters.
Project Start-Up and Integration
The start-up of a project is similar to the start-up of a new organization. The project
leader develops the project infrastructure used to design and execute the project.
The project management team must develop alignment among the major
stakeholders—those who have a share or interest—on the project during the early
phases or definition phases of the project. The project manager will conduct one or
more kickoff meetings or alignment sessions to bring the various parties of the
project together and begin the project team building required to operate efficiently
during the project.
During project start-up, the project management team refines the scope of work
and develops a preliminary schedule and conceptual budget. The project team
builds a plan for executing the project based on the project profile. The plan for
developing and tracking the detailed schedule, the procurement plan, and the plan
for building the budget and estimating and tracking costs are developed during the
start-up. The plans for information technology, communication, and tracking client
satisfaction are all developed during the start-up phase of the project.
Flowcharts, diagrams, and responsibility matrices are tools to capture the work
processes associated with executing the project plan. The first draft of the project
procedures manual captures the historic and intuitional knowledge that team
members bring to the project. The development and review of these procedures and
work processes contribute to the development of the organizational structure of
the project.
Chapter 1 Introduction to Project Management
26
This is typically an exciting time on a project where all things are possible. The
project management team is working many hours developing the initial plan,
staffing the project, and building relationships with the client. The project manager
sets the tone of the project and sets expectations for each of the project team
members. The project start-up phase on complex projects can be chaotic, and until
plans are developed, the project manager becomes the source of information and
direction. The project manager creates an environment that encourages team
members to fully engage in the project and encourages innovative approaches to
developing the project plan.
Project Scope
The project scope is a document that defines the parameters8
—factors that define a
system and determine its behavior—of the project, what work is done within the
boundaries of the project, and the work that is outside the project boundaries. The
scope of work (SOW)9
is typically a written document that defines what work will
be accomplished by the end of the project—the deliverables of the project. The
project scope defines what will be done, and the project execution plan10
defines
how the work will be accomplished.
No template works for all projects. Some projects have a very detailed scope of
work, and some have a short summary document. The quality of the scope is
measured by the ability of the project manager and project stakeholders to develop
and maintain a common understanding of what products or services the project will
deliver. The size and detail of the project scope is related to the complexity profile
of the project. A more complex project often requires a more detailed and
comprehensive scope document.
According to the Project Management Institute,Project Management Institute, Inc.,
A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown
Square, PA: Project Management Institute, Inc., 2008), 115–16. the scope statement
should include the following:
• Description of the scope
• Product acceptance criteria
• Project deliverables
• Project exclusions
• Project constraints
• Project assumptions
The scope document is the basis for agreement by all parties. A clear project scope
document is also critical to managing change on a project. Since the project scope
8. Factors that define a system
and determine its behavior.
9. Document that defines what
work will be accomplished by
the end of the project.
10. Defines how the work will be
accomplished.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 27
Figure 1.5
Project managers must track the
schedules of several activities at
the same time.
reflects what work will be accomplished on the project, any change in expectations
that is not captured and documented creates the opportunity for confusion. One of
the most common trends on projects is the incremental expansion in the project
scope. This trend is labeled scope creep11
. Scope creep threatens the success of a
project because the small increases in scope require additional resources that were
not in the plan. Increasing the scope of the project is a common occurrence, and
adjustments are made to the project budget and schedule to account for these
changes. Scope creep occurs when these changes are not recognized or not
managed. The ability of a project manager to identify potential changes is often
related to the quality of the scope documents.
Events do occur that require the scope of the project to change. Changes in the
marketplace may require change in a product design or the timing of the product
delivery. Changes in the client’s management team or the financial health of the
client may also result in changes in the project scope. Changes in the project
schedule, budget, or product quality will have an effect on the project plan.
Generally, the later in the project the change occurs, the greater the increase to the
project costs. Establishing a change management system for the project that
captures changes to the project scope and assures that these changes are
authorized by the appropriate level of management in the client’s organization is
the responsibility of the project manager. The project manager also analyzes the
cost and schedule impact of these changes and adjusts the project plan to reflect the
changes authorized by the client. Changes to the scope can cause costs to increase
or decrease.
Project Schedule and Time Management
The definition of project success often includes
completing the project on time. The development and
management of a project schedule that will complete
the project on time is a primary responsibility of the
project manager, and completing the project on time
requires the development of a realistic plan and the
effective management of the plan. On smaller projects,
project managers may lead the development of the
project plan and build a schedule to meet that plan. On
larger and more complex projects, a project controls
team that focuses on both costs and schedule planning
and controlling functions will assist the project
management team in developing the plan and tracking
progress against the plan.
11. Incremental expansion in the
project scope without formal
approval.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 28
© 2010 Jupiterimages
Corporation
To develop the project schedule, the project team does
an analysis of the project scope, contract, and other
information that helps the team define the project
deliverables. Based on this information, the project
team develops a milestone schedule12
. The milestone
schedule establishes key dates throughout the life of a
project that must be met for the project to finish on time. The key dates are often
established to meet contractual obligations or established intervals that will reflect
appropriate progress for the project. For less complex projects, a milestone
schedule may be sufficient for tracking the progress of the project. For more
complex projects, a more detailed schedule is required.
To develop a more detailed schedule, the project team first develops a work
breakdown structure (WBS)13
—a description of tasks arranged in layers of detail.
Although the project scope is the primary document for developing the WBS, the
WBS incorporates all project deliverables and reflects any documents or
information that clarifies the project deliverables. From the WBS, a project plan is
developed. The project plan lists the activities that are needed to accomplish the
work identified in the WBS. The more detailed the WBS, the more activities that are
identified to accomplish the work.
After the project team identifies the activities, the team then sequences the
activities according to the order in which the activities are to be accomplished. An
outcome from the work process is the project logic diagram14
. The logic diagram
represents the logical sequence of the activities needed to complete the project. The
next step in the planning process is to develop an estimation of the time it will take
to accomplish each activity or the activity duration. Some activities must be done
sequentially, and some activities can be done concurrently. The planning process
creates a project schedule by scheduling activities in a way that effectively and
efficiently uses project resources and completes the project in the shortest time.
On larger projects, several paths are created that represent a sequence of activities
from the beginning to the end of the project. The longest path to the completion of
the project is the critical path15
. If the critical path takes less time than is allowed
by the client to complete the project, the project has a positive total float16
or
project slack17
. If the client’s project completion date precedes the calculated
critical path end date, the project has a negative float. Understanding and
managing activities on the critical path is an important project management skill.
To successfully manage a project, the project manager must also know how to
accelerate a schedule to compensate for unanticipated events that delay critical
activities. Compressing—crashing18
—the schedule is a term used to describe the
12. Establishes key dates
throughout the life of a project
that must be met for the
project to finish on time.
13. Layered description of the
work with increasing detail in
each layer.
14. A graphic with boxes that
represent tasks and their
durations with connecting
arrows to indicate their
sequence relationships with
other tasks.
15. Sequence of activities through
the network that results in the
latest completion date of the
project.
16. Amount of time an activity can
be delayed from an early start
without delaying the
completion date.
17. Difference between the
estimated time and project
completion date (see float).
18. Accelerating the project
schedule.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 29
Figure 1.6
Early project decisions are based
on rough estimates.
© 2010 Jupiterimages
Corporation
techniques used to shorten the project schedule. During the life of the project,
scheduling conflicts often occur, and the project manager is responsible for
reducing these conflicts while maintaining project quality and meeting cost goals.
Project Costs
The definition of project success often includes completing the project within
budget. Developing and controlling a project budget that will accomplish the
project objectives is a critical project management skill. Although clients expect the
project to be executed efficiently, cost pressures vary on projects. On some projects,
the project completion or end date is the largest contributor to the project
complexity. The development of a new drug to address a critical health issue, the
production of a new product that will generate critical cash flow for a company, and
the competitive advantage for a company to be first in the marketplace with a new
technology are examples of projects with schedule pressures that override project
costs.
The accuracy of the project budget is related to the amount of information known
by the project team. In the early stages of the project, the amount of information
needed to develop a detailed budget is often missing. To address the lack of
information, the project team develops different levels of project budget estimates.
The conceptual estimate19
(or “ballpark estimate”) is developed with the least
amount of knowledge. The major input into the conceptual estimate is expert
knowledge or past experience. A project manager who has executed a similar
project in the past can use those costs to estimate the costs of the current project.
When more information is known, the project team can
develop a rough order of magnitude (ROM)20
estimate.
Additional information such as the approximate square
feet of a building, the production capacity of a plant,
and the approximate number of hours needed to
develop a software program can provide a basis for
providing a ROM estimate. After a project design is
more complete, a project detailed estimate can be
developed. When the project team knows the number of
rooms, the type of materials, and the building location
of a home, the project team can provide a detailed
estimate. A detailed estimate is not a bid.
The cost of the project is tracked relative to the
progress of the work and the estimate for accomplishing
that work. Based on the cost estimate, the cost of the
19. Initial cost estimate made with
partial knowledge. Also called a
ballpark estimate.
20. Cost estimate based on partial
knowledge and past experience
that is usually more accurate
than the initial conceptual
estimate.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 30
work performed is compared against the cost budgeted for that work. If the cost is
significantly higher or lower, the project team explores reasons for the difference
between expected costs and actual costs.
Project costs may deviate from the budget because the prices in the marketplace
were different from what was expected. For example, the estimated costs for
lumber on a housing project may be higher than budgeted or the hourly cost for
labor may be lower than budgeted. Project costs may also deviate based on project
performance. For example, the project team estimated that the steel design for a
bridge over the Hudson River would take 800 labor hours, but 846 hours were
actually expended. The project team captures the deviation between costs budgeted
for work and the actual cost for work, revises the estimate as needed, and takes
corrective action if the deviation appears to reflect a trend.
The project manager is responsible for assuring that the project team develops cost
estimates based on the best information available and revises those estimates as
new or better information becomes available. The project manager is also
responsible for tracking costs against the budget and conducting an analysis when
project costs deviate significantly from the project estimate. The project manager
then takes appropriate corrective action to assure that project performance
matches the revised project plan.
Project Quality
Project quality focuses on the end product or service deliverables that reflect the
purpose of the project. The project manager is responsible for developing a project
execution approach that provides for a clear understanding of the expected project
deliverables and the quality specifications. The project manager of a housing
construction project not only needs to understand which rooms in the house will be
carpeted but also what grade of carpet is needed. A room with a high volume of
traffic will need a high-grade carpet.
The project manager is responsible for developing a project quality plan that
defines the quality expectations and assures that the specifications and
expectations are met. Developing a good understanding of the project deliverables
through documenting specifications and expectations is critical to a good quality
plan. The processes for assuring that the specifications and expectations are met
are integrated into the project execution plan. Just as the project budget and
completion dates may change over the life of a project, the project specifications
may also change. Changes in quality specifications are typically managed in the
same process as cost or schedule changes. The impact of the changes is analyzed for
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 31
impact on cost and schedule, and with appropriate approvals, changes are made to
the project execution plan.
The Project Management Institute’s A Guide to the Project Management Body of
Knowledge (PMBOK Guide) has an extensive chapter on project quality management.
The material found in this chapter would be similar to material found in a good
operational management text. Although any of the quality management techniques
designed to make incremental improvement to work processes can be applied to a
project work process, the character of a project (unique and relatively short in
duration) makes small improvements less attractive on projects.
Rework on projects, as with manufacturing operations, increases the cost of the
product or service and often increases the time needed to complete the reworked
activities. Because of the duration constraints of a project, the development of the
appropriate skills, materials, and work process early in the project is critical to
project success. On more complex projects, time is allocated to developing a plan to
understand and develop the appropriate levels of skills and work processes.
Project management organizations that execute several similar types of projects
may find the process improvement tools useful in identifying and improving the
baseline processes used on their projects. Process improvement tools may also be
helpful in identifying cost and schedule improvement opportunities. Opportunities
for improvement must be found quickly to influence project performance. The
investment in time and resources to find improvements is greatest during the early
stages of the project, when the project is in the planning stages. During later project
stages, as pressures to meet project schedule goals increase, the culture of the
project is less conducive to making changes in work processes.
Another opportunity for applying process improvement tools is on projects that
have repetitive processes. A housing contractor that is building several identical
houses may benefit from evaluating work processes in the first few houses to
explore the opportunities available to improve the work processes. The investment
of $1,000 in a work process that saves $200 per house is a good investment as long
as the contractor is building more than five houses.
Project Team: Human Resources and Communications
Staffing the project with the right skills, at the right place, and at the right time is
an important responsibility of the project management team. The project usually
has two types of team members: functional managers and process managers. The
functional managers and team focus on the technology of the project. On a
construction project, the functional managers would include the engineering
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 32
Figure 1.7
manager and construction superintendents. On a training project, the functional
manager would include the professional trainers; on an information technology
project, the software development managers would be functional managers. The
project management team also includes project process managers. The project
controls team would include process managers who have expertise in estimating,
cost tracking, planning, and scheduling. The project manager needs functional and
process expertise to plan and execute a successful project.
Because projects are temporary, the staffing plan for a project typically reflects
both the long-term goals of skilled team members needed for the project and shortterm
commitment that reflects the nature of the project. Exact start and end dates
for team members are often negotiated to best meet the needs of individuals and
the project. The staffing plan is also determined by the different phases of the
project. Team members needed in the early or conceptual phases of the project are
often not needed during the later phases or project closeout phases. Team members
needed during the execution phase are often not needed during the conceptual or
closeout phases. Each phase has staffing requirements, and the staffing of a
complex project requires detailed planning to have the right skills, at the right
place, at the right time.
Typically a core project management team is dedicated to the project from start-up
to closeout. This core team would include members of the project management
team: project manager, project controls, project procurement, and key members of
the function management or experts in the technology of the project. Although
longer projects may experience more team turnover than shorter projects, it is
important on all projects to have team members who can provide continuity
through the project phases.
For example, on a large commercial building project,
the civil engineering team that designs the site work
where the building will be constructed would make
their largest contribution during the early phases of the
design. The civil engineering lead21
would bring on
different civil engineering specialties as they were
needed. As the civil engineering work is completed and
the structural engineering is well under way, a large
portion of the civil engineers would be released from
the project. The functional managers, the engineering
manager, and civil engineering lead would provide
expertise during the entire length of the project,
addressing technical questions that may arise and
addressing change requests.
21. Leader of a group.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 33
The core team is dedicated to the
project from start-up to closeout.
© 2010 Jupiterimages
Corporation
Project team members can be assigned to the project
from a number of different sources. The organization
that charters the project can assign talented managers
and staff from functional units within the organization,
contract with individuals or agencies to staff positions
on the project, temporarily hire staff for the project, or
use any combination of these staffing options. This
staffing approach allows the project manager to create
the project organizational culture. Some project
cultures are more structured and detail oriented, and some are less structured with
less formal roles and communication requirements. The type of culture the project
manager creates depends greatly on the type of project.
Communications
Completing a complex project successfully requires teamwork, and teamwork
requires good communication among team members. If those team members work
in the same building, they can arrange regular meetings, simply stop by each
other’s office space to get a quick answer, or even discuss a project informally at
other office functions. Many complex projects in today’s global economy involve
team members from widely separated locations, and the types of meetings that
work within the same building are not possible. Teams that use electronic methods
of communicating without face-to-face meetings are called virtual teams22
.
Communicating can be divided into two categories: synchronous23
and
asynchronous24
. If all the parties to the communication are taking part in the
exchange at the same time, the communication is synchronous. A telephone
conference call is an example of synchronous communication. When the
participants are not interacting at the same time, the communication is
asynchronous. The letter a at the beginning of the word means not.
Communications technologies require a variety of compatible devices, software,
and service providers, and communication with a global virtual team can involve
many different time zones. Establishing effective communications requires a
communications plan.
Project Risk
Risk exists on all projects. The role of the project management team is to
understand the kinds and levels of risks on the project and then to develop and
implement plans to mitigate these risks. Risk represents the likelihood that an
event will happen during the life of the project that will negatively affect the
achievement of project goals. The type and amount of risk varies by industry type,
complexity, and phase of the project. The project risk plan will also reflect the risk
22. Group that uses electronic
methods of communicating
without face-to-face meetings.
23. Communication between
parties at the same time.
24. Not synchronous;
communication between
parties does not take place at
the same time.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 34
Figure 1.8
A risk mitigation plan reduces
the impact of an unwanted event.
profile of the project manager and key stakeholders. People have different comfort
levels with risk, and some members of the project team will be more risk adverse
than others.
The first step in developing a risk management plan involves identifying potential
project risks. Some risks are easy to identify, such as the potential for a damaging
storm in the Caribbean, and some are less obvious. Many industries or companies
have risk checklists developed from past experience. The Construction Industry
Institute published a one-hundred-item risk checklistConstruction Industry
Institute Cost/Schedule Task Force, Management of Project Risks and Uncertainties
(Austin, TX: Construction Industry Institute, 1989). that provides examples and
areas of project risks. No risk checklist will include all potential risks. The value of a
checklist is the stimulation of discussion and thought about the potential risks on a
project.
The project team then analyzes the identified risks and estimates the likelihood of
the risks occurring. The team then estimates the potential impact of project goals if
the event does occur. The outcome from this process is a prioritized list of
estimated project risks with a value that represents the likelihood of occurrence
and the potential impact on the project.
The project team then develops a risk mitigation plan that reduces the likelihood of
an event occurring or reduces the impact on the project if the event does occur. The
risk management plan is integrated into the project execution plan, and mitigation
activities are assigned to the appropriate project team member. The likelihood that
all the potential events identified in the risk analysis would occur is extremely rare.
The likelihood that one or more events will happen is high.
The project risk plan reflects the risk profile of the
project and balances the investment of the mitigation
against the benefit for the project. One of the more
common risk mitigation approaches is the use of
contingency. Contingency is funds set aside by the
project team to address unforeseen events. Projects
with a high-risk profile will typically have a large
contingency budget. If the team knows which activities
have the highest risk, contingency can be allocated to
activities with the highest risk. When risks are less
identifiable to specific activities, contingency is
identified in a separate line item. The plan includes
periodic risk plan reviews during the life of the project.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 35
© 2010 Jupiterimages
Corporation
Figure 1.9
The risk review evaluates the effectiveness of the
current plan and explores for possible risks not
identified in earlier sessions.
Project Procurement
The procurement effort on projects varies widely and depends on the type of
project. Often the client organization will provide procurement services on less
complex projects. In this case, the project team identifies the materials, equipment,
and supplies needed by the project and provides product specifications and a
detailed delivery schedule. When the procurement department of the parent
organization provides procurement services, a liaison from the project can help the
procurement team better understand the unique requirements of the project and
the time-sensitive or critical items of the project schedule.
On larger, more complex projects, personnel are dedicated to procuring and
managing the equipment, supplies, and materials needed by the project. Because of
the temporary nature of projects, equipment, supplies, and materials are procured
as part of the product of the project or for the execution of the project. For
example, the bricks procured for a construction project would be procured for the
product of the project, and the mortar mixer would be equipment procured for the
execution of the project work. At the end of the project, equipment bought or
rented for the execution of the work of the project are sold, returned to rental
organizations, or disposed of some other way.
More complex projects will typically procure through
different procurement and management methods.
Commodities25
are common products that are
purchased based on the lowest bid. Commodities include
items like concrete for building projects, office supplies,
or even lab equipment for a research project. The
second type of procurement includes products that are
specified for the project. Vendors26
who can produce
these products bid for a contract. The awarding of a
contract can include price, ability to meet the project
schedule, the fit for purpose of the product, and other
considerations important to the project. Manufacturing
a furnace for a new steel mill would be provided by a
project vendor. Equipment especially designed and built
for a research project is another example. These
vendors’ performances become important parts of the
project, and the project manager assigns resources to
coordinate the work and schedule of the vendor. The
25. Items that can be bought off
the shelf with no special
modification for the project.
26. Company that designs goods or
services to meet specified
needs.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 36
Procurement is obtaining the
materials, equipment, and
services needed for the project.
© Thinkstock
third procurement approach is the development of one
or more partners. A design firm that is awarded the
design contract for a major part of the steel mill and a
research firm that is conducting critical subparts of the
research are examples of potential project partners. A
partner contributes to and is integrated into the
execution plan. Partners perform best when they share
the project vision of success and are emotionally
invested in the project. The project management team
builds and implements a project procurement plan that recognizes the most
efficient and effective procurement approach to support the project schedule and
goals.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 37
KEY TAKEAWAYS
• During the start-up phase, the project leader develops the project
infrastructure used to design and execute the project. A team is formed
to create agreement among project stakeholders on the goals, cost, and
completion date. Plans for executing the project, managing the schedule
and quality, and controlling the budget are created.
• The scope statement establishes project parameters that define what
will be done.
• The project schedule begins with a milestone schedule followed by a
WBS and a project diagram. The longest path through the project
diagram is the critical path, and the difference between the completion
of the critical path and the project finish date is the float. Shortening
the critical path is called crashing the project.
• Cost estimating begins with a conceptual or ballpark estimate that is
followed by a ROM estimate. A project budget is determined from the
cost of the tasks in the WBS. Costs are monitored during the project and
estimates updated if the costs vary from expectations.
• Project quality begins with the specifications of materials and labor. A
quality plan creates a process for assuring the requirements and
specifications of the project are met. Quality improvement tools can be
applied to projects if the company has several similar projects.
• Team members are selected to manage functions and processes. The
staffing plan assigns people as needed. Sources of team members are
company employees, contractors, new hires, and partners.
• The risk on a project reflects the number of things that can possibly
happen that will have a negative effect on the project and the
probability of those events happening.
• The provider of procurement management depends on the size of the
project and the organization. Commodities are purchased from the
lowest bidder, while specialty items are purchased from bids or from
partners.
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 38
EXERCISES
1. During the start-up phase, the first estimate of the cost of the project is
called the __________ or ballpark estimate.
2. Shortening the schedule to meet the project completion date is called
___________the schedule.
3. Why would it be important to get the stakeholders in a project to
actually sign the scope statement?
4. What is the difference between a milestone schedule and a work
breakdown schedule?
Areas of Knowledge
Write one or two sentences in which you describe each area of project
management knowledge—as defined by the Project Management Institute.
1. Start-up
2. Scope
3. Time
4. Cost
5. Quality
6. Team selection (human resources)
7. Communications
8. Risk
9. Procurement
Chapter 1 Introduction to Project Management
1.5 Introduction to the Project Management Knowledge Areas 39
1.6 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. If you were planning to change the landscaping around the location
where you or a friend lives and decided to approach it like a project,
describe the start-up activities you would use. Refer to the elements of a
project start-up as described in this chapter.
2. Describe a project you have worked on where you experienced scope
creep. Begin by defining scope creep in your own words. Describe the
project, how the scope creep occurred, and the effect it had on the
project cost, quality, and completion date.
Chapter 1 Introduction to Project Management
40
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Client satisfaction. Should the project manager go beyond the written
requirements in the project scope statement to satisfy the client? Does
the answer to this question depend on the role of the project in the
organization? For example, does it matter if the organization is a
consulting firm that sells project management or if the project is done
for another department in the same organization? Form an opinion on
this topic, and write a few paragraphs on it to organize your thoughts on
the subject. Be prepared to share your thoughts with classmates. Submit
the work as directed by your instructor.
2. Organizational priorities. Consider that three different organizations are
planning to construct a building for their own use. The organizations
are a for-profit company, a religious group, and a local school district.
Choose three project knowledge areas, and consider how the project
might be affected in each of these areas by the different types of
organizations behind the project. Write a few paragraphs on this topic
to organize your thoughts on the subject, and be prepared to share your
thoughts with classmates. Submit the work as directed by your
instructor.
Chapter 1 Introduction to Project Management
1.6 Exercises 41
1.7 Web Exercise
LEARNING OBJECTIVE
1. Find pronunciation of terms using an online dictionary.
Use an Online Audio Pronunciation Aid
One of the problems with learning a new vocabulary in an online class is that you do
not get to hear the instructor pronounce the terms. If the pronunciation is not
obvious from the spelling, it can be embarrassing if you say the word incorrectly.
Fortunately, several online dictionaries have features that say the word. You must
have speakers or headphones attached to the computer, and they must be enabled.
How to Use an Online Audio Pronunciation Aid
1. Obtain speakers or headphones and plug them into the audio output
jack on your computer. The location of this jack on computers varies
greatly, but it is usually green as shown in Figure 1.10 "Audio Output
Ports on Three Computers".
Figure 1.10 Audio Output Ports on Three Computers
2. Enable the speaker output. In Windows computers, look for a speaker
icon in the lower right corner of the screen. If the speakers/headphone
jack is turned off, it will have the universal symbol for “No” on it. If
that is the case, double-click the icon and remove the check mark next
to Mute to enable the speaker output. The icon displays without the
“No” symbol.
3. Use your web browser to go to http://www.thefreedictionary.com.
4. In the Search box, type synchronous and then click the Search button.
5. The term is displayed with a phonetic spelling and a speaker icon, as
shown in Figure 1.11 "Pronunciation Option in an Online Dictionary".
Chapter 1 Introduction to Project Management
42
Figure 1.11 Pronunciation
Option in an Online
Dictionary
Source:
www.thefreedictionary.com.
6. To the right of the word, click the speaker icon. You should be able to
hear the pronunciation through the speakers or headphones.
7. Capture a screen that shows the dictionary definition of synchronous
and then paste it into a word processing document.
8. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name N/A
Used an
online
audio aid
to learn to
pronounce
terms
correctly
Used a browser to
open an online
dictionary that
has an audio
feature for
pronouncing
terms that is
indicated by an
icon
Same as
Best
Choice of a
website that
does not include
audio
pronunciations
or has an
inability to
activate the
audio output
9. Submit evidence of completion as directed by the instructor.
Chapter 1 Introduction to Project Management
1.7 Web Exercise 43
1.8 Software and Technology Exercises
LEARNING OBJECTIVES
1. Download software from an Internet site and install it on a computer.
2. Capture a computer screen and paste it into a word processing
document.
3. Create a folder of project management web addresses in a web browser.
Download and Install Adobe Reader
There are many programs that are useful for project managers that can be
downloaded from a website. Some of them are free while others are trial versions or
are available for a license fee. To download and install software on a computer, you
must have administrative rights on that computer. If you are trying to use a
computer at a company for your homework in this class, you probably do not have
administrative rights to install software. You need to use a private computer on
which you can log in as the administrator or as a user with rights to install
software.
Alternatively, in some campus computer labs you are allowed to install software,
but the computer is refreshed to its original configuration when the machine is
restarted. If you use a computer in a common lab, be sure to complete the
assignment before the machine is restarted.
In this exercise, you download and install Adobe Reader. This program allows you to
read files that are saved in the PDF format. This format is very popular because it
allows distribution of documents that may be easily viewed but not changed.
How to Download and Install Adobe Reader
1. Using a web browser, go to http://www.adobe.com/reader. The Adobe
home page displays as shown in Figure 1.12 "Adobe Reader Download
Page".
Chapter 1 Introduction to Project Management
44
Figure 1.12 Adobe Reader Download Page
Source: Adobe product screenshot reprinted with permission from Adobe Systems Incorporated.
2. Click the check boxes next to optional features, such as virus scans or
toolbars, to deselect them and then click Download now.
3. Follow the directions on the screen to install Adobe Reader.
4. When the installation process is complete, the program is added to the
list of available programs on your computer. It will start automatically
whenever you try to open a file that is saved using the PDF file format.
5. From the list of programs on your computer start Adobe Reader to
confirm that it is successfully installed, as shown in Figure 1.13 "Adobe
Reader Installed".
Figure 1.13 Adobe Reader Installed
Source: Adobe product screenshot reprinted with permission from Adobe Systems Incorporated.
6. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name N/A
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 45
Element Best Adequate Poor
Downloaded
software from
an Internet site
and installed it
on a computer
Program is
installed
and
functioning
Same as
Best
Did not allow time
to find a computer
on which software
could be installed;
process failed
7. Submit evidence of completion as directed by the instructor.
Download and Install Google Earth
There are many programs that are useful for project managers that can be
downloaded from a website. Some of them are free while others are trial versions or
are available for a license fee. To download and install software on a computer, you
must have administrative rights on that computer. If you are trying to use a
computer at a company for your homework in this class, you probably do not have
administrative rights to install software. You need to use a private computer on
which you can log in as the administrator or as a user with rights to install
software.
Alternatively, in some campus computer labs you are allowed to install software,
but the computer is refreshed to its original configuration when the machine is
restarted. If you use a computer in a common lab, be sure to complete the
assignment before the machine is restarted.
In this exercise, you download and install Google Earth. This program provides
information that would be valuable to a project manager who needs to consider the
implications of the location of a project.
How to Download and Install Google Earth
1. Using a web browser, go to http://earth.google.com. The Google Earth
home page displays as shown in Figure 1.14 "Google Earth Home Page".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 46
Figure 1.14 Google Earth Home Page
© Google
2. Click the Download Google Earth button.
3. Scroll through and review the Terms of Service. See Figure 1.15 "Terms
of Service".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 47
Figure 1.15 Terms of Service
© Google
4. Click the Agree and Download button if you agree to abide by the
terms. If not, contact your instructor for an alternative assignment.
5. Choose a folder into which the file will be downloaded. The default
choice in Windows is usually the Downloads folder in My Documents.
Make note of where the file will be placed so you can find it in the next
step.
The file that is downloaded is a program that can be executed by
clicking the file name. It is an installation program that manages the
rest of the download and installation process. In some browsers, the
option to click the file name is available from the browser window, and
in others, you must use a file management program like Windows
Explorer to find the file and then double-click the file name. This
process is typical of most programs that you download and install.
6. Click or double-click the file name to start the installation. A security
warning box may display seeking your permission to install a program,
as shown in Figure 1.16 "Permission to Run the Installation Program".
Only programs from trusted sites should be installed.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 48
Figure 1.16 Permission to Run the Installation Program
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
7. Click the Run button. The program will contact the Google Earth
website and begin the process of downloading the main part of the
program. A window with a progress bar displays to indicate how much
of the file has been successfully transferred, as shown in Figure 1.17
"Progress Bar".
Figure 1.17 Progress Bar
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
8. When the installation process is complete, the program starts. Any
location on earth may be entered, and a satellite image with a variety
of accompanying information is displayed, as shown in Figure 1.18
"Google Earth Installed".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 49
Figure 1.18 Google Earth Installed
© Google
9. Enter a location of your choice in the Fly to box and then press Enter.
10. Capture the screen and then paste it into a word processing document.
11. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name N/A
Downloaded
software from
an Internet site
and installed it
on a computer
Program is
installed
and
functioning
Same as
Best
Did not allow time
to find a computer
on which software
could be installed;
process failed
12. Submit evidence of completion as directed by the instructor.
Capture a Screen Using Windows XP and the Print Screen Button
The operating system of your computer manages the display on the monitor or
screen. The operating system can make a copy of the screen and save it to disk or to
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 50
the clipboard—a temporary storage area—and then the image of the screen can be
pasted into a word processing document. The document can be saved and then
attached to an e-mail or otherwise sent to team members. This skill might be used
to illustrate a computer problem, illustrate a point, or prove that you have followed
directions properly.
How to Capture a Screen Using Windows XP and the Print Screen Button
1. Open a blank document in your word processing program.
2. Save the file to a folder of your choice, such as Ch01StudentName, where
you use your name without spaces in place of StudentName. Save the
file as a Word 97–2003 file type. Your display may show the .doc file
extension that is characteristic of the file type if it is set to display file
extensions. See Figure 1.19 "File Name in Save As Dialog Box".
Figure 1.19 File Name in Save As Dialog Box
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. In the first line of the document, type Chapter 1 Exercises by StudentName
where you replace StudentName with your name. Press the Enter key to
move the insertion point to the next line, as shown in Figure 1.20
"Document with Insertion Point on Second Line".
Figure 1.20 Document with Insertion Point on Second Line
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. Leave this document open. Start a web browser. Use the browser to go
to http://maps.google.com. The Google Maps page displays.
5. On the keyboard, find the PrntScrn button. This is the Print Screen
button. (Some laptop computers do not have a PrntScrn button. If you
have a laptop with Windows XP and no PrntScrn button, use a search
engine like Google to find a free screen capture software like
ScreenHunter, and then install it.)
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 51
6. Press the PrntScrn button. An image of the screen is saved in a
temporary memory area called the Windows clipboard.
7. Switch to the word processing document. Click below the first line of
text. Hold the Control (CTRL) key and then press the V key to paste the
image from the clipboard.
8. Press the Enter key twice to create a new empty line below the image.
See Figure 1.21 "Capture of the Google Maps Screen with Insertion
Point below the Image".
Figure 1.21 Capture of the Google Maps Screen with Insertion Point below the Image
© Google
9. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name
Ch01StudentName
in the Word 2003
format where
StudentName is
Same as
Best
Different
file name
than
specified
without the
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 52
Element Best Adequate Poor
replaced by your
name
student’s
name
Download
software
from an
Internet site
and install it
on a
computer
Title; screen
capture of the
Google Maps site;
insertion point
below the image
Title plus
screen
capture;
insertion
point on
same line as
image
Missing
title
10. Save the file and submit it as directed by the instructor.
Capture a Screen Using Windows Vista or Windows 7
The operating system of your computer manages the display on the monitor or
screen. The operating system can make a copy of the screen and save it to disk or to
the clipboard—a temporary storage area—and then the image of the screen can be
pasted into a word processing document. The document can be saved and then
attached to an e-mail or otherwise sent to team members. This skill might be used
to illustrate a computer problem, illustrate a point, or prove that you have followed
directions properly.
How to Capture a Screen Using Vista or Windows 7 and the Snipping Tool
1. Open a blank document in your word processing program.
2. Save the file to a folder of your choice, such as Ch01StudentName where
you use your name in place of StudentName. Save the file as a Word
97–2003 file type. Your display may show the .doc file extension that is
characteristic of the file type if it is set to display file extensions. See
Figure 1.19 "File Name in Save As Dialog Box".
3. In the first line of the document, type Chapter 1 Exercises by StudentName
where you replace StudentName with your name. Press the Enter key to
move the insertion point to the next line, as shown in Figure 1.20
"Document with Insertion Point on Second Line".
4. Leave this document open. Start a web browser. Use the browser to go
to http://maps.google.com. The Google Maps page displays.
5. Click the Windows Start button to display a menu of options.
6. On the menu of options, click All Programs.
7. On the menu of programs, click the Accessories folder.
8. On the menu of accessories, click Snipping Tool.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 53
9. In the Snipping Tool, click the New Snip button arrow and then click
Window Snip.
10. Click anywhere on the screen. In the Snipping Tool dialog box, on the
toolbar, click the Copy button.
11. Switch to the word processing document. Click below the first line of
text. Hold the CTRL key, and then press the V key to paste the image
from the clipboard.
12. Press the Enter key twice to create a new empty line below the image.
See Figure 1.21 "Capture of the Google Maps Screen with Insertion
Point below the Image".
13. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name
Ch01StudentName
in the Word 2003
format where
StudentName is
replaced by your
name
Same as
Best
Different
file name
than
specified
without the
student’s
name
Capture a
computer
screen and
paste it into a
word
processing
document
Title; screen
capture of the
Google Maps site;
insertion point
below the image
Title plus
screen
capture;
insertion
point on
same line as
image
Missing
title
14. Save the file and submit it as directed by the instructor.
Capture a Screen Using OSX on a Mac
The operating system of your computer manages the display on the monitor or
screen. The operating system can make a copy of the screen and save it to disk or to
the clipboard—a temporary storage area—and then the image of the screen can be
pasted into a word processing document. The document can be saved and then
attached to an e-mail or otherwise sent to team members. This skill might be used
to illustrate a computer problem, illustrate a point, or prove that you have followed
directions properly.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 54
How to Capture a Screen Using OSX on a Mac
1. Open a blank document in your word processing program.
2. Save the file to a folder of your choice, such as Ch01StudentName where
you use your name in place of StudentName. Save the file as a Word
97–2003 file type. Your display may show the .doc file extension that is
characteristic of the file type if it is set to display file extensions. See
Figure 1.19 "File Name in Save As Dialog Box".
3. In the first line of the document, type Chapter 1 Exercises by StudentName
where you replace StudentName with your name. Press the Enter key to
move the insertion point to the next line, as shown in Figure 1.20
"Document with Insertion Point on Second Line".
4. On the keyboard, press Command + Control + Shift + 3. An image of the
screen is saved in the clipboard.
5. Switch to the word processing document. Click below the first line of
text. Hold the CTRL key, and then press the V key to paste the image
from the clipboard.
6. Press the Enter key twice to create a new empty line below the image.
See Figure 1.21 "Capture of the Google Maps Screen with Insertion
Point below the Image".
7. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name
Ch01StudentName
in the Word 2003
format where
StudentName is
replaced by your
name
Same as
Best
Different
file name
than
specified
without the
student’s
name
Capture a
computer
screen and
paste it into a
word
processing
document
Title; screen
capture of the
Google Maps site;
insertion point
below the image
Title plus
screen
capture;
insertion
point on
same line as
image
Missing
title
8. Save the file and submit it as directed by the instructor.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 55
Create a Folder of Bookmarks in a Web Browser in Chrome
You will visit sites that contain supporting information and useful templates. To
save the addresses of these sites, you can create in a folder named Project
Management in your web browser.
How to Create a Folder of Bookmarks in Google Chrome
1. Open your web browser program. In the address box, type
http://maps.google.com and then press Enter. The Google Maps home
page displays as shown in Figure 1.22 "Google Maps Home Page".
Figure 1.22 Google Maps Home Page
© Google
2. On the toolbar, click the Bookmarks button. The Bookmark Added
dialog box displays.This assumes that you have not previously added
this site as a bookmark. The default location for the bookmark is the
Bookmarks bar, which is a toolbar that contains links to the websites. It
is also a folder.
3. In the Bookmark dialog box, click the Close button. The web address
for http://maps.google.com is placed in the Bookmarks bar folder and
is available for display on the toolbar.
4. On your keyboard, at the lower left, locate the Control (CTRL) key.
Press and hold the CTRL key, and then on the keyboard press B.In the
future, this sequence of holding the Control key and pressing another
key will be written with a plus sign (e.g., Ctrl + B). The Bookmark
toolbar displays, as shown in Figure 1.23 "Chrome Bookmarks Bar".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 56
Figure 1.23 Chrome Bookmarks Bar
© Google
5. On the toolbar above the Bookmarks bar, click the Tools button. On the
menu, click Bookmark Manager. The Bookmark Manager dialog box
displays, as shown in Figure 1.24 "Chrome Bookmark Manager Dialog
Box".
Figure 1.24 Chrome Bookmark Manager Dialog Box
© Google
6. In the Bookmark Manager dialog box, on the toolbar, on the Organize
button, click the small arrow.This is an example of Microsoft syntax. In
the future, the process of clicking the arrow on a button will be
shortened (e.g., click the Organize arrow). In the menu, click New Folder.
The New Folder dialog box displays.
7. In the New Folder dialog box, in the Name box, type Project Management
and then click OK. The Project Management folder is added to the
Bookmarks bar as shown in Figure 1.25 "Folder Added to the
Bookmarks Bar".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 57
Figure 1.25 Folder Added to the Bookmarks Bar
© Google
8. On the toolbar, click the Tools button. On the menu, click Bookmark
manager. The Bookmark manager dialog box displays, as shown in
Figure 1.26 "Managing Bookmarks".
Figure 1.26 Managing Bookmarks
© Google
9. Move the mouse pointer onto Google Maps. Press and hold the left
mouse button and move the mouse to move the pointer on the screen
to the Project Management folder in either pane of the dialog box.In
the future, description of this type of process will be shortened (e.g.,
drag Google Maps to the Project Management folder). The link is moved into
the Project Management folder.
10. In the Bookmark Manager dialog box, in the left pane, click the Project
Management folder. The link to Google Maps is displayed in the right
pane to indicate that it is now in the Project Management folder. The
link to Google Maps displays in the pane to the right, as shown in
Figure 1.27 "Link Placed in the Project Management Folder".
Figure 1.27 Link Placed in the Project Management Folder
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 58
© Google
11. Use the skills you practiced previously to capture an image of this
dialog box and then paste it into Ch01StudentName.doc.
12. In the Bookmark Manager dialog box, in the upper right corner, click
the close button.In the future, description of this process will be
shortened (e.g., close the dialog box). Close the Chrome web browser.
13. Start the Chrome browser again. On the Bookmarks bar, click the
Project Management folder. The link to Google Maps is displays under
the Project Management folder on the Bookmarks bar, as shown in
Figure 1.28 "Project Management Folder on the Chrome Bookmarks
Bar".
Figure 1.28 Project Management Folder on the Chrome Bookmarks Bar
© Google
14. Click the link to Google Maps. The Google Maps home page displays.
Close the browser.
15. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch01StudentName.doc
Same
name
using
.docx
format
Does not
include
student
name in file
name
Create a
folder of
project
management
web
addresses in
Folder named Project
Management on the
Bookmarks toolbar
with a working link to
Google Maps
Same as
Best
Project
Management
folder
without a
working link
to Google
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 59
Element Best Adequate Poor
a web
browser
Maps or just
a link to
Google Maps
as one of the
Favorites
but not in a
folder
16. Submit evidence of completion as directed by the instructor.
Create a Folder of Bookmarks in a Web Browser in Firefox 3
You will visit sites that contain supporting information and useful templates. To
save the addresses of these sites, you can create a folder named Project Management
in your web browser.
How to Create a Folder of Bookmarks in Mozilla Firefox 3
1. Open your web browser program. In the address box, type
http://maps.google.com and then press Enter. The Google Maps home
page displays as shown in Figure 1.29 "Firefox 3 Browser".
Figure 1.29 Firefox 3 Browser
© Google
2. On the toolbar, click the Bookmarks button. The Edit This Bookmark
dialog box displaysThis assumes that you have not previously added
this site as a bookmark. as shown in Figure 1.30 "Bookmark Dialog Box
in Firefox". The default location for the bookmark is the Unsorted
Bookmarks.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 60
Figure 1.30 Bookmark Dialog Box in Firefox
© Google
3. In the Edit This Bookmark dialog box, click the Done button. The web
address for http://maps.google.com is placed in the list of unsorted
bookmarks, and the Bookmarks toolbar displays, as shown in Figure
1.31 "Firefox Bookmarks Bar".
Figure 1.31 Firefox Bookmarks Bar
© Google
4. On the Menu bar, click Bookmarks. On the menu, click Organize
Bookmarks. The Library dialog box displays, as shown in Figure 1.32
"Library of Bookmarks in Firefox".
Figure 1.32 Library of Bookmarks in Firefox
© Google
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 61
5. In the Library dialog box, in the left pane, click Bookmarks Toolbar. On
the Library dialog box, on the toolbar, click Organize. On the menu,
click New Folder. The Add Folder dialog box displays.
6. In the Add Folder dialog box, in the Name box, type Project Management
as shown in Figure 1.33 "Folder Added to the Bookmarks Bar".
Figure 1.33 Folder Added to the Bookmarks Bar
© Google
7. In the Add Folder dialog box, click the Add button. The new folder is
added to the Bookmarks toolbar.
8. In the Library dialog box, in the left pane, click the arrow to the left of
Bookmarks Toolbar to show its subfolders. The Project Management
folder displays as a subfolder.
9. In the Library dialog box, in the left pane, click Unsorted Bookmarks to
show its bookmarks. Locate the link to Google Maps, as shown in Figure
1.34 "Managing Bookmarks".
Figure 1.34 Managing Bookmarks
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 62
© Google
10. Move the mouse pointer onto Google Maps. Press and hold the left
mouse button and move the mouse to move the pointer on the screen
to the Project Management folder in the left pane of the dialog box.In
the future, description of this type of process will be shortened (e.g.,
drag Google Maps to the Project Management folder). The link is moved into
the Project Management folder.
11. In the Library dialog box, in the left pane, click the Project
Management folder. The link to Google Maps is displayed in the right
pane to indicate that it is now in the Project Management folder, as
shown in Figure 1.35 "Link Placed in the Project Management Folder".
Figure 1.35 Link Placed in the Project Management Folder
© Google
12. In the Library dialog box, in the upper right corner, click the Close
button.In the future, description of this process will be shortened (e.g.,
close the dialog box). Close the Firefox web browser.
13. Start the Firefox browser again. On the Bookmarks bar, click the
Project Management folder. The link to Google Maps displays under
the Project Management folder on the Bookmarks bar, as shown in
Figure 1.36 "Project Management Folder on the Bookmarks Bar".
Figure 1.36 Project Management Folder on the Bookmarks Bar
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 63
© Google
14. Capture this screen and paste it into a blank word processing
document. Save the document as Ch01StudentName.doc
15. In the browser, click the link in the Project Management folder to
Google Maps. The Google Maps home page displays. Close the browser.
16. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name N/A
Create a
folder of
project
management
web
addresses in
a web
browser
Folder
named
Project
Management
on the
Bookmarks
toolbar with
a working
link to
Google Maps
Same as
Best
Project
Management folder
without a working
link to Google Maps
or just a link to
Google Maps as one
of the Favorites but
not in a folder
17. Submit evidence of completion as directed by the instructor.
Create a Folder of Bookmarks in a Web Browser in
Internet Explorer 8
You will visit sites that contain supporting information and useful templates. To
save the addresses of these sites, you can create a folder named Project Management
in your web browser.
How to Create a Folder of Favorites in Internet Explorer 8
1. Open your web browser program. In the address box, type
http://maps.google.com and then press Enter. The Google Maps home
page displays as shown in Figure 1.37 "Google Maps Home Page".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 64
Figure 1.37 Google Maps Home Page
Useful website to store in a Favorites folder.
© Google
2. On the toolbar, click the Favorites button. The Add to Favorites menu
displays as shown in Figure 1.38 "Add to Favorites Menu".
Figure 1.38 Add to Favorites Menu
© Google
3. To the right of Add to Favorites, click the arrow.In the future, arrows
associated with buttons will be referred to with the button name (e.g.,
click the Add to Favorites button). On the menu, click Add to Favorites bar.
Click outside the menu to close it. The web address for
maps.google.com is placed in the Favorites toolbar and the toolbar is
displayed, as shown in Figure 1.39 "Internet Explorer Favorites
Toolbar".
Figure 1.39 Internet Explorer Favorites Toolbar
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 65
4. On the Favorites toolbar, click the Favorites button. On the menu, click
the Add to Favorites arrow. On the menu, click Organize Favorites. The
Organize Favorites dialog box displays, as shown in Figure 1.40
"Internet Explorer Favorites Dialog Box". Your favorites and folders
will be different from those shown.
Figure 1.40 Internet Explorer Favorites Dialog Box
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
5. In the Organize Favorites dialog box, click the New Folder button. A
new folder is added with the default name—New Folder—selected and
ready to be replaced.
6. Type Project Management and then press Enter. The Project
Management folder is added at the bottom of the list of favorite links
and folders, as shown in Figure 1.41 "Folder Added to the List of
Favorites".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 66
Figure 1.41 Folder Added to the List of Favorites
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
7. Locate the Favorites Bar folder on the list of favorites. Drag the Project
Management folder onto the Favorites Bar folder and release the
mouse button. The Project Management folder is a subfolder of the
Favorites Bar, as shown in Figure 1.42 "Project Management Folder
Moved into the Favorites Bar Folder".
Figure 1.42 Project Management Folder Moved into the Favorites Bar Folder
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
8. In the Organize Favorites dialog box, drag the Google Maps link onto
the Project Management folder. The link to Google Maps is placed in
the Project Management folder.
9. Click the Project Management folder. The Google Maps link displays in
the Project Management folder, as shown in Figure 1.43 "Google Maps
Link in the Project Management Subfolder".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 67
Figure 1.43 Google Maps Link in the Project Management Subfolder
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
10. In the Bookmark Manager dialog box, click the Close button. Close the
web browser.
11. Start the Internet Explorer browser again. On the Favorites toolbar,
click the Project Management folder. The link to Google Maps displays
under the Project Management folder on the Bookmarks bar, as shown
in Figure 1.44 "Project Management Folder on the Internet Explorer
Bookmarks Bar".
Figure 1.44 Project Management Folder on the Internet Explorer Bookmarks Bar
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
12. Capture this screen and paste it into Ch01StudentName.doc.
13. In the browser, click the link to Google Maps. The Google Maps home
page displays. Close the browser.
14. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch01StudentName.doc
.docx
format
Student
name not in
file name
Create a
folder of
project
management
web
addresses in
Folder named Project
Management on the
Favorites toolbar with
a working link to
Google Maps
Same as
Best
Project
Management
folder
without a
working link
to Google
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 68
Element Best Adequate Poor
a web
browser
Maps or just
a link to
Google Maps
as one of the
Favorites
but not in a
folder
15. Submit evidence of completion as directed by the instructor.
Create a Folder of Bookmarks in a Web Browser in
Internet Explorer 9
You will visit sites that contain supporting information and useful templates. To
save the addresses of these sites, you can create a folder named Project Management
in your web browser.
How to Create a Folder of Favorites in Internet Explorer 9
1. Open your web browser program. In the address box, type
http://maps.google.com and then press Enter. The Google Maps home
page displays as shown in Figure 1.45 "Google Maps Home Page".
Figure 1.45 Google Maps Home Page
Useful website to store in a Favorites folder.
© Google
2. On the toolbar, click the View Favorites button, and then click the Add
to Favorites button. The Add a Favorite dialog box displays as shown in
Figure 1.46 "Add a Favorite Dialog Box".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 69
Figure 1.46 Add a Favorite Dialog Box
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. Click the New Folder button. In the Create a Folder dialog box, in the
Folder Name box, type Project Management. Confirm that Favorites is
chosen in the Create in box, as shown in Figure 1.47 "Create a New
Folder".
Figure 1.47 Create a New Folder
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. Click the Create button.
5. In the Add a Favorite dialog box, observe that the new folder displays
in the Create in box, as shown in Figure 1.48 "Internet Explorer Add a
Favorite Dialog Box".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 70
Figure 1.48 Internet Explorer Add a Favorite Dialog Box
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. Click the Add button.
7. Click the View Favorites button. Click the Favorites tab, if necessary.
Scroll to the new Project Management folder and then click it. The link
to Google Maps is stored within the Project Management folder, as
shown in Figure 1.49 "Google Maps Link in the Project Management
Folder".
Figure 1.49 Google Maps Link in the Project Management Folder
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
8. In the Bookmark Manager dialog box, click the Close button. Close the
web browser.
9. Capture this screen and paste it into Ch01StudentName.doc.
10. In the browser, click the link to Google Maps. The Google Maps home
page displays. Close the browser.
11. Review your work and use the following rubric to determine its
adequacy:
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 71
Element Best Adequate Poor
File name Ch01StudentName.doc
.docx
format
StudentName
not in file
name
Create a
folder of
project
management
web
addresses in
a web
browser
Folder named Project
Management on the
Favorites toolbar with
a working link to
Google Maps
Same as
Best
Project
Management
folder
without a
working link
to Google
Maps or just
a link to
Google Maps
as one of the
Favorites but
not in a
folder
12. Submit evidence of completion as directed by the instructor.
Create a Folder of Bookmarks in a Web Browser in Safari
You will visit sites that contain supporting information and useful templates. To
save the addresses of these sites, you can create a folder named Project Management
in your web browser.
How to Create a Folder of Bookmarks in Apple Safari
1. Open your web browser program. In the address box, type
http://maps.google.com and then press Enter. The Google Maps home
page displays as shown in Figure 1.50 "Safari Browser".
Figure 1.50 Safari Browser
© Safari
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 72
2. On the toolbar, click the Bookmarks button. A dialog box displaysThis
assumes that you have not previously added this site as a bookmark. as
shown in Figure 1.51 "Dialog Box in Safari". The default location for the
bookmark is the Bookmarks bar.
Figure 1.51 Dialog Box in Safari
© Google and © Safari
3. In the dialog box, click the Add button. The web address for
http://maps.google.com is placed on the Bookmarks toolbar, as shown
in Figure 1.52 "Safari Bookmarks Bar".
Figure 1.52 Safari Bookmarks Bar
© Safari
4. On the Menu bar, click Bookmarks. On the menu, click Add Bookmarks
Folder. The Bookmarks dialog box displays, as shown in Figure 1.53
"New Folder".
Figure 1.53 New Folder
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 73
© Safari
5. In the Bookmarks dialog box, with untitled folder selected, type Project
Management as shown in Figure 1.54 "Folder Added to the Bookmarks
Bar".
Figure 1.54 Folder Added to the Bookmarks Bar
© Safari
6. In the Bookmarks dialog box, in the Collections pane, click Bookmarks
Bar to display its contents. The Google Maps link displays in the right
pane.
7. Move the mouse pointer onto Google Maps. Drag the Google Maps link
onto the Project Management folder. The link is moved into the Project
Management folder.
8. In the Bookmarks dialog box, in the left pane, click the Project
Management folder. The link to Google Maps is displayed in the right
pane to indicate that it is now in the Project Management folder, as
shown in Figure 1.55 "Link Placed in Project Management Folder".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 74
Figure 1.55 Link Placed in Project Management Folder
© Safari
9. Use the skills you practiced previously to capture an image of this
dialog box. If necessary, open Ch01StudentName.doc. Paste the screen
capture below the previous screen. Save the file and leave it open.
10. From the Collections pane, drag the Project Management folder onto
the Bookmarks toolbar. The Project Management folder is added to the
Bookmarks toolbar, as shown in Figure 1.56 "Project Management
Folder on Bookmarks Toolbar".
Figure 1.56 Project Management Folder on Bookmarks Toolbar
© Safari
11. In the Bookmarks dialog box, in the upper left corner, click the close
button.In the future, description of this process will be shortened (e.g.,
close the dialog box). Close the Safari web browser.
12. Start the Safari browser again. On the Bookmarks bar, click the Project
Management folder. The link to Google Maps displays under the
Project Management folder on the Bookmarks bar, as shown in Figure
1.57 "Project Management Folder on Bookmarks Toolbar".
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 75
Figure 1.57 Project Management Folder on Bookmarks Toolbar
© Safari
13. Capture this screen and paste it into a blank word processing
document. Save the document as Ch01StudentName.doc.
14. In the browser, click the link to Google Maps. The Google Maps home
page displays. Close the browser.
15. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch01StudentName.doc
Same as
Best
Other word
processing
program
format
Create a
folder of
project
management
web
addresses in
a web
browser
Folder named Project
Management on the
Bookmarks toolbar
with a working link to
Google Maps
Same as
Best
Project
Management
folder
without a
working link
to Google
Maps or just
a link to
Google Maps
as one of the
Favorites
but not in a
folder
16. Submit evidence of completion as directed by the instructor.
Chapter 1 Introduction to Project Management
1.8 Software and Technology Exercises 76
Chapter 2
Project Profiling
A project profile provides a snapshot look at a project and provides valuable
information in the development of the project execution plan and the assignment
of resources to the project. An analysis of the project environment, including the
internal and external environment, provides information that allows the project’s
parent organization to allocate the organizational resources and assign the
appropriate organizational leadership to the project. Most organizations have some
form of project profiling process. Some simple processes consider the project size,
technology, and location to develop the project profile. This chapter discusses
different processes for profiling projects and discusses one method for developing a
project profile based on the project’s complexity.
77
2.1 Using a Project Profile
LEARNING OBJECTIVES
1. Identify project attributes that can be used for project profiling.
2. Define project profiling.
A few years ago, I observed a project manager with a long list of successful projects
absolutely struggle with a project. As I looked around, I noticed that often times
project managers who do superb jobs on some projects will fail on others. What
causes this to happen? Why were project managers successful on some projects but
struggling on others?
Even though all projects are by definition unique, there are attributes1
that are
common among projects that allow the characterization or profiling of a project.
We can look at just two project attributes and develop some understanding of the
project. A large project that will be executed in at least three locations will have a
very different profile from a small project that will be executed in one location.
These two attributes—size and location—provide information about the project that
will enable a manager in the parent organization to assign a project manager with
the appropriate knowledge and skills. We can then develop an execution approach
to increase the likelihood of success.
Project managers have not always been assigned to projects based on their skills
and the skills required by the project. Research by the Construction Industry
InstituteConstruction Industry Institute, “Executive Summary,”
RR103-11—Optimizing Project Organizations, 2009, https://www.constructioninstitute.org/scriptcontent/more/rr103_11_more.cfm
(accessed June 18, 2009).
indicated that the number one criterion for assignment of a project manager to a
project was availability. Even if available, the ideal project manager for a large
construction project may not be a good fit for a software development project. The
technical knowledge needed to manage these projects is not the same and having
the wrong technical knowledge may make the difference between a successful
project and project failure.
1. Characteristic of an entity or
object.
Chapter 2 Project Profiling
78
Figure 2.1
Profiling describes the
complexity of a project.
© 2010 Jupiterimages
Corporation
Even within the same industry, like the construction
industry, different skills are needed by the project
manager for different projects. For example, the
construction of an office building in downtown
Philadelphia is a very different project from the
construction of a chemical plant in Mexico. The
differences in these projects require different skills and
different execution approaches. Organizations have not
had good tools for understanding and matching the
needs of a project with the project manager who has the
right skills and experience. Developing a project profile
is one method for developing an understanding of the
project that will allow a systematic approach to
developing an execution plan based on the profile of the
project and selecting a project manager who has the
right kind of experience and skills.
Project profiling2
is the process of extracting a
characterization from the known attributes of a project.
The characterization will provide a more
comprehensive understanding of the project that
should result in developing an appropriate execution
approach and the assignment of organizational
resources. In different terms, project profiling is a
process that summarizes what is known about the attributes of a project and places
the project into a category with other projects that have similar characteristics. For
example, you can characterize a project as a large project or a small project. The
size of the project becomes the profiling attribute. You can characterize a project as
domestic or global, and the location of the project becomes the profiling
characteristic.
A company that has twenty projects may determine that four of these projects are
estimated to cost more than $1 million dollars and the remaining sixteen projects
are estimated to cost much less. The company then communicates that all projects
over $1 million be considered a large project. The company now establishes a rule
that large projects will require a project manager with at least five years
experience, it will have a vice president as executive sponsor, and it will require
formal quarterly reports. In this example, one characteristic is used to develop the
organization’s project management approach to their twenty projects.
2. Process of extracting a
characterization from the
known attributes of a project.
Chapter 2 Project Profiling
2.1 Using a Project Profile 79
KEY TAKEAWAYS
• Project profiles can be created based on attributes such as budget and
size to determine a systematic approach to developing an execution plan
and selecting a project manager.
• Project profiling is the process of extracting a characterization from the
known attributes of a project.
EXERCISES
1. Several types of project profiles use budget size, location, and
__________ knowledge.
2. Project profiling is the process of extracting a characterization from the
known _____________ of a project.
3. Describe how location can make a difference in the difficulty of a
project.
4. Why is it valuable to create a project profile? Base your answer on the
text of this chapter but use your own words.
Project Profiling
Propose another attribute that might be used for project profiling besides
budget size, location, and technical knowledge. Include the following in your
answer:
• Describe the categories into which you would divide your attribute.
• Describe the skills or knowledge a project manager would need to work
on a project in each of your categories.
Chapter 2 Project Profiling
2.1 Using a Project Profile 80
2.2 Project Profiling Models
LEARNING OBJECTIVE
1. Identify different methods of typing projects.
Aaron J. Shenhar and Dov DvirAaron J. Shenhar and Dov Dvir, “Toward a
Typological Theory of Project Management,” Research Policy 25 (1996): 607–32.
developed a typology3
—classification or profile—of engineering projects that
reflected two dimensions. The first dimension reflected the technological
uncertainty and ranged from low tech, medium tech, and high tech to super high
tech. Although projects involve the use of various levels of technology, Shenhar and
Dvir develop criteria for each type of technological uncertainty that enabled the
project to be typed. The second dimension reflected the system scope. The system
scope dimension ranged from assembly projects that dealt with building a single
component, to system projects that included interactive elements, to array projects
that included a wide dispersal of interactive systems and subsystems.
Shenhar and Dvir observed that the project execution approach was connected to
the project type. The study identified different management patterns associated
with project type as well as different management tools and practices. As the
project system scope became more complex and the system scope of the project
became larger, more sophisticated management tools were put in place to reduce
project uncertainty. As project technology increased, project managers became
more invested in processes to manage technical issues such as redesign and testing.
As projects increased in system scope, project managers became more invested in
formal planning and control issues. In later research, ShenharAaron J. Shenhar,
Adapting Your Project Management Style: The Key to Project Success (Hoboken, NJ:
Stevens Institute of Technology, 1999). developed recommendations for adjusting
the project management approach based on the project typology—systematic
classification or profile. For example, project managers will use more risk
management techniques (see Chapter 11 "Managing Project Risk" on risk
management) when the technological uncertainty is high.
Robert YoukerRobert Youker, “Defining the Hierarchy of Project Objectives,” IPMA
Conference (Slovenia: American Society for Advancement of Project Management,
1998). identified basic differences in project types. Among the attributes he used
were the uncertainty and risk, level of sophistication of the workers, the level of
detail in the planning, the newness of the technology, and the time pressure.
3. Classification or profiling of
items that have characteristics
or traits in common.
Chapter 2 Project Profiling
81
Youker also looked at project size, duration, industrial sector, geographic location,
number of workers, cost, complexity, urgency, and organizational design as
attributes that help determine a project profile.
KEY TAKEAWAYS
• The typology of Shenhar and Dvir characterized projects based on the
attributes of technological uncertainty and complexity of scope.
• Youker used the attributes of uncertainty and risk, sophistication of
workers, planning detail, industrial sector, location, number of workers,
cost, complexity, urgency, and organizational design.
EXERCISES
1. The typology of Shenhar and Dvir used attributes of technological
____________ and project scope.
2. The typology of Youker used several attributes, including the ________
of workers.
3. What are the two attributes of a project that Shenhar and Dvir used to
characterize projects?
Simple versus Complex Profiles
Simple profiles are easier to use than profiles that consider many attributes.
Compare the profiling method of Shenhar and Dvir with the profiling
method of Youker. Address the following issues:
• Which profiling method would be faster and easier to communicate to
team members? (Explain your choice.)
• Which attributes used by Youker but not used by Shenhar and Dvir do
you think are important? Explain your answer and give an example of a
situation where consideration of the attribute would make a difference
to the project.
Chapter 2 Project Profiling
2.2 Project Profiling Models 82
2.3 Complex Systems and the Darnall-Preston Complexity Index
LEARNING OBJECTIVES
1. Describe the characteristics of complex systems.
2. Identify the categories used by the Darnall-Preston Complexity Index.
Understanding and managing complex systems like a project require some systems
concepts that have been developed in other disciplines and applied to project
management as a tool to make complex projects manageable.
Complex Systems
When is a project complex? The answer to this question depends on how you define
complex. One way to explore this question is to look at complexity models in
various disciplines for insights that may apply to project management. In biology,
the simplest plant is composed of one cell. As the cellular structure increases in
number of cells and the number of connections to other cells increases, the plant
life is seen as more complex. In the animal kingdom, the single cell ameba is the
simplest animal, and life becomes more complex as the numbers of cells combine to
form muscles and organs.
The complexity of a system is usually determined by the number of parts or
activities, the degree of differentiation between the parts, and the structure of their
connections. Heterogeneous and irregularly configured systems are complex, such
as organisms, airplanes, and junkyards. Order is the opposite of complex. Ordered
systems are homogenous and redundant, like an interstate toll booth or a
production line in a factory. Complex systems have multiple interacting
components whose collective behavior cannot be simply inferred from the behavior
of the components.Stephen Jay Gould, Full House: The Spread of Excellence from Plato to
Darwin (New York: Three Rivers Press, 1996).
In addition to the number of parts, the degree of differentiation between parts and
the number, type, and strength of relationships between parts also influences the
degree of complexity. For example, the transistors in a computer have three
connections to other parts of the computer, but each nerve cell in the human brain
can be connected to thousands of other cells in the brain, which is why the human
brain is more complex than a computer. Complexity is context dependent. A project
is more or less complex in relation to the number of activities, the type and
Chapter 2 Project Profiling
83
strength of relationships to other project activities, and the degree and type of
relationships to the project environment.
Projects are complex adaptive systems4
. A complex adaptive system is a system
consisting of a large number of parts or activities that interact with each other in
numerous and various ways. A complex adaptive system is adaptive if the activities
adjust or react to the events of the environment. Successful adaptive systems adjust
in a way that facilitates or allows the system or project to achieve its purpose.
The dependence of the project on the activities, the interdependence of the
activities, and the specialization of the activities underscore the relationship
dependence5
of project activities. This relationship dependence is a key aspect of
complex adaptive systems. The nature of complex adaptive systems can be probed
by investigating the impact of change in one activity and the effect on other
activities and the behavior of the whole. Activities must be studied and understood
as interrelated, connected parts of the whole. If you remove a computer chip from a
computer and the computer powers down, do not assume the purpose of the chip
was to provide power to the computer. If you remove or shorten a project kickoff
activity, do not assume the project will finish earlier because of the dependence of
later project activities on project kickoff activities. Any change to the kickoff
activities will impact other activities and the project as a whole.
4. Organization of elements that
change in response to events in
their environment.
5. Activities that are affected by
events that change the
characteristics of other
activities.
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 84
Chemical Company
A chemical company was building a new plant in Tennessee with a new design
model that was intended to shorten the design phase on the project and lower
the cost. The design of the plant was managed by a United States–based
company with part of the design work contracted to an Indian company. The
engineers in the United States would work on the design and would
electronically transfer the design work to India at the end of the day. Engineers
in India, many who had graduated from U.S. colleges, continued to work on the
design and at the end of the day would electronically transfer the work back to
the United States. The project would benefit from differences in time zones that
would allow work on the project twenty-four hours per day. The project would
also benefit from the lower engineering wages in India. The project approach
was abandoned when the project started falling behind schedule. The added
complexity of the project offset the scheduling and cost benefit. The project
complexity profile became significantly less complex when the execution
approach changed from global to domestic partnering. The execution model
could have worked but would have required more investment during the startup
phase of the project.
Complex adaptive systems have three characteristics that are also reflected in
complex projects.
Complex Adaptive Systems Tend to Self-Organize
Formal organizational charts indicate reporting relationships but are not very
effective at displaying project relationships. Projects organize around the work,
phases, or activities. The organization of the project reacts to the nature of the
work at any given phase.
During the start-up meeting of a large complex project, the project manager
facilitated the development of the project organization chart that included all the
major companies and leaders from the client and key subcontractors. After the
chart was complete, the project manager ripped the chart up in front of the entire
project team to demonstrate his key message, which was that there are formal
reporting relationships, but the real leadership and communication will change
during the life of the project. In other words, the system will adapt to meet the
needs of the project at each phase. During the design phase, the engineering team
will identify the primary needs and communication will center on supporting the
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 85
engineering efforts. Later, the procurement team will take the lead as critical
equipment and supplies are identified and purchased. Later in the project, the
construction team takes the lead as the project moves from the design offices to the
field and the engineering and procurement teams support the construction effort.
Informally, the project team reorganizes information flows and priorities to
support the current work of the project and a good project manager facilitates this
adaptive behavior of the project organization by minimizing the impact of formal
authority and processes.
Complex Systems Adapt to Changing Environments
A deterministic system is a system that will produce the same results if you start
with the same conditions. The outcome can be reliably predicted if you know the
starting conditions. For example, if you fire a rifle several times at a target, the hits
on the target will be closely grouped if all the initial conditions are almost identical.
A nonlinear, or chaotic, system can produce wildly different results even if the
starting conditions are almost exactly the same. If today’s weather pattern is almost
exactly the same as it was on a previous date, the weather a week later could be
entirely different. Projects are usually nonlinear systems. If we execute an identical
complex project three different times, we would deliver three different outcomes.
We start with the assumption that the project is deterministic and use scenarios
and simulations to develop the most likely outcome, yet a small change such as the
timing of someone’s vacation or a small change in the delivery date of equipment
can change the entire trajectory of a project.
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 86
Drug Manufacturing Facility
A pharmaceutical company in California developed a drug that improved the
quality of life for people with arthritis and in some cases prevented serious
debilitations and even death. The drug was in the final FDA testing stage, and
the company decided to accept the risk and proceed with designing and
building a facility to manufacture the drug. The company had done this type of
project before, and some managers felt that the outcome would be fairly
predictable. The company assigned the lead scientist as the project manager to
get the project started. Two weeks into the project start-up, the company
president realized the project needed a project manager with more engineering
and construction expertise and hired a new person to manage the project. Then
the company decided to build the facility on land the company owned in
Colorado, and the project team began designing a facility that would fit the
existing site. Thirty days into the design phase, the company found an existing
facility that could be retrofitted to meet the production needs of the new drug.
During the first week of construction, the drug failed an FDA test and the
project was placed on hold. This project environment was highly volatile, and
the project plan and organization adjusted and evolved to respond to each of
these changes.
Not all projects experience this degree of environmental turbulence, yet all projects
experience some forms of environment shift during the life of the project. This is
one of the reasons project managers develop an aggressive change management
process6
. The purpose of the change management process is not to stop change but
to incorporate the change into the project planning and execution processes.
Projects, like all other complex adaptive systems, must respond to the evolving
environment to succeed. Plan as if the project is deterministic but be prepared for
unpredictable changes.
6. Method of incorporating
change into project planning
and execution processes.
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 87
Figure 2.2
Complex systems interact in
unpredictable ways.
© 2010 Jupiterimages
Corporation
In addition to responding to changes in the project
environment, the internal project organization and
environment is in a constant state of change. New
people become members of the team, people quit, retire,
and get sick. The office roof starts leaking, headquarters
rolls out a new computer program required for all
workers, or the project’s lead engineer cannot get her
immigration visa extended. These are real examples of
events that occurred on one project, and the project
team adjusted to each event. The adaptation to changes
in the project’s internal situation while also adapting to
the external environment reflects the coevolving nature
of a complex adaptive system. An increase in the
number of events within the project and the project
environment that are likely to change during the life of
the project is reflected in an increase in the complexity
of a project.
Darnall-Preston Complexity Index
Profiling a project correctly requires a system that is relatively easy to use but that
includes enough attributes to capture all the most important characteristics of a
complex project. The Darnall-Preston Complexity Index (DPCI™)7
achieves this
objective by grouping eleven attributes into four broad categories: internal
attributes, external attributes, technological complexity, and environmental
attributes.
7. Project profiling system that
groups project attributes into
four categories: internal
attributes, external attributes,
technological complexity, and
ecological attributes.
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 88
Figure 2.3 Russ
Darnall—Creator of the
Darnall-Preston Complexity
Index
Projects are more likely to fail in the beginning, not in
the end. This generalized statement reflects the
importance of understanding the environment in which
a project will be executed and the importance of
developing an execution plan that can be successfully
implemented within this environment. Recovery costs
can be extremely high for projects where the
environment is misread or the execution plan does not
address critical issues of the project environment. In
addition to cost overruns and delays in the project,
execution plans that are not aligned with the project
environment can create barriers that make recovery
difficult, and in some cases, the business purpose of the
project cannot be met. The DPCI is a tool to assist
project stakeholders in developing a comprehensive
analysis of the project environment and a project
execution plan more aligned with that environment.
Understanding and aligning a project with the project’s
environment increase the likelihood of achieving project success.
The foundation of a sound project execution plan is an assessment of the project
environment. This assessment provides the information on which the execution
plan is built. In the absence of an accurate assessment of the project environment,
the project leadership makes assumptions and develops the execution plan around
those assumptions. The quantity and quality of those assumptions will significantly
influence the effectiveness of the project execution plan. The amount of
information available to the project manager will increase over time and
assumptions will be replaced with better information and better estimates. As
better tools are developed for evaluating the project environment, better
information will become available to the project manager.
The project environment includes all the conditions that can influence the outcome
or success of the project. Project size, technological complexity, cultural and
language barriers, the political landscape, and resource constraints are some of the
components of the project environment that can influence the project success.
Understanding these influences and developing a project profile creates a
foundation for building an effective project execution plan.
The DPCI is one model for understanding and profiling projects. This index assesses
the complexity level of key components of a project and produces a unique project
profile. The profile indicates the project complexity level, which provides a
benchmark for comparing projects and provides information about the
characteristics of a project that can then be addressed in the project execution plan.
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 89
The DPCI provides project stakeholders with information about the project to
define the experience, knowledge, skills, and abilities needed by the project
manager. The DPCI also has implications for the composition, organization, and
skills needed by the project leadership team. The DPCI provides information and a
context for developing the project execution plan and for assessing the probability
of success.
KEY TAKEAWAYS
• Complex systems have many different parts that interact with each
other in different and often unpredictable ways. They adapt to changes
in their external and internal environments.
• The Darnall-Preston Complexity Index (DPCI) groups project attributes
into four categories: external attributes, internal attributes,
technological complexity, and environmental attributes.
EXERCISES
1. Complex systems _____ to changes in their external and internal
environments.
2. The Darnall-Preston Complexity Index (DPCI) groups project attributes
into four categories: external, internal, _________, and environmental.
3. What are the characteristics of a system that make it complex?
Complex Systems
Consider the example of the drug manufacturing facility. Describe in your
own words how this project demonstrated the attributes of a complex
system.
• External
• Internal
• Technological
• Environmental
Chapter 2 Project Profiling
2.3 Complex Systems and the Darnall-Preston Complexity Index 90
2.4 Darnall-Preston Complexity Index Structure
LEARNING OBJECTIVES
1. Describe each of the external attributes that contribute to project
complexity.
2. Describe each of the internal attributes that contribute to project
complexity.
3. Describe each of the technological attributes that contribute to project
complexity.
4. Describe each of the environmental attributes that contribute to project
complexity.
The Darnall-Preston Complexity Index (DPCI™) is designed to develop a project
profile that reflects different aspects of the project that will influence the approach
to leading and executing the project. The DPCI is built on four categories of
attributes:
1. External. Environmental attributes that are in existence at the
beginning of the project, such as size, duration, and available resources
2. Internal. Clarity of project objectives, the clarity of scope, the
organizational complexity, and stakeholder agreement
3. Technological. Newness of the technology and familiarity of team
members with the technology
4. Environmental. Legal, cultural, political, and ecological
The DPCI was developed around four assumptions:
1. All projects are unique.
2. Projects have common characteristics.
3. These characteristics can be grouped together to create a project
profile.
4. There is an optimum execution approach for each project profile and
therefore an optimum set of skills and experience for the project
manager and execution team.
Chapter 2 Project Profiling
91
Figure 2.4
External Attributes
The external attributes include those issues that are typically established early in
the project definition phase and are usually outside the direct control of the project
management team. The project size can be a product of the dollars needed to
execute the project or project cost. The cost of the project is estimated during the
conceptual phase of the project. At the time the project is authorized, the cost or
size of the project is established. The duration or time allocated to complete the
project and the resources available are also attributes that are established when the
project is authorized.
Size
Project size is a relative concept. How do we decide if something is large or small? A
150-pound person is big if the person is ten years old. A 150-pound person is small if
the person is a professional football lineman. The frame of reference provides the
context in which size is determined.
The size of a project is also relative. A $250 million oil refinery expansion is a
relatively small project in an industry where billion dollar projects are common. A
$250 million pharmaceutical development project or software development project
would be considered a large project. The size of a project is determined by the
context of the industry and the experience of the team executing the project.
Within the construction industry, firms usually specialize in projects that fall
within a defined range. Small firms usually execute small projects and large firms
usually execute larger projects. There is a size range for which the company
experience, management skills, tools, and work processes are primarily designed.
This size range or comfort zone exists for both the company and the members of
the project team executing the project.
When a project team executes a project outside their
comfort zone, stress is placed on both the tools and
project team. When a project is larger than the comfort
zone of a company, stresses are placed on the ability to
provide experience and appropriate work processes,
and the results are typically cost overruns and schedule
delays. To mitigate this stress, some companies will
divide large projects into smaller projects and execute
the smaller projects with separate dedicated staff and
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 92
Tools and skills must match the
size of the project.
© 2010 Jupiterimages
Corporation
Figure 2.5
Large open pit mining project.
© 2010 Jupiterimages
Corporation
resources. The key to success then becomes the
coordination of the small projects to behave as if they
are one large project.
Copper Mining in Argentina
One example of this process was a copper mining project in Argentina. The
comfort zone of the company was projects ranging from $150 million to $500
million. Projects over $500 million were divided into smaller projects. The
mining project was estimated to cost a little over $1 billion and the project was
divided into three projects, each with a project manager and leadership team.
Although the projects shared some resources and reported to an oversight
project manager, each project developed a separate execution plan that
included a budget and schedule.
When a company is executing a project that is much
smaller than the company norm, resources are often
misused and inappropriate work processes are utilized.
The result often increases the project costs. Some
companies with a history of executing large projects
have set up a small project group to execute smaller
projects. These groups establish a different culture,
develop appropriate work processes, and use tools
designed to execute smaller projects.
The more the project size is outside the comfort zone of
the project, the more stress is created for the project.
This is true on both ends of the spectrum. Both smaller
and larger projects that fall outside the comfort zone of
the project management team will create stress for the
project. New skills, tools, and processes will need to be
developed to manage the project, and this activity will absorb management time
and energy. The higher the stress level created by executing a project outside the
comfort zone of the organization, the greater the impact on the complexity level of
the project.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 93
Duration
The duration of a project is often set by the parent organization that charters the
project with a deadline that reflects the business purpose of the project. The
following are examples of projects with end dates that are established to meet the
organization’s business purpose:
• A new software program for a university to be implemented in time for
registering students in the fall
• A new product to be introduced to the marketplace at the industry’s
major conference
• A new high school to be constructed and open next fall
The project team also estimates the duration of the project and establishes a project
end date based on normal work (e.g., forty hours per week) and the availability of
resources.
Sometimes the normal time needed to complete a project is longer than the time
available.
Super Bowl Hotel Space
The investors in a planned hotel start booking rooms for an upcoming Super
Bowl weekend a year before the hotel is finished. This is six weeks ahead of the
time estimated to build and open the hotel. People will be working overtime,
suppliers will be paid a bonus to supply materials early, and management is
meeting with city officials to expedite permitting issues. A new project
schedule is developed based on these changes to the execution approach, and
now the project schedule has zero float.
The result of this six-week compression to the project schedule is additional stress
on the project. Significant management time and energy will be invested in
tracking and managing schedule issues. Every issue that arises will need to be
resolved quickly and involve the project’s senior manager to assure the project
schedule does not slip. This additional stress increases the overall project
complexity.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 94
Resource Availability
Projects require both human and tangible resources. The project requires people
with the right experience, knowledge, and skills to accomplish the assigned tasks.
Construction projects typically require resources such as bricks and cranes. Some
projects require specialized subcontractors with skills not found within the project
team. Each of these resources required by the project will be needed at the point in
the project schedule when the materials or skills are required. When these
resources are scarce or not available, additional management time and energy is
needed.
Boeing Dreamliner
In 2003, Boeing announced the development of the new 787 Dreamliner
Airplane. The airframe for the new airplane was a new composite material.
During the same period that Boeing was beginning construction of the new
manufacturing facility, other new planes were announced, and the Air Force
increased its demand for people with airplane manufacturing and maintenance
experience. A project was chartered to train the people the new plant would
need to manufacture the Boeing Dreamliner. The project manager found that
the people with the skills and knowledge needed to develop the curriculum and
train the workers were in short supply. In addition to the lack of skilled
trainers, the materials needed for the workers to train on were also scarce. The
project manager dedicated significant time and energy developing the
resources the project needed.
When resources needed to execute the project are not readily available, the project
leadership dedicates more management time and energy to acquiring the resources
or finding innovative solutions to accomplish the project goals without the needed
resources or with creative alternative solutions. The more time and energy the
management team must dedicate to searching for resources or alternatives, the
more stress on the project. The more scarce and more important the resources, the
more stress that is placed on the project.
Internal Attributes
The internal attributes are within the control or influence of the project manager.
Internal attributes include clarity of objectives, clarity of scope, the organizational
complexity, and stakeholder agreement. Although the clarity of objectives, as with
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 95
the other attributes, can be improved during the life of the project, the project
profile reflects the project at a given time. If the project objectives are not clear
during the evaluation of the project, this lack of clarity impacts the complexity of
the project.
Clarity of the Project Objectives
Project decisions are made based on how these decisions help the project meet its
objectives. If the objectives are unclear, the team will not make the best decisions.
The greater the confusion for the project team on the goals and objectives of the
project, the greater the impact on the complexity of the project.
Confusion Over Objectives in Philadelphia
A consultant was asked to evaluate the likelihood of success of a large project in
Philadelphia. The consultant interviewed the project leadership and asked if
the goals of the projects were clear. Each member of the leadership team
responded that the goals and objectives were clear. When asked what the goals
were, the answers varied greatly.
Clarity of Objectives Saves Millions
A critical piece of equipment was being fabricated in Europe for a construction
project in South America. The cost to transport the equipment by air was
$200,000 more than by ship. Transporting the equipment by ship would also
delay the project two months. Early in the project, it was determined that any
delay in the project would cost the project over $1 million per month. Because
the goals of the project were well understood, the decision to transport the
equipment by air was made quickly and easily.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 96
Figure 2.6
Confusion about the scope and
objectives must be avoided.
© 2010 Jupiterimages
Corporation
Island Ecology Protected
A large mining company initiated a copper mining project on an ecologically
sensitive island in Indonesia. The company stated very clearly and forcefully
that every effort would be made on the project to protect both the human and
natural environment of the island during construction and operation. Every
major decision passed through an evaluation of the impact on the island
ecology. Although the island ecology increased the complexity of the project,
the clear goals mediated the project complexity.
Clarity of Scope
The project scope defines what is inside the project and what is outside. Does the
project to train five hundred technicians for the Boeing 787 include recruiting and
assessing potential employees? The project scope did include recruitment and
assessment, but hiring processes and drug testing belonged to Boeing. This scope
was clear about which responsibilities belonged to the contractor doing the training
and which responsibilities belonged to the parent organization.
Not all project scopes are this clear. The development of
a clear project scope depends on information available
about what products and services will be required. A
project to develop a vaccine for a new strain of flu may
not include sufficient information to develop the
processes the team will utilize to understand the flu
virus and develop a vaccine. As the team develops more
information, the scope can be further developed.
Leadership time and energy will be focused on
developing scope clarity. The lack of clarity and the
amount of time needed by the leadership team to
develop a clear scope will add to the project complexity.
Organizational Complexity
The structure of the project’s client organization and
the organizational decision-making processes influence the project complexity. A
project with one client as the central point for making decisions and providing
client approvals and technical information has only one relationship to manage and
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 97
a streamlined communication process. Projects with a team representing the client
require more of the project manager’s time and energy managing the client
relationships and communication process. The client team approach brings more
expertise and often more comprehensive project oversight, but it adds to the
project complexity.
Stakeholder Agreement
Often there is more than one major stakeholder in the project. An increase in the
number of stakeholders adds stress to the project and influences the project’s
complexity level. The business or emotional investment of the stakeholder in the
project and the ability of the stakeholder to influence the project outcomes or
execution approach will also influence the stakeholder complexity of the project. In
addition to the number of stakeholders and their level of investment, the degree in
which the project stakeholders agree or disagree also influences the complexity of
the project.
A small commercial construction project will typically have several stakeholders in
addition to the client. All the building permitting agencies, environmental agencies,
and labor and safety agencies have an interest in the project and can influence the
execution plan of the project. The neighbors will have an interest in the
architectural appeal, the noise, and the purpose of the building.
Tire Plant in India
A U.S. chemical company chartered a project team to design and build a plant
to produce the raw materials for building truck tires designed for nonpaved
roads. The plant was to be built in India a few years after an accident that killed
several Indians and involved a different U.S. chemical company. When the
company announced the new project and began to break ground, the
community backlash was so strong that the project was shut down. A highly
involved stakeholder can significantly influence your project.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 98
Wind Turbine on a College Campus
A small college in South Carolina won a competitive grant to erect and operate
a wind turbine on campus. The engineering department submitted the grant as
a demonstration project for engineering students to expose students to wind
technology. The campus facilities department found only one location for the
wind turbine that would not disrupt the flow of traffic on campus. The
engineering department found that location unacceptable for students who had
to maintain the wind turbine. The county construction permitting department
had no policies for permitting a wind turbine and would not provide a building
permit. The college had to go to the county council and get an exception to
county rules. The marketing department wanted the wind turbine placed in a
highly visible location to promote the innovativeness of the college.
Each of the college’s stakeholders had a legitimate interest in the location of the
wind turbine. The number of stakeholders on the project, multiplied by their
passion for the subject and the lack of agreement on the location, increased the
complexity of the project. Significant time and resources of the project will be
dedicated to identifying, understanding, and managing client expectations.
Technological Complexity
The technology of a project refers to the product of the project and not the
technology used to manage the project. This technology is typically unique to the
industry. A pharmaceutical project technology is the drug-making technology or
pharmacology. The technology for a project to build a new automobile plant is the
car production process. The key stress on the project is the newness of the
technology. What aspects of the technology are known, and what aspects are
unknown? Does the project combine technologies on the project that have never
been combined?
Project technology that is newer and more complex will require more technological
expertise on the project team.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 99
Family Life Center
A church in western New York decided to build a new family life center that
would not use electricity from the power grid. The charter of the project
included statements that required the building to use renewable power sources
and have an environmentally friendly footprint. The project required the
adaptation of a new technology for producing and managing power, location of
the building relative to the sun, and landscaping to minimize water usage. Most
of the technology was tested, and the project team brought in experts to help
design and implement a program to meet the requirements of the project. The
technology of the project required the project team to develop a new
understanding of this technology and work processes to adapt the project to
address the requirement of the technology.
Typically, the newer the technology and the less familiar the project team is with
the technology, the greater the stress and the contribution to the complexity of the
project.
Project Environment
The project environment includes all the issues related to the environment that will
influence the development and execution of the project plan. A project to build an
airport expansion in Pittsburgh, Pennsylvania will have very different legal,
cultural, political, and ecological issues to address from an airport expansion in São
Paolo, Brazil. The environment attributes in Brazil require more planning,
resources, and leadership attention to successfully execute the project. The greater
the number and difficulty of the issues, the greater the influence on the complexity
of the project.
Legal
The legal issues on a project can be broad and include many different levels of
government. Most local governments have various permits, such as business
licenses and building permits, required to do work. Some projects will have security
issues and will work with local law enforcement.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 100
Figure 2.7
Legal problems increase the
project’s complexity.
© 2010 Jupiterimages
Corporation
Workforce laws vary significantly in country, regional,
and local jurisdictions. The hiring and management of
workers can be a complex and time-consuming issue for
some projects. Companies not used to working in a
union environment will invest project resources in
learning and adapting to the new environment.
Scheduling holidays, supporting maternity leave, and
dealing with workforce reduction issues surrounding
project closeout will vary in each environment,
industry, and project. Understanding and managing
workforce issues on a project can be simple or very
complex.
National, regional, and local taxes require a project tax
approach or policy on most international projects and
some domestic projects. Duties for equipment and
material brought into a country add complexity to the
procurement plan. Equipment used temporarily to execute the project, such as a
crane, is treated differently than permanently installed equipment, such as a pump.
In some countries, a third party is hired to expedite the flow of materials through
complex custom processes.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 101
Copper Mining in Argentina
The new president of Argentina instituted a program to encourage economic
development. One of the projects to support this program was a copper mining
project in northern Argentina. This is the desert area of Argentina with a basic
agrarian economy. A joint venture was formed with the encouragement of the
Argentina government between a Canadian and Australian Company with all
three entities owning a share of the new company.
The conceptual design work was done in Canada with support from offices in
Chile, Argentina, and the United States. A U.S. contractor was awarded the
contract to design, procure equipment, and build the mine. The project
leadership team included members from the United States, Canada, Australia,
Argentina, Chile, Puerto Rico, Cuba, and Lebanon. Materials were procured,
transported, and brought through customs from twenty-one different
countries. Legal issues on this project consumed a great deal of management
attention and sometimes affected the project execution. Materials were
occasionally delayed in customs, people with critical skills could not get visas to
enter Argentina, and which country’s laws would apply to the contracts had to
be debated.
Not every project will have significant legal issues. When legal issues are involved,
they are typically significant and will add to the complexity of the project.
Understanding the legal issues than can affect the project and developing a plan to
address these issues will reduce the complexity of the project.
Cultural
Culture is a term that reflects the community’s assumptions, norms, values, and
artifacts. Community includes the parent organization charting the project, the
local community or communities where the project is executed, and the region and
country where the project is located. The project team must understand the
community’s culture and its potential impact on the project.
Culture also defines the meaning of work, truth, the value of nature, relationships,
and how to communicate. Projects executed in various cultures will often
experience cultural conflict.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 102
Figure 2.8
Gender Difficulties in Argentina
A project team from the United States was responsible for executing a project
in Argentina. The U.S. leadership team included women in key leadership
positions, and the Argentines refused to take direction from females. The U.S.
team believed strongly in their leadership capability and refused to make
changes. This conflict was settled by senior managers of both organizations,
and rules were established that respected all team members in leadership roles.
The conflict did not go away, but the team was able to successfully execute the
project with the original team. Delays were experienced on the project that
could be traced to this cultural conflict.
Many organizations have rule-based cultures. Institutions of higher learning,
organizations related to judicial organizations, and most government organizations
are examples of rule-based organizations. The organizational structure and culture
inhibits risk taking through established rules and policies. Projects are goal based
and focus on plans and processes to achieve goals. Goal-based cultures promote
assuming risk to achieve goals. Projects that are closely tied to a rule-based parent
organization will often find conflict with the parent organization’s need to follow
rules and the project’s need to accomplish goals. This conflict creates additional
stress that adds to the project complexity.
On global projects, language, cultural conflict with the
role of women, the religious role in daily activities, and
even the concept of time can becomes issues on the
project. These issues require project leadership to
resolve and they add to the project complexity. In some
countries and even different companies in the same
country, meetings start on time, and a person arriving
five minutes late will cause major disruption. In other
situations, meetings can start within thirty minutes of
the starting time without anyone objecting.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 103
Dealing with diverse cultures
increases complexity.
© 2010 Jupiterimages
Corporation
Communication Problem in India
A team of project experts was sent to India to evaluate a large construction
project. The team arrived and reviewed the project documents and found the
project on time and meeting all project goals. After spending three days with
various contractors and team managers, the team discovered the project was
significantly behind schedule and would miss an important window during the
monsoon season. A culture existed on the project where workers told the
project management what they expected to hear, and the difference between
the progress of the project team and the progress reports became so large that
the difference could not be reconciled during the original schedule of the
project.
An increase in the number of cultures represented on the project team raises the
cultural complexity. Increases in the number of cultures with which the project
team must interface also increase the complexity of a project. Although this
cultural diversity creates leadership challenges, it also presents opportunities. The
diversity of cultures presents various approaches to solving problems, and the
project manager may find innovative solutions easier to develop with a diverse
project team.
Political
Every project operates within one or more communities that reflect organizational
dynamics and power struggles. The more important the project is to the
organizational leadership, the more invested various organizational leaders will be
in the project. The more people that become invested in the project and the more
influence these people exhibit on the resources and activities of the project, the
more time and energy will be expended by the project team in managing these
outside influences. This additional stress on project leadership time and resources
adds complexity to the project.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 104
Stakeholders and a Bridge Project
The Department of Highways chartered a project to upgrade a number of
bridges that crossed the interstate in one of the larger cities in South Carolina.
The closing of these bridges severely impacted traffic congestion, including a
large shopping mall. The contract included provisions for minimizing the
impact on the traffic and communities near the construction areas. This
provision allowed businesses or interested parties to review the project
schedule and make suggestions that would lessen the impact of the
construction. The project leadership invested significant time and resources in
developing alignment among the various political stakeholders on the project
approach and schedule.
Ecological
Projects have the potential to impact the living conditions or the health of people,
plants, and animals. In addition to the potential impact to land, water, and air, the
ecology includes the sights and sounds that can impact the quality of life. An
increasing number of clients expect the project team to minimize the impact of the
project on the ecology. An ecology that is more sensitive to disruption and a more
disruptive technology will place greater stress on the project and increase the
project complexity. Construction projects that require the use of explosions to
effectively move rocks and dirt, projects that require the addition of twenty-five
people in existing office space, and projects that require the release of strong odors
like those from adhesives in an office environment will all impact the ecology. The
project team develops means and methods to minimize the impact of the disruption
in a manner consistent with the requirements as communicated by the client. The
effort that is needed to minimize the ecological impact will influence the
complexity of the project.
The ecology will also impact the execution of a project. The weather is an attribute
of most construction projects. Construction projects in India are often scheduled
around the monsoon season, and construction projects in the Caribbean consider
the hurricane season. A project to build an offshore wind farm will require an
understanding of the ocean currents, the wind currents, and temperature
fluctuation to understand the impact of the ecology on the project execution plan.
The larger the number of potential ecological attributes and the greater the impact
of each attribute, the greater the influence on the project complexity.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 105
KEY TAKEAWAYS
• The external attributes are the relative size of the project, duration of
the project, and the available resources.
• The internal attributes are the clarity of its scope, the complexity of the
organization, and the agreement among stakeholders.
• The technological attributes are the technology of the product (not the
technology used to manage the project), the newness of the technology,
and the familiarity of the team with the technology.
• The environmental attributes are the legal issues, cultural conflicts,
political interests, the impact of the project on the ecology, and the
impact of the ecology on the project.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 106
EXERCISES
1. The external attributes considered in the DPCI are relative size,
________, and available resources.
2. The internal attributes considered in the DPCI are clarity of scope,
complexity of the organization, and agreement among _________.
3. The technological attributes considered in the DPCI are ______ of the
technology and familiarity of the team with the technology.
4. The environmental attributes considered in the DPCI are _____, cultural,
political, impact on the ecology, and impact of the ecology on the
project.
5. Under what circumstances would a large project qualify for a low DPCI
score?
6. Describe an organization structure that would receive a high score for
complexity.
7. Does the technology attribute refer to the technology used by the
project team or the project itself?
8. Give an example of a cultural problem that would have a highcomplexity
score.
9. Give an example of an ecological problem that would have a highcomplexity
score.
10. What is the difference between an external and an internal attribute in
the DPCI?
Behind the Scenes
Stanley PortnyStanley E. Portny, Project Management for Dummies, 2nd ed.
(Hoboken, NJ: Wiley, 2007). advocates that as a project manager, you
research the source of a project to determine who had the original idea by
asking questions of your boss, reading meeting minutes and feasibility
studies, and checking other correspondence and contacts. The purpose of
this investigation is to find out who is most likely to champion the project if
you have trouble, who opposed the project, or whose interests will be
harmed by the project. Consider this advice in light of the Darnall-Preston
Complexity Index and answer the following questions:
• Is this an external, internal, technological or environmental attribute?
Explain your reasoning and refer to the definitions provided. A case can
be made for putting it in more than one.
• What might you find that would increase the project’s complexity and
what might you find out that would reduce the complexity? Provide
examples of each.
Chapter 2 Project Profiling
2.4 Darnall-Preston Complexity Index Structure 107
2.5 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Compare the attributes used by the Darnall-Preston Complexity Index
and those used by Youker. Which attributes are used in both typologies?
Which attributes are not in common? If you chose to add one attribute
to either typology what would it be? Explain your answer.
2. Complex systems. A complex system adapts to changes in its external and
internal characteristics. Describe a project with which you are familiar
that has experienced changes in its external or internal characteristics
during the life of the project and describe how the project manager and
the management team changed their behavior to adapt to the new
situation or how they failed to adapt and the result of that failure.
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Institutional memory. One of the responsibilities of a project manager is to
keep a history of past projects to create an organizational knowledge
base. Do you think using the DPCI™ as a basis for organizing those past
projects would be useful? How would you go about creating a storage
and retrieval system that uses the DPCI?
2. Environmental impact. Describe a project that might have an impact on
the environment and the steps the project manager might have to take.
Describe the score you would give this attribute if you were using the
DPCI.
Chapter 2 Project Profiling
108
2.6 Software and Technology Exercise
LEARNING OBJECTIVE
1. Calculate and interpret the DPCI.
Calculate the DPCI
Russell Darnall (Darnall 1996) introduced a method that rates characteristics of a
project on a scale from 1 to 5. The characteristics are grouped into four categories:
external attributes, internal attributes, technology, and project environment. Each
category is rated based on the average of the scores of its attributes.
A method of calculating and representing the final Darnall-Preston Complexity
Index (DPCI) was added by John Preston and Darnall in this publication to allow the
DPCI to be represented by a four-number code. The rules for calculating the DPCI
are as follows:
1. The scores in each category are averaged and then rounded to a whole
number to create a category rating.
2. Averages that are halfway between two whole numbers are rounded
up.
3. If one of the characteristics has a score that is higher than the average
for that category by 2 or more, the average for that category is shown
in boldface.
A project can be quickly characterized using the DPCI. For example, a project that is
similar in size to previous projects with plenty of time to complete it and with
adequate resources available would have a low average external complexity score of
2 (see Table 2.1 "Calculating the DPCI"). If there is significant disagreement among
the stakeholders on the objectives and several scope issues are not well defined
because there is overlap between responsibilities of groups within the organization,
the internal complexity score would be high—4 (see Table 2.1 "Calculating the
DPCI"). If the project relies on technology that is fairly new and some of the team
members are unfamiliar with it, the average score would be 2.5, rounded up to 3
(see Table 2.1 "Calculating the DPCI"). If the legal and cultural attributes have low
complexity, and there is little impact on the project by ecological factors, the
average is low—2—in spite of a high complexity score for the effect of politics of the
project. In this case, the score is shown in boldface to warn the user that there is an
Chapter 2 Project Profiling
109
individual score that is at least two points higher than the average, and the details
of that category must be investigated.
Table 2.1 Calculating the DPCI
Category Attribute Score Average Rating DPCI
External Size 2 2 2 2.4.3.2
Duration 1
Resource availability 2
Internal Clarity of objectives 4 3.75 4
Clarity of scope 3
Organizational complexity 4
Stakeholder agreement 4
Technological Newness 2 2.5 3
Familiarity of team 3
Environmental Legal 2 2 2
Culture 1
Political 4
Ecological 1
The final DPCI in this example is 2.4.3.2, which tells you at a glance that this project
has fairly low external complexity, a fairly high degree of internal complexity, and
a moderate technological complexity and that a majority of the environmental
attributes are low complexity, but at least one of them has a rating of 4 or 5 and
needs attention.
Projects with different profiles require different management approaches,
applications of different tools, and mitigation of different levels of risk. Information
derived from the complexity profile can be used in the selection of the project
manager, the project leadership team, and the execution approach to the project
and in the analysis of the project risk.
There is no generally agreed-upon project typology or classification system. In this
text, we will utilize the DPCI as a tool for analyzing projects and choosing
appropriate tools, but the same skills could be used with other taxonomies.
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 110
How to Calculate a DPCI Rating
Assume that a project went through the DPCI rating process and it achieved the
following scores in each attribute:
Table 2.2 Calculating the DPCI
Category Attribute Score Average Rating DPCI
External Size 1
Duration 1
Resource availability 2
Internal Clarity of objectives 1
Clarity of scope 4
Organizational complexity 4
Stakeholder agreement 3
Technological Newness 3
Familiarity 2
Environmental Legal 2
Culture 1
Political 4
Ecological 1
1. Start a spreadsheet program such as Excel 2010. Refer to Table 2.2
"Calculating the DPCI" and then type the category and subcategory
labels into the first two columns and the scores in column C. Some of
the labels will appear to be cut off if there is not enough width to
display the entire label, as shown in Figure 2.9 "Labels in a
Spreadsheet".
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 111
Figure 2.9 Labels in a Spreadsheet
Source: Courtesy of © Microsoft Corporation. All Rights Reserved. Used with permission from
Microsoft Corporation.
2. Click cell B15 and then type your name.
3. Capture a screen that shows the worksheet at this point in its
development with your name in cell B15. (Refer to Section 1.7 "Web
Exercise" and Section 1.8 "Software and Technology Exercises", if
necessary, for instruction on how to capture a screen.)
4. Open a new word processing document and then paste the screen
capture into the new document. Your name must be included in the
screen capture. Save the document as Ch02DPCIStudentName using the
Word 2003 .doc file format.
5. Move the mouse pointer to the boundary between the headers of
columns A and B, where it turns into a double-headed pointer. Doubleclick
the boundary to automatically adjust the column width to the
widest label, as shown in Figure 2.10 "Adjust Column Width".
Alternatively, drag the boundary to the right to adjust the column
width manually.
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 112
Figure 2.10 Adjust Column Width
Source: Courtesy of © Microsoft Corporation. All Rights Reserved. Used with permission from
Microsoft Corporation.
6. Repeat the skill you practiced in the previous step to widen column B
to accommodate the longest label (or your name) in column B.
7. Click cell D3. Type =AVERAGE(C1:C3) and then press Enter. The average
of numbers in cells C1, C2, and C3 is calculated and displayed in cell D3.
A sequence of cells is denoted by the first cell address and the last cell
address separated by a colon.
8. Click cell D7. Type =AVERAGE(C4:C7) and then press Enter.
9. Use the skill you practiced in the previous steps to calculate the
averages of the technological and environmental categories and
display them in cells D9 and D13 respectively.
10. Click cell D13. Notice the formula displays in the formula bar, as shown
in Figure 2.11 "Adjusted Column Widths and Average Functions" (You
may ignore the alert boxes or notations due to the unused cells in
column D.)
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 113
Figure 2.11 Adjusted Column Widths and Average Functions
Source: Courtesy of © Microsoft Corporation. All Rights Reserved. Used with permission from
Microsoft Corporation.
11. Capture this screen and then paste it into the word processing
document Ch02DPCIStudentName below the previously captured screen.
12. In the spreadsheet, click cell E3. Type =ROUND(D3,0) and then press
Enter. The ROUND function requires two types of information. The first
is a cell address and the second is the decimal place to which the
number in that cell will be rounded. A zero indicates rounding to
whole numbers. (See the spreadsheet Help menu if you would like
more information about the ROUND function.)
13. Use the skill you practiced in the previous step to calculate the
rounded values for each category. Click cell E13 to display the ROUND
function in the formula bar, as shown in Figure 2.12 "Round Function
Rounds to the Nearest Whole Number". Notice the ROUND function in
cell E9 rounded the number 2.5 up to 3. This is the method used for
rounding in the DPCI.
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 114
Figure 2.12 Round Function Rounds to the Nearest Whole Number
Source: Courtesy of © Microsoft Corporation. All Rights Reserved. Used with permission from
Microsoft Corporation.
14. Capture this screen and paste it into Ch02DPCIStudentName.doc.
15. In cell B16, type DPCI rating:. In cell C16, type the DPCI rating 1.3.3.2 and
then press Enter.
16. Visually examine the individual scores in column C and the rounded
averages in column E. Determine if any of the individual scores is 2
points or more higher than the rounded average. Notice that the
political rating is 4, and the environmental rating is 2. Also notice that
the clarity of objectives rating is 1 and the internal rating is 3.
According to the DPCI method, the environmental rating should be
displayed in bold. (Even though the internal rating has a score that is 2
points lower than the rounded average, it is not bold. An individual
rating must be 2 points or more higher than the rounded average—not
lower.)
17. Click cell C16. On the formula bar, select the 2 and then on the ribbon
(or formatting toolbar) click the Bold button. The rating for
environmental complexity is emphasized with bold font to indicate
there is a significantly higher individual rating that should be
considered, as shown in Figure 2.13 "Ratings That Contain Higher
Individual Ratings Are Bold".
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 115
Figure 2.13 Ratings That Contain Higher Individual Ratings Are Bold
Source: Courtesy of © Microsoft Corporation. All Rights Reserved. Used with permission from
Microsoft Corporation.
18. Capture this screen and paste it into Ch02DPCIStudentName.doc. Save
and close Ch02DPCIStudentName.doc.
19. In the spreadsheet, save the file as Ch02DPCIStudentName.xls using the
Excel 2003 .xls file format.
20. Close the spreadsheet.
21. Review your word processing file, Ch02DPCIStudentName.doc and use
the following rubric to determine its adequacy:
Element Best Adequate Poor
File
name
Ch02DPCIStudentName.doc
Word 2010
.docx
version
Other file
name or
format
Calculate
and
Sequence of screen
captures shows the
One or two
screens
taken out of
Only one
image of the
finished
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 116
Element Best Adequate Poor
interpret
the DPCI
development of the
spreadsheet
the exact
sequence
described;
student
name
displayed
clearly in
each of the
development
screens
spreadsheet;
development
by the
student not
proven
22. Review your spreadsheet file, Ch02DPCIStudentName.xls, and use the
following rubric to determine its adequacy:
Element Best Adequate Poor
File
name
Ch02DPCIStudentName.xls
Excel 2010
version
using .xlsx
Other file
name
Calculate
and
interpret
the DPCI
AVERAGE and ROUND
functions used correctly;
bold feature used
correctly
AVERAGE
and
ROUND
functions
not in the
cells
specified
but used
the
correct
ranges
Incorrect
ranges in
the
functions;
last
number
in the
DPCI
rating
not bold
23. Submit the file(s) as directed by the instructor.
Chapter 2 Project Profiling
2.6 Software and Technology Exercise 117
Chapter 3
Project Phases and Organization
This chapter provides an overview of the organizational structure and phases of a
project. The complexity level of a project influences the organizational structure
and the resources and skills needed at each phase. This chapter also provides an
overview of the typical functions within the organizational structure of a project.
118
3.1 Project Phases
LEARNING OBJECTIVES
1. Identify the phases of a project.
2. Describe the types of activities in each phase of a project.
Projects, by definition, have a beginning and an end. They also have defined phases
between the project kickoff and project closeout. A phase represents a grouping of
similar activities that has a very loosely defined beginning and end. Phases are also
typically sequential, where the prior phase is essentially complete before the
beginning of the next phase. Phases do not have clear-cut end dates and some
activities in an early phase of the project will continue into the later phases. This is
in contrast to project beginning and ending dates and milestone dates, which do
have clearly defined dates with the expectation that these dates will be met.
Initiation
The initiation phase1
of a project represents the activities associated with starting
up the project. Activities during the initiation phase include project kickoff
meetings, identifying the project team, developing the resources needed to develop
the project plan, and identifying and acquiring the project management
infrastructure (space, computers). On projects where the scope of work for the
project is not well defined, the project team will invest time and resources in
developing a clearer scope of work. On projects where the major project
stakeholders are not aligned, the project team will expend resources and time
creating stakeholder alignment.
The activities that occur within the initiation phase of the project vary on each
project. They include all the activities necessary to begin planning the project. The
initiation phase typically begins with the assignment of the project manager and
ends when the project team has sufficient information to begin developing a
detailed schedule and budget. Unlike project milestones, some activities associated
with project initiation may be delayed without delaying the end of the project. For
example, it is advantageous for the project to have the major project stakeholders
aligned from the beginning, but sometimes it is difficult to get the commitment
from stakeholders to invest the time and resources to engage in an alignment
process. Sometimes it is only after stakeholders begin observing progress on a
project that the project manager can facilitate the stakeholder alignment processes.1. Activities associated with
starting the project.
Chapter 3 Project Phases and Organization
119
The knowledge, skills, and experience needed on the project can vary in each phase.
During the early phases of a project, the project leadership needs good conceptual
skills, the ability to build a team, and the experience to build a project roadmap.
During project closeout, the project leadership provides a high degree of motivation
and attention to details. On a large project, lasting two or more years, it is common
to see the project management team change leadership to provide skills that are
appropriate to the final phases of the project.
The Project Management InstituteProject Management Institute, Inc., A Guide to the
Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA:
Project Management Institute, Inc., 2008), 11–16. identifies four major phases of a
project as characteristics of the project life cycle. These four life-cycle phases are
initiation, planning, execution, and project closeout. The initiation phase, which
PMI labels “starting the project,” includes all the activities necessary to start the
project. These activities include holding the project kickoff meeting, confirming or
developing conceptual schedules and budgets, and acquiring project execution
resources such as office space, computers, and communications equipment.
Planning
The planning phase2
, which PMI labels “organizing and preparing,” includes the
development of more detailed schedules and a budget. The planning also includes
developing detailed staffing, procurement, and project controls plans. The
emphasis of the planning phase is to develop an understanding of how the project
will be executed and a plan for acquiring the resources needed to execute it.
Although much of the planning activity takes place during the planning phase, the
project plan will continue to be adjusted to respond to new challenges and
opportunities. Planning activities occur during the entire life of the project.
Execution
The execution phase3
, labeled by PMI as “carrying out the work,” includes the
major activities needed to accomplish the work of the project. On a construction
project, this would include the design and construction activities. On an
information technology (IT) project, this would include the development of the
software code. On a training project, this would include the development and
delivery of the training.
Closeout
The closeout phase4
—or using PMI’s nomenclature, “closing of the
project”—represents the final stage of a project. Project staff is transferred off the
2. Developing detailed schedules;
plans for staffing,
procurement, and project
controls; and a budget.
3. Carrying out the planned work.
4. Shutting down the project,
including transferring staff,
closing offices, archiving
documents, and finishing
punch list items.
Chapter 3 Project Phases and Organization
3.1 Project Phases 120
project, project documents are archived, and the final few items or punch list is
completed. The project client takes control of the product of the project, and the
project office is closed down.
The amount of resources and the skills needed to implement each phase of the
project depends on the project profile. Typically, a project with a higher-complexity
profile requires more skills and resources during the initiation phase. Projects with
a profile that indicates problems with alignment among key stakeholders or
political and legal issues will require specialized resources to develop plans that
address these issues early in the project. A project with a lower complexity level
will invest more resources in the execution phases to execute the project as
effectively and efficiently as possible.
Chapter 3 Project Phases and Organization
3.1 Project Phases 121
Project Phases on a Large Multinational Project
A United States Construction company won a contract to design and build the
first copper mine in northern Argentina. There was no existing infrastructure
for either the mining industry or large construction projects in this part of
South America. During the initiation phase of the project, the project manager
focused on defining and finding a project leadership team with the knowledge,
skills, and experience to manage a large complex project in a remote area of the
globe. The project team set up three offices. One was in Chile, where large
mining construction project infrastructure existed. The other two were in
Argentina. One was in Buenos Aries to establish relationships and Argentinean
expertise, and the second was in Catamarca—the largest town close to the mine
site. With offices in place, the project start-up team began developing
procedures for getting work done, acquiring the appropriate permits, and
developing relationships with Chilean and Argentine partners.
During the planning phase, the project team developed an integrated project
schedule that coordinated the activities of the design, procurement, and
construction teams. The project controls team also developed a detailed budget
that enabled the project team to track project expenditures against the
expected expenses. The project design team built on the conceptual design and
developed detailed drawings for use by the procurement team. The
procurement team used the drawings to begin ordering equipment and
materials for the construction team; to develop labor projections; to refine the
construction schedule; and to set up the construction site. Although planning is
a never-ending process on a project, the planning phase focused on developing
sufficient details to allow various parts of the project team to coordinate their
work and to allow the project management team to make priority decisions.
The execution phase represents the work done to meet the requirements of the
scope of work and fulfill the charter. During the execution phase, the project
team accomplished the work defined in the plan and made adjustments when
the project factors changed. Equipment and materials were delivered to the
work site, labor was hired and trained, a construction site was built, and all the
construction activities, from the arrival of the first dozer to the installation of
the final light switch, were accomplished.
The closeout phase included turning over the newly constructed plant to the
operations team of the client. A punch list of a few remaining construction
Chapter 3 Project Phases and Organization
3.1 Project Phases 122
items was developed and those items completed. The office in Catamarca was
closed, the office in Buenos Aries archived all the project documents, and the
Chilean office was already working on the next project. The accounting books
were reconciled and closed, final reports written and distributed, and the
project manager started on a new project.
KEY TAKEAWAYS
• The phases of a project are initiation, planning, execution, and closeout.
• The initiation phase, which PMI calls “starting the project,” includes
activities such as holding alignment and kickoff meetings, identifying
the project team, developing the resources needed to develop the
project plan, and identifying and acquiring the project management
infrastructure.
• The planning phase, which PMI calls “organizing and preparing,”
includes developing detailed staffing, procurement, and project controls
plans.
• The execution phase, which PMI calls “carrying out the work,” includes
the major activities needed to accomplish the work of the project.
• The closeout phase, which PMI calls “closing of the project,” includes
transferring staff, archiving documents, closing offices, completing
punch list tasks, and turning over the results of the project to the client.
Chapter 3 Project Phases and Organization
3.1 Project Phases 123
EXERCISES
1. Completing the items on a punch list occurs during the _________ phase.
2. The ______ phase includes start-up activities and is called “starting the
project” by PMI.
3. The phase in which the project work is mainly accomplished is the
_______ phase.
4. How does the initiation phase differ from the planning phase?
5. What is a punch list and in which phase is it used?
6. What are the four phases of a project?
Project Phases
Consider a personal project that you have been involved with in the last few
years, such as moving your residence, buying a car, or changing jobs.
Describe the activities related to that project that fit into each of the four
project phases.
Chapter 3 Project Phases and Organization
3.1 Project Phases 124
3.2 Project Organization
LEARNING OBJECTIVES
1. Identify the various functions represented on a project.
2. Analyze and evaluate the influence of organizational structure on
project functions.
3. Design a project organizational chart for various project complexity
profiles.
There is no single organizational approach to projects. Each project is organized to
accomplish the work effectively and efficiently. Several factors influence the
organizational approach to execute a project. The complexity profile of a project,
the culture of the parent organization, the preferences of the project manager, the
knowledge and skills of the team, and a parent organization with a project
management office are examples of factors that influence the project’s
organization.
In developing the project organizational structure, the project manager considers
the span of control5
for each manager. The span of control represents the number
of people reporting to a manager. For example, the project manager does not want
all the engineers on a project reporting to the engineering manager and assigns
senior engineers to report to the engineering manager with other engineers
reporting to the senior engineers.
The engineering manager can organize the engineering reporting structure so that
the various engineering discipline managers would report to him or her. For
example, the structural, electrical, and mechanical engineering team leaders would
report to the engineer manager. On a larger, more complex project, the engineer
manager may establish area team leaders and have the structural, electrical, and
mechanical engineers report to an area team leader. If the project is geographically
dispersed, with the engineering office staff in different cities working on the
project, then structuring the engineering function by area provides better
coordination and control (see Figure 3.1 "Decreasing Span of Control by Increasing
Levels of Reporting").
5. The number of people
reporting to a manager.
Chapter 3 Project Phases and Organization
125
Figure 3.1 Decreasing Span of Control by Increasing Levels of Reporting
The organization on the left has seventy-one engineers reporting to the same
person. The organization on the right creates two additional positions and reduces
the span of control to thirty-seven and thirty-four, respectively.
Most projects have similar functions that are important to successfully managing
the project. Included among these are the following:
• Sponsor
• Project manager
• Controls
• Procurement
• Technical management
• Quality
• Administration
Chapter 3 Project Phases and Organization
3.2 Project Organization 126
Figure 3.2 Typical Project Organization
On smaller projects, more than one function can be managed by one person. On
larger projects, large teams may be needed to accomplish the work within the
function.
Project Sponsor
The project sponsor is outside the day-to-day operations of the project and has the
organizational authority to provide resources and overcome barriers for the
project. The project sponsor is typically a leader in the parent organization with an
interest in the outcome of the project. As a leader in the parent organization, the
project sponsor can provide input into the project scope and other documents that
define project success. The guidance and support from the project sponsor
enhances the ability of the project to successfully meet the parent organization’s
objectives.
Chapter 3 Project Phases and Organization
3.2 Project Organization 127
Southern Training Center Organization
A training organization in South Carolina assigned a project sponsor to every
project. For smaller projects, the regional manager fulfilled the role of project
sponsor. On larger, more complex projects, the operations manager was the
project sponsor. The vice president was the project sponsor of the three or four
most complex projects, and the president was the project sponsor only on
projects with a high degree of political risk. This approach to assigning project
sponsors assured that each project had an organizational advocate that could
address barriers and provide direction and resources. The project sponsor, in
this organization, developed a relationship with a senior representative of the
client organization, reviewed monthly reports, and conducted thorough
quarterly reviews.
Project Manager
Project managers often have the breadth of responsibility associated with corporate
chief executive officers (CEOs). The project manager facilitates the start-up of a
project and develops the staff, resources, and work processes to accomplish the
work of the project. He or she manages the project effectively and efficiently and
oversees the closeout phase. Some projects are larger than major divisions of some
organizations, with the project manager responsible for a larger budget and
managing more risk than most of the organizational leaders. A mining company
that builds a new mine in South Africa, an automobile manufacturer that creates a
new truck design, and a pharmaceutical company that moves a new drug from
testing to production are examples of projects that may consume more resources in
a given year than any of the organization’s operating divisions.
The function of the project manager can vary depending on the complexity profile
and the organizational structure. Defining and managing client expectations and
start-up activities, developing the scope, and managing change are functions of the
project manager. On some projects, the project manager may provide direction to
the technical team on the project. On other projects, the technical leadership might
come from the technical division of the parent organization.
Although the functional responsibilities of the project manager may vary, the
primary role is consistent on every project. The primary role of the project
manager is to lead, to provide a vision of success, to connect everyone involved in
the project to that vision, and to provide the means and methods to achieve
Chapter 3 Project Phases and Organization
3.2 Project Organization 128
success. The project manager creates a goal-directed and time-focused project
culture. The project manager provides leadership.
Project Control
In general, project controls6
is both the planning function and the function that
tracks progress against the plan. Project control provides critical information to all
the other functions of the project and works closely with the project manager to
evaluate the cost and scheduling impact of various options during the life of a
project.
Sometimes accounting functions such as payroll, budgeting, and cash management
are included within project controls. On larger projects, accounting functions are
typically separate because the accounting culture tracks expenses to the nearest
penny, and cost estimating and tracking by project controls can often be off by
hundreds and sometimes thousands of dollars. The lack of definitive information
necessitates the development of cost estimates within ranges that are often
inconsistent with accounting practices. Separating these two functions allows each
to operate within their own accuracy comfort zone. The following are typical
activities included within the project controls function:
• Estimating
• Tracking costs
• Analyzing trends and making projections
• Planning and scheduling
• Managing change
• Tracking progress against schedule
The project controls team gathers this information from all the functions on the
project and develops reports that enable each functional manager to understand
the project plan and progress against the plan at both the project level and the
functional level. On large complex projects, some project managers will assign
project controls professionals to work within the major functions as well as the
project management office. This approach allows each function to plan and track
the function’s work in more detail. The project controls manager then coordinates
activities across functions.
Project Procurement
The approach to purchasing the supplies and equipment needed by the project is
related to the complexity profile of the project. A small project with a low
complexity level may be able to use the procurement services of the parent
6. Planning function and the
function that tracks progress
against the plan.
Chapter 3 Project Phases and Organization
3.2 Project Organization 129
organization. In an organization where project resources reside in various
departments, the departments may provide the supplies and equipment each team
member of the project may need.
Southern College Procurement Organization
A college in South Carolina chartered a number of projects to increase the
energy efficiency of the college. The project team included members from
various college departments. Each department paid for the time, travel
expenses, and supplies needed by the team member from their department.
Each team member continued to use the computers and administrative support
in their department for project work. The costs for this support was not
included in the project budget nor tracked as a project expense. Equipment
purchased by the project that was installed to reduce the energy consumption
of the college was purchased through the college procurement department and
charged to the project.
More complex projects with greater procurement activity may have a procurement
person assigned to the project. This same South Carolina college retrofitted a
warehouse to create a new training center for industry. A procurement person was
assigned to the project to manage the contract with the construction firm
remodeling the space, the purchase and installation of the new training equipment,
and the purchase of the supplies needed by the project team. All the procurement
activity was charged to the project. The procurement person reported to the
project manager for better communication on what the project needed and when it
needed it. The procurement person participated as a member of the project team to
understand and provide input into the costs and scheduling decisions. The
procurement person reported to the college procurement manager for developing
and implementing project procurement processes that met college procurement
policies and procedures.
Chapter 3 Project Phases and Organization
3.2 Project Organization 130
Figure 3.3
The procurement manager is part of the project team.
On larger, more complex projects, the procurement team has several
responsibilities. The team is responsible for procuring the supplies and equipment
(such as office supplies and computers) needed for the project team and the
supplies and equipment (such as the training equipment) needed to execute the
project. On a typical construction project, the procurement team would rent a
construction trailer, office supplies, and computers for the project team to establish
a construction office at the construction site. The procurement team would also
purchase the concrete, rebar, steel, and other material needed to construct the
building.
Procurement for Mining Project in South America
On the large mining project in South America, during the initiation phase of the
project, the procurement department arranged for office space and supplies for
the engineering teams in Canada, Chile, and Argentina and construction offices
at the construction site in Argentina. As the design and engineering progressed,
the procurement team managed bids for the major equipment and bids for the
preparation of the construction site. The procurement team managed the
logistics associated with transporting large equipment from Europe, North
America, and Asia to the job site in rural Argentina. After the completion of the
project, the procurement team managed the deposal of project property.
Chapter 3 Project Phases and Organization
3.2 Project Organization 131
On large, complex projects, the procurement team manages at least three types of
relationships with companies doing business with the project.
Commodity Procurement
The largest number of purchased items for most projects are commodity items.
Commodities are items that can be bought off the shelf with no special modification
for the project. These items are typically bid and the lowest prices that can meet
the schedule of the project will win the contract. The procurement team assures the
company that wins the bid can perform to the contact specifications and then
monitors the progress of the company in meeting the projects requirements.
Concrete for the project and the cranes leased to the project are examples of
commodities. The key to success in managing commodity suppliers is the process
for developing the bids and evaluating and awarding the contracts.
Procurement from Vendors
The second type of relationship is the vendor relationship. The terms supplier and
vendor are often used interchangeably. In this text, suppliers provide commodities,
and vendors provide custom services or goods. Suppliers bid on specialized
equipment for the project. Engineers will specify the performance requirements of
the equipment, and suppliers that have equipment that meets the requirements will
bid on the project. The engineering team will assist in the evaluation of the bids to
assure compliance with specifications. The lowest bid may not win the contract.
Sometimes the long-term maintenance costs and reliability of the equipment may
indicate a high price for the equipment. The key to success is the development of
clear performance specifications, good communication with potential bidders to
allow bidders to develop innovative concepts for meeting the performance
requirements, and a bidding process that focuses on the goals of the project.
Partnerships
The third type of project procurement relationship is the partnership. Sometimes
the partnership is legally defined as a partnership, and sometimes the success of
each partner is so closely tied together that the relationship operates as a
partnership. On the South American project, the project team partnered with an
Argentinean construction company to access the local construction practices and
relationship with local vendors. This was a legal partnership with shared profits.
The partner also designed and procured some large mining equipment on which the
success of the project and the company building the mining equipment depended.
With this type of relationship, a senior manager on the project is assigned to
coordinate activities with the partner, and processes are put in place to develop
shared goals, align work processes, and manage change.
Chapter 3 Project Phases and Organization
3.2 Project Organization 132
Figure 3.4 Procurement Manager Relationships
Technical Management
The technical management on the project is the management of the technology
inherent in the project—not the technology used by the team to manage the
project. The technical complexity on a project can vary significantly. The
technological challenges required to build a bridge to span a five-hundred-meter
canyon are significantly different from those required to span a five-thousandmeter
body of water. The technological complexity of the project will influence the
organizational approach to the project. The technological complexity for a project
reflects two aspects: the newness of the technology and the team’s familiarity with
the technology. The newness refers to the degree to which the technology has been
accepted in the industry. The more accepted the technology is in the industry
usually means that more knowledge and experience will be available to the team.
Familiarity refers to the experience the project team has with the technology. The
less familiarity the team has with the technology, the more energy and resources
the team will expend on managing the technological aspect of the project. For
projects with high levels of project technology, a specialist may be hired to advise
the technology manager.
Chapter 3 Project Phases and Organization
3.2 Project Organization 133
Indiana Steel Company
A steel company in Indiana purchased a new coal injection technology that
would improve the quality of steel, reduce the cost to produce the steel, and
reduce air and water pollution. The contract to design and construct the new
plant was awarded to an engineering and construction company. No one on the
engineering and construction team had experience with the coal injection
technology. The client’s team understood the technology and provided
guidance to both the project engineering and construction teams. The client
owned the coal injection technology, and the engineering and construction
team brought the project management technology.
Project Quality
Project quality is often part of the technical manager’s responsibility. On large
projects or projects with a high degree of technical complexity, the quality is
sometimes a separate function reporting to the project manager. The project
quality manager focuses on the quality of the project work processes and not the
quality of the client’s product. For example, if the project is to design and construct
an automobile factory, the quality manager focuses on the project work processes
and meeting the technical specification of the equipment installed by the project
team. The project quality manager is not responsible for the quality of the car the
plant produces. If the plant functions to the defined project specifications, the
quality of the plant output is the responsibility of the plant quality department, and
it may take several months for the plant to refine the work processes to meet the
design specifications of the car.
On a construction project, the quality manager may test steel welders to assure the
welders have the skills and that the welds meet project specifications. On a training
project, the quality manager may review the training curriculum and the
qualification of the instructors to assure the training provides the knowledge and
skills specified by the client. On a drug development project, the quality manager
may develop processes to assure the water and other raw material meet
specifications and every process in the development process is properly
documented.
Project Administration
The administrative function provides project specific support such as the following:
Chapter 3 Project Phases and Organization
3.2 Project Organization 134
• Accounting services
• Legal services
• Property management
• Human resources (HR) management
• Other support functions found in most organizations
In most organizations, support for these functions is provided by the parent
organization. For example, people assigned to the project will get human resources
(HR) support from the HR department of the parent organization. Salary, benefits,
and HR policies for employees assigned to the project will be supported out of the
HR department. The parent organization will provide accounting functions such as
determining the cost of cash, taxes, year-end project reports, and property disposal
at the end of the project.
The project manager on smaller, less complex projects will have sufficient
knowledge about these issues to coordinate with the parent organization’s
functional leaders. On more complex projects, the project may have an
administrative manager responsible for coordinating the administrative functions
of the projects. On larger, more complex projects, an administrative function may
be established as part of the project team, with many of the functions assigning a
resource to the project. In all cases, the administrative function on a project is
closely related to the legal and organizational responsibilities of the parent
organization and close coordination is important.
Chapter 3 Project Phases and Organization
3.2 Project Organization 135
South American Mining Project
The South American mine project has major design work to accomplish in three
different design offices: Vancouver, Santiago, and Argentina. The project
manager and the leadership team reside in Santiago, Chile. During the design
stage of the project, the engineering manager in each engineering office is
leading the work with project controls, procurement, and administration, each
assigning resources to support the engineering activities at each location. The
project engineer manager assigned the engineering work based on the
capabilities of the office and coordinates the work between offices. The
procurement, project controls, and administrative leaders assign resources to
support the work in each office. For example, the project controls manager
assigned a planner in each office to support the engineering manager in that
office to develop and track the schedule. The project planner in Vancouver
supports the development of the engineering schedule in Vancouver and
communicates and coordinates with the planning activities in the other
locations
When the project construction activities started, project controls, procurement,
and administrative resources moved from supporting engineering to
supporting the construction activity. The project organizational structure
changed as the engineering manager and the engineering effort changed from
primarily designing the project to supporting the construction effort, by
answering construction questions and developing solutions to construction
challenges. The procurement effort changes from managing the bidding and
contracting activities to managing the logistics.
Chapter 3 Project Phases and Organization
3.2 Project Organization 136
Figure 3.5 Organization for Major International Project
Chapter 3 Project Phases and Organization
3.2 Project Organization 137
KEY TAKEAWAYS
• Key functions on a project include sponsor, project manager, controls,
procurement, technical, quality, and administration.
• The project sponsor has the organizational authority to provide
guidance and resources and can overcome barriers for the project.
• The project manager is the project leader with broad responsibilities for
all phases of the project and for meeting project goals and client
expectations.
• The project controls manager is responsible for controlling the project
processes, including cost estimating and tracking, developing schedules,
tracking progress against schedules, managing changes to the schedule
or budget, and analyzing trends.
• The procurement manager is responsible for obtaining the services and
materials needed to complete the project. This is accomplished by
purchasing commodities, managing contractors who provide services
and products, and working with partners.
• The technical manager deals with the issues related to the technology of
the project.
• The quality manager monitors the project’s processes—not the quality
of the product of the project—and takes steps to assure they are done
correctly and meet specifications.
• Project administration manages accounting, legal, property, and human
resources.
Chapter 3 Project Phases and Organization
3.2 Project Organization 138
EXERCISES
1. Materials or services whose quality is standardized and that are usually
purchased based on lowest price are __________.
2. Major components of a project that are specialized and that require the
provider to help with solving problems and share in the profits are
provided by ____________
3. Worker benefits would be managed by the ________ function.
4. Tracking costs and comparing them to the project budget is handled by
the ___________ function.
5. Buying concrete for a bridge project would be handled by the
__________ function.
6. Checking to see that the work performed on the project is done
consistently and up to specifications is managed by the ________
function.
7. The number of people who report to a manager is referred to as the
_____ __ ______ (three words).
8. If employees are responsible for estimating costs, to whom would they
report?
9. Refer to Figure 3.1 "Decreasing Span of Control by Increasing Levels of
Reporting". How many additional employees were added to decrease the
span of control of the engineering manager, and how was this
accomplished?
10. Refer to Figure 3.4 "Procurement Manager Relationships". How do
partnerships affect the complexity of the project? Describe an example
of a situation where the partnership could affect the complexity of the
project.
11. How is procurement from suppliers different from buying commodities?
12. Refer to Figure 3.3. To whom does the procurement manager report?
Provide an example of a situation where this reporting relationship
might increase the complexity of the project.
Project Organization
Refer to the descriptions of the project functions and determine which
manager would take care of each of the following problems. If you think the
problem requires the attention of more than one function, explain why.
1. One of the project team members has filed a sexual harassment suit
against another team member of equal rank. ___________
2. A contractor is installing equipment that is substandard. ___________
Chapter 3 Project Phases and Organization
3.2 Project Organization 139
3. The computer software used to make a step improvement in the client’s
operations has a significant bug in it. ___________
4. The client wants to use higher-quality materials in the project than was
originally agreed on. ___________
5. Your organization has announced budget cuts but you cannot afford to
lose anyone at this crucial stage in the project. ___________
6. A contractor has complained that the procurement manager has a
conflict of interest with a competing contractor. ___________
Chapter 3 Project Phases and Organization
3.2 Project Organization 140
3.3 Using the Darnall-Preston Complexity Index to Measure
Organizational Complexity
LEARNING OBJECTIVE
1. Analyze a project function for size, organizational complexity,
technological newness, and technological familiarity and assign a
complexity score.
Recall that the Darnall-Preston Complexity Index (DPCI™) ranks complexity in four
categories: external, internal, technological, and environmental. The information
provided in this chapter can be used to rate a project’s complexity in the areas of
size, organizational complexity, technological newness, and technology familiarity.
Scores range from 1 (least complex) to 5 (most complex).
Size
Recall that size is relative to the organization’s comfort zone for projects. Refer to
the following descriptions for tips on arriving at a DPCI score for size:
1. The project size is the most common size the organization does. The
project manager and team members have done many similarly sized
projects, and the tools they use to manage this size project are well
tested and reliable.
2. The project size is at the high or low end of the range of project sizes
that the organization or team members have done before.
3. The project size is about 20 percent higher or lower than projects the
organization or some of the team members have done before. The
project leader and a few key team leaders are familiar with this size
project from work they have done elsewhere. Project management
tools and processes will have to be adjusted but will probably work.
4. The project size is about 50 percent higher or lower than projects the
organization or most of the team members have done before. Project
management tools and processes will have to be adjusted, and it is not
certain that they will work well. New tools and procedures may be
needed.
5. Neither the organization nor the team members are experienced
working on a project this size. It is several times larger or smaller than
Chapter 3 Project Phases and Organization
141
previous projects. It is too small or too large for the tools and
techniques with which the team is familiar.
Organizational Complexity
Recall that system complexity is determined by the variety of types of elements and
the number of connections there are between elements. Review a chart of the
organizational structure that depicts the reporting relationships, the number of
people involved, their familiarity with each other, and the amount of cross
connections between reporting relationships and functions. Refer to the following
descriptions for tips on arriving at a DPCI score for size:
1. The organizational structure is simple and involves few people. No new
relationships need to be formed, and the people have worked together
in these relationships before.
2. The team includes people who report to operations managers instead
of the project manager, and more people are involved.
3. The organization chart has numerous segments, but most people are
familiar with their roles and have worked in this type of role before.
4. The number of people involved is large, and the functions are handled
by many different people. There are several levels of reporting in the
organization chart.
5. The number of people is very large, and many of them do not know
each other or have never met. Each major function requires a full-time
person, and coordinating between functions requires frequent
meetings among mid- and top-level managers.
Technology Newness
Recall that this category refers to the technology that is part of the project. It might
be new technology that is being implemented to make a step change in the
efficiency of an operation. Refer to the following descriptions for tips on arriving at
a DPCI score for size:
1. The technology is not new. It has been around for years and is reliable.
2. The technology is only a few years old. Most of the initial bugs are out
of it, but the fixes have not been thoroughly tested.
3. The technology is recent, and only a few other organizations have
experience with it. The providers promise that the next release or
version will have the problems resolved.
4. The technology is new and has just been released for general use.
Problems are likely.
Chapter 3 Project Phases and Organization
3.3 Using the Darnall-Preston Complexity Index to Measure Organizational Complexity 142
5. The technology is in an early testing phase, and your organization is
one of the test sites. Problems are expected.
Technology Familiarity
Recall that this category refers to the familiarity of the project team with the
technology that is part of the project. Refer to the following descriptions for tips on
arriving at a DPCI score for size:
1. The team members have all used the technology or have been involved
with projects that used this technology. They are confident that they
understand it and can handle problems related to it.
2. The technology is new to some of the team members who are not in
key positions. Standardized training is available, if necessary, to teach
them what they need to know about it to do their jobs.
3. Several team members have not worked with this technology,
including some of the key team members. Standardized training is not
available, and consultants might be needed.
4. The technology is new but is similar to previous technologies with
which the team leaders are familiar. An advisor from the product’s
development team may serve as a technology advisor.
5. The technology is new, and no one has worked with it before. A
specialist might be needed to avoid serious errors.
Tips for Assigning a Score
Assigning a score is not an absolutely accurate process. Your objective is to be
approximately correct, and some people are not comfortable with this type of
estimate. Recall that one of the attributes of a successful project manager is the
ability to live with ambiguity. One method that will help when assigning a score is
to consider the two extremes. For each factor in the DPCI, consider what the
simplest—least complex—scenario would look like, which would be a 1 on the DPCI
scale. Next consider what the most complex scenario would be, which would
describe a 5. Then, compare actual projects to those two extremes. If it is close to,
but not as simple as, the least complex, you would give it a 2. If it is close to, but not
as complex as, the most complex scenario you would give it a 4. If it is about in the
middle, it rates a 3.
Chapter 3 Project Phases and Organization
3.3 Using the Darnall-Preston Complexity Index to Measure Organizational Complexity 143
KEY TAKEAWAY
• Scores range from 1 to 5, where 1 is the lowest level of complexity and 5
is the highest. In each situation, consider what the two extremes would
look like and then judge where the current situation lies between those
extremes.
Chapter 3 Project Phases and Organization
3.3 Using the Darnall-Preston Complexity Index to Measure Organizational Complexity 144
EXERCISES
1. If a project is about 20 percent larger or smaller than projects previously
done by most of the team members, it should be rated as a ____ for size
complexity.
2. If the organizational structure is simple and involves few people and no
new relationships need to be formed, the project rating for
organizational complexity should be a ___.
3. If the technology is in an early testing phase, your organization is one of
the test sites, and problems are expected, the technology newness
complexity rating should be a ______.
4. If the technology is new to some of the team members who are not in
key positions, but standardized training is available to teach them what
they need to know about it to do their jobs, the technology familiarity
complexity rating should be a ____.
5. Why does the newness of a project’s technology increase its complexity?
6. The project controls manager decides to change the software his team
uses to track project activities from Microsoft Project to Primavera. Few
of the staff in that department are familiar with Primavera. How would
this change affect the project technology complexity index score?
Explain your answer.
Techniques for Assigning Scores
Refer to the tips for assigning scores to answer the following questions:
1. How does the ability to live with ambiguity relate to assigning scores
using the DPCI? ___________
2. How does considering extremes help to assign a score? ___________
Choosing a Complexity Score
Consider a project that involves the merger of computer systems of two
banks. The acquiring bank wants to convert the other bank’s computer
system to its own software, and the project is to convert all the client
account files. The software used by the acquiring bank is relatively new, and
only about a third of the project team is familiar with it. Your task is to
determine a DPCI rating for the familiarity of the project team with the
technology.
1. Describe a scenario that would qualify for a rating of 1.
2. Describe a scenario that would qualify for a rating of 5.
Chapter 3 Project Phases and Organization
3.3 Using the Darnall-Preston Complexity Index to Measure Organizational Complexity 145
3. Indicate the rating you would choose and explain your choice.
Chapter 3 Project Phases and Organization
3.3 Using the Darnall-Preston Complexity Index to Measure Organizational Complexity 146
3.4 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. In June 2009, the CEO of Fiat took on the management of Chrysler and
began a project with the objective of joining the two companies. He
chose to “flatten” the management organization by increasing the
number of people who report to him from a “handful” to twenty-three.
Video conferences between the Chrysler and Fiat management teams
take place from a conference room in Chrysler headquarters in Michigan
where there are twenty-three seats and microphones for the Chrysler
team members.Neal E. Boudette, “Fiat CEO Sets New Tone at Chrysler,”
Wall Street Journal, June 19, 2009, http://online.wsj.com/article/
SB124537403628329989.html (accessed June 21, 2009). What do you think
are the pros and cons of changing the CEO’s span of control in this
manner? Will this increase or decrease the complexity of the
organization? Your answer should display an understanding of span of
control and organizational complexity.
2. The DPCI™ and the Myers-Briggs Type Indicator® (MBTI): The human
personality is more complex than a project; an evaluation system
developed by Isabel Myers-Briggs based on the work of psychologist Carl
Jung attempts to provide a simple profile based on four ranges of
personality traits: introverted versus extroverted, intuitive versus
sensing, thinking versus feeling, and judging versus perceiving. How
does the Myers-Briggs profile compare and contrast with using the DPCI
to determine the strengths and challenges of a project?
Chapter 3 Project Phases and Organization
147
DISCUSSION
The exercises in this section are designed to promote an exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Controls and procurement. Under what circumstances would the
responsibilities of the controls manager and the procurement manager
overlap? Describe the situation. Your description should indicate an
understanding of the roles and duties of each manager. Consider the
examples provided by your classmates and compare them with your
example to determine if you correctly understand these two roles.
2. Describe the four phases of a project in your own words. Pick a project
that would have a score of 1 on the Darnall-Preston Complexity Index in
the areas of size, organizational complexity, technology newness, and
technology familiarity. Consider the examples provided by your
classmates and compare them with your example to determine if you
correctly understand how to score a project’s complexity in these areas.
Chapter 3 Project Phases and Organization
3.4 Exercises 148
3.5 Web Exercise
LEARNING OBJECTIVE
1. Locate, download, and analyze project templates.
Use Templates to Standardize Project Development
Many organizations standardize their project development process using templates.
The use of templates makes it easier to compare projects and to assure that all the
requirements are met. In this exercise, you locate and download a template for
creating a scope statement and its completion instructions. The template is used by
the State of Virginia. This template and its instructions for completion provide an
overview of the structure of a project because the main parts of a project are clearly
identified.
How to Download a Project Template and Its Instructions for Completion
1. Start a web browser program and go to the Office of Enterprise
Technology for the State of Virginia at http://www.vita.virginia.gov/
oversight/projects/default.aspx?id=567. A list of templates displays, as
shown in Figure 3.6 "State of Virginia Project Management Templates".
Chapter 3 Project Phases and Organization
149
Figure 3.6 State of Virginia Project Management Templates
© Commonwealth of Virginia
2. Under Project Initiation, in the Project Charter row, in the Instructions
column, click the Word icon. Save the file to your computer. Notice the
folder in which you choose to save the file so you can find it again
later.
3. Open the file. Scroll down to page 2 and display section E, steps 1
through 3, as shown in Figure 3.7 "Description of the Project and Its
Scope, Milestones, and Deliverables".
Chapter 3 Project Phases and Organization
3.5 Web Exercise 150
Figure 3.7 Description of the Project and Its Scope, Milestones, and Deliverables
© Commonwealth of Virginia
4. Read each of the three items. Capture this screen to the computer’s
memory.
5. Start a word processing program and open a new document. On the
first line, type your name. Below your name, paste the screen capture.
6. Save that document as Ch03ScopeStudentName in the .doc format used
by Microsoft Word 2003.
7. Return to the Scope Statement Development Instructions document.
Scroll to item F and then read the instructions for describing the
project authority.
8. Capture this screen to the computer’s memory. Switch to
Ch03ScopeStudentName.doc and paste the screen below the first screen
capture image.
9. Return to the Scope Statement Development Instructions document.
Scroll to item G and then read the instructions for describing the
project organization.
10. Capture this screen to the computer’s memory. Switch to
Ch03ScopeStudentName.doc and paste the screen.
11. Switch to the web browser program. On the Project Charter row, in the
Word Template column, click the Word icon. Save this document to the
same folder as the instructions. Open this document.
12. In the Scope Statement Template, scroll through all eleven pages to
review the elements of the project.
13. Scroll to the top of page 7. In section F, below item 2, enter your name
as the project manager. Capture this screen to the computer’s memory.
Switch to Ch03ScopeStudentName.doc and paste the screen below the
other screen images.
Chapter 3 Project Phases and Organization
3.5 Web Exercise 151
14. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch03ScopeStudentName.doc
Word
2010
version
using
.docx
Another
file
name
Locate,
download,
and
analyze
project
templates
Name on first line followed
by screen captures of
sections E, F, and G of the
instructions and page 7 of
the template with your
name as the project
manager
Same as
Best
Some
screens
missing
or name
not
shown
as the
project
manager
in the
template
15. Save Ch03ScopeStudentName.doc and submit it as directed by the
instructor. Close all documents and programs.
Chapter 3 Project Phases and Organization
3.5 Web Exercise 152
Chapter 4
Understanding and Meeting Client Expectations
Project management is about managing work processes and leading people. The
technical skills of a project manager—the ability to organize the project and
develop a scope, budget, and schedule—are critical to executing a project that will
finish on time, within budget, and to the project specifications. However, the
project will not be a success if the important stakeholders are unhappy with the
results.
Project stakeholders often have a significant role in the success of a project. The
ability of the project manager to understand the expectations of the various
stakeholders and motivate them to contribute to the project success is a major
aspect of the project manager’s leadership role. In this chapter, we explore the
concepts and skills needed by the project manager to understand and meet the
expectations of the one of the most important stakeholders—the client—and the
various means and methods for motivating the client to contribute to project
success.
One of the definitions of project success focuses on achieving client satisfaction.
This definition highlights the importance of the client as critical for both defining
and achieving project success. The client is an important project constituent and in
most cases the most important constituent. DarnallRussell W. Darnall, The World’s
Greatest Project (Newtown Square, PA: Project Management Institute, Inc., 1996),
48–55. described actions for the project manger focused on defining and meeting
client expectations. Project success often includes meeting project goals and
specifications, and it also includes understanding and meeting the expectations of
the client. Depending on the complexity level of the project, the plan to meet the
client’s expectations can range from having a general discussion with the project
leadership team to developing a formal plan that is tracked during the life of the
project.
153
Figure 4.1 Educating the
Client
© 2010 Jupiterimages
Corporation
4.1 Including the Client
LEARNING OBJECTIVES
1. Describe what the client needs to know about changes in management
style during different phases of a project.
2. Identify advantages and disadvantages of including the client on project
teams.
To appreciate the skill and effort expended by the project team in achieving the
objectives of the project, the client needs to know more about what the team does.
Educate the Client from the Beginning
Often the client does not have the project management
experience of the project manager or project team. An
experienced project manager understands the phases of
the project and the requirements of the different
phases. A less experienced client may become frustrated
at the changes in the management approach required
for the different phases of the project. For example,
during the early phases, the project leadership is
encouraging creative approaches to accomplishing the
project goals. As the project proceeds and the project
plan becomes more firm, the project leadership focuses
on accomplishing the project goals. The types of
meetings, the agenda of the meetings, and the general
project atmosphere change as the project moves from
the planning phase to the production mode of the
execution phase of the project.
During the last phases on a project, project team
members are often tired and beginning to anticipate the
transition that will take place at the end of the project.
The motivational approach that worked during the
early phases of the project is less effective during the final phases, and the project
manager applies different approaches to motivating the project team. These
changes can be disconcerting on a person’s first project. By explaining what to
expect and planning with the client a process to minimize the impact of these
Chapter 4 Understanding and Meeting Client Expectations
154
Figure 4.2 Client
Participation
© 2010 Jupiterimages
Corporation
changes, the project manager prepares the client for these events and reduces the
frustration.
Include the Client on Selected Project Teams
The project client translates the needs of the organization through chartering the
project and defining the project scope to the project manager and the project team.
The client also has an oversight role. This oversight is often accomplished through
regular project reviews and reports from the project team. Depending on the
complexity level of the project, the reviews can vary significantly. On less complex
projects, the review might be conducted in a one-hour meeting with a one-page
summary document serving as the project progress report. On more complex
projects, a full-day meeting might be necessary for the project progress to be fully
understood, and the project report may be one hundred pages or more.
In addition to providing the formal overview of the
project, most clients would like to actively participate in
the success of the project. This is a delicate balance. The
participation of the client can have undue influence on
project decisions. The advantage of including the client
in project activities is to gain the client’s personal
investment in the project plan, to create a better
understanding for the client of the problems the project
encounters during the life of the project, and to gain the
insights and contributions of the client in problem
solving.
Involving the client in teams where the client’s special
knowledge can add value to the team discussions and
activities contributes both to the success of the team
and the satisfaction of the client. During the construction of a chemical plant in
Tennessee, the project team struggled with a very tight project schedule. A team
was established to explore ways to reduce the approval process for the drawings of
the plant design. It was taking two weeks for the design review, and even though
this was within the normal time frame for design reviews, the project management
team believed there were opportunities to reduce this time and shorten the length
of the project.
The client’s engineering manager participated in the brainstorming sessions that
explored ways to reduce the design review time. Several good ideas were developed
and put into place. The client’s engineering manager took these ideas back to the
client’s team and instituted many of the same ideas. The result was a shortened
Chapter 4 Understanding and Meeting Client Expectations
4.1 Including the Client 155
schedule that saved two weeks by the end of the plant design. The other result was
a client that contributed to the project success and was emotionally engaged in the
positive outcomes.
KEY TAKEAWAYS
• The project manager’s style changes with each phase of the project. The
client could be surprised when the style changes from one that is open
to any new idea in the initiation phase to a more task-oriented style
during execution or a more demanding style during closeout.
• Client participation in project teams can have undue influence on
decisions, but this is offset by the buy-in of the client and the insights
the client can offer when special knowledge is needed or schedules need
to be changed.
EXERCISES
1. The client might be surprised when the project manager’s style changes
from inviting new ideas during the conceptual phase to discouraging
them during the ________ phase.
2. One problem with client participation in project teams is that a client
can have ______ influence.
3. What should the client know about the different management styles
used in the initiation, execution, and closeout phases of the project?
4. What is an advantage of having the client participate in some project
teams?
Client Influence
Consider a project you have been involved in which the client took part in
meetings and decision making. If you were to do the project again, describe
how you would manage the client’s involvement. Specifically, describe the
positive aspects that you would repeat and the negative aspects that you
would try to avoid.
Chapter 4 Understanding and Meeting Client Expectations
4.1 Including the Client 156
4.2 Understanding Values and Expectations
LEARNING OBJECTIVES
1. Identify methods for determining client expectations.
2. Identify methods for clarifying values and determining differences.
3. Describe the importance of dealing fairly with the client.
Two of the sources of dissatisfaction in personal and business interactions are
unmet expectations and a misunderstanding or ignorance of the values held by the
other party. The project manager needs to avoid having a dissatisfied client due to a
clash of values or a failure to meet expectations.
Clarify Expectations
Client expectations are expressed in chartering documents such as the scope of
work, the project purpose statement, and the list of project deliverables. Other
expectations exist that are more difficult to express in written documents.
Managing Expectations
One project client had such a difficult time with the billing processes on her
previous project that significant project management time and resources were
expended on reconciling billing issues. This client has an expectation in the
next project that project accounting and billing processes operate effectively
and efficiently. Another client had been constantly surprised by changes and
nonplanned events happening on the project. This client wanted to participate
early in the discussion of problems that arise during the life of the problem and
contribute to finding solutions and minimizing the negative impact on project
performance.
Understanding and capturing these expectations in a written document is an
important step in effectively meeting client expectations. Often it is the next
question1
that enables a project manager to discover the less obvious expectations.
The next question is the one the project manager asks after the initial response to
1. Refers to asking additional
questions to reveal hidden
expectations.
Chapter 4 Understanding and Meeting Client Expectations
157
inquiries about expectations. In our example, the client may express that he or she
wants project billings to be accurate and timely. This is an easily understandable
expectation, but when the project manager asked the next question—“Can you tell
me more about what you mean?”—the client revealed the problems on her previous
project, and the project team developed a better understanding of the client’s
concern. The project team developed measures for tracking project billings that
measured both timeliness and accuracy. This process enabled the project team to
understand the client’s concern, develop work processes that demonstrated a
response, and provide data to the client on the timeliness and the accuracy of the
billing processes.
For the client that expected to hear about problems early and participate in the
problem-solving discussions, the project team shared the project action item
register and highlighted issues the team felt may be important to the client. The
project manger also discussed potential concerns with the client during their
weekly project update.
After the project team captures the client expectations, the team then develops a
method for tracking performance against expectations. In our example, the project
team defined accuracy and timeliness in measurable terms and tracked the team
performance. The project team developed a survey to track the client’s perception
of inclusion in the problem-solving process and tracked the client’s response. These
measures were then presented in the project review meetings with other measures
of project performance such as cost and schedule.
As the project team meets and exceeds the client expectations, these expectations
tend to change. If the goal is 85 percent accuracy on all project billings, and the
project team begins to perform with an average of 95 percent accuracy or higher
and never falls below 90 percent, then the client begins to expect 95 percent
accuracy. This is a realistic expectation of the client; it also changes the expectation
so that meeting the client’s expectation becomes harder. Even if expectations
change, it is important to maintain the original goal. This reminds the client at the
end of the project that the project team not only met expectations but also raised
them during the life of the project.
Clarify Values
Values are desirable principles or qualities.Merriam-Webster Unabridged Online
Dictionary, s.v. “values,” http://unabridged.merriam-webster.com/cgi-bin/
collegiate (accessed June 18, 2009). Disagreements based on differences in values are
extremely difficult to resolve because compromising means compromising your
values. Organizations often have developed a list of corporate values. Sometimes
Chapter 4 Understanding and Meeting Client Expectations
4.2 Understanding Values and Expectations 158
Figure 4.3
Safety is an important value.
© 2010 Jupiterimages
Corporation
these are real and sometimes they are more important to the corporate brand. The
project manager needs to understand the real organizational and personal values
related to the project.
On construction projects, safety is an important
consideration in the planning and execution of a
project. Every construction company will assert a strong
safety value. The value is tested when safety rules are
developed. Is the organization willing to terminate or
sanction an employee for a major safety violation? This
is not a yes or no question but the beginning of a
dialogue. Everyone on the project needs to understand
safety rules, and consistent application of the approach
to safety is critical to establishing a safety culture on the
project. Agreeing on a safety program based on a value
for safety at the beginning of a project will prevent
serious confrontations later.
Phone Etiquette
A large project in Washington had a client that valued communications. All the
members of the client’s team had the newest phone technology and took calls
during project meetings. The project team saw this behavior as rude and
interfering with the effectiveness of the project. The client was very
comfortable in this chaotic environment and saw constant communication as a
value that helped the organization identify and respond to opportunities. This
provided the organization with a competitive advantage in their marketplace.
The same behavior was preventing the project team from developing a common
understanding and agreeing on a project plan because they could not focus on
the needs of the project long enough to develop this common understanding.
The project manager and the lead client recognized the potential conflict for
the project and developed a list of project meetings that would be “cell-less,”
which meant that the team members would turn cell phones off for that
meeting. Other meetings would follow the cultural standards of the client.
Developing a mutual understanding of the personal and organizational values and
dealing with differences during the early phases of the project will significantly
Chapter 4 Understanding and Meeting Client Expectations
4.2 Understanding Values and Expectations 159
Figure 4.4
Dealing fairly creates satisfied
clients.
© 2010 Jupiterimages
Corporation
reduce the potential for insolvable conflicts. This becomes more important on a
large, complex project where the likelihood of a diverse project team is high, and
the team may have to deal with different laws, customs, and cultural values.
Developing an understanding of these differences and developing an appreciation
for the value of this diversity for project team members can prevent conflict later in
the project.
Deal Fairly with the Client
During the life of the project, the project manager will
often have the opportunity to take advantage of the
client, either because a clause in the contract is not
written accurately or because the project manager has
access to more detailed information. For example, a
client finds a mistake in the original documents
provided to the project team. The project team analyzes
the new information to access the potential impact on
the project cost and schedule. A skilled project manager
can demonstrate a negative impact and increase project
profits by requesting a change order. A skilled project
manager can also usually find an innovative approach to
finding a solution without increasing the cost or
schedule. In most cases, the client wants to be treated
fairly. Fairness2
is characterized by impartiality and
honesty that is free from self-interest, prejudice, or
favoritism.Merriam-Webster Unabridged Online Dictionary,
s.v. “fairness,” http://unabridged.merriam-
webster.com/cgi-bin/collegiate?va=fairness&x=0&y=0
(accessed June 18, 2009). If the client interprets the
change order as fair, then the project manager has the
opportunity to create a satisfied client. If the client
believes the behavior of the project manager is unfair,
then it is difficult to create a satisfied client.
2. Impartial and honest
treatment that is free from
self-interest, prejudice, or
favoritism.
Chapter 4 Understanding and Meeting Client Expectations
4.2 Understanding Values and Expectations 160
KEY TAKEAWAYS
• To identify client expectations, review written documents, but have a
dialogue with the client to uncover unwritten expectations by asking
questions and listening. Manage increasing expectations by reminding
the client of the original objectives.
• Determine the stated corporate values by reviewing written documents
and review actions related to those stated values to see which ones are
the basis for action. Attempt to avoid conflicts of values by identifying
the differences before they become problems.
• Do not take advantage of clients’ mistakes, but help them meet their
objectives in spite of their errors. Live your own values of fairness.
EXERCISES
1. If a project is regularly exceeding the stated goal for quality, it is
important to remind the client of the __________ objective.
2. Values are desirable _______ or qualities.
3. Treating a client fairly means avoiding _______, prejudice, or favoritism.
4. What are some written sources of client expectations?
5. What is an example of a corporate value?
6. What does it mean to treat a client fairly?
Organizational Values
Choose an organization with which you are familiar that proclaims to
support a particular set of values. Describe actions that it has taken that
either support or differ from its stated values.
Chapter 4 Understanding and Meeting Client Expectations
4.2 Understanding Values and Expectations 161
4.3 Dealing with Problems
LEARNING OBJECTIVES
1. Describe standards and procedures for dealing with problems.
2. Describe the advantages of dealing with difficult issues as soon as they
arise.
3. Describe the importance of establishing methods for revising major
decisions.
Projects always experience unexpected problems that produce stress. Dealing with
problems with competence is vital to maintaining a good relationship with clients.
Establish Standards and Procedures for Decisions
There are competing interests on projects, and the larger and more complex the
project, the greater the number of issues and concerns that need to be addressed.
Competing Interests
It’s 7:30 in the morning and the client called and wants you to have coffee in an
hour with the new CEO, who flew in last night, to give him an update on the
project. The concrete trucks were supposed to be on site at 7:00, but they have
not arrived. A storm is predicted for tomorrow, and the concrete has to be in
and covered before the storm hits. A news reporter called and said she has an
unnamed source who claims that there is contamination of a nearby river
coming from the project site.
The project manager decided to postpone a team meeting about project
scheduling and cancelled lunch plans with his wife. It was going to be a busy
day.
On large, complex projects, hundreds of decisions are made every day. Most of the
decisions focus on the day-to-day operation of the project. Early in the project,
decisions focus on choosing between alternative options for accomplishing project
Chapter 4 Understanding and Meeting Client Expectations
162
goals and determining how the project will be executed. Later, the focus is typically
on solving problems. The project team develops solutions to deal with the barriers
that emerge and develops alternative plans to meet project goals. The authority to
make decisions is typically established early in the project and identified in a
responsibility matrix3
—a table of people and types of problems that might require
decisions—as shown in Figure 4.5 "The Responsibility Matrix".
Figure 4.5 The Responsibility Matrix
The responsibility matrix identifies roles and client involvement.
Decisions that influence the outcome of the project, such as a delay to the project
completion date or an increase in the project costs, typically involve the client.
Some clients prefer to make the final decision, with the project manager developing
alternative solutions with a cost-benefit analysis of each of the alternatives. Others
prefer to be involved in discussions to better understand the barriers, developing
alternative solutions and making decisions in a team environment. Understanding
the client’s decision-making preference and developing procedures and processes
that support that preference is important to meeting client expectations.
Develop processes and methods that encourage both client and team members to
identify issues and concerns early. Develop processes for dealing with these issues
and concerns effectively. Define how and when decisions are made.
On projects with a low complexity level, the project manager and team leaders can
make decisions informally, with short meetings or phone calls. Weekly or monthly
staff meetings are appropriate for more complex decisions. Even though the
decision-making process may be simpler on less complex projects, it is still
important to understand the client’s expectation for inclusion in the decisionmaking
process and recording decisions and changes in project plans.
3. Table of people and types of
problems that might require
decisions.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 163
On more complex projects, the use of action item registers, weekly staff meetings,
responsibility matrices, and other tools foster the decision making on a timely
basis. For project teams operating in diverse locations, Internet-based tools for
recording and tracking action items can provide a location for capturing issues and
concerns.
Deal with Difficult Issues Early
Project managers typically have a high degree of confidence in their ability to deal
with issues and concerns as they arise. The delivery of some equipment is delayed a
week, causing changes in the project schedule, or the beta test of a software
program identified far more problems than expected. The project manager knows
the problems, the team developed a solution, and the project has a plan for
recovering. The project will be back on track soon. Should the project manager
inform the client? The answer seems like an easy yes, yet many project managers
often believe there is no reason to bother the client with a problem they have under
control.
Then the second delay occurs on the equipment delivery or the fixes for the beta
test are more costly than expected. Now the problems have elevated to the point
the clients should be informed. The greater the distance between the time of the
event and the time the client knows about the events, the greater the client’s
frustration and mistrust. Including the client in the processes for analyzing project
issues or concerns as well as the recovery planning enables the client to develop
confidence that problems are being addressed. Including the client early in the
process for dealing with problems enables the client to contribute with solutions
and builds confidence that he or she is aware of critical issues on the project.
New Estimates Increase Cost Projections
On a large, complex project in South America, the project team was
reestimating the project cost and schedule projections after the project design
was complete. The team was also conducting a new risk analysis, and the
results of the cost and schedule projections, together with the risk analysis,
provided the client with better cash flow projections. Early in the process, the
project team understood that the cost projections would significantly increase,
and the final project cost would be significantly above the contingency set aside
for the project.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 164
The client looked for an early indication of the results of the analysis, and the
project manager kept reporting it was too early to know. The project team debated
how much contingency the project needed and how to inform the client. When the
client was told the results of the cost projections, the response was a combination of
frustration and anger. The project manager was removed from the project and a
new project manager assigned.
The project manager should have dealt with the increased cost of the project early
on. When first indications suggested that estimates were low and several items in
the budget needed extra funds, the project manager should have had conversations
with the client. Including one or more members of the client’s team in the
reevaluation effort would have kept the client informed of the progress regularly
and built trust in the new numbers. The project team could have offered
suggestions and contributed to possible solutions for addressing the concerns that
were developing, as costs were higher than expected. Dealing openly and early with
the client is critical to client satisfaction.
Provide Mechanisms for Revisiting Major Decisions and Issues
The project environment moves fast, and decisions are made and implemented to
keep pace. Decisions made in the conceptual phase of the project seem less effective
during the design phase. It is not that the decision was necessarily wrong; based on
the data at the time, most decisions are understandable. With new information, it is
sometimes important to revisit and change decisions made earlier in the project. As
obvious as this sounds, many project teams are reluctant to challenge earlier
decisions. Without a mechanism in place to revisit decisions, decisions may be seen
as final. This sense of finality may slow down the decision-making process to make
sure every decision is right. Delays in decisions can put activities behind schedule
and affect the project completing on time.
Mechanisms for revisiting decisions are similar to project change orders. Similar to
a change order, a request to revisit a decision must be initiated by someone on the
team. The formality of methods used by the project to revisit a decision depends on
the complexity profile of the project. On less complex projects, an informal
discussion in project meetings can develop the awareness that a decision needs to
be revisited. On more complex projects, the action item register and the weekly
project meetings provide a venue for revisiting decisions.
Sometimes people asked that decisions be revisited because they did not like the
decision that was made.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 165
Revisiting Decisions
On an engineering project, the electrical design schedule was changed to
support the completion of the activities on the critical path by a project
milestone date. The change increased the number of hours needed to complete
the work because of the change in work processes. The project manager
accepted the costs of the change to achieve the milestone date, but the manager
of the electrical engineering team objected because the change would cause
their part of the job to exceed the budgeted amount. The project manager
decided not to revisit the decision because no new information was available
that would cause the decision to change.
Clients are often involved in major decisions on the project. For example, if the
project invested another million dollars, the project could be completed a month
early. The client will conduct the cost-benefit analysis and decide if the extra
expense is worth the gain in time. Once this decision is made, the necessary changes
are made in the execution plan and new goals are established through the change
management process. Later, for reasons outside the control of the project, the
project will not experience the time savings from the additional investment of
funds. It is important to revisit the decision. A culture that encourages project team
members to bring up the need for revisiting decisions and a mechanism that makes
it easy to surface issues and concerns will increase the likelihood that these issues
will come to the attention of the management team.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 166
Vendor Decision Not Revisited
On a major pharmaceutical project in Ireland, a United States–based company
was building a new plant to produce a new drug, and the priority was
completing the plant to get the drug to the marketplace. The client was
involved in the process to select major equipment, and after an expedited
bidding process, an equipment vendor was selected for a critical piece of the
plant equipment. Later, members of the project team learned that this vendor
was overcommitted, and there was a high risk that the vendor would not be
able to meet the schedule dates. Because it was the client’s decision, the project
leadership was not warned of the possible risk. Weeks later, the vendor began
missing critical dates, and the leadership became aware of the risks.
The client was furious that the decision was not revisited earlier in the project.
Even though changes were made that brought the project back on track, the
client did not trust the project team again. The project finished on time and
within budget while meeting all quality specifications, but the client was not
pleased.
Establishing a culture and a mechanism for revisiting project decisions is important
for meeting client expectations.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 167
Emergency Button
An experienced project manager came up with a clever idea to enable his
clients to capture the attention of the project team. He gave the client’s team a
bright red index card and said, “This is your emergency button.” The card was a
symbol. It empowered the client with the ability to capture the complete
attention of the project team. When the client presented the red button, the
project manager instantly stopped current activities and focused on the client.
The red button meant the project leadership focused on understanding the
issue or concern presented by the client and developing project priorities to
meet the client’s concerns.
Although the red button was rarely used, it gave a sense of power to the client
and communicated that the client was important. One project manager used
the “red button” on four projects, and on two of the projects the card was never
used. On one project, the client used the card to get the project ready for a visit
from the client’s boss, and on the fourth project, the client used the card often.
Although the project manager believed the card was overused to get the total
attention of the project leadership team, he never regretted providing the
client with the card. The “red button” card provided them a method to
distinguish the really important needs of the client.
KEY TAKEAWAYS
• Determine who should be included in decisions for each category using a
decision matrix
• Decide at what level of problem the client should be involved by
discussing the threshold with the client. Involve the client early in the
process to give them a chance to contribute to the solution before the
problem gets worse.
• Decide what criteria to use to determine when a decision should be
revisited. Additional information that is developed during the design
and planning phase can require that decisions made during the
conceptual phase need to be reconsidered.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 168
EXERCISES
1. A table that displays who should be included in making different types
of decisions is a decision ______.
2. A client should be involved in decisions ______ in the process of dealing
with a problem.
3. Information that is developed in the planning phase can require
reconsidering decisions that were made in the _________ phase.
4. Describe a responsibility matrix and how it is used.
5. Why is it important to inform a client early in the process of resolving a
problem?
6. Why should earlier decisions be revisited?
Threshold for Client Involvement
Consider a project with which you are familiar where the client was not
included in making day-to-day decisions. Describe a type of problem that
would be too small to take to the client for input and another problem that
would be just large enough to require client involvement. If you were trying
to communicate the reasons for your decision to another team member,
describe the threshold that had to be crossed for the second problem to
qualify for client involvement.
Chapter 4 Understanding and Meeting Client Expectations
4.3 Dealing with Problems 169
4.4 Nurturing a Feeling of Satisfaction
LEARNING OBJECTIVES
1. Describe the advantages of using project milestones.
2. Describe the advantages of including the client in celebrations and
guidelines for doing so.
Manage around Project Milestones
Project milestones represent significant events on the project. Some project
milestones signify external events that provide critical information or resources to
the project or an external event that requires information or deliverables from the
project.
Board of Directors Meeting
The client’s board of directors meets on March 15, and the client must report
the project progress and submit the project final budget for approval. The
project team develops the information needed for the project progress report
and finalizes the project estimate by March 10 to provide the client with five
days to review the information and make any changes.
Recall that a milestone is an event that consumes no time or resources. In this
example, the Provide Client with Report is the milestone event. All the activity to
develop and deliver the report takes place before the milestone event.
Chapter 4 Understanding and Meeting Client Expectations
170
Extra Effort to Meet a Milestone
On March 8, the project team determines that the progress report and estimate
cannot be completed by March 10. The team will need one more day to
complete the report and estimate. Should the project manager ask the client for
a one-day extension? The client may be able to review and revise the
information before it goes to the board in four days, but the message to the
client has a bigger impact on the project. By missing the deadline, the client can
develop the perception that client deadlines are less important, that the project
team is unable to complete critical tasks on time, or that the project team is not
dedicated.
Instead of asking the client for one more day, the project manager pulls
together the project team and asks what it will take to make the milestone date.
If the estimator works overtime tonight and the project controls team starts a
few hour early on March 9, then the project controls team can work late on
March 9 to finish the report. The project administrative staff can come in early
on March 10 to do the revisions and make copies, and the reports can be ready
by noon. Other activities will have to be delayed and critical staff will work
overtime, but the client will get the needed information by the promised date.
Making the extra effort to deliver by the milestone date communicates to the client
and the project team the importance of meeting milestones. The client develops
confidence that the project team is dedicated to meeting client expectations and
that deadlines are important. The extra efforts by the team to meet the client’s
critical dates will often result in the client making an extra effort to help the
project team meet critical dates.
During the life of a project, the project team encounters a large number of small
problems that can cause small delays. A thunderstorm caused the loss of electricity
in the office building, and the bidders’ conference had to be delayed one day; a
computer virus shut down the use of computers, causing the loss of another day;
and the airplane flights were late, so the project reviews were one day late. None of
these events caused significant problems for the project, but together they add up
to delays that could affect the end date of the project.
Chapter 4 Understanding and Meeting Client Expectations
4.4 Nurturing a Feeling of Satisfaction 171
Figure 4.6
Meeting milestones creates better
project atmosphere.
© 2010 Jupiterimages
Corporation
Figure 4.7
Meeting milestone objectives
reduces stress.
© 2010 Jupiterimages
Corporation
If these delays continue to add up, then the project end
date will begin to slip. As the project nears the
completion date, the team will work overtime, decisions
will be rushed, and resources will be added to the
project to avoid missing the project end date. This type
of end-of-project atmosphere will leave a strong lasting
impression with the client and usually does not produce
a satisfied client.
Project milestones provide the opportunity for the
project manager to spread the end-of-project pressure
over the life of the project. Project managers add
resources, authorize overtime, and expedite work to
accomplish what is required to meet the milestone. The
project work increases in intensity, motivating project
team members to accomplish the work on time until the
milestone is achieved. After the milestone is achieved, the project celebrates and
acknowledges the success of the team and then begins working toward the next
milestone. Project managers use milestones to increase this intensity and focus to
keep the project on schedule and prevent the delays of hard decisions to the end of
the project.
This approach allows the project manager to lower the
intensity of the project after a milestone is
accomplished. After celebrating the successful
completion of the milestone, a project manager will
often review the future plans and allow the team to
reflect on finding new ways of approaching the project
work. Adjustments are made to the project work plan
and the milestone cycle begins again.
Milestones are rarely evenly distributed over the length
of the project. Project managers often select key events
and make them milestone events to create roughly
equal spacing between milestone dates. On large,
multiyear projects, managing to a milestone each
quarter provides good timing for the project. On shorter
projects, monthly milestones can provide the right
timing. On larger, more complex projects, typically a
large number of activities can be designated as milestones for the project. On
smaller projects, the project manger may need to artificially create milestones.
Chapter 4 Understanding and Meeting Client Expectations
4.4 Nurturing a Feeling of Satisfaction 172
Figure 4.8
Include the client in milestone
celebrations.
© 2010 Jupiterimages
Corporation
Include the Client in Celebrations
Project celebrations are a time when the project manager and the management
team can thank the project team members for their contribution to the project’s
success at various stages of the project. Celebrations for successfully accomplishing
project milestones are good examples of creating the opportunity to honestly
celebrate. Some projects have birthday celebrations for the team or holiday
celebrations, and although these events can be a positive contribution to the
project morale, they are not connected to the success of the team in accomplishing
project objectives.
Successful celebrations reinforce the effort and
activities that created the success. Successful
celebrations communicate appreciation for the energy
and commitment of the team, focused on team goals.
Successful celebrations communicate progress and
confidence to project stakeholders, and successful
celebrations share the success of the project with the
client and reinforce the meeting of client expectations.
Successful celebrations result from good planning and
the application of some basic principles for celebrations.
The following are some of the basic principles for
developing a successful celebration:
• What was accomplished and why it was
important to the overall success of the
project should be communicated to the
team. Discuss the goals that were accomplished and the milestones met
and how that advanced the project. For example, the civil design team
on a construction project completed the site work design early, the
bids for the site work were on the street early, and the project met the
milestone of moving dirt on the site by May 1. Starting the site work
early helps assure that the construction work will be under a roof
before the bad weather hits in the late fall.
• Appreciation should be expressed specifically. A general statement
that the project met all the goals does not carry the same meaning as
“the project team completed the development of the new training
curriculum by December 1.” People associate their activities with
meeting the milestone and take pride in their contribution to the
project’s success. Team members appreciate it when the project
manager and others recognize their contribution.
Chapter 4 Understanding and Meeting Client Expectations
4.4 Nurturing a Feeling of Satisfaction 173
• Celebrations should occur in the work area where the
accomplishments were achieved. Celebrating holidays in the cafeteria
is appropriate. Celebrating the accomplishments of the project in the
project task force area brings a stronger association of the work of the
project with the accomplishments being celebrated.
• Accomplishments of the team should be celebrated shortly after the
milestone is achieved. The more time elapsed between the
accomplishments and the celebrations, the less the impact.
• The persons that publicly recognize the team are important. The
project leadership expressing personal appreciation reinforces the
recognition of the work and effort to achieve project goals. Senior
managers of the company reinforce the importance of the project to
company goals and recognition of the role of individual project team
members’ contribution to company success.
• In many cultures, food is associated with times of reflection, such as
the dinner table discussion or lunch meetings. Serving food
communicates that this event is special. Serving food also
communicates that someone took the time to prepare and serve the
project team as a form of appreciation.
• Clients play a special role in celebrations, and celebrations play a
special role in meeting client expectations. A client expression of
appreciation to the project team is often more significant than the
appreciation expressed by senior managers. Clients in most
commercial organizations are acknowledged as the source of profits,
bonuses, and future business. A client expressing appreciation to the
project team, especially in front of the company’s senior management,
gives the project team special status for creating goodwill with clients.
When clients speak at a celebration, their remarks usually provide high praise for
the work of the project team. This event provides an opportunity for the client to
reflect and appraise the progress of the project team. Often the client concludes
that the team is meeting or exceeding expectations. The celebration reinforces that
conclusion.
If the client has doubts about some of the project performance but still speaks at
the celebration and praises the team, the client may experience cognitive
dissonance. The client will typically reevaluate the perception of the project team’s
performance and conclude the team really has done a good job. The perception is
now consistent with the client’s remarks and the end result is a client perception of
a project as meeting expectations.
Understanding and meeting client expectations is a proactive process. The project
manager and the project team develop plans and processes that focus on defining
Chapter 4 Understanding and Meeting Client Expectations
4.4 Nurturing a Feeling of Satisfaction 174
both specifications and expectations that are often difficult to quantify. The team
executes the project in a way that meets both the specifications of the client and
also the more subtle expectations not reflected in the measured data.
KEY TAKEAWAYS
• Making extra efforts to meet milestone dates keeps the project on track
and avoids large problems at the end of the project. It allows for
lessening of intensity after a milestone to provide stress relief for team
members, and it builds confidence in the client that the project will be
completed on time.
• If the client is included in milestone celebrations, he or she has a better
understanding of what effort it takes to keep the project on track. If
asked to say something at the celebration, the client will usually say
positive things that have an effect on his or her perception of the
project. Celebrations should communicate the importance of the
milestone to the project and praise specific accomplishments. The
celebration should occur in the workplace. Get high-ranking people to
praise the project team in front of each other to reinforce a sense of
satisfaction and include food in the celebration to make it more social.
EXERCISES
1. Managing a project using ___________ keeps the project on track and
allows for periodic celebrations of achieving interim objectives.
2. Clients should be encouraged to ___________ in celebration of project
achievements.
3. Why should extra effort be expended to meet a milestone when the final
project’s due date is months away?
4. Why should the client be included in milestone celebrations?
Milestone Celebrations
Consider a workplace with which you are familiar. If it utilizes milestone
celebrations to mark completion of special tasks or phases of work, compare
the components of the celebration with those recommended in the text. If it
does not, describe how you would use milestone celebrations in this
workplace.
Chapter 4 Understanding and Meeting Client Expectations
4.4 Nurturing a Feeling of Satisfaction 175
4.5 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Describe a project with which you are familiar that resulted in a
dissatisfied client. The project can be personal or professional if it serves
to illustrate the concepts in this chapter. Identify how the client was
included or excluded from project teams and how they were informed of
problems. Analyze the situation and draw a conclusion regarding how a
similar client might be satisfied on a future project.
2. Describe a project with which you are familiar that resulted in a satisfied
client. The project can be personal or professional if it serves to
illustrate the concepts in this chapter. Identify how the client was
included or excluded from project teams and how they were informed of
problems. Analyze the situation and draw a conclusion regarding which
aspect of client relations was most effective in achieving client
satisfaction.
3. Describe a project with which you are familiar where early decisions had
to be changed based on information that became available later in the
project. Analyze the process by which the decision was made and at
what point the client was informed of the need for a change. Describe
any changes you would make in the process or timing that might
improve client satisfaction.
Chapter 4 Understanding and Meeting Client Expectations
176
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Milestone celebrations. Consider celebrations of milestone events in your
life and how those celebrations affected your memory and attitudes
toward achieving those objectives. Do you think using milestone
celebrations can be a useful tool for projects? Express your opinion and
support it with examples.
2. Client participation. Where would you place the threshold for involving a
client in a decision? What criteria would you use and how would you
involve the client with that process of establishing the threshold?
Chapter 4 Understanding and Meeting Client Expectations
4.5 Exercises 177
4.6 Web Exercises
LEARNING OBJECTIVES
1. Locate and analyze information online related to managing client
relationships.
2. Locate, download, and analyze a project milestone analysis and then
create your hypothetical project milestone analysis for distribution to
your team and client.
Locate and Analyze Information Online Related to Managing
Client Relationships
Managing relationships with clients is a challenging task, and it is often discussed
online. In this exercise, you locate online articles and other publications dealing
with client relationships and then compare and analyze them.
How to Read about Client Relationships
1. Start a web browser program and go to the an idea website at
http://anidea.com/etc/how-to-create-a-cooperative-relationship-
between-account-and-project-management.
2. Review the five topics listed in this article.
3. Start a word processing program and open a new document. On the
first line, type your name. Below your name, write a brief summary of
the points made in each of the five major topics.
4. Save the word processing document as Ch04ClientStudentName using the
Word 2003 .doc file format.
5. In the web browser, use a search program such as Google to search for
a combination of key terms such as Project Management Client
Relationships.
6. Review the results of the search and choose a site that addresses some
of the same points. Consider the similarities and differences between
this site and the article from an idea.
7. Copy the web address from the browser’s address bar.
8. Switch to Ch04ClientStudentName. Paste the web address into the
document.
9. Switch to the browser. Capture the screen and paste it into
Ch04ClientStudentName.
Chapter 4 Understanding and Meeting Client Expectations
178
10. Below the screen image, compare the content of the two sites point by
point using a separate paragraph for each point. Be specific. If the site
does not address one of the five points in the first site, briefly mention
that it does not.
11. Save the document.
12. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch04ClientStudentName.doc
Word
2010
version
using
.docx
Another
file name
Locate and
analyze
information
online
related to
managing
client
relationships
Summary of the five points;
web address; screen
capture; comparison of each
point
Same as
Best
Summary
not
accurate;
missing
web
address
or screen;
all five
topics not
addressed
13. Save the file and submit it as directed by the instructor. Close all
documents and programs.
Project Milestone AnalysisWritten by Eric Ouellette as his
additional project for graduate credit, December 2010, Eastern
Michigan University. Edited by Professor Preston on June 20,
2012.
Morale and psyche are an important component in any project; this includes both
the team and the client. Project milestones represent significant events within the
project. Some project milestones signify external events that provide critical
information or resources to the project or an external event that requires
information or deliverables from the project. Nonetheless, the proper creation and
distribution of this information can be an integral part of the overall success of
your project.
Chapter 4 Understanding and Meeting Client Expectations
4.6 Web Exercises 179
How to Download a Project Milestone Analysis
1. Open a blank word processing document and type Milestone and your
name and date on the first line. Save the file as
Ch04MilestonesStudentName using the Word 2003 file format that ends
with .doc.
2. Start a web browser program and go to the Orion Crew Exploration
Vehicle Project Milestones page for NASA at http://www.nasa.gov/
pdf/479023main_Orion_2010_Milestones.pdf. A screen capture of this
milestone analysis is shown in Figure 4.9 "Orion Milestone—NASA".
Figure 4.9 Orion Milestone—NASA
Source: nasa.gov.
3. Add this website to your browser’s favorites list, in a folder named
Milestones.
4. Capture a screen that shows a link to this site in the Projects folder of
your bookmarks or favorites and then paste it into the word processing
document.
5. Within the PDF file locate the milestone attribute within the analysis
that you feel to be most significant, capture the screen of that
milestone accomplishment, and paste it in the Word document.
6. Below the Word document, include a brief summary (250 words) as to
why you think this accomplishment is of merit and utilize references
from the reading in Chapter 4 "Understanding and Meeting Client
Expectations" to correlate this accomplishment to things you’ve
Chapter 4 Understanding and Meeting Client Expectations
4.6 Web Exercises 180
learned in the text. Describe the advantages of using project
milestones.
How to Create an Analysis
1. Now that you have familiarized yourself with the reading on the
importance of project milestones and witnessed a firsthand account of
a project milestone analysis on behalf of NASA, create your
hypothetical 1,000-word milestone analysis document including a
minimum of four digital images. Make sure that the analysis is
pertinent and consistent—maintain a common theme.
2. Use appropriate verbiage that will be comprehendible by everyone
who may read this analysis: team members, clients, and so on.
3. Insert this 1,000-word analysis with imagery below the final screen
capture from the NASA website.
4. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate
File name Ch04MilestonesStudentName.doc Ch04MilestonesStudentName
Locate,
download,
and analyze
a project
milestone
analysis and
then create
your
hypothetical
project
milestone
analysis for
your team
and client
Milestone and name/date on
first line; screen captures that
show the web link in the
Milestone folder of your
browser’s favorites and an image
of the initial screen capture of
the NASA milestone analysis;
your perceived, most important
aspect and rebuttal (250 words);
a hypothetical 1,000-word
milestone analysis that is
entirely consistent
Milestone and name on first
line; screen captures that
show the web link in the
Milestone folder of your
browser’s favorites and an
image of the NASA milestone
analysis; a brief rebuttal (150
words or less) as to why you
think this is the most
important aspect of the
milestone; a hypothetical
500-word milestone analysis
that is somewhat consistent
Chapter 4 Understanding and Meeting Client Expectations
4.6 Web Exercises 181
Element Best Adequate
5. Save Ch04MilestoneStudentName and submit it as directed by the
instructor. Close all documents and programs.
Chapter 4 Understanding and Meeting Client Expectations
4.6 Web Exercises 182
Chapter 5
Working with People on Projects
Project management encompasses the concepts of management and leadership.
Although leadership and management research have made distinctions between the
two concepts, the project management profession has integrated the two concepts,
and project management refers to the leadership and management needed to lead
and manage a project. A project manager leads people and manages work processes.
Project management is both art and science. It is the art of creating a vision of
success, building a project team, and developing a project story. Project leadership
encompasses the personality, leadership style, and leadership skills of the project
manager. Project management also includes formulas and processes for calculating
the critical path, developing goals, and managing meetings.
Some projects are more leader sensitive,Albert A. Einsiedel, “Profile of Effective
Project Managers,” Project Management Journal 18 (1987): 5. and the success of the
project is more dependent on the leadership skills of the project manager.
Leadership is a function of the project manager’s leadership style, personality type,
and understanding of emotions. Management is mastery of the skills needed to
organize and execute the work of the project. Each project includes challenges that
require both leadership and management. The leadership and management skills
needed are related to the project complexity profile. In general, more complex
projects require a greater degree of leadership and management skill. This chapter
will review various leadership approaches and management skills.
183
5.1 Working with Individuals
LEARNING OBJECTIVES
1. Describe emotional intelligence.
2. Describe personality types and tools used to describe them.
3. Describe the relationship between leadership style and personality
types.
4. Describe people skills that are necessary for negotiation and conflict
resolution.
5. Describe how work is delegated.
6. Describe individual goals that are related to personality types.
Working with other people involves dealing with them both logically and
emotionally. A successful working relationship between individuals begins with
appreciating the importance of emotions and how they relate to personality types,
leadership styles, negotiations, and setting goals.
Emotional Intelligence
Emotions are neither positive nor negative. Emotions are both a mental and
physiological response to environmental and internal stimuli. Leaders need to
understand and value their emotions to appropriately respond to the client, project
team, and project environment. Daniel GolemanDaniel Goleman, Emotional
Intelligence (New York: Bantam Books, 1995). discussed emotional intelligence
quotient (EQ)1
as a factor more important than IQ in predicting leadership success.
According to Robert Cooper and Ayman Sawaf, “Emotional intelligence is the ability
to sense, understand, and effectively apply the power and acumens of emotions as a
source of human energy, information, connection, and influence.”Robert K. Cooper
and Ayman Sawaf, Executive EQ, Emotional Intelligence in Leadership and Organizations
(New York: Perigree Book, 1997), xiii.
Emotional intelligence includes the following:
• Self-awareness
• Self-regulation
• Empathy
• Relationship management
1. Ability to sense, understand,
and effectively apply the power
and acumens of emotions.
Chapter 5 Working with People on Projects
184
Figure 5.1
Understanding emotions leads to
project success.
© 2010 Jupiterimages
Corporation
Emotions are important to generating energy around a
concept, to building commitment to goals, and to
developing high-performing teams. Emotional
intelligence is an important part of the project
manager’s ability to build trust among the team
members and with the client. It is an important factor in
establishing credibility and an open dialogue with
project stakeholders. Emotional intelligence is a critical
ability for project managers, and the more complex the
project profile, the more important the project
manager’s EQ becomes to project success.
Personality Types
Personality types refer to the difference among people.
Understanding your personality type as a project
manager will assist you in understanding your
tendencies and strengths in different situations.
Understanding personality types can also help you
understand the contributions of various members of
your team and the various needs of your client.
There are a number of tools for helping people assess personality types, such as the
DISC2
acronym, which stands for the following:
• Dominance—relates to control, power, and assertiveness
• Influence—relates to social situations and communication
• Steadiness—relates to patience, persistence, and thoughtfulness
• Conscientiousness—relates to structure and organization
These four dimensions are then grouped to represent various personality types.
The Myers-Briggs Type Indicator (MBTI)3
is one of most widely used tools for
exploring personal preference, with more than two million people taking the MBTI
each year. The MBTI is often referred to as simply the Myers-Briggs. It is a tool that
can be used in project management training to develop awareness of preferences
for processing information and relationships with other people.
Based on the theories of psychologist Carl Jung, the Myers-Briggs uses a
questionnaire to gather information on the ways individuals prefer to use their
perception and judgment. Perception represents the way people become aware of
2. Acronym for a personality
assessment tool, where DISC
stands for dominance,
influence, steadiness, and
conscientiousness.
3. Personality assessment tool
that uses four pairs of letters:
E-I, S-N, T-F, and J-P.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 185
Figure 5.2
Personality type indicates
preferences for dealing with
situations.
people and their environment. Judgment represents the evaluation of what is
perceived. People perceive things differently and reach different conclusions based
on the same environmental input. Understanding and accounting for these
differences is critical to successful project leadership.
The Myers-Briggs identifies sixteen personality types based on four preferences
derived from the questionnaire. The preferences are between pairs of opposite
characteristics and include the following:
• Extroversion (E)-Introversion (I)
• Sensing (S)-Intuition (N)
• Thinking (T)-Feeling (F)
• Judging (J)-Perceiving (P)
Sixteen Myers-Briggs types can be derived from the four dichotomies. Each of the
sixteen types describes a preference: for focusing on the inner or outer world (E-I),
for approaching and internalizing information (S-I), for making decisions (T-F), and
for planning (J-P). For example, an ISTJ is a Myers-Briggs type who prefers to focus
on the inner world and basic information, prefers logic, and likes to decide quickly.
It is important to note that there is no best type and
that effective interpretation of the Myers-Briggs
requires training. The purpose of the Myers-Briggs is to
understand and appreciate the differences among
people. This understanding can be helpful in building
the project team, in developing common goals, and
communicating with project stakeholders. For example,
different people process information differently.
Extraverts prefer face-to-face meetings as the primary
means of communicating, while introverts prefer
written communication. Sensing types focus on facts,
and intuitive types want the big picture.
On larger, more complex projects, some project
managers will use the Myers-Briggs as a team-building
tool during project start-up. This is typically a
facilitated work session where team members take the
Myers-Briggs and share with the team how they process
information, what communication approaches they
prefer, and what decision-making preferences they
have. This allows the team to identify potential areas of
Chapter 5 Working with People on Projects
5.1 Working with Individuals 186
© 2010 Jupiterimages
Corporation
conflict, develop communication strategies, and build
an appreciation for the diversity of the team.
Personality Type Badges
One project team in South Carolina used color-coded badges for the first few
weeks of the project to indicate Myers-Briggs type. For this team, this was a
way to explore how different team members processed information, made
decisions, and took action.
Some people use a description of personality types that is based on research that
shows that some functions of thinking and perception are localized on the left or
right side of the brain. In this system, the left side of the brain is associated with
recalling specific facts and definitions and performing calculations, while the right
side of the brain is associated with emotions, estimates, and comparisons. The
attraction of this system is that it categorizes people into just two categories—left
or right brain dominance—but it should be used cautiously to avoid
oversimplification.
Understanding the differences among people is a critical leadership skill. This
includes understanding how people process information, how different experiences
will influence the way people perceive the environment, and how people develop
filters that allow certain information to be incorporated while other information is
excluded. The more complex the project, the more important the understanding of
how people process information, make decisions, and deal with conflict.
Leadership Styles
Leadership is a function of both the personal characteristics of the leader and the
environment in which the leadership must occur. Several researchers have
attempted to understand leadership from the perspective of the characteristics of
the leader and the environment of the situation. Robert Tannenbaum and Warren
SchmidtRobert Tannenbaum and Warren Schmidt, “How to Choose a Leadership
Pattern,” Harvard Business Review 36 (1958): 95–101. described leaders as either
autocratic or democratic. Harold LeavittHarold Leavitt, Corporate Pathfinders (New
York: Dow-Jones-Irwin and Penguin Books, 1986). described leaders as pathfinders
Chapter 5 Working with People on Projects
5.1 Working with Individuals 187
Figure 5.3
(visionaries), problem solvers (analytical), or implementers (team oriented). James
MacGregor BurnsJames MacGregor Burns, Leadership (New York: Harper & Row,
1978). conceived leaders as either transactional (focused on actions and decisions)
or transformational (focused on the long-term needs of the group and
organization).
Fred FiedlerFred E. Fiedler, “Validation and Extension of the Contingency Model of
Leadership Effectiveness,” Psychological Bulletin 76, no. 2 (1971): 128–48. introduced
contingency theory and the ability of leaders to adapt their leadership approach to
the environment. Most leaders have a dominant leadership style that is most
comfortable. For example, most engineers spend years training in analytical
problem solving and often develop an analytical approach to leadership.
A leadership style reflects personal characteristics and life experiences. Although a
project manager’s leadership style may be predominantly a pathfinder (using
Leavitt’s taxonomy), most project managers become problem solvers or
implementers when they perceive the need for these leadership approaches. The
leadership approach incorporates the dominant leadership style and Fiedler’s
contingency focus on adapting to the project environment.
No particular leadership approach is specifically appropriate for managing a
project. Each project has a unique set of circumstances because, by definition,
projects are unique endeavors. The leadership approach and the management skills
required to be successful vary depending on the complexity profile of the project.
The Project Management Institute published research that studied project
management leadership skillsQian Shi and Jianguo Chen, The Human Side of Project
Management: Leadership Skills (Newtown Square, PA: Project Management Institute,
Inc., 2006), 4–11. and concluded that project managers needed good communication
skills and the ability to build harmonious relationships and motivate others. Beyond
this broad set of leadership skills, the successful leadership approach will depend of
the profile of the project.
A transactional project manager with a strong command
and control leadership approach may be very successful
on a small software development project or a
construction project, where tasks are clear, roles are
well understood, and the project environment is
cohesive. This same project manager is less likely to be
successful on a larger, more complex project with a
diverse project team and complicated work processes.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 188
Appropriate leadership style
depends on project complexity.
© 2010 Jupiterimages
Corporation
Matching the appropriate leadership style and approach
to the complexity profile of the project is a critical
element of project success. Even experienced project
managers are less likely to be successful if their
leadership approach does not match the complexity
profile of the project.
Each project phase may also require a different
leadership approach. During the start-up phase of a
project, when new team members are first assigned to the project, the project may
require a command and control leadership approach. Later, as the project moves
into the conceptual development phase, creativity becomes important, and the
project management takes on a more transformational type leadership approach.
Most experienced project managers are able to adjust their leadership approach to
the needs of the project phase. Occasionally, on very large, complex projects, some
companies will change project managers after the conceptual phase of the project
to bring in a different project leadership approach or change project managers to
manage the closeout of a project. Changing project managers may bring the right
level of experience and the appropriate leadership approach but is also disruptive
to a project. Senior management must balance the benefit of matching the right
leadership approach with the cost of disrupting the project.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 189
Multinational Chemical Plant Project
On a project to build a new chemical plant that produced dyes for paint, the
project manager led a team that included members from partners that were
included in a joint venture. The design manager was Greek, the construction
manager was German, and other members of the team were from various
locations in the United States and Europe. In addition to the traditional
potential for conflict that arises from team members from different cultures,
the design manager and construction manager were responsible for protecting
the interest of their company in the joint venture.
The project manager held two alignment or team-building meetings. The first
was a two-day meeting held at a local resort and included only the members of
the project leadership team. An outside facilitator was hired to facilitate
discussion, and the topic of cultural conflict and organizational goal conflict
quickly emerged. The team discussed several methods for developing
understanding and addressing conflicts that would increase the likelihood of
finding mutual agreement.
The second team-building session was a one-day meeting that included the
executive sponsors from the various partners in the joint venture. With the
project team aligned, the project manager was able to develop support for the
project’s strategy and commitment from the executives of the joint venture. In
addition to building processes that would enable the team to address difficult
cultural differences, the project manager focused on building trust with each of
the team members. The project manager knew that building trust with the
team was as critical to the success of the project as the technical project
management skills and devoted significant management time to building and
maintaining this trust.
Negotiation and Conflict Resolution
EinsiedelAlbert A. Einsiedel, “Profile of Effective Project Managers,” Project
Management Journal 18 (1987): 5. discussed qualities of successful project managers.
The project manager must be perceived to be credible by the project team and key
stakeholders. The project manager can solve problems. A successful project
manager has a high degree of tolerance for ambiguity. On projects, the
environment changes frequently, and the project manager must apply the
appropriate leadership approach for each situation.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 190
The successful project manager must have good communication skills. Barry
PosnerBarry Z. Posner, “What It Takes to Be a Good Project Manager,” Project
Management Journal 18 (1987): 32–46. connected project management skills to
solving problems. All project problems were connected to skills needed by the
project manager:
• Breakdown in communication represented the lack of communication
skills.
• Uncommitted team members represented the lack of team-building
skills.
• Role confusion represented the lack of organizational skills.
The research indicates that project managers need a large numbers of skills. These
skills include administrative skills, organizational skills, and technical skills
associated with the technology of the project. The types of skills and the depth of
the skills needed are closely connected to the complexity profile of the project.
Typically on smaller, less complex projects, project managers need a greater degree
of technical skills. On larger, more complex projects, project managers need more
organizational skills to deal with the complexity. On smaller projects, the project
manager is intimately involved in developing the project schedule, cost estimates,
and quality standards. On larger projects, functional managers are typically
responsible for managing these aspects of the project, and the project manager
provides the organizational framework for the work to be successful.
Listening
One of the most important communication skills of the project manager is the
ability to actively listen. Active listening takes focus and practice to become
effective. Active listening is placing yourself in the speaker’s position as much as
possible, understanding the communication from the point of view of the speaker,
listening to the body language and other environmental cues, and striving not just
to hear, but to understand.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 191
Figure 5.4
Conflict resolution requires good
listening skills.
© 2010 Jupiterimages
Corporation
Active listening enables a project manager to go beyond
the basic information that is being shared and to
develop a more complete understanding of the
information.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 192
Client’s Body Language Indicates Problems at a Board
Meeting
A client just returned from a trip to Australia where he reviewed the progress
of the project with his company’s board of directors. The project manager
listened and took notes on the five concerns expressed by the board of
directors to the client.
The project manager observed that the client’s body language showed more
tension than usual. This was a cue to listen very carefully. The project manger
nodded occasionally and clearly demonstrated he was listening through his
posture, small agreeable sounds, and body language. The project manager then
began to provide feedback on what was said using phrases like “What I hear you
say is…” or “It sounds like.…” The project manager was clarifying the message
that was communicated by the client.
The project manager then asked more probing questions and reflected on what
was said. “It sounds as if it was a very tough board meeting.” “Is there
something going on beyond the events of the project?” From these
observations and questions, the project manager discovered that the board of
directors meeting did not go well. The company had experienced losses on
other projects, and budget cuts meant fewer resources for the project and an
expectation that the project would finish earlier than planned. The project
manager also discovered that the client’s future with the company would
depend on the success of the project. The project manager asked, “Do you think
we will need to do things differently?” They began to develop a plan to address
the board of directors’ concerns.
Through active listening, the project manager was able to develop an
understanding of the issues that emerged from the board meeting and
participate in developing solutions. Active listening and the trusting
environment established by the project manager enabled the client to safely
share information he had not planned on sharing and to participate in creating
a workable plan that resulted in a successful project.
The project manager used the following techniques:
Chapter 5 Working with People on Projects
5.1 Working with Individuals 193
1. Listening intently to the words of the client and observing the client’s
body language
2. Nodding and expressing interest in the client without forming
rebuttals
3. Providing feedback and asking for clarity while repeating a summary
of the information back to the client
4. Expressing understanding and empathy for the client
The active listening was important to establishing a common understanding from
which an effective project plan could be developed.
Negotiation
Negotiation is a process for developing a mutually acceptable outcome when the
desired outcome for parties in the negotiation is sufficiently different that both
cannot achieve the desired outcome. A project manager will often negotiate with a
client, with team members, with vendors, and with other project stakeholders. A
larger and more complex project will have a large number of stakeholders, often
with conflicting desired outcomes. Negotiation is an important skill in developing
support for the project and preventing frustration among stakeholders, which
could delay or cause project failure.
Vijay VermaVijay K. Verma, Human Resource Skills for the Project Manager (Sylvia, NC:
PMI Publications, 1996), 145–75. suggests that negotiations involve four principles:
1. The first principle is to separate people from the problem. If the person
is seen as the problem, then finding a mutually acceptable solution will
be difficult. Framing the discussions in terms of desired outcomes
enables the negotiations to focus on finding new outcomes.
2. The second principle is to focus on common interests. By avoiding the
focus on differences, both parties are more open to finding solutions
that are acceptable.
3. The third principle is to generate options that advance shared
interests. Once the common interests are understood, solutions that do
not match with either party’s interests can be discarded, and solutions
that may serve both parties’ interests can be more deeply explored.
4. Verma’s final principle is to develop results based on standard criteria.
The standard criterion is the success of the project. This implies that
the parties develop a common definition of project success.
For the project manager to successfully negotiate issues on the project, he or she
should first seek to understand the position of the other party. If negotiating with a
Chapter 5 Working with People on Projects
5.1 Working with Individuals 194
Figure 5.5
client, what is the concern or desired outcome of the client? What are the business
drivers and personal drivers that are important to the client? Without this
understanding, it is difficult to find a solution that will satisfy the client. The
project manager should also seek to understand what outcomes are desirable to the
project. Typically, more than one outcome is acceptable. Without knowing what
outcomes are acceptable, it is difficult to find a solution that will produce that
outcome.
One of the most common issues in formal negotiations is finding a mutually
acceptable price for a service or product. Understanding the market value for a
product or service will provide a range for developing a negotiations strategy. The
price paid on the last project or similar projects provides information on the
market value. Seeking expert opinions from sources who would know the market is
another source of information. Based on this information, the project manager can
then develop an expected range from the lowest price that would be expected
within the current market to the highest price.
Additional factors will also affect the negotiated price. The project manger may be
willing to pay a higher price to assure an expedited delivery or a lower price if
delivery can be made at the convenience of the supplier or if payment is made
before the product is delivered. Developing as many options as possible provides a
broader range of choices and increases the possibility of developing a mutually
beneficial outcome.
The goal of negotiations is not to achieve the lowest
costs, although that is a major consideration, but to
achieve the greatest value for the project. If the supplier
believes that the negotiations process is fair and the
price is fair, the project is more likely to receive higher
value from the supplier. The relationship with the
supplier can be greatly influenced by the negotiation
process and a project manager that attempts to drive
the price unreasonably low or below the market value
will create an element of distrust in the relationship
that may have negative consequences for the project. A
positive negotiation experience may create a positive
relationship that may be beneficial, especially if the
project begins to fall behind schedule and the supplier is
in a position to help keep the project on schedule.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 195
The process of negotiation can
influence future supplier
relationships.
© 2010 Jupiterimages
Corporation
Negotiation on a Construction Project
After difficult negotiations on a construction project in Indiana, the project
management team met with a major project supplier and asked, “Now that the
negotiations are complete, what can we do to help you make more profit?”
Although this question surprised the supplier, the team had discussed how
information would flow, and confusion in expectations and unexpected changes
always cost the supplier more money. The team developed mechanisms for
assuring good information and providing early information on possible changes
and tracked the effect of these efforts during the life of the project.
These efforts and the increased trust did enable the supplier to increase profits
on the project, and the supplier made special efforts to meet every project
expectation. During the life of the project, the supplier brought several ideas on
how to reduce total project costs and increase efficiency. The positive outcome
was the product of good supplier management by the project team, but the
relationship could not have been successful without good faith negotiations.
Conflict Resolution
Conflict on a project is to be expected because of the level of stress, lack of
information during early phases of the project, personal differences, role conflicts,
and limited resources. Although good planning, communication, and team building
can reduce the amount of conflict, conflict will still emerge. How the project
manager deals with the conflict results in the conflict being destructive or an
opportunity to build energy, creativity, and innovation.
David Whetton and Kim CameronDavid Whetton and Kim Cameron, Developing
Management Skills (Upper Saddle River, NJ: Pearson Education, 2005). developed a
Chapter 5 Working with People on Projects
5.1 Working with Individuals 196
response-to-conflict model that reflected the importance of the issue balanced
against the importance of the relationship. The model presented five responses to
conflict:
1. Avoiding
2. Forcing
3. Collaborating
4. Compromising
5. Accommodating
Each of these approaches can be effective and useful depending on the situation.
Project managers will use each of these conflict resolution approaches depending
on the project manager’s personal approach and an assessment of the situation.
Most project managers have a default approach that has emerged over time and is
comfortable. For example, some project managers find the use of the project
manager’s power the easiest and quickest way to resolve problems. “Do it because I
said to” is the mantra for project managers who use forcing as the default approach
to resolve conflict. Some project managers find accommodating with the client the
most effective approach to dealing with client conflict.
The effectiveness of a conflict resolution approach will often depend on the
situation. The forcing approach often succeeds in a situation where a quick
resolution is needed, and the investment in the decision by the parties involved is
low.
Resolving an Office Space Conflict
Two senior managers both want the office with the window. The project
manager intercedes with little discussion and assigns the window office to the
manager with the most seniority. The situation was a low-level conflict with no
long-range consequences for the project and a solution all parties could accept.
Sometimes office size and location is culturally important, and this situation would
take more investment to resolve.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 197
Conflict Over a Change Order
In another example, the client rejected a request for a change order because
she thought the change should have been foreseen by the project team and
incorporated into the original scope of work. The project controls manager
believed the client was using her power to avoid an expensive change order and
suggested the project team refuse to do the work without a change order from
the client.
This is a more complex situation, with personal commitments to each side of the
conflict and consequences for the project. The project manager needs a conflict
resolution approach that increases the likelihood of a mutually acceptable solution
for the project.
One conflict resolution approach involves evaluating the situation, developing a
common understanding of the problem, developing alternative solutions, and
mutually selecting a solution. Evaluating the situation typically includes gathering
data. In our example of a change order conflict, gathering data would include a
review of the original scope of work and possibly of people’s understandings, which
might go beyond the written scope.
The second step in developing a resolution to the conflict is to restate, paraphrase,
and reframe the problem behind the conflict to develop a common understanding
of the problem. In our example, the common understanding may explore the
change management process and determine that the current change management
process may not achieve the client’s goal of minimizing project changes. This phase
is often the most difficult and may take an investment of time and energy to
develop a common understanding of the problem.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 198
Figure 5.6
Conflict resolution skills are
needed to meet goals.
© 2010 Jupiterimages
Corporation
After the problem has been restated and agreed on,
alternative approaches are developed. This is a creative
process that often means developing a new approach or
changing the project plan. The result is a resolution to
the conflict that is mutually agreeable to all team
members. If all team members believe every effort was
made to find a solution that achieved the project
charter and met as many of the team member’s goals as
possible, there will be a greater commitment to the
agreed-on solution.
Project Goals Accomplished
In our example, the project team found a new way to accomplish the project
goals without a change to the project scope. On this project, the solution
seemed obvious after some creative discussions, but in most conflict situations,
even the most obvious solutions can be elusive.
Delegation
Delegating responsibility and work to others is a critical project management skill.
The responsibility for executing the project belongs to the project manager. Often
other team members on the project will have a functional responsibility on the
project and report to a functional manager in the parent organization. For example,
the procurement leader for a major project may also report to the organization’s
vice president for procurement. Although the procurement plan for the project
must meet the organization’s procurement policies, the procurement leader on the
Chapter 5 Working with People on Projects
5.1 Working with Individuals 199
Figure 5.7
A good project manager
delegates work well.
© 2010 Jupiterimages
Corporation
project will take day-to-day direction from the project manager. The amount of
direction given to the procurement leader, or others on the project, is the decision
of the project manager.
If the project manager delegates too little authority to others to make decisions and
take action, the lack of a timely decision or lack of action will cause delays on the
project. Delegating too much authority to others who do not have the knowledge,
skills, or information will typically cause problems that result in delay or increased
cost to the project. Finding the right balance of delegation is a critical project
management skill.
When developing the project team, the project manager
selects team members with the knowledge, skills, and
abilities to accomplish the work required for the project
to be successful. Typically, the more knowledge, skills,
abilities, and experience a project team member brings
to the project, the more that team member will be paid.
To keep the project personnel costs lower, the project
manager will develop a project team with the level of
experience and the knowledge, skills, and abilities to
accomplish the work.
On smaller, less complex projects, the project manager
can provide daily guidance to project team members
and be consulted on all major decisions. On larger, more
complex projects, there are too many important
decisions made every day for the project manager to be
involved at the same level, and project team leaders are
delegated decision-making authority. Larger projects, with a more complex profile
will typically pay more because of the need for the knowledge and experience. On
larger, more complex project, the project manager will develop a more experienced
and knowledgeable team that will enable the project manager to delegate more
responsibility to these team members.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 200
Construction Project in Peru
A construction project in Peru was falling behind schedule, and the project
manager decided to assign a new construction manager for the construction
site that was the most behind schedule. An experienced project manager from
the United States with a reputation for meeting aggressive schedules was
assigned to the construction site and delegated the authority to meet scheduled
milestones.
The construction manager did not have experience outside the United States
and began making decisions that would have worked in the United States but
met cultural resistance in Peru. The project began falling further behind and
another construction manager was assigned to the site.
The project manager must have the skills to evaluate the knowledge, skills, and
abilities of project team members and evaluate the complexity and difficulty of the
project assignment. Often project managers want project team members they have
worked with in the past. Because the project manager knows the skill level of the
team member, project assignments can be made quickly with less supervision than
with a new team member with whom the project manager has little or no
experience.
Delegation is the art of creating a project organizational structure with the work
organized into units that can be managed. Delegation is the process of
understanding the knowledge, skills, and abilities needed to manage that work and
then matching the team members with the right skills to do that work. Good project
managers are good delegators.
Setting Individual Goals
The Myers-Briggs rates an individual’s preferences—not their limitations. It is
important to understand that each individual can still function in situations for
which they are not best suited. For example, a project leader who is more Thinking
(T) than Feeling (F) would need to work harder to be considerate of how a team
member who is more Feeling (F) might react if they were singled out in a meeting
because they were behind schedule. If a person knows their preferences and which
personality types are most successful in each type of project or project phase, they
can set goals for improvement in their ability to perform in those areas that are not
their natural preference.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 201
Another individual goal is to examine which conflict resolution styles are least
comfortable and work to improve those styles so that they can be used when they
are more appropriate than your default style.
KEY TAKEAWAYS
• Emotional intelligence is the ability to sense, understand, and effectively
apply emotions.
• Two common tools for describing personality types are DISC
(Dominance, Influence, Steadiness, and Conscientiousness) and the
Myers-Briggs Type Indicator (MBTI). The MBTI is the most common. It
rates personalities on the position between extremes of four paired
terms: Extroversion (E)-Introversion (I), Sensing (S)-Intuition (I),
Thinking (T)-Feeling (F), and Judging (J)-Perceiving (P).
• Leadership styles are usually related to the personality of the leader.
The type of leadership style that is most effective depends on the
complexity and the phase of the project.
• Negotiation and conflict resolution require skill at listening and an
understanding of emotional intelligence and personality types.
• Delegation is the art of creating a project organizational structure that
can be managed and then matching the team members with the right
skills to do that work.
• Individual goals can be set for improving abilities that are not natural
personality strengths to deal with projects and project phases.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 202
EXERCISES
1. Ability to sense and understand emotions is called _____ _______ (two
words).
2. A personality assessment tool that is commonly used that identifies
preferences between pairs of terms is the MBTI, or more commonly
known as the ________-________.
3. What is emotional intelligence?
4. What do the letters INTJ stand for in a Myers-Briggs personality profile?
5. How does delegation involve the organization and its people?
Internalize your learning experience by preparing to discuss the following.
Identify which leadership style you think is most suitable for your
personality and which is least suitable. Next, identify a level of project
complexity or project phase where your preferred style is least suitable.
Describe an individual goal and how you might pursue that goal for
strengthening your ability to lead on that type of project or during that
phase.
Chapter 5 Working with People on Projects
5.1 Working with Individuals 203
5.2 Working with Groups and Teams
LEARNING OBJECTIVES
1. Describe the value of trust and how it relates to contracts and complex
projects.
2. Identify four types of trust.
3. Describe how a project manager can build trust.
4. Identify three common meeting types and then describe how they differ.
5. Identity types of teams.
6. Describe the HUMM method of measuring project performance.
7. Describe the importance of developing a project story.
A team is a collaboration of people with different personalities that is lead by a
person with a favored leadership style. Managing the interactions of these
personalities and styles as a group is an important aspect of project management.
Trust
Trust is the foundation for all relationships within a project. Without a minimum
level of trust, communication breaks down, and eventually the project suffers in the
form of costs increasing and schedules slipping. Often, when reviewing a project
where the performance problems have captured the attention of upper
management, the evidence of problems is the increase in project costs and the
slippage in the project schedule. The underlying cause is usually blamed on
communication breakdown. With deeper investigation, the communication
breakdown is associated with a breakdown in trust.
Chapter 5 Working with People on Projects
204
Figure 5.8
Lack of trust makes filters
stronger.
© 2010 Jupiterimages
Corporation
Filters
On projects, trust is the filter through which we screen
information that is shared and the filter we use to
screen information we receive. The more trust that
exists, the easier it is for information to flow through
the filters. As trust diminishes, the filters become
stronger and information has a harder time getting
through, and projects that are highly dependent on an
information-rich environment will suffer from
information deprivation.
Contracts and Trust Relationships
The project typically begins with a charter or contract.
A contract is a legal agreement that includes penalties
for any behavior or results not achieved. Contracts are
based on an adversarial paradigm and do not lend
themselves to creating an environment of trust.
Contracts and charters are necessary to clearly
establish, among other things, the scope of the project,
but they are not conducive to establishing a trusting
project culture.
A relationship of mutual trust is less formal but vitally
important. When a person or team enters into a relationship of mutual trust, each
person’s reputation and self-respect are the drivers in meeting the intent of the
relationship. A relationship of mutual trust within the context of a project is a
commitment to an open and honest relationship. There is nothing that enforces the
commitments in the relationship except the integrity of the people involved.
Smaller, less complex projects can operate within the boundaries of a legal
contract, but larger, more complex projects must develop a relationship of mutual
trust to be successful.
Types of Trust
Svenn LindskoldSvenn Lindskold, “Trust Development, the GRIT Proposal, and the
Effects of Conciliatory Acts on Conflict and Corporation,” Psychological Bulletin 85,
no. 4 (1978): 772–93. describes four kinds of trust:
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 205
1. Objective credibility. A personal characteristic that reflects the
truthfulness of an individual that can be checked against observable
facts.
2. Attribution of benevolence. A form of trust that is built on the
examination of the person’s motives and the conclusion that they are
not hostile.
3. Nonmanipulative trust. A form of trust that correlates to a person’s selfinterest
and the predictability of a person’s behavior in acting
consistent in that self-interest.
4. High cost of lying. The type of trust that emerges when persons in
authority raise the cost of lying so high that people will not lie because
the penalty will be too high.
Creating Trust
Building trust on a project begins with the project manager. On complex projects,
the assignment of a project manager with a high trust reputation can help establish
the trust level needed. The project manager can also establish the cost of lying in a
way that communicates an expectation and a value for trust on the project. Project
managers can also assure that the official goals (stated goals) and operational goals
(goals that are reinforced) are aligned. The project manager can create an
atmosphere where informal communication is expected and reinforced.
The informal communication is important to establishing personal trust among
team members and with the client. Allotting time during project start-up meetings
to allow team members to develop a personal relationship is important to
establishing the team trust. The informal discussion allows for a deeper
understanding of the whole person and creates an atmosphere where trust can
emerge.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 206
High Cost of Lying in a Charleston Project
On a project in Charleston, South Carolina, the client was asking for more and
more backup to information from the project. The project manager visited the
client to better understand the reporting requirements and discovered the
client did not trust the reports coming from the project and wanted validating
material for each report. After some candid discussion, the project manager
discovered that one of the project team members had provided information to
the client that was inaccurate. The team member had made a mistake but had
not corrected it with the client, hoping that the information would get lost in
the stream of information from the project.
The project manager removed the team member from the project for two main
reasons. The project manager established that the cost of lying was high. The
removal communicated to the project team an expectation of honesty. The
project manager also reinforced a covenant with the client that reinforced the
trust in the information the project provided. The requests for additional
information declined, and the trust relationship between project personnel and
the client remained high.
Small events that reduce trust often take place on a project without anyone
remembering what happened to create the environment of distrust. Taking fast and
decisive action to establish a high cost of lying, communicating the expectation of
honesty, and creating an atmosphere of trust are critical steps a project manager
can take to ensure the success of complex projects.
Project managers can also establish expectations of team members to respect
individual differences and skills, look and react to the positives, recognize each
other’s accomplishments, and value people’s self-esteem to increase a sense of the
benevolent intent.
Managing Team Meetings
Team meetings are conducted differently depending on the purpose of the meeting,
the leadership style that is appropriate for the meeting, and the personality types of
the members of the team.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 207
Action Item Meetings
Action item meetings are short meetings to develop a common understanding of
what the short-term priorities are for the project, individual roles, and expectations
for specific activities. This type of meeting is for sharing, not problem solving. Any
problems that emerge from the discussion are assigned to a person, and another
meeting is established to address the issue. Action item meetings focus on shortterm
activities, usually less than a week in duration.
The action item meeting is fact based and information oriented. It is a left-braintype
focus. The action item meeting has very little dialogue except to ask
clarification questions. If discussion is needed or disagreement is not easily
resolved, another problem-solving meeting is established to deal with that issue. On
smaller topics, that meeting might take place immediately after the action item
meeting and only include those people with an interest in the outcome of the
discussion.
The project manager keeps the successful action item meeting short in duration
and focused on only those items of information needed for the short-term project
plan. The project manager will restate the common understandings of what
activities are priorities and who will be responsible for the activities. Often these
meetings can include a review of safety procedures or security procedures when
these issues are important to the project. The leadership approach to action item
meetings focuses on data, actions, and commitments. Although the project manager
may observe stresses between project team members or other issues, they are not
addressed in this meeting. These are fact-based meetings. If issues begin to arise
between people, the project manager will develop other opportunities to address
these issues in another forum. Using the Myers-Briggs descriptions, team members
who favor thinking more than feeling and judging more than perceiving are more
comfortable with this type of meeting.
Management Meetings
Management meetings are longer in duration and are focused on planning. They are
oriented toward developing plans, tracking progress of existing plans, and making
adjustments to plans in response to new information.
These meetings include focused discussion on generating a common understanding
of the progress of the existing plan. This discussion is based on quantitative
information provided on the progress of the schedule and other data, but the
discussion is qualitative in evaluating the data to develop a more complete
understanding of the data. The experience and opinions of the project leaders are
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 208
solicited, and disagreement about meaning of the data is even encouraged to
develop a deeper understanding of the data. Through this discussion, a common
understanding of the status of the project should emerge, and the project manager
invites discussion, includes people to offer their thoughts, and assures that
disagreements are positive discussions about interpretation of the information and
that disagreements do not become personal.
Management meetings also focus on developing midterm goals. For larger, more
complex projects, the goals may be monthly or even quarterly. For smaller or less
complex projects, weekly goals will provide the focus. The project manager focuses
the discussion on the broad priorities for the next period and includes all the
functional leaders in the discussion. The goals that emerge from the discussion
should represent a common understanding of the priorities of the project for the
next term.
For example, during the early phases of a project, the team is focused on developing
a conceptual understanding of the project. A major milestone on complex projects
is typically the completion of the conceptual plan. The project manager would lead
a discussion on what needs to be accomplished to meet the project milestone and
asks what potential barriers exist and what key resources are needed. From the
discussion, the project team develops a few key goals that integrate the various
functions of the project team and focus the team on priorities.
The following are some examples of goals during the conceptual phase:
• Developing a list of the procurement long lead items and defining
critical dates
• Developing a human resources plan that identifies critical positions
• Developing and building agreement with the client on the project
scope of work
Each of these goals is measurable and time framed. They can be developed as
positive motivators and will take the project leaders and most of the project team to
accomplish. They develop a general understanding of the priorities and are easy to
remember.
Management meetings are a combination of left-brain thinking, which is fact based,
and right-brain thinking, which is creative and innovative. Using the Myers-Briggs
terminology, team members who prefer feeling over thinking and perceiving over
judging can contribute ideas and perspectives on the project that the more factoriented
members might miss.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 209
Figure 5.9
Different personality types have
different perspectives.
© 2010 Jupiterimages
Corporation
The project manager allows and encourages
conversation in developing and evaluating the goals but
focuses the discussion on the goals and obstacles.
Management meetings take on a different focus during
the month. Meetings at the beginning of the month
spend time addressing the progress and potential
barriers to the goals developed the previous month.
During the middle of the month, the project manager
leads the team to develop next month’s goals as the
team also works on the current month’s goals. Toward
the end of the month as the goals for the month are
accomplished, the meeting focuses more on the next
month, enabling the team to remain goal focused during
the life of the project.
Management meetings are also an opportunity to
discover obstacles to goal achievement. The project
team reallocates resources or develops alternative methods for accomplishing the
goals. As the project team discusses the progress of project goals, the project
manger explores possible obstacles and encourages exposing potential problems in
achieving goals. The project manager focuses the team on finding solutions and
avoids searching for blame.
The project manager uses a facilitative leadership approach, encouraging the
management team to contribute their ideas, and builds consensus on what goals
will bring the appropriate focus. The project manager keeps the focus on
developing the goals, tracking progress, identifying barriers, and making
adjustments to accomplish the management goals. Although there are typically
meetings for scheduling and procurement and other meetings where goals are
established and problems solved, the management meeting and the goal
development process create alignment among the project leadership on the items
critical to the project’s success.
Leadership Meetings
Leadership meetings are held less frequently and are longer in length. These
meetings are used by the project manager to reflect on the project, to explore the
larger issues of the project, and to back away from the day-to-day problem solving.
The project manager will create a safe environment for sharing thoughts and
evaluations of issues that are less data oriented. This is a right-brained, creative
meeting that focuses on the people issues of the project: the relationship with the
client, vendors, and project team. Team members who favor feeling, perceiving, and
intuition often contribute valuable insights in this type of meeting. The team might
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 210
also share perceptions by upper management and perceptions of the community in
which the project is being executed. Where the time frame for action item meetings
is in weeks and management meetings is in months, the time frame for leadership
meetings is longer and takes in the entire length and impact of the project.
The project manager’s meeting management skill includes creating the right
meeting atmosphere for the team discussion that is needed. For discussions based
on data and facts, the project manager creates the action item type meeting. The
conversation is focused on sharing information and clarification. The conversation
for leadership meetings is the opposite. Discussion is more open ended and focused
on creativity and innovation. Because each type of meeting requires a different
meeting atmosphere, mixing the purposes of a meeting will make it difficult for the
project manager to develop and maintain the appropriate kind of conversation.
Skilled project managers know what type of meeting is needed and how to develop
an atmosphere to support the meeting type. Meetings of the action item type are
focused on information sharing with little discussion. They require efficient
communication of plans, progress, and other information team members need to
plan and execute daily work. Management type meetings are focused on developing
and progressing goals. Leadership meetings are more reflective and focused on the
project mission and culture.
These three types of meetings do not cover all the types of project meetings.
Specific problem-solving, vendor evaluation, and scheduling meetings are examples
of typical project meetings. Understanding what kinds of meetings are needed on
the project and creating the right focus for each meeting type is a critical project
management skill.
Types of Teams
Teams can outperform individual team members in several situations. The effort
and time invested in developing a team and the work of the team are large
investments of project resources, and the payback is critical to project success.
Determining when a team is needed and then chartering and supporting the
development and work of the team is another critical project management ability.
Teams are effective in several project situations:
• When no one person has the knowledge, skills, and abilities to either
understand or solve the problem
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 211
• When a commitment to the solution is needed by large portions of the
project team
• When the problem and solution cross project functions
• When innovation is required
Individuals can outperform teams on some occasions. An individual tackling a
problem consumes fewer resources than a team and can operate more
efficiently—as long as the solution meets the project’s needs. A person is most
appropriate in the following situations:
• When speed is important
• When one person has the knowledge, skills, and resources to solve the
problem
• When the activities involved in solving the problem are very detailed
• When the actual document needs to be written (Teams can provide
input, but writing is a solitary task.)
In addition to knowing when a team is appropriate, the project manager must also
understand what type of team will function best.
Functional Teams
A functional team refers to the team approach related to the project functions. The
engineering team, the procurement team, and the project controls team are
examples of functional teams within the project. On a project with a low complexity
profile that includes low technological challenges, good team member experience,
and a clear scope of work, the project manager can utilize well-defined functional
teams with clear expectations, direction, and strong vertical communication.
Cross-Functional Teams
Cross-functional teams address issues and work processes that include two or more
of the functional teams. The team members are selected to bring their functional
expertise to addressing project opportunities.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 212
Figure 5.10
Problem-solving teams focus on a
particular problem.
© 2010 Jupiterimages
Corporation
Cross-Functional Teamwork on Concrete Project
A cross-functional project team in Tennessee was assigned to develop a project
approach to procuring, delivering, and erecting precast concrete without
storing the concrete on the site. Although the complexity of this goal is
primarily related to delivering the precast concrete in a sequence that will
allow erection from the delivery trucks, the planning involved coordination of
the design, procurement, and project controls. Team members from each of
these functions developed and tracked a plan to meet the project goal. The
cross-functional team was successful in designing a process and executing the
plan in a way that saved three weeks on the schedule and several thousand
dollars in cost.
Problem-Solving Teams
Problem-solving teams are assigned to address specific
issues that arise during the life of the project. The
project leadership includes members that have the
expertise to address the problem. The team is chartered
to address that problem and then disband.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 213
Problem-Solving Teamwork on Equipment
Manufacturing
On a project in Indiana, a company selected to design and build a critical piece
of equipment began having financial problems, and the delivery of the
equipment on the date needed by the project was at risk. A problem-solving
team was chartered to assess the problem and develop a solution for the
project. The team brought in some accounting expertise from the parent
company and assessed the status of the vendor. The engineering team assessed
the current state of the design, and the construction team developed an
alternative schedule to allow for a late delivery of the equipment. The team
developed a plan to support the vendor with funds and expertise that allowed
the project to complete on time. The problem-solving team was organized to
address a specific problem, developed and executed a plan to address the
problem, and then was disbanded.
Qualitative Assessment of Project Performance
Project managers should provide an opportunity to ask such questions as “What is
your gut feeling about how the project going?” and “How do you think our client
perceives the project?” This creates the opportunity for reflection and dialogue
around larger issues on the project. The project manager creates an atmosphere for
the team to go beyond the data and search for meaning. This type of discussion and
reflection is very difficult in the stress of day-to-day problem solving.
The project manager has several tools for developing good quantitative4
information—based on numbers and measurements—such as the project schedules,
budgets and budget reports, risk analysis, and goal tracking. This quantitative
information is essential to understanding the current status and trends on the
project. Just as important is the development of qualitative5
information—comparisons of qualities—such as judgments made by expert team
members that go beyond the quantitative data provided in a report. Some would
label this the “gut feeling” or intuition of experienced project managers.
The Humm Factor6
is a tool developed by Russ DarnallShari Caudron, “Industry’s
Unsung Heroes,” Industry Week, December 4, 1995, 12–16. to capture the thoughts of
project participants that are not reflected in the project reporting tools. The Humm
Factor derived its name from a project manager who always claimed he could tell
you more by listening to the hum of the project than reading all the project reports.
4. Based on numbers and
measurements.
5. Comparison of qualities.
6. Qualitative project
measurement tool developed
by Russ Darnall.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 214
The tool developed qualitative information for the project manager and leadership
team.
The Humm Factor is essentially a survey that is developed during the early phases
of the project. A series of questions are selected from a database of questions that
are designed to elicit responses that require reflection and do not require data. “Do
you feel the project is doing the things it needs to do to stay on schedule?” and “Is
the project team focused on project goals?” are the types of questions that can be
included in the Humm Factor. The qualitative responses are converted to a
quantitative value as a score from 1 to 10.
Someone on the project or assigned to support the project is responsible for
distributing the survey on a weekly or less frequent basis depending on the
complexity profile of the project. A project with a high level of complexity due to
team-based and cultural issues will be surveyed more frequently.
Responses are tracked by individual and by total project, resulting in qualitative
comparisons over time. The project team reviews the ratings regularly, looking for
trends that indicate an issue may be emerging on the project that might need
exploring.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 215
Humm Survey Uncovers Concern About a Vendor
On a project in South Carolina, the project surveyed the project leadership with
a Humm Survey each week. The Humm Factor indicated an increasing worry
about the schedule beginning to slip when the schedule reports indicated that
everything was according to plan. When the project manager began trying to
understand why the Humm Factor was showing concerns about the schedule,
he discovered an apprehension about the performance of a critical project
supplier. When he asked team members, they responded, “It was the way they
answered the phone or the hesitation when providing information—something
didn’t feel right.”
The procurement manager visited the supplier and discovered the company
was experiencing financial problems and had serious cash flow problems. The
project manager was able to develop a plan to help the supplier through the
period, and the supplier eventually recovered. The project was able to meet
performance goals. The Humm Factor Survey provided a tool for members of
the project team to express concerns that were based on very soft data, and the
project team was able to discover a potential problem.
Another project team used the Humm Factor to survey the client monthly. The
completed surveys went to a person who was not on the project team to
provide anonymity to the responses. The responses were discussed at the
monthly project review meetings, and the project manager summarized the
results and addressed all the concerns expressed in the report. “I don’t feel my
concerns are being heard” was one response that began increasing during the
project, and the project manager spent a significant portion of the next project
review meeting attempting to understand what this meant. The team
discovered that as the project progressed toward major milestones, the project
team became more focused on solving daily problems, spent more time in
meetings, and their workday was becoming longer. The result was fewer
contacts with the clients, slower responses in returning phone calls, and much
fewer coffee breaks where team members could casually discuss the project
with the client.
The result of the conversation led to better understanding by both the project
team and client team of the change in behavior based on the current phase of
the project and the commitment to developing more frequent informal
discussion about the project.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 216
Figure 5.11
An elevator speech is a synopsis
of the project’s purpose and
character that can be told
quickly.
© 2010 Jupiterimages
Corporation
Developing a Project Story
Every project develops a story. It is the short explanation that project team
members give when asked about the project. This is also called the elevator speech,
which is the explanation a person would give if he or she were in the elevator with
the CEO and the CEO asked him or her to describe the project. Project stories often
express important aspects of the project and can create a positive picture of the
project or one that is less appealing.
A project story will develop, and creating a positive
project story is a project management skill that helps
the project. A positive project story is inviting to people
and helps with the recruitment of talent to the project.
A positive project story also helps when services are
needed from functional departments within the
company and in developing management support for
the project.
Creation of the project story is an active process. The
project manager actively sets out to create the story.
Every project, by definition, is unique. Creating the
positive story entails identifying those unique aspects of
the project and building a positive outcome.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 217
Project Story of a Drug to Save Lives
A pharmaceutical project team in Colorado was building a plant to produce a
drug that would save lives. The faster the plant was completed, the more lives
would be affected by the drug. One story addressed the challenges of designing
and building a plant in record time. A second story emerged: the balance of
safety against speed. Safety procedures limited the number of subcontractors
and people working in the same area.
To accomplish the work, the project team found creative ways of accomplishing
the work off-site and scheduling work to minimize safety problems while
meeting aggressive timelines. The story became the challenge. People identified
with the challenge and wanted to be part of the success.
Building a Reputation for Project Completion Speed
A project manager in South Carolina always challenged people with speed. He
identified the last project with similar characteristics and challenged the team
to beat the time by weeks or months. The story became, “If you want a project
done on time, this is the project team you need.” The project manager created a
spirit of competition and fun. The project manager was a high-energy person,
and the idea of finding a way to finish a project early seemed a natural
outcome.
Every project manager can find the unique aspect of the project and build a sense of
specialness about the project. The project becomes a good place to work, provides
the team with a sense of accomplishment, and becomes the story created by the
project manager.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 218
KEY TAKEAWAYS
• Trust is important to reduce delays caused by excessive filtering and
fact checking. Contracts are specific about the project scope, but
personal relationships of mutual trust are necessary on complex
projects.
• Four types of trust are objective credibility, attribution of benevolence,
nonmanipulation, and a high cost of lying.
• To create trust, the project manager needs a reputation for
trustworthiness and needs to align official goals with operational goals,
establish a high cost of lying, and create an atmosphere of respect and
benevolent intent.
• Meeting types are action item, management, and leadership. Action item
meetings focus on specific short-term priorities. Management meetings
focus on planning, and leadership meetings focus on larger issues.
• The types of teams are functional, cross-functional, and problem
solving.
• The Humm Factor measures project performance and uses a
questionnaire to identify qualitative information about project
performance.
• A short statement of the purpose and character of the project is useful
in recruiting and obtaining support for a project.
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 219
EXERCISES
1. A type of trust that is formed by observing that a person’s truthfulness
is supported by observable facts is called ________ _________ (two
words).
2. A type of trust that is formed by knowing that the other person would
not risk the penalties for being untruthful is called the high cost of
________.
3. A type of trust that is formed by knowing that the other person is acting
in his or her own self-interest is called ___-________ trust.
4. A type of trust that is formed by evaluating a person’s motives and
concluding that they are not hostile is called an attribute of
________________.
5. To create trust, a manager should align official goals with ______ goals.
6. The Humm Factor is a method to collect ________ information about a
project that indicates the “gut feeling” that the project team has about a
project.
7. A short statement about the project that captures its purpose and
character that could be relayed in less than a minute is called an
_________ story.
8. How does lack of trust affect filtering of information, and how does that
affect the project?
9. What are four types of trust?
10. How can a manager create trust?
11. What are three main meeting types and what are their characteristics?
12. How do functional, cross-functional, and problem-solving teams differ
from each other?
13. What is the purpose of the Humm Factor?
Internalize your learning experience by preparing to discuss the following.
Consider someone you met recently and whom you felt you could trust.
Which of the four types of trust do you think you have for this person? Is
there a relationship of mutual trust between you? If so, what would be an
example of something each of you would trust the other to do? What would
be an example of a project team function or type of team where this trust
would be beneficial?
Chapter 5 Working with People on Projects
5.2 Working with Groups and Teams 220
5.3 Creating a Project Culture
LEARNING OBJECTIVES
1. Describe how project culture is developed and enforced.
2. Describe how differences in culture between stakeholders can influence
the project.
3. Describe the role of innovation on projects.
Project managers have a unique opportunity during the start-up of a project. They
create a project culture, something organizational managers seldom have a chance
to do. In most organizations, the corporate or organizational culture has developed
over the life of the organization, and people associated with the organization
understand what is valued, what has status, and what behaviors are expected. Edgar
Schein defined culture as a pattern of basic assumptions formed by a group on how
to perceive and address problems associated with both internal adaptation and
external integration.Edgar Schein, “Organizational Culture,” American Psychologist
45 (1990): 109–19. Schein also described organizational culture as an abstract
concept that constrains, stabilizes, and provides structure to the organization. At
the same time, culture is being constantly enacted, created, and shaped by
leadership behavior.
Characteristics of Project Culture
A project culture represents the shared norms, beliefs, values, and assumptions of
the project team. Understanding the unique aspects of a project culture and
developing an appropriate culture to match the complexity profile of the project
are important project management abilities.
Culture is developed through the communication of
• the priority
• the given status
• the alignment of official and operational rules
Official rules are the rules that are stated, and operational rules are the rules that
are enforced. Project managers who align official and operational rules are more
effective in developing a clear and strong project culture because the project rules
Chapter 5 Working with People on Projects
221
are among the first aspects of the project culture to which team members are
exposed when assigned to the project.
Operational Rules on a Project in India
During the start-up of a project in India, members of the project team were
given a policy that stated all travel expense claims must be submitted within
three days of completion of travel. During the first few weeks, the
administrative team began to understand that this was a difficult policy to
enforce without creating morale problems on the project. Instead of changing
the official rule, it was seldom enforced. The official rules and operational rules
differed.
Later on in the project, a worker was injured after crossing an area that was
marked as unsafe. Workers indicated that they knew the official rules but it
took too much time to go around the unsafe area. They assumed that official
rules could be ignored if they were difficult to obey. The difference between
official rules and operational rules of the project created a culture that made
communication of the priorities more difficult.
In addition to official and operational rules, the project leadership communicates
what is important by the use of symbols, storytelling, rituals, rewards or
punishments, and taboos.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 222
Creating a Culture of Safety
A project manager in South America who wanted to create a strong safety
culture on a construction project with significant safety concerns used several
methods to create the desired culture. In the first meeting that project team
members attended upon joining the project was a safety orientation. Members
were issued a card—a symbol—after the meeting granting permission to
participate on the project. The project leadership team told stories of previous
projects where people were fired for breaking safety rules and often warned
that the fastest way to get fired on the project was to break a safety rule—an
example of storytelling. Every project meeting started with a discussion of a
safety topic—a ritual—and any discussion of lessening the safety rules was
forbidden—taboo—and was quickly and strongly cut off by the project
leadership if it occurred.
Culture guides behavior and communicates what is important and is useful for
establishing priorities. On projects that have a strong safety culture, team members
feel free to challenge anyone who breaks a safety rule, even managers. The safety
aspects of culture are stronger than the cultural aspects of the power of
management.
Culture of Stakeholders
When project stakeholders do not share a common culture, project management
must adapt its organizations and work processes to cope with cultural differences.
The following are three major aspects of cultural difference that can affect a
project:
1. Communications
2. Negotiations
3. Decision making
Communication is perhaps the most visible manifestation of culture. Project
managers encounter cultural differences in communication in language, context,
and candor. Language is clearly the highest barrier to communication. When
project stakeholders do not share the same language, communication slows down
and is often filtered to share only information that is deemed critical. The barrier to
communication can influence project execution where quick and accurate exchange
of ideas and information is critical.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 223
The interpretation of information reflects the extent that context and candor
influence cultural expressions of ideas and understanding of information. In some
cultures, an affirmative answer to a question does not always mean yes. The
cultural influence can create confusion on a project where project stakeholders
share more than one culture.
Culture Affects Communication in Mumbai
A project management consultant from the United States was asked to evaluate
the effectiveness of a U.S. project management team executing a project in
Mumbai, India. The project team reported that the project was on schedule and
within budget. After a project review meeting where each of the engineering
leads reported that the design of the project was on schedule, the consultant
began informal discussions with individual engineers and began to discover
that several critical aspects of the project were behind schedule, and without a
mitigating strategy, the project would miss a critical window in the weather
between monsoon seasons. The information on the project flowed through a
cultural expectation to provide positive information. The project was
eventually cancelled by the U.S.-based corporation when the market and
political risks increased.
Not all cultural differences are related to international projects. Corporate cultures
and even regional differences can create cultural confusion on a project.
Cultural Differences between American Regions
On a major project in South America that included project team leaders from
seven different countries, the greatest cultural difference that affected the
project communication was between two project leaders from the United
States. Two team members—one from New Orleans and one from
Brooklyn—had more difficulty communicating than team members from
Lebanon and Australia.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 224
Figure 5.12
Innovation can be the focus of a
project.
© 2010 Jupiterimages
Corporation
Innovation on Projects
The requirement of innovation on projects is influenced
by the nature of the project. Some projects are
chartered to develop a solution to a problem, and
innovation is a central ingredient of project success. A
project to develop a vaccine in response to a recent flu
outbreak is an example of a project where innovation is
important to achieving the purpose of the project.
Innovation is also important to developing methods of
lowering costs or shortening the schedule. Traditional
project management thinking provides a trade-off
between cost, quality, and schedule. A project sponsor
can typically shorten the project schedule with an
investment of more money or a lowering of quality.
Finding innovative solutions can sometimes lower costs
while also saving time and maintaining the quality.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 225
Innovation on a Steel Plant Project
On a project to design and build a plant to make steel using new technology, the
project leadership was committed to generating cost savings on the project that
would allow needed technical modifications later on during the project. The
project was in the early design phase, and the project leadership established a
goal for generating $1 million in cost saving suggestions. The goal was
established in early fall, and the project manager declared that he would swim
the lake on the day of the project review in February if the project met its goal.
A process was established to track cost saving ideas using highly visible green
paper for documenting ideas, and a chart was placed on the project
communication wall recognizing people and teams that submitted ideas. Each
team was allocated a specific cost savings goal, and a team lunch was provided
when the goals were met. The project manager created a balance between the
message that this is a serious goal and that the project will have some fun with
the process.
On one occasion, the project manager talked with the electrical engineering
lead to understand why no suggestions were emerging from the electrical
design team. The electrical design team was struggling to maintain the project
schedule and did not have time to focus on project contests. The project
manager emphasized that the project had several goals, and generating the cost
savings for the client was an important project goal.
The electrical engineering lead gathered some senior electrical engineers into a
small conference room, and for the next three hours, this impromptu team
reviewed electrical drawings and concepts and began to generate ideas on how
to accomplish the design specifications and cut costs. The electrical
engineering lead maintained a flip chart in the front of the conference room,
and as soon as the team found enough savings to meet the electrical target, the
team disbanded and went back to working on the electrical design.
The team exceeded the goal prior to the February project review. The project
manager swam the lake during an enjoyable project celebration.
Innovation is a creative process that requires both fun and focus. Fun reduces the
amount of stress on the project. Stress is a biological reaction to perceived threats.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 226
Stress, at appropriate levels, can make the work environment interesting and even
challenging. Many people working on projects enjoy a high-stress, exciting
environment. When the stress level is too high, the biological reaction increases
blood flow to the emotional parts of the brain and decreases the blood flow to the
creative parts of the brain, making creative problem solving more difficult. Project
managers recognize the benefits of balancing the stress level on the project with
the need to create an atmosphere that enables creative thought.
Stress Managed on Steel Project
The electrical lead engineer on the steel project was able to create the
environment for the electrical team to focus on the electrical design and
explore alternative designs that could generate cost savings. The electrical lead
also saw the investment in creating cost savings as an addition to the job. The
electrical team stopped to contribute to the project goal and went back to the
design work once the electrical cost-saving target was met.
Exploring opportunities to create savings takes an investment of time and energy,
and on a time-sensitive project, the project manager must create the motivation
and the opportunity for creative thinking.
KEY TAKEAWAYS
• Project culture is developed by communicating priority, status, and the
alignment of official and operational rules. It is enforced through use of
symbols, storytelling, rituals, rewards or punishments, and taboos.
• Differences in culture between stakeholders can affect communications,
negotiations, and decision making.
• Innovation can be the main focus of the project, or it can be used to
achieve improvement in goals that are usually mutually exclusive, such
as lowering costs and shortening schedule.
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 227
EXERCISES
1. The project ________ is developed by communicating what is important,
communicating what gives status, and aligning operational and official
rules.
2. How can innovation achieve improvement in goals?
Internalize your learning experience by preparing to discuss the following.
Describe a team project with which you are familiar where the objective was
to find an innovative solution. What was the level of stress and how was it
managed to support an innovative atmosphere?
Chapter 5 Working with People on Projects
5.3 Creating a Project Culture 228
5.4 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Describe two situations that involve delegating work to other people.
The first is a positive example that worked well, and the other is one
that did not. Analyze the reasons for the success and failure of the two
examples using the information about trust and personality types from
this chapter.
2. Choose a project with which you are familiar that does not have a good
elevator story. Attempt to create one and explain how it could be used
to promote the project.
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Describe a project where trust or distrust became a major factor in the
success or failure of the project. Using the four kinds of trust described
by Lindskold, explain how trust was formed or lost. Consider the
descriptions offered by other students of their trust experiences and
identify a situation where one of the same types of trust was established
or lost. Compare the effects on both projects.
2. Describe a project where differences in culture affected
communications, negotiations, or decision making.
Chapter 5 Working with People on Projects
229
5.5 Web Exercises
LEARNING OBJECTIVES
1. Describe the characteristics of the Myers-Briggs personality profile.
2. Describe the characteristics of emotional intelligence.
3. Locate, download, and analyze meeting agenda examples.
Explore Personality Testing
A popular tool for categorizing personality types is the Myers-Briggs Type Indicator
(MBTI). In this exercise, you learn about the MBTI and other tests based on the
personality types described by psychologist Carl Jung.
MBTI
1. Start a web browser and go to the Myers and Briggs Foundation
website by typing http://www.myersbriggs.org/my-mbti-personality-type/
mbti-basics.
2. Read the section titled MBTI Basics.
3. Scroll down to the table of sixteen personality types. Move the mouse
pointer over one of the types to display the pop-up window that shows
the explanation of that type.
4. Point to one of the other types in the table and then capture the
screen.
5. Open a Word document. In the first line, type your name. Below your
name, paste the screen capture.
6. Save that document as Ch05MBStudentName.doc using the Word 2003
.doc file format.
7. Switch back to the web page. Below the table, click All types are equal to
move to that web page. Read the page.
8. Capture a portion of the All types are equal page and paste it into the
Word document.
9. Leave the word processing document open.
Free Online Personality Tests
The Myers-Briggs test is administered and interpreted by trained and certified
people who help explain the meaning of the results. This is an important function
because terms like introvert do not mean what many people normally assume them
Chapter 5 Working with People on Projects
230
to mean, and self-evaluation can be misinterpreted. It can still be instructive to take
one of the free, online tests that are similar to the MBTI.
1. In a web browser, type http://www.humanmetrics.com/cgi-win/
jtypes1.htm.
2. Follow the directions to take the Jung Typology Test (it consists of
seventy-two Yes/No questions).
3. Display the test score, as shown in Figure 5.13 "Example of a Result",
except it may be any of the sixteen types.
Figure 5.13 Example of a Result
Source: Courtesy of www.humanmetrics.com.
4. Notice the brief explanation in bulleted list format. Capture this screen
and paste it into the word processing document.
5. Return to the Myers and Briggs Foundation website by typing
http://www.myersbriggs.org/my-mbti-personality-type/mbti-basics. Scroll
down to the table of types and click the one that corresponds to your
score from the other website. Capture the screen and paste it into the
word processing document.
6. Below the screens, reflect on what you learned about the MBTI and the
Jung personality types. Relate any experiences you might have had
with this personality typing and your impressions of its accuracy in
describing your personality.
7. Review your work and use the following rubric to determine its
adequacy:
Chapter 5 Working with People on Projects
5.5 Web Exercises 231
Element Best Adequate Poo
File name Ch05MBStudentName.doc Ch05MBStudentName.docx
Anoth
file na
Describe the
characteristics
of the Myers-
Briggs
personality
profile
First line with name; four
screen captures that
show one of the types in
the table, a screen from
the All types are equal
page, the results of your
test, and that type on the
table
Same as Best
Some
screen
missin
or not
match
the tes
result
8. Save the file and submit it as directed by the instructor.
Emotional Intelligence: Developing a Strong MindBased on a
graduate project by Bonnie Jankovic, December 2011.
In the project management profession, developing strong people skills helps
management understand how to deal with personality types, like the Myers-Briggs
test uses the emotional intelligence test site to develop strong career building skills.
Mind Tools helps develop strong people skills.
1. Start a web browser and go to the Mind Tools website at
http://www.mindtools.com/pages/article/newCDV_59.htm.
Read the first page, including the sections titled
◦ Developing Strong “People Skills”
◦ What Is Emotional Intelligence
◦ Characteristics of Emotional Intelligence
◦ How to Improve Your Emotional Intelligence
Chapter 5 Working with People on Projects
5.5 Web Exercises 232
Figure 5.14 Mind Tools homepage
Source: Courtesy of www.mindtools.com.
2. Open MS Word and save a new document as Ch5EQStudentName.doc.
3. Click the Play button on the video. Capture a screen that shows the
video playing and then paste it into your Word document.
4. In a browser, type http://www.ihhp.com/testsite.htm.
Figure 5.15 Institute for Health and Human Potential homepage
Source: Courtesy of The Institute for Health and Human Potential.
Chapter 5 Working with People on Projects
5.5 Web Exercises 233
5. Begin the test and fill out the first few questions. Copy the screen and
then paste it into your Word document.
6. Complete the test and then click the Evaluate button.
7. In the Word document below the screen captures, reflect on what you
learned about emotional intelligence (EQ) and then describe how being
more aware of EQ might improve the work environment on a project.
8. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch05EQStudentName.doc Ch05EQStudentName.docx
Anothe
file nam
Describe the
characteristics
of emotional
intelligence
First line with name;
four screen captures that
show the video playing
and the first few
questions of the EQ test;
a reflective essay of two
hundred to three
hundred words in which
you describe what you
learned and how it might
be useful on a project
Correct screen captures
with a reflective essay
between one hundred and
two hundred words
Some
screens
missing
very bri
essay th
did not
cover
both
objectiv
9. Save the document, and then submit it as directed by your instructor.
Use Templates to Standardize Project Development
Different types of meetings have different objectives. To achieve those objectives, it
helps to organize the agenda of the meeting around those objectives and to
sequence them properly. Studying examples used by other organizations will assist
in choosing an agenda that suits the purpose of a meeting.
How to Download a Meeting Agenda
1. Open a blank word processing document and type your name and date
on the first line. Save the file as Ch05MeetingsStudentName using the
Word 2003 file format that ends with .doc.
2. Start a web browser program and go to the Project Management
Guidebooks and Templates page for the State of North Dakota at
http://www.nd.gov/itd/standards/project-management/projectChapter
5 Working with People on Projects
5.5 Web Exercises 234
management-guidebooks-and-templates. A list of links displays, as
shown in Figure 5.16 "North Dakota Projects"
Figure 5.16 North Dakota Projects
Source: Courtesy of the North Dakota Information Technology Department.
3. Add this website to your browser’s favorites list, in a folder named
Projects.
4. Capture a screen that shows a link to this site in the Projects folder of
your bookmarks or favorites, and then paste it into the word
processing document.
5. On the web page, under Managing Projects, click Project Kickoff Meeting
Agenda Template (25kb rtf). Notice the file is labeled “25kb rtf,” which
means that it is a small file saved in rich text format (rtf). The rtf
format is a standard format that virtually all word processing
programs can read.
6. Save the file to your computer and then open it.
7. Review the topics and the time allowed for each topic.
8. Near the top of the page, select the placeholder text to the right of
Project, and then type Classwork for StudentName, where you use your
name.
9. Capture a screen that shows your modification to the agenda and paste
it into the word processing document.
Chapter 5 Working with People on Projects
5.5 Web Exercises 235
Analysis
1. Compare this agenda with the concepts described in the text. Address
the following questions:
◦ What type of meeting is this (action item, management, or
leadership)? Support your analysis with references to the sample
agenda and quotations from the text.
◦ Is this agenda designed to build trust? Compare this agenda to the
section in the text titled Creating Trust.
2. At the bottom of the word processing document, write an essay of
between two hundred and five hundred words that consists of two
parts that address these two questions.
3. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate P
File name Ch05MeetingsStudentName.doc Ch05MeetingsStudentName
Ano
nam
Locate,
download,
and
analyze
meeting
agenda
examples
Name on first line; screen
captures that show the web
link in the Project folder of
your browser’s favorites and an
image of the agenda with your
name next to Project; a twopart
essay that addresses the
two questions with specific
references in the text and in
the sample agenda to support
your analysis
Name on first line; screen
captures that show the web
link in the Project folder of
your browser’s favorites
and an image of the agenda
with your name next to
Project; a single paragraph
that addresses the two
questions with
paraphrased references in
the text and in the sample
agenda to support your
analysis
Miss
inco
scre
capt
essa
too g
and
does
addr
ques
does
dem
an in
fami
with
text
sam
4. Save Ch05MeetingsStudentName and submit it as directed by the
instructor. Close all documents and programs.
Chapter 5 Working with People on Projects
5.5 Web Exercises 236
Chapter 6
Communication Technologies
Projects require teamwork, and team members must communicate with each other
in a variety of ways. The documents they produce must be collected, distributed,
and stored in an appropriate manner to assure timely and accurate communication
between team members. This process is often assisted by a variety of technologies
and computer software products. Communication technology can facilitate faster
and better communication, or it can become a barrier if the technologies are not
well understood and applied appropriately.
237
6.1 Types of Communication
LEARNING OBJECTIVES
1. Identify characteristics and examples of synchronous communication.
2. Identify characteristics and examples of asynchronous communication.
3. Identify questions to answer when considering new communications
technologies.
Completing a complex project successfully requires good communication among
team members. If those team members work in the same building, they can arrange
regular meetings, simply stop by each other’s office space to get a quick answer, or
even discuss a project informally at other office functions. Many projects are
performed by teams that interact primarily through electronic communication and
are, therefore, called virtual teams.Business Dictionary, s.v. “Virtual Team,”
http://www.businessdictionary.com/definition/virtual-team.html (accessed
January 27, 2010). To avoid miscommunication that can harm trust and to include
team members in a project culture, the project team needs a plan for
communicating reliably and in a timely manner. This planning begins with
understanding two major categories of communication.
Synchronous Communications
If all the parties to the communication are taking part in the exchange at the same
time, the communication is synchronous. A telephone conference call is an example
of synchronous communication. When the participants are not interacting at the
same time, the communication is not synchronous, or asynchronous.
The following are examples of synchronous communications:
• Live meeting. Gathering of team members at the same location.
• Audio conference. A telephone call between two individuals or a
conference call where several people participate.
• Computer-assisted conference. Audio conference with a connection
between computers that can display a document or spreadsheet that
can be edited by both parties.
• Video conference. Similar to an audio conference but with live images of
the participants. Some laptop computers have built-in cameras to
Chapter 6 Communication Technologies
238
facilitate video conferencing, as shown in Figure 6.1 "Video
Conferencing by Laptop".
Figure 6.1 Video Conferencing by Laptop
© 2010 Jupiterimages Corporation
• IM (instant messaging). Exchange of text or voice messages using pop-up
windows on the participants’ computer screens, as shown in Figure 6.2
"Instant Messaging Pop-Up Window".
Chapter 6 Communication Technologies
6.1 Types of Communication 239
Figure 6.2 Instant Messaging Pop-Up Window
• Texting. Exchange of text messages that are 160 characters or fewer
between mobile phones, pagers, or personal digital assistants
(PDAs)1
—devices that hold a calendar, a contact list, a task list, and
other support programs. See Figure 6.3 "Texting via Cell Phone".
1. Device that holds a calendar, a
contact list, a task list, and
other support programs.
Chapter 6 Communication Technologies
6.1 Types of Communication 240
Figure 6.3 Texting via Cell Phone
© 2010 Jupiterimages Corporation
Time Zones
The worldwide communication network makes it possible to assemble project teams
from anywhere in the world. Most people work during daylight hours, which can
make synchronous meetings difficult if the participants are in different time zones,
where they start, end, and take meal breaks at different times. It can be an
advantage in some circumstances. For example, if something must be done by the
start of business tomorrow, team members in Asia can work on the problem during
their normal work hours while team members in North America get some sleep.
Chapter 6 Communication Technologies
6.1 Types of Communication 241
Figure 6.4 World Time Zones
© 2010 Jupiterimages Corporation
As the earth turns, the sun appears to move across the sky from east to west. Local
noon occurs when the sun is at its highest position in the sky. Cities and countries
to the north or south of each other all observe local noon at the same time. For
example, noon in New York occurs at the same time as it does in Bogotá, Colombia,
in South America. Be aware that many well-educated people in the United States
think of South America as directly south of North America. As you can see in Figure
6.4 "World Time Zones", most of South America is one or two time zones east of the
United States.
To prevent confusion between a.m. and p.m., times are given using a twenty-fourhour
clock. Noon is 12:00 and 1 p.m. is 13:00, and parts of an hour are divided by
colons. For example, 13:25:21 is thirteen hours, twenty-five minutes, and twentyone
seconds.
Local Time
Local time is compared to the time zone that is centered at the historically
significant naval observatory at Greenwich, England. The time at that location is
Chapter 6 Communication Technologies
6.1 Types of Communication 242
Greenwich Mean Time (GMT)2
. More recent references use UT for Universal Time
(UT)3
instead of GMT.
Conference Call between New York and Paris
A project manager in New York is five time zones west of the reference zone, so
the time is given as UT –5 (or GMT –5). If it is noon in the reference zone, it is 7
a.m. (five hours earlier) in New York. The manager would like to contact a
project team member in Paris, France. Paris is one time zone west of the
reference zone (UT +1 or GMT +1). If it is noon (12:00) in the reference zone, it is
13:00 (1 p.m.) in Paris.
This means that there is a six-hour difference between New York and Paris. If
the project manager waits until after lunch to place the call (1 p.m. in New
York), it might be too late in the day in Paris (7 p.m.) to reach someone.
Asynchronous Communications
Getting a team together at the same time can be a challenge—especially if they are
spread out across time zones. Many types of communication do not require that the
parties are present at the same time. This type of communication is not
synchronous; it is asynchronous. There are several choices of asynchronous
communications.
Mail and Package Delivery
Many companies prefer that final contracts are personally signed by an authorized
representative of each party to the agreement. If several signatures are required,
this can take weeks to get all the signatures if the contracts are transferred by the
postal service. If this process is holding up the start of the project, you can use an
overnight delivery service to minimize the time spent transferring the documents.
Fax
A telefacsimile (fax) machine4
is a device that scans a document a narrow band at
a time converting it into tones that can be conveyed over traditional telephone
lines to a receiving device that reproduces a facsimile5
—exact duplicate—of the
document. A fax machine typically has a paper feeder that can be used for feeding
2. Time zone system historically
based on the naval observatory
at Greenwich, England.
3. Time zone system that is
compatible with GMT but
without the historical
reference.
4. Device that scans a document
and converts it to electronic
signals that can be transmitted
by telephone to another fax
machine, which can reproduce
the original document.
5. A duplicate (see telefacsimile).
Chapter 6 Communication Technologies
6.1 Types of Communication 243
multiple-page documents, a telephone key pad and handset, and a status display, as
shown in Figure 6.5 "Fax Machine".
Figure 6.5 Fax Machine
© 2010 Jupiterimages Corporation
Transmission rates of fax machines are typically limited by the use of traditional
telephone lines. The data transmission uses the same method as a dial-up computer
modem. A Group 3 fax machine6
has a maximum data rate of 14.4 kilobits per
second (Kbps), but if the phone connection is poor, it will drop down to lower
speeds automatically until it can establish a reliable connection between machines.
The Group 3 fax machine digitizes data in a form that is compatible with computers
and the fax function is often integrated with other computer functions. A
multifunction device, such as the one shown in Figure 6.6 "Multifunction Printer,
Scanner, Fax, and Copier", can scan a document and save it as an image, send it as a
fax, or print multiple copies.
6. Model of fax machine that uses
digital scanning and data
compression.
Chapter 6 Communication Technologies
6.1 Types of Communication 244
Figure 6.6 Multifunction
Printer, Scanner, Fax, and
Copier
© 2010 Jupiterimages
Corporation
Fax machines have been around a long time and enjoy a
high level of trust for transmitting documents
accurately. In many countries, a fax of a signed contract
is legal, but a computer-scanned image is not.
Electronic Mail
Electronic mail (e-mail) is widely used to coordinate
projects and to communicate between team members. It
has several valuable characteristics for project
management:
• Copies can be sent to a list of team
members.
• A preconference-call e-mail can list the
agenda items of the conference call.
• A postconference e-mail can summarize the results of the discussion
on each topic.
• Messages can be saved to document the process in case of a
misunderstanding or miscommunication.
• Files can be attached and distributed.
Project Log and Web Log (Blog)
A Web log7
is typically called a blog. It is an online journal that can be private,
shared by invitation, or made available to the world. Some project managers keep a
journal in which they summarize the day’s challenges and triumphs and the
decisions they made. They return to this journal at a later date to review their
decision-making process after the results of those decisions are known to see if they
can learn from their mistakes. Many decisions in project management are made
with incomplete knowledge, and reflecting on previous decisions to develop this
decision-making skill is important to growth as a project manager.
Really Simple Syndication (RSS)
Some projects are directly affected by external factors such as political elections,
economic trends, corporate mergers, technological or scientific breakthroughs, or
weather. To keep informed about these factors, you can subscribe to online news
sources. A method that facilitates this process is Really Simple Syndication (RSS)8
.
To use an RSS feed, team members download a free news reader on the Internet.
Web pages with RSS news feeds have labeled links, as shown in Figure 6.7 "Link to
RSS Feed on a Web Page".
7. Online personal journal.
8. Communications technology
that allows news to be sent to a
computer screen.
Chapter 6 Communication Technologies
6.1 Types of Communication 245
Figure 6.7 Link to RSS Feed
on a Web Page
If the user clicks on the RSS feed, news from the Web
site is automatically sent to the user’s news reader. The
news reader can be set to filter the news for key words
to limit the stories to those that are relevant to the
project.
The following are examples of asynchronous
communications:
• Mail and package delivery. Transfer of objects and contracts that need
signatures.
• Fax. Document transmittal over telephone. Facsimiles are accepted for
some documents.
• Electronic mail (e-mail). Text messages with attachments can be
distributed and managed by computer programs.
• Web log (blog). An online journal may be used to record events,
thoughts, and lessons learned.
• Really Simple Syndication (RSS). News feeds that push relevant content to
a reader to keep the manager informed of new events that could affect
the project.
Assessing New Communication Technologies
New technologies for communicating electronically appear with increasing
frequency. Using a new technology that is unfamiliar to the team increases the
technology complexity, which can cause delays and increase costs. To decide if a
new technology should be included in a communications plan, seek answers to the
following questions:
• Does the new communication technology provide a competitive
advantage for the project by reducing cost, saving time, or preventing
mistakes?
• Does the project team have the expertise to learn the new technology
quickly?
• Does the company offer support such as help desk and equipment
service for new communication technology?
• What is the cost of training and implementation in terms of time as
well as money?
Chapter 6 Communication Technologies
6.1 Types of Communication 246
KEY TAKEAWAYS
• Synchronous communications take place when all the parties are
present at the same time. Examples are telephone calls and video
conferencing.
• Asynchronous communications take place when the parties are not
present at the same time. Examples are e-mail, fax, package delivery,
blogs, and RSS feeds.
• Determine if a new technology can save time, reduce cost, or prevent
mistakes and if the increased complexity can be handled by the team
and support staff for an affordable cost in time and money.
EXERCISES
1. Communications methods that do not require both parties to participate
at the same time are called _______________.
2. A telephone call is an example of __________ communication.
3. An exchange of e-mail messages is an example of _______________
communication.
4. A __________ is an online journal used to share an individual’s thoughts
and experiences.
5. A video conference is an example of _____________ communications.
6. What are two examples of synchronous communications technologies
that you have used?
7. What are two examples of asynchronous communications technologies
that you have used?
8. What is a virtual team?
9. Where is the reference time zone and why is it sometimes referred to as
both GMT and UT?
10. Why are fax machines still used for legal documents?
Internalize your learning experience by preparing to discuss the following.
If you were managing a functional team that included people from three
other countries, which synchronous communications technologies would
you include in your communications plan and for what purposes? Which
asynchronous technologies would you use and for what purposes? What new
technologies would you consider?
Chapter 6 Communication Technologies
6.1 Types of Communication 247
6.2 Selecting Software
LEARNING OBJECTIVES
1. Identify the types of software that are appropriate for projects of low
complexity.
2. Identify the types of software that are appropriate for projects of
medium complexity.
3. Identify the types of software that are appropriate for projects of high
complexity.
4. Describe strategies for sharing documents that can be edited by a team.
Part of a communications plan is determining the type of computer software that
will be used to create documents, spreadsheets, diagrams, and reports. The choice
of software is related to the complexity of the project.
Simple Projects
Basic projects can be managed using some of the features available in generalpurpose
software that is available in most offices.
Word Processing
Even the most basic project will generate numerous documents using word
processing software. A communications plan can specify standards for these
documents that makes it easier to create, edit, combine, store, and retrieve the
documents. Document standards include the following:
• Specifying the file format
• Using templates for commonly used forms
File Format
Word processing software programs display a document on a computer’s screen and
allow the user to enter and edit text. When the file is saved to a storage device, the
text and all the various formatting such as font and font size are converted to a
code for efficient storage. The code varies from one word processing program to
another and even between releases of the same program.
Chapter 6 Communication Technologies
248
The most common word processing program, by a wide margin, is Microsoft Word
(MS Word). Several releases of MS Word run on the Windows operating system and
on the Macintosh operating system. Versions of MS Word released prior to 2007
save files in a proprietary format. The format is indicated by a period and a threeletter
extension—.doc—that is automatically attached to the file when it is saved.
Beginning with MS Word 2007 for Windows and MS Word 2008 for Macintosh, files
are saved using a different format that is indicated by a period and a four-letter
extension—.docx—that identify the newer format.
Almost all word processing programs have the ability to save files in the .doc file
format, and it is a common standard for word processing files. Newer versions of
word processing programs, including MS Word 2007 and MS Word for Mac 2008, can
save files in the older .doc format. There are new features in MS Word 2007—such as
the ability to format citations in a variety of styles, including APA, MLA, and
Chicago—that are lost when the file is saved in the .doc format. Older versions of MS
Word can be adapted to read the newer .docx file formats by downloading and
installing a compatibility program that is available at no cost from Microsoft’s Web
site. Display of document file extensions is hidden by default in the Windows
operating system. They can be displayed by turning off this feature. Instructions for
displaying the file extensions are available from the operating system’s help menu.
In the Windows Vista operating system, the option is found on the Control Panel, in
Appearance and Personalization, in Folder Options, on the View tab, under
Advanced Settings, as shown in Figure 6.8 "Displaying File Name Extensions".
Figure 6.8 Displaying File Name Extensions
Chapter 6 Communication Technologies
6.2 Selecting Software 249
When a list of files is displayed in a dialog box, choose the Details option. In
Windows Vista, the Details option is on the View button, as shown in Figure 6.9 "File
Extensions Displayed in Details View".
Figure 6.9 File Extensions Displayed in Details View
Styles
The combination of formatting, including font, font size, font color, shading, and
other attributes used to display a segment of text and to identify its level of
importance, is called a style9
. A style can be given a name and applied repeatedly to
different portions of a document. Predefined styles are available in MS Word 2007
on the ribbon, on the Home tab, in the Styles group, as shown in Figure 6.10 "Style
Choices". Users can define their own styles and give them names. Some
organizations prefer that all of their documents have similar fonts and styles for
headings, body text, and figure captions.
Figure 6.10 Style Choices
Outlines
An outline of a document consists of topic headings and subheadings, and it is
useful when organizing or reorganizing a document. The Styles group in MS Word
2007 includes predefined styles for nine levels of headings. In addition to using
different fonts, each heading is assigned a level of importance. A document that
uses headings with assigned levels can be viewed in the Outline view, such as the
book outline shown in Figure 6.11 "Outline View in MS Word 2007". In this view, the
level of detail displayed in the outline is selected to display the first two levels of
9. Combination of formatting,
including font, font size, font
color, shading, and other
attributes used to display a
segment of text and to identify
its level of importance.
Chapter 6 Communication Technologies
6.2 Selecting Software 250
the outline. The headings and the hidden text associated with each heading can be
moved by selecting and dragging headings from one location in the outline to
another.
Figure 6.11 Outline View in MS Word 2007
Templates
If a particular type of document will be used repeatedly, it might be worth the time
to create an example document—a template10
—that is formatted using the
appropriate styles with blanks or placeholder text where the user can insert the
information that describes a particular situation. A variety of templates are already
available for download at no additional cost. For example, when a new document is
created in Microsoft Word 2007, there is an option to choose a template such as the
invoice template shown in Figure 6.12 "Standardized Document Used as a
Template".
10. An example document that
uses standard design features
that can be completed to create
similar documents.
Chapter 6 Communication Technologies
6.2 Selecting Software 251
Figure 6.12 Standardized Document Used as a Template
The template may be customized and used repeatedly for all the documents of that
type, or the organization can design its own.
Diagrams
Reporting relationships and the flow of work are often described using diagrams
that consist of boxes connected by arrows. Recent releases of popular word
processing programs include drawing tools that can be used for basic diagrams. In
MS Word 2007, a variety of shapes and connectors are available on the Insert tab, in
the Illustrations group on the Shapes button, as shown in Figure 6.13 "Menu of
Diagramming Shapes and Connectors in Word 2007".
Chapter 6 Communication Technologies
6.2 Selecting Software 252
Figure 6.13 Menu of Diagramming Shapes and Connectors in Word 2007
Adaptable connecting lines and arrows can be used that redraw automatically when
the shapes are moved. This feature facilitates rapid revisions when the shapes must
be moved, because the connecting arrows do not need to be redrawn.
A feature named SmartArt was introduced in Microsoft Office 2007 that has a
variety of charts that can be used for displaying organization and relationships that
use more sophisticated and artistic graphics, as shown in Figure 6.14 "SmartArt
Feature in Microsoft Word".
Chapter 6 Communication Technologies
6.2 Selecting Software 253
Figure 6.14 SmartArt Feature in Microsoft Word
Spreadsheets
Another commonly available software creates a spreadsheet11
—a display of data in
row and column format—in which financial or numerical data can be manipulated.
The intersection of the rows and columns are cells into which numbers, text, dates,
and formulas can be entered. The formulas can utilize values found in other cells
and display the results in the cell in place of the formula. If the value in a cell to
which the formula refers is changed, all the formulas that use that cell’s value are
immediately recalculated. This feature makes it convenient to examine several
options quickly. Spreadsheets are often used to manage data on simple projects
instead of a dedicated database or project management software.
Organizing Data in Rows and Columns
If a spreadsheet is used to store data, such as a list of project activities or a list of
expenses, it is prudent to arrange the data in some way that would be used by more
sophisticated data management software. Most data management programs
arrange data in such a way that each type of data is represented by a column with a
label at the top and each row contains the specific data for one type of item. A
collection of data arranged in rows and columns is a table12
. For example, a list of
expenses would be arranged so that individual expenses are recorded on each row,
and each column would be a type of information related to the expenses, as shown
in Figure 6.15 "Expenses Arranged in a Table in a Spreadsheet".
11. Display of data in row and
column format.
12. Group of data that is organized
in rows and columns, where
columns are types of data and
rows are individual instances.
Chapter 6 Communication Technologies
6.2 Selecting Software 254
Figure 6.15 Expenses Arranged in a Table in a Spreadsheet
File Format
The most common spreadsheet program, by a wide margin, is Microsoft Excel (MS
Excel). There have been several releases of MS Excel that run on the Windows
operating system and on the Macintosh operating system. Versions of MS Excel
released prior to 2007 save files in a proprietary format. The format is indicated by
a period and a three-letter extension—.xls—that is automatically attached to the file
when it is saved. Beginning with MS Excel 2007 for Windows and MS Excel 2008 for
Macintosh, files are saved using a different format that is indicated by a period and
a four-letter extension—.xlsx—that identifies the newer format.
Almost all spreadsheet programs have the ability to save files in the .xls file format,
and it is a common standard for spreadsheet files. Newer versions of spreadsheet
programs, including MS Excel 2007 and MS Excel for Mac 2008 can save files in the
older .xls format. There are a few new basic features in MS Excel 2007 that would be
lost by saving files to the older file format.
Using a Spreadsheet to Manage Project Data
If the data in the spreadsheet is arranged in simple rows of the same type of data, it
can be manipulated to provide reports for basic projects.
If one or more of the columns in a table contain labels, identification numbers, or
other descriptions, those labels can be used to specify sorting and filtering options.
For example, if the spreadsheet has a list of expenses, the rows of data can be sorted
in decreasing or increasing value by one of the data types such as the due date or
the amount of the expense. The display can be restricted—filtered13
—to display
13. Display is restricted to data
that meets criteria.
Chapter 6 Communication Technologies
6.2 Selecting Software 255
only those rows that meet criteria specified by the user. For example, the table
could be filtered to display the expenses for a particular department that were
incurred between two dates. This ability facilitates the preparation of monthly
progress reports and budgets.
In MS Excel 2007, the sorting and filtering options are on the Data tab, in the Sort
and Filter group under the Sort or Filter button. Once a filter is applied, option
buttons are placed at the top of each column to facilitate changes in the sorting or
filtering options. For example, the list of expenses shown in the previous figure can
be sorted by the labels in the Category column and filtered to show only costs that
are more than $20, as shown in Figure 6.16 "Sorting and Filtering in Microsoft Excel
2007".
Figure 6.16 Sorting and Filtering in Microsoft Excel 2007
Subtotals
If the user wants to find a subtotal of the values that belong in a particular group,
the groups must be identified by a label in one of the columns. Finding subtotals is a
two-step process. First, the table is sorted by that column to bring all the rows in
each group together. Next, the subtotal feature is applied. In Excel 2007, the
Chapter 6 Communication Technologies
6.2 Selecting Software 256
subtotal option is found on the Data tab, in the Outline group. A dialog box allows
the user to choose the columns to subtotal and the columns that contain the labels
of the groups. A subtotal is inserted below the last row for each group, as shown in
Figure 6.17 "Using Subtotals".
Figure 6.17 Using Subtotals
In a panel at the left of the screen are lines and symbols that indicate the level of
detail that is displayed. By clicking on the boxes with minus signs, the rows
containing the data can be hidden, leaving the subtotals or grand total, as shown in
Figure 6.18 and Figure 6.19. This feature allows a manager to view summary data
very quickly without the visual clutter of the details.
Figure 6.18
Third level details are hidden.
Chapter 6 Communication Technologies
6.2 Selecting Software 257
Figure 6.19
All details in rows 2–16 are hidden.
Graphics for Bar Charts and Milestones
Spreadsheets can be used for basic progress reports that show activities, dates, and
horizontal bars that represent the duration of an activity. A sequence of dates can
be created as column labels by entering the first two dates in the sequence,
selecting both dates, and then dragging the fill handle—a small square in the lower
right corner of the selected cell, as shown in Figure 6.20 "Creating a Sequence of
Dates"—to extend the pattern.
Figure 6.20 Creating a Sequence of Dates
The program is sophisticated enough to correctly fill date sequences between
months that have a different number of days and even account for leap years in
February. Because more sophisticated project management software uses a table
design in which the first two columns are description and duration, a similar
structure, in which those two columns are adjacent and in that order will make it
convenient to transfer the list of activities in a low-complexity project into the
project management software at a later date if the spreadsheet is not sufficient. In
the duration column, use the following abbreviations:
• d for days
• wk for weeks
Chapter 6 Communication Technologies
6.2 Selecting Software 258
• mons for months
The duration of each activity and the relationships between activities can be
illustrated using the drawing shapes. In Excel 2007, the same set of shapes and
connector arrows are available as those in Word 2007. A long rectangle can
represent a bar whose length represents the duration of the activity. Events or
significant dates in the project are identified with a diamond. The diamond can be
created by using a small square shape and rotating it. Arrows can be drawn between
the shapes to indicate their relationships, as shown in Figure 6.21 "Diagram of
Activities". Unfortunately, the arrows in Excel 2007 connect to handles on the sides
of the rotated squares instead of the corners. This detail may be overlooked in a
simple project diagram.
Figure 6.21 Diagram of Activities
This type of diagram is useful for projects with low complexity where a simple chart
of a few activities will suffice.
Software for Moderately Complex Projects
More complex projects involve more people who are often separated geographically
and who contribute to the same documents. Complex projects have more tasks with
more complex relationships. To manage those tasks and relationships, using
dedicated project management software and more sophisticated diagramming
software is justified.
Sharing Team Documents
If more than one person on a team will be contributing to a document, the
document must be accessible to them. To manage documents that are created by a
team, it is necessary to control the edits so that work is not lost or confused.
Chapter 6 Communication Technologies
6.2 Selecting Software 259
Version Control
Files such as word processing documents and spreadsheets may be stored on an
individual’s computer and copies sent to participants who then make changes and
return the revised version to the person who is responsible for the final version of
the document. If more than one person is editing his or her own copy of a document
at the same time, different versions of the document with different additions or
corrections are created. Word processing programs such as MS Word 2007 have a
feature that can compare two documents and identify the differences to help bring
the two different documents back together. This feature is found on the Review tab,
in the Compare group, as shown in Figure 6.22 "Compare Documents Feature".
Figure 6.22 Compare Documents Feature
Most software programs make periodic backups to protect from accidental power
loss. One of the ways that a user can still lose a lot of work is by replacing a newer
version of a document with an older version. It is possible to display the date on
which the file was last saved using the Details view. If more than one version of the
file exists in two different locations, the dates can be compared to determine which
is the most recent. These techniques are useful for simple projects with very few
participants.
File Storage and Access Control
Managing versions of documents that are edited by more than one person can be
done more effectively by placing the file in a location that can be accessed by all the
team members. This can be a shared drive on the company’s computer or on a
document sharing service. People who need to use the document are grouped by
their need for access. Three groupings are common:
1. View only
2. Edit only
3. Ownership/administrator
Chapter 6 Communication Technologies
6.2 Selecting Software 260
The owner or administrator of the document can set the access levels. These levels
of access can be assigned to each individual, or they can be assigned to named
groups and the person can be made a member of a group. The owner of the
document can choose to accept or reject changes made by those with edit-only
permission.
The advantage of this method is that there is only one version of the file. If a file is
being edited, it is usually locked so that other team members may view the file but
cannot edit it until the first editor closes the file.
If the file is stored on a computer that is on a secure network within an
organization, it can be difficult for team members who do not have direct
connections to the company’s network to get access to the files. To protect the
security of the company’s network, the network administrator can grant an outside
user permission to access the network from anywhere on the Internet using a
virtual private network (VPN)14
connection. A VPN uses encryption15
—replacing
readable content with a code—to protect the communication between the network
and the user to make it secure. The VPN connection gets the user onto the company
network as if they were directly connected, but they still need the appropriate
passwords to access the shared documents.
Tracking Changes and Adding Comments
One of the features that is particularly useful for keeping track of the changes made
to a document by several users is called Track Changes. In Microsoft Word 2007, it is
found on the Review tab, in the Tracking group. Changes may be shown in the
document or in balloons at the side.
If a team member wishes to explain a change, it is very important that they do not
insert their explanation as text into the document. Such explanations might not be
deleted and would end up in the final version of the document with potentially
damaging results. Instead, team members can use a form of electronic sticky note to
make comments. This feature is found in MS Word 2007 on the Review tab, in the
Comments group. A change and a comment are shown in Figure 6.23 "Tracking
Changes and Adding Comments". The document owner must go through the
document and accept or reject each change and delete all the comments before the
document is released as a finished product. The Next, Accept, and Reject options are
found in Microsoft Word 2007 on the Review tab, in the Changes group.14. Method of connecting to a
network from the Internet
using a code to protect the
communication.
15. Replacing readable content
with a code.
Chapter 6 Communication Technologies
6.2 Selecting Software 261
Figure 6.23 Tracking Changes and Adding Comments
Diagramming Software
The processes and relationships in medium- and high-complexity projects usually
require more sophisticated software tools for creating reporting diagrams and
workflow charts. The market for diagramming software is more diverse than for
word processing and spreadsheets, and it is not as likely that most team members
will have the same programs that save files in the same formats. Microsoft Viseo
2007 is available as a stand-alone program that sells for several hundred dollars. For
medium-complexity projects, a free alternative to Viseo is Open Office Draw. Open
Office is a free software alternative that includes a word processing, spreadsheet,
presentation, and drawing programs. The Open Office Draw program, and others
like it, can create diagrams such as the one shown in Figure 6.24 "Diagram Created
Using Open Office Draw".
Chapter 6 Communication Technologies
6.2 Selecting Software 262
Figure 6.24 Diagram Created Using Open Office Draw
The files created by the various drawing programs might not be compatible with
each other, but all the programs can create static image files that can be pasted into
word processing documents.
Project Management Software
The relationships between project activities can become complicated in mediumand
high-complexity projects. Dedicated project management software can
compute the sum of activity durations along several different paths through
complex relationships and recalculate them immediately if any of the durations or
starting times are changed. Similarly, charts and reports are updated automatically
based on the new data. The most popular software for medium-complexity projects
is Microsoft Project. If a project manager begins work on the project in the belief
that it can be managed using a list of activities in a word processing program or in a
spreadsheet, the list of activities and their durations can be copied and pasted, or
imported, into the project management software’s table of activities, if the original
document or spreadsheet was designed with that possibility in mind, as shown in
Figure 6.25 "List of Activities Transferred to a Project Management Program".
Chapter 6 Communication Technologies
6.2 Selecting Software 263
Figure 6.25 List of Activities Transferred to a Project Management Program
Once the data are placed in the project management software, the relationships can
be defined and reports created. Organizations on a tight budget might consider
using an open source16
program named OpenProject. Open source software is
usually available at no cost for individual users and with fewer restrictions than
proprietary software like Microsoft Project. OpenProject is similar to Microsoft
Project, as shown in Figure 6.26 "Open Source Project Management Software", and
could be used on low- and medium-complexity projects that do not need the more
advanced features available in Microsoft Project.
Figure 6.26 Open Source Project Management Software
Software for Complex Projects
Complex projects can involve thousands of individual activities and a company
might have several projects going at the same time. Large, complex projects are
common in the construction industry. A software that is commonly used for
complex projects in construction is P3 or P6 from Primavera. It has the ability to
produce sophisticated reports that help project managers to anticipate problems
and make projections.
16. Available at no cost for
individual users and with fewer
restrictions than proprietary
software.
Chapter 6 Communication Technologies
6.2 Selecting Software 264
Word processing documents often contain data that could be aggregated and
analyzed. Beginning with Microsoft Word 2007 and the .docx file format, it is
possible to insert characters called tags17
on either side of a particular section of a
form or document and assign a data label. For example, the name of the supplier on
an invoice could be enclosed between two tags: <supplier>Thompson
Hardware</supplier>. These tags resemble those used in the hypertext markup
language (HTML) to identify how to display text on a Web page, but instead of
telling a Web browser how to display the name of the supplier, it identifies
Thompson Hardware as the supplier. These tags are can be created by following a
set of rules called the extensible markup language (XML)18
. Forms created using
XML can be scanned for the content that is marked by tags. The data can be
imported into a spreadsheet or database for analysis. Creating documents that use
XML to identify data in the forms can be done using Microsoft InfoPath. An example
that identifies key facts in a document that was prepared using InfoPath is shown in
Figure 6.27 "InfoPath Form with XML Tags". Because it takes extra effort to learn to
use InfoPath, or a similar XML authoring program, and to create the forms, this
approach is normally limited to complex and sophisticated organizations that have
the need to manage large amounts of data.
Figure 6.27 InfoPath Form with XML Tags
17. Labels that enclose text to
describe how it is displayed or
to give it meaning as data.
18. Rules for defining tags that can
identify text as data or for
display purposes.
Chapter 6 Communication Technologies
6.2 Selecting Software 265
KEY TAKEAWAYS
• Low-complexity projects might be managed using general purpose word
processing and spreadsheet software by using the special features for
outlining, managing data, and inserting graphic objects
• Medium-complexity projects need special purpose software for
managing project activities, such as Microsoft Project, and graphic
software such as VISEO. Open source software such as OpenProject and
Open Office Draw may suffice.
• High-complexity projects need more sophisticated project management
software like P6 from Primavera. Forms can be created using XML tags
that allow data to be extracted from the documents.
• Files can be stored at a location that is accessible by all the team
members. They can be granted different levels of access, including view
only, edit only, and ownership. Features like track changes and compare
documents can help manage edits.
Chapter 6 Communication Technologies
6.2 Selecting Software 266
EXERCISES
1. General purpose word processing and spreadsheet software might be
sufficient for managing _____ (low-, medium-, high-) complexity
projects.
2. Three features that are available in spreadsheet programs such as
Microsoft Excel to manage tables of data are subtotal, sort, and
_________.
3. If outline levels are assigned in a word processing document, the outline
may be _________ or expanded to hide or display different levels of
detail.
4. ______-________ (two words) software is often available at no cost, and
its use is less restricted than proprietary software.
5. A VPN connection uses ___________ to protect the content of the
communication.
6. How are XML tags similar to HTML tags and how are they different?
7. How should activity information be organized in a spreadsheet to make
it easier to transfer to a project management program?
8. What are three options for creating a diagram that displays a project’s
reporting hierarchy for low- or medium-complexity projects?
9. What is an example of a software product that is commonly used for
highly complex projects?
10. What are three levels of file access and editing permissions that can be
assigned, and what are examples of user groups that would be assigned
to each level?
Internalize your learning experience by preparing to discuss the following.
Describe an experience you might have had with editing the same word
processing document and how you managed the revisions. If you used some
of the features described above, how well did they work? What features were
described that might have been helpful?
Chapter 6 Communication Technologies
6.2 Selecting Software 267
6.3 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Assume that you are the leader of a virtual team that includes members
who are in New York, Bogotá, Honolulu, and Tokyo. You would like to
choose a day and time for a weekly conference call to keep the project
on track. Choose a day and time and explain your choice and the
compromises and problems it might cause for each member. Use the
term “synchronous” correctly and identify the specific time zone for
each participant.
2. From the list of available templates in your word processing or
spreadsheet software, choose a template and describe it. Fill it out and
then describe how it could be modified to meet the needs of a particular
situation or organization.
Chapter 6 Communication Technologies
268
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Consider the newer synchronous and asynchronous communications
technologies with which you are familiar. Describe how they might be
used on projects in new and innovative ways. Relate these ideas to what
you learned about project cultures—specifically about innovation on
projects—and describe how the new communications technologies could
be used to innovate.
2. Describe your experience using Excel to manage data such as lists of
purchases. Discuss how the features of sorting, filtering, and subtotaling
could help answer questions about that list.
Chapter 6 Communication Technologies
6.3 Exercises 269
6.4 Web Exercise
LEARNING OBJECTIVE
1. Determine the local time for team members in other time zones given
GMT or UT zone designations.
Using an Online Time Zone Map
Fortunately, there are several websites that provide the information you need to
schedule a conference call so that all the participants know the correct time and
day of the week regardless of where they are in the world.
How to Use a Website to Help Find Local Time
1. Open a word processing document. Save it as Ch06TZStudentName.doc.
Use the .doc file format.
2. On the first line, type Chapter 6 study documentation by and then type
your name. Press Enter to move the insertion point to the next line
3. Open a web browser and go to http://www.worldtimezone.com.
4. The map will display the world’s time zones at the time you visit the
site. See Figure 6.28 "World Times Compared to 6:40 p.m. EST". The
example in Figure 6.28 "World Times Compared to 6:40 p.m. EST" was
displayed on the author’s computer at 6:40 p.m. EST on Thursday,
December 18 (23:40 GMT).
Chapter 6 Communication Technologies
270
Figure 6.28 World Times Compared to 6:40 p.m. EST
5. Capture the screen that displays the World Time Zone Map with your
current time and date.
6. Switch to the word processing document and paste the screen capture
below the first line of text.
7. Below the image, type The time and date in India would be and then type
the time and date in India for your current time and date.
8. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch06TZStudentName.doc Ch06TZStudentName.docx
Different
name or
incompat
format
Determine
the local
time for
team
members in
other time
Title; screen capture
with current date and
time; correctly
calculated day and time
in India.
Same as Best
Incomplet
or an erro
in the tim
or date
Chapter 6 Communication Technologies
6.4 Web Exercise 271
Element Best Adequate Poor
zones given
GMT or UT
zone
designations
9. Save the file and submit it as directed by the instructor.
Chapter 6 Communication Technologies
6.4 Web Exercise 272
Figure 6.29 Rotary Dial
Telephone
6.5 Software and Technology Exercises
LEARNING OBJECTIVES
1. Locate the dialing codes for making international telephone calls.
2. Identify dialing techniques used with cell phones to make international
telephone calls.
3. Select the appropriate times and methods for making international calls.
4. Subscribe to a news service using a newsreader and RSS.
Placing International Calls
International Telephone Calls Using Wired Phones
The telephone may be used for two-person synchronous communication or in a
multipart conference call. Using a telephone to make long-distance and
international calls involves using international telephone numbering conventions.
Calls within North America and the Caribbean
The telephone companies in North America use the North American numbering
plan (NANP) that includes the United States, its territories, Canada, Bermuda, and
sixteen Caribbean nations.
Wired telephones are connected physically to a local
switch that can handle up to ten thousand connections
represented by the last four-digit numbers in a
telephone number from 0000 to 9999. Each switch is
identified by a three-digit number such as 555. A local
telephone number consists of the switch number and
one of the ten thousand four-digit numbers such as 555
0112. This system can provide up to ten million different
unique phone numbers,The three-digit area code plus
the next four digits make up a seven-digit number. A
seven-digit number has ten million possible
combinations from 000 0000 to 999 9999. In practice,
some area codes are reserved for special purposes such
as trouble-shooting, emergencies, directory assistance,
and maintenance, so the maximum is less than ten million per area code. For
example, numbers 555-0100 through 555-0199 are reserved for fictional use and are
Chapter 6 Communication Technologies
273
not assigned to real customers. but it does not have the capacity to provide service
to billions of people.
The switches are grouped into areas and assigned a group number or area code.
Area codes in North America were assigned at a time when numbers were
converted to a sequence of electrical pulses by inserting your finger in a rotary
disc—the dial—and pulling it to a stop on a phone like the one shown in Figure 6.29
"Rotary Dial Telephone".
As a spring returns the dial to its original position, it opens and closes a set of
electrical contacts to create a series of pulses that match the number dialed.
Because it takes longer to dial higher numbers like 8 or 9, area codes that could be
dialed quickly like 212 and 213 were assigned to densely populated areas like
Manhattan (212) and Los Angeles (213). Higher numbers were assigned to rural
areas or to newer areas. As a result, it is difficult to determine where a telephone is
located by its area code. Do not assume that numbers with similar area codes in
North America are located in the same time zone—they may be thousands of miles
apart. To initiate a call to a different area code, the number 1 is dialed first. This is
the national direct dialing (NDD) code for NANP members.
Calling from North America to a Country outside the NANP
The IDD code for the United States is 011.
To make an international call from an NANP member such as the United States to
another country, you need to provide two codes: the international direct dialing
(IDD) code and the country code. The IDD code for the United States is 011. For
example, if you wanted to place a call to a number in Rio de Janeiro, you would
enter 011 55 21 xxx xxxx, where 011 is the IDD code for the United States, 55 is the
country code for Brazil, 21 is the area code for Rio de Janeiro, and xxx xxxx
represents the final seven digits of the number.
Calling to North America from a Country outside the NANP
The IDD and the country code are not simply reversible. The country code for
the United States is 1 (not 011).
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 274
If you traveled to Rio de Janeiro for a meeting and wanted to call back to a number
in the United States from a local phone, you would have to look up the IDD code for
the local service provider in Brazil. In Brazil, there is a different code for each of the
five phone companies. The IDD for Brasil Telecom is 0014.
The IDD and the country code are not simply reversible. The country code for the
United States is 1 (not 011), so you would enter 0014 1 xxx xxx xxxx, where the last
ten digits are the area code and telephone number in the United States.
Reading the Phone Number on a Business Card in North America
It is commonly understood in the United States that you do not enter the hyphens,
parentheses, spaces, or periods that are used to make a telephone number more
readable and that you dial 1 first—even though it is not included—for a call destined
for a different area code. For example, if the phone number on the business card
shows (555) 222-1111, you know that you would enter 2221111 if you are calling
from within the 555 area codeSome area codes cover large geographic areas, and
the NDD code is required to dial a number from within the same area code if they
are far apart. or 15552221111 for a call from a different area code, but you would
not attempt to enter the parentheses, space, or hyphen. Spaces are used in some
instances in the following discussion to make the numbers easier to read in this
text, but it will be understood that they are not entered when dialing the number.
Reading the Phone Number on an International Business Card
Unlike those countries participating in the NANP, other countries use different
numbers for the national direct dialing (NDD) code and the country code. They
might use a different number of digits for the area or city code. A business card
from a team member in Rio de Janeiro might be +55 (0)21-xxxx xxxx where 55 is the
country code and 0 is the NDD code. To call this team member from the United
States on a wired telephone, you would enter 011 55 21 xxxx xxxx, where 011 is the
IDD for the United States, 55 is the country code for Brazil, and 21 is the code for Rio
de Janeiro.
Notice the zero between 55 and 21 is not included when calling from outside the
country. This is the NDD code that is used for calls between areas within the
country. For example, if you land in the airport at Sao Paulo, Brazil, and want to call
the person in Rio de Janeiro from a local phone, you would enter 0 21 xxxx xxxx
(without the spaces) where 0 is the NDD code—like 1 in the United States—and 21 is
the area/city code.
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 275
Finding International Telephone Codes
1. Open a word processing document. Save it as
Ch06PhoneStudentName.doc. Use the .doc file format.
2. On the first line, type Chapter 6 study documentation by and then type
your name. Press Enter to move the insertion point to the next line
3. Open a web browser and go to http://www.kropla.com. This site
provides information on international dialing codes.
4. Near the middle of the page, click the International Dialing Codes link.
5. On the CountryCode.org page, in the Country column, scroll down and
click Brazil. A list of country codes and city codes is displayed next to a
map of the country.
6. Use the browser’s Back button to return to the CountryCode.org web
page. Add the address for this page to the Project Management folder
in your browser’s favorites or bookmarks.
7. Switch back to the browser. In the Country column, scroll down and
click one of the country names other than Brazil.
8. Capture the screen that shows the country’s code and map, paste it
into a blank document, and then save the document as
Ch06Exercises6.5.doc.
Making International Telephone Calls Using a Mobile Phone
To place an international call to a country outside the NANP using a mobile phone,
you use the plus sign (+) instead of the IDD code. For example, the number of the
British Museum is +44 (0) 20 7323 8000. To call this number from a wired phone in
the United States, you would dial 011 44 20 7323 8000. If you make the call from a
mobile phone, you dial +44 20 7323 8000. Notice the plus sign takes the place of the
IDD code.
Finding the Plus Sign on a Mobile Phone
Wired phones do not have a plus sign on their keypads, but recent model mobile
phones include a method to dial a plus sign. Unfortunately, the method varies by
brand of telephone.
International Telephone Calls Using a Mobile Phone
1. Open a web browser and go to
http://www.howtocallinternationally.com. This site has a step-by-step
demonstration of how to make calls using wired and mobile phones.
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 276
2. At the right of the page under Shortcuts, click From a mobile (cellphone).
The How to call internationally from a mobile (cellular) telephone page
displays. Read this page.
3. Scroll down to the video and click the play button.
4. During the video, when a telephone number with a plus sign is
displayed on the cell phone, pause the video and capture the screen.
5. Paste the screen into Ch06PhoneStudentName.doc.
6. Switch back to the browser window and then watch the rest of the
video.
7. Add a link to this web page in your browser’s favorites or bookmarks.
8. Capture a screen that shows the links to CountryCode.org and
Howtocallinternationally.com in the Project Management folder in
your browser’s favorites or bookmarks and then paste it into the
Ch06PhoneStudentName.doc.
Element Best Adequate
File name Ch06PhoneStudentName.doc Ch06PhoneStudentName.docx
D
n
i
f
Choose the
correct
dialing codes
for making
international
telephone
calls
Title; screen capture showing
the country code and map of
one of the countries other
than Brazil
Same as Best
I
o
B
Identify
dialing
techniques
used with
cell phones
to make
international
telephone
calls
A screen capture from the
video on how to enter a plus
sign on a cell phone; a screen
capture that shows the links
to CountryCode.org and
Howtocallinternationally.com
in the Project Management
folder in the favorites or
bookmarks
Same as Best
C
s
c
n
p
s
o
t
s
b
f
9. Save the file and submit it as directed by the instructor.
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 277
Practice Using International Dialing Codes
Selecting the appropriate numbers to use from a business card for placing an
international call requires practice. In this exercise, you practice using your
knowledge of international calling codes to compare your answers to reference
answers that are hidden on a spreadsheet.
Using a Spreadsheet for Practice
1. Navigate to the location where the student files for chapter exercises
are located and then open 6.3.3_PhonePractice.xls. Save the file as
Ch06PhonePracticeStudentName.xls using the Excel 2003 file format.
2. Use the skills you practiced in this chapter and in previous exercises to
answer the first question in cell C2. You are allowed to open a browser
and refer to websites for assistance.
3. Notice that if you type and enter the correct answer, in exactly the
format indicated, the cell background turns green, as shown in Figure
6.30 "Background Turns Green If Correct".
Figure 6.30 Background Turns Green If Correct
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. Observe that column D is hidden. It contains a set of correct answers.
The spreadsheet’s conditional formatting feature is used to change the
background color if the cell content matches the hidden answer.
5. Use your web references and personal knowledge to answer the
remaining questions. Place the answers in column C. If some of the
answers do not turn green, check your work. If you cannot determine
the error, move on to the next question. Answer all the questions, even
if some of the answers are wrong or do not match the reference answer
exactly.
6. Select columns C through E. To accomplish this, you may click and drag
the column headings from C through E, or you can click the column C
heading, hold the Shift key, and click the column E heading. Columns
C, D, and E are selected, even though column D is hidden, as shown in
Figure 6.31 "Columns C, D, and E Selected".
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 278
Figure 6.31 Columns C, D, and E Selected
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
7. Move the pointer onto either column, then right-click. On the shortcut
menu, click Unhide. The answers in column D are displayed.
8. Locate any answers that are still displayed in red. Compare your
answer to the reference answer. In the Analysis column on the same
row, analyze and explain why your answer did not match the reference
answer. Use this opportunity to correct misunderstandings.
9. Save the spreadsheet. Check your work to assure that it is complete
using the following table:
Element Best Adequate
File name Ch06PhonePracticeStudentName.xls Ch06PhonePracticeStuden
Select the
appropriate
times and
methods for
making
international
calls
All incorrect answers are analyzed;
the cause of the error correctly
identified
All correct
10. Save the file and submit it as directed by the instructor.
Using a Newsreader
Some projects are directly affected by external factors such as political elections,
economic trends, corporate mergers, technological or scientific breakthroughs, or
weather. To keep informed about these factors, you can subscribe to online news
sources. A method that facilitates this process is Really Simple Syndication (RSS). To
use this service, you need a newsreader so you can subscribe to RSS feeds. For this
activity, you need a Google account. If you do not have one, go to Google.com and
create one for no cost.
Chapter 6 Communication Technologies
6.5 Software and Technology Exercises 279
Chapter 7
Starting a Project
This chapter provides an overview of the selection and initiation of a project. Prior
to the initiation of a project, the chartering organization1
—the organization that
determines the need for the project—develops a justification for the project. Often,
several initiatives compete for the resources of the organization, and potential
projects are evaluated to see which ones are best aligned with the mission and goals
of the organization. This evaluation process can be very simple where the benefits
to the organization are obvious and the economics of the project are very favorable.
On larger, more complex initiatives, the process of gathering and evaluating the
data to justify the project can take a year or more. The information gathered during
this evaluation process provides the basis for the project charter, the initial scope
of work, and other information required to initiate the project.
1. Group that determines the
need for the project.
280
7.1 Project Selection
LEARNING OBJECTIVES
1. Describe the difference between an organization’s mission, goals, and
objectives.
2. Describe how the missions are different depending on the type of
organization.
3. Define economic terms used for choosing projects.
4. Define a project champion and his or her role.
5. Describe the influences of funding, timing, and unofficial considerations
on project selection.
Projects are chosen for a variety of reasons and not all of them are apparent. The
project manager must understand why a project was selected over other choices so
that he or she can align the team toward justifying the choice that has been made
by senior management.
Mission of the Organization
The mission2
of an organization is a statement of why it exists. For example, a
police department might have its mission stated on the door of each patrol car—to
protect and serve. A well-written mission statement is short and has the following
sections:
• Purpose of the organization
• Primary stakeholders
• Responsibility of the organization toward the stakeholders
• Products or services offered
2. Statement of the purpose of an
organization.
Chapter 7 Starting a Project
281
Police Department Mission Statement
The mission of the Philadelphia Police Department is to fight crime and the fear
of crime, including terrorism, by working with our partners to enforce the laws,
apprehend offenders, prevent crime from occurring, and improve the quality of
life for all Philadelphians.Philadelphia Police Department, Philadelphia Police
Department: Mission Statement, 2009, http://phillypolice.com/about/missionstatement
(accessed July 16, 2009).
The missions of organizations can be categorized as profit, not for profit, and
government. A business that is created to make a profit for its owners and stock
holders must consider the cost of each project and how much profit it is likely to
generate. The mission statement of a not-for-profit organization like a charity
would emphasize the service it provides. A not-for-profit organization must control
its costs so that it does not exceed its funding, and it is always seeking funding and
is in competition with other not-for-profit organizations for funding from the same
sources. A government agency, like a police department, is similar to a not-forprofit
organization, but its sources of funding are usually taxes and fees. Its mission
would include its responsibilities to the citizens it represents. Government
organizations compete for funding from higher levels of government. Projects are
more likely to be funded if the proposal for the project is closely aligned with the
mission of the organization. The project manager must be aware of that mission
while building a team and aligning it behind the purpose of the project.
Goals and Objectives
Senior administrators of the organization decide on how to achieve the mission of
the organization by choosing goals. For example, the director of a not-for-profit
preschool that provides low-cost education for children of poor, single parents
might set a goal3
of improving its reputation for quality. A goal is an end toward
which effort is directed. The director meets with her staff and they consider several
ways of achieving that goal. They decide to seek certification by a nationally known
group that evaluates the quality of preschool programs. Obtaining this certification
is an objective4
.
3. An end toward which effort is
directed.
4. An end toward which effort is
directed that has a measurable
outcome.
Chapter 7 Starting a Project
7.1 Project Selection 282
Figure 7.1 Relationships between Mission, Goals, and Objectives
In this text, we distinguish between the terms goals and objectives. An objective
must have a measurable outcome. In this example, it is easy to measure whether or
not the organization receives the certification, which is the distinguishing
characteristic of an objective. The use of these terms is not standardized across the
industry or in business, but we will be consistent within this text. To determine
whether a statement is a goal or an objective, simply ask if there is a measurable
outcome. Seeking the certification is an objective that can be met by treating it as a
project that has a measurable outcome and a limited time frame.
Chapter 7 Starting a Project
7.1 Project Selection 283
Figure 7.2 Cash Flow
© 2010 Jupiterimages
Corporation
Economic Selection Criteria
If an organization’s mission is to make money, it will try
to maximize the profits of the company by increasing
the money coming in or decreasing the money going
out. The flow of money is called cash flow5
. Money
coming in is positive cash flow, and money going out is
negative. The company can maximize profits by
improving its operational efficiency or by executing
projects. The company must raise money to fund
projects. Companies can raise money in three ways:
1. Borrow it (government organizations, such
as cities and schools, can sell bonds, which
is a form of borrowing).
2. Fund the project from existing earnings.
3. Sell additional stock or ownership shares in
the company.
If a company borrows money, it must pay back a portion
of the amount it borrowed plus additional interest6
.
The interest is a percentage of the amount of the loan that has not been repaid. The
repayment of the loan and interest is usually paid quarterly or annually. To qualify
for selection, a project that is intended to make or save money must be able to do
the following:
• Repay loans if money must be borrowed to fund the project
• Increase future earnings for shareholders
• Make the company stock more valuable
When senior managers at a for-profit company decide which projects to fund, they
must consider these economic issues.
Simple Payback
To help managers choose between projects, they can use an unsophisticated
measurement called simple payback7
. If the purpose of the project is to improve
cash flow—make it more positive or less negative—the improved positive cash flow
each year is applied to the original cost (negative cash flow) of the project to
determine how many years it would take to pay back the original cost. It is assumed
that after that date, the improved cash flow could be used for other purposes or
paid out to owners. For example, if the company borrows $100,000 to fund the
5. The movement of money
where income is positive and
spending is negative.
6. Charge for a loan.
7. Time period it takes to recoup
the original expense without
considering interest payments
or other complicating factors.
Chapter 7 Starting a Project
7.1 Project Selection 284
Figure 7.4
Weighing options requires
financial tools.
project and the project increases cash flow by $20,000 a year, the simple payback
would be five years, as shown in Figure 7.3 "Simple Payback".
Figure 7.3 Simple Payback
The cash flow from each year is summed up in the cumulative cash flow row. When the cumulative cash flow
becomes zero or positive, it means that the original cost has been paid back by the increased income or savings
created by the investment.
Companies can use simple payback to establish a cutoff for project consideration.
For example, management could declare that no projects will be considered that
have a payback of more than three years. For projects that meet this criterion,
projects with shorter simple payback periods would have an advantage in the
selection process. Not-for-profit or government organizations are likely to approve
projects with longer simple payback periods because they are not compared to
other not-for-profit or government agencies based on their profitability.
Internal Rate of Return
Companies whose mission is to make a profit are usually
trying to make more profit than their competitors.
Simply paying back the loan is not sufficient. If the
project involves buying and installing equipment to
make a profit, executives can use another method called
internal rate of return (IRR)8
. The IRR is like an
internal interest rate that can be used to compare the
profitability of competing projects. To calculate an IRR,
the company considers the cash flow each year for the
expected life of the product of the project. It assumes
that some of the annual cash flows will be negative and
that they can vary from year to year due to other
factors, such as lost production during changeover,
periodic maintenance, and sale of used equipment. For
8. Average annual return on an
investment that earns or saves
money.
Chapter 7 Starting a Project
7.1 Project Selection 285
© 2010 Jupiterimages
Corporation
example, a company decides to upgrade a
manufacturing line with new equipment based on new
technology. They know that the initial cash
flow—shown in year zero—will be negative due to the
expense of the conversion. They know that the new
equipment has an expected life of six years before
newer technologies make it out of date, at which time they can sell it for a certain
salvage value. The inputs to the IRR calculation are the net cash flow for each year
where at least one of them is negative and at least one of them is positive. The
result is a percentage that indicates how well this project performs as an
investment. Refer to Figure 7.5.
Figure 7.5
The internal rate of return measures the profitability of an investment.
The life of the equipment is part of the IRR calculation. If a project manager knows
that senior management intends to sell the equipment in six years, team members
can be made aware of that decision if it affects their choices.
Other Selection Criteria
Besides making money, there are many other reasons for a project to be selected,
including the following:
• Keeping up with competitors
• Meeting legal requirements, such as safety or environmental
protection
• Improving the organization’s public image
Chapter 7 Starting a Project
7.1 Project Selection 286
Figure 7.6
Project champion can help when
a project is in trouble.
© 2010 Jupiterimages
Corporation
The timing of the project can be very important. A project might be selected at a
particular time of year for some of the following reasons:
• Accumulating a year-end budget surplus
• Increasing executive bonus for the year or quarter
• Funding or certification review deadline
If the project manager must make changes to the schedule at some point in the
project that could affect its completion date, it is valuable to know if the project was
selected because of timing.
Project Champions and Opponents
In addition to knowing why a project was selected, it is valuable to know which
senior executives supported or opposed the selection of the project and if the
project manager’s supervisor was in favor of it or not. Because most project teams
consist of people who do not report to the project manager but who report to other
unit managers, they might not be available when you need them if their boss thinks
other projects are more important. If a particular executive proposed the project
and actively advocated for its approval, that person could be a source of support if
the project runs into trouble and needs additional resources. A project champion9
,
sometimes called an executive sponsor, is an influential person who is willing to use
his or her influence to help the project succeed.
To identify the advocates and opponents of the project,
begin by reading public documents (if available), such as
the minutes of the meeting at which the project was
approved. Next, the project manager can use his or her
unofficial network of trusted colleagues to get their
opinions. Those discussions should be informal and off
the record. Those opinions might be inaccurate, but it is
valuable to know what misunderstandings exist about a
project. If executives in an organization are assigned as
project sponsors, the project champion might be a
different person.
9. Influential person who is
willing to use his or her
influence to help the project
succeed.
Chapter 7 Starting a Project
7.1 Project Selection 287
Project Champions Support an Aircraft Project
When Vought Aircraft won a contract with Boeing to build a significant portion
of the fuselage for the new 787 Dreamliner in Charleston, South Carolina, there
was no existing workforce with aircraft experience. To give Vought Aircraft an
incentive to locate the plant in South Carolina, Governor Mark Sanford, with
the support of the legislature, committed to the recruitment and training of the
workforce needed for the plant to be successful. The legislature provided
several million dollars and assigned the role of developing a trained workforce
to the South Carolina Technical College System and Trident Technical College,
the local community college in Charleston, South Carolina.
Dr. Jim Hudgins, president of South Carolina’s Technical College System,
assigned the most experienced project manager to the project and personally
accepted the role of project sponsor.
Dr. Hudgins and Dr. Thornley, president of Trident Technical College, met with
the project leadership at least monthly to review project plans and progress.
Each month both Dr. Hudgins and Dr. Thornley assigned resources and
removed barriers to project success. Dr. Thornley assigned procurement
personnel to the project to assure materials were purchased and delivered in
time to support the project schedule. She reallocated space to provide training
laboratories for the project and assigned a college leader to the project fulltime
to coordinate actions with the college. Dr. Hudgins coordinated with the
Governor’s office to assure the project received the appropriate level of
support.
Both Dr. Hudgins and Dr. Thornley had the political power and the resources to
assure the project had the autonomy and the resources to succeed. The project
met every milestone, exceeded every measurable goal, and received high praise
from Vought Management as the plant began operations on schedule.
Chapter 7 Starting a Project
7.1 Project Selection 288
KEY TAKEAWAYS
• A mission statement declares the purpose of the organization and
identifies the primary stakeholders, the products or services offered,
and the responsibility toward the stakeholders. Goals are statements of
direction for the organization, and objectives are activities that achieve
those goals with measurable outcomes.
• Profit-making organizations exist to make profits for their owners while
in competition with other companies. The goals of those companies are
directed at making as much or more money than the competition. Notfor-profit
organizations are directed at providing a service to a
particular group. They must control costs to perform their tasks with
the funds they have, and they compete with other not-for-profit
organizations for donations and funding. A government agency is
similar to a not-for-profit organization, but its sources of funding are
usually taxes, fees, and funding from a higher level of government, and
it has a responsibility to the citizens it represents. Government
organizations must justify their expenditure of tax money to elected or
appointed officials.
• Two economic tools for evaluating and comparing projects are simple
payback and internal rate of return. Simple payback is a calculation of
the year when the cumulative income or savings due to spending money
on a project will meet or exceed the original cost of the project. Internal
rate of return is a calculation of the average percentage of increased
cash flow over the life of the project’s product.
• A project champion is an influential person who is willing to use his or
her influence to help the project succeed. It is useful to know why the
project champion wants the project to succeed and to be sure to
accomplish that goal even if it is not stated.
• Project selection depends on the availability of funds, which depends on
the way each type of organization receives money for projects. Funds
might be available at certain times and projects are selected that can
take advantage of that opportunity. Projects might be initiated for
reasons that are not stated, and investigating the source of funding and
likely motivation of project champions can provide better
understanding of the project’s chances for success.
Chapter 7 Starting a Project
7.1 Project Selection 289
EXERCISES
1. An end toward which effort is directed that has measurable outcomes is
an __________ in this text.
2. A general statement of the direction an organization should take is a
______.
3. If a company has to make quarterly loan payments to the bank, this is an
example of a negative _______ ______ (two words).
4. If you borrow $1,000 and have to pay back $1,010 a month later, the $10
dollars is the _______.
5. If a company had to choose between installing two different pieces of
expensive equipment that had different expected lifetimes, different
salvage values, and different production capabilities, it would compare
the _______ _____ __ ________ (four words) for each option
6. On Google’s Web pages, it says that they want to “organize the world’s
information and make it universally accessible and useful.” This is an
example of a _______ statement.
7. An influential person who is in favor of a project is one of the project
________.
8. If upgrading the windows in a building costs $100,000 and it reduces
heating and cooling costs by $5,000 a year, the investment in the
window upgrade has a _____ ______ (two words) of twenty years.
9. The group that determines the need for a project is the ________
organization.
10. What are four parts of a well-written mission statement?
11. What is the primary mission of each of the following types of
organizations: profit-making, not-for-profit, and government
organizations?
12. What does it mean if the money spent on a project has a simple payback
of five years?
13. Why is it important to identify project champions?
14. What is an example of funding for a project that is only available for a
short period of time under special circumstances?
Internalize your learning experience by preparing to discuss the following.
Choose an example from outside the assigned reading of a mission, goal, and
objective that demonstrates the characteristics of each and how they relate
to each other. The example can be from a real organization or it can be
fictional. Describe the characteristics of a mission, goal, and objective, as
defined in this chapter, and how the example demonstrates those
characteristics.
Chapter 7 Starting a Project
7.1 Project Selection 290
7.2 Project Scope
LEARNING OBJECTIVES
1. Define scope and describe how it is affected by project complexity.
2. Identify the uses of a scope document.
3. Describe how a scope document is developed and changed.
The project scope identifies the total work of the project.
Definition of Scope and the Effects of Complexity
The scope document10
defines what tasks the project team is expected to
accomplish and, just as importantly, what is not part of the project. Depending on
the complexity level of the project, the scope document can be as short as one page
or as long as several hundred pages. On more technical projects, such as a project to
design an offshore wind-turbine farm, the scope would include a significant amount
of technical specifications, with a focus on the electrical output from the wind
turbines. The size and character of the project scope document is related to the
project complexity. Higher scores on the Darnall-Preston Complexity Index indicate
the need for more detailed scope documents.
Uses of a Scope Document
A well-developed project scope statement provides the project team with
information the team needs to design and implement the project execution plan.
The well-developed project scope also provides the team with an understanding of
the purpose of the project and the basis for defining project success.
10. Written description of what
activities are included in the
project and some of those that
are specifically not included.
Chapter 7 Starting a Project
291
Scope Document for Training Auto Workers
An automotive company is building a new plant to produce electric passenger
cars in the southeast United States. As the plant nears completion, the plant’s
manager issues a contract to train the new plant workers. The training of
workers who will be maintaining the production equipment will be done by the
equipment suppliers and will not be in the scope of the training contract.
The scope of work for the training project will include the identification of the
knowledge, skills, and abilities needed by each classification of worker and the
development of the delivery methodology that will effectively and efficiently
develop the identified knowledge, skills, and abilities (online, classroom, handson).
The scope will also include delivery of the training, evaluation of the
workers after training, and the development of training records. Items not
included in the project scope are items that will be the responsibility of the
automotive company, such as the selection and hiring of the workers and the
provision of the automotive tools and equipment needed for training. These
exclusions are specifically stated in the scope document.
During the design of the plant, the Human Resources Division of the company
explored different workforce models. The plant will be a typical assembly
operation working three shifts. Experience in other plants indicated that a
team-based approach combined with a lean manufacturing philosophy
produced the highest productivity. This information was included in the
documents provided to the team developing the training project’s scope. The
plant manager, the human resources manager, and the plant engineer reviewed
and occasionally made changes to the draft training scope.
The scope of work for the training project was developed from a combination of
information from experts with previous experience, documents that reflected
the plant operation philosophy, and selected managers from operations and
human resources. All the knowledge needed to develop the scope was within
the automotive project team. Sometimes outside consultants are needed to
develop a complete project scope. For example, if the team in our automotive
training example did not have experience in the start-up of another automotive
plant, then the hiring of a consultant with that experience might have been
required to understand the entire scope of activities needed for training the
automotive workforce.
Chapter 7 Starting a Project
7.2 Project Scope 292
The automotive project described above is a typical example of the types of
information and the people involved in developing a project scope. From the
information in the project description, the project team could develop a project
scope document.
Development of a Scope Document
The project manager will often develop the first draft of the project scope and then
solicit feedback and suggestions from the project team, client, and sometimes key
vendors. The project manager will attempt to develop consensus around the project
scope, but the final approval belongs to the project client or sponsor. Depending on
the complexity profile of the project, the development of the project scope
document can be a short discussion between the project manager and the client, or
on a large, complex project, the process can take weeks.
Managing Changes to the Scope Document
The project scope is not a stagnant document, and changes are to be expected.
Changes to the project scope are necessary to reflect new information. Changes to
the project scope also create the opportunity for new purposes to emerge that will
change the end results of the project. In some cases, these new results represent a
positive outcome for the chartering organization.
Deviation versus Change
If a minor change is made to the schedule that does not affect the completion date
of the project, it is a deviation from the schedule. As long as the end date of the
project or major objectives are not delayed, a formal change request to the client is
not needed. Recording and communicating these schedule deviations is still
important for coordinating resources and maintaining the client’s awareness of the
project’s progress.
Chapter 7 Starting a Project
7.2 Project Scope 293
Deviation of Labor Cost
The labor cost was estimated at fifteen dollars per hour for cleaning the project
office once per week. The winning bid for the contract was at sixteen dollars
per hour. The cost deviated from the estimate and a change was made to the
budget. This was a cost deviation, not a change in scope. The additional cost for
the contract was covered from the project contingency reserves, and the
budget was revised to reflect the changes.
Truck Crash Causes a Deviation to the Schedule
Installation of a fence around the project site was delayed when the truck
delivering the fence was wrecked on the way to the job site. The fence project
was delayed by one week and the delay did not affect any other activity on the
project. This deviation from the original schedule did not cause a delay in the
project, and the schedule was adjusted as a deviation to the schedule—not a
change request.
Documenting Changes
It is important to have a written record of changes to the scope of a project. On the
least complex projects, an e-mail message can be sufficient, but on larger projects a
standard form is normally used. The following steps are paraphrased by Tom
Mochal,Tom Mochal and Jeff Mochal, Lessons in Project Management (Berkeley, CA:
Apress, 2003). and they have the necessary components of a change documentation
process:
Chapter 7 Starting a Project
7.2 Project Scope 294
Figure 7.7
Changes to the original scope of work must be documented.
© 2010 Jupiterimages Corporation
• Inform project stakeholders of the change request process.
• Require that the change request is made in writing, including the
business value of the change to the project.
• Enter the request in the scope change log11
.
• Estimate the time needed to evaluate the change. If the evaluation
process is time consuming and would affect activity completion dates
by diverting management resources, get approval from the project
sponsor to evaluate the change request. If the evaluation is not
approved, record the decision in the scope change log.
• Evaluate the change and its impact on the schedule and budget if the
evaluation is approved.
• Present the change request to the project sponsor for approval. Record
the decision in the scope change log with the recommended course of
action.
• Distribute the scope change log periodically to team members so they
know what changes are being considered and what happened to those
that were not approved or evaluated.11. Sequential list of scope change
requests and actions related to
scope changes.
Chapter 7 Starting a Project
7.2 Project Scope 295
• If the change is approved, update the project charter or other
initiation documents.
• Update the work plan.
• Distribute the revised work plan to stakeholders and team members.
KEY TAKEAWAYS
• Scope is a description of the major tasks that are included in the project
and some of the tasks that are specifically not included. More complex
projects require more detailed and specific scope documents.
• A scope document is used to provide the project team with the
information it needs to design and implement the project plan. It
provides understanding of the purpose of the project and what project
success would be.
• The scope document begins as a draft that is circulated for comments by
the team, client, and in some cases, key vendors. The final draft is
approved by the client or sponsor. Changes to the scope are documented
carefully using standard forms and processes and approved by the
project sponsor or client.
EXERCISES
1. How is the scope statement affected by the complexity of the project?
2. What negative aspect of the scope statement is important?
3. What are the uses of a scope statement?
4. Once a scope statement is agreed to, how is it changed and what is
always required when a scope statement is changed?
Internalize your learning experience by preparing to discuss the following.
Describe a situation where the elements of the project scope did not
specifically exclude an activity that caused a misunderstanding.
Chapter 7 Starting a Project
7.2 Project Scope 296
7.3 Project Start-Up
LEARNING OBJECTIVES
1. Identify the major activities included in project start-up.
2. Explain how the project start-up activities may differ on a highly
complex project.
The parent organization’s decision-making process influences when start-up
activities of the project will take place. The transition from planning to project
initiation is typically marked by the decision to fund the project and selection of the
project manager. However, selection of the project manager is not always the
defining event. Some organizations will have the project manager involved in
project evaluation activities, and some select the project manager after the decision
to fund the project has been made. Including the project manager in the evaluation
process enables the project manager to have an understanding of the selection
criteria that he or she can use when making decisions about the project during later
phases. Selecting the project manager prior to a complete evaluation also includes
some risks. The evaluation of the project may indicate a need for project manager
skills and experiences that are different from the project manager who is involved
in the evaluation.
Selecting the best project manager depends on how that person’s abilities match
those needed on the project. Those skills can be determined using the DarnallPreston
Complexity Index (DPCI). If the project profile indicates a high complexity
for external factors and a medium complexity for the project’s technology, the
profile would indicate the preference for a project manager with good negotiation
skills and an understanding of external factors that affect the project. Because of
the technological rating, the project manager should also be comfortable in
working with the technical people assigned to the project. The project manager
involved in the project selection process may not be the best match for the project
execution.
During the start-up of a project, the project manager focuses on developing the
project infrastructure needed to execute the project and developing clarity around
the project charter and scope. Developing the project infrastructure can be a simple
task on a project with a low complexity level. For example, the project manager of a
worker training project in South Carolina who works for a training college has
existing accounting, procurement, and information technology (IT) systems in the
Chapter 7 Starting a Project
297
Figure 7.8 Construction
Project in South America
© 2010 Jupiterimages
Corporation
college that he or she can use. On large complex projects, a dedicated project office,
IT system, and support staff might be needed that would be more challenging to set
up. For example, on a large construction project in South America, the design and
operations offices were set up in Canada, Chile, and Argentina. Developing
compatible IT, accounting, and procurements systems involved a high degree of
coordination. Acquiring office space, hiring administrative support, and even
acquiring telephone service for the offices in Argentina required project
management attention in the early phases of the project.
The project manager will conduct one or more kickoff
meetings to develop plans for the following activities:
• Establish the project office.
• Develop project policies and procedures.
• Begin refining the scope of work, the
schedule, the budget, and the project
execution plan.
Depending on the complexity level of the project, these
meetings can be lengthy and intense. Tools such as work
flow diagrams and responsibility matrices can be
helpful in defining the activities and adding clarity to
project infrastructure during the project start-up.
Typically, the project start-up involves working lots of hours developing the initial
plan, staffing the project, and building both internal and external relationships. The
project start-up is the first opportunity for the project manager to set the tone of
the project and set expectations for each of the project team members. The project
start-up phase on complex projects can be chaotic, and the project manager must
be both comfortable in this environment and able to create comfort with the client
and team members. To achieve this level of personal comfort, the project manager
needs appropriate tools, one of which is an effective alignment process. This is one
of the reasons there are a large number of meetings during the start-up of projects
with a high-complexity profile.
Chapter 7 Starting a Project
7.3 Project Start-Up 298
KEY TAKEAWAYS
• The major activities included in project start-up are selecting the
project manager; establishing funding; developing project infrastructure
such as accounting, procurement, and IT; holding a kickoff meeting,
determining staffing; and building relationships.
• The start-up activities for small projects can utilize existing
infrastructure for support functions and can have a single start-up
meeting, while larger projects require more dedicated infrastructure
and full-time staff, and the start-up meetings can take longer and
involve more people.
EXERCISES
1. What are four of the major activities that occur during project start-up?
2. What is one type of start-up activity that is affected by the difference in
a project’s complexity? Describe the difference in that activity between
low-, medium-, and high-complexity projects.
Internalize your learning experience by preparing to discuss the following.
How does the choice of project manager affect the start-up of the project?
Include a discussion of the point in the process at which the project manager
is assigned and how the personality of the manager affects the match
between the manager and the complexity of the project.
Chapter 7 Starting a Project
7.3 Project Start-Up 299
7.4 Alignment Process
LEARNING OBJECTIVES
1. Identify the purpose of the alignment process.
2. Identify the components of the alignment process.
3. Identify the effects of a lack of trust on a project.
Developing a common understanding among the key stakeholders of the purpose
and goals of the project and the means and methods of accomplishing those goals is
called the alignment process12
. It is important to accomplish this alignment during
the initiation phase. Project managers usually conduct a start-up meeting that is
sometimes called a kickoff meeting. The agenda and duration of the start-up
meeting depends on the complexity level of the project. Projects with a limited
scope and short duration may engage in a session start-up meeting over lunch. A
medium-complexity project will require a four-hour meeting or more while a highcomplexity
project cannot achieve alignment in a single meeting. Alignment can
require several days of activities.
Five-Day Alignment Meeting on a Horse Ranch
On one large, complex project, the project alignment required a five-day
process. Over twenty members of the project team and client participated in
this alignment. To create a relaxed atmosphere and facilitate an open
discussion, the alignment meetings and activities were held on a horse ranch in
Argentina.
A number of companies specialize in designing and facilitating alignment sessions
for large complex projects. Although designed to meet the needs of each project,
alignment sessions have some common agenda items:
• Developing a common understanding of the project purpose
• Agreeing on the means and methods for accomplishing the purpose
• Establishing trust among team members
12. Developing a common
understanding among the key
stakeholders of the purpose
and goals of the project and the
means and methods of
accomplishing those goals.
Chapter 7 Starting a Project
300
Common Understanding
A common understanding does not mean building a consensus. People may disagree
with the direction being developed, but they have the same basic understanding as
those who agree. For a project plan to be effective, there must be a critical mass or
sufficient commitment among the critical stakeholders. Therefore, disagreement is
not fatal to the project execution, but a unified team with a common understanding
is much more powerful and increases the likelihood of success. If disagreement does
exist, an open and forthright discussion will enable the project leadership to
address the disagreement in developing the project plan. If the disagreement stays
hidden and is not openly discussed, problems will emerge later in the project.
Developing a common understanding can be as easy as an informal discussion that
lasts a few hours, or it can be a lengthy, complex process. The methods and
processes employed to develop a common understanding are directly related to the
complexity of the project. The more complex projects will require more intense
discussions around those issues that score high on the complexity profile.
Developing a common understanding among the key project stakeholders requires
the following:
• Defining project success
• Determining potential barriers to success
• Establishing key milestones
• Identifying decision makers and the decision-making process
It is difficult to execute a successful project without first defining what makes a
successful project. The first part of this discussion is easy: the project must be
completed on time, within budget, and to all specifications. The next level of the
discussion requires more reflection. During this discussion, reflection on the
organization’s mission, goals, and related issues such as safety and public
perception of the project emerge.
After the team develops a common understanding of project success, a discussion of
barriers to achieving that success enables team members to express skepticism. On
more complex projects, the goals of a project often seem difficult to achieve. A
discussion by the team of the potential barriers to project success places these
concerns out in the open where team members can discuss and develop plans to
address the barriers. Without this discussion, the perception of these barriers
becomes powerful and can have an effect on project performance.
Chapter 7 Starting a Project
7.4 Alignment Process 301
Figure 7.9
Determine the purpose.
© 2010 Jupiterimages
Corporation
Project Purpose
The project purpose is sometimes reflected in a written charter, vision, or mission
statement. These statements are developed as part of the team development
process that occurs during the project initiation phase and results in a common
understanding of the purpose of the project. A purpose statement derived from a
common understanding among key stakeholders can be highly motivating and
connects people’s personal investment to a project purpose that has value.
A purpose statement—also called a charter, vision, or mission—provides a project
with an anchor or organizational focus. Sometimes called an anchoring statement,
these statements can become a basis for testing key decisions. A purpose statement
can be a powerful tool for focusing the project on actions and decisions that can
have a positive impact on project success. For example, a purpose statement that
says that the project will design and build an airplane that will have the best fuel
efficiency in the industry will influence designs on engine types, flight
characteristics, and weight. When engineers are deciding between different types of
materials, the purpose statement provides the criteria for making these decisions.
Developing a common understanding of the project’s
purpose involves engaging stakeholders in dialogue that
can be complex and in-depth. Mission and vision
statements reflect some core values of people and their
organization. These types of conversations can be very
difficult and will need an environment where people
feel safe to express their views without fear of
recrimination.
Goals
Goals add clarity to the anchor statement. Goals break
down the emotional concepts needed in the
development of a purpose statement and translate them
into actions or behaviors, something we can measure.
Where purpose statements reflect who we are, goals
focus on what we can do. Goals bring focus to
conversations and begin prioritizing resources. Goals
are developed to achieve the project purpose.
Chapter 7 Starting a Project
7.4 Alignment Process 302
Figure 7.10
Develop goals.
© 2010 Jupiterimages
Corporation
Developing goals means making choices. Project goals
established during the alignment process are broad in
nature and cross the entire project. Ideally, everyone on
the project should be able to contribute to the
achievement of each goal.
Goals can have significantly different characteristics.
The types of goals and the processes used to develop the
project goals will vary depending on the complexity
level of the project, the knowledge and skills of the
project leadership team, and the boldness of the project
plan. Boldness is the degree of stretch for the team. The
greater the degree of challenge and the greater the
distance from where you are to where you want to be,
the bolder the plan and the higher the internal
complexity score.
Roles
Role clarity is critical to the planning and execution of the project. Because projects
by definition are unique, the roles of each of the key stakeholders and project
leaders are defined at the beginning of the project. Sometimes the roles are
delineated in contracts or other documents. Yet even with written explanations of
the roles defined in documents, how these translate into the decision-making
processes of the project is often open to interpretation.
A discussion of the roles of each entity and each project leader can be as simple as
each person describing their role and others on the project team asking questions
for clarification and resolving differences in understanding. On less complex
projects, this is typically a short process with very little conflict in understanding
and easy resolution. On more complex projects, this process is more difficult with
more opportunities for conflict in understanding.
Chapter 7 Starting a Project
7.4 Alignment Process 303
Figure 7.11
Clarify roles.
© 2010 Jupiterimages
Corporation
One process for developing role clarification on projects
with a more complex profile requires project team
members, client representatives, and the project’s
leadership to use a flip chart to record the project roles.
Each team divides the flip chart in two parts and writes
the major roles of the client on one half and the roles of
the leadership team on the other half. Each team also
prioritizes each role and the two flips charts are
compared.
This and similar role clarification processes help each
project team member develop a more complete
understanding of how the project will function, how
each team member understands their role, and what
aspects of the role are most important. This
understanding aids in the development or refinement of
work processes and approval processes. The role
clarification process also enables the team to develop
role boundary spanning processes. This is where two or
more members share similar roles or responsibilities.
Role clarification facilitates the development of the
following:
• Communication planning
• Work flow organization
• Approval processes
• Role boundary spanning processes
Means and Methods
Defining how the work of the project will be accomplished is another area of
common understanding that is developed during the alignment session. An
understanding of the project management methods that will be used on the project
and the output that stakeholders can expect is developed. On smaller and less
complex projects, the understanding is developed through a review of the tools and
work processes associated with the following:
• Tracking progress
• Tracking costs
• Managing change
Chapter 7 Starting a Project
7.4 Alignment Process 304
Figure 7.12
Build trust.
© 2010 Jupiterimages
Corporation
On more complex projects, the team may discuss the use of project management
software tools, such as Microsoft Project, to develop a common understanding of
how these tools will be used. The team discusses key work processes, often using
flowcharts, to diagram the work process as a team. Another topic of discussion is
the determination of what policies are needed for smooth execution of the project.
Often one of the companies associated with the project will have policies that can
be used on the project. Travel policies, human resources policies, and authorization
procedures for spending money are examples of policies that provide continuity for
the project.
Trust
Trust on a project has a very specific meaning. Trust is the filter that project team
members use for evaluating information. The trust level determines the amount of
information that is shared and the quality of that information. When a person’s
trust in another person on the project is low, he or she will doubt information
received from that person and might not act on it without checking it with another
source, thereby delaying the action. Similarly, a team member might not share
information that is necessary to the other person’s function if they do not trust the
person to use it appropriately and respect the sensitivity of that information. The
level of communication on a project is directly related to the level of trust.
Trust is also an important ingredient of commitment.
Team member’s trust in the project leadership and the
creation of a positive project environment fosters
commitment to the goals of the project and increases
team performance. When trust is not present, time and
energy is invested in checking information or finding
information. This energy could be better focused on
goals with a higher level of trust.Marsha Willard,
“Building Trust: The Relationship Between Trust and
High Performance,” Axis Advisory 1999,
http://www.paclink.com/~axis/M7trust.html.
Establishing trust starts during the initiation phase of
the project. The kickoff meeting is one opportunity to
begin establishing trust among the project team
members. Many projects have team-building exercises
during the kickoff meeting. The project team on some
complex projects will go on a team-building outing. One
project that built a new pharmaceutical plant in Puerto
Rico invited team members to spend the weekend
spelunking in the lime caves of Puerto Rico. Another
Chapter 7 Starting a Project
7.4 Alignment Process 305
project chartered a boat for an evening cruise off the coast of Charleston, South
Carolina. These informal social events allow team members to build a relationship
that will carry over to the project work.
KEY TAKEAWAYS
• The purpose of the alignment process is to develop a common
understanding of the purpose, agree on the means and methods, and
establish trust.
• The components of the alignment process are discussions of the
purpose, goals, participant roles, methods of tracking progress and
costs, methods of managing change, and building trust.
• The effects of a lack of trust are delays caused by fact checking or
missing information that was not shared because the person’s discretion
was not trusted to handle sensitive information.
EXERCISES
1. The initial meeting that is designed to build understanding and
consensus around the goals and objectives of the project is the
__________ meeting.
2. What are the objectives of the alignment process?
3. What are five of the seven components of the alignment process?
4. How can lack of trust between team members adversely affect the
project?
Internalize your learning experience by preparing to discuss the following.
Why is an alignment meeting important? What needs to be accomplished,
and what are two examples of things that could go wrong if the alignment
meeting does not meet its objectives?
Chapter 7 Starting a Project
7.4 Alignment Process 306
7.5 Communications Planning
LEARNING OBJECTIVES
1. Describe the differences between communications in an existing
organization compared with a new project.
2. Describe how the detail of the communications plan is related to the
complexity of the project.
3. Describe a communication matrix and its function.
4. Describe conventions for naming files to indicate their content and the
version.
The flow of information between team members and stakeholders is managed by
rules set forth in a communications plan.
When a person joins an existing organization, one of the early tasks is to learn the
work processes of the organization, including where to find information, the
meeting schedule, and what reports are required. In existing organizations, new
members discover the gatekeepers of information: those persons in the
organization who know how to generate or find information. Typically, the
generation, flow, and storage of information reflects the organizational culture, and
to effectively communicate in an organization, a person must be able to develop
communication styles and processes consistent with that organization.
Projects do not have the advantage—or sometimes the disadvantage—of an existing
organizational culture or communication structure. The project leadership team
develops an understanding of the information needs of the various members and
stakeholders of the projects and develops a communications plan that provides the
right information, at the right time, to the right people.
The detail of the communications plan is related to the complexity level of the
project. Highly complex projects require a detailed communications plan to assure
that the information needed by the project team and stakeholders is both generated
and distributed to support the project schedule and project decisions. Crucial
information can be lost or delayed in a complex project if the communications plan
is not functioning properly.
Chapter 7 Starting a Project
307
Communicating Priorities
During a project in Tennessee, the project management team was exploring
ways to complete the project earlier to meet the changing requirements of the
project’s client. The team identified a number of actions that could create an
earlier completion date. The plan required an early delivery of critical
equipment by a supplier, and the team visited the supplier’s senior
management and agreed to pay a bonus for early delivery of the equipment.
Two weeks later, during a review of the project procurement team progress,
the project manager discovered that the organization’s procurement
department had delayed approvals needed by the supplier because the
engineering design was not submitted in the required format. This action
effectively delayed the project two weeks and reduced the possibility of the
project team meeting milestone requirements for earning a bonus.
The organization’s procurement team did not understand the critical nature of
this supplier’s contribution to an early completion of the project. All the
information needed by the organization’s procurement team was in the
meeting minutes distributed to the entire team. The procurement team did not
understand the implications of their work processes, and the result was a delay
to the project schedule and a reduction in client satisfaction and project
profitability.
Effective communication on a project is critical to project success. The Tennessee
project is a typical example of errors that can be created by the breakdown in
communication flow. Highly complex projects require the communication of large
amounts of data and technical information that often changes on a frequent basis.
The project manager and the leadership team are responsible for developing a
communications plan that provides the right information, at the right place, at the
right time. The Tennessee project example demonstrates that even when the
information is at the right place and at the right time, the project procurement
leader must assist the procurement team in understanding the priorities of the
project. On large, complex projects, that procurement lead would not be in the daily
communication to subcontractors or vendors. In the Tennessee project example,
the procurement leader’s unique understanding that came from participation in the
project leadership meeting required a more direct involvement with those
subcontractors and vendors that impacted the project goals.
Chapter 7 Starting a Project
7.5 Communications Planning 308
Just as important, an effective project communications plan does not overload team
members and project systems with information that is not useful. Some project
managers will attempt to communicate everything to the entire project team.
Although this assures that each team member will receive critical information, the
large influx information can make the distillation of the information to the critical
and relevant people more difficult for each team member.
Communication Matrix
A Guide to the Project Management Body of Knowledge (PMBOK Guide) describes tools and
techniques for identifying project stakeholders, defining their information
requirements, and determining the appropriate communication technology. The
project includes developing a list of all the people impacted by the outcome of the
project and people who can influence the execution of the project, including project
team members. The project leadership then generates a list of information needed
or requested by each stakeholder.
The project leadership team develops a list of communication methods for
gathering and communicating project information. These include a list of reports,
meetings, and document flowcharts. The leadership team then typically develops a
communication matrix13
that details who is included in each project meeting and
the distribution of major documents in a table format.
Figure 7.13 Simple Communication Matrix
13. Table that displays the
responsibilities and
distribution for each type of
document or information.
Chapter 7 Starting a Project
7.5 Communications Planning 309
Document Control
On large, complex projects, organizing the creation, distribution, and storage of
documents is a major and important activity. Organizations that execute a large
number of complex projects will often have project document control systems that
the project leadership team will adapt for their project. Document control systems
distribute, store, and retrieve information that is needed by the project team.
Documents originate from the various team members during the planning and
execution of the work and then are transmitted to the document team for
cataloging, distributing, and storing.
Document control systems have a systematic numbering system that allows a team
member to derive information about the document through the document number.
Document Naming Provides Information about the
Content
On a complex project, document names were chosen to indicate the category,
location, purpose, author, and date. For example, a file named
323RFQDewateringPump_Darnall_10.08.2012 rev 3. contains five pieces of
information about the content of the file. The first digit of the first number was
used to indicate the category of the document. For example, all documents
related to the project scope started with a 100 number and documents related
to procurement started with 300. In this file name, the 3 indicates the
document refers to procurement, the next two digits—23—refer to a location on
the project (the south pumping station). The naming convention was
distributed to team members so that when they saw this file name, they could
interpret it to mean that the document refers to a procurement document,
specifically a request for a quote for a dewatering pump for the south pumping
station and that the document was prepared by the procurement team member
(Darnall) on August 10, 2012. One of the naming conventions that was
specifically described was the use of date formats in the international format of
dd/mm/yyyy instead of the American format of mm/dd/yyyy, so team
members know this document was created on August 10 rather than October 8.
When files are stored on a computer, the names can be sorted alphabetically. The
beginning of the name is used as the primary sorting criteria. In the example above,
sorting a list of document names would place all the documents together by
category (e.g., scope and procurement), because all the documents related to scope
Chapter 7 Starting a Project
7.5 Communications Planning 310
would begin with a 1 and all those that are related to procurement would begin
with a 3.
When a document is expected to be revised over the course of the project, version
control becomes important. Version control means labeling each revision to enable
the team to understand the latest activity and status of the document (or the
activity behind the document). For example, on engineering and construction
projects, document control tracks the development and distribution of documents.
Each drawing is given a unique identification that reflects the type of drawing
(electrical, civil, etc.), the location (first floor, mechanical room, etc.), and the
version number. Because the design process includes several iterations of the
drawings as more information is developed, document control uses an
identification that indicates the version of the document.
For example, a project will use letters to indicate the version of the document until
the document is approved for construction, and then it is given a number after
approval. Therefore, a document with revision D will be the fourth version of the
document. The same document with revision 3 means that this is third revision
after the project was approved for construction.
To assure that everyone who should either review or approve the document
received a copy, document control develops a distribution list for each type of
documents. Each person reviews and signs the distribution list and then sends the
document to the next person on the list. The design documents, distribution lists,
and other project documents are archived by document control for future
reference. In the example above, the document was the third revision after the
design was approved for construction.
Naming conventions for files and the versions of files should be consistent with the
practices of the parent organization or with the client organization so that the files
may be archived with files from other projects. For example, California Road
Construction Projects require a specific file naming convection.
Chapter 7 Starting a Project
7.5 Communications Planning 311
Document Naming Convention in California
All Highway Construction Projects (Roadway) are required to be named in
accordance with the following naming convention:
d12345ppXXX
• d = District code. The district code represents the district where
the project is being constructed (not the district creating the CADD
drawings). Districts 1–9 use a single numeric character (1–9,
respectively). Districts 10 through 12 use a single alpha character
(a–c, respectively).
• 12345 = First five characters of the project expenditure
authorization.
• pp = Print Sequence Code (two alpha characters).
• XXX = Respective sheet numbers (numerical characters) for each
Print Sequence Code used in the project.
For example,
512121ic007.dgn
• 5 = District 05.
• 12121 = First five characters of the project expenditure
authorization.
• ic = Print Sequence Code (Drainage Details).
• 007 = Sheet number (seventh Drainage Detail sheet).
Chapter 7 Starting a Project
7.5 Communications Planning 312
KEY TAKEAWAYS
• In an existing organization, there are gatekeepers of information who
know how to find it, when meetings are scheduled, and what reports are
required. In a new project, the project manager can create a new flow of
information and reporting requirements.
• More complex projects require more sophisticated communications
plans.
• A communication matrix is a table that shows the names of people as
column or row headings and the types of documents as row or column
headings. In the cells where the name and document type intersect, a
symbol indicates the person’s responsibility or access with regard to
that type of document.
• File names can be used as codes to describe the contents of the file. Parts
of the name can be used to identify the category, location, subject,
author, and date. File name conventions should be used that match
those used by the parent organization or by the client.
EXERCISES
1. A table that relates types of documents, people, and their
responsibilities and access is a communications ____________.
2. How do communications on a new project differ from communications
in an existing organization?
3. How does the communications plan differ for a complex project
compared to a simple project? Provide an example.
4. What is the purpose of using a document naming convention? Describe
at least three types of information that the file name could contain.
Internalize your learning experience by preparing to discuss the following.
What is the purpose of a communications plan and what is an example of a
problem that might arise if the communications plan is not complete and an
example of a problem that might arise if the communications plan is not
followed?
Chapter 7 Starting a Project
7.5 Communications Planning 313
7.6 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Choose an organization of which you are a member. Identify the type of
organization (profit, not-for-profit, government) and locate its mission
statement. Quote the mission statement and then analyze it to
determine if it has the four elements described in this chapter as
necessary for a well-written mission statement. Revise the mission
statement, if necessary, so that it addresses all four of the elements of a
well-written mission statement.
2. Describe the pros and cons of assigning a project manager to the project
during the design phase. Describe how the complexity of the project
might affect that decision.
3. Describe a project with which you are familiar that suffered from lack of
alignment. Identify the component of alignment that was missing and
its effects.
4. Describe the function of a communication matrix and provide an
example of how it would be used to create, edit, approve, and distribute
a particular type of document.
Chapter 7 Starting a Project
314
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Effects of lack of trust: Relate an example of a project on which you
worked where the participants did not know each other well enough to
trust each other, and describe the effect of this lack of trust on the
project. Describe alignment activities that could have increased trust on
that project.
2. Describe an example of a project with which you have been personally
involved that suffered from undocumented changes in scope. Consider
an example provided by a classmate and determine if their example is a
deviation or a scope change and if it requires a scope change, how
should it have been handled? Demonstrate your knowledge of the steps
for making scope changes described in the text.
3. What is the mission statement of your college or university? Give an
example of a recent project undertaken by the organization. Determine
if the project directly supports the stated mission and explain your
opinion.
4. Do you think a communication matrix is necessary on a small project
that only involves six people? Be prepared to support your opinion with
examples.
Chapter 7 Starting a Project
7.6 Exercises 315
7.7 Software and Technology Exercise
LEARNING OBJECTIVE
1. Use a spreadsheet to calculate cash flow, payback, and Internal Rate of
Return (IRR).
Create a Worksheet to Calculate Cash Flow, Payback, and IRR
Projects that purport to save money or earn additional money in the future as a
result of spending money now can be evaluated and compared using basic financial
tools. A simple payback analysis determines how long it will be before the result of
the project pays off the initial investment, and the Internal Rate of Return (IRR) is a
percentage similar to an interest rate that can be compared to other projects or
investment opportunities.
How to Set Up a Spreadsheet to Show Cash Flow, Simple Payback, and
Calculate IRR
1. Start Excel 2007. In cells A1 through A5, type Payback and Internal Rate
of Return, Year, Expense, Income/Savings, Annual Cash Flow, Cumulative
Cash Flow, and Internal Rate of Return (IRR). Drag the boundary between
column A and B to the right to increase the width of column A, as
shown in Figure 7.14 "Widen Column to Fit Labels".
Figure 7.14 Widen Column to Fit Labels
2. In cell B2, type 0, and in cell C2, type 1. Click and drag across cells B2
and C2 to select them both. Identify the fill handle at the lower right
corner of C2 as shown in Figure 7.15 "Use Fill Handle to Extend a
Chapter 7 Starting a Project
316
Pattern of Intervals". Selecting the first two numbers in a sequence
determines the interval of the sequence.
Figure 7.15 Use Fill Handle to Extend a Pattern of Intervals
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. Click and drag the fill handle to the right to cell H2. The sequence of
years from zero to six is filled into cells B2 through H2.
4. In cell B3, type $(100,000) and then press the Enter key. Typing a
number with the dollar sign and comma sets the formatting
automatically. The parentheses indicate a negative number that the
computer may display in red.
5. In cell C3, type $(2,000) and then press Enter. Click cell C3 again to select
it. Drag the fill handle to the right to cell H3. Because a single value was
selected, the same value is filled into cells D3 through H3, as shown in
Figure 7.16 "Initial Expense in Year Zero Followed by Annual
Expenses".
Figure 7.16 Initial Expense in Year Zero Followed by Annual Expenses
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. In cell C4, type 25,000 and then press Enter. Use the procedure you
practiced in step 5 to fill this value into cells D4 through H4.
7. In cell B5, type =B4+B3 and then press Enter. This formula adds the
positive and negative cash flows in the two cells above its location to
find the annual cash flow.
8. Click cell B5 and then drag the fill handle to cell H5 to fill this formula
into the adjacent cells. The formulas adapt to their new locations to
add the two cells immediately above. Click cell D5 to observe how the
formulas change to sum the cells above, as shown in Figure 7.17
"Formula to Calculate a Running Total".
Chapter 7 Starting a Project
7.7 Software and Technology Exercise 317
Figure 7.17 Formula to Calculate a Running Total
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
9. In cell B6, type =B5 and then press Enter. This formula transfers the
value for the initial expense to cell B6 so the next formula can be used
in the remaining cells.
10. In cell C6, type =B6+C5 and then press Enter. This formula sums the
value from the previous year with the annual cash flow for the current
year.
11. Click cell C6 and then drag the fill handle to cell H6. Observe from the
change in color or from the missing parentheses that the cumulative
cash flow becomes positive in year five, as shown in Figure 7.18 "Initial
Investment Paid Back in Year Five".
Figure 7.18 Initial Investment Paid Back in Year Five
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
12. In cell B7, type =IRR(B5:H5) and then press Enter. The spreadsheet
program uses a built-in program named IRR to calculate the internal
rate of return using the annual cash flows in cells B5 through H5 and
determines the rate of return is 10 percent, as shown in Figure 7.19
"IRR Can Be Used to Choose between Very Different Projects". Notice
that the IRR function uses the annual cash flows in row 5 and not the
cumulative cash flow in row 6.
Chapter 7 Starting a Project
7.7 Software and Technology Exercise 318
Figure 7.19 IRR Can Be Used to Choose between Very Different Projects
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
13. Click cell A1. Type Payback and Internal Rate of Return and then press
Enter. Click and drag cells A1 through H1 to select them. On the ribbon,
in the Alignment group, click the Merge and Center button. The new
title is centered across the columns, as shown in Figure 7.20 "Center
the Title". This worksheet can be used and extended to determine
simple payback and IRR for a variety of projects.
Figure 7.20 Center the Title
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
14. In cell A9, type your name.
15. Check your formulas and calculations. Change the initial expense in
cell B3 to $(90,000). The values that depend on the initial expense
should all change and produce new cash flows and a different IRR of 14
percent.
16. Click cell B7 to select it and to show the IRR function on the formula
bar.
17. Capture a screen that shows the recalculated values, the IRR function,
and your name. Open a word processing file and paste the screen into
the document. Save the word processing file as
Ch07FinanceStudentName.doc and close it.
18. Save the worksheet and close it. Keep it where you can find it to
demonstrate the provenance of your work, if necessary.
19. Review your work and use the following rubric to determine its
adequacy:
Chapter 7 Starting a Project
7.7 Software and Technology Exercise 319
Element Best Adequate
File name Ch07FinanceStudentName.doc Ch07FinanceStudentName.docx
Use a
spreadsheet
to calculate
cash flow,
payback,
and
Internal
Rate of
Return
(IRR)
Screen capture of spreadsheet
after the value in B3 is
changed to negative $90,000,
with cell B7 selected to show
the IRR function on the
toolbar
Same as Best
20. Save the file and submit it as directed by the instructor.
Chapter 7 Starting a Project
7.7 Software and Technology Exercise 320
Chapter 8
Project Time Management
The project scope identifies the objectives of the project, what activities will be
performed, and some of the activities that are not included in the project. The scope
document is used to create a master schedule that identifies important dates and
activities. In this chapter, the student learns how the scope and schedule are
developed.
Project planning and scheduling is both an art and a science. No two project
managers or planning professionals develop identical plans or project schedules.
The planning process is creative and reflects the planner’s approach and style. Even
though the project plan is unique to the approach and style of the planner, methods
for developing the schedule and documenting the resulting plan follow certain
rules.
On larger and more complex projects, a planning function composed of a small
team of planning and scheduling experts may be needed to develop and track the
project schedule. Project planners facilitate the development of the information
required to develop the project plan using templates, past or similar projects, and
most importantly, the thoughts and plans of the project team leaders and members.
On a smaller project, the project manager may be responsible for accomplishing
this planning function.
321
Figure 8.1 Schedule
© 2010 Jupiterimages
Corporation
After gathering this information, the planner begins
developing the project’s master schedule1
—a summary
level schedule that encompasses the entire project
scope—that includes major events and provides a view
of the entire project. Working with the project team, the
planning continues to include more details as additional
information becomes available. The schedule continues
to evolve during the life of the project, and major
revisions may be necessary in response to events both
inside and outside the project that change critical dates
on the schedule.
Determining the schedule of activities that comprise the
project is a key element of project management.
1. Schedule with key dates and
activities.
Chapter 8 Project Time Management
322
8.1 Types of Schedules
LEARNING OBJECTIVE
1. Define the types of project schedules.
The schedule develops as the project moves from its early conceptual phase into the
execution phase.
Conceptual
When the scope of the project is being determined, a simple schedule that shows
the major tasks and approximate start and end dates is developed to allow senior
management to make decisions about the scope of the project. Detail is not required
at this stage because entire tasks might be dropped from the scope, or the whole
project might not be approved.
Master
If the project is chosen, a master schedule is created. It has major events and dates
such as the starting date and the completion date. The master schedule is often part
of a contract. Changes to the master schedule must be approved using a
documented change process with approval by the project sponsor and client.
Detail
To execute the master schedule, the major activities are broken down into smaller
activities and resources are assigned to those activities. The most detailed versions
or portions of the schedule may be developed a few weeks prior to the execution of
those activities and are called two-week plans2
. Portions of the master schedule
that affect particular vendors might be sent to them so they can provide detailed
activities that they would perform.
2. The most detailed version or
portion of the schedule that is
developed a few weeks prior to
the execution of those
activities.
Chapter 8 Project Time Management
323
KEY TAKEAWAY
• Types of schedules vary in detail. A broad, general conceptual schedule
is used in the earliest phases of the project design. A master schedule
with start date, milestones, and completion date becomes part of the
contract and is changed by mutual agreement using a formal change
process. Details are added to the master schedule as needed to perform
the work of the project activities.
EXERCISES
1. A _________ schedule identifies major types of activities and
approximate start and end dates for use in decision making about the
scope of the project.
2. A schedule of activities that is prepared every two weeks is the _______
schedule.
3. How does a conceptual schedule differ from a master schedule?
Conceptual Schedule
Choose an activity that you are considering and describe a conceptual
schedule for it. Limit the schedule to between five and ten major sections.
Make a rough estimate of the duration and cost of each phase.
Chapter 8 Project Time Management
8.1 Types of Schedules 324
8.2 Elements of Time Management
LEARNING OBJECTIVES
1. Describe a work breakdown structure and how it relates to activities.
2. Describe the use of graphic representations for time management.
According to the Project Management Institute (PMI), project time management
includes the following elements:Project Management Institute, Inc., A Guide to the
Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA:
Project Management Institute, Inc., 2008), 129.
• Define activities
• Sequence activities
• Estimate activity resources
• Estimate activity durations
• Develop schedule
• Control schedule
The list of activities, their relationship to each other, and estimates of durations
and required resources comprise the work breakdown structure (WBS). The project
WBS is a hierarchical3
—classified according to criteria into successive
levels—listing and grouping of the project activities required to produce the
deliverables of the project. The WBS represents a breakdown of the project into
components that encompass the entire scope of the project. Each level of the WBS
hierarchy represents a more detailed description of the project work so that the
highest level represents broad categories, and the lower levels represent increasing
amounts of detail.
3. Classified according to criteria
into successive levels.
Chapter 8 Project Time Management
325
Figure 8.2
Work Breakdown Structure
(WBS) can be focused on function
or phase.
© 2010 Jupiterimages
Corporation
Larger and more complex projects often require a larger
WBS. The size of the WBS is directly related to the
amount of work on the project and how that work is
divided into work packages. The WBS can be developed
around the project phases or the project units or
functions that will be performing the work. A WBS
organized around the project phases facilitates the
understanding of the amount of work required for each
phase of the project. A WBS developed around the
project units or functions of the project facilitates the
understanding of the amount of work required for each
function.
The following example, named John’s move, has a low
level of complexity compared to a larger project.
Normally, this project would not receive the amount of
detailed planning described in the following examples,
but the authors chose to use a basic project that is
familiar to most students to help them focus on learning
the new concepts.
Changing Jobs
John has a small but important project. He has accepted a job in Atlanta and
now has to move from Chicago to Atlanta and be there, ready to work, right
after the Christmas holidays. If the furniture arrives in good condition at least
two days before John starts work, and for less than Five thousand dollars, the
project will be a success. The move to Chicago five years ago cost five thousand
dollars, but John is smarter now and will use his friends to help, so he is
confident he can stay within budget.
Developing a WBS begins by defining and developing lists of all activities—work
performed on the project that consumes project resources, including cost and
time—needed to accomplish the work of the project. The first draft of the WBS
includes activities at the highest level of the hierarchy or the management level and
Chapter 8 Project Time Management
8.2 Elements of Time Management 326
typically includes the major activities or summary activities required to accomplish
the deliverables identified in the project scope of work.
Chapter 8 Project Time Management
8.2 Elements of Time Management 327
Top-Level Activities in Move Planning
On John’s move project, these top-level activities are numbered 1.0, 2.0, 3.0, and
so on. For example, a plan for the move is the major deliverable from 1.0 Plan
Move, as shown below.
Figure 8.3
Top Level of WBS
The work breakdown structure is then decomposed4
—broken down into
smaller units. The 1.1, 1.2, and 1.3 numbers are the first subdivision of the
work. For example, one of John’s Summary Level Activities is Packing (3.0).
Although some minor packing (delicate items: 2.4) are packed under another
summary activity, 3.3 is the major packing and includes the coordination and
support of labor (friends Dion and Carlita). The activity is then
decomposed—separated into basic elements—to the next level by listing the
individual rooms that need packed, as shown below.
Figure 8.4
Major Activity Decomposed into
Smaller Activities
The WBS could be decomposed further to a greater level of detail by listing the
tasks needed for each activity. For example activity 3.3.3, Pack Bedroom, can be
decomposed into additional tasks, such as 3.3.3.1 Pack Closet, 3.3.3.2 Pack
4. Separated into basic elements.
Chapter 8 Project Time Management
8.2 Elements of Time Management 328
Figure 8.5 Need for Greater
Detail
© 2010 Jupiterimages
Corporation
Drawers, and 3.3.3.3 Pack Blankets. This type of numbering of the activities is
called intelligent numbering. In intelligent numbering, the numbering system
has meaning so that a member of the project team knows something about the
activity by the number of the activity. For example, any activity associated with
packing begins with a 3; even picking up donuts can be an activity that supports
packing. The donuts are a form of payment for the labor of Dion and Carlita.
The WBS is developed or decomposed to the level that the manager needs to control
or manage the project. Typically, larger and more complex projects require a more
detailed WBS.
Estimation of Duration
After the project team has created the WBS, each activity is reviewed and evaluated
to determine the duration5
(how long it will take to accomplish from beginning to
end) and what resources6
(time, materials, facilities, and equipment) are needed.
An estimate is an educated guess based on knowledge, experience, and
inference7
—the process of deriving conclusions based on assumptions. The
accuracy of the estimate is related to the quality of the knowledge and how that
knowledge is applied. The person with the most knowledge may not be the most
objective person to provide duration estimates. The person responsible for the work
may also want to build in extra time. Multiple inputs into the duration estimate and
a more detailed WBS help reduce bias—the making of decisions based on a
prejudged perspective.
The unit of time used to develop the activity duration is
a function of the level of detail needed by the user of the
schedule. The larger and more complex the project, the
greater the need for detail, which usually translates into
shorter durations for activities.
5. Time from beginning to end of
an activity.
6. Time and materials.
7. Process of deriving conclusions
based on assumptions.
Chapter 8 Project Time Management
8.2 Elements of Time Management 329
Duration Estimate for Training
On a new plant start-up, the plant manager may need to know when the new
employees will start training, when they will be fully trained, and when they
can begin working in the plant. The plant human resources manager may need
to know what skills workers need and how much time each training class will
take. The schedule detail the HR manager needs will include activities to locate
facilities, schedule training, write contracts for trainers, and manage the
initiation of training classes. The trainer will need an even greater level of
detail, which could be measured in days or even hours.
On our John’s move example, the project schedule may have been just as effective
without detailing the packing of the individual rooms in the old apartment. If we
deleted these items, would John know when he needed to pack each one of these
rooms? If the answer is yes, then we may not need that level of detail.
The activity duration is the length of time the activity should take to complete from
beginning to end. The unit of duration is typically working days but could include
other units of time such as hours, weeks, or months. The unit chosen should be used
consistently throughout the schedule.
An important event, such as a ground-breaking ceremony or receipt of occupancy
from the building inspector, is called a milestone8
. A milestone has no duration or
resources. It is simply an indicator of an important point in the project.
Resource Allocation and Calendars
A common resource constraint is availability. To consider the availability of team
members, consultants, and key pieces of equipment, you can create a resource
calendar9
for each that indicates which days are available and which are days off
for a group, an individual, or a project asset such as a piece of important
equipment. A calendar for team members from the same company could be the
company calendar that shows working days, weekend days, and holidays. Individual
team members can have individual calendars that show their vacation days or other
days off, such as parental leave days. If major pieces of equipment are only available
for certain periods of time, they can be given a resource calendar. Resource
calendars become important tools when changes must be made to the schedule.
When a resource calendar is applied to a duration estimate, the duration in days is
distributed across the available calendar days. For example, if the duration is three
8. An important point in a project
without duration or resources.
9. Calendar that indicates
working days and days off for a
group or individual.
Chapter 8 Project Time Management
8.2 Elements of Time Management 330
days and the start date of the activity is Thursday, the activity would begin on
Thursday and end on Monday of the following week, assuming the resource
calendar shows that the person has the weekend off. If the weekend included an
extra day off for a holiday like Labor Day, shown in the calendar in Figure 8.6, the
completion day of the same three-day activity would be pushed to Tuesday.
Figure 8.6
Nonworking days can be designated in a calendar.
Activity Sequencing
Determining the schedule of a project begins by examining each activity in the WBS
to determine its relationship to the other activities.
Project Logic
The project logic10
is the development of the activity sequence or determining the
order in which the activities will be completed. The process for developing the
10. Activity sequence showing
predecessor and successor
activities.
Chapter 8 Project Time Management
8.2 Elements of Time Management 331
project logic involves identifying the predecessors11
—activities that come
before—and successors12
—the activities that come after.
Project Logic for John’s Move
In our example of John’s move, contacting Dion and Carlita—activity 1.1—comes
before the lunch meeting is scheduled. You must logically contact Dion and
Carlita before you schedule your Host Planning Lunch—activity 1.2. Your
conversation with Dion and Carlita will provide you with dates they are
available and establish their commitment to help you move. Therefore, the
conversation with Dion and Carlita is a predecessor to the Host Planning Lunch
Activity. This relationship is diagramed below.
Figure 8.7
Relationship between Two Activities
These terms define a relationship that is similar to a family relationship like father
and son. The father exists in time before the son. Similarly, each element of the
diagram can have predecessor-successor relationships with other elements, just like
a father can be the son of someone else. Unlike the biological father-son
relationship, activities can have more than one predecessor.
The relationship between a predecessor activity and a successor activity is called a
dependency13
. The successor activity starts after and is dependent on the
predecessor activity. Because the conversation with Dion and Carlita must take
place before a planning meeting can be scheduled, this is called a natural
dependency14
because the relationship can be inferred logically. Activities that
have predecessor-successor relationships occur sequentially15
—one after the other.
Another term for this type of relationship is finish-start16
, which means the first
activity must finish before the next one can start. Refer to the figure above.
11. Activity that comes before.
12. Activity that comes afterward.
13. Relationship between activities
that affects their sequence.
14. Sequence that can be
determined logically.
15. One after the other.
16. Sequence of activities where
the first activity must end
before the next activity can
begin.
Chapter 8 Project Time Management
8.2 Elements of Time Management 332
Some activities take place concurrently17
—at the same time. If they must begin at
the same time, they have a start-start18
relationship. If the activities can start at
different times but they must finish at the same time, they have a finish-finish19
relationship. Refer to Figure 8.8.
Figure 8.8
Concurrent activities can be constrained to finish at the same time or start at the same time.
17. At the same time.
18. Concurrent activities begin at
the same time.
19. Concurrent activities end at
the same time.
Chapter 8 Project Time Management
8.2 Elements of Time Management 333
Predecessor Relationships in John’s Move
The figure below shows the activities in John’s move with the predecessors
identified for the Plan Move and Prepacking groups of activities. Because the
finish-start relationship is by far the most common, the type of relationship is
assumed to be finish-start unless otherwise mentioned.
Figure 8.9
Outline of Activities with Predecessors Identified
Lag and Lead Times
Most activities in a network diagram have a finish-start relationship. If a certain
amount of time must go by before a successor activity can begin, the required delay
is called lag time20
. For example, concrete does not reach its full strength for
several days after it is poured. Lag time is required between the end of the pouring
process and the beginning of construction that puts stress on the concrete as
diagrammed in Figure 8.10. Similarly, you must allow lag time for payment checks
to be processed by the banking system before you can spend the money.
Figure 8.10
20. Amount of time that must
separate the finish of one
activity and the start of the
next sequential activity.
Chapter 8 Project Time Management
8.2 Elements of Time Management 334
Required time between activities is lag time.
In some cases, the successor activity can overlap the end of its predecessor activity
and begin before the predecessor is finished. This is called lead time21
.
Lead Time in John’s Move
In John’s move, you might begin separating the small and delicate items that
will be packed in step 2.3 before you get the packing materials in step 2.1 so
that when the materials are available, step 2.3 is already partially completed. If
the preparing the small items for packing can overlap its predecessor and
shortens the time it takes to accomplish both tasks by a day, it has a lead time
of one day.
Figure 8.11
Overlap is called the lead time of the successor activity.
21. Amount of time that the start
of the next activity can overlap
the finish of its predecessor.
Chapter 8 Project Time Management
8.2 Elements of Time Management 335
The characteristics and identifiers of an activity are its attributes22
.
At this point in the process of analyzing John’s move, each activity has an
identifying code, a short description, predecessors, and lead or lag times, as shown
in a partial table of activities in Figure 8.12 "Table of Attributes".
Figure 8.12 Table of Attributes
Milestones
Milestones are significant events in your project. An effective milestone schedule
will capture the major constraints to the project schedule and provide a summary
level overview of the project. Even though milestone events are significant to the
project, they consume no resources and have no duration. Milestones are usually
indicated on the project schedule with a diamond and often have a vertical line on a
time-scaled graph to show the relationship of various schedule paths to the
milestone.
In our John’s move project, we might create a milestone called “all packing
complete” to represent the date when everything is packed and ready for the
moving van. Any delay in this date will mean a delay in the arrival of the moving
van in Chicago, a delay in the arrival of the moving van in Atlanta, and a delay of all
the unpacking and other downstream activities. See Figure 8.13 "Gantt Chart".22. Characteristic of an entity or
object.
Chapter 8 Project Time Management
8.2 Elements of Time Management 336
Graphic Representations
Relationships between activities are easier to recognize if they are presented using
graphics such as bar charts or a network of connected boxes.
Bar Charts
The type of bar chart used to illustrate activity relationships in a project is the
Gantt chart23
. The Gantt chart was developed by Henry Gantt and used on major
projects, including building the Hoover Dam and the U.S. interstate highway
system.Reference.com, “Henry Gantt,” http://www.reference.com/browse/wiki/
Henry_Gantt (accessed July 27, 2009). The Gantt chart, also called a bar chart, is a
time-scaled graphic that represents each activity with a bar that reflects the
duration, start, and finish time, as shown in Figure 8.13 "Gantt Chart".
Figure 8.13 Gantt Chart
A Gantt chart is easy to read and provides sufficient information for project team
members to plan activities within a short time frame. For many larger projects, a
two-week bar chart, extracted from the larger master schedule, provides the
information needed for team members and contractors to coordinate activity
details. The Gantt chart provides information for simple planning but is limited
because a Gantt chart does not illustrate complex relationships well.
Network Diagrams
People recognize relationships and patterns more effectively when they look at
diagrams like the one in Figure 8.14 "Project Network Diagram". The precedence
diagram method (PDM)24
is a technique for graphically displaying the logic of the
23. Bar chart used to indicate
duration and relationships
between project activities.
24. Technique for graphically
displaying the logic of
scheduled activities using
boxes and arrows.
Chapter 8 Project Time Management
8.2 Elements of Time Management 337
schedule by placing the activities in boxes with arrows between them to show the
precedence-successor relationships. The boxes in this type of diagram are called
nodes25
and the arrows indicate finish-start relationships. Compare the diagram in
Figure 8.14 "Project Network Diagram" to the outline in Figure 8.9 "Outline of
Activities with Predecessors Identified" to see how much easier it is to trace a
sequential path from one activity to the next in the precedence diagram. This type
of diagram is also called a project network diagram26
.
Figure 8.14 Project Network Diagram
KEY TAKEAWAYS
• The work breakdown structure is a list of activities, including estimates
of their durations, their relationships with others, and the resources
assigned to them.
• Bar charts are used to indicate durations and sequencing where the
relationships are simple. Network diagrams are used to show complex
relationships between activities.
25. An activity in a network
diagram.
26. Graphic representation of the
sequencing of project
activities.
Chapter 8 Project Time Management
8.2 Elements of Time Management 338
EXERCISES
1. What is work breakdown structure?
2. If two activities are concurrent and they have the same completion date,
they have a _______-_______ relationship.
3. A calendar that shows when a person, facility, or key piece of equipment
is available is a __________ calendar.
4. What is the advantage of a network diagram over a bar chart for
illustrating the critical path?
Compare Charts
Perceptions of graphic representations of data differ among individuals.
Consider the bar chart and network diagram in this section. Describe which
type of chart conveys the important aspects of the project best to you
personally and why you think that is the case. Alternatively, describe which
aspects of the project are conveyed to you best by which type of chart.
Chapter 8 Project Time Management
8.2 Elements of Time Management 339
8.3 Critical Path and Float
LEARNING OBJECTIVE
1. Calculate critical path, project float, early start dates, and late start
dates.
The critical path27
is the path through the network that results in the latest
completion date of the project.
If any activity on the critical path is delayed, the completion of the project will be
delayed by an equal amount. It is the path with the greatest total duration. To
determine the critical path, add the amount of time estimated for the duration of
each activity to the previous activity to determine which path through the network
has the longest total duration, as shown in Figure 8.15 "Critical Path". Durations are
indicated in days. The critical path through these tasks takes at least eight days.
Activities on the critical path are shaded.
Figure 8.15 Critical Path
Early Start Dates
Starting dates can be assigned to each activity by doing a forward pass28
proceeding from left to right in the network diagram beginning with the project
start date. The dates derived by this method are the early start (ES) dates29
. The
early start date for an activity is the earliest date the activity can begin. The
estimate considers durations and resource availability calendars. To calculate early
start dates, begin with the project start date and assign that date as the start date of
activities that have no predecessor activities. Follow these steps to calculate the
early start dates of subsequent activities, assuming finish-start relationships:
27. Sequence of activities through
the network that results in the
latest completion date of the
project.
28. The process of determining the
earliest starting date for each
activity by beginning at the
project start date and adding
the activity durations,
resulting with the early finish
date for the project.
29. The soonest date an activity
can begin determined by the
project start date and the
durations of its predecessor
activities.
Chapter 8 Project Time Management
340
• Add the predecessor activity’s duration to its start date.
• Add the lag time or subtract the lead time.
• Refer to the resource calendar (or calendars) that applies to the people
and equipment necessary for the activity, and add the number of offdays
that the activity would span on those calendars.
• Assign the calculated date as the early start date of the successor
activity.
Forward Pass for John’s Move
John begins planning his move to Atlanta the same day he accepts the job. The
start date in this example is Monday, November 29, 2010. Tasks 1.1 and 2.1 can
both start on that day, so the early start dates for tasks 1.1 and 2.1 are
November 29. John calculates the early start date for the activities. A partial list
is provided below. Compare the figure below and the figure in the next sidebar.
Observe that John is willing to work on weekends, but activity 2.2.3 is delayed
by two days because one of the moving companies did not provide bids on the
weekend. Observe that activity 2.3 has a lead time of one day, but that
relationship is between activity 2.1 and 2.3. The network path from activity 1.3
is longer, so the lead time with activity 2.1 is not considered in calculating the
early start date of 2.3.
Figure 8.16
Early Start Dates Determined by a Forward Pass
Doing this process manually is error prone and time consuming. Fortunately, there
are computer programs to assist in the process, but the project manager must
understand the process well enough to recognize computer errors. Computer
software must be combined with common sense or good judgment.
Chapter 8 Project Time Management
8.3 Critical Path and Float 341
Float
Float30
, sometimes called slack, is the amount of time an activity, network path, or
project can be delayed from the early start without changing the completion date of
the project.
Total Float
Total float31
is the difference between the finish date of the last activity on the
critical path and the project completion date. Any delay in an activity on the critical
path would reduce the amount of total float available on the project. A project can
also have negative float32
, which means the calculated completion date of the last
activity is later than the targeted completion date established at the beginning of
the project.
Float in John’s Move
The last activity in John’s move has an early start date of December 28 and a
duration of one day. John could start work on Wednesday, December 29. John’s
first day at work is Monday, January 3, so the project has a total float of five
days.
Figure 8.17
Total Project Float
Late Start Dates
The next step is to work through the network diagram from right to left beginning
with the mandated completion date, which is a milestone that is set in the project
plan. Subtract the duration of each activity in each path to determine the latest
date the activity could begin and still meet the project completion date. Resource
calendars must be considered in the backward pass as well as the forward pass.
30. The amount of time an activity
can be delayed from an early
start without delaying the
completion date.
31. The amount of time the project
start date can be delayed
without delaying the project
completion date.
32. The amount by which the early
completion date exceeds the
project completion date.
Chapter 8 Project Time Management
8.3 Critical Path and Float 342
To calculate late start dates, begin with the project completion milestone and assign
that date as the finish date of its predecessor activities. Follow these steps to
calculate the late start dates of predecessor activities, assuming finish-start
relationships:
• Subtract the predecessor activity’s duration from its late finish date.
• Subtract the lag time or add the lead time to the late finish date.
• Refer to the resource calendar (or calendars) that applies to the people
and equipment necessary for the activity, and subtract the number of
off days that the activity would span on those calendars.
• Assign the calculated date as the late start date of the predecessor
activity.
The difference between the early start date and the late start date for activities on
the critical path is usually the same as the total float, unless the activities are
affected by the resource calendars differently in the forward and backward pass.
For example, if a piece of key equipment is only available for a few days, activities
that depend on it have the same start and finish dates in the forward and backward
passes.
Free Float
If activities that are not on the critical path have a difference between their early
start date and their late start date, those activities can be delayed without affecting
the project completion date. The float on those activities is called free float33
.
KEY TAKEAWAY
• To calculate total project float, begin at the start date and add the
duration of each activity in each possible path through the network
diagram, including nonworking days from the resource calendars, to
determine the early project end date. The longest path through the
network is the critical path. The difference between the early end date
and the required completion date of the project is the total project float,
and the start date of each activity is the early start date. To calculate the
late start dates, begin with the required project completion date and
work backward, subtracting the duration of each activity through each
possible pathway.
33. The time an activity that is not
on the critical path can be
delayed without delaying the
start of a successor activity.
Chapter 8 Project Time Management
8.3 Critical Path and Float 343
EXERCISES
1. The path through the network diagram that has the longest total
duration is the __________ path.
2. The difference between the sum of the activity durations along the
critical path and the project completion date is the project _______.
3. If two sequential activities overlap and the successor activity can begin
three days before the predecessor begins, those three days are called
_________ time.
4. If the last activity in the critical path has a completion date that is five
days later than the project completion date, the project has a _______
_________ (two words) of five days.
5. What is the difference between free float and project float?
6. If an activity has a duration of three days, how do you calculate the
finish date in a way that considers availability of the resources for that
activity?
7. What would be an example of lag time between two activities?
Project Float
Consider a project in which you have been involved that experienced
unexpected delays. Describe how the project’s manager dealt with the
delays. Specifically, consider if the delay was due to an activity that was on
the project’s critical path, if people or resources were diverted from other
tasks, or if free float existed in the original schedule. Describe the ultimate
effect on the project’s completion date.
Chapter 8 Project Time Management
8.3 Critical Path and Float 344
8.4 Managing the Schedule
LEARNING OBJECTIVES
1. Describe methods of tracking and reporting progress.
2. Define resource leveling.
3. Describe methods of accelerating the schedule.
To manage a schedule, the project manager must know how the work is progressing
compared to the master schedule and, if necessary, make changes to keep the
project on time.
Tracking and Reporting Progress
Tracking the schedule performance involves measuring the work performed against
the work expected to be performed with a given expenditure of resources. Periodic
reporting on the progress of the project provides the project management team
with information on how the project is performing against expectations and to
make decisions and corrections. Accurate measurement of schedule performance
requires planning during the early stages of the project to determine the unit of
measure and process for tracking progress.
Reporting Percentage Completed
To determine the percentage of a project that has been completed, the project
manager must determine what to measure. Some percentages are misleading. For
example, a project that has completed 25 percent of the scheduled activities does
not mean that the project is 25 percent complete. In our John’s move example, four
rooms were to be packed. After the bedroom was packed, packing was not 25
percent complete. The kitchen contained five times as many items and required
more delicate, time-consuming packing. John estimated that 40 percent of the items
to be packed were in the kitchen, 20 percent in the living room, 20 percent in the
bedroom, and the remaining 20 percent in miscellaneous locations. If the unit of
measure for these activities is items packed, the packing is only 20 percent
complete instead of 25 percent if rooms are the unit of measure.
The unit of measure for tracking schedule progress is related to the estimate. If
hours of labor are used as the unit of measure, the percentage of packing is even
less because more time is estimated to pack each item in the kitchen. As the project
Chapter 8 Project Time Management
345
management team estimates the duration for each activity, the amount of work to
accomplish the tasks is captured in both resources expended and a unit of measure
for tracking progress. The unit of measure is related to the type of project. On a
software development project, the unit of measure may be lines of code written.
The unit of measure that is chosen can affect the quality of the work.
Units of Measure on a Programming Project
Steve Ballmer of Microsoft recalls early clashes with IBM over the unit of
measure used to determine how much Microsoft would get paid for its work.
In IBM there’s a religion in software that says you have to count K-LOCs, and a
K-LOC is a thousand lines of code. How big a project is it? Oh, it’s sort of a 10 KLOC
project. This is a 20 K-LOCer. And this is 50 K-LOCs. And IBM wanted to sort
of make it the religion about how we got paid. How much money we made off
OS/2, how much they did. How many K-LOCs did you do? And we kept trying to
convince them—hey, if we have—a developer’s got a good idea and he can get
something done in 4 K-LOCs instead of 20 K-LOCs, should we make less money?
Because he’s made something smaller and faster, less KLOC. K-LOCs, K-LOCs,
that’s the methodology. Ugh anyway, that always makes my back just crinkle
up at the thought of the whole thing.Robert X. Cringely, Triumph of the Nerds,
June 1996, http://www.pbs.org/nerds/part2.html (accessed July 27, 2009).
In this case, IBM’s insistence on using thousands of lines of code as the unit of
measure did not reward Microsoft for writing smaller code that would run
faster. Microsoft and IBM cancelled their joint project for writing an operating
system named OS/2. Microsoft wrote Windows, and IBM’s OS/2 operating
system was not able to compete with it successfully.
On a construction project, a unit of measure may be yards of concrete poured, and
on a training project, the unit of measure may be the class curriculums developed
or the students taught.
Managing Schedules Using Milestones
Milestones provide the opportunity for project management to focus on completing
activities that will have the greatest impact on the schedule. On complex projects,
focusing on the milestones is useful for communicating important dates to the
Chapter 8 Project Time Management
8.4 Managing the Schedule 346
entire project team. Project team members can then adjust their efforts to complete
the activities connected to the milestone events.
Many project leaders believe that time lost on early activities can be made up
toward the end of the project. Hard decisions about paying overtime and working
weekends are often delayed until the end of the project when the pressure to
complete the project on time becomes much stronger. Project managers who focus
on milestone events create a sense of urgency to meet the milestone deadlines and
spread the urgency to complete the project over the life of the project. Projects that
meet milestone dates are more likely to meet project completion dates.
Informing Stakeholders
A schedule update is distributed regularly to provide project stakeholders with an
assessment of the progress of the project against the master schedule. This updated
schedule is called the current schedule34
. The current schedule provides new start
and end dates for all activities and the project. Calculations based on the current
schedule may result in a new critical path and subsequent changes in the project
execution plan.
The project team develops an understanding of the project productivity by
comparing the current schedule to the original schedule. If the schedule is behind
original estimates, the project team conducts an assessment of the causes of the
schedule slippage and develops a plan to address the changes to the project. The
project management team typically has several alternatives for addressing changes
to the project situation. Selecting the right alternative requires good information.
Resource Leveling
The schedule of activities is constrained by the availability of resources. If you apply
the resource calendar to each activity to be sure the people and equipment are
available on those dates, you can still miss an important constraint. If there are
several activities that use a particular person’s time on the same days, that person
could end up with too many activities scheduled for the same days and very little on
other days. If key people are overloaded, the activities to which they are assigned
might not be completed on time. Managing the schedule of activities to ensure that
enough resources are available to complete each task by distributing the work load
is called resource leveling35
. Activities to which that person is assigned and that
have free float can be delayed to reduce work overload of key people.
34. An updated schedule that show
the present status of the
project.
35. Distributing work load to
reduce uneven concentrations
of work.
Chapter 8 Project Time Management
8.4 Managing the Schedule 347
Accelerating the Schedule
The project manager must know how to accelerate a schedule to compensate for
unanticipated events that delay critical activities or to accommodate changes in the
project completion date. Compressing or crashing the schedule are terms used to
describe the various techniques used to shorten the project schedule. Project
managers utilize several techniques to keep projects on schedule.
Contingency Resources
One method of accelerating the schedule is to add activities to the critical path that
are empty or that are optional. If the project is behind schedule, the time can be
made up by dropping these activities. This extra time that is built into the schedule
is called contingency time36
, buffer, or reserve time.
Reassigning Resources
Activities that are not on the critical path that have free float can be delayed
without delaying the end date of the project if they start by the late start date.
Project managers can divert some resources from activities with free float to
activities on the critical path without delaying the completion of the project.
Changing Scope
The unit cost of work to be performed on a project is calculated at the beginning of
the project based on the execution strategy of the project to meet the project
completion date. If the project completion date is moved up, then the unit cost of
work will likely increase. Conversely, a project team may be able to save money by
extending the project end date. With more time, the project team may be able to
schedule activities in such a way to reduce their costs. For example, an activity
requiring overtime to be paid can now pay the labor at normal rates, saving the
overtime premium. Changing elements of the master schedule means a change in
scope. Scope changes often affect costs and require agreement by the parties who
signed the original scope documents.
Additional Resources
Another option is to allocate funds that can be used to add resources if necessary.
Available resources can be increased by adding overtime to existing resource
calendars or by hiring additional contract workers or renting additional equipment.
36. Additional time added to the
schedule that can be used if a
scheduled activity exceeds its
estimated duration.
Chapter 8 Project Time Management
8.4 Managing the Schedule 348
Adding Resources to the Dreamliner Project
When Boeing sales of the new 878 Dreamliner Airplane exceeded expectations,
contractors who were building the plane were asked to increase production
while maintaining all quality and safety requirements. All contractors involved
in the plane production were affected by this change.
One project team was responsible for developing and delivering training to the
new employees who would be building the fuselage of the Dreamliner. Training
for new employees had to be complete three months early and the project team
developed an execution strategy to meet the new deadlines. The project had a
month of float, so the project accelerated the schedule by two months. The
team authorized overtime from forty to fifty hours a week for team members
working activities on the critical path. The project team leased additional space
and hired contractors to perform selected work packages on the critical path
and delayed the production of library quality documents until after the critical
dates on the project. Authorizing overtime and hiring contractors added a 15
percent cost to the project. Overtime and the procurement of additional
contract help was authorized only for work packages on the critical path
because work not on the critical path would not accelerate the schedule.
A concrete contractor on a construction project may be scheduled to lay one
thousand yards of a building foundation by pouring one hundred yards a day
for ten days. Foundations are on the critical path, and because of rain, the
project is three days behind schedule. The project manager asked the concrete
contractor to bring in a second crew and pour two hundred yards a day, and the
work is complete in five days.
Changing Quality
Another option for accelerating the schedule is the changing of the quality
specifications of the product. This is usually done as a scope change.
Chapter 8 Project Time Management
8.4 Managing the Schedule 349
Making Up Time by Reducing Quality
At a midwestern university, a new building was being built, but it was behind
schedule. To speed up the installation of the heating and cooling equipment, it
was decided to make the zones of control larger, which meant that each floor
would have fewer points where temperature was sensed and controlled and
fewer air flow control boxes. The contract did not specify the zone size or how
many control points were required on each floor of the building, so this change
did not require a change in scope. As a result, when the sun is coming in on the
south side of the building, those rooms get as much heat or cooling as the
rooms on the north side, so they are often too hot. If the single temperature
controller on each floor is set to a lower temperature, the rooms on the north
side are too cold. The client for the building did not realize this change had
been made until they were in the building for several months and the project
was completed.
KEY TAKEAWAYS
• Progress can be measured by determining the percentage of resources
expended, completion of activities by scheduled dates, milestones
achieved, or fraction of activities accomplished. Standards used to
measure progress, particularly when partial payment to contractors is
concerned, should be specified in contract documents.
• Resource leveling is reallocating people and equipment to remove
periods of overuse or underuse.
• Unplanned delays and costs can be anticipated by including contingency
time and budget amounts where needed to keep the schedule on time.
Resource allocation and resource calendars should be examined to
determine if a resource is overcommitted. Free float can be used to delay
noncritical activities that use the same resource to allocate its time
more evenly. If it is necessary to accelerate the schedule, activities that
are not on the critical path can be delayed using their free float and
their resources can be moved to activities on the critical path to
complete them sooner. Contingency resources can be committed to
speeding up the activities. If necessary, the scope can be changed to
bring in additional resources or lower the quality.
Chapter 8 Project Time Management
8.4 Managing the Schedule 350
EXERCISES
1. Accelerating the project schedule is also known as ________ the project.
2. Extra amounts of time and money that are built into the schedule to
buffer against delays and extra costs are called ___________ time or
funds.
3. What might be a drawback to a reporting method that stated project
progress as a fraction of activities completed?
4. How does a manager accelerate a project by using free float?
Progress Reports
From the client’s point of view, describe what you think would be the
advantages of each type of progress measurement.
Chapter 8 Project Time Management
8.4 Managing the Schedule 351
8.5 Project Scheduling Software
LEARNING OBJECTIVES
1. Describe the relationship between the choice of software and project
complexity.
2. Identify the features that should be considered when selecting software
for project management.
Low-complexity projects can be managed with lists of activities on paper or by
using an outline in word processing or spreadsheet software. This software is
inadequate for tracking complex projects. Fortunately, there are several dedicated
software programs that keep track of the complex relationships between activities
and resources.
Appropriate to Project Complexity
Simple projects can be tracked using general purpose word processing and
spreadsheet software like those available in Microsoft Office or OpenOffice.
Medium-complexity projects benefit from dedicated project management software
such as Microsoft Project and OpenProject. Complex projects require software that
can track the interactions of thousands of tasks and produce sophisticated reports
such as Oracle’s P6.
Features
There are dozens of computer software programs available with a wide range of
prices. Some open source software programs are free, but others cost up to a
thousand dollars. There are several considerations for selecting a project
management software besides price.
Currently Used Software
Use software that is already in use and with which most team members are already
familiar. If software that is used by most team members is appropriate to the
complexity of your project, it is the default choice. It is also valuable to know what
software is used by key vendors or project partners so files can be exchanged
electronically in the same format.
Chapter 8 Project Time Management
352
Basic Features
Any project management software that is selected must have the ability to track
and display basic features such as the following:
• Durations
• Relationships
• Milestones
• Start and end dates
• Resource calendars
• Graphic displays using Gantt and network charts
Collaboration
Team members should be able to view the project schedule. Some software products
require the use of expensive proprietary software that runs on the company’s
server and that will allow several different team members to use the same schedule
and restricts the use of the software to team members who have access to the
company’s computer system. Other software products use a server on the Internet
that is open to team members and vendors who have valid passwords.
Advanced Features
For more complex projects, look for advanced features, such as the following:
• Issue tracking that tracks problems, actions, and resolutions
• Project portfolio management that tracks and compares groups of
related projects
• Automatic resource leveling and alerts when a resource is
overscheduled
• Document management feature that tracks contracts, bids, scope
changes, and incidents
Chapter 8 Project Time Management
8.5 Project Scheduling Software 353
KEY TAKEAWAYS
• Medium- to high-complexity projects usually require the use of software
that is designed specifically for managing projects.
• Features to look for when choosing project management software
include (1) compatibility with existing software at the company or its
vendors, (2) basic features for managing medium-complexity projects,
(3) a method for collaboration between team members, and (4) if
needed, advanced features for managing multiple projects.
EXERCISES
1. When choosing software, the new software should be __________ with
the software currently in use and with the software used by vendors and
partners.
2. How does the complexity of the project affect the choice of software
used to manage it?
3. What is an example of an advanced feature that is available for
managing the most complex projects? Explain why this feature is
needed for complex projects.
Learning New Software
Describe the methods that work best for you when you learn a new
computer program, such as self-directed exploration, a textbook, self-paced
tutorials, or organized classes with an instructor. If you wanted to require
that all the members of your ten-person team use project management
software that was new to all of them, how would you recommend that they
learn the software?
Chapter 8 Project Time Management
8.5 Project Scheduling Software 354
8.6 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Compare the Gantt and Network charts. Describe the uses of each type of
chart.
2. Choose a project with which you are familiar (it could be a simple
project like John’s move) and describe how the project could be crashed
using each of the methods described in the text.
3. Describe what size project could be done using general purpose word
processing and spreadsheet software and how you could structure the
data in those documents to make it easier to transfer that data into a
project management software, if necessary.
Chapter 8 Project Time Management
355
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Describe a personal experience where the average amount of work
required of you was appropriate but the scheduling of that work was so
uneven that there were periods when you could not get the work done
on time and other periods when you did not have enough to do. Describe
how you would have used resource leveling and free float to distribute
your workload if you had been the manager. Consider the situations and
solutions offered by classmates and suggest other ways they could have
distributed their workloads more evenly.
2. Describe your experience working with a spreadsheet to manage data
such as expenses or activities. How would the ability to treat them like
data by sorting and filtering help you to prepare reports?
Chapter 8 Project Time Management
8.6 Exercises 356
8.7 Software and Technology Exercises
LEARNING OBJECTIVES
1. Use dedicated project management software to manage changes to the
work breakdown structure (WBS).
2. Use the outline and subtotal features in a spreadsheet to create a lowcomplexity
WBS.
3. Use the outline feature in a word processor to create a low-complexity
WBS.
Using Dedicated Project Management Software
General purpose software such as word processing or spreadsheet programs are not
capable of managing changes in relationships between activities or determining the
critical path. They might suffice for the simplest projects, but more sophisticated
interactive programs are needed for determining the effects of changes to
interconnected activities. Small projects performed by groups with limited budgets
can use open-source software such as OpenProj.
To complete this exercise, you must have permission to download and install
software on your computer or use a computer that has OpenProj installed on it.
Install OpenProj
Complete the exercise by following these instructions:
1. Open a web browser and go to http://openproj.org. The program may
be downloaded from this site, as shown in Figure 8.18 "Single User and
Collaborative Versions".
Chapter 8 Project Time Management
357
Figure 8.18 Single User and Collaborative Versions
Source: Courtesy of Serena Software.
OpenProj is an open-source project management software that
resembles Microsoft Project.
2. Click the Download now button. You must have administrative
privileges to install software on the computer you are using.
3. Click the arrow next to the Save button, and then save this program to
your computer in a location where you can find it again.
4. Open Windows explorer or your file finder program, locate the file you
downloaded, and then double-click on it. Run the installation program
and follow the directions on the screen.
Figure 8.19 Single User and Collaborative Versions
Source: Courtesy of Serena Software.
5. Open Windows explorer or your file finder program, locate the file you
downloaded, and then double-click on it. Run the installation program
and follow the directions on the screen.
6. After OpenProj is installed, start the program. Choose to create a new
project. In the New Project dialog box, in the Project Name box, type
Ch08StudentName replacing StudentName with your name without
spaces.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 358
7. In the Manager box, enter your name. The current date will display in
the Start Date box by default. Your date will differ from the example
shown in Figure 8.20 "Identify the Project and Its Manager".
Figure 8.20 Identify the Project and Its Manager
Source: Courtesy of Serena Software.
8. Capture this screen. Paste it into a blank word processing document
named Ch08OpenProjStudentName and save the file using the Word 2003
.doc file format.
9. In OpenProj, click OK. Leave this program running for use in the next
section.
Import WBS from Excel
1. Use Windows Explorer to navigate to the location where the
supplemental files for this chapter are stored. Download the Excel
spreadsheet Ch08JohnsMove.xls and then open it in Excel.
2. Select cells B3 through C36, as shown in Figure 8.21 "List of Activities
and Their Durations Selected in a Spreadsheet".
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 359
Figure 8.21 List of Activities and Their Durations Selected in a Spreadsheet
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. Copy this range of cells to the clipboard. (Use CTRL+C in Windows.)
4. Switch to the OpenProj window. In row 1, below Name, click the empty
box. Paste the content. (Use CTRL+V in Windows.) The activities and
their durations are placed in the project window, as shown in Figure
8.22 "List of Activities and Their Durations Pasted into OpenProj".
Figure 8.22 List of Activities and Their Durations Pasted into OpenProj
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 360
Source: Courtesy of Serena Software.
5. Capture this screen and paste it into Ch08OpenProjStudentName.doc.
6. In OpenProj, move the pointer to the vertical line to the right of the
Start column heading. Drag this line to the left to minimize the width
of the Start column. Repeat this process to minimize the width of the
End column to minimize both columns, as shown in Figure 8.23
"Reduce Size of Start and End Columns".
Figure 8.23 Reduce Size of Start and End Columns
Source: Courtesy of Serena Software.
7. In the first column, click the cell with a 2 in it. Press and hold the Shift
key. In the first column, click the cell with a 5 to select rows 2 through
5.
8. On the toolbar, click the Indent button. The four selected activities are
indented as subordinate activities, and the activity in the row above
becomes the group name. A black group symbol spans the group in the
chart at the right, as shown in Figure 8.24 "Group Defined".
Figure 8.24 Group Defined
Source: Courtesy of Serena Software.
9. In the Predecessor column, in rows 3–5, type 2, 3, and 2.
The Gantt chart at the right adjusts the positions of the bars
automatically and connects them with arrows to indicate their finishChapter
8 Project Time Management
8.7 Software and Technology Exercises 361
start relationship, as shown in Figure 8.25 "List of Activities and Their
Durations Selected in a Spreadsheet". Notice that Saturdays and
Sundays are gray. They are not included as workdays. This will be
addressed in a later step.
Figure 8.25 List of Activities and Their Durations Selected in a Spreadsheet
Source: Courtesy of Serena Software.
10. Repeat this process to indent the activities under the Prepacking,
Packing, Moving, Unpacking, and Project Closeout headings.
11. Indent activities 16–19 another level to make them subactivities under
Pack Apartment.
12. Fill in the remaining predecessors. Refer to the Predecessors column
on the John’s Move worksheet or Figure 8.25 "List of Activities and
Their Durations Selected in a Spreadsheet" . Notice where two
predecessors are indicated, they are separated by a semicolon. Notice
that activities that span the weekend days are extended by two days, as
shown in Figure 8.26 "Bar Chart Showing Durations and Relationships".
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 362
Figure 8.26 Bar Chart Showing Durations and Relationships
Source: Courtesy of Serena Software.
13. Capture this screen and paste it into Ch08OpenProjStudentName.doc.
14. In OpenProj, on the menu bar, click File and then click Save. Navigate to
a folder where you save your files for this class and save the project
file. Notice the project file name extension is .pod. Leave the project
open.
15. Review your work in OpenProj and use the following rubric to
determine its adequacy:
Element Best Adequate Poor
File name Ch08StudentName.pod Ch08StudentName.pod
Used a
different
name
Use
dedicated
project
management
Activities imported
from Excel; correct
groups; correct
Same as Best
Mistakes
with
multiple
predecessors;
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 363
Element Best Adequate Poor
software to
manage
changes to
the WBS
predecessors; dates
will differ from figures
incorrect
groupings
16. Review your work in Ch08OpenProjStudentName.doc and use the
following rubric to determine its adequacy:
Element Best Adequate Poor
File name Ch08OpenProjStudentName.doc
Same
name
saved as
.docx file
Used a
different
name
Use
dedicated
project
management
software to
manage
changes to
the WBS
Three screen captures that
show the development of the
WBS in OpenProj
Same as
Best
Missing
screens
or lack
of
student
name in
first
screen
17. Save the files and submit them as directed by the instructor.
Using the Subtotal and Outline Features in Excel 2007 for a LowComplexity
Work Breakdown Structure
Some advanced spreadsheet programs such as Microsoft Excel can sort tables of
text and data. If the text is used as category labels, the sorting feature can be used
to bring all the same type of expenses together, after which they can be subtotaled
by category. The individual rows in each category can be hidden, and the category
text and a subtotal for each column that contains numeric data such as durations or
costs are displayed. This feature may be used to manage the costs or durations
associated with each item in a work breakdown structure for a low-complexity
project.
Create a WBS using the subtotal and outline features of Microsoft Excel 2007:
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 364
1. Navigate to the folder where the student files for this chapter are
located and then open Ch08JohnsMove.xls. Do not save the file—it will
not be submitted.
2. Observe that a group name has been given to each row of the WBS in
column E.
3. Click cell E1, and then type your name.
4. On the Data tab, in the Outline group, click Subtotal. The Subtotal dialog
box displays.
5. Under At each change in click the arrow button. The program shows a
list of column headings, as shown in Figure 8.27 "Subtotal Dialog Box".
Figure 8.27 Subtotal Dialog Box
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. On the list of column headings, click Group. A subtotal is calculated
each time the label in this column changes.
7. In the Subtotal dialog box, under Use function, click the arrow button
and then click Sum.
8. In the Subtotal dialog box, under Add subtotal to, next to Duration, click
the check box. Click to remove any other check boxes under Add
subtotal to if necessary. The durations will be summed for each group.
Refer to Figure 8.28 "Subtotal Dialog Box Set to Sum the Durations for
Each Type of Group".
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 365
Figure 8.28 Subtotal Dialog Box Set to Sum the Durations for Each Type of Group
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
9. Capture this screen. Open a blank word processing document and save
it as Ch08WBSExcel2007StudentName.doc using the Word 2003 file format.
On the first line, type your name and the current date. Below the date,
paste the screen capture. Leave the file open.
10. In Ch08JohnsMove.xls, in the Subtotal dialog box, click OK. Subtotals are
inserted below each type of group label, as shown in Figure 8.29
"Subtotal Dialog Box Set to Sum the Durations for Each Type of Group".
Figure 8.29 Subtotal Dialog Box Set to Sum the Durations for Each Type of Group
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
11. Capture this screen and then paste it into
Ch08WBSExcel2007StudentName.doc.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 366
12. In Ch08JohnsMove.xls, at the upper left corner of the worksheet, click
the number 2. The detail of each type of group is hidden and the
subtotals are displayed, as shown in Figure 8.30 "WBS Subtotaled and
Collapsed".
Figure 8.30 WBS Subtotaled and Collapsed
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
13. Capture this screen and then paste it into
Ch08WBSExcel2007StudentName.doc.
14. At the upper left corner of the worksheet, click 3. The outline is
expanded.
15. On the Data tab, in the Outline group, click Subtotal. In the Subtotal
dialog box, click the Remove All button. The subtotals and outline are
removed.
16. Close the spreadsheet. Do not save the changes.
17. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch08WBSExcel2007StudentName.doc
Same as
Best
Chapter
number
or
student
name
missing
Use the
outline and
subtotal
features in
a
spreadsheet
to create a
Name and date in first row; three
screen captures that show the use of
subtotal and outline
Same as
Best
Name
not in
first
line;
name
not
shown
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 367
Element Best Adequate Poor
low-
complexity
work
breakdown
structure
in
screen
captures
18. Save the file and submit it as directed by the instructor.
Using the Outline Feature in Word 2007 for a Low-Complexity
Work Breakdown Structure
Advanced word processing software includes an outlining feature that allows the
user to work in an outline format with collapsible headings. This feature may be
used to define a work breakdown structure in a low-complexity project.
Create a WBS using an outline in Microsoft Word 2007:
1. Open MS Word 2007 and open a blank document. Save the file as
Ch08WBSStudentName.docx using the Word 2007 document format that
uses the .docx file extensions.
2. On the Home tab, in the Styles group, scroll to display the Title option,
and then click Title.
3. Type John’s Move and then press Enter. The text is formatted using the
title style as shown in Figure 8.31 "Title Style".
Figure 8.31 Title Style
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. On the second line, type your name and then press Enter.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 368
5. On the third line, type the date and then press Enter. Notice that the
title style does not apply to the following lines. The program’s default
style is called the normal style.
6. On the Home tab, in the Styles group, scroll and click Heading 1. Type
Plan Move and then press Enter. The Heading 1 style is applied.
7. On the Home tab, in the Styles group, click Heading 2. Type Contact Dion
and Carlita and press Enter. Repeat this process to enter the following
items formatted as Heading 2. Refer to Figure 8.32 "Title, Body Text,
Heading 1, and Heading 2".
◦ Host Planning Lunch
◦ Develop and Distribute Schedule
◦ Make Hotel Arrangement in Atlanta
◦ Prepacking
Figure 8.32 Title, Body Text, Heading 1, and Heading 2
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
8. Open a new blank word processing document. On the first line, type
your name and the date. Save the new document as
Ch08OutlineWord2007StudentName.doc using the Word 2003 file format.
9. Switch to Ch08WBSStudentName.docx. Capture the screen that shows the
outline at this point in the development of the exercise. Paste the
screen into Ch08OutlineWord2007StudentName.doc. Save the file but leave
it open.
10. In Ch08WBSStudentName.docx, at the end of the line that begins with
Contact Dion and Carlita, click to place the insertion point and then press
Enter.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 369
11. Type Phone numbers are: Dion 555-0125, Carlita 555-0234. Observe that the
additional text is formatted in normal style, similar to the name and
date, as shown in Figure 8.33 "Screen Capture and Phone Numbers
Added".
Figure 8.33 Screen Capture and Phone Numbers Added
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
12. Select the line that begins with Pre-packing. On the Home tab, in the
Styles group, click Heading 1. The Heading 1 style is applied.
13. Use this process to fill in the remaining items in the WBS, as shown in
Figure 8.34 "WBS with Three Levels", using heading styles 1, 2, and 3.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 370
Figure 8.34 WBS with Three Levels
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
14. On the View tab, in the Document Views group, click the Outline
button. Change the zoom, if necessary, to display all the document
text, as shown in Figure 8.35 "WBS in Outline View". Each heading is
also formatted with a corresponding outline level of the same number.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 371
Figure 8.35 WBS in Outline View
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
15. Capture this screen and paste it into
Ch08OutlineWord2007StudentName.doc.
16. In Ch08WBSStudentName.docx, on the Outlining tab, in the Outline Tools
group, click the Show Level button, and then click Level 2. Text that is
formatted with Headings 1 and 2 are displayed while the title, normal
text, and lower-level headings are not. Plus signs indicate the presence
of hidden text, as shown in Figure 8.36 "Display of Levels 1 and 2".
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 372
Figure 8.36 Display of Levels 1 and 2
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
17. Capture this screen and paste it into
Ch08OutlineWord2007StudentName.doc. Save
Ch08OutlineWord2007StudentName.doc.
18. In Ch08WBSStudentName.docx, on the Outlining tab, in the Close group,
click the Close Outline View button. Save the document.
19. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch08OutlineWord2007StudentName.doc
Same as
Best but
in .docx
format
Chapter
number or
student
name
missing
Use the
outline
feature in
a word
processor
to create a
lowName
and date on first line; three
screen captures that show the
development and use of the WBS in
Word 2007’s outline form using Heading
styles 1, 2, and 3
Same as
Best
Missing
information
or screens
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 373
Element Best Adequate Poor
complexity
WBS
File name Ch08WBSStudentName.docx
Same as
Best
Chapter
number or
student
name
missing
Use the
outline
feature in
a word
processor
to create a
low-
complexity
WBS
Title style applied to the first line;
normal style used for name, date, and
phone numbers; heading styles 1, 2, and
3 used as directed; can be collapsed and
expanded using the Outline view
Same as
Best
Incorrect
styles
applied to
some lines
20. Save the files and submit them as directed by the instructor.
Chapter 8 Project Time Management
8.7 Software and Technology Exercises 374
Chapter 9
Estimating and Managing Costs
An important part of a project manager’s job is managing money. All types of
organizations must manage their money well in order to fulfill their mission,
including not-for-profit and government organizations. The tools and methods used
to manage money on a project vary depending on the phase and complexity of the
project. This chapter describes the methods used to estimate the cost of a project,
create a budget, and manage the cost of activities while the project is being
executed.
375
9.1 Estimating Costs
LEARNING OBJECTIVES
1. Describe methods of estimating costs.
2. Identify the effects of project phase and complexity on the choice of
estimating method.
3. Describe the method of combining cost estimates with a schedule to
create a budget.
Estimating Costs to Compare and Select Projects
During the conceptual phase when project selection occurs, economic factors are an
important consideration when choosing between competing projects. To compare
the simple paybacks or internal rates of return between projects, an estimate of the
cost of each project is made. The estimates must be accurate enough so that the
comparisons are meaningful, but the amount of time and resources used to make
the estimates should be appropriate to the size and complexity of the project. The
methods used to estimate the cost of the project during the selection phase are
generally faster and consume fewer resources than those used to create detailed
estimates in later phases. They rely more on the expert judgment1
of experienced
managers who can make accurate estimates with less detailed information.
Estimates in the earliest stages of project selection are usually made using estimates
based from previous projects that can be adjusted—scaled2
—to match the size and
complexity of the current project or by applying standardized formulas.
Analogous Estimate
An estimate that is based on other project estimates is an analogous estimate3
. If a
similar project cost a certain amount, then it is reasonable to assume that the
current project will cost about the same. Few projects are exactly the same size and
complexity, so the estimate must be adjusted upward or downward to account for
the difference. The selection of projects that are similar and the amount of
adjustment needed is up to the judgment of the person who makes the estimate.
Normally, this judgment is based on many years of experience estimating projects,
including incorrect estimates that were learning experiences for the expert.
1. Decisions based on incomplete
information made by people
who have extensive personal
experience.
2. Multiplied by an adjustment
factor to make the new
estimate proportional to the
original.
3. Budget estimate based on a
similar project.
Chapter 9 Estimating and Managing Costs
376
Analogous Estimate for John’s Move
In the John’s move example, John asked a friend for advice about the cost of his
move. His friend replied, “I moved from an apartment a little smaller than
yours last year and the distance was about the same. I did it with a fourteenfoot
truck. It cost about $575 for the truck rental, pads, hand truck, rope, boxes,
and gas.” Because of the similarity of the projects, John’s initial estimate of the
cost of the move was less than $700 and he decided that the cost would be
affordable and the project could go forward.
Less experienced managers who are required to make analogous estimates can look
through the documentation that is available from previous projects. If those
projects were evaluated using the Darnall-Preston Complexity Index (DPCI), the
manager can quickly identify projects that have similar profiles to the project
under consideration even if those projects were managed by other people.
Comparing the original estimates with the final project costs on several previous
projects with the same DPCI ratings gives a less experienced manager the
perspective that it would take many years to acquire by trial and error. It also
provides references the manager can use to justify the estimate.
Parametric Estimate
If the project consists of activities that are common to many other projects, average
costs are available per unit. For example, if you ask a construction company how
much it would cost to build a standard office building, they will ask for the size of
the building in square feet and the city in which the building will be built. From
these two factors—size and location—the company’s estimator can predict the cost
of the building. Factors like size and location are parameters4
—measurable factors
that can be used in an equation to calculate a result. The estimator knows the
average cost per square foot of a typical office building and adjustments for local
labor costs. Other parameters such as quality of finishes are used to further refine
the estimate. Estimates that are calculated by multiplying measured parameters by
cost-per-unit values are parametric estimates5
.
4. Measurable factors that can be
used in an equation to
calculate a result.
5. Estimates that are calculated
by multiplying measured
parameters by cost-per-unit
values.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 377
Parametric Estimate for John’s Move
To estimate the size of the truck needed for John’s move, the parameter used by
a truck rental company is the number of bedrooms, as shown below.
Figure 9.1
Number of Bedrooms Used for Parametric Cost Estimate
The moving company assumes that the number of bedrooms is the important
parameter in determining how big a truck is needed for a move. For John’s move, he
has a one-bedroom apartment, so he chooses the fourteen-foot truck. Once the size
is determined, other parameters, such as distance and days, are used to estimate
the cost of the truck rental.
Estimating Costs to Initiate Projects
Once the project is selected, more accurate estimates are often needed to raise
funds and agree on contracts with vendors in the initiation phase.
Estimate During the Initiation Phase of John’s Move
John recalled that his friend also told him how tiring it was to do all the
packing, loading, and driving himself, and some items were damaged when the
load shifted inside the truck during the trip. John decides to call in favors from
two friends, Dion and Carlita, to help him pack in Chicago and to hire some of
the skilled labor like that needed to load the truck properly.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 378
Vendor Bid Analysis
If services or products will be provided by vendors, the cost of those services can be
determined by issuing a request for proposal (RFP)6
. The RFP describes the work,
service, or product to be provided by the vendor and the quality level required. The
RFP is sent to a list of vendors who are qualified7
—meet standards of reliability and
capability—to perform this type of work. They respond with a proposal for
completing the work described in the RFP, including an estimate of the cost. Some
government organizations are required to use the qualified vendor with the lowest
bid. Other organizations are not bound to take the lowest bid but are usually
required to justify their reasons for not doing so.
Using RFPs to Make Estimates on John’s Move
John wants to find out how much it would cost to hire a skilled crew to load and
secure the furniture in the truck and then have another crew from the same
company meet him in Atlanta to unload the truck and help him unpack. He is
not sure if any companies offer this option, so he decides to ask three moving
companies for bids. He also decides to ask for bids on a standard move that
includes all phases of packing, loading, transportation, and unloading as a
comparison to see if his cost-saving plan is worth the extra effort.
The project management team can review the responses by several vendors to the
RFP to determine if their estimate of the cost of that aspect of the project is close to
the estimate made during the project selection stage. If the estimates by the
vendors are much higher than expected, and if the project cannot be completed for
the cost that was used to select the project, the selection decision might have to be
reconsidered. Reconsidering the selection of the project should take into
consideration the economic ratings of the competing projects that were not chosen
and who the project champions are for the projects that would be affected.
Some vendors may suggest an alternative way to meet the objective of the RFP in a
more cost-effective manner that does not match the specifics of the RFP. Such
alternatives can reduce costs if they are acceptable.
Bottom-Up Estimating
The most accurate and time-consuming estimating method is to identify the cost of
each item in each activity of the schedule, including labor and materials. If you view
6. Requires a bidder to offer
solutions and ideas on how to
perform the scope of work and
a price for performing that
work.
7. Meets a standard of reliability
and capability.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 379
the project schedule as a hierarchy where the general descriptions of tasks are at
the top and the lower levels become more detailed, finding the price of each item at
the lowest level and then summing them to determine the cost of higher levels is
called bottom-up estimating8
.
Bottom-Up Estimate for John’s Move
After evaluating the bids by the moving companies, John decides the savings
are worth his time if he can get the packing done with the help of his friends.
He decides to prepare a detailed estimate of costs for packing materials and use
of a rental truck. He looks up the prices for packing materials and truck rental
costs on company Web sites and prepares a detailed list of items, quantities,
and costs, as shown below.
Figure 9.2
Detailed Cost Estimate
This type of estimate is typically more accurate than an analogous or parametric estimate. In this example,
the sum of packing materials and truck expenses is estimated to be $661.25.
8. Summing of estimates of each
detail of the activity and
project.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 380
The detail can be rolled up9
—subtotaled—to display less detail. This process is
made easier using computer software. On projects with low complexity, the cost
estimates can be done on spreadsheet software.
Rolling Up a Detailed Cost Estimate for John’s Move
For example, the subtotal feature could be used in Excel and collapsed to show
the subtotals for the two categories of costs, as shown below.
Figure 9.3
Sum of Detailed Costs by Type
On larger projects, software that manages schedules can also manage costs and
display costs by activity and by category.
Activity-Based Estimates
An activity can have costs from more than one vendor plus costs for labor and
materials from internal sources. Detailed estimates from all sources can be
reorganized so those costs that are associated with a particular activity can be
grouped by adding the activity code to the detailed estimate, as shown in Figure 9.4
"Detailed Costs Associated with Activities".
9. Subtotaled.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 381
Figure 9.4 Detailed Costs Associated with Activities
The detailed cost estimates can be sorted by activity and then subtotaled by activity to determine the cost for each
activity.
Establishing a Budget
Once the cost of each activity is estimated, it is possible to determine how much
money is needed for each group of tasks and for the whole project.
Cost of Tasks
The cost of each group of activities of the project can be estimated by summing the
costs of the components of each activity in the group. This process of subtotaling
costs by category or activity is called cost aggregation10
.
Budget Timeline
Because the costs are associated with activities and each activity has a start date
and a duration, it is possible to calculate how much money needs to be spent by any
10. Sum of component costs.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 382
particular date during the project. The money needed to pay for a project is usually
transferred to the project account shortly before it is needed. These transfers must
be timed so that the money is there to pay for each activity without causing a delay
in the start of the activity. If the money is transferred too far in advance, the
organization will lose the opportunity to use the money somewhere else, or they
will have to pay unnecessary interest charges if the money is borrowed. A schedule
of money transfers is created that should match the need to pay for the activities.
The process of matching the schedule of transfers with the schedule of activity
payments is called reconciliation11
. Refer to Figure 9.5 "Fund Transfers and
Expenditures" that shows the costs of ten major activities in a project. Funds are
transferred into the project account four times. Notice that during most of the
project, there were more funds available than were spent except at activity 6 when
all the available funds were spent.
Figure 9.5 Fund Transfers and Expenditures
In the project budget profile shown in Figure 9.5 "Fund Transfers and
Expenditures", there is no margin for error if the total of the first six activities
exceeds the amount of funding at that point in the project.
Contractual agreements with vendors often require partial payment of their costs
during the project. Those contracts can be managed more conveniently if the unit
11. Matching funds provided with
funds spent.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 383
of measure for partial completion is the same as that used for cost budgeting. For
example, if a contractor is pouring concrete for a large project, their contract may
call for partial payment after 25 percent of the total volume of concrete is poured as
determined by cubic yards of concrete.
KEY TAKEAWAYS
• Analogous estimating scales an estimate from a similar project to match
the current project. Parametric estimating multiplies a standard costper-unit
value by the number of units in the project. Bids from
contractors can be compared to estimate costs. Bottom-up estimating
determines the cost of each detail and aggregates them to determine
activity cost estimates.
• During the project selection and approval stage, rough estimates are
used that are usually obtained using analogous and parametric methods.
Vendor bid analysis and detailed bottom-up estimates are used in the
initiation phase to estimate project costs.
• Detailed estimates are associated with activities and aggregated during
the planning phase to create an activity-based budget. Funding transfers
are arranged to reconcile money spent to money from funding sources
in a timely manner.
EXERCISES
1. An estimate that is obtained by scaling up an estimate from a similar
project is a(n) ___________ estimate.
2. An estimate that uses standard costs per unit such as price per square
foot or price per cubic yard is a ____________ estimate.
3. Matching the transfer of funds into the project account with the money
spent is called __________________.
Estimates
Consider a project in which you have been involved that used an estimating
technique to provide numbers for the conceptual plan. Briefly describe the
type of project and identify the estimating method used.
Chapter 9 Estimating and Managing Costs
9.1 Estimating Costs 384
9.2 Managing the Budget
LEARNING OBJECTIVES
1. Describe methods to manage cash flow.
2. Describe the terms and relationships of budget factors used in earned
value analysis.
3. Calculate and interpret budget and schedule variances.
4. Calculate and interpret the schedule performance index and the cost
performance index.
5. Calculate and interpret estimates to complete the project.
6. Calculate the revised final budget.
Projects seldom go according to plan in every detail. It is necessary for the project
manager to be able to identify when costs are varying from the budget and to
manage those variations.
Managing Cash Flow
If the total amount spent on a project is equal to or less than the amount budgeted,
the project can still be in trouble if the funding for the project is not available when
it is needed. There is a natural tension between the financial people in an
organization, who do not want to pay for the use of money that is just sitting in a
checking account, and the project manager, who wants to be sure that there is
enough money available to pay for project expenses. The financial people prefer to
keep the company’s money working in other investments until the last moment
before transferring it to the project account. The contractors and vendors have
similar concerns, and they want to get paid as soon as possible so they can put the
money to work in their own organizations. The project manager would like to have
as much cash available as possible to use if activities exceed budget expectations.
Contingency Reserves
Most projects have something unexpected occur that increases costs above the
original estimates. If estimates are rarely exceeded, the estimating method should
be reviewed because the estimates are too high. It is not possible to predict which
activities cost more than expected, but it is reasonable to assume that some of them
will be. Estimating the likelihood of such events is part of risk analysis, which is
discussed in more detail in a later chapter.
Chapter 9 Estimating and Managing Costs
385
Instead of overestimating each cost, money is budgeted for dealing with unplanned
but statistically predictable cost increases. Funds allocated for this purpose are
called contingency reserves12
.Project Management Institute, Inc., A Guide to the
Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA:
Project Management Institute, Inc., 2008), 173. Because it is likely that this money
will be spent, it is part of the total budget for the project. If this fund is adequate to
meet the unplanned expenses, then the project will complete within the budget.
Management Reserves
If something occurs during the project that requires a change in the project scope,
money may be needed to deal with the situation before a change in scope can be
negotiated with the project sponsor or client. It could be an opportunity as well as a
challenge. Money can be made available to the project to be used at the discretion
of the manager to meet needs that would change the scope of the project. These
funds are called management reserves13
. Unlike contingency reserves, they are
not likely to be spent and are not part of the project’s budget baseline, but they can
be included in the total project budget.Project Management Institute, Inc., A Guide
to the Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square,
PA: Project Management Institute, Inc., 2008), 177.
Evaluating the Budget During the Project
A project manager must regularly compare the amount of money spent with the
budgeted amount and report this information to managers and stakeholders. It is
necessary to establish an understanding of how this progress will be measured and
reported.
Reporting Budget Progress on John’s Move
In the John’s move example, he estimated that the move would cost about
$1,500 and take about sixteen days. Eight days into the project, John has spent
$300. John tells his friends that the project is going well because he is halfway
through the project but has only spent a fifth of his budget. John’s friend Carlita
points out that his report is not sufficient because he did not compare the
amount spent to the budgeted amount for the activities that should be done by
the eighth day.
12. Money held to pay for
predictable but unspecified
extra costs.
13. Money that is available for
changing the scope of the
project.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 386
As John’s friend points out, a budget report must compare the amount spent with
the amount that is expected to be spent by that point in the project. Basic measures
such as percentage of activities completed, percentage of measurement units
completed, and percentage of budget spent are adequate for less complex projects,
but more sophisticated techniques are used for projects with higher complexity.
Earned Value Management
A method that is widely used for medium- and high-complexity projects is the
earned value management (EVM)14
method. EVM is a method of comparing the
budgeted and actual costs of a project periodically during the project. It combines
the scheduled activities with detailed cost estimates of each activity. It allows for
partial completion of an activity if some of the detailed costs associated with the
activity have been paid but others have not. The earned value analysis method
compares the anticipated cost of work that is scheduled to be done at a given point
in time against what has been done and how much it actually cost.
The Budgeted Cost of Work and Planned Value
The budgeted cost of work scheduled (BCWS)15
comprises the detailed cost
estimates for each activity in the project. The amount of work that should have
been done by a particular date is the planned value (PV)16
. These terms are used
interchangeably by some sources, but the planned value term is used in formulas to
refer to the sum of the budgeted cost of work up to a particular point in the project,
so we will make that distinction in the definitions in this text for clarity.
Planned Value on Day Six of John’s Move
On day six of the project, John should have taken his friends to lunch and
purchased the packing materials. The portion of the BCWS that should have
been done by that date (the planned value) is listed in Figure 9.6 "Planned
Value for Lunch and Packing Materials". This is the planned value for day six of
the project.14. Method of comparing the
budgeted and actual costs of a
project during the project.
15. All the items in the cost
estimate. See budget at
completion (BAC).
16. Sum of the items in the
budgeted cost of work
scheduled that should have
been spent by a particular day.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 387
Figure 9.6 Planned Value for Lunch and Packing Materials
Budgeted Cost of Work Performed and Earned Value
The budgeted cost of work performed (BCWP)17
is the budgeted cost of work
scheduled that has been done. If you sum the BCWP values up to that point in the
project schedule, you have the earned value (EV)18
.
Actual Cost
The amount spent on an item is often more or less than the estimated amount that
was budgeted for that item. The actual cost (AC)19
is the sum of the amounts
actually spent on the items.
17. The budgeted cost of work
scheduled that has been done.
18. Sum of budgeted expenses up
to a particular point in the
schedule.
19. Sum of money spent so far.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 388
Comparing PV, EV, and AC in John’s Move on Day Six
Dion and Carlita were both trying to lose weight and just wanted a nice salad.
Consequently, the lunch cost less than expected. John makes a stop at a store
that sells moving supplies at discount rates. They do not have all the items he
needs, but the prices are lower than those quoted by the moving company.
They have a very good price on lifting straps so he decides to buy an extra pair.
He returns with some of the items on his list, but this phase of the job is not
complete by the end of day six. John bought half of the small boxes, all of five
other items, twice as many lifting straps, and none of four other items. John is
only six days into his project, and his costs and performance are starting to
vary from the plan. Earned value analysis gives us a method for reporting that
progress. Refer to the figure below.
Figure 9.7
Planned Value, Earned Value, and Actual Cost
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 389
The original schedule called for spending $261.65 (PV) by day six. The amount
of work done was worth $162.10 (EV) according to the estimates, but the actual
cost was only $154.50 (AC).
Schedule Variance
The project manager must know if the project is on schedule and within the budget.
The difference between planned and actual progress is the variance20
. The
schedule variance (SV)21
is the difference between the earned value (EV) and the
planned value (PV). Expressed as a formula, SV = EV − PV. If less value has been
earned than was planned, the schedule variance is negative, which means the
project is behind schedule.
Schedule Variance on John’s Move
Planning for John’s move calls for spending $261.65 by day six, which is the
planned value (PV). The difference between the planned value and the earned
value is the scheduled variance (SV). The formula is SV = EV − PV. In this
example, SV = $162.10 − $261.65 = $(99.55) A negative SV indicates the project is
behind schedule.
The difference between the earned value (EV) and the actual cost (AC) is the cost
variance (CV)22
. Expressed as a formula, CV = EV − AC
Cost Variance on John’s Move
The difference between the earned value of $162.10 and the actual cost of
$154.50 is the cost variance (CV). The formula is CV = EV − AC. In this example,
CV = $162.10 − $154.50 = $7.60.
A positive CV indicates the project is under budget.
20. Difference between estimated
and actual.
21. Difference between the earned
value (EV) and the planned
value (PV).
22. Earned value minus actual cost.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 390
Variance Indexes for Schedule and Cost
The schedule variance and the cost variance provide the amount by which the
spending is behind (or ahead of) schedule and the amount by which a project is
exceeding (or less than) its budget. They do not give an idea of how these amounts
compare with the total budget.
The ratio of earned value to planned value gives an indication of how much of the
project is completed. This ratio is the schedule performance index (SPI)23
. The
formula is SPI = EV/PV. In the John’s move example, the SPI equals 0.62 (SPI =
$162.10/$261.65 = 0.62) A SPI value less than one indicates the project is behind
schedule.
The ratio of the earned value to the actual cost is the cost performance index
(CPI)24
. The formula is CPI = EV/AC.
23. Ratio of earned value (EV) to
planned value (PV).
24. Ratio of earned value (EV) to
actual cost (AC).
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 391
Cost Performance Index of John’s Move
In the John’s move example, CPI = $162.10/$154.50 = 1.05 A value greater than 1
indicates the project is under budget.
Figure 9.8
Schedule Variance and Cost Variance on Day Six of the John’s Move Project
The cost variance of positive $7.60 and the CPI value of 1.05 tell John that he is
getting more value for his money than planned for the tasks scheduled by day
six. The schedule variance (SV) of negative $99.55 and the schedule
performance index (SPI) of 0.62 tell him that he is behind schedule in adding
value to the project.
During the project, the manager can evaluate the schedule using the schedule
variance (SV) and the schedule performance index (SPI) and the budget using the
cost variance (CV) and the cost performance index (CPI).
Estimated Cost to Complete the Project
Partway through the project, the manager evaluates the accuracy of the cost
estimates for the activities that have taken place and uses that experience to
predict how much money it will take to complete the unfinished activities of the
project—the estimate to complete (ETC)25
.
25. Estimate of the amount of
money needed to complete the
unfinished part of the project.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 392
Atypical Cost Variance
To calculate the ETC, the manager must decide if the cost variance observed in the
estimates to that point are representative of the future. For example, if unusually
bad weather causes increased cost during the first part of the project, it is not likely
to have the same effect on the rest of the project. If the manager decides that the
cost variance up to this point in the project is atypical26
—not typical—then the
estimate to complete is the difference between the original budget for the entire
project—the budget at completion (BAC)27
—and the earned value (EV) up to that
point. Expressed as a formula, ETC = BAC − EV
Estimate to Complete John’s Move
In John’s move, John was able to buy most of the items at a discount house that
did not have a complete inventory and, he chose to buy an extra pair of lift
straps. He knows that the planned values for packing materials were obtained
from the price list at the moving company where he will have to buy the rest of
the items, so those two factors are not likely to be typical of the remaining
purchases. The reduced cost of lunch is unrelated to the future costs of packing
materials, truck rentals, and hotel fees. John decides that the factors that
caused the variances are atypical. He calculates that the estimate to complete
(ETC) is the budget at completion ($1,534) minus the earned value at that point
($162.10), which equals $1,371.90. Expressed as a formula, ETC = $1,534 − $162.10
= $1,371.90.
Typical Cost Variance
If the manager decides that the cost variance is caused by factors that will affect the
remaining activities, such as higher labor and material costs, then the estimate to
complete (ETC) needs to be adjusted by dividing it by the cost performance index
(CPI). For example, if labor costs on the first part of a project are estimated at
$80,000 (EV) and they actually cost $85,000 (AC), the cost variance will be 0.94.
(Recall that the cost variance = EV - AC).
To calculate the estimate to complete (ETC) assuming the cost variance on known
activities is typical of future cost, the formula is ETC = (BAC – EV)/CPI. If the budget
at completion (BAC) of the project is $800,000, the estimate to complete is ($800,000
– $80,000)/0.94 = $766,000.
26. Opposite of typical—not
typical.
27. Budget for the entire project.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 393
Estimate Final Project Cost
If the costs of the activities up to the present vary from the original estimates, it
will affect the total estimate for the project cost. The new estimate of the project
cost is the estimate at completion (EAC)28
. To calculate the EAC, the estimate to
complete (ETC) is added to the actual cost (AC) of the activities already performed.
Expressed as a formula, EAC = AC + ETC.
Estimate at Completion for John’s Move
The revised estimate at completion (EAC) for John’s move at this point in the
process is EAC = $154.50 + $1,371.90 = $1,526.40.
Refer to Figure 9.9 "Summary of Terms and Formulas for Earned Value Analysis" for
a summary of terms and formulas.
Figure 9.9 Summary of Terms and Formulas for Earned Value Analysis
28. Revised project budget based
on actual cost to date plus the
estimate to complete (ETC).
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 394
KEY TAKEAWAYS
• Extra money is allocated in a contingency fund to deal with activities
where costs exceed estimates. Funds are allocated in a management
reserves in case a significant opportunity or challenge occurs that
requires change of scope but funds are needed immediately before a
scope change can typically be negotiated.
• Schedule variance is the difference between the part of the budget that
has been done so far (EV) versus the part that was planned to be
completed by now (PV). Similarly, the cost variance is the difference
between the EV and the actual cost (AC).
• The schedule performance index (SPI) is the ratio of the earned value
and the planned value. The cost performance index (CPI) is the ratio of
the earned value (EV) to the actual cost (AC).
• The formula used to calculate the amount of money needed to complete
the project (ETC) depends on whether or not the cost variance to this
point is expected to continue (typical) or not (atypical). If the cost
variance is atypical, the ETC is simply the original total budget (BAC)
minus the earned value (EV). If they are typical of future cost variances,
the ETC is adjusted by dividing the difference between BAC and EV by
the CPI.
• The final budget is the actual cost (AC) to this point plus the estimate to
complete (ETC).
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 395
EXERCISES
1. Money that is allocated for dealing with unplanned but predictable
expenses is _________ reserve.
2. The formula used to calculate the cost performance index is
____________.
3. The formula used to calculate the estimate to complete for atypical cost
variances is _________________________.
4. The sum of the budgeted amounts for the tasks that have been
performed is the _______ _______ (two words).
5. Schedule variance is the ____ minus the _____ and cost variance is the
____ minus the _____ (use acronyms).
6. Schedule performance index is ____ / _____ and the cost performance
index is _____ / ______ (use acronyms).
7. The revised final budget is the ____ plus the _____ (use acronyms).
Estimating Earned Value
Consider a project you are familiar with in which the contractor or service
provider who was performing the work needed to be replaced before the job
was completed. Describe how the value of the contractor’s efforts up to that
point was determined and how that evaluation compared to an earned value
analysis.
Chapter 9 Estimating and Managing Costs
9.2 Managing the Budget 396
9.3 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
Chapter 9 Estimating and Managing Costs
397
SHORT ANSWER QUESTIONS
The questions in this section refer to the project budget shown below.
Figure 9.10
Example for Short Answer Questions
This project has three completed activities whose durations are indicated by the blue bars in row 2. The
budgeted cost of work scheduled for each task is shown on the bar in row 2. The budgeted cost of work
scheduled for each week is shown on row 3. Notice that the amounts in row 3 add up to the amounts
shown on the bars. Rows 4 and 5 indicate the budgeted cost of work performed and actual cost. Notice that
the second task started a week late.
1. What is the planned value (PV) at the end of week three?
2. What is the earned value (EV) at the end of week three?
3. What is the actual cost (AC) at the end of week three?
4. What is the cost variance (CV) at the end of week three?
5. What is the schedule variance (SV) at the end of week three?
6. What is the planned value (PV) at the end of week seven?
7. What is the earned value (EV) at the end of week seven?
8. What is the actual cost (AC) at the end of week seven?
9. What is the cost variance (CV) at the end of week seven?
10. What is the schedule variance (SV) at the end of week seven?
11. What is the cost performance index (CPI) at the end of week seven?
12. What is the schedule performance Index at the end of week seven?
13. If the budget at completion (BAC) for this project is $500,000, what is the
Estimate to Complete (ETC) at the end of week seven if the cost and
schedule variances experienced are typical of the remainder of the
activities?
Chapter 9 Estimating and Managing Costs
9.3 Exercises 398
14. Based on your answer to the previous question, what is the estimate at
completion (EAC) for this project?
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. A project is about a third of the way through its scheduled activities, and
an earned value management report has been prepared. The summary
indicates that it has a CPI of 0.9 and an SPI of 0.8. What do these two
values tell you about the project?
2. A project is about half done with a CV of $(4,000) due to atypical costs in
the first half of the project. Its project manager provides an ETC of
$50,000. Interpret this statement in your own words.
3. Give an example of an analogous estimate and a parametric estimate
that are different from those described in the text.
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Describe an experience of your own that involved a parametric estimate.
Describe the parameter and how it was used. Compare the estimate with
the actual cost.
2. As an inexperienced project manager, how do you develop expert
knowledge? Interview someone who would qualify as an expert in
estimating costs and ask them to describe the process they went
through. Ask them for advice on how to become an acknowledged
expert in estimating and then share what you learn with your
classmates.
Chapter 9 Estimating and Managing Costs
9.3 Exercises 399
9.4 Software and Technology Exercise
LEARNING OBJECTIVE
1. Create a spreadsheet to perform an earned value analysis.
Earned Value Analysis
In this exercise, you apply the formulas of earned value (EV) analysis to the John’s
Move project. Complete the exercise by following these instructions:
1. Navigate to the location where the student supplement files are stored
and open Ch09EV.xls in a spreadsheet program such as MS Excel. Save
the file on your computer as Ch09EVStudentName.xls. Four tasks span
four weeks. The budgeted cost of work scheduled (BCWS) is shown at
the beginning of each bar, as shown in Figure 9.11 "EV Analysis for
John’s Move".
Figure 9.11 EV Analysis for John’s Move
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
2. In cell C25, type =C4+C7+I10+L12 and then press Enter. The sum of the
budgeted amounts for each task is the budget at completion (BAC).
Chapter 9 Estimating and Managing Costs
400
3. Click cell C25 to select it. In the Number group, click the Increase
Decimal button two times, if necessary, to display two decimal places.
See Figure 9.12 "BAC Calculation".
Figure 9.12 BAC Calculation
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. Click cell E15. Type =C4+C7/2. The planned value (PV) for the first week
is the BCWS for the week. In this example, that is all the BCWS for
planning and half of the BCWS for packing. The packing task is
scheduled to take two weeks. Without further instructions, the
budgeted amount is divided equally between the two weeks.
5. Move the mouse pointer to the Enter button on the Formula bar. See
Figure 9.13 "PV Calculation for Week 1". Entering formulas by using
this button keeps the selection on the current cell.
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 401
Figure 9.13 PV Calculation for Week 1
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. On the Formula bar, click the Enter button. The PV is calculated and
displayed in cell E15.
7. Capture this screen and paste it into a blank word processing
document. Save the word processing document as Ch9EVStudentName
using the Word 2003 .doc file format.
8. In the spreadsheet, click cell E16. Type =D5+D8 and then, on the
Formula bar, click the Enter button. The EV is the sum of the budgeted
work that has been performed up to that point in the project. See
Figure 9.14 "EV Calculation for Week 1".
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 402
Figure 9.14 EV Calculation for Week 1
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
9. Click cell E17. Type =E5+E8 and then, on the Formula bar, click the Enter
button. The actual cost (AC) for week 1 is the sum of the AC for
planning and packing that occurred in week 1.
10. Click cell E18. Type =E16−E17 and then, on the Formula bar, click the
Enter button. The cost variance (CV) for week 1 is the EV minus the AC.
11. Click cell E19. Type =E16−E15 and then, on the Formula bar, click the
Enter button. The schedule variance (SV) for week 1 is EV minus the
PV. See Figure 9.15 "AC, CV, and SV Calculations for Week 1".
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 403
Figure 9.15 AC, CV, and SV Calculations for Week 1
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
12. Refer to the definitions of CPI and SPI. Enter formulas in cells E20 and
E21 to calculate the CPI and SPI. Recall that formulas begin with an
equal sign and use cell names instead of the numbers in those cells. Use
the Decrease Decimal or Increase Decimal buttons as needed to display
two decimal places. See Figure 9.16 "CPI and SPI Calculations for Week
1".
Figure 9.16 CPI and SPI Calculations for Week 1
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 404
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
13. Refer to the definitions of estimate to complete (ETC) for typical and
atypical variances in AC. Enter formulas in cells E22 and E23 to
calculate the ETC for typical and atypical CV. Recall that the BAC value
is in cell C25. Compare your results to Figure 9.17 "ETC at the End of
Week 1 for Typical and Atypical AC".
Figure 9.17 ETC at the End of Week 1 for Typical and Atypical AC
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
14. Click cell H15. Type =E15+C7/2 and then, on the Formula bar, click the
Enter button. The PV at the end of week 2 is the sum of PV from the
previous week plus the PV for the current week. In this case, the PV for
week 2 is the second half of the packing task.
15. Click cell H16. Type =E16+G8 and then, on the Formula bar, click the
Enter button. The EV at the end of week 2 is the sum of EV from the
previous week plus the budgeted cost of work performed (BCWP) for
the current week.
16. Click cell H17. Type =E17+H8 and then, on the Formula bar, click the
Enter button. The AC at the end of week 2 is the sum of AC from the
previous week plus the AC for the current week.
17. Refer to the definitions for CV, SV, CPI, SPI, and ETC and write
formulas in cells H18 through H23 to calculate those values at the end
of week 2. See Figure 9.18 "Calculations for Week 2".
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 405
Figure 9.18 Calculations for Week 2
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
18. Capture the screen and paste it into Ch09EVStudentName.doc.
19. In the spreadsheet, apply what you have learned to perform similar
calculations for weeks 3 and 4. See Figure 9.19 "Calculations for Weeks
3 and 4".
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 406
Figure 9.19 Calculations for Weeks 3 and 4
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
20. Click cell E5. Type 30 and then, on the Formula bar, click the Enter
button. Notice that all the calculations that depend on the AC in this
cell are recalculated. See Figure 9.20 "Values That Depend on the AC in
Cell E5 Change".
Figure 9.20 Values That Depend on the AC in Cell E5 Change
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
21. Capture the screen and paste it into Ch09EVStudentName.doc.
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 407
Prepare the worksheet for printing:
1. In the spreadsheet, on the menu bar, click Page Layout. In the Page
Setup group, at the lower right corner, click the Expand button.
2. In the Page Setup dialog box, on the Page tab, click the Landscape
button and the Fit To button. See Figure 9.21 "Printout Oriented
Horizontally and Forced to Fit on One Page".
Figure 9.21 Printout Oriented Horizontally and Forced to Fit on One Page
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. In the Page Setup dialog box, on the Header/Footer tab, click the In the
Header dialog box, click the Left section, and then type your name.
Click the Center section and then type John’s Move. Click the Right
section box and type For InstructorName, substituting your instructor’s
name. See Figure 9.22 "Your Name and Your Instructor’s Name in the
Header".
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 408
Figure 9.22 Your Name and Your Instructor’s Name in the Header
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. Click OK to close both dialog boxes. Close the print preview, if
necessary.
5. Review your work in Ch09EVStudentName.xls and use the following
rubric to determine its adequacy:
Element Best Adequate Poor
File name Ch09EVStudentName.xls Ch09EVStudentName.xlsx
Did not
include
student
name
Create a
spreadsheet
to perform
an EV
analysis
Formulas that produce
the values shown in
Figure 9.16 "CPI and SPI
Calculations for Week 1"
and Figure 9.17 "ETC at
the End of Week 1 for
Typical and Atypical
AC", depending on the
value in cell E5; names
in header for printout
Same as Best
Could do
formulas
for weeks
1 and 2
but could
not apply
knowledge
to weeks 3
and 4;
errors in
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 409
Element Best Adequate Poor
formulas;
missing
header
6. Review your work in Ch09EVStudentName.doc and use the following
rubric to determine its adequacy:
Element Best Adequate Poor
File name Ch09EVStudentName.doc
Same
name
saved as
.docx file
Used a
different
name
Use
dedicated
project
management
software to
manage
changes to
the WBS
Three screen captures
that show the
development of the
spreadsheet
Same as
Best
Missing
screens
7. Save the file and submit it as directed by the instructor.
Chapter 9 Estimating and Managing Costs
9.4 Software and Technology Exercise 410
Chapter 10
Managing Project Quality
Project managers have two different interests in quality. Some projects are
performed to provide a significant improvement in the quality of an existing
process, and the project activities themselves must reflect high-quality standards. A
basic knowledge of the statistics and procedures used in quality control will help
the project manager understand the objectives of step projects and perform
projects in companies that are committed to high-quality standards.
411
10.1 Quality and Statistics
LEARNING OBJECTIVES
1. Define quality.
2. Define and explain statistics terms used in quality control.
3. Estimate the likelihood of samples falling within one, two, or three
standard deviations of the mean given a normal distribution caused by
random factors.
Definitions of Quality and Grade
Quality1
is a relative term, which means that something is of high or low quality
compared to what it is required to be. According to the International Organization
for Standardization (ISO), quality is “the degree to which a set of inherent
characteristics fulfill requirements.”International Organization for Standardization,
Quality Management Systems—Fundamentals and Vocabulary (Geneva: ISO Press, 2005),
in Project Management Institute, Inc., A Guide to the Project Management Body of
Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA: Project Management
Institute, Inc., 2008), 190. The requirements of a product or process can be
categorized or given a grade2
. The quality is determined by how well something
meets the requirements of its grade. Consider the following examples.
Quality of Gasoline Grades
Petroleum refiners provide gasoline in several different grades based on the
octane rating because higher octane ratings are suitable for higher
compression engines. Gasoline must not be contaminated with dirt or water,
and the actual performance of the fuel must be close to its octane rating. A
shipment of low-grade gasoline graded as 87 octane that is free of water or
other contaminants would be of high quality, while a shipment of high grade 93
octane gas that is contaminated with dirt would be of low quality.
1. Degree to which a set of
inherent characteristics fulfill
requirements.
2. Category of product or service
requirements.
Chapter 10 Managing Project Quality
412
Quality of Furniture Packing in John’s Move
John has antique furniture that is in excellent condition that was left to him by
his grandmother. The pieces are important to John for sentimental reasons and
they are also valuable. John decides to hire movers (high-grade professionals)
to load his furniture into the truck using appropriate padding and restraints to
prevent dents and scratches during the long trip to Atlanta and then to unload
the truck in Atlanta. John’s standard for high quality is that no observable
damage occurs to his large pieces of furniture, especially the antiques. If the
furniture arrives in his new apartment without a single dent, scratch, or other
damage, the activity will be of high quality.
John’s standard for packing his kitchen is lower. His dishes are old and cheap,
so he decides to trust his inexperienced friends (low-grade amateurs) to help
him pack his kitchen. If a few of the dishes or glassware are chipped or broken
in the process, the savings in labor cost will more than make up for the loss,
and the dishes can be easily replaced. If John has a few chipped dishes and a
broken glass or two by the time he is unpacked in Atlanta, he will consider the
kitchen packing to be of high quality.
For most people, the term quality also implies good value—getting your money’s
worth. For example, even low-grade products should still work as expected, be safe
to use, and last a reasonable amount of time.
Statistics Terminology
Determining how well products meet grade requirements is done by taking
measurements and then interpreting those measurements. Statistics3
—the
mathematical interpretation of numerical data—is useful when interpreting large
numbers of measurements and is used to determine how well the product meets a
specification when the same product is made repeatedly. Measurements made on
samples of the product must be between control limits4
—the upper and lower
extremes of allowable variation—and it is up to management to design a process
that will consistently produce products between those limits.
3. Mathematical interpretation of
numerical data.
4. Upper and lower extremes of
allowable variation.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 413
Setting Control Limits in Gasoline Production
A petroleum refinery produces large quantities of fuel in several grades.
Samples of the fuels are extracted and measured at regular intervals. If a fuel is
supposed to have an 87 octane performance, samples of the fuel should produce
test results that are close to that value. Many of the samples will have scores
that are different from 87. The differences are due to random factors that are
difficult or expensive to control. Most of the samples should be close to the 87
rating and none of them should be too far off. The manufacturer has grades of
85 and 89, so they decide that none of the samples of the 87 octane fuel should
be less than 86 or higher than 88.
If a process is designed to produce a product of a certain size or other measured
characteristic, it is impossible to control all the small factors that can cause the
product to differ slightly from the desired measurement. Some of these factors will
produce products that have measurements that are larger than desired and some
will have the opposite effect. If several random factors are affecting the process,
they tend to offset each other most of the time, and the most common results are
near the middle of the range. This idea is called the central limit theorem5
.
If the range of possible measurement values is divided equally into subdivisions
called bins6
, the measurements can be sorted, and the number of measurements
that fall into each bin can be counted. The result is a frequency distribution7
that
shows how many measurements fall into each bin. If the effects that are causing the
differences are random and tend to offset each other, the frequency distribution is
called a normal distribution8
, which resembles the shape of a bell with edges that
flare out. The edges of a theoretical normal distribution curve get very close to zero
but do not reach zero.
Normal Distribution of Gasoline Samples
A refinery’s quality control manager measures many samples of 87 octane
gasoline, sorts the measurements by their octane rating into bins that are 0.1
octane wide, and then counts the number of measurements in each bin. Then
she creates a frequency distribution chart of the data, as shown in Figure 10.1
"Normal Distribution of Measurements of Gasoline Samples".
5. Idea that if variation is caused
by several random factors, they
will generally cancel each
other out and most
measurements will be near the
middle of the range of
variation.
6. Equal size ranges into which
measurements are sorted to
obtain a frequency
distribution.
7. The number of measurements
that fall into defined bins.
8. Frequency distribution that
looks like a bell and is the
result of offsetting random
variations.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 414
If the measurements of product samples are distributed equally above and below
the center of the distribution as they are in Figure 10.1 "Normal Distribution of
Measurements of Gasoline Samples", the average of those measurements is also the
center value that is called the mean9
and is represented in formulas by the
lowercase Greek letter µ (pronounced mu). The amount of difference of the
measurements from the central value is called the sample standard deviation or just
the standard deviation10
. The first step in calculating the standard deviation is
subtracting each measurement from the central value and then squaring that
difference. (Recall from your mathematics courses that squaring a number is
multiplying it by itself and that the result is always positive.) The next step is to
sum these squared values and divide by the number of values minus one. The last
step is to take the square root. The result can be thought of as an average
difference. (If you had used the usual method of taking an average, the positive and
negative numbers would have summed to zero.) Mathematicians represent the
standard deviation with the lowercase Greek letter σ (pronounced sigma). If all the
elements of a group are measured, it is called the standard deviation of the
population and the second step does not use a minus one.
Figure 10.1 Normal Distribution of Measurements of Gasoline Samples
The chart shows that the most common measurements of octane rating are close to 87 and that the other
measurements are distributed equally above and below 87. The shape of the distribution chart supports the central
limit theorem’s assumption that the factors that are affecting the octane rating are random and tend to offset each
other, which is indicated by the symmetric shape. This distribution is a classic example of a normal distribution.
The quality control manager notices that none of the measurements are above 88 or below 86 so they are within
control limits and concludes that the process is working satisfactorily.
9. Average found by summing the
values and dividing by the
number of values.
10. A type of average that takes
into account positive and
negative values where a sample
is used instead of all the
measurements. To calculate
the standard deviation, first
the difference between each
value and the mean is squared.
The squared values are
summed and divided by the
number of values minus one.
The square root of this value is
the standard deviation, also
known as the Sample Standard
Deviation.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 415
Standard Deviation of Gasoline Samples
The refinery’s quality control manager uses the standard deviation function in
his spreadsheet program to find the standard deviation of the sample
measurements and finds that for his data, the standard deviation is 0.3 octane.
She marks the range on the frequency distribution chart to show the values
that fall within one sigma (standard deviation) on either side of the mean. See
the figure below.
Figure 10.2
Most of the measurements are within 0.3 octane of 87.
For normal distributions, about 68.3 percent of the measurements fall within one
standard deviation on either side of the mean. This is a useful rule of thumb for
analyzing some types of data. If the variation between measurements is caused by
random factors that result in a normal distribution and someone tells you the mean
and the standard deviation, you know that a little over two-thirds of the
measurements are within a standard deviation on either side of the mean. Because
of the shape of the curve, the number of measurements within two standard
deviations is 95.4 percent, and the number of measurements within three standard
deviations is 99.7 percent. For example, if someone said the average (mean) height
for adult men in the United States is 5 feet 10 inches (70 inches) and the standard
deviation is about 3 inches, you would know that 68 percent of the men in the
United States are between five feet seven inches (67 inches) and six feet one inch
(73 inches) in height. You would also know that about 95 percent of the adult men
in the United States were between five feet four inches and six feet four inches tall,
and that almost all of them (99.7 percent) are between five feet one inches and six
feet seven inches tall. These figures are referred to as the 68-95-99.7 rule11
.
11. Approximate percentages of
measurements that are within
one, two, and three standard
deviations of the mean.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 416
Almost All Samples of Gasoline are Within Three STD
The refinery’s quality control manager marks the ranges included within two
and three standard deviations, as shown below.
Figure 10.3
The 68-95-99.7 Rule
Some products must have less variability than others to meet their purpose. For
example, if one machine drills a hole and another machine shapes a rod that will
slide through the hole, it might be very important to be sure that if the smallest
hole was ever matched with the widest rod, that the rod would still fit. Three
standard deviations from the control limits might be fine for some products but not
for others. In general, if the mean is six standard deviations from both control
limits, the likelihood of a part exceeding the control limits from random variation is
practically zero (2 in 1,000,000,000). Refer to Figure 10.4 "Meaning of Sigma Levels".
Figure 10.4 Meaning of Sigma Levels
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 417
A Step Project Improves Quality of Gasoline
A new refinery process is installed that produces fuels with less variability. The
refinery’s quality control manager takes a new set of samples and charts a new
frequency distribution diagram, as shown below.
Figure 10.5
Smaller Standard Deviation
The refinery’s quality control manager calculates that the new standard
deviation is 0.2 octane. From this, he can use the 68-95-99.7 rule to estimate
that 68.3 percent of the fuel produced will be between 86.8 and 87.2 and that
99.7 percent will be between 86.4 and 87.6 octane. A shorthand way of
describing this amount of control is to say that it is a five-sigma production
system, which refers to the five standard deviations between the mean and the
control limit on each side.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 418
KEY TAKEAWAYS
• Quality is the degree to which a product or service fulfills requirements
and provides value for its price.
• Statistics is the mathematical interpretation of numerical data, and
several statistical terms are used in quality control. Control limits are
the boundaries of acceptable variation.
• If random factors cause variation, they will tend to cancel each other
out—the central limit theorem. The central point in the distribution is
the mean, which is represented by the Greek letter mu, µ. If you choose
intervals called bins and count the number of samples that fall into each
interval, the result is a frequency distribution. If you chart the
distribution and the factors that cause variation are random, the
frequency distribution is a normal distribution, which looks bell shaped.
• The center of the normal distribution is called the mean, and the
average variation is calculated in a special way that finds the average of
the squares of the differences between samples and the mean and then
takes the square root. This average difference is called the standard
deviation, which is represented by the Greek letter sigma, σ.
• About 68 percent of the samples are within one standard deviation, 95.4
percent are within two, and 99.7 percent are within three.
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 419
EXERCISES
1. According to the ISO, quality is the degree to which a set of inherent
characteristics fulfill ___________.
2. The upper and lower extremes of acceptable variation from the mean
are called the __________ limits.
3. The odds that a sample’s measurement will be within one standard
deviation of the mean is ____ percent.
4. How is quality related to grade?
5. If the measurements in a frequency distribution chart are grouped near
the mean in normal distribution, what does that imply about the causes
of the variation?
6. If you have a set of sample data and you had to calculate the standard
deviation, what are the steps?
7. If a set of sample measurements has a mean of 100, a normal
distribution, a standard deviation of 2, and control limits of 94 and 106,
what percentage of the samples are expected to be between 94 and 106?
Explain your answer.
Using Statistical Measures
Choose two groups of people or items that have a measurable characteristic
that can be compared, such as the height of adult males and females.
Describe the distribution of the measurements by stating whether you think
the groups have a relatively small or large standard deviation and whether
the distributions overlap (e.g., some women are taller than some men even
though the mean height for men is greater than the mean height for
women). Demonstrate that you know how to use the following terms
correctly in context:
• Normal distribution
• Standard deviation
• Mean
Chapter 10 Managing Project Quality
10.1 Quality and Statistics 420
10.2 Development of Quality as a Competitive Advantage
LEARNING OBJECTIVES
1. Describe the historical events and forces that led up to today’s emphasis
on quality as a competitive requirement.
2. Describe quality awards in Japan and the United States.
3. Describe quality programs and standards such as TQM, Six Sigma, and
ISO 9000.
4. Describe and calculate the cost of quality.
Quality management is an approach to work that has become increasingly
important as global cooperation and competition have increased. A review of the
history of quality management explains why it is so important to companies and
why clients often require projects to document their processes to satisfy quality
standards.
Statistical Control Before World War II
Prior to the late 1700s, products such as firearms and clocks were made as
individual works where the parts were adjusted to each other so they could work
together. If a part broke, a new one had to be made by hand to fit. In 1790 in France,
Honoré Blanc demonstrated that he could make musket parts so nearly identical
that a musket could be assembled from bins of parts chosen at random.Ken Alder,
“Innovation and Amnesia: Engineering Rationality and the Fate of Interchangeable
Parts Manufacturing in France,” Technology and Culture 38, no 2 (April 1997):
273–311. The practice of making parts to a high level of accuracy in their
dimensions and finishes made the parts interchangeable. The use of
interchangeable parts became the founding principle of assembly line
manufacturing to produce all manner of goods from sewing machines to
automobiles. The manufacturers of firearms and weapons were often the leaders in
improving quality because reliable and safe operation of weapons and their rapid
repair is a matter of life and death.
Statistical Control in the United States During World War II
During World War II, factories were converted from manufacturing consumer goods
to weapons. War plants had to make large numbers of parts as fast as possible while
doing it safely for the workers and for the service members who used them.
Chapter 10 Managing Project Quality
421
Important improvements in quality control (QC)12
—the management of production
standards through statistical interpretation of random product measurements,
which emphasizes consistency and accuracy—were made during this period. A key
figure in the history of quality management who was an important person in the
war effort was Walter Shewhart at Bell Telephone Laboratories. Shewhart
recognized that real processes seldom behaved like theoretical random
distributions and tended to change with time. He separated causes of variation into
two categories: chance cause13
and assignable cause14
. Chance causes could be
ignored if they did not cause too much variation, and trying to eliminate them often
made the problem worse, but assignable causes could be fixed. To help distinguish
between variations caused by random events and trends that indicated assignable
causes, Shewhart introduced the control chart15
, which is also known as a type of
run chart16
because data are collected while the process is running. A control chart
has time on the bottom axis and a plot of sample measurements. The mean, upper
control limit, lower control limit, and warning lines that are two sigma from the
mean are indicated by horizontal lines.
12. Management of production
standards through statistical
interpretation of random
product measurements.
13. Variation due to random
events.
14. Variations that can be
attributed to a particular event
or influence.
15. Scatter chart with time on the
horizontal axis and
measurement scale on the
vertical axis. It also displays
the mean and control limits. It
may mark two standard
deviations from the mean.
16. Chart of measurements that
shows variations as the process
progresses in time.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 422
Control Chart Shows Production Variation of Gasoline
The refinery quality control manager takes samples each day of the 87 octane
gasoline for twenty days and charts the data on a control chart, as shown
below.
Figure 10.6
Control Chart Displaying Variations Due to Chance Causes
She recognizes that the highest and lowest measurements are not part of a
trend and are probably due to chance causes. However, the control chart from
the next twenty days, as shown below, indicates an upward trend that might be
due to an assignable cause. She alerts the process manager to let him know that
there is a problem that needs to be fixed before the product exceeds the upper
control limit. This might indicate the need to initiate a project to fix the
problem.
Figure 10.7
Control Chart Displaying Variations That Might Be Due to an Assignable Cause
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 423
Deming and Postwar Japan
The most influential person in modern quality control was an American who was a
hero in Japan but virtually unknown in the United States. W. Edwards Deming
worked with Shewhart at Bell Labs and helped apply Shewhart’s ideas to American
manufacturing processes during World War II. Following the war, American
factories returned to the production of consumer goods. Many of the other major
manufacturing centers in the world had been damaged by bombing during the war
and took time to recover. Without the safety needs of wartime and with little
competition, quality control was not a high priority for American companies.John
Dowd, “How the Japanese Learned to Compete,” Asia Times, October 27, 2006,
http://www.atimes.com/atimes/Japan/HJ27Dh01.html (accessed August 11, 2009).
Management in the United States focused on increasing production to meet
demand and lowering costs to increase profits.
After the war, while the United States occupied Japan, Deming was asked by the U.S.
Department of the Army to assist with the statistics of the 1950 census in Japan.
Kenichi Koyanagi, the managing director of the Union of Japanese Scientists and
Engineers and a very influential industrialist, asked Deming to speak to twenty-one
top industrial leaders on the topic of global strategy for Japanese industry. Deming
went beyond Shewhart’s work and talked about his philosophy of quality
manufacturing and how the responsibility for quality begins with management. He
explained that a corporate culture devoted to producing high-quality products
would result in less waste, lower costs, greater client loyalty, and greater market
share. With Koyanagi’s support, Deming’s ideas were widely adopted by these
influential leaders.
Deming described his philosophy as a system of profound knowledge, which has
four parts:
1. Appreciation of a system. Understanding how suppliers, producers, and
clients interact
2. Knowledge of variation. Understanding statistical variation
3. Theory of knowledge. Understanding what can be known and what
cannot
4. Knowledge of psychology. Understanding human nature
In 1950, the Japanese created the Deming prize17
in Deming’s honor, which is
awarded to an individual and a company for major advances in quality
improvements. In 1960, Deming was awarded the Order of the Sacred Treasure,
Second Class by the Prime Minister on behalf of Emperor Hirohito.17. Award for quality in Japan
named after W. Edwards
Deming, an American.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 424
Quality Management in America
By the 1970s, Japanese companies had a reputation for high quality and were taking
market share from American companies, but Deming’s teachings were virtually
unknown in his own country. It was not until 1980 that America became aware of
Deming when his work was described in an NBC documentary titled If Japan Can,
Why Can’t We?John Dowd, “How the Japanese Learned to Compete,” Asia Times,
October 27, 2006, http://www.atimes.com/atimes/Japan/HJ27Dh01.html (accessed
August 11, 2009). By then, Deming was eighty years old and the producer of the
show originally assumed he was dead.Thomas J. Boardman, “The Statistician Who
Changed the World: W. Edwards Deming, 1900–1993,” The American Statistician 48
(August 1994): 179–87.
In 1982, Deming’s book was published and later retitled Out of Crisis, in 1986.W.
Edwards Deming, Out of the Crisis (Boston: MIT Press, 1982). It was aimed at
explaining his system to American manufacturers and the American public. In the
book, Deming described fourteen principles of management to guide the
implementation of his philosophy. Some of them were challenges to Western
managers and very different from the thinking that was prevalent at the time. In
brief, they are as follows:
1. Create constancy of purpose toward improvement of product and
service.
2. Adopt a new philosophy. We are in a new economic age. Western
management must awaken to the challenge, learn their
responsibilities, and take on leadership for a change.
3. Cease dependence on inspection to achieve quality. Eliminate the need
for inspection on a mass basis by building quality into the product in
the first place.
4. End the practice of awarding business on the basis of price tag. Instead,
minimize cost. Move toward a single supplier for any one item, on a
long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service
to improve quality and productivity and thus constantly decrease
costs.
6. Institute training on the job.
7. Institute leadership. The aim of supervision should be to help people
and machines and gadgets to do a better job. Supervision of
management is in need of overhaul, as well as supervision of
production workers.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 425
10. Eliminate slogans, exhortations, and targets for the workforce asking
for zero defects and new levels of productivity.
11. Eliminate work standards (quotas) on the factory floor. Substitute
leadership.
12. Remove barriers that rob the hourly worker of his right to pride of
workmanship.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the
transformation. The transformation is everybody’s job.
Between 1979 and 1982, Ford Motor Company lost $3 billion, and they were looking
for solutions to their problems. They chose to apply Deming’s approach to develop
the new Taurus-Sable model and by 1986 had become the most profitable American
auto company.Gabor, A. (2001, June 13). Quality revival, Part 2: Ford embraces Six
Sigma. New York Times (Late Edition (east Coast)), p. C.5. Retrieved October 24,
2010, from ProQuest National Newspapers Core. (Document ID: 74042886).
Ford adopted a Japanese approach to quality known in America as total quality
management (TQM)18
. TQM in Japan has four major components:
1. Kaizen19
. Improvement must involve all members of a
company.Encyclopedia Britannica, s.v. “Total Quality Control,”
http://www.britannica.com/EBchecked/topic/1387304/Total-QualityControl
(accessed August 13, 2009).
2. Atarimae hinshitsu20
. Make things work the way they are supposed to
work.NationMaster.com, “Miryokuteki Hinshitsu,” 2005,
http://www.statemaster.com/encyclopedia/Miryokuteki-Hinshitsu
(accessed August 14, 2009).
3. Kansei21
. Learn from the way a user applies the product to make
improvements.WASEDA University, “Kansei Quality” (accessed June 20,
2010).
4. Miryokuteki hinshitsu22
. Things should have an aesthetic quality and
be pleasing to use.NationMaster.com, “Miryokuteki Hinshitsu,” 2005,
http://www.statemaster.com/encyclopedia/Miryokuteki-Hinshitsu
(accessed August 14, 2009).
According to Peter B. Petersen,Peter B. Petersen, “Total Quality Management and
the Deming Approach to Quality Management,” Journal of Management History 5, no.
8 (1999): 468–88. TQM differs from the Deming approach in four fundamental ways:
18. Philosophy of managing
quality adapted from a
Japanese method that includes
kaizen, atarimae hinshitsu,
kansei, and miryokuteki
hinshitsu.
19. Japanese term for involvement
of all members of the group
(see total quality
management).
20. Japanese concept of making
things work as they are
intended to work (See total
quality management).
21. Japanese concept of learning
from the way a user applies the
product in order to improve it
(see total quality
management).
22. Japanese concept that things
should have an aesthetic
quality and be pleasing to use
(see total quality
management).
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 426
1. The Deming approach represents one philosophy that is used in its
entirety or not at all. In contrast, TQM can be tailored to a particular
environment.
2. Both agree that a long-term commitment is required by top
management. However, Deming would drop clients if they started to
wane, while TQM consultants were less demanding.
3. Deming insists on constancy of purpose, while TQM adapts to the
situation, which results in lack of constancy.
4. Deming requires adoption of his principles of profound knowledge,
while TQM lacks this unified philosophy.
Many poorly qualified consulting firms provided training in TQM to American
companies. The approach worked in some cases but not in others where it was
applied superficially, and the movement’s credibility was diminished.
Another approach to quality management in the United States was formulated at
Motorola in 1986 and was named Six Sigma (6σ)23
. The Six Sigma practices were
based on Deming’s work, TQM, and others and had similarities regarding
continuous efforts at improvement involving everyone at the company. It
emphasized a clear focus on achieving quantifiable financial returns from any Six
Sigma project. To determine the financial return on a quality initiative, the cost of
quality (COQ)24
must be determined. The cost of quality has two parts: the cost of
prevention and the cost of failure (or nonconformance). The cost of quality is the
sum of the cost of prevention and the cost of failure. If spending more on
prevention reduces the cost of failure by an even greater amount, the total cost of
quality is reduced.
• Cost of prevention
a. Cost of conformance. Cost to improve quality
b. Cost of appraisal. Cost to measure and evaluate quality
• Cost of failure
a. Internal costs. Repairing bad parts before shipment or retooling a
manufacturing line to reduce failures
b. External costs. Managing returns, lawsuits, product recalls
Six Sigma identified individuals as experts in quality and awarded titles like
Champion and Master Black Belt. The name Six Sigma refers to a process that has
six standard deviations from the mean to either control limit that would ensure
virtually zero defects. (In practice, the Six Sigma approach allows for a 1.5 sigma
drift, so it is really a 4.5 sigma standard that allows approximately 3.4 defects per
23. Quality management system
that give titles to specialists
and requires a cost-benefit
analysis.
24. Total cost of efforts to improve
quality plus the cost of failure.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 427
million products.) This approach was adopted by Jack Welch at General Electric
with great success. By the late 1990s, about two-thirds of the top five hundred
companies in the United States had begun Six Sigma projects, including Ford, which
had allowed its quality programs to slip. To provide encouragement and a
consistent standard, the U.S. government created the Malcolm Baldrige National
Quality Award25
in 1987 to encourage companies to improve quality; the award was
named for Malcolm Baldrige who was the U.S. secretary of commerce from 1981 to
1987.National Institute of Standards and Technology, “Frequently Asked Questions
about the Malcolm Baldrige National Quality Award,” November 25, 2008,
http://www.nist.gov/baldrige/index.cfm (accessed August 14, 2009). The criteria
used to determine award winners are as follows:
1. Leadership of senior executives
2. Strategic planning
3. Customer and market focus
4. Measurement, analysis, and knowledge management
5. Workforce focus
6. Process management
7. Results
Trade and International Standards
Trade between countries increased as countries recovered from WWII and began
producing consumer goods. In 1948, the General Agreement on Tariffs and Trade
(GATT) established the rules for international trade in the postwar world. Through
years of negotiations based on GATT, the World Trade Organization (WTO)26
was
created in 1995. The WTO is a negotiating forum where governments can discuss
ways to help trade flow as freely as possible.World Trade Organization,
“Understanding the WTO: Basics,” http://www.wto.org/english/thewto_e/
whatis_e/tif_e/fact1_e.htm (accessed August 14, 2009).
Increases in trade forced companies to improve the quality of their products to
compete for clients and to exchange parts reliably between companies that used
parts suppliers. To assist in developing standards for quality that would be the same
between countries, an organization of 158 national standards groups formed the
International Organization for Standardization (ISO)27
, which is headquartered
in Switzerland. For example, a company might require a parts supplier to meet
certain ISO standards if it wants to bid on contracts. There are thousands of ISO
standards, and they are grouped by their numbers. The ISO 9000 group of standards
relate to quality:
25. U.S. award for quality named
after a former secretary of
commerce.
26. Negotiating forum for
improving trade relationships
between countries.
27. Degree to which a set of
inherent characteristics fulfill
requirements.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 428
• ISO 9000. Fundamentals and vocabulary for this group of quality
standards.
• ISO 9001. Standards for evaluating the quality management processes in
an organization. It has five parts:
a. Overall requirements for the quality management system and
documentation
b. Management responsibility, focus, policy, planning and objectives
c. Resource management and allocation
d. Product realization and process management
e. Measurement, monitoring, analysis, and improvement
• ISO 9004. Ways to extend benefits of ISO 9001 to employees, owners,
suppliers, partners, and society in general. It is a guide for top
management for overall quality improvement.
• ISO 9011. Guidance for auditing a quality system.
Recommended steps for implementing a quality management system (QMS) are as
follows:
1. Fully engage top management.
2. Identify key processes and the interactions needed to meet quality
objectives.
3. Implement and manage the QMS and its processes.
4. Build your ISO 9001-based QMS.
5. Implement the system, train company staff, and verify effective
operation of your processes.
6. Manage your QMS—focus on client satisfaction, strive for continual
improvement.
7. If necessary, seek third-party certification and registration of the QMS,
or alternatively, issue a self-declaration of conformity.International
Organization for Standardization, Quality Management
Systems—Fundamentals and Vocabulary (Geneva: ISO Press, 2005), in
Project Management Institute, Inc., A Guide to the Project Management
Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA: Project
Management Institute, Inc., 2008).
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 429
KEY TAKEAWAYS
• The need for production of safe, reliable weapons that could be mass
produced led to use of methods to assure that parts were manufactured
within controlled limits. An early example is the interchangeable
musket parts produced in France in 1790 and, later, the quality control
methods introduced by Shewhart in the United States during World War
II.
• Following World War II, Japanese companies followed advice from
Deming and others to make quality a top priority for management.
Higher-quality products gave Japan a competitive advantage with U.S.
consumers that forced U.S. firms to respond with similar quality
programs.
• The Deming award is given by Japan to companies doing business in
Japan for high-quality standards. Similarly, the Baldrige National
Quality Award is given to U.S. companies and individuals for their
contribution to quality.
• Total quality management is a flexible program that is adapted from
Japanese practices that emphasize kaizen, participation by all; atarimaie
hinshitsu, making things work the way they should; kansei, learning from
the way the client uses the product to make improvements; and
miryokuteki hinshitsu, giving products an aesthetic quality to make them
pleasing to use. Six Sigma identifies specialists within the organization
and assigns titles like Master Black Belt. Each quality project must
evaluate the cost of quality to gain approval.
• The International Standards Institute devises guidelines for establishing
practices. The ISO 9000 group are guidelines for establishing practices
that are likely to create quality products.
• The cost of quality has two parts: the cost of prevention and the cost of
failure. The cost of prevention includes costs to establish quality
practices and the costs to verify them. The cost of failure includes
internal costs before the product is sold, such as waste and fixing
products, while external costs include those that occur after the product
is sold, such as returns and lawsuits.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 430
EXERCISES
1. Quality control is very important in the manufacturing of _______
because the safe and reliable operation of those products is a matter of
life and death.
2. The prize for quality in Japan is named after _________ (last name).
3. The quality program created at Motorola and adopted by Jack Welch at
General Electric is __________.
4. The cost of quality considers the cost of prevention and the cost of
___________.
5. What is the purpose of having an international quality standard like
ISO?
6. Describe benchmarking.
7. If a quality program costs $10,000 to plan and $50,000 to administer,
what is the COQ if the program reduces waste by $30,000 and returns of
bad products by $40,000? Explain how you calculated the answer.
Balancing Cost of Prevention to Cost of Failure
Describe a project activity where the cost of prevention might be much
higher than the cost of failure and unlikely enough to accept the risk of its
failure rather than pay the cost of prevention. Similarly, describe a project
activity where the cost of prevention is smaller than the cost of failure.
Chapter 10 Managing Project Quality
10.2 Development of Quality as a Competitive Advantage 431
10.3 Relevance of Quality Programs to Project Quality
LEARNING OBJECTIVES
1. Identify the similarities between process quality management and
project quality management.
2. Identify the differences between process quality management and
project quality management.
Project quality refers to two distinct aspects of the project. Project quality can refer
to the quality of the product or service delivered by the project. Does the end
product meet client specifications? For example, does a software development
project develop a program that performs to the client’s requirements? A software
program that performs the basic work functions but does not integrate with
existing software would not be considered a quality product, as long as the client
specified that the software must interface with existing software.
Project quality can also refer to managing the project efficiently and effectively.
Almost any client specification can be met if the project manager has unlimited
time and resources. Recall that high quality means meeting the requirements for a
particular grade while providing value. Meeting project deliverables within the
time and resource constraints is also a measure of project quality. Developing a
project execution plan that matches the complexity level of the project is the most
critical aspect in developing a project plan that meets project specifications within
the time frame and at the lowest costs. These two aspects of project quality have
similarities and differences to quality as applied to parent organizations.
Similarities
All successful quality programs have (1) a requirement for commitment to quality
by all the employees and their partners and (2) an emphasis on error prevention
and client satisfaction. To comply with TQM, Six Sigma, ISO, or other quality
standards required by the client or by the project management firm, the project
manager must engage in quality programs and provide documents that specifically
comply with the quality standards in use. For example, a project is typically
required to follow the parent organization’s work processes related to procurement
and document management. Any project processes that interface with the
organization’s quality processes will be required to meet the quality standards of
the organization.
Chapter 10 Managing Project Quality
432
If a large project involves repetitive processes such as welding or pouring concrete,
statistical processes control methods can be used to maintain the quality of the
product. These processes control methods are similar to those used by process
managers in the manufacturing environment. The intent is for the work of the
project to meet design specifications. The welding tools and equipment must be
sufficient to perform the welds established in the welding specifications, and the
welds must be tested, usually by an independent tester, to assure the end product
meets the design specifications. The civil engineers design a concrete pour to meet
certain criteria that will support a structure. The criteria, detailed in the design
specifications, provide the parameters that the construction crew must meet when
pouring the concrete. On large projects, which sometimes have thousands of welds
and hundreds of yards of concrete to pour, the use of quality control tools and
methods are critical to meeting design specifications
Differences
Because projects are temporary, spotting trends in samples produced by repetitive
processes is not as important as considering quality in the planning of the project.
Instead, the project manager must be able to provide documentation that
demonstrates that the correct processes are in place to prevent quality failures.
The cost of quality (COQ) must be considered in the scope document and the project
budget. If the group or company that is providing the project management is
separate from the client, the project budget will bear the cost of prevention while
the client will reap the rewards of avoiding the costs of failure. If senior
management does not recognize the benefit to the organization of reducing cost of
failure by spending more on prevention during the project, the project manager can
be placed in the position of producing a product or service that he or she knows
could be of higher quality.
If the cost of quality is not specifically considered and approved by senior
management in the scope of the project, quality might be sacrificed during the
project to meet budget goals.
Chapter 10 Managing Project Quality
10.3 Relevance of Quality Programs to Project Quality 433
Cost of Quality in an Energy Management System
At a midwestern university, a new building was being built, but it was over
budget. To reduce the cost of the energy management system and avoid a late
penalty, the project manager installed a cheaper energy management system.
The less expensive system could not reduce power to the air circulation fans
during peak electrical price periods, and it was not compatible with other
campus systems. Five years after the building was built, when a central control
unit was installed to coordinate building energy consumption, the incompatible
system was replaced because it could not communicate with the central campus
energy control system or save as much in electrical costs. The university did
not take the time to specify the quality of the building control system in the
scope statement and was not aware of the implication of the substitution at the
time it was made. As a result, the cost of quality was lower in the prevention
category but much higher in the cost of failure category. Because the parties
acted in their own interests instead of the interest of the total university and
quality was not a team effort, waste occurred and total cost increased.
Some separation of responsibility for quality is necessary. For example, if a project
is undertaken to build a facility that makes something, it is important to distinguish
between the quality of the work done by the project team and the quality of the
items produced after the project is over. The client provides specifications for the
facility that should result in production of quality products. It is the client’s
responsibility to provide appropriate project requirements that will result in a
facility that can produce quality products. It is the project manager’s responsibility
to meet the project requirements. The project manager must focus on meeting
requirements for project activities, but as part of the quality team, opportunities to
improve the quality of the final product should be discussed with the client. If the
final products fail to meet quality standards, someone will be blamed for the failure.
It could be the project manager, even if he or she met all the requirements of the
project specified by the client.
Chapter 10 Managing Project Quality
10.3 Relevance of Quality Programs to Project Quality 434
Cost of Prevention in Safety Training
An electronic parts manufacturer chooses to expand operations and needs to
hire and train fifty employees. It uses its own human resources department to
handle the selection and hiring of the employees, but it contracts with a nearby
technical college to provide some of the training. The technical college is
responsible for designing and delivering training on the topic of plant safety
practices. The objective of the training project is to reduce the number of
workplace accidents, but that is not the characteristic by which the quality of
the training program is determined because the rate of accidents for employees
who go through the training will not be known until after they have been
employed for months or years. The criteria for determining the quality of the
training must be something that can be controlled and measured by the project
manager during the project.
Because projects are time sensitive, meeting activity finish dates is a common
characteristic of quality work on a project that is not typical of a requirement of a
process manager.
Timely Delivery Part of Quality
At a remote mining site in South America, the gasoline and diesel fuel must be
brought in by truck over poorly maintained roads to run the trucks and heavy
equipment used to set up an ore processing facility. The vendor for supplying
fuel is required to provide fuel in the right grades for the various vehicles, in
the appropriate quantities, and in a timely manner. If fuel of the right type and
grade, with acceptable levels of impurities, is delivered a week after the
vehicles have run out of fuel, the work on the fuel-delivery activity is of low
quality.
Chapter 10 Managing Project Quality
10.3 Relevance of Quality Programs to Project Quality 435
KEY TAKEAWAYS
• Both project and process quality management require commitment
from all employees, including top management. They are both client
oriented and prevention oriented.
• Projects are temporary and allow fewer opportunities to improve
repetitive processes. Cost of prevention is often part of the project
budget, but the cost of failure usually happens after the project is
completed. This separation of costs and benefits can lead to taking
short-term savings on the project at the expense of higher cost of failure
after the project is complete.
EXERCISES
1. How is quality control of a project different from quality control of a
manufacturing process?
Cost of Failure after the Project
Consider a project you have been involved in, in which the cost of
prevention would be part of the project budget but the cost of failure would
be incurred after the project was completed. Describe why you think top
management would have to be involved to make the best decision for the
company.
Chapter 10 Managing Project Quality
10.3 Relevance of Quality Programs to Project Quality 436
10.4 Planning and Controlling Project Quality
LEARNING OBJECTIVES
1. Define statistical measurement terminology.
2. Identify sources of information for the planning process.
3. Identify and describe the techniques for controlling project quality.
4. Describe the results of planning and controlling quality.
High quality is achieved by planning for it rather than by reacting to problems after
they are identified. Standards are chosen and processes are put in place to achieve
those standards.
Measurement Terminology
During the execution phase of the project, services and products are sampled and
measured to determine if the quality is within control limits for the requirements
and to analyze causes for variations. This evaluation is often done by a separate
quality control group, and knowledge of a few process measurement terms is
necessary to understand their reports. Several of these terms are similar, and it is
valuable to know the distinction between them.
The quality plan specifies the control limits of the product or process; the size of
the range between those limits is the tolerance28
. Tolerances are often written as
the mean value, plus or minus the tolerance. The plus and minus signs are written
together, ±.
Tolerance in Gasoline Production
The petroleum refinery chose to set its control limits for 87 octane gasoline at
86 and 88 octane. The tolerance is 87 ± 1.
Tools are selected that can measure the samples closely enough to determine if the
measurements are within control limits and if they are showing a trend. Each
measurement tool has its own tolerances. For example, if a machine is making rods
28. Variation allowed on either
side of the mean, often shown
with the ± symbol to mean plus
or minus.
Chapter 10 Managing Project Quality
437
whose diameters should be 10 mm ± 0.01 mm, you need a measuring device that can
accommodate a rod that is 10 mm wide but can measure that width to a much
smaller tolerance than 0.01 mm, such as 0.001 mm.
The choice of tolerance directly affects the cost of quality (COQ). In general, it costs
more to produce and measure products that have small tolerances. The costs
associated with making products with small tolerances for variation can be very
high and not proportional to the gains. For example, it might double the
manufacturing cost to improve a process from a 4 σ to a 5 σ (lower tolerances from
25 percent of control limits to 20 percent), which might only reduce the number of
parts that are out of control from 4 per 100,000 to 6 per 10 million (see Figure 10.4
"Meaning of Sigma Levels"). The cost of failure of only 4 parts per 100,000 might be
much less than the cost of prevention.
Defining and Meeting Client Expectations
Clients provide specifications for the project that must be met for the project to be
successful. Meeting project specifications is one definition of a project success.
Clients often have expectations that are more difficult to capture in a written
specification. For example, one client will want to be invited to every meeting of the
project and will then select the ones that seem most relevant. Another client will
want to only be invited to project meetings that need client input. Inviting this
client to every meeting will cause unnecessary frustration. Listening to the client
and developing an understanding of the expectations that are not easily captured in
specifications is important to meeting the client’s expectations.
Project surveys that capture how the client perceives the project performance
provide the project team with data that is useful in meeting client expectation. If
the results of the surveys indicate that the client is not pleased with some aspect of
the project, the project team has the opportunity to explore the reasons for this
perception with the client and develop recovery plans. The survey can also help
define what is going well and what needs improved.
Sources of Planning Information
Planning for quality is part of the initial planning process. The early scope, budget,
and schedule estimates are used to identify processes, services, or products where
the expected grade and quality should be specified. Risk analysis is used to
determine which of the risks the project faces could affect quality.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 438
Techniques
Several different tools and techniques are available for planning and controlling the
quality of a project. The extent to which these tools are used is determined by the
project complexity and the quality management program in use by the client.
Quality Management Methodology
The quality management methodology required by the client is used. The project
manager must provide the documentation the client needs to prove compliance
with their methodology. There are several different quality management
methodologies, but they usually have characteristics that are similar to the ones
described previously in the text.
Flowcharting
Many processes are more complicated than a simple sequence of related events that
include several different paths. A flowchart29
uses standard symbols to diagram a
process that has branches or loops. Diamonds indicate decisions, and arrows
indicate the direction of the flow of the process, as shown in Figure 10.8 "Flowchart
of a Quality Control Process".
29. Diagram of processes that have
branches and loops based on
decisions.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 439
Figure 10.8 Flowchart of a Quality Control Process
The process used to plan and assess quality can be described using flowcharts. They
are useful for communicating processes that have logical branches that can be
determined by simple yes or no questions. Flowcharting is also useful for
discovering misunderstanding in project roles and responsibilities and
communicating responsibility for work processes.
Benchmarking
When products like shoes were made by hand, artisans would seek some degree of
standardization by marking standard lengths for different parts of the product on
their workbench. In modern management practice, if a particular method or
product is a standard of quality, comparing your organization’s quality plan to it is
called benchmarking30
. If a product or service is similar to something that is done
in another industry or by a competitor, the project planners can look at the best
practices that are used by others and use them as a comparison.
30. Comparison of practices to
standards or best practices in
the same industry.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 440
Cost-to-Benefit Analysis
Because the cost of prevention is more often part of the project budget, the case
must be made for increasing the project budget to raise quality. Some quality
management programs, like Six Sigma, require that expenditures for quality are
justified using a cost-to-benefit analysis that is similar to calculating the cost of
quality, except that it is a ratio of cost of increasing quality to the resulting benefit.
A cost-benefit analysis in some quality programs can take into account nonfinancial
factors such as client loyalty and improvements to corporate image and the cost-tobenefit
analysis takes the form of a written analysis rather than a simple numeric
ratio. It is similar to determining the cost of quality (COQ).
Design of Experiments
Measuring for quality of manufactured products or use of repetitive processes
requires taking samples. Specialists in quality control design a test regimen that
complies with statistical requirements to be sure that enough samples are taken to
be reasonably confident that the analysis is reliable. In project management, the
testing experiments are designed as part of the planning phase and then used to
collect data during the execution phase.
Control Charts
If some of the functions of a project are repetitive, statistical process controls can
be used to identify trends and keep the processes within control limits. Part of the
planning for controlling the quality of repetitive processes is to determine what the
control limits are and how the process will be sampled.
Cause and Effect Diagrams
When control charts indicate an assignable cause for a variation, it is not always
easy to identify the cause of a problem. Discussions that are intended to discover
the cause can be facilitated using a cause-and-effect or fishbone diagram31
where
participants are encouraged to identify possible causes of a defect.
31. Graphic representation of the
contributing causes of a quality
problem.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 441
Diagramming Quality Problems
For example, a small manufacturing firm tries to identify the assignable causes
to variations in its manufacturing line. They assemble a team that identifies six
possibilities, as shown in the fishbone diagram below.
Figure 10.9
Cause and Effect Diagram
Each branch of the diagram can be expanded to break down a category into more specific items.
An engineer and the electrician work on one of the branches to consider
possible causes of power fluctuation and add detail to their part of the fishbone
diagram, as shown below.
Figure 10.10
Possible Causes of Power Fluctuation
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 442
Check Sheets, Histograms, and Pareto Charts
When several quality problems need to be solved, a project manager must choose
which ones to address first. One way to prioritize quality problems is to determine
which ones occur most frequently. This data can be collected using a check sheet32
,
which is a basic form on which the user can make a check in the appropriate box
each time a problem occurs or by automating the data collection process using the
appropriate technology. Once the data are collected, they can be analyzed by
creating a type of frequency distribution chart called a histogram33
. A true
histogram is a column chart where the width of the columns fill the available space
on the horizontal axis and are proportional to the category values displayed on the
x axis, while the height of the columns is proportional to the frequency of
occurrences. Most histograms use one width of column to represent a category,
while the vertical axis represents the frequency of occurrence.
Charting Electrical Problems
The engineer and electrician place a recording meter on the electrical supply to
the manufacturing area and instruct the building automation system to keep a
log of voltage coming into the plant from the local utility and when it starts and
stops large electrical fan motors. They create a check sheet to track the number
of times that power dips or spikes due to lighting strikes or electric space
heater malfunctions. They collect the data, count the number of occurrences in
each category, and then chart the number of occurrences in a histogram, as
shown below.
Figure 10.11
Histogram Showing Frequency of Power Problems by Likely Cause
32. Form for recording the
frequency of quality problems.
33. Column chart that displays
frequency of occurrence on the
vertical axis.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 443
A variation on the histogram is a frequency distribution chart invented by
economist Vilfredo Pareto known as a Pareto chart34
, in which the columns are
arranged in decreasing order with the most common on the left and a line added
that shows the cumulative total. The combination of columns and a line allows the
user to tell at a glance which problems are most frequent and what fraction of the
total they represent.
Using Pareto Chart to Analyze Voltage Problem
The engineer creates a Pareto chart by sorting the data and adds a line to show
total problems, as shown below. He concludes that about half of the electrical
voltage problems are caused when one of the large electrical fan motors on the
same circuit as the manufacturing line is shut down to conserve electricity by
the energy management system and then restarted.
Figure 10.12
Pareto Chart with Problems in Decreasing Order and a Line Showing a Cumulative Total
Planning and Control Results
The quality plan is produced during the initiation phase. The methods, procedures,
and logic are described to demonstrate a commitment to a project of high quality.
The plan identifies the products or services that will be measured and how they will
be measured and compared to benchmarks. A flowchart demonstrates the logic and
pathways to improve the plan.
34. Column chart that shows
frequency on the vertical axis
sorted from largest to smallest
with a line that shows the
cumulative total.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 444
During the execution phase, data are collected by measuring samples according to
the design specified in the plan. The data are charted and analyzed. If variations are
due to assignable causes, change requests are created.
KEY TAKEAWAYS
• Statistical control terms that are commonly used are tolerance (the
range between control limits), flowchart (a diagram showing decision
branches and loops), benchmarking (comparison to best practices),
fishbone diagram (shows possible causes of quality problems), check
sheet (form used to record frequency of problem occurrences),
histogram (column chart that shows frequency of problems), and Pareto
chart (histogram sorted by frequency from highest to smallest with a
line that shows total cumulative problems).
• The quality planning process uses initial scope, budget, and schedule
estimates to identify areas that need quality management.
• Control of quality in repetitive processes use statistical control methods
that involve designing testing while considering the cost of quality,
taking measurements, and then analyzing the data using run charts that
show control limits and trends. Methodologies are compared to the best
practices by competitors, which is called benchmarking. Errors are
documented using check sheets and analyzed using fishbone diagrams,
histograms, or Pareto charts.
• The products of planning and controlling quality are a quality
management plan, data, analysis documents, and proposals for
improvement
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 445
EXERCISES
1. The range from the mean to either control limit is the __________.
2. A diagram that shows branches and loops based on decisions is a ____
_____. (two words)
3. The best practices in an industry to which a company can compare its
practices are called ___________.
4. What is the difference between a histogram and a Pareto chart?
Quality Management Plan
Consider a project in which you have been involved where there was a
quality management plan or where such a plan was missing. Describe the
effect of having or not having such a plan.
Chapter 10 Managing Project Quality
10.4 Planning and Controlling Project Quality 446
10.5 Assuring Quality
LEARNING OBJECTIVE
1. Describe the purpose and methods of quality assurance.
The purpose of quality assurance is to create confidence that the quality plan and
controls are working properly. To assure quality, time must be allocated to review
the original quality plan and compare that plan to how quality is being created
during the execution of the project.
Process Analysis
The flowcharts of quality processes are compared to the processes followed during
actual operations. If the plan was not followed, the process is analyzed and
corrective action taken. The corrective action could be to educate the people
involved on how to follow the quality plan or to revise the plan.
The experiments that sample products and processes and collect data are examined
to see if they are following statistically valid sampling techniques and that the
measurement methods have small enough tolerances to detect variation within
control limits.
Because projects are temporary, there are fewer opportunities to learn and improve
within one project if it has a short duration, but even in short projects, the quality
manager should have a way to learn from experience and change the process for
the next project of a similar complexity profile.
Chapter 10 Managing Project Quality
447
Analyzing Quality Processes in Safety Training
The technical college responsible for training employees in safe plant practices
evaluates its instructor selection process at the end of the training to see if it
had the best criteria for selection. For example, it required the instructors to
have Masters degrees in manufacturing to qualify as college instructors. The
college used an exit survey of the students to ask what they thought would
improve the instruction of future classes on this topic. Some students felt that
it would be more important to require that the instructors have more years of
training experience, while others recommended that the college seek
certification as a training center by the Occupational Safety and Health
Administration (OSHA).Occupational Safety and Health Administration, OSHA
Training Institute Education Center Fact Sheet, July 3, 2007, http://www.osha.gov/
dte/oti/index.html (accessed August 7, 2009). The college considered these
suggestions and decided to retain its requirement of a Masters degree but add a
requirement that the instructor be certified by OSHA in plant safety.
Quality Audit
For additional confidence and assurance, an outside group can come in and review
the quality procedures and accuracy of the data. This process is similar to a
financial audit and is called a quality audit35
. The purpose of a quality audit is to
compare the stated quality goals of the project against the actual practice and
procedures that are used. It is not a certification of the quality of the products
themselves.
KEY TAKEAWAY
• The purpose of quality assurance is to build confidence in the client that
quality standards and procedures are being followed. This is done by an
internal review of the plan, testing, and revisions policies or by an audit
of the same items performed by an external group or agency.
35. Review of the quality plan,
procedures, data collection,
and analysis by an outside
group.
Chapter 10 Managing Project Quality
10.5 Assuring Quality 448
EXERCISES
1. How is a quality audit different from a quality plan?
Customer Confidence
Consider a product that has suffered from a failure in its quality. Describe
how the company handled the problem and its effect on your personal
perception of the company and your confidence in buying its products.
Chapter 10 Managing Project Quality
10.5 Assuring Quality 449
10.6 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Describe the difference between chance cause and assignable cause. How
do these terms relate to Deming’s system of profound knowledge?
2. According to the text, why did the quality of manufactured goods
decline in the United States after World War II, and how did Japan take
advantage of that situation?
3. Describe the four Japanese terms used in TQM and give an example of
how they might apply to a particular product.
Chapter 10 Managing Project Quality
450
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. The auto industry has been a highly visible battleground for
international competition in which quality and the public’s perception
of a company’s quality have played an important role. Deming stresses
that management is 85 percent of the problem and the solution to a
company’s quality. What are specific examples with which you are
familiar from the news or personal experience that demonstrate
management leadership (or lack of leadership) toward improving
quality.
2. Consider how the four Japanese concepts of quality included in TQM are
applied in your educational institution. Based on your experience with
the management of your school, does the management use the
principles of kaizen, atarimae hinshitsu, kansei, and miryokuteki hinshitsu?
Provide an example (or counter example) of each.
Chapter 10 Managing Project Quality
10.6 Exercises 451
10.7 Software and Technology Exercises
LEARNING OBJECTIVES
1. Predict likely range of values in a normal distribution.
2. Recognize assignable and unassignable causes of statistical variation.
Predicting Value Ranges Using Standard Deviation
Real production processes are never perfect. In some cases, a few products that are
too small or that do not work will just cause inconvenience, but in other cases they
might be life threatening. Samples of the production process will show how much
variation occurs. If it appears that the variations are distributed equally above and
below the mean (average), it might be assumed that the statistics of a normal
distribution can be used to predict the percentage of products that will be defective
when many of them are produced even if none of the samples are defective.
Some projects are initiated to increase the quality by reducing the variation in
production. To understand the language of statistics and how it is used to justify a
project, it is useful to gain a “feel” for how the distribution of samples is described
by the standard deviation. A spreadsheet can be used to simulate samples of
production runs where the mean and standard deviation can be chosen to show
their relationship in a normal distribution. By trying different values for the
standard deviation and observing the effect on the distribution of estimated
samples in a chart, you can develop a sense of how the two are related.
Recall that a standard deviation is called a sigma and represented by the Greek
letter σ and the 68-95-99.7 rule refers to the percentage of samples that will be
within one, two, and three standard deviations of the mean.
Examine a Normal Distribution
Complete the exercise by following these instructions:
1. Navigate to the directory location where the exercise files for this unit
are located and open Ch10STD.xls in a spreadsheet program such as MS
Excel.
2. In cell A2, replace StudentName with your name.
Chapter 10 Managing Project Quality
452
3. This worksheet is designed to simulate a set of sample values that vary
from the mean for random reasons and form a normal distribution.
The data and calculations in columns A through F are hidden. They are
used to calculate the values in column G on which the chart is based.
4. Notice the following features of the spreadsheet:
◦ Column A has bins. In this example, the bins are .1 units wide. The
size of the bin and the horizontal scale of the chart are determined
by the value in cell L5.
◦ This simulation uses forty-two bins that are distributed equally
above and below the mean. The mean value can be specified in cell
L4.
◦ The usual method is to sample a sequence of products, count the
number that fall into each bin, and then calculate the standard
deviation. In this simulation, you can specify the standard
deviation in cell L3, and the percentage of samples that are likely
to occur in each bin is calculated and displayed in column G. The
display is rounded to a whole percent. The display of decimal
places can be increased using the spreadsheet’s controls.
◦ The percentage of estimated samples that occur in each bin is
charted using a column chart. The scale at the left side of the chart
indicates the percent of the samples in each bin.
5. Compare the chart in the spreadsheet to the chart in Figure 10.13
"Normal Distribution of Gasoline Samples" that was used in the text.
Observe that the standard deviation, σ, is .2 and that almost all the
sample values occur between 86.4 and 87.6—three σ on either side of
the mean.
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 453
Figure 10.13 Normal Distribution of Gasoline Samples
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. Open a word processing document and then save it as
Ch10STDStudentName.doc. Switch back to the spreadsheet and capture
the screen. Switch to the word processing document and paste the
screen into the document.
7. Switch back to the spreadsheet. To see the effect of a better production
process that would have a σ of .1 instead of .2, click cell L3. Type .1 and
then, on the Formula bar, click the Enter button. The distribution
narrows so that almost all the estimated samples are within .3 on
either side of the mean (87.0), as shown in Figure 10.14 "Normal
Distribution with Smaller Standard Deviation".
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 454
Figure 10.14 Normal Distribution with Smaller Standard Deviation
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
8. Capture the screen showing in the narrow distribution and paste it into
the word processing document.
9. In the spreadsheet, in cell L3, type .4 and then, on the Formula bar,
click the Enter button. Notice that a larger standard deviation means
the distribution is more spread out. Three standard deviations is 1.2 (3
× .4), so almost all the samples will be within 1.2 on either side of the
mean, as shown in Figure 10.15 "Normal Distribution with Larger
Standard Deviation".
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 455
Figure 10.15 Normal Distribution with Larger Standard Deviation
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
10. Capture this screen and paste it into the word processing document.
11. Change the value in cell L3 to 1. Almost all the samples will be above 84
(87−3) and below 90 (87+3), but the horizontal scale is too small to show
all the values.
12. Change the value in cell L5 to .3.
13. Capture the screen and paste it into the word processing document.
Use the Spreadsheet for a Different Example
The effects of a lower-than-expected octane rating in a passenger car might be
engine knock during acceleration and less power climbing a hill, but the effect of
lower-than-expected octane fuel in a military aircraft might mean that the plane
could not achieve the desired altitude or speed in a critical situation. Aviation
gasoline is designed for use in high-performance engines that require 100 octane
fuel. Use the spreadsheet to examine the estimated distribution of gasoline samples
with a different mean and σ.
Examine a Normal Distribution
Complete the exercise by following these instructions:
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 456
1. Change the value in cell L4 to 100 and the standard deviation in cell L3
to .1. Notice that a standard deviation of .1 means that 99.7 percent of
the gasoline samples will be between 99.7 and 100.3 octane.
2. Practice changing the mean and standard deviation values in the
spreadsheet. Each time you do so, predict the high and low values that
represent three σ above and below the mean and use the spreadsheet
to check your prediction. If the values extend beyond the sides of the
chart, increase the increment value in cell L5.
3. Capture the screen that shows one of your estimates that is different
from the examples shown in the previous steps and paste it into the
word processing document.
4. In the word processing document, below the last screen, write between
one hundred and two hundred words to describe what you learned
about the relationship between the standard deviation and the
distribution of likely values. Specifically describe how you predict the
upper and lower limits of the range.
5. Close the spreadsheet. Do not save the changes.
6. Save the word processing document as Ch10STDStudentName.doc.
7. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch10STDStudentName.doc
Same or
.docx file
format
Student
name
missing
Predict
likely range
of values in
a normal
distribution
Five screen captures plus
a reflective essay on what
you learned about
predicting the upper and
lower limits defined by 3
σ
Same as
Best
Missing
pictures;
essay
does not
describe
how the
upper
and
lower
limits of
3 σ are
calculated
8. Revise the document, if necessary. Save the document and submit it as
directed by the instructor.
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 457
Recognizing Variations Due to Unassignable and Assignable
Causes
W. Edwards Deming teaches that some variation is inevitable due to chance cause. A
manager needs to recognize the difference between variations that are due to
chance and those that indicate the presence of an assignable cause or a trend. If it
appears that there is an assignable cause for variation in quality, a project manager
might be required to identify and fix the problem. To communicate with process
managers who are monitoring and sampling production, it is useful to understand
the use of control charts.
A run chart is a type of chart that shows variations from the mean as a function of
time. The value of each sample is plotted to show the day it was taken and how it
differs from the mean. If the variation is random, there will be roughly the same
number of points above and below the mean.
A spreadsheet can be used to simulate random variations in production. In this
exercise, the spreadsheet uses its random number function to pick two numbers
that are positive and two that are negative and adds them to the mean. Each
number represents a variation that is between the control limits. Most of the time
the positive and negative numbers cancel each other out and result in a sum that is
close to the mean, but occasionally the four random factors add up to values that
are far from the mean.
In this part of the exercise, you observe variations in a run chart and frequency
distribution chart that are due to random effects. You generate the random
numbers several times to see what production runs with random (unassignable)
variations look like.
Examine a Run Chart with Random Effects
Complete the exercise by following these instructions:
1. Navigate to the directory location where the exercise files for this unit
are located and open Ch10ControlChart.xls in a spreadsheet program
such as MS Excel.
2. Observe that in cells B4 through B23 the RAND function is used to
simulate the effects of four random influences on each day of
production for a twenty-day period.
3. Scroll the screen or adjust the zoom so that you can see both charts.
See Figure 10.16 "Screen Adjusted to Show Both Charts".
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 458
Figure 10.16 Screen Adjusted to Show Both Charts
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
4. On your keyboard, near the top, press the F9 key. The random
functions pick new numbers. Observe how the samples on the run
chart change and how the frequency distribution changes.
5. Press the F9 key several more times until you get a set of samples that
are grouped close to the mean like the example shown in Figure 10.17
"Most Samples near the Mean".
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 459
Figure 10.17 Most Samples near the Mean
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
6. Open a word processing document and then save it as
Ch10RunChartStudentName.doc. Switch back to the spreadsheet and
capture the screen. Switch to the word processing document and paste
the screen into the document. Your values will differ from those in the
figure.
7. According to Deming, it is not productive to hold employees to quality
standards that they do not control. Consider the effect on employee
moral if this set of samples was taken as the standard by which the
next run would be judged.
8. Press the F9 key again and stop at a set of samples that has a greater
variation, such as the example shown in Figure 10.15 "Normal
Distribution with Larger Standard Deviation".
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 460
Figure 10.18 Greater Variation
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
9. Capture this screen and paste it into Ch10RunChartStudentName.doc.
Because of the chance-cause random factors, this set of data has more
variation. If employee performance were punished or rewarded based
on this data, they would become discouraged because they do not
control the quality. Leave both files open.
Examine a Run Chart with Assignable Cause
Complete the exercise by following these instructions:
An assignable cause can be mixed in with the chance-cause random effects. In this
part, you introduce a factor that causes the samples to display a trend. You run the
simulation several times to learn how to recognize a set of data that is a mix of
random (chance-cause) factors and a trend that is probably from an assignable
cause.
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 461
1. In the spreadsheet, click cell B2. Type .03 and then, on the Formula bar,
click the Enter button. The random functions are recalculated, but
each value is increased by .03 over its predecessor.
2. Press the F9 key several times and observe how this trend appears
within the samples such as the example in Figure 10.19 "Trend That Is
Probably Due to an Assignable Cause".
Figure 10.19 Trend That Is Probably Due to an Assignable Cause
© Microsoft Corporation. All Rights Reserved. Used with permission from Microsoft Corporation.
3. It is clear that action must be taken soon to prevent the next batch of
samples from exceeding the control limit. The process manager might
create a project to identify the assignable cause and take the necessary
action, such as replacing a worn-out piece of equipment. Choose an
example where the upward trend is most apparent. Capture the screen
and paste it into the word processing document.
4. Close the spreadsheet without saving the changes.
5. In the word processing document, below the last picture, write a
reflective essay of between one hundred and two hundred words that
describes how you would recognize the difference between run charts
that show assignable and unassignable causes. Discuss the effect on
morale if one of the runs with random values that are close to the
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 462
mean is chosen as the standard of performance by which workers
would be measured.
6. Leave the word processing document open.
7. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate
File name Ch10RunChartStudentName.doc Ch10RunChartStudentName.do
Recognize
assignable
and
unassignable
causes of
statistical
variation
Three screen captures that
show two random causes and
one assignable cause; an essay
that describes how to recognize
the difference and the effect on
worker morale if a run with low
random variation is chosen as a
standard
Same as Best
8. Save the file and submit it as directed by the instructor.
Chapter 10 Managing Project Quality
10.7 Software and Technology Exercises 463
Chapter 11
Managing Project Risk
Project managers must be prepared to deal with adversity. Planning for events that
can delay a project, decrease its quality, or increase its budget is a necessary part of
project planning.
464
11.1 Defining Risk
LEARNING OBJECTIVES
1. Define project risk.
2. Define the difference between known and unknown risks.
3. Describe the difference between the business risk of the organization
and project risk.
Risk1
is the possibility of loss or injury.Merriam-Webster Online, s.v. “risk,”
http://www.merriam-webster.com/dictionary/Risk (accessed August 21,
2009).Project risk2
is an uncertain event or condition that, if it occurs, has an effect
on at least one project objective.Project Management Institute, Inc., A Guide to the
Project Management Body of Knowledge (PMBOK Guide), 4th ed. (Newtown Square, PA:
Project Management Institute, Inc., 2008), 273.Risk management3
focuses on
identifying and assessing the risks to the project and managing those risks to
minimize the impact on the project. There are no risk-free projects because there is
an infinite number of events that can have a negative effect on the project. Risk
management is not about eliminating risk but about identifying, assessing, and
managing risk.
Tzvi Raz, Aaron Shenhar, and Dov DvirTzvi Raz, Aaron J. Shenhar, and Dov Dvir,
“Risk Management, Project Success, and Technological Uncertainty,” R&D
Management 32 (2002): 101–12. studied the risk management practices on one
hundred projects in a variety of industries. The results of this study suggested the
following about risk management practices:
• Risk management is not widely used.
• The projects that were most likely to have a risk management plan
were those that were perceived to be high risk.
• When risk management practices were applied to projects, they
appeared to be positively related to the success of the project.
• The risk management approach influenced the meeting of project
schedules and cost goals but exerted less influence on project product
quality.
• Good risk management increases the likelihood of a successful project.
1. Possibility of loss or injury.
2. An uncertain event or
condition that, if it occurs, has
an effect on at least one project
objective.
3. Identification, evaluation, and
mitigation of risk.
Chapter 11 Managing Project Risk
465
Risk deals with the uncertainty of events that could affect the project. Some
potential negative project events have a high likelihood of occurring on specific
projects. Examples are as follows:
• Safety risks are common on construction projects.
• Changes in the value of local currency during a project affect
purchasing power and budgets on projects with large international
components.
• Projects that depend on good weather, such as road construction or
coastal projects, face risk of delays due to exceptionally wet or windy
weather.
These are examples of known risks4
. Known risks are events that have been
identified and analyzed for which advanced planning is possible. Other risks are
unknown or unforeseen.
Terrorist Attack
On September 11, 2001, project team members were flying from various
locations to a project review meeting in South Carolina when all flights were
cancelled because of the attacks on the World Trade Center. Members of the
leadership team could not make the meeting or return to their home base, and
progress on the project, like many projects that day, was delayed.
Sudden Family Death
Just before a project meeting in Texas, the engineering lead received word that
his father had died in the middle of the night. The team delayed making
decisions on some critical engineering events without the knowledge and
judgment of the engineering manager.
4. Risks that can be anticipated,
such as exceptionally bad
weather.
Chapter 11 Managing Project Risk
11.1 Defining Risk 466
Whole Crew Fails Drug Test
On a project in Texas, the entire twelve-member masonry crew failed the drug
screening test even though they had been told that drug screening was
required on the project.
These events were unforeseen by the project team, and in all three cases the
projects experienced schedule delays and additional costs.
Project risks are separate from the organizational risks5
that are associated with
the business purpose of the project.
A project was chartered to design and construct a copper mine at a cost not to
exceed $1.2 billion. If a project is completed on time, within budget, and meets all
quality specifications, the project is successful. If the price of copper drops below
the profit threshold for the company, the organizational goals of the project may
not be achieved. The price of copper is an organizational or business risk. The
copper mining company authorized the project based on assumptions about the
future price of copper. The price of copper is not a project risk on this project.
KEY TAKEAWAYS
• Project risk is the possible outcome that planned events on the project
will not occur as planned or that unplanned events will occur that will
have a negative impact on the project.
• Known risks can be identified before they occur, while unknown risks
are unforeseen.
• Organizational risks are associated with the business purpose of the
project and assumed by the client when deciding to do the project.
5. Possible loss that is associated
with the business purpose of
the project.
Chapter 11 Managing Project Risk
11.1 Defining Risk 467
EXERCISES
1. According to PMI, project risk is a(n) ___________ event or condition
that, if it occurs, has an effect on at least one project objective.
2. A risk such as the future market price of a commodity is an example of
a(n) _________ risk.
3. Define risk in your own words.
4. Give an example of a known risk and an unknown risk that are different
from those in the text.
5. Describe the difference between organizational risk and project risk in
your own words and give an example of each that is not used in the text.
Planning for Known and Unknown Risks
Consider a trip that you might be planning. Describe at least five risks that
are associated with taking the trip.
Chapter 11 Managing Project Risk
11.1 Defining Risk 468
11.2 Risk Management Process
LEARNING OBJECTIVES
1. Identify the major elements in managing project risk.
2. Describe the processes for identifying project risk.
3. Describe the processes for evaluating risk.
4. Describe the processes for mitigating risk.
Managing risks on projects is a process that includes risk assessment and a
mitigation strategy for those risks. Risk assessment6
includes both the
identification of potential risk and the evaluation of the potential impact of the
risk. A risk mitigation plan7
is designed to eliminate or minimize the impact of the
risk events8
—occurrences that have a negative impact on the project. Identifying
risk is both a creative and a disciplined process. The creative process includes
brainstorming sessions where the team is asked to create a list of everything that
could go wrong. All ideas are welcome at this stage with the evaluation of the ideas
coming later.
Risk Identification
A more disciplined process involves using checklists of potential risks and
evaluating the likelihood that those events might happen on the project. Some
companies and industries developed risk checklists based on experience from past
projects. The Construction Industry InstituteConstruction Industry Institute Cost/
Schedule Task Force, Management of Project Risks and Uncertainties (Austin, TX:
Construction Industry Institute, 1989). developed a detailed checklist of potential
risks based on the experience of several large construction companies executing
major construction projects. These checklists can be helpful to the project manager
and project team in identifying both specific risks on the checklist and expanding
the thinking of the team. The past experience of the project team, project
experience within the company, and experts in the industry can be valuable sources
for identifying potential risk on a project.
Identifying the sources of risk by category is another method for exploring
potential risk on a project. Some examples of categories for potential risks include
the following:
• Technical
6. Identification of the possibility
for loss due to an event and an
estimate of its effect.
7. Plan to reduce or eliminate loss
from unexpected events.
8. Possible occurrence that may
have a negative impact on the
project.
Chapter 11 Managing Project Risk
469
• Cost
• Schedule
• Client
• Contractual
• Weather
• Financial
• Political
• Environmental
• People
The people category can be subdivided into risks associated with the people.
Examples of people risks include the risk of not finding the skills needed to execute
the project or the sudden unavailability of key people on the project. David
HillsonDavid Hillson, “Using a Risk Breakdown Structure in Project Management,”
Journal of Facilities Management 2, no. 1 (2003): 85–97. uses the same framework as the
work breakdown structure (WBS) for developing a risk breakdown structure
(RBS)9
. A risk breakdown structure organizes the risks that have been identified
into categories using a table with increasing levels of detail to the right.
9. Organization of risks
associated with each activity in
the work breakdown structure
using a similar graphic
approach.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 470
Risks in John’s Move
In John’s move, John makes a list of things that might go wrong with his project
and uses his work breakdown structure as a guide. A partial list for the
planning portion of the RBS is shown below.
Figure 11.1
Risk Breakdown Structure (RBS)
The result is a more obvious understanding of where risks are most concentrated.
Hillson’s approach helps the project team identify known risks but can be
restrictive and less creative in identifying unknown risks and risks not easily found
inside the work breakdown structure.
Risk Evaluation
After the potential risks have been identified, the project team then evaluates the
risk based on the probability that the risk event will occur and the potential loss
associated with the event. Not all risks are equal. Some risk events are more likely
Chapter 11 Managing Project Risk
11.2 Risk Management Process 471
to happen than others, and the cost of a risk event can vary greatly. Evaluating the
risk for probability of occurrence and the severity or the potential loss to the
project is the next step in the risk management process.
The Construction Industry Institute conducted a study of large construction project
risk evaluation and categorized risk according to the potential impact of project
costs. High-impact risk consisted of risks that could increase the project costs by 5
percent of the conceptual budget or 2 percent of the detailed budget. Only thirty
potential risk events met these criteria. These were the critical few potential risk
events that the project management team focused on when developing a project
risk mitigation or management plan. Risk evaluation is about developing an
understanding of which potential risks have the greatest possibility of occurring
and can have the greatest negative impact on the project. These become the critical
few.
Figure 11.2 Risk and Impact
There is a positive correlation10
—both increase or decrease together—between
project risk and project complexity. A project with new and emerging technology
will have a high-complexity rating and a correspondingly high risk. The project
management team will assign the appropriate resources to the technology
10. Two variables that respond in
the same way to change in
their environment.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 472
managers to assure the accomplishment of project goals. The more complex the
technology, the more resources the technology manager typically needs to meet
project goals, and each of those resources could face unexpected problems.
Risk evaluation often occurs in a workshop setting. Building on the identification of
the risks, each risk event is analyzed to determine the likelihood of occurring and
the potential cost if it did occur. The likelihood and impact are both rated as high,
medium, or low. A risk mitigation plan addresses the items that have high ratings
on both factors—likelihood and impact.
Risk Analysis of Equipment Delivery
For example, a project team analyzed the risk of some important equipment
not arriving to the project on time. The team identified three pieces of
equipment that were critical to the project and would significantly increase the
costs of the project if they were late in arriving. One of the vendors, who was
selected to deliver an important piece of equipment, had a history of being late
on other projects. The vendor was good and often took on more work than it
could deliver on time. This risk event (the identified equipment arriving late)
was rated as high likelihood with a high impact. The other two pieces of
equipment were potentially a high impact on the project but with a low
probably of occurring.
Not all project mangers conduct a formal risk assessment on the project. There are
barriers to identifying risks. David Parker and Alison MobeyDavid Parker and Alison
Mobey, “Action Research to Explore Perceptions of Risk in Project Management,”
International Journal of Productivity and Performance Management 53, no. 1 (2004):
18–32. found in a phenomenological study of project managers that there was a low
understanding of the tools and benefits of a structured analysis of project risks. The
lack of formal risk management tools was seen as a barrier to implementing a risk
management program. The level of investment in formal risk management was also
associated with managerial psychological dimensions.
Some project managers are more proactive11
and will develop elaborate risk
management programs for their projects. Other managers are reactive12
and are
more confident in their ability to handle unexpected events without prior planning,
while some managers are risk averse13
and prefer to be optimistic and not consider
risks or to avoid taking risks whenever possible.
11. Making decisions and taking
action to anticipate an
expected difficulty.
12. Making decisions and taking
action in response to events.
13. A project manager or decision
maker who avoids taking risks.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 473
On projects with a low complexity profile, the project manager may informally
track items that may be considered risk items. On more complex projects, the
project management team may develop a list of items perceived to be higher risk
and track them during project reviews. On projects with greater complexity, the
process for evaluating risk is more formal with a risk assessment meeting or series
of meetings during the life of the project to assess risks at different phases of the
project. On highly complex projects, an outside expert may be included in the risk
assessment process, and the risk assessment plan may take a more prominent place
in the project execution plan.
On complex projects, statistical models are sometimes used to evaluate risk because
there are too many different possible combinations of risks to calculate them one at
a time. One example of the statistical model used on projects is the Monte Carlo
simulation14
, which simulates a possible range of outcomes by trying many
different combinations of risks based on their likelihood. The output from a Monte
Carlo simulation provides the project team with the probability of an event
occurring within a range and for combinations of events. For example, the typical
output from a Monte Carol simulation may reflect that there is a 10 percent chance
that one of the three important pieces of equipment will be late and that the
weather will also be unusually bad after the equipment arrives.
Risk Mitigation
After the risk has been identified and evaluated, the project team develops a risk
mitigation plan, which is a plan to reduce the impact of an unexpected event. The
project team mitigates risks in the following ways:
• Risk avoidance
• Risk sharing
• Risk reduction
• Risk transfer
14. A simulation that uses
statistical processes to evaluate
risk.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 474
Figure 11.3 Risk Mitigation
© 2010 Jupiterimages
Corporation
Each of these mitigation techniques can be an effective
tool in reducing individual risks and the risk profile of
the project. The risk mitigation plan captures the risk
mitigation approach for each identified risk event and
the actions the project management team will take to
reduce or eliminate the risk.
Risk Avoidance
Risk avoidance15
usually involves developing an
alternative strategy that has a higher probability of
success but usually at a higher cost associated with
accomplishing a project task. A common risk avoidance
technique is to use proven and existing technologies
rather than adopt new techniques, even though the new
techniques may show promise of better performance or
lower costs. A project team may choose a vendor with a
proven track record over a new vendor that is providing
significant price incentives to avoid the risk of working
with a new vendor. The project team that requires drug
testing for team members is practicing risk avoidance
by avoiding damage done by someone under the influence of drugs.
Risk Sharing
Risk sharing16
involves partnering with others to share responsibility for the risk
activities. Many organizations that work on international projects will reduce
political, legal, labor, and others risk types associated with international projects by
developing a joint venture with a company located in that country. Partnering with
another company to share the risk associated with a portion of the project is
advantageous when the other company has expertise and experience the project
team does not have. If the risk event does occur, then the partnering company
absorbs some or all of the negative impact of the event. The company will also
derive some of the profit or benefit gained by a successful project.
15. Changing the project plan to
eliminate a risk.
16. Partnering with others to share
responsibility for the risk
activities.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 475
Figure 11.4 Risk Transfer
© 2010 Jupiterimages
Corporation
Risk Sharing on Pipeline in Peru
One example of risk sharing is a large United States construction firm that won
a contract to build a pipeline in Peru. The company partnered with a
construction company in Peru with a reputation for performing on time. The
Peruvian company brought local expertise and the U.S. company contributed
the latest construction methods. If the project had not successfully completed
on time, both companies would have received less profit, but the project was
successful and both companies met profit targets.
Risk Reduction
Risk reduction17
is an investment of funds to reduce the risk on a project. On
international projects, companies will often purchase the guarantee of a currency
rate to reduce the risk associated with fluctuations in the currency exchange rate. A
project manager may hire an expert to review the technical plans or the cost
estimate on a project to increase the confidence in that plan and reduce the project
risk. Assigning highly skilled project personnel to manage the high-risk activities is
another risk reduction method. Experts managing a high-risk activity can often
predict problems and find solutions that prevent the activities from having a
negative impact on the project. Some companies reduce risk by forbidding key
executives or technology experts to ride on the same airplane.
Risk Transfer
Risk transfer18
is a risk reduction method that shifts
the risk from the project to another party. The purchase
of insurance on certain items is a risk transfer method.
The risk is transferred from the project to the insurance
company. A construction project in the Caribbean may
purchase hurricane insurance that would cover the cost
of a hurricane damaging the construction site. The
purchase of insurance is usually in areas outside the
control of the project team. Weather, political unrest,
and labor strikes are examples of events that can
significantly impact the project and that are outside the
control of the project team.
17. Investment of funds to reduce
the risk on a project.
18. Risk transfer is the risk
mitigation process of shifting
the possible negative impact of
an event to a party outside the
project.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 476
Contingency Plan
The project risk plan balances the investment of the mitigation against the benefit
for the project. The project team often develops an alternative method for
accomplishing a project goal when a risk event has been identified that may
frustrate the accomplishment of that goal. These plans are called contingency
plans. The risk of a truck drivers strike may be mitigated with a contingency plan
that uses a train to transport the needed equipment for the project. If a critical
piece of equipment is late, the impact on the schedule can be mitigated by making
changes to the schedule to accommodate a late equipment delivery.
Roof Left Unfinished for Late Equipment
On one project, the project team left a section of a roof unfinished to allow the
installation of equipment after the building was done and the roof installed.
The equipment was late, and the project would have been delayed if the
building was not completed. The project team left a section of the roof
unfinished to allow the equipment to be placed in the building with the use of a
crane. The roof was then completed, and the project finished on time.
In this example, the equipment arriving on time to meet the project schedule
was considered a high risk. One option was to delay the end of the project. The
team developed a contingency plan to install the roof in two phases to allow the
installation of the equipment, if it was late. The contingency plan was more
expensive and contingency funds were placed in the budget to cover the
possibility that the equipment would be late.
Contingency funds are funds set aside by the project team to address unforeseen
events that cause the project costs to increase. Projects with a high-risk profile will
typically have a large contingency budget. Although the amount of contingency
allocated in the project budget is a function of the risks identified in the risk
analysis process, contingency is typically managed as one line item in the project
budget.
Some project managers allocate the contingency budget to the items in the budget
that have high risk rather than developing one line item in the budget for
contingencies. This approach allows the project team to track the use of
contingency against the risk plan. This approach also allocates the responsibility to
manage the risk budget to the managers responsible for those line items. The
Chapter 11 Managing Project Risk
11.2 Risk Management Process 477
availability of contingency funds in the line item budget may also increase the use
of contingency funds to solve problems rather than finding alternative, less costly
solutions. Most project managers, especially on more complex projects, will manage
contingency funds at the project level, with approval of the project manager
required before contingency funds can be used.
KEY TAKEAWAYS
• Risk management is a creative process that involves identifying,
evaluating, and mitigating the impact of the risk event.
• Risk management can be very formal, with defined work processes, or
informal, with no defined processes or methods. Formal risk evaluation
includes the use of checklists, brainstorming, and expert input. A risk
breakdown structure (RBS) can follow the work breakdown structure
(WBS) to identify risk by activity.
• Risk evaluation prioritizes the identified risks by the likelihood and the
potential impact if the event happens.
• Risk mitigation is the development and deployment of a plan to avoid,
transfer, share, and reduce project risk. Contingency planning is the
development of alternative plans to respond to the occurrence of a risk
event.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 478
EXERCISES
1. A risk ___________ plans eliminates or minimizes the impact of risk
events.
2. Risk management is a creative process that involves identifying,
evaluating, and __________ the impact of risk events
3. A process for risk assessment that is parallel to the WBS is a _________
_______ _______ (three words).
4. Choose a project risk that could be related to the John’s move example
that is not described in the text and describe a mitigation plan for that
risk. You may choose from any part of the John’s move example that has
been described in previous chapters.
5. If you are planning a party at your residence, list three project risks and
rate each of them for their potential impact and likelihood. Use high,
medium, and low.
6. Describe the similarities and differences between risk transfer and risk
sharing.
Risk Management
Assume that you are involved in planning a wedding. What are three risks
that might affect the ceremony or reception, and how would you mitigate
the impact of those risks? For example, if you are planning an outdoor
wedding, describe the backup plan in case of rain.
Chapter 11 Managing Project Risk
11.2 Risk Management Process 479
11.3 Project Risk by Phases
LEARNING OBJECTIVES
1. Describe the elements of risk management during the initiation phase.
2. Describe the elements of risk management during the planning phase.
3. Describe the elements of risk management during the execution phase.
4. Describe the elements of risk management during the closeout phase.
Project risk is dealt with in different ways depending on the phase of the project.
Initiation Phase
Risk is associated with things that are unknown. More things are unknown at the
beginning of a project, but risk must be considered in the initiation phase and
weighed against the potential benefit of the project’s success in order to decide if
the project should be chosen.
Chapter 11 Managing Project Risk
480
Risks by Phase in John’s Move
In the initiation phase of John’s move, John considers the risk of events that
could affect the whole project. He identifies the following risks during the
initiation phase that might have a high impact and rates the likelihood of their
happening from low to high.
1. His new employer might change his mind and take back the job
offer after he’s given notice at his old job: Low.
2. The current tenants of his apartment might not move out in time
for him to move in by the first day of work at the new job: Medium.
3. The movers might lose his furniture: Low.
4. The movers might be more than a week late delivering his
furniture: Medium.
5. He might get in an accident driving from Chicago to Atlanta and
miss starting his job: Low.
John considers how to mitigate each of the risks.
1. During his job hunt, John had more than one offer, and he is
confident that he could get another job, but he might lose deposit
money on the apartment and the mover. He would also lose wages
during the time it took to find the other job. To mitigate the risk of
his new employer changing his mind, John makes sure that he
keeps his relationships with his alternate employers cordial and
writes to each of them thanking for their consideration in his
recent interviews.
2. John checks the market in Atlanta to determine the weekly cost
and availability of extended-stay motels.
3. John checks the mover’s contract to confirm that they carry
insurance against lost items, but they require the owner to provide
a detailed list with value estimates and they limit the maximum
total value. John decides to go through his apartment with his
digital camera and take pictures of all of his possessions that will
be shipped by truck and to keep the camera with him during the
move so he has a visual record and won’t have to rely on his
memory to make a list. He seals and numbers the boxes so he can
tell if a box is missing.
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 481
4. If the movers are late, John can use his research on extended-stay
motels to calculate how much it would cost. He checks the moving
company’s contract to see if they compensate the owner for late
delivery, and he finds that they do not.
5. John checks the estimated driving time from Chicago to Atlanta
using an Internet mapping service and gets an estimate of eleven
hours of driving time. He decides that it would be too risky to
attempt to make the drive by himself in one day, especially if he
didn’t leave until after the truck was packed. John plans to spend
one night on the road in a motel to reduce the risk of an accident
caused by driving while too tired.
John concludes that the high-impact risks can be mitigated and the costs from
the mitigation would be acceptable in order to get a new job.
Planning Phase
Once the project is approved and it moves into the planning stage, risks are
identified with each major group of activities. A risk breakdown structure (RBS) can
be used to identify increasing levels of detailed risk analysis.
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 482
Risk Breakdown Structure for John’s Move
John decides to ask Dion and Carlita for their help during their first planning
meeting to identify risks, rate their impact and likelihood, and suggest
mitigation plans. They concentrate on the packing phase of the move. They fill
out a table of risks, as shown below.
Figure 11.5
Risk Breakdown Structure (RBS) for Packing John’s Apartment
Execution Phase
As the project progresses and more information becomes available to the project
team, the total risk on the project typically reduces, as activities are performed
without loss. The risk plan needs to be updated with new information and risks
checked off that are related to activities that have been performed.
Understanding where the risks occur on the project is important information for
managing the contingency budget and managing cash reserves. Most organizations
develop a plan for financing the project from existing organizational resources,
including financing the project through a variety of financial instruments. In most
cases, there is a cost to the organization to keep these funds available to the project,
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 483
including the contingency budget. As the risks decrease over the length of the
project, if the contingency is not used, then the funds set aside by the organization
can be used for other purposes.
To determine the amount of contingency that can be released, the project team will
conduct another risk evaluation and determine the amount of risk remaining on
the project. If the risk profile is lower, the project team may release contingency
funds back to the parent organization. If additional risks are uncovered, a new
mitigation plan is developed including the possible addition of contingency funds.
Closeout Phase
During the closeout phase, agreements for risk sharing and risk transfer need to be
concluded and the risk breakdown structure examined to be sure all the risk events
have been avoided or mitigated. The final estimate of loss due to risk can be made
and recorded as part of the project documentation. If a Monte Carlo simulation was
done, the result can be compared to the predicted result.
Risk Closeout on John’s Move
To close out the risk mitigation plan for John’s move, John examines the risk
breakdown structure and risk mitigation plan for items that need to be
finalized. He makes a checklist to be sure all the risk mitigation plans are
completed, as shown below.
Figure 11.6
Closeout of Risk Mitigation Plan for John’s Move
Risk is not allocated evenly over the life of the project. On projects with a high
degree of new technology, the majority of the risks may be in the early phases of
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 484
the project. On projects with a large equipment budget, the largest amount of risk
may be during the procurement of the equipment. On global projects with a large
amount of political risk, the highest portion of risk may be toward the end of the
project.
KEY TAKEAWAYS
• During the initiation phase, risks are identified that could threaten the
viability of the project. Mitigation options are considered to see if they
would be sufficient to protect the project.
• During the planning phase, risks are identified and analyzed for each
activity group in a risk breakdown structure, and mitigation is planned
for each risk
• During the execution phase, risks are checked off as activities are
completed or mitigation is performed if loss does occur. New risks are
identified and added to the plan.
• During the closeout phase, insurance contracts are cancelled and
partnerships terminated. A summary of actual costs associated with
risks are compared with initial estimates to refine estimating
capabilities. The successes and failures of the risk management plan are
summarized and saved with the project documentation to add to the
company’s corporate knowledge.
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 485
EXERCISES
1. High-risk events that require expensive mitigation options threaten the
choice of the project during the _________ phase.
2. A risk breakdown structure is developed during the _______ phase.
3. Risk transfers and risk sharing arrangements are terminated during the
___________ phase.
4. If you plan an outdoor wedding, what is a risk that would threaten the
project in the initiation phase and a mitigation plan that would allow
the project to proceed?
5. In your own words, describe risk management during the planning
phase.
6. In your own words, describe risk management during the closeout
phase?
Risk Assessment
Recall a project that you considered at one time but decided against during
the initiation phase because the risks were too great or the mitigation plan
was insufficient to proceed. Describe the project, the risks, the mitigation
plan, and why you chose not to go forward.
Chapter 11 Managing Project Risk
11.3 Project Risk by Phases 486
11.4 Project Risk and the Project Complexity Profile
LEARNING OBJECTIVE
1. Identify the relationship between project risk and external, internal,
technical, and environmental complexity.
Risk seems to have a positive correlation to complexity. High-risk projects are in
most cases highly complex. The process of conducting a risk analysis focuses on
understanding what can go wrong and the likelihood that it will go wrong. The
project team then develops a project mitigation plan that addresses the items that
were identified as high risk. The complexity analysis explores the project from the
perspective of what elements on the project add to project complexity. The result of
this analysis is the information needed by the project leadership to develop an
appropriate execution plan. This execution plan also contains the risk management
plan.
Although increased complexity on a project increases the project risk profile, risk is
only one component of the complexity profile, and the manageability of the risk is
also reflected in the complexity level of the project. For example, the organizational
component of the project may be extremely complex with decision making shared
among several independent clients. The project management team will develop an
execution plan that includes developing and maintaining alignment among the
various clients. Although the organizational risk of the project decreases with the
development of the execution plan, the organizational approach of the client did
not change the complexity level of the project. If the Darnall-Preston Complexity
Index (DPCI) is used to rate the project, high ratings in each category carry their
own types of increased risks.
External Complexity
Projects that have a high score in the external complexity category in the DPCI are
larger and longer than usual for the project management group and the project
manager and the available resources are lacking. Due to lack of experience on this
size project, unknown risks are significant. The inadequacy of resources will cause
risks that are more predictable.
Chapter 11 Managing Project Risk
487
Internal Complexity
Projects with high scores for internal complexity have risks to the budget, schedule,
and quality due to organizational complexity and changes of scope due to lack of
clarity in project and scope statements.
Technological Complexity
High scores in technological complexity are associated with high levels of risk due
to unknown flaws in the technology and lack of familiarity with it. These problems
result in risks to the schedule, budget, and quality.
Environmental Complexity
Environmental complexity includes legal, cultural, political, and ecological factors.
High scores for complexity in this category imply high risks for delay and expensive
resolution to lawsuits, public opposition, changes for political considerations, and
unforeseen ecological impacts.
KEY TAKEAWAYS
• There is a positive correlation between the complexity of a project and
the risk. Increased levels of complexity imply more people, newer
technologies, and increased internal and external unknown factors.
• High scores for external complexity imply high risks to the schedule,
budget, and quality due to unknown factors and limited resources.
• High scores for internal complexity imply high risks to the budget,
schedule, and quality due to organizational complexity and changes of
scope due to lack of clarity in project and scope statements.
• High scores for technological complexity imply high risks to the budget,
schedule, and quality due to unknown flaws in the technology and lack
of familiarity with it.
• Environmental complexity includes legal, cultural, political, and
ecological issues. High scores for complexity in this category imply high
risks for delay and expensive resolution to lawsuits, public opposition,
changes for political considerations, and unforeseen ecological impacts.
Chapter 11 Managing Project Risk
11.4 Project Risk and the Project Complexity Profile 488
EXERCISES
1. There seems to be a ______ correlation between project complexity and
risk.
2. One complexity category that is likely to have high risks due to
unknown causes is _______, due to lack of experience with the size of
project.
3. How does a high degree of complexity in a project’s environment affect
the level of risk?
Environmental Risks
Identify a project with which you are familiar or one that has been in the
news recently where the external environmental complexity caused
increased costs or delays. Describe the impact of the risk, and the mitigation
and its effectiveness. If the mitigation was ineffective, describe how you
might have prepared a different mitigation plan.
Chapter 11 Managing Project Risk
11.4 Project Risk and the Project Complexity Profile 489
11.5 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Choose a simple project with which you are familiar and describe a risk
that is typical of each phase of the project and a mitigation plan for
those four risks.
2. Assume that you are considering the purchase of a house. What are
examples of each of the four types of risk mitigation that are associated
with buying a house? Explain your choice of each example and relate it
to the definition of each type of risk mitigation.
3. Assume that you are working on a complex project to add a wing to a
hospital that is next to a natural wetland. Using the four categories of
the Darnall-Preston Complexity Index, identify a high-impact risk and
explain your choice.
Chapter 11 Managing Project Risk
490
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Choose a situation with which you are familiar where a risk event
occurred that had a high impact on a project causing it to exceed the
contingency allowances in the schedule or budget. Do you think this
event was an unknown or known risk? What additional mitigation
efforts (if any) should be used on a similar project in the future?
Consider situations described by your classmates and contribute ideas
for mitigation of events in their projects.
2. Consider your personal health. What are two examples of known risks
and a mitigation plan for those two risks? Describe your mitigation plan
for unknown risks. Consider the risks and plans described by your
classmates and make suggestions for other mitigation options.
Chapter 11 Managing Project Risk
11.5 Exercises 491
11.6 Web Exercise
LEARNING OBJECTIVE
1. Describe the benefits of estimating risk using a Monte Carlo simulation.
Monte Carlo Risk Simulations
Planning for risks is a form of betting on the future. An accomplished gambler
knows the odds of drawing a certain combination of cards in a poker hand or of a
ball landing on a number at a roulette wheel. If a project has several risk factors,
they are not likely to all occur on the same project, but it is important to know the
odds of that happening and to compare them to the potential profit of the project. If
several risks do materialize on the same project, it might cause the company to lose
money on the project, and senior management must decide if the benefit is worth
the risk.
Computers can generate random numbers that can be used to simulate the
likelihood of combinations of risk factors occurring and the impact on the project’s
profitability. These simulations calculate odds like those a gambler would use
before placing a bet, and the process is named after a famous gambling center in
Europe.
To use a Monte Carlo simulation, you have to decide how the frequency of
occurrences is distributed. Three types of distributions are most common: normal,
skewed, and equal. If they are governed by the central limits principle, the
occurrences will have a normal distribution.
Chapter 11 Managing Project Risk
492
Figure 11.7 Normal Distribution
If the likely frequency of occurrences of a risk factor is more likely to be distributed
to either side of the middle of the range, it is a skewed distribution.
Figure 11.8 Skewed Distribution
If the likelihood of occurrence is evenly distributed across the range where each
possibility has the same odds of occurring, it is an equal distribution.
Figure 11.9 Equal Distribution
Chapter 11 Managing Project Risk
11.6 Web Exercise 493
A computer can choose numbers for each risk factor that represent a possible
outcome for that risk on the project according to its distribution. Those numbers
are fed into a spreadsheet that determines the effect on the project and its costs.
This process is repeated thousands of times, and the result of each
iteration—repeated process—is stored in a table of possible outcomes. This table is
summarized in a histogram that shows how many of the iterations produced profit
(or loss) in each range (bin).
The outcome of a Monte Carlo simulation gives managers an idea of how much the
project could make or lose and the odds of that happening. Monte Carlo simulations
are often used to predict the likelihood of a new product making a profit or loss.
The same methods can be applied to predicting the profit or loss on a project.
Learn More about Monte Carlo Simulations
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and then save
the document as Ch11MonteCarloStudentName.doc. Leave the document
open.
2. Start a web browser and then to go to A Practical Guide to Monte Carlo
Simulations at http://www.vertex42.com/ExcelArticles/mc/
MonteCarloSimulation.html.
3. Read the first screen to review the concepts.
4. Near the bottom of the first screen, click the arrow labeled Sales
Forecast Example, as shown in Figure 11.10 "Next Page Button".
Figure 11.10 Next Page
Button
Source: Courtesy of
www.vertex42.com.
5. Scroll down past the advertisements and begin reading at Step 1.
Capture a screen that shows Step 1 and paste it into
Ch11MonteCarloStudentName.doc.
6. Read the explanation of how to create a model.
7. Use the Next button at the bottom of the screen to go to step 2,
Generating Random Inputs.
8. Read steps 2, 3, and 4 on this screen.
Chapter 11 Managing Project Risk
11.6 Web Exercise 494
9. Continue reading and advancing screens until you get to the histogram
as shown in Figure 11.11 "Estimated Loss or Profit".
Figure 11.11 Estimated Loss or Profit
Source: Adapted from Wittwer, J.W., "Creating a Histogram In Excel" from www.vertex42.com,
June 1, 2004, http://vertex42.com/ExcelArticles/mc/Histogram.html.
10. The green line is the cumulative probability. The red lines are intended
to help you find the 5 percent and 95 percent probability points on the
green line.
11. Capture this screen and paste it into Ch11MonteCarloStudentName.doc.
12. Refer to Figure 11.11 "Estimated Loss or Profit". Notice a spot on the
green line is circled. According to the horizontal scale, this is the spot
on the cumulative percentage line that marks the difference between
negative and positive income for the project. In the word processing
document, below the last screen capture, describe how you would use
this chart to predict the percentage chance that this project will lose
money. Leave the document open.
Learn about Using Dedicated Monte Carlo Simulation Software
Complete the exercise by following these instructions:
1. Use your web browser to go to Monte Carlo Simulation Tutorial at
http://www.solver.com/simulation/monte-carlo-simulation/tutorial.htm.
Chapter 11 Managing Project Risk
11.6 Web Exercise 495
2. Read each of the first seven screens. Capture screens where indicated
in the following list and paste them into
Ch11MonteCarloStudentName.doc:
◦ Introduction (Capture the section titled The Flawed Average Model.)
◦ Introducing Uncertainty
◦ Introducing Uncertainty (cont.)
◦ Uncertain Functions and Statistics
◦ Using Interactive Simulation (Capture the table near the bottom.)
◦ Viewing the Full Range of Profit Outcomes
◦ Focusing on Profitable Outcomes (Capture the simulation results
histogram at the bottom of the screen.)
3. The authors make the case that a simple average of the risks produces
an estimate that is too high. If they run a thousand combinations of
risk outcomes, they predict a lower profit and a certain likelihood of
losing money. In the word processing document, below the last screen
capture, review the screens and answer the following questions:
◦ What does a simple average model predict for a net profit?
◦ What does the simulation predict is the “True Average” profit?
◦ If most of the risk factors occur, how much money could the
project lose?
Analysis
1. At the bottom of Ch11MonteCarloStudentName.doc, write between one
hundred and two hundred words to describe the benefits of estimating
risk using a Monte Carlo simulation versus a simple average of the
risks. Use specific references to the assigned reading in the text and in
the web pages in the previous two parts of this exercise.
2. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch11MonteCarloStudentName.doc
.docx
version
Student
name not
included
Describe
the
benefits of
Two screen captures plus a
description of how the chart is
used to estimate the percentage
Same as
Best
Missing
screens;
inaccurate
Chapter 11 Managing Project Risk
11.6 Web Exercise 496
Element Best Adequate Poor
estimating
risk using
a Monte
Carlo
simulation
chance of losing money; three
screen captures and answers to
the three questions; description
of the benefits of a Monte Carlo
simulation
estimates;
incorrect
answers to
the three
questions;
description
without
specific
references
3. Save the file and submit it as directed by the instructor.
Chapter 11 Managing Project Risk
11.6 Web Exercise 497
Chapter 12
Project Procurement and Closure
To achieve the objectives of the project, the management team will purchase goods
and some services. The process of obtaining goods and services from providers who
are outside of the organization is procurement1
. This chapter discusses the process
for selecting the work that will be procured and the different methods and
processes for procuring the equipment, materials, and services for the project.
1. Obtaining goods and services
from providers outside the
organization.
498
12.1 Identifying the Need for Resources Outside the Organization
LEARNING OBJECTIVES
1. Identify the factors that are considered when deciding whether to buy
goods from within the organization or to obtain them from outsiders.
2. Identify what factors are considered when deciding to outsource or
perform the work within the organization.
The project team decides the work that will be self-performed2
—performed by
members of the project team—and the work that will be outsourced to others. The
procurement strategy focuses on the work that will be outsourced3
—performed by
outsiders.
Luu, Ng, and ChenDuc Thanh Luu, S. Thomas Ng, and Swee Eng Chen, “Parameters
Governing the Selection of Procurement System,” Journal of Engineering, Construction,
and Architectural Management 10, no. 3 (2003): 209–18. studied project procurement
selection priorities and identified budget and schedule as the most important
considerations in the decision to outsource activities. This study of construction
projects also identified other items that project managers must consider in
developing a procurement strategy, including quality, risk, complexity, and
flexibility. Some outsourcing decisions are easy.
Outsourcing Steel and Concrete in New York
A construction company has a contract to build a large building in downtown
New York. Most, if not all, the construction materials, such as steel and
concrete, will be purchased from companies that specialize in steel and
concrete. Existing companies that produce and sell steel can provide the steel
the project needs at a much lower cost and faster than if the project manager’s
organization attempted to build the capacity itself.
Some outsourcing decisions—sometimes called make or buy decisions—are more
difficult. On the same building construction project, new construction materials and
methods are required that will make the building more energy efficient. The project
2. Work done by members of the
organization rather than
outsiders.
3. Services or products provided
by another company.
Chapter 12 Project Procurement and Closure
499
Figure 12.1 Outsourcing
Supply of Construction
Materials
© 2010 Jupiterimages
Corporation
manager can outsource this portion of the project to companies that have this
expertise or develop this expertise on the project and self-perform the work. The
costs of developing this expertise within the project will be more expensive and
may take more time than outsourcing this work.
Self-performing this work also has benefits. The project
team would develop this expertise and the additional
expertise would add value to the parent company and
save money on future projects. The project management
team would have greater control over the work because
the work would be performed by members of the
project team instead of outsiders. Self-performing and
outsourcing the work have both benefits and risks.
This decision is primarily influenced by the following:
• Cost (budget)
• Schedule
The following factors also influence outsourcing
decisions:
• Risk
• Quality
• Flexibility
Outsourcing Versus Self-Performing
On the New York building construction project, the project manager decided to
outsource the portion of the work that required new methods and materials.
The project team assigned engineers from the project team to evaluate the
work during the project and to assess the appropriate methods and costs for
the parent company to develop this capacity within the company. The
additional costs of developing the capacity and the additional risks of
implementing a new method with existing resources outweighed the benefits of
developing the capacity within the organization.
Chapter 12 Project Procurement and Closure
12.1 Identifying the Need for Resources Outside the Organization 500
The project procurement strategy begins with these self-perform or buy decisions.
New York Construction Project
On the New York building construction project, the basic engineering and
construction activities are core expertise of the parent company, and the
project team had access to the qualified resources to perform the work. The
decision to self-perform this portion of the work was easy because the company
had a cost and schedule advantage by using the existing resources. The
purchase of the steel, concrete, and other commodities was also easy because
the costs of developing those resources far outweighed the benefit of
purchasing them.
Some of the procurement decisions are not so obvious and the project team
evaluates the cost, schedule, quality, flexibility, and risk implication of selfperforming
versus outsourcing the work.
KEY TAKEAWAYS
• The factors that influence procurement are primarily cost and schedule
but also include risk, quality, and flexibility.
• To determine whether to outsource or do the work within the
organization, consider which option is less costly and which option can
deliver the work on time.
Chapter 12 Project Procurement and Closure
12.1 Identifying the Need for Resources Outside the Organization 501
EXERCISES
1. The primary factors that influence procurement are cost and
____________.
2. In addition to the two primary factors that influence procurement, what
are three other important factors?
3. What is one advantage of doing the work within the organization
instead of outsourcing it?
Internalize your learning experience by preparing to discuss the following.
Choose a situation with which you are familiar where you or your
organization chose to hire someone outside your organization instead of
developing the skill yourselves. What factors were most important in
making the choice and how do they relate to the factors described in this
section?
Chapter 12 Project Procurement and Closure
12.1 Identifying the Need for Resources Outside the Organization 502
12.2 Procurement Plan
LEARNING OBJECTIVES
1. Describe the role of suppliers.
2. Describe the role of vendors.
3. Describe the role of partners.
After the outsourcing versus self-performing decisions are made, the procurement
team develops the purchasing plan.
The method of purchasing products or services depends on the uniqueness and
importance of the product or service. One way to organize the procurement plan is
by the type of relationship with the providers of the outsourced goods or services.
Suppliers
Some of the goods or services are commonly available with little variation in quality
or availability. Such goods and services are called commodities4
. The providers of
commodities are suppliers5
and there are usually several from which to choose.
Purchasing commodities from suppliers focuses on achieving the lowest cost. Cost
of commodities can often be found in the supplier’s catalog. On smaller, less
complex projects, supplies can be purchased as needed from the supplier’s catalog.
Additional cost savings are often available if large quantities of a commodity are
purchased from the same supplier. On larger, more complex projects, a list of
materials and supplies is developed from the project cost estimate. This list is
provided to suppliers as a request for quote (RFQ)6
, and the suppliers respond with
their lowest price. To avoid choosing a bid7
from a company that will make a
promise it cannot keep, many organizations will maintain a list of suppliers that
meet the organization’s requirements. These requirements usually include the
proven ability to meet the quality and schedule specifications.
4. Items that can be bought off
the shelf with no special
modification for the project.
5. Source of commodities.
6. Requires a bidder to provide a
price and additional
information for a defined scope
of work.
7. An offer to provide something
of value for compensation. A
bid can be written or verbal
and can be in response to a
solicitation or unsolicited.
Chapter 12 Project Procurement and Closure
503
Figure 12.2 Commodities
Purchased from a Supplier
Using an RFQ
© 2010 Jupiterimages
Corporation
The project management team develops a procedure for
requesting a quote. On smaller projects, the parent
purchasing organization may process all RFQs. On larger
projects, a procurement organization is established with
expertise in purchasing. The purchasing team will
develop a list of all procurement requirements for the
project and develop a procurement schedule that
assures the materials will be available to the project
when needed.
The project team develops an RFQ based on the quantity
and schedule needs of the project and sends the RFQ to
the identified qualified suppliers. The suppliers then
develop a quote that lists the specific materials to be
provided, the price for each, and a schedule for delivery.
The project team evaluates each quote from suppliers
and determines that the supplier bid meets all the
requirements, and in most cases, the supplier with the
lowest price will be awarded the bid.
RFQ for Housing Contractor
A housing contractor who is building ten identical houses develops a materials
list that includes all the carpentry, plumbing, and electrical supplies needed to
build all ten houses. The housing contractor develops an RFQ for all these
materials, including the construction schedule, and submits the RFQ to the four
largest building supply companies in the region. Each of the supply companies
decides to bid on the project and provides a bid for the materials in the RFQ.
One of the bidders has the lowest price but is unable to deliver the materials to
the job site. The project team calculates the cost of transporting the materials
to the job site. After the cost of transportation is added to the bid, it is no
longer the lowest total cost. The bidder with the total lowest total cost is
awarded the contract.
Some organizations that do a large number of projects will develop a relationship
with one or two suppliers based on developing cost savings for both organizations.
This relationship is commonly called a key supplier8
relationship.
8. A person or organization
supplying goods or services to
the project that has a special
relationship with the project or
parent organization and might
bypass the bidding process.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 504
Key Supplier for Housing Supplies
The housing contractor develops a key supplier relationship with one or two of
the building supply companies. The building supply company would guarantee
a 10 percent discount on all materials and the contractor would promise to
purchase exclusively from the key supplier. Both organizations save the cost
and time associated with preparing the bid. The building supply company plans
on a consistent volume of business from the contractor and the contractor can
expect priority treatment when supplies are scarce.
Vendors
Vendors9
often provide a unique product or service that cannot be readily
purchased in the marketplace. The vendor typically provides a product or service
that is designed for the project. The following are examples of products or services
provided by vendors:
• A large military contract to design and build a new fighter aircraft
• A new software program design to improve the efficiency of a hospital
emergency room
• The design and construction of a blast furnace for a new steel mill
Products and services from vendors need input and insight from the vendor.
Instead of issuing a request for quote (RFQ) for a list of commodities, the project
team issues a request for proposal (RFP)10
. Companies responding to an RFP are
invited to provide creative approaches to adding value to the project. Bidders are
encouraged to offer design alternatives, alternative uses of materials, and
scheduling alternatives that meet all the project requirements and also reduce the
total project cost. The bids are evaluated on the total value to the project, including
the contribution to the project goals.
9. Provider of products or
services.
10. Requires a bidder to offer
solutions and ideas on how to
perform the scope of work and
a price for performing that
work.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 505
Figure 12.3
Vendors provide solutions in
response to an RFP.
© 2010 Jupiterimages
Corporation
RFP for Mining Operation
A copper mining project in Argentina included the design and construction of
the mine site, the extraction of copper from the raw materials, the building of a
pipeline to transport the copper ore to the Atlantic coast, and the construction
of a port to enable the loading of the copper ore into various size ships. The
construction materials, such as lumber, steel, and concrete, were purchased
through suppliers, including key suppliers.
Some of the equipment used to extract the copper ore from the raw materials
costs several million dollars and is only fabricated by a few companies. The
project team designs the equipment to meet characteristics of the mining
environment in Argentina: size, hardness, and composition of the raw material.
The bid documents sent to the mining equipment vendors included the design
specification and performance specification of the equipment, the project
schedule, and the mining process. A request for proposal (RFP) was issued to
each of the vendors.
Because vendor performance is critical to the success of
the project, the management of the vendor relationship
is a project management priority. Project management
will often implement processes that encourage the
vendors to submit suggestions that will reduce total
project cost, shorten the schedule, or improve the
performance. The project management team will often
assign someone from the team to monitor the
relationship and provide support from project resources
to help assure vendor success.
Partners
If the parent organization lacks key skills or
relationships, it might work with other organizations as
partners—especially on international projects.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 506
Figure 12.4
Partners provide missing skills
and relationships.
© 2010 Jupiterimages
Corporation
Partnership on Mining Project
In the Argentina mining project example, the United States parent organization
had project management, engineering, procurement, construction, and mining
technology expertise. The company also had relationships with major mining
equipment vendors. The U.S. construction company partnered with an
Argentinean company that had expertise and relationships important to the
success of the project.
The Argentinean company contributed local knowledge of the construction
workforce; local engineering and construction practices, knowledge, and
expertise in the government permitting processes; and an existing relationship
with potential key suppliers and local vendors.
A partnership11
is a formal arrangement to execute the project with each party
contributing resources. In most partnerships, both parties benefit from the success
of the project and share the costs associated with a less successful project. Critical
to the success of a partnership is the clear definition of roles and responsibilities on
the project, a common understanding of the project goals, and a scope of work for
each partner.
Building the relationship between major partners on
the project is similar to building relationships with
clients. On a large, complex project, a partnership
alignment session is often required to build the trust
required for open communication channels.
Maintaining the relationship permits more effective
problem solving and coordinated action on the project.
A well-managed partnering relationship can contribute
to the achievement of project goals, reduce overall
costs, and shorten the project schedule. In most cases,
the parent organization is aware of weaknesses in the
project resources or skills and searches for a potential
partner that has the needed resources or skills. In our
Argentinean example, the parent company knew that
construction experience in Argentina would be
important to a successful project. Both companies will
research the capability of the other company to assure
that the partnership is appropriate for both companies.
11. Formal arrangement to
execute the project with each
party contributing resources.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 507
Biotech Plant Partnership in Puerto Rico
On a project to build a new biotech plant in Puerto Rico, a large engineering
and construction company selected a Puerto Rican civil engineering company
to design the site work on the project. Because the plant was needed quickly,
the project schedule was an important component of every discussion and
meeting the project end date was a major goal. The Puerto Rican Company was
asked to begin developing the civil drawings early, before much of the needed
information had been developed. This was a situation where a partnering
relationship would benefit the project. Both companies would mutually support
each other to achieve project goals and both would benefit from project
success.
In this situation, the project procurement plan specified the development of a
subcontract for the civil engineering, and a contract was developed with a clear
scope of work and a cost based on completing the work in the contract on time
and according to specification. Because the aggressive project schedule
required the civil engineering company to begin work before all the needed
information was available, change orders were required when new information
became available. The contract allowed several days to evaluate the impact of
the change on cost and schedule, and the time evaluation process began to
cause delays in the project.
Eventually, a new contract was developed to make the Puerto Rican company a
partner. These new partnering arrangements allowed the engineers to get early
information and contribute ideas that would shorten the schedule. This case is
an example of the need to evaluate the project goals and environment and
develop a procurement strategy that matches the conditions of the project.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 508
KEY TAKEAWAYS
• Commodities are purchased through suppliers using a request for quote
(RFQ) and selected on the basis of price. An exception is the key supplier
relationship where the supplier-organization relationship is long term
and the supplier passes along some of the savings of avoiding the
bidding process.
• Vendors provide products and services that are designed for the project
based on a request for proposal (RFP) that invites the vendors to meet
the goals of the request using their products and skills.
• If the organization lacks key skills or relationships, it might form a
partnership arrangement with another company to share the benefits
and risks of the project.
EXERCISES
1. Commodities are described in an ______ (three-letter acronym).
2. The objectives of the work are described in an _____________ (threeletter
acronym), and the details of how to accomplish those objectives is
proposed by the vendor.
3. If a project takes place in a different country, the project team might
seek a _________ with a local company to provide local contacts and
expertise in local issues.
4. What is different about a key supplier relationship?
5. What is the difference between an RFP and an RFQ?
6. How is a partnership different from a vendor relationship?
Internalize your learning experience by preparing to discuss the following.
If you were building your own house, what would be an example of
something that would be procured using an RFQ and something that would
be procured with an RFP? Describe how your choices meet the descriptions
of products or services procured from suppliers or vendors.
Chapter 12 Project Procurement and Closure
12.2 Procurement Plan 509
12.3 Selecting the Type of Contract
LEARNING OBJECTIVES
1. Identify factors that determine which type of contract to select.
2. Describe the types of fixed cost contracts.
3. Describe the types of cost reimbursable contracts.
An agreement between the organization and an outside provider of a service or
materials is a legal contract12
. To limit misunderstandings and make them more
enforceable, contracts are usually written documents that describe the obligations
of both parties.
Because legal agreements often create risk for the parent organization,
procurement activities are often guided by the policies and procedures of the
parent organization. After the project management team develops an
understanding of what portions of the project work will be outsourced and defines
the type of relationships that are needed to support the project execution plan, the
procurement team begins to develop the contracting plan13
. On smaller, less
complex projects, the contract development and execution is typically managed
through the parent company or by a part-time person assigned to the project. On
larger, more complex projects, the procurement team can consist of work teams
within the procurement function with special expertise in contracting. The contract
plan defines the relationship between the project and the subcontractors (supplier,
vendor, or partner) and also defines a process for making changes in the agreement
to accommodate changes that will occur on the project. This change management
process is similar to the change management process used with the project
agreement with the project client.
12. An agreement that is legally
enforceable.
13. Defines the relationship
between the project and the
subcontractors—supplier,
vendor, or partner—and also
defines a process for making
changes in the agreement.
Chapter 12 Project Procurement and Closure
510
Figure 12.5
Contracts are legally binding
agreements.
© 2010 Jupiterimages
Corporation
The contracting plan of the project supports the
procurement approach of the project. The following are
some factors to consider when selecting the type of
contract:
• The uncertainty of the scope of work
needed
• The party assuming the risk of unexpected
cost increases
• The importance of meeting the scheduled
milestone dates
• The need for predictable project costs
There are several types of contracting approaches and
each supports different project environments and
project approaches. The legal contracts that support the
procurement plan consist of two general types of
contract: the fixed price and the cost reimbursable
contracts, with variations on each main type.
Fixed Price Contracts
The fixed price contract14
is a legal agreement between
the project organization and an entity (person or company) to provide goods or
services to the project at an agreed-on price. The contract usually details the
quality of the goods or services, the timing needed to support the project, and the
price for delivering goods or services. There are several variations of the fixed price
contract. For commodities and goods and services where the scope of work is very
clear and not likely to change, the fixed price contract offers a predictable cost. The
responsibility for managing the work to meet the needs of the project is focused on
the contractor. The project team tracks the quality and schedule progress to assure
the contractors will meet the project needs. The risks associated with fixed price
contracts are the costs associated with project change. If a change occurs on the
project that requires a change order from the contractor, the price of the change is
typically very high. Even when the price for changes is included in the original
contract, changes on a fixed price contract will create higher total project costs
than other forms of contracts because the majority of the cost risk is transferred to
the contractor, and most contractors will add a contingency to the contract to cover
their additional risk.
Fixed price contracts require the availability of at least two or more suppliers that
have the qualifications and performance histories that assure the needs of the
14. A type of contract that pays a
contractor an amount that is
agreed upon at the start of the
project.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 511
Figure 12.6
project can be met. The other requirement is a scope of work that is most likely not
going to change. Developing a clear scope of work based on good information,
creating a list of highly qualified bidders, and developing a clear contract that
reflects that scope of work are critical aspects of a good fixed priced contract.
Fixed Total Cost Contract
If the service provider is responsible for incorporating all costs, including profit,
into the agreed-on price, it is a fixed total cost contract15
. The contractor assumes
the risks for unexpected increases in labor and materials that are needed to provide
the service or materials and in the quantity of time and materials needed.
Fixed Price with Price Adjustment
The fixed price contract with price adjustment16
is used for unusually long
projects that span years. The most common use of this type of contract is the
inflation-adjusted price. In some countries, the value of its local currency can vary
greatly in a few months, which affects the cost of local materials and labor. In
periods of high inflation, the client assumes risk of higher costs due to inflation,
and the contract price is adjusted based on an inflation index. The volatility of
certain commodities can also be accounted for in a price adjustment contract. For
example, if the price of oil significantly affects the costs of the project, the client
can accept the oil price volatility risk and include a provision in the contract that
would allow the contract price adjustment based on a change in the price of oil.
Fixed Price with Incentive Fee Contract
Fixed price with incentive fee17
is a contract type that
provides an incentive for performing on the project
above the established baseline in the contract. The
contract might include an incentive for completing the
work on an important milestone for the project. Often
contracts have a penalty clause if the work is not
performed according to the contract. For example, if the
new software is not completed in time to support the
start-up of a new plant, the contract might penalize the
software company a daily amount of money for every
day the software is late. This type of penalty is often
used when the software is critical to the project and the
delay will cost the project significant money.
15. The service provider is
responsible for incorporating
all costs, including profit, into
the agreed-on price.
16. The service provider is allowed
an adjustment for economic
changes that affect costs such
as changes in currency values
or inflation.
17. A contract type that provides
an incentive for performing on
the project above the
established baseline in the
contract.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 512
Incentives can be rewards or
punishments.
© 2010 Jupiterimages
Corporation
Incentive Fee on Copper Mine Project
A project in South America to design and construct a copper mine would supply
copper to several companies throughout the world. The copper that would be
produced by the mine was sold before the mine was complete and ships were
scheduled to make the delivery dates to processing plants.
Any delay in the project would mean a delay in shipping and significant loss to
the mine, the shipping company, and the plants that were expecting the
copper. Including an incentive fee for completing the project on time and
including the important subcontracts increased the likelihood that the mine
would make copper deliveries on time.
Fixed Unit Price
If the service or materials can be measured in standard units, but the amount
needed is not known accurately, the price per unit can be fixed—a fixed unit price
contract18
. The project team assumes the responsibility of estimating the number
of units used. If the estimate is not accurate, the contract does not need to be
changed, but the project will exceed the budgeted cost.
18. A contract based on an agreedon
unit price for services or
materials if the amount needed
is not known accurately.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 513
Fixed Unit Price Contract for Concrete
An example of a fixed price contract is a contract for the concrete needed for
the foundation of a building. The project contracted for the concrete company
to supply 1,000 cubic yards (CY) at 5,000 PSI (hardness standard) of concrete at
the project site according to, and in support of, the project schedule for $70 per
square yard. This is an example of a unit price contract. If the project only uses
970 CY, then the total costs will be lower. If the project uses 1,050 CY, then the
costs will be higher.
An alternative pricing would be to establish a fixed price of $70,000 (1,000 CY ×
$70.00). Both the unit price approach and the total costs approach are fixed
price contracts.
Figure 12.7 Table of Fixed Price Contracts and Characteristics
Cost Reimbursable Contracts
In a cost reimbursable contract19
, the organization agrees to pay the contractor
for the cost of performing the service or providing the goods. Cost reimbursable
contracts are also known as cost plus contracts20
. Cost reimbursable contracts are
most often used when the scope of work or the costs for performing the work are
not well known. The project uses a cost reimbursable contract to pay the contractor
for allowable expenses related to performing the work. Since the cost of the project
is reimbursable, the contractor has much less risk associated with cost increases.
When the costs of the work are not well known, a cost reimbursable contract
19. A contract in which the
organization agrees to pay the
contractor for the cost of
performing the service or
providing the goods.
20. A contract that covers all
allowable expenses and pays
the contractor for all allowable
costs with an additional
amount to cover the
contractor’s fee. The fee can be
either a percent or an amount.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 514
Figure 12.8 Cost
Reimbursable Contract
reduces the amount of money the bidders place in the bid to account for the risk
associated with potential increases in costs.
The contractor is also less motivated to find ways to reduce the cost of the project
unless there are incentives for supporting the accomplishment of project goals.
Cost reimbursable contracts also require good documentation of the costs that
occurred on the project to assure that the contractor gets paid for all the work
performed and to assure that the organization is not paying for something that was
not completed.
Cost Reimbursable Contract to Drill Wells
A project to build a new plant in an area that did not have sufficient water
included the drilling of water wells to produce several thousand gallons of
water a day for the new plant. Although geological surveys indicated there was
sufficient water to meet the plant’s requirements, the number of wells needed
was unknown. The project developed a cost reimbursable contract that paid the
well drilling contractor for allowable costs associated with drilling the wells.
Allowable costs included the costs associated with locating all the equipment
and materials to the project site, the labor and materials used to drill the wells,
daily costs for the use of the drilling rigs, routine maintenance of the drilling
equipment, the room and board for the workers, and administrative fees and
profit. The contractor collected the costs associated with drilling the wells each
month and submitted a bill to the project accountant.
The contractor is paid an additional amount above the
costs. There are several ways to compensate the
contractor.
Cost Reimbursable Contract with Fixed Fee
A cost reimbursable contract with a fixed fee21
provides the contractor with a fee or profit amount that
is determined at the beginning of the contract and does
not change.
21. A contract that reimburses the
contractor for costs, but the
profit is a fixed amount.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 515
© 2010 Jupiterimages
Corporation
Fixed Fee for Providing Water
On the new water plant project, the project accountant reviewed each bill,
including time cards for labor, invoices for materials, and other documents that
supported the invoice. The contractor was then reimbursed for the allowable
costs plus the administrative fee and a fixed amount for his profit.
Cost Reimbursable Contract with Percentage Fee
A cost reimbursable contract with a percentage fee22
pays the contractor for
costs plus a percentage of the costs, such as 5 percent of total allowable costs. The
contractor is reimbursed for allowable costs and is paid a fee.
Percentage Fee to Evaluate Dam in West Virginia
A small community in West Virginia was worried about the structural integrity
of a dam above the town. The county council was worried the dam would break
and cause loss of life and property. They contracted with a civil engineering
firm to evaluate the dam structure and attest to the structural soundness. The
firm hired an expert from outside the area and paid the expert $1,000.00 per
day plus expenses such as meals, travel, and lodging. The civil engineering firm
billed the community for the expert’s fees and expenses plus 10 percent of the
total.
Cost Reimbursable Contract with an Incentive Fee
A cost reimbursable contract with an incentive fee23
is used to encourage
performance in areas critical to the project. Often the contract attempts to motivate
contractors to save or reduce project costs. The use of the cost reimbursable
contract with an incentive fee is one way to motivate cost reduction behaviors.
22. A contract that reimburses the
contractor for costs, but the
profit is a fixed amount.
23. A cost reimbursable contract
that includes an additional
incentive payment if the
contractor reduces costs below
a target amount or completes
the work ahead of schedule.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 516
Incentive Fee for Road Project
A road construction company won a contract to build a small road to the new
county courthouse. The estimate to complete the road was $10 million. The
contract received a cost reimbursable contract that would pay all costs plus a 3
percent fee. The contactor could also earn an incentive by performing the work
for less than $10 million. The contract might include a fee that would pay the
contract 20 percent of all savings below the estimated $10 million. In this case,
the county got the road at a lower cost, and the contractor made more money.
The contract could have focused on schedule and paid a bonus for completing
ahead of schedule. This type of contract requires that the project management
team has the capability to assure the quality of work performed meets project
specifications and the savings was not generated through reducing the quality
of the work.
Cost plus Contract with Award Fee
A cost plus contract with award fee reimburses the contractor for all allowable costs
plus a fee that is based on performance criteria. The fee is typically based on goals
or objectives that are more subjective. An amount of money is set aside for the
contractor to earn through excellent performance, and the decision on how much
to pay the contractor is left to the judgment of the project team. The amount is
sufficient to motivate excellent performance.
The following Reuters story is about the use of an award fee to incentivize the
contractor’s performance in maintaining the ship’s performance during transfer to
other owners.
VSE Corporation (NASDAQ GS: VSEC) reported today that it has been awarded a
$249 million cost-plus award fee contract option modification by the Naval Sea
Systems Command that can be exercised by the Navy to provide one additional year
of continued support to NAVSEA PMS 326 and 333 for ex-U.S. Navy ships that are
sold, leased or otherwise transferred through the Foreign Military Sales (FMS)
program to FMS clients.
This contract provides for services supporting U.S. ships that are sold, leased or
otherwise transferred to FMS clients by providing engineering, technical,
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 517
procurement, logistics, test, inspection, calibration, repair, maintenance and
overhaul support services, including reactivation and modernization.
Since 1995, VSE’s International Group, GLOBAL Division (formerly BAV Division) has
transferred 42 ships to foreign governments. VSE is currently reactivating EX-USNS
Andrew J. Higgins (TAO-190) for transfer to Chile. Additionally, VSE actively
supports various countries through the follow-on technical support requirements
of the contract, providing training, maintenance, repair, and in-country
infrastructure improvement assistance in support of transferred ships. Countries
currently supported by VSE include Bahrain, Egypt, Japan, Mexico, Taiwan, Turkey,
Poland, Philippines, Italy and Romania.
“We are extremely pleased to have won this award. It is a testament to the
confidence and trust we have earned from the U.S. Navy and their foreign clients
for the past 14 years,” said VSE CEO/COO/President Maurice “Mo” Gauthier. “We
look forward to continuing to deliver excellence and innovative technology
solutions to the world’s navies for years to come.”VSE Corporation, “VSE Awarded
$249 Million Cost-Plus Award Fee Contract Option Modification by Navy,” Business
Wire, August 24, 2009, http://www.businesswire.com/portal/site/home/
permalink/?ndmViewId=news_view&newsId=20090824006017&newsLang=en
(accessed October 5, 2009).
Time and Materials Contracts
On small activities that have a high uncertainty, the contractor might charge an
hourly rate for labor, plus the cost of materials, plus a percentage of the total costs.
This type of contract is called time and materials (T&M)24
. Time is usually
contracted on an hourly rate basis and the contractor usually submits time sheets
and receipts for items purchased on the project. The project reimburses the
contractor for the time spent based on an agreed-on rate and the actual cost of the
materials. The fee is typically a percent of the total cost.
Time and materials contracts are used on projects for work that is smaller in scope
and has uncertainty or risk, and the project rather than the contractor assumes the
risk. Since the contractor will most likely include contingency in the price of other
types of contracts to cover the high risk, T&M contracts provide lower total cost to
the project.
24. A contract used on small jobs
with a high degree of
uncertainty in which the
contractor might charge an
hourly rate for labor, plus the
cost of materials, plus a
percentage of the total costs.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 518
Figure 12.9 Table of Contract Types and Characteristics
To minimize the risk to the project, the contract typically includes a not-to-exceed
amount, which means the contract can only charge up to the agree amount. The
T&M contract allows the project to make adjustments as more information is
available. The final cost of the work is not known until sufficient information is
available to complete a more accurate estimate.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 519
Archeological Site Evaluation
On a road construction project, the survey team discovers an archeological site.
Contractors are required to preserve archeological sites and the project team
explores ways to advance the schedule while a decision is made on how to
handle the site. The project issues a T&M contract to an archeologist to
determine the nature of the site and develop a plan to preserve the integrity of
the site. A T&M contract is awarded because the size and character of the site is
unknown and the amount of time and the type of equipment needed to explore
the site is also unknown.
An archeologist from the local university was issued a T&M contract to cover
the labor and expenses to explore the site and develop a plan. An hourly rate
was established for each member of the five-person archeological team.
Equipment rental fees plus 15 percent was paid on all equipment rented and
supplies used. The archeological team’s profit was incorporated into the labor
rates.
A not-to-exceed amount was also included in the contract to capture the team’s
estimate of the amount of work. A contract change order would increase the
not-to-exceed number when more information was available.
Progress Payments and Change Management
Vendors and suppliers usually require payments during the life of the contract. On
contracts that last several months, the contractor will incur significant cost and will
want the project to pay for these costs as early as possible. Rather than wait until
the end of the contract, a schedule of payments is typically developed as part of the
contract and is connected to the completion of a defined amount of work or project
milestones. These payments made before the end of the project and based on the
progress of the work are called progress payments. For example, a concrete
supplier on a construction project may bill the contract for the amount of concrete
poured the previous month plus the profit earned during that period. On a training
project, the contract might develop a payment schedule that pays for the
development of the curriculum, and payment is made when the curriculum is
completed and accepted. In each case, there is a defined amount of work to be
accomplished, a time frame for accomplishing that work, and a quality standard the
work must achieve before the contractor is paid for the work.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 520
Just as the project has a scope of work that defines what is included in the project
and what work is outside the project, vendors and suppliers have a scope of work
that defines what they will produce or supply to the company. (Partners typically
share the project scope of work and may not have a separate scope of work.) Often
changes occur on the project that require changes in the contractor’s scope of
work. How these changes will be managed during the life of the project is typically
documented in the contract. Capturing these changes early, documenting what
changed and how the change impacted the contract, and developing a change order
(a change to the contract) are important to maintaining the progress of the project.
Conflict among team members will often arise when changes are not documented
or when the team cannot agree on the change. Developing and implementing an
effective change management process for contractors and key suppliers will
minimize this conflict and the potential negative effect on the project.
KEY TAKEAWAYS
• Contract selection is based on uncertainty of scope, assignment of risk,
need for predictable costs, and the importance of meeting milestone
dates.
• Total fixed cost is a single price where the scope is well defined. A fixed
price with incentive contract offers a reward for finishing early or under
budget or a penalty for being late. A fixed price with adjustment allows
for increases in cost of materials or changes in currency values. A fixed
unit price contract sets a price per unit, but the exact number of units is
not known.
• In a cost reimbursable contract, the project pays for costs. A cost plus
fixed fee contract assures the contractor of a known fee. A cost plus
percentage fee calculates the fee as a percentage of the costs. A cost plus
incentive fee sets goals for the contractor to achieve that would result in
a bonus. A cost plus award fee is similar, but the goals are more
subjective. Time and materials contracts pay for costs plus an hourly
rate for the contractor’s time.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 521
EXERCISES
1. A key factor in choosing the type of contract is the uncertainty of the
______, risk, cost, or schedule of the activity.
2. A contract with an _____________ fee might reward the contractor for
finishing early.
3. Contracts that pay the contractor’s costs are ____________ contracts.
4. Which type of contract is most appropriate to use if the scope is
extremely well known, and which type is most appropriate if the scope
is very uncertain? Explain your choices.
5. Why would a water well drilling company prefer a cost reimbursable
contract versus a fixed cost contract?
Internalize your learning experience by preparing to discuss the following.
If you were a contractor, which type of contract would you prefer most and
which would you like least? Explain your choices. Your explanation should
demonstrate that you are familiar with the definitions of the contracts you
chose and at least one similar type of contract.
Chapter 12 Project Procurement and Closure
12.3 Selecting the Type of Contract 522
12.4 Procurement Process
LEARNING OBJECTIVES
1. Describe the components of the procurement plan.
2. Identify the decisions made when selecting the type of contract.
3. Describe how bidders are qualified, solicited, and chosen.
4. Identify the methods used to manage the contracts.
The project procurement cycle reflects the procurement activities from the
decision to purchase the material or service through the payment of the bills and
closing of procurement contracts.
Procurement Plan
After the decision has been made to purchase goods or outsource services, the
procurement team develops a plan that includes the following:
• Selecting the appropriate relationships and contract approaches for
each type of purchased goods or outsourced service
• Preparing RFQs and RFPs and evaluating partnership opportunities
• Evaluating RFQs, RFPs, and partnerships
• Awarding and signing contracts
• Managing quality, timely performance, and contract changes
• Closing contracts
Depending on the complexity level of the project, each of these steps can take
either hours or sometimes weeks of work to complete. Each of these steps is also
included in the project master schedule. The time involved in the procurement
cycle can influence the scheduling of critical activities, including the decision to
self-perform the work or contract the work to others. The equipment and materials
deliveries and completion of contracted work dates are placed on the project
schedule and any procurement activities that create a project delay or fall on the
project critical path may require special attention.
Chapter 12 Project Procurement and Closure
523
Selecting the Contract Approach
The technical teams typically develop a description of the work that will be
outsourced. From this information, the project management team answers the
following questions:
• Is the required work or materials a commodity, customized product or
service, or unique skill or relationship?
• What type of relationship is needed: supplier, vendor, or partnership?
• How should the supplier, vendor, or potential partner be approached:
RFQ, RFP, or personal contact?
• How well known is the scope of work?
• What are the risks and which party should assume which types of risk?
• Does the procurement of the service or goods affect activities on the
project schedule’s critical path and how much float is there on those
activities?
• How important is it to be sure of the cost in advance?
The procurement team uses the answers to the first three questions listed above to
determine the approach to obtaining the goods or services and the remaining
questions to determine what type of contract is most appropriate.
A key factor in selecting the contract approach is determining which party will take
the most risk. The team determines the level of risk that will be managed by the
project and what risks will be transferred to the contractor. Typically, the project
management team wants to manage the project risk, but in some cases, contractors
have more expertise or control that enable them to be better positioned to manage
the risk associated with the contracted work.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 524
Weather Risk on Concrete Contract
On a construction contract, the concrete supplier will not be penalized for
schedule delays caused by weather because the project team has more options
for making up weather delays than the concrete supplier. The risk associated
with weather remains with the project and not transferred through the
contract.
The contractor knows more about the risks associated with obtaining the raw
materials used to make concrete and assumes the risk of delays caused by
shortages of those materials.
Soliciting Bids
A solicitation25
is the process of requesting a price and supporting information
from bidders. The solicitation usually takes the form of either a request for quote
(RFQ) or a request for proposal (RFP). Partnerships are pursued and established on a
case-by-case basis by senior management.
Qualifying Bidders
Potential bidders are people or organizations capable of providing the materials or
performing the work required for the project. On smaller, less complex projects, the
parent company typically has a list of suppliers and vendors that have successfully
provided goods and services in the past, and the project has access to the
performance record of companies on that list. On unique projects, where no
suppliers lists exist, the project team develops a list of potential suppliers and then
qualifies them to become eligible to bid on project work. Eligible bidders are placed
on the bidders list and provided with a schedule of when work on the project will be
bid.
The eligibility of a supplier is determined by the ability to perform the work in a
way that meets project requirements and demonstrates financial stability. Ability to
perform the work includes the ability to meet quality specifications and meet the
project schedule. During times when economic activity is high in a region, many
suppliers become busy and stretch their resources. The project team investigates
the potential suppliers to assure they have the capacity and the track record of
meeting deadlines before they are included on the bidder’s list.
25. Process of requesting a price
and supporting information
from bidders.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 525
The potential supplier must also be financially stable to be included on the bidders
list. A credit check or a financial report from Dun and Bradstreet (D&B26
)—a
provider of financial information about individual companies—will provide the
project with information about the potential bidder’s financial status. D&B services
include the following:
• D&B proprietary rankings and predictive creditworthiness scores
• Public filings, including suits, liens, judgments, and UCC
filings27
—standardized financial disclosure documents that conform to
the uniform commercial code
• Comprehensive payment history, including D&B’s Paydex Scores
• Company financial statements and history
Request for Quote
A request for quote focuses on price. The type of materials or service is well defined
and can be obtained from several sources. The bidder that can meet the project
quality and schedule requirements usually wins the contract by quoting the lowest
price.
Request for Proposal
A request for a proposal accounts for price but focuses on meeting the project
quality or schedule requirements. The process of developing a proposal in response
to an RFP can be very expensive for the bidder, and the project team should not
issue an RFP to a company that is not eligible to win the bid.
Evaluating Bids
Evaluation of bids in response to RFQs for commodity items and services is heavily
graded for price. In most cases, the lowest total price will win the contract. The
total price will include the costs of the goods or services, any shipping or delivery
costs, the value of any warranties, and any additional service that adds value to the
project.
The evaluation of bids based on RFPs is more complex. The evaluation of proposals
includes the price and also an evaluation of the technical approach chosen by the
bidder. The project team evaluating the proposal must include people with the
expertise to understand the technical aspects of the various proposal options and
the value of each proposal to the project. On more complex projects, the
administrative part of the proposal is evaluated and scored by one team, and the
26. A company that is also known
as Dun and Bradstreet. It
provides information that may
be useful in evaluating
financial stability of bidders.
27. Standardized financial
disclosure documents that
conform to the uniform
commercial code (UCC).
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 526
technical aspect of the proposal is evaluated by another team. The project team
combines the two scores to determine the best proposal for the project.
Awarding the Contract
After the project team has selected the bidder that provides the best value to the
project, a project representative validates all conditions of the bid and the contract
with the potential contractor. Less complex awards, like contracts for building
materials, require a reading and signing of the contract to assure the building
materials supplier understands the contract terms and requirements of the project
schedule. More complex projects require a detailed discussion of the goals, the
potential barriers to accomplishing those goals, the project schedule and critical
dates for the contract to make, and the processes for resolving conflicts and
improving work processes.
Planning Session Follows Contract Award
On a design and construction project to build a major industrial plant in the
Chicago area, the project invited two critical partners to a three-day planning
session after the project contracts were awarded.
The project manager began the session by stating that the project leadership
intended to create an environment that enabled each of the partners to exceed
profit expectations on the project and that the only way to accomplish this goal
was through a mutually supportive team where everyone contributed to
improve project performance and everyone benefited from better performance.
The session then focused on developing ways to resolve problems and increase
performance. Although this may appear to be a simple process of focusing
contractors on project success, the process took several days of lengthy
discussion and conflict resolution. The effort invested in developing alignment
between the project team and contractors can significantly improve project
performance.
Managing the Contracts
The contract type determines the level of effort and the skills needed to manage the
contract. The manager of supplier contracts develops detailed specifications and
assures compliance to these specifications. The manager of vendor contracts
assures the contractors that bid the work have the skills and capacity to accomplish
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 527
the work according to the project schedule and tracks the vendor’s performance
against the project needs, supplying support and direction when needed. The
manager of partnering arrangements develops alignment around common goals
and work processes. Each of these approaches requires different skills and various
degrees of effort.
Items that take a long time to acquire—long lead items28
—receive early attention
by the project leadership. Examples of long lead items are equipment that is
designed and built specifically for the project, curriculum that is created for
training a new workforce, and a customized bioreactor for a biotech project. These
items might require weeks, months, and sometimes years to develop and deliver to
the project site. Long lead items that are procured through the normal
procurement cycle may cause delays in the project, and the project team identifies
these items early to begin the procurement activities as soon as possible.
After the contract is awarded, the project team tracks the performance of the
contractor against performance criteria in the contract and his contribution to the
performance of the project. Typically, the contractors deliver the product or service
that meets the quality expectations and supports the project schedule. Typically,
there are also one or two contractors that do not perform to project expectations.
Some project managers will then pull out the contract and attempt to persuade the
contractor to improve performance or be penalized. Other project managers will
explore with the contractor creative ways to improve performance and meet
project requirements. The contract management allows for both approaches to deal
with nonperforming contractors and the project team must assess what method is
most likely to work in each situation.
28. Equipment or materials that
will require a long time to
acquire or build.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 528
Building Support with Vendor on Chemical Plant Project
Eastman Chemical was building a new plant at their Kingsport, Tennessee
location when a critical vendor began falling behind schedule. The project team
analyzed the situation and determined the vendor had taken on more work
than it was capable of completing by the project’s required due dates. This was
an important vendor to the project and any delay in delivery from the vendor
meant a delay in the completion of the project.
The project manager and Eastman executives flew to the vendor’s plant in New
Jersey and brought a large bar graph of the project schedule. The discussion
focused on the critical project dates and the importance of the equipment
delivery dates. Eastman offered technical support to the team and resources
from the project to expedite the delivery. During lunch, Eastman executives
and managers from the project walked with the plant manager around the
plant floor, talking with the skilled labor working on the equipment. Eastman
managers left Eastman hats and other small gifts as tokens of appreciation for
their effort in supporting the Eastman project.
The effort by the Eastman project team to improve the vendor’s schedule
performance was successful. The vendor was able to make critical dates and the
project completed on time.
Managing contractor performance on a project is as important to the overall
project outcomes as the work performed by the project team.
Logistics and Expediting
Equipment and materials that are purchased for use on the project must be
transported, inventoried, warehoused, and often secured. This area of expertise is
called logistics29
. The logistics for the project can be managed by the project team
or can be included in the RFP or RFQ. On international projects, materials may be
imported, and the procurement team manages the customs process. On smaller
projects, the logistical function is often provided by the parent company. On larger
projects, these activities are typically contracted to companies that specialize in
logistical services. On larger, more complex projects, that procurement team will
include logistical expertise.29. Managing procurement,
distribution, maintenance, and
replacement of goods and
services.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 529
Figure 12.10
Logistics is management of the
delivery and storage of materials.
© 2010 Jupiterimages
Corporation
The project work often depends on materials procured
for the project. The delivery of these materials
influences the scheduling of the project, and often some
materials are needed earlier than normal procurement
practices would deliver. On long lead items, the project
schedule is included in the contracting plans and
contractors must explain how they will support the
project schedule.
On large, complex projects, critical items might be
scheduled for delivery after they are needed on the
project. The procurement team then explores ideas with
the contractor to expedite30
—speed up—the
manufacturing or transportation of the equipment or
materials. The contract can often place a priority on the
fabrication of the equipment and delivery of the
equipment to meet the project schedule. The project
logistics team can also explore ways of shortening the
transportation time. For example, a project in Argentina
flew some critical equipment from Sweden rather than
transport the equipment by ship to save several weeks
in transit. The logistics costs were higher, but the
overall value to the project was greater.
KEY TAKEAWAYS
• The procurement plan includes determining the category of materials or
services, choosing the type of contractual relationship, soliciting bids,
selecting bidders, managing the work, and closing the contracts.
• The decisions made when selecting the type of contract are based on
whether the materials can be provided by suppliers, vendors, or
partners; how well defined the work is; how the risk will be shared; the
importance of the task to the schedule; and the need for certainty of the
cost.
• Companies that bid on contracts are evaluated on past performance and
current financial status. RFQs and RFPs are sent to those companies.
RFQs are evaluated on price and RFPs are evaluated on price and
method.
• Long lead time items are identified and monitored. Items that are
critical to the schedule or delayed are assigned to an expediter. The
logistics of handling delivery, storage, and transportation are
determined. Work and materials are inspected for quality.
30. The work processes associated
with shortening the time of
delivering a product or service.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 530
EXERCISES
1. Materials that are widely available with standardized quality are
____________, which are provided by ______________.
2. The financial soundness of a vendor can be measured by the ratings
provided by __________ (company name).
3. If an item takes a long time to deliver or if it is an important item, an
_________ might be assigned to be sure it is delivered on time.
Internalize your learning experience by preparing to discuss the following.
Assume that you are managing a project to replace the heating and cooling
system in an old building and you would like to consider alternatives that
are more environmentally sustainable in addition to the typical systems.
How would you go about it? Describe what type of relationship you think
you need, what type of contract you would choose, and how you would
identify and select a provider.
Chapter 12 Project Procurement and Closure
12.4 Procurement Process 531
12.5 Project Closure
LEARNING OBJECTIVES
1. Describe the procedures for closing out contracts.
2. Describe the elements and purpose of the postproject review process.
3. Identify the types of documents that should be archived.
4. Identify the objectives of the project closeout celebration.
Team members who were excited by the project in its early stages may find it
difficult to maintain their focus to complete the project. They might already be
looking forward to the next project. Bringing a project to an end requires a
different management style that focuses on details as well as an analysis of the
decisions that were made.
Closeout Procurement Contracts
The last stage of the project procurement cycle includes the payment of the bills
and closing of procurement contracts.
Contracts with Suppliers
Suppliers provide commodities that should meet standards of quality. The project
team must check the records of deliveries made and determine that they were
acceptable quality. If any items were rejected for poor quality or not delivered, the
final payment is adjusted accordingly.
Punch Lists and Performance Tests
If a vendor is providing a service or building something for the project, there are
usually items that must be fixed or mistakes that must be corrected before the
contract is complete. On a software project, performance tests are run on the
software, usually by the people who will be using the software, and any
performance expectations not met are noted. Sometimes the expectations were not
captured in the project scope of work and sometimes the performance did not meet
the expectations established in the scope. If the items were not in the scope of work
and the owner wants the work done, then the owner typically issues a change
order. If the expectations were in the scope of work, the contractor is still
responsible for completing the work.
Chapter 12 Project Procurement and Closure
532
On a project to build a new house, the owner might go through the house looking
for minor items not completed by the contractor. Before the contract is closed, any
minor items that need to be repaired or completed are placed on a punch list, which
is a list of all the items found by the owner that still remain to be done. The project
team will then work on all of the items on the list, building a small schedule to
complete the remaining work.
If the number of items on the punch list is too large or the amount of work is
significant, the project team continues to work the project. Once the punch list
becomes smaller, the project manager begins closing down the project, maintaining
only enough staff and equipment to support the team that is working the punch list.
Transfer to Customer or Sponsor
If the product of the project is a building, software system, or something that must
be operated and maintained by someone else, it must be turned over to the people
who will be responsible for it after the project is complete. They might perform
their own inspection to determine if the project team has met its goals for quality
and that all elements of the project are complete. These performance tests are
typically identified in the original project contract.
Final Payments
The final payment is usually more than a simple percentage of the work that
remains to be completed. Completing the project might involve fixing the most
difficult problems that are disproportionately expensive to solve, so the final
payment should be large enough to motivate the vendor to give the project a high
priority so that the project can be completed on time.
If the supplier has met all the contractual obligations, including fixing problems
and making repairs as noted on a punch list, the project team signs off on the
contract and submits it to the accounting department for final payment. The
supplier is notified that the last payment is final and completes the contractual
agreement between the supplier and the project.
Chapter 12 Project Procurement and Closure
12.5 Project Closure 533
Overtime Needed to Complete Project and Earn Final
Payment
The building automation vendor devoted additional personnel and paid them
overtime wages to troubleshoot the problems and get them resolved so the
building could open on time. When the project team was satisfied, they
approved the system and the final payment.
Postproject Evaluations
Before the team is dissolved and begins to focus on the next project, a review is
conducted to capture the lessons that can be learned from this project, often called
a lessons learned meeting or document. The team explores what went well and
captures the processes to understand why they went well. The team asks if the
process is transferable to other projects. The team also explores what did not go
well and what people learned from the experience. The process is not to find blame
but to learn.
Quality management is a process of continuous improvement that includes learning
from past projects and making changes to improve the next project. This process is
documented as evidence that quality management practices are in use. Some
organizations have formal processes for changing work processes and integrating
the lessons learned from the project so other projects can benefit. Some
organizations are less formal in the approach and expect individuals to learn from
the experience and take the experience to their next project and share what they
learned with others in a very informal way.
Project Profile Evaluation
One of the first activities was to create a project profile to determine where the
challenges were most likely to occur. If the Darnall-Preston Complexity Index
(DPCI) was used, each of the complexity evaluations is reviewed and compared to
actual events that occurred during the project. The team explores the changes in
the complexity level during the life of the project and how the team managed the
complexity during the life of the project. Learning from this exercise develops
expertise that is useful in making the next project profile. The DPCI rating is
adjusted, if necessary, for reference purposes on future projects.
Chapter 12 Project Procurement and Closure
12.5 Project Closure 534
Trust and Alignment Effectiveness
The project leadership reviews the effect of trust—or lack of trust—on the project
and the effectiveness of alignment meetings at building trust. The team determines
which problems might have been foreseen and mitigated and which ones could not
have been reasonably predicted. What were the cues that were missed by the team
that indicated a problem was emerging? What could the team have done to better
predict and prevent trust issues?
Schedule Management
The original schedule of activities and the network diagram are compared to the
actual schedule of events. Events that caused changes to the schedule are reviewed
to see how the use of contingency reserves and float mitigated the disruption
caused by those events. The original estimates of contingency time are reviewed to
determine if they were adequate and the estimates of duration and float were
accurate. These activities are necessary for the project team to develop expertise in
estimating schedule elements in future projects—they are not used to place blame.
Budget Management
A review of budget estimates for the cost of work scheduled is compared to the
actual costs. If the estimates are frequently different from the actual costs, the
choice of estimating method is reviewed.
Risk Mitigation
After the project is finished, the estimates of risk can be reviewed and compared to
the events that actually took place. Did events take place on the project that were
unforeseen? What cues existed that may have allowed the team to predict these
events? Was the project contingency sufficient to cover unforeseen risks? Even if
nothing went wrong on this project, it is not proof that risk mitigation was a waste
of money, but it is useful to compare the cost of avoiding risk versus the cost of
unexpected events to understand how much it cost to avoid risk.
Procurement Contracts
The performance of suppliers and vendors is reviewed to determine if they should
still be included in the list of qualified suppliers or vendors. The choice of contract
for each is reviewed to determine if the decision to share risk was justified and if
the choice of incentives worked.
Chapter 12 Project Procurement and Closure
12.5 Project Closure 535
Customer Satisfaction
Relationships with the client are reviewed and decisions about including the client
in project decisions and alignment meetings are discussed. The client is given the
opportunity to express satisfaction and identify areas in which to improve. Often a
senior manager from the organization interviews the client to develop feedback on
the project team performance.
Reports
The results of the postproject evaluations are summarized in reports for external
and internal use.
Stakeholders
A general report that provides an overview of the project is created to provide
stakeholders with a summary of the project. The report includes the original goals
and objectives and statements that show how the project met those goals and
objectives. Performance on the schedule and budget are summarized and an
assessment of client satisfaction is provided. A version of this report can be
provided to the client as a stakeholder and as another means for deriving feedback.
Senior Management
The report to senior management contains all the information provided to the
stakeholders in a short executive summary. The report identifies practices and
processes that could be improved or lessons that were learned that could be useful
on future projects.
Document Archival
The documents associated with the project must be stored in a safe location where
they can be retrieved for future reference. Signed contracts or other documents
that might be used in tax reviews or lawsuits must be stored. Organizations will
have legal document storage and retrieval policies that apply to project documents
and must be followed. Some project documents can be stored electronically.
Care should be taken to store documents in a form that can be recovered easily. If
the documents are stored electronically, standard naming conventions should be
used so documents can be sorted and grouped by name. If documents are stored in
paper form, the expiration date of the documents should be determined so they can
Chapter 12 Project Procurement and Closure
12.5 Project Closure 536
be destroyed at some point in the future. The following are documents that are
typically archived:
• Charter documents
• Scope statement
• Original budget
• Change documents
• DPCI ratings
• Manager’s summary—lessons learned
• Final DPCI rating
Project Celebration
A symbolic ending of a project can be a final celebration to mark the end of the
project and perhaps the dissolution of the team. The end of a major project is often
a time to reflect. Project team members and stakeholders have typically invested a
great deal of time and emotional energy into the success of the project. Because of
this investment and because of the close relationships that develop during a
project, project closure in often sad. Project managers stay tuned into the project
team environment and use celebrations and team recognition to ameliorate the
effects of project closure.
This is an opportunity to improve client satisfaction and team member satisfaction.
Awards or recognition plaques might be given out to individuals who made an
outstanding contribution to the project. Celebrating and reviewing the challenges
and successes of the project creates a positive memory of the project and reinforces
the learning that can be transferred to future projects. Groups or teams can be
recognized and instances where trust between team members made a positive
difference can be rewarded.
The client can be praised for contributions during planning and execution of the
project.
Chapter 12 Project Procurement and Closure
12.5 Project Closure 537
KEY TAKEAWAYS
• To close contracts, systems are tested, materials are inspected, and
punch lists of work to be completed are made.
• The purpose of the postproject review is to examine decisions that were
made with partial knowledge with the way the project actually
developed to learn from the experience and to improve future decisions.
It is also used to identify processes that can be improved.
• Original project documents, such as the charter, scope statement, and
budget, are stored. Documents developed during the project, such as
change agreements, are stored. Postproject reviews, including a
summary of lessons learned and a final project profile description—DPCI
rating—are saved.
• At the project closeout celebration, positive behavior is awarded for
individuals, and groups and the client or sponsor is invited to speak to
enforce a sense of satisfaction.
EXERCISES
1. Why is a postproject review valuable to future projects?
2. Which documents should be archived?
3. Why should the project have a closeout celebration?
Internalize your learning experience by preparing to discuss the following.
Consider why it would be important to withhold a significant amount for the
final payment. If you are familiar with a situation where a contractor had to
spend extra to fix or finish items to complete a job, describe why they might
need a financial incentive to get those jobs done.
Chapter 12 Project Procurement and Closure
12.5 Project Closure 538
12.6 Exercises
Exercises at the end of the chapter are designed to strengthen your understanding
and retention of the information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-depth analysis and
consideration when answering the following questions.
1. Describe an activity that would require an RFP and why it should be
handled with an RFP instead of a RFQ or a partnership.
2. Describe a procurement task. Rate it for the amount of uncertainty of
the scope, cost, schedule, and risk. Choose a contract type and explain
why that contract type would be an appropriate choice for that set of
uncertainties.
3. Describe requirements of a particular quality method, and describe how
a postproject review would meet that standard.
DISCUSSION
The exercises in this section are designed to promote exchange of
information among students in the classroom or in an online discussion. The
exercises are more open ended, which means that what you find might be
completely different from what your classmates find, and you can all benefit
by sharing what you have learned.
1. Research the document retention standards at an organization of your
choice that apply to normal business records. Describe how those
standards would or would not meet the needs of project document
archival. Be prepared to compare the standards of the organization you
described with those described by your classmates.
2. Describe a situation with which you are familiar where conflicts arose
over completion of punch list items or fixing items to complete a
project.
Chapter 12 Project Procurement and Closure
539
12.7 Web Exercises
LEARNING OBJECTIVES
1. Locate commodities in online catalogs.
2. Use an RFQ template obtained online.
3. Use an RFP template obtained online.
4. Describe and interpret D&B financial reports using definitions from the
D&B website.
Locate Commodities in Online Catalogs
Commodities can be purchased from online catalogs if the buyer knows exactly
what is needed for the task.
Learn More about Using an Online Catalog to Buy Commodities
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and then save
the document as Ch12CommoditiesStudentName.doc. Leave the document
open.
2. Use your web browser and go to http://www.eastmfg.com. The catalog
is provided in PDF format. This format is not easily changed by the
viewer.
3. Click the Parts menu and then click the link to the Hardware Catalog
shown in Figure 12.11 "Parts Catalog".
Figure 12.11 Parts Catalog
Source: Courtesy of http://www.eastmfg.com.
Chapter 12 Project Procurement and Closure
540
4. In the Search box, type Lynch Pin and then press Enter. Refer to Figure
12.12 "Searching for a Part".
Figure 12.12 Searching for a Part
Source: Courtesy of http://www.eastmfg.com.
5. Notice the following characteristics:
◦ The price is not listed. Separate price lists are often maintained for
different classes of customer, and discounts are usually available
for large orders.
◦ There is a unique catalog number for each type of anchor. This
number is used for placing orders.
◦ The part's capacity, size, and weight are provided.
◦ Some labels require knowledge of the product to understand; for
example, Side Swing Pin.
6. Capture this screen and paste it into Ch12CommoditiesStudentName.doc.
Analysis
1. At the bottom of Ch12CommoditiesStudentName.doc, write between one
hundred and two hundred words to describe how to navigate and
interpret an online catalog that is provided in PDF format.
2. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File name Ch12CommoditiesStudentName.doc
.docx
version
Student
name not
included
Locate
commodities
Two screen captures; a description
of how to navigate an online
catalog in PDF format
Same as
Best
Missing
screens;
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 541
Element Best Adequate Poor
in online
catalogs
inaccurate
description
3. Save the file and submit it as directed by the instructor.
Use an Online RFQ Template
Commodities can be services that are specifically defined and common enough to
have standardized descriptions and quality. In this exercise, you download a
template for writing an RFQ from the state of Massachusetts for requesting quotes
on testing software for accessibility compliance.
Locate and Download an RFQ Template
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and then save
the document as Ch12RFQStudentName.doc Leave the document open.
2. Use your web browser to type http://www.mass.gov/dep/recycle/
reduce/rmrfq.pdf.
3. Scroll to the Preface page, as shown in Figure 12.13 "Description of RFQ
Template".
Figure 12.13 Description of RFQ Template
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 542
© 2012 Commonwealth of Massachusetts.
4. Add this web address to your browser’s bookmarks or favorites list in
the Project Management folder.
5. Capture a screen that shows the address in the Project Management
folder in the favorites or bookmarks and then paste it into
Ch12RFQStudentName.doc.
6. Scroll through appendices at the end of the document. Capture a
screen from one of these appendices pages and then paste it into
Ch12RFQStudentName.doc.
Analysis
1. At the bottom of Ch12RFQStudentName.doc, write between one hundred
and two hundred words to describe the advantages of using a template.
Make specific reference to at least two sections of the RFQ template
used in the first part of this exercise, including page references.
2. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File
name
Ch12RFQStudentName.doc
.docx
version
Student
name not
included
Use an
RFQ
template
obtained
online
A screen capture that
shows a link to the
template in the Project
Management folder in the
bookmarks or favorites;
screen capture of one of
the first eight pages;
reflective essay between
one hundred and two
hundred words on use of a
RFQ template
Project
Management
folder does
not show
links from
previous
exercises
Missing
screens;
only one
feature
discussed;
no page
references
3. Save the file and submit it as directed by the instructor.
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 543
Use an Online RFP Template
If you need to rely on the vendor’s experience and expertise to solve a problem, you
can request companies to submit proposals on how they would go about it. The
state of Maryland provides a template for RFPs.
Locate and Download an RFP Template
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and then save
the document as Ch12RFPStudentName.doc. Leave the document open.
2. In a browser, type http://energy.maryland.gov/documents/
ProcurementConsultingServicesRFPFINAL.pdf. An RFP template used
by the Maryland Energy Administration displays as a PDF file, as shown
in Figure 12.14 "Source of RFQ Template".
Figure 12.14 Source of RFQ Template
Source: Courtesy of Maryland Energy Administration.
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 544
3. Add this web address to your browser’s bookmarks or favorites in the
Project Management folder.
4. Capture a screen that shows the address in the Project Management
folder in the favorites or bookmarks and then paste it into
Ch12RFPStudentName.doc.
5. Scroll to section 1.7 Pre-Proposal Conference. Observe that many
organizations give contractors an opportunity to meet and ask
questions before they prepare a proposal.
6. Scroll back to page ii, Project No. Observe that the state asks the
contractors who decide not to bid to explain why.
7. Capture the screen that shows the list of reasons why the contractor
chose not to bid, and then paste it into Ch12RFPStudentName.doc.
8. Explore the other sections of this RFP template and choose one that is
new to you or that you find most interesting.
Analysis
1. At the bottom of Ch12RFPStudentName.doc, write between one
hundred and two hundred words to describe what you learned from
each of the three sections: the pre-proposal conference, the refusal to
bid, and the third section of your choice. Make specific reference to
each of the three sections of the RFP template used in Part I including
page references.
2. Review your work and use the following rubric to determine its
adequacy:
Element Best Adequate Poor
File
name
Ch12RFPStudentName.doc
.docx
version
Student
name not
included
Use an
RFP
template
obtained
online
A screen capture that
shows a link to the
template in the Project
Management folder in the
bookmarks or favorites;
screen capture of the
preproposal conference;
reflective essay between
one hundred and two
hundred words on the
conference, refusal, and
Project
Management
folder does
not show
links from
previous
exercises
Missing
screens;
four
sections not
discussed
individually;
no page
references
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 545
Element Best Adequate Poor
one other section with
specific page references
3. Save the file and submit it as directed by the instructor.
Interpret D&B Financial Ratings
The relationship between the project and its suppliers and vendors involves trust
that both parties will keep their financial commitments. This trust may be based on
past experience, but it can also be based on a third party’s rating of the financial
health of the organization and its past behavior. For example, organizations with
better credit ratings can negotiate lower prices with suppliers and vendors because
there is less risk. One of the most popular rating agencies is D&B. In this exercise,
you locate and review the types of financial reports that are available from D&B.
Locate and Review the Financial Reports Available from D&B
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and then save
the document as Ch12DBStudentName.doc. Leave the document open.
2. In a browser, type http://www.dnb.com/us/customer_service/scores.html.
The D&B web page displays, as shown in Figure 12.15 "D&B Ratings".
Figure 12.15 D&B Ratings
© Dun & Bradstreet, Inc.
3. Add this web address to your browser’s bookmarks or favorites in the
Project Management folder.
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 546
4. Capture a screen that shows the address in the Project Management
folder in the favorites or bookmarks and then paste it into
Ch12DBStudentName.doc.
5. Scroll down the page to the D&B Rating Interpretation table. The
rating in the first column indicates the worth of the company, and the
numbers 1 through 4 indicate its general credit worthiness, where 1 is
high and 4 is low. For example, a rating of 1A-4 indicates a company
with a worth between $500,000 and $749,999 with a low credit
worthiness rating.
6. Capture this screen and paste it into Ch12DBStudentName.doc.
7. Scroll down to the US Employee Range Designation table. Notice this
rating indicates the number of employees, where ER1 is more than
1,000.
8. Capture this screen and paste it into Ch12DBStudentName.doc.
9. Scroll down to the D&B PAYDEX Value table. Observe that the PAYDEX
score indicates when the company pays its debts. Notice that paying off
debts sooner than is contractually required earns a PAYDEX score
above 80.
10. Capture this screen and paste it into Ch12DBStudentName.doc.
11. Scroll down to the Financial Stress Score table. Notice that companies
with a score of 1 are estimated to have a probability of failure of .03
percent (3 per 10,000) of failing in the next twelve months, while a
rating of 5 means a probability of failure of 4.7 percent (almost 1 in 20).
12. Capture this screen and paste it into Ch12DBStudentName.doc.
Analysis
1. At the bottom of Ch12DBStudentName.doc, write between one hundred
and two hundred words to describe the function of these four tables.
2. Explain what it would mean if a company had the following D&B
ratings:
◦ BB-1
◦ ER3
◦ PAYDEX 80
◦ Financial stress: 4
3. Review your work and use the following rubric to determine its
adequacy:
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 547
Element Best Adequate Poor
File name Ch12DBStudentName.doc
.docx
version
Student name
not included
Describe
and
interpret
D&B
financial
reports
using
definitions
online
A screen capture that
shows a link to the
template in the Project
Management folder in
the bookmarks or
favorites; four screens
that show the four
tables; reflective essay
between one hundred
and two hundred words
on use of D&B ratings;
interpretation of
example scores
Same as
Best
Missing
screens;
incorrect
interpretation
of table;
incorrect
interpretation
of ratings
4. Save the file and submit it as directed by the instructor.
Chapter 12 Project Procurement and Closure
12.7 Web Exercises 548