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Project Management 6e 1/24/2018

An Overview of Project Management 7th ed

What Is a Project?

• Project Defined (according to PMI)

– A temporary endeavor undertaken to create a unique

product, service, or result

• Major Characteristics of a Project

– Has an established objective

– Has a defined life span with a beginning and an end

– Requires across-the-organizational participation

– Involves doing something never been done before

– Has specific time, cost, and performance

requirements

Program versus Project

• Program Defined

– A group of related projects designed to accomplish a

common goal over an extended period of time

• Program Management

– A process of managing a group of ongoing,

interdependent, related projects in a coordinated way

to achieve strategic objectives

– Examples:

• Project: completion of a required course in project management.

• Program: completion of all courses required for a business major.

Project Management 6e 1/24/2018

Project Life Cycle

1–4

FIGURE 1.1

Current Drivers of Project Management

• Factors leading to the increased use

of project management:

– Compression of the product life cycle

– Knowledge explosion

– Triple bottom line (planet, people, profit)

– Increased customer focus

– Small projects represent big problems

Project Governance

• Integration (or centralization) of project

management provides senior management with:

– An overview of all project management activities

– A big picture of how organizational resources are

used

– A risk assessment of their portfolio of projects

– A rough metric of the firm’s improvement in managing

projects relative to others in the industry

– Linkages of senior management with actual project

execution management

Project Management 6e 1/24/2018

A Project Management Today:

A Socio-Technical Approach

• The Technical Dimension (The “Science”)

– Consists of the formal, disciplined, purely logical parts

of the process.

– Includes planning, scheduling, and controlling

projects.

• The Sociocultural Dimension (The “Art”)

– Involves contradictory and paradoxical world of

implementation.

– Centers on creating a temporary social system within

a larger organizational environment that combines the

talents of a divergent set of professionals working to

complete the project. 1–7

Where We Are Now

2–8

Chapter Outline

2.1 The Strategic Management Process: An

Overview

2.2 The Need for a Project Priority System

2.3 A Portfolio Management System

2.4 Selection Criteria

2.5 Applying a Selection Model

2.6 Managing the Portfolio System

2–9

Project Management 6e 1/24/2018

Why Project Managers Need

to Understand Strategy

• Changes in the organization’s mission and

strategy

– Project managers must respond to changes with

appropriate decisions about future projects and

adjustments to current projects.

– Project managers who understand their

organization’s strategy can become effective

advocates of projects aligned with the firm’s mission.

The Strategic Management Process:

An Overview

• Strategic Management

– Requires every project to be clearly linked to strategy.

– Provides theme and focus of firm’s future direction.

• Responding to changes in the external environment— environmental scanning

• Allocating scarce resources of the firm to improve its competitive position—internal responses to new programs

– Requires strong links among mission, goals,

objectives, strategy, and implementation.

Strategic

Management

Process

FIGURE 2.1

Project Management 6e 1/24/2018

The Need for a Project Priority System

• The Implementation Gap

– The lack of understanding and consensus on strategy

among top management and middle-level (functional)

managers who independently implement the strategy.

• Organization Politics

– Project selection is based on the persuasiveness and

power of people advocating the projects.

• Resource Conflicts and Multitasking

– Multiproject environment creates interdependency

relationships of shared resources which results in the

starting, stopping, and restarting projects.

2–13

Benefits of Project Portfolio Management

• Builds discipline into the project selection process

• Links project selection to strategic metrics

• Prioritizes project proposals across a common set

of criteria, rather than on politics or emotion

• Allocates resources to projects that align with

strategic direction

• Balances risk across all projects

• Justifies killing projects that do not support strategy

• Improves communication and supports agreement

on project goals

EXHIBIT 2.2

Portfolio of Projects by Type

FIGURE 2.2

Project Management 6e 1/24/2018

A Portfolio Management System

• Selection Criteria

– Financial models: payback, net present value (NPV)

– Non-financial models: projects of strategic

importance to the firm

• Multi-Criteria Selection Models

– Use several weighted selection criteria to evaluate

project proposals.

Financial Models

• The Payback Model

– Measures the time the project will take to recover

the project investment.

– Uses more desirable shorter paybacks.

– Emphasizes cash flows, a key factor in business.

• Limitations of Payback:

– Ignores the time value of money.

– Assumes cash inflows for the investment period

(and not beyond).

– Does not consider profitability.

Financial Models (cont’d)

• The Net Present Value (NPV) Model

– Uses management’s minimum desired rate-of-return

(discount rate) to compute the present value of all net

cash inflows.

• Positive NPV: project meets minimum desired rate of return and is eligible for further consideration.

• Negative NPV: project is rejected.

Project Management 6e 1/24/2018

Nonfinancial Strategic Criteria

• To capture larger market share

• To make it difficult for competitors to enter the market

• To develop an enabler product, which by its introduction will

increase sales in more profitable products

• To develop core technology that will be used in next-generation

products

• To reduce dependency on unreliable suppliers

• To prevent government intervention and regulation

• To restore corporate image or enhance brand recognition

• To demonstrate its commitment to corporate citizenship and support

for community development

Multi-Criteria Selection Models

• Checklist Model

– Uses a list of questions to review potential projects

and to determine their acceptance or rejection.

– Fails to answer the relative importance or value of a

potential project and doesn’t to allow for comparison

with other potential projects.

• Multi-Weighted Scoring Model

– Uses several weighted qualitative and/or quantitative

selection criteria to evaluate project proposals.

– Allows for comparison of projects with other potential

projects.

Project Screening Matrix

FIGURE 2.3

Project Management 6e 1/24/2018

Applying a Selection Model

• Project Classification

– Deciding how well a strategic or operations project

fits the organization’s strategy

• Selecting a Model

– Applying a weighted scoring model to align projects

closer with the organization’s strategic goals

• Reduces the number of wasteful projects

• Helps identify proper goals for projects

• Helps everyone involved understand how and why a project is selected

• Sources and Solicitation of Project Proposals

– Within the organization

– Request for proposal (RFP) from external sources

(contractors and vendors)

• Ranking Proposals and Selection of Projects

– Prioritizing requires discipline, accountability,

responsibility, constraints, reduced flexibility,

and loss of power

• Managing the Portfolio

– Senior management input

– The governance team (project office) responsibilities

Applying a Selection Model (cont’d)

Project

Screening

Process

FIGURE 2.5

Project Management 6e 1/24/2018

Managing the Portfolio System

• Senior Management Input

– Provide guidance in selecting criteria that are

aligned with the organization’s strategic goals.

– Decide how to balance available resources

among current projects.

• The Governance Team Responsibilities

– Publish the priority of every project.

– Ensure that the project selection process is open

and free of power politics.

– Reassess the organization’s goals and priorities.

– Evaluate the progress of current projects.

Balancing the Portfolio for

Risks and Types of Projects

• Bread-and-butter Projects

– Involve evolutionary improvements

to current products and services.

• Pearls

– Represent revolutionary commercial opportunities

using proven technical advances.

• Oysters

– Involve technological breakthroughs

with high commercial payoffs.

• White Elephants

– Showed promise at one time

but are no longer viable.

2–26

Where We Are Now

Project Management 6e 1/24/2018

Chapter Outline

3.1 Project Management Structures

3.2 What Is the Right Project Management

Structure?

3.3 Organizational Culture

3.4 Implications of Organizational Culture for

Organizing Projects

3–28

Project Management Structures

• Challenges to Organizing Projects

– The uniqueness and short duration of projects relative

to ongoing longer-term organizational activities

– The multidisciplinary and cross-functional nature of

projects creates authority and responsibility dilemmas.

• Choosing an Appropriate Project Management

Structure

– A good system balances

the needs of the project

with the needs of the

organization.

Project Management Structures (cont’d)

• Organizing Projects: Functional Organization

– Different segments of the project are delegated

to respective functional units.

– Coordination is maintained through normal

management channels.

– It is used when the interest of one functional area

dominates the project or one functional area has

a dominant interest in the project’s success.

Project Management 6e 1/24/2018

Functional Organizations

FIGURE 3.1

Functional Organization

• Advantages

1. No structural

change

2. Flexibility

3. In-depth expertise

4. Easy post-project

transition

• Disadvantages

1. Lack of focus

2. Poor integration

3. Slow

4. Lack of ownership

Project Management Structures (cont’d)

• Organizing Projects: Dedicated Project Teams

– Teams operate as separate units under the

leadership of a full-time project manager.

– In a projectized organization where projects are the

dominant form of business, functional departments

are responsible for providing support for its teams.

Project Management 6e 1/24/2018

Dedicated Project Team

FIGURE 3.2

Project Organization: Dedicated Team

• Advantages

1. Simple

2. Fast

3. Cohesive

4. Cross-functional

integration

• Disadvantages

1. Expensive

2. Internal strife

3. Limited technological

expertise

4. Difficult post-project

transition

Projectized Organization Structure

FIGURE 3.3

Project Management 6e 1/24/2018

Project Management Structures (cont’d)

• Organizing Projects: Matrix Structure

– Hybrid organizational structure (matrix) is overlaid on

the normal functional structure.

• Two chains of command (functional and project)

• Project participants report simultaneously to both functional and project managers.

– Matrix structure optimizes the use of resources.

• Allows for participation on multiple projects while performing normal functional duties

• Achieves a greater integration of expertise and project requirements

Matrix Organization Structure

FIGURE 3.4

Division of Project Manager and Functional

Manager Responsibilities in a Matrix Structure

TABLE 3.1

Project Manager Negotiated Issues Functional Manager

What has to be done? Who will do the task? How will it be done?

When should the task be done? Where will the task be done?

How much money is available Why will the task be done? How will the project involvement

to do the task? impact normal functional activities?

How well has the total project Is the task satisfactorily How well has the functional

been done? completed? input been integrated?

Project Management 6e 1/24/2018

Different Matrix Forms

• Weak Form

– The authority of the functional manager predominates

and the project manager has indirect authority.

• Balanced Form

– The project manager sets the overall plan and the

functional manager determines how work to be done.

• Strong Form

– The project manager has broader control and

functional departments act as subcontractors

to the project.

Project Organization: Matrix Structure

• Advantages

1. Efficient

2. Strong project focus

3. Easier post-project

transition

4. Flexible

• Disadvantages

1. Dysfunctional conflict

2. Infighting

3. Stressful

4. Slow

What Is the Right Project

Management Structure?

• Organization Considerations

– How important is the project to the firm’s success?

– What percentage of core work involves projects?

– What level of resources (human and physical)

are available?

Project Management 6e 1/24/2018

What Is the Right Project

Management Structure? (cont’d)

• Project Considerations

– Size of project

– Strategic importance

– Novelty and need for innovation

– Need for integration (number of departments involved)

– Environmental complexity (number of external

interfaces)

– Budget and time constraints

– Stability of resource requirements

Organizational Culture

• Organizational Culture Defined

– A system of shared norms, beliefs, values, and

assumptions which binds people together, thereby

creating shared meanings.

– The “personality” of the organization that sets it

apart from other organizations.

• Provides a sense of identity to its members

• Helps legitimize the management system of the organization

• Clarifies and reinforces standards of behavior

• Helps create social order

Key Dimensions Defining an Organization’s Culture

FIGURE 3.5

Project Management 6e 1/24/2018

Implications of Organizational Culture

for Organizing Projects

• Challenges for Project Managers

in Navigating Organizational Cultures

– Interacting with the culture and subcultures

of the parent organization

– Interacting with the project’s clients

or customer organizations

– Interacting with other organizations

connected to the project

Cultural Dimensions of an Organization Supportive

of Project Management

FIGURE 3.7