Project Management. Synopsis. 1. Introduction. Learning Objectives. Sections. Learning Summary

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1 Synopsis Project Management 1. Introduction By the time you have completed Module 1 you should understand: what is meant by a project; the concept of project management; how project management can be structured within an organisation; the potential benefits and challenges of using a project management approach; the history and origins of project management; the current state of project management as an international discipline. 1.1 What Is This Course All About? 1.2 What Is a Project? 1.3 What Is Project Management? 1.4 Project Management Characteristics 1.5 Potential Benefits and Challenges of Project Management 1.6 The History of Project Management 1.7 Project Management Today A project is one type of production system. It usually has a single definable aim and a series of separate objectives. The project aim is the overall outcome that the project is intended to achieve. The objectives are a series of individual constraints or stages that have to be achieved if the project aim is to be realised. For example, the aim of the project might be to build a new house to the requirements of the client. The objectives as set by the client might be to build it within six months, spending no more than , and to the required standards. If the new house is to be built to the client s requirements, the stipulated time, cost and performance objectives must be met. Projects have other characteristics that differentiate them from other types of production system. For example, projects are unique and tend to be executed by multidisciplinary project teams. Projects are generally designed to bring about change and operate under conditions of change. In consequence they tend to be relatively complex and risky compared to other types of production system. They Project Management Edinburgh Business School 1

2 also tend to have a clear lifecycle, after which they terminate and the project team is disbanded. In the meantime the project develops through clear lifecycle stages and this drives corresponding lifecycle stages in the development of the project team and in the leadership style required of the project manager. Project managers, therefore, have to be a bit like jugglers walking along a tightrope. They have to be able to balance a series of different and often conflicting objectives as they progress along the lifecycle of the project, constantly adapting to the evolution of the task and the team as the project develops. This means that a project manager faces a unique profile of demands and responsibilities, many of which would be unfamiliar to a traditional functional manager. Project managers have to satisfy a number of objectives in order to achieve the project aim, and so they tend to think in terms of a range of acceptable outcomes rather than a single definable point. Two different outcomes (in terms of project objectives) could each achieve the project aim. Projects tend to be structured in a number of fairly standard ways. The two most common are as an internal matrix within an existing organisational structure (internal or non-executive project management) or as an external radial structure (external or executive project management). Internal arrangements are good in that everybody works for the same organisation, so there are no divided loyalty or security issues. An external system may, however, be required where there are no suitably qualified internal staff and where additional expertise is required. Project management as a discipline is growing rapidly. In order to remain competitive and/or viable, organisations everywhere are usually forced to operate within increasingly onerous time, cost and quality constraints using flexible approaches to production. As a result there has been a steady increase in global demand for qualified and experienced project managers. This in turn has led to a steady increase in the reach and membership of the main project management professional associations. From humble origins just 60 years ago, project management has developed into an international and interdisciplinary profession. 2. Individual and Team Issues the concept of what a project manager is; the typical position and role of the project manager; the essential project management skills; the concept of what a project team is and how it works; project team staffing and profiling; project team lifecycles and evolution; the concept of project team communications and motivation; the concept of project team stress and conflict. Project Management Edinburgh Business School 2

3 2.1 Introduction 2.2 The Project Manager 2.3 The Project Team 2.4 Project Team Staffing Profile and Operation 2.5 The Project Team Lifecycle 2.6 Project Team Motivation 2.7 Project Team Communications 2.8 Project Team Stress 2.9 Conflict Identification and Resolution Project managers have to run project teams. Project teams tend to operate under different conditions from functional teams. They have a limited lifespan and are often multidisciplinary. As a result project teams have to adapt to a changing task profile and a changing team profile. The technical content of the finite lifespan project evolves in parallel with the people aspects of the team. Project managers, therefore, need to develop and apply a combination of technical and people skills. Project managers also have to be able to operate across a range of different team structures. They may have to manage internal teams comprising employees from different functional departments and/or external teams comprising external consultants, contractors, subcontractors and so on with varying degrees of client involvement. The profile and characteristics of the project team can vary considerably from project to project. Project managers have to have good teambuilding skills. Effective and structured teambuilding is an essential element in any leadership application, but it is of especial importance in project management, where the team is multidisciplinary, transient, subject to high levels of change, and working under conditions of risk, with multiple objectives and clear success and failure criteria. All aspects of the classic teambuilding stages, from securing adequate resources to managing conflict, are particularly important. Within the overall scope of the teambuilding exercise, project managers must be able to motivate project team members. Motivation is important in all leadership roles but it is especially important in project management, where team members may be internal or external and may have widely different specialisations and perspectives. Generating motivation can be especially difficult where individual team members are seconded to the project team from their normal functional roles and they remain aware that their involvement in the project is transient and that their long-term career path lies elsewhere. Project teams are particularly susceptible to stress and conflict. The typically multidisciplinary and transient nature of the project team tends to amplify the general issue of sentience: the tendency of specialists to associate with their own profession and areas of expertise. Sentience can be a major factor in highly multidisciplinary teams and it can act as a major source of conflict and stress. Project teams Project Management Edinburgh Business School 3

4 also tend to be highly interdependent. In order to develop both the task and team aspects of the project, a number of typically sentient specialists have to work together towards a common aim. A simple project report may require separate input from, say, five or six different specialists before it can be completed. If any one of these specialists fails to meet his or her obligations the whole team may miss a key deadline. In order to address these motivational, stress and conflict issues the project manager needs to have a range of management skills. Leadership is undoubtedly a key aspect but in many applications effective communication can be extremely important. The project manager must be a good communicator and must be able to establish and manage effective informal and formal communications systems for the duration of the project. Informal communications systems in particular can be a major determinant of project success or failure. 3. Project Risk Management By the time you have completed this module, you should understand: what risk is and why it is important; the difference between certainty, risk and uncertainty; how decisions can be made under each condition; the concept of risk management; the basic components of a risk management system; the basics of contract theory and how contracts are used to transfer risk. 3.1 Introduction 3.2 Background to Risk 3.3 The Human Cognitive Process 3.4 Risk Handling and Control 3.5 Types of Risk 3.6 Risk Conditions and Decision Making 3.7 The Concept of Risk Management 3.8 Risk, Contracts and Procurement Project managers have to be able to make decisions under conditions of certainty, risk and uncertainty. Conditions of certainty apply where the eventual outcome is known (with certainty) in advance. Conditions of uncertainty apply where the eventual outcome is not known in advance and cannot be predicted with any degree Project Management Edinburgh Business School 4

5 of certainty. Conditions of risk apply where the outcome is not known in advance but can be predicted and expressed as a percentage. Project managers have to be able to understand and manage conditions of certainty, risk and uncertainty. Projects are often designed to bring about change and they typically operate under conditions of change. High levels of change generate high levels of risk and uncertainty, and these have to be managed in order to maintain any possible negative impacts within the limits of acceptability. Project managers have to understand the concepts of exposure (the scope of the risks that can impact) and sensitivity (the damage those risks can cause if they do impact). In applying the risk management system, the project manager has to be able to identify the risk profile that faces the project and to evaluate the risk profile in terms of the exposure and sensitivity of the organisation. The greater the degree of exposure and sensitivity, the more powerful and robust the risk management system needs to be. Project managers do not usually try to get rid of all risk. To do so would be extremely expensive and require a very complex risk management system. In addition, risk generates opportunity. In many enterprises, if most of the risk is eliminated then most of the opportunity may disappear as well. Project managers, therefore, try to manage risk rather than eliminate it. The objective of a risk management system is to manage the risk profile within the acceptability limits set by the organisation. The amount of residual risk left in the profile will depend on the risk attitude of the organisation. Project managers obviously have to be able to manage project risk. These are the standard risks that apply to most projects that are subject to standard success/failure criteria. Most projects have time, cost and quality limits, so the project manager has to be able to identify and manage the corresponding project risks of late completion, cost overspend and quality compromise. Project managers also, however, have to able to manage a wider range of risk types, including strategic risk, operational risk and unforeseen/unforeseeable risk. In real projects there is a complex profile of these four basic risk types. In addition, each type impacts on the others and cannot be considered in isolation. Project managers, therefore, have to consider the risk profile in terms of risk interdependency. The risk profile is more like a mesh than a simple curve and it is important that the project manager understands the nature of that mesh. Project managers tend to use risk management systems that are based on major international standards such as AS/NZS 4360:2000 and ISO 31000:2012. Most risk management systems include a number of standard stages, including risk strategy, risk identification, risk analysis and classification, risk attitude, risk response and long-term monitoring and control. Risk management systems are complex and dynamic tools and, used effectively, they can maintain the risk profile within the limits of acceptability. In external project management structures, risks are allocated using contracts. Contracts are essentially tools for agreeing and recording how risks are allocated between the parties to the contract. Project managers need to understand the basics of contract theory and to be able to differentiate between the various types of contract and understand the risks and liability distribution associated with each type. Project Management Edinburgh Business School 5

6 4. Project Management Organisational Structures and Standards By the time you have completed this module, you should be familiar with the following: the concept of project management organisational structures; the difference between internal and external systems; the organisational links that bind these systems together; the Association for Project Management Body of Knowledge (BoK) and BS 6079:2010; the concept of the BS 6079:2010 generic or strategic project plan (SPP); the way in which these standards combine to establish operational procedures. 4.1 Introduction 4.2 The Concept of the Organisational Breakdown Structure 4.3 Organisational Theory and Structures 4.4 Examples of Organisational Structures 4.5 Project Management Standards In most cases the project team has to have some kind of formal structure. This can vary between a single direct reporting line in the simplest projects up to a multilevel matrix in the case of a large and highly complex engineering project. Irrespective of the nature of the project, the project manager has to be able to design a suitable structure and represent it on an organisational breakdown structure (OBS). In setting up a project the OBS is one of the first control elements prepared by the project manager. It is a kind of map of who does what and of how everything fits together. There are numerous forms of project structure, ranging from some arrangement within a pure functional structure to a pure project structure. Most large organisations tend to evolve towards a pure functional structure where the organisation develops a series of different specialisations or functions headed by a functional manager. This arrangement gives clear reporting lines and sectional responsibility where individual managers can be set performance targets and where the performance of each section can be isolated and evaluated separately. The downside is that it is bureaucratic and inflexible and can have difficulty responding quickly to changes in the environment. It is ideal for large organisations that do not have to change very often. The other extreme is a pure project structure where there are no functional boundaries. The organisation is comprised of a pool of specialists that can be assembled into different project teams as and when required depending on the Project Management Edinburgh Business School 6

7 workload faced by the organisation at any time. This structure has the advantage that it is very flexible and can be adapted to meet frequent and significant changes in workload demand. The disadvantage is that it tends to become unworkable as the organisation grows above a certain critical size. As pure project structures grow larger, they tend to reach a stage where they start to develop functional specialisations. Professional project managers have to be able to operate across a range of different organisational structures. In one case an internal project manager may be required to set up a project team that operates purely within a single functional unit such as the IT department. In another case the project manager might have to set up a wholly external structure that includes a range of different external specialists with only a single connection to a client body via an interface section. The choice of OBS design can vary significantly across applications and a professional project manager has to be able to set up and manage the most appropriate OBS solution. A typical OBS is held together by organisational linkages. In most cases the project manager has to design and manage a range of different contractual, authority and communication linkages. In terms of contracts the project manager has to be able to use the correct contract type in each application and understand the risk distribution associated with each. Most large projects with external project management structures will make use of a range of perhaps seven or eight contract types, ranging from professional services contracts to subcontract agreements. The detail of these contracts varies considerably between countries but the basic structure and intent is remarkably similar in most cases. Professional project managers may hold professional qualifications from one of two main professional bodies. The largest professional body is the Project Management Institute (PMI) and the basic practitioner qualification is Project Management Professional (PMP). The other main professional body is the International Project Management Association (IPMA). These professional bodies both provide codes of practice and Bodies of Knowledge (BoK) that set basic levels of practice for members. These bodies effectively drive the development and evolution of project management as a discipline and as a profession. 5. Project Time Planning and Control The objective of this module is to develop an understanding of the time planning process. This process involves breaking the project down into individual components and then allocating times or duration values to each component. The next stage is to link these components together in a logical progression. Models are then generated to ascertain likely completion dates for individual and collective activities. Finally, further models may need to be generated to allow for replanning and change. By the time you have completed this module you should be able to: Project Management Edinburgh Business School 7

8 understand the process for generating a work breakdown structure (WBS); understand the basic sequence of works necessary to produce a precedence diagram; appreciate the basic mechanics of scheduling using the critical path method (CPM); appreciate the basic mechanics of the program evaluation and review technique (PERT); clearly define the differences, advantages and disadvantages of CPM and PERT; generate and execute crash scenarios; generate and present trade-off scenarios. Time planning and control cannot be considered in isolation. Time, cost and quality planning and control are intrinsically linked and must be considered collectively and as part of the project management three-way continuum. Time planning will therefore be examined as one aspect of the overall, or generic, strategic project planning exercise. 5.1 The Concept of Project Time Planning and Control 5.2 The Process of Project Time Planning 5.3 Scheduling 5.4 Project Replanning 5.5 Trade-off Analysis 5.6 Resource Scheduling Completion on time is one of the three classic project success criteria. In most real projects a target date for completion is established at the outset. In cases where there is a form of contract, the date or time for completion may be set as a contractual term within the contract, and failure to achieve it could result in some form of damages for late completion. Project managers have to be able to maximise the likelihood of the project finishing on time. They usually do this by establishing a time plan and then by implementing the plan as the project progresses, making any necessary corrections as the work proceeds. The time planning process comprises six major elements or components. These are the statement of work, project logic evaluation, scheduling/networking, draft master schedule, trade-off analysis and project master schedule. In planning the project the project manager can assume either a logic-driven or a resource-driven solution. In a logic-driven approach the project is planned on the basis of selecting the most logical sequence of activities irrespective of resource demand. This approach gives the fastest (not cheapest) solution. In a resourcedriven approach the project is planned on the basis of not exceeding a stated maximum resource limit. This approach gives the cheapest (not fastest) solution. In Project Management Edinburgh Business School 8

9 most cases the whole project is planned on the basis of one or other of these approaches. In some cases parts of the same project may use different approaches. The main objective of the time planning process is the production of the project master schedule. In preparing this the project manager can use either a deterministic or a probabilistic approach. A deterministic approach is used where it is possible to break the project down into separate elements and generate a reasonably accurate time estimate for each element. In such cases the time required to complete the whole project can be calculated by adding up the time required to complete each element on the critical (longest) path through the network or schedule. A probabilistic approach is used where it is either not possible to break the project down into separate elements or where it is possible to break the project down into separate elements but it is not possible to estimate with any accuracy how long each element will take to complete. This might be the case where the work is new and has never been done before or where the time required varies each time the work is done. Project managers use the critical path method (CPM) for deterministic scheduling and program evaluation and review technique (PERT) for probabilistic scheduling. A typical CPM (deterministic) application would be a construction project, while a typical PERT (probabilistic) application would be a research and development project. Irrespective of the planning approach used, project managers use trade-off analysis to optimise the projected end performance of the project within the range of acceptable outcomes. Trade-off analysis is a way of trading off one success criterion (time, cost or quality) against another while keeping the third constant. Project managers therefore can trade off time against cost (quality constant), time against quality (cost constant) or cost against quality (time constant). Trade-offs effectively allow the project manager to move the current position of the project around within the triangle formed by the time, cost and quality objectives that apply to the project. 6. Project Cost Planning and Control By the time you have completed this module you should: understand the basis of project budgeting; understand the concept of project cost control systems; be able to summarise the essential sections and components of a project cost planning and control system (PCPCS); be familiar with the concepts of project estimating and budgeting; appreciate the main components of the PCPCS planning cycle; understand the main components of the PCPCS control cycle; understand the concept of computerised database estimating systems (CDES); understand the mechanics and application of earned value analysis; Project Management Edinburgh Business School 9

10 understand the mechanics and application of project variance analysis reporting. 6.1 Introduction 6.2 Project Cost Planning and Control as a Concept 6.3 Project Cost Planning 6.4 Project Cost Control Completion on cost is another of the three classic project success criteria. In most real projects a target cost limit is established at the outset. As with date for completion in cases where there is a form of contract, the contract sum may be set as a contractual term within the contract. As with time planning and control, project managers maximise the likelihood of the project finishing on cost by producing some kind of cost plan and then implementing the cost plan as the project progresses, making any necessary adjustments as the work proceeds. The cost planning process comprises five major elements or components. These are cost planning, work initiation, cost data collection and analysis, generation of variances and cost reporting. The cost plan is prepared using some kind of estimating procedure. The work is broken down into elements and the cost of each element is estimated. The total planned cost of the project is the sum of the estimated cost of the elements plus any additional costs and allowances such as reserves and contingencies. Estimates can be prepared using a variety of techniques and a range of different types of data. Project managers may use historical data based on past projects or data provided by a database where the input data is provided by a wide range of different subscribers. On large projects most project managers use a computerised database estimating system (CDES) for preparing estimates. The final cost plan is a kind of expenditure profile for the project, showing how much should be spent on what work elements by a certain stipulated date. Most cost plans are set out using a standard structure. Project managers tend to use a more or less standard set of cost plan headings. A typical cost plan includes separate provisions for works that can be measured and priced beforehand, works that are likely to be required but which cannot be pre-quantified, and unforeseen/unforeseeable works. Most cost plans also contain general reserves to allow for the possibility of change and/or additional works. Increasingly project managers are using earned value as the standard method of preparing and implementing cost plans. The use of earned value generates a number of advantages when compared to more traditional cost planning and control systems. Earned value is the internationally recognised standard method for cost planning and control for all project managers. Project managers working across a range of disciplines in different countries all use the same basic approach when applying earned value. In addition, earned value has the great advantage that it offers simultaneous evaluation of cost and schedule performance. Project Management Edinburgh Business School 10

11 Earned value provides both a retrospective and a predictive capability. It can be applied to historic/current cost data to provide a snapshot of past/current cost performance comparing planned and actual values. This allows the project manager to evaluate the past/current cost/schedule performance of the project and express it in terms of the cost and schedule variance. The project manager can also use earned value to predict the likely final end cost of the project based on past/current rates of expenditure. Past/current and predicted cost and schedule performance is usually represented on a purpose-designed cost/schedule report, which is usually referred to as a project variance analysis report (PVAR). 7. Project Quality Management By the time you have completed this module, you should be able to: understand the concept of quality management; understand the concept of configuration management; understand the main principles of concurrent engineering; define and discuss the quality management six pack ; summarise the primary quality control tools; understand the main principles of Business Excellence; 7.1 Introduction 7.2 Quality Management as a Concept 7.3 The Quality Gurus 7.4 The Quality Management Six Pack 7.5 Total Quality Management and Business Excellence 7.6 Some Quality Management Tools and Techniques Quality or performance is the final classic project success criterion. Quality can be difficult to quantify and analyse subjectively and so it is often the least scientifically controlled of the three criteria. Quality is, however, crucial to project success, and, as with time and cost planning and control, project managers maximise the likelihood of the project finishing to the required quality standards by producing some kind of quality plan and then implementing it as the project progresses, making any necessary adjustments as the work proceeds. This process is referred to as quality management. Most standard quality management systems based on ISO 9000 comprise six major elements or components: quality policy, quality objectives, quality assurance, quality control, quality audit and long-term monitoring and review. Project Management Edinburgh Business School 11

12 Most modern quality management systems are based on the Japanese view that evolved between 1950 and the late 1970s and is founded on two key concepts: the true cost of defects and the true value of quality. The idea of the true cost of defects is that defects generate an apparent cost and a true cost. The apparent cost is the cost associated with making good the effect and may include the cost of actions such as repairs and/or replacement. It is relatively easy to calculate this cost for any given defect scenario. The true cost comprises the apparent cost plus the cost of damage to brand or reputation resulting from the defect. In some cases the true cost can be many times higher than the apparent cost. Organisations should remember this when implementing quality management systems. The cost of the system may be high compared to the apparent cost of the defects it attempts to control, but it may be much lower compared to the actual costs the organisation could incur as a result of defects. There are many examples of major companies that have been fatally damaged by a single occurrence of a defective product. The idea of the true value of quality is that a reputation for quality enables a company to charge premium prices for its products. A good brand image and a reputation for high quality and reliability can add considerable competitive advantage to an organisation. There are many examples of international companies that are able to charge premium rates and yet compete very effectively, because of their iconic quality brand image. Most current quality management systems are based on ISO There is typically a quality policy that sets out the quality vision or collective aim of the organisation. It is usually based on what the customers regard as key performance requirements and is usually broken down into a series of measurable objectives using a quality breakdown structure, or QBS. The objectives act as targets for the various functions within the organisation. The targets are set, and performance towards the targets is evaluated using quality assurance and control procedures. The system has to be subject to some kind of audit to make sure it is working effectively, and it needs to be constantly updated and modified to allow for changes both externally and within the organisation itself. Current quality management systems use a combination of traditional and current tools and techniques. Recent large-scale innovations include the introduction of configuration management systems to manage information flow, and the use of concurrent engineering as a means of reducing the time taken for a new product to progress through development and reach the market. 8. Case Study 8.1 Aims and Objectives of the Case Study 8.2 Introduction (Module 1) 8.3 Individual and Team Issues (Module 2) Project Management Edinburgh Business School 12

13 8.4 Risk Management (Module 3) 8.5 Case Study First Supplement 21 June 8.6 Organisational Structures (Module 4) 8.7 Case Study Second Supplement 28 June 8.8 Time Planning and Control (Module 5) 8.9 Cost Planning and Control (Module 6) 8.10 Quality Management (Module 7) Project Management Edinburgh Business School 13