Project Management & Economics

PROJECT MANAGEMENT & ECONOMICS
SESSIONS 4 - 5 THE EMERGENCE OF PROJECT MANAGEMENT
THE EMERGENCE OF PROJECT MANAGEMENT

Project management has matured as an outgrowth to the need to develop and produce complex and/or large projects in the shortest possible time, within anticipated cost, with required reliability and performance, and (when applicable) to realise a profit. Started in the late 1960s after 200 years of traditional management
DR ASSEM AL-HAJJ, Univation, RGU Project Management and Economics. SITP-SPDC, NIGERIA
ORGANISATIONS
Organisations can be defined as groups of people who must co-ordinate their activities in order to meet organisational objectives. This co-ordination requires:
Strong communications Clear understanding of relationships Interdependencies among people
Organisations must have structures

STRUCTURE OF ORGANISATIONS
Functional divisions Product line Geographical location Production process Type of customer Subsidiary organisation By element of vertical & horizontal integration
FACTORS INFLUENCING ORGANISATIONAL STRUCTURES
Organisations are sensitive to the following: Technology & its rate of change Complexity Resource availability Products and/or services Competition Decision making requirements
Types of Project Organisations

Traditional/Functional organisation Pure project organisation Matrix organisation Hybrid
The Traditional Management Structure

EXECUTIVE OFFICE
DIVISION
ENGINEERING
OPERATIONS
FINANCIAL
ADMINISTRATION
MARKETING
DEPARTMENT
SECTION
FUNCTIONAL RESPONSIBILITY
1 The Functional
Organisation
General manager is responsible for all of the functional entities necessary to either perform R & D or develop and manufacture a product. All activities are performed within the functional groups and are headed by a department All projects must flow through the functional departments Projects can benefit from the most advanced technology Well suited to mass production Functional managers control the budget
Project as Part of Functional Organisation:
ADVANTAGES

Maximum flexibility in the use of manpower Easier budgeting and cost control Experts can be utilised by different projects Specialist can be easily grouped to share knowledge and experience Continuity in functional disciplines Easily defined and understandable policies, procedures, and line of responsibility. Good control over personnel Communication channels are vertical and well established Normal path of advancement are contained within functional units
Project as Part of Functional Organisation:
DISADVANTAGES
No one individual is given full responsibility for the project No project-oriented emphasis necessary to accomplish project tasks Co-ordination becomes complex and additional lead time is required for approval of decisions Decisions normally favour the strongest functional groups No customer focal point Response to customer needs is slow Difficulty in pinpointing responsibility Motivation and innovation tend to be weak Does not provide a holistic approach to project
Organisations grew and matured
Change in technology
Stockholder increased demand
Business development
Competition and profit squeeze
High cost of marketing
Unpredictability of consumer demands
FACTORS LEADING TO CHANGE

Departmental Project Management

DIVISION MANAGER
DEPARTMENT X
DEPARTMENT Y
DEPARTMENT Z
PROJECT LEADERS
PROJECT LEADERS
PROJECT LEADERS
SECTION LEVEL
SECTION LEVEL
SECTION LEVEL
OUTCOME OF ANALYSIS
Control of a project must be given to personnel whose first loyalty is directly toward the completion of the project. A project management position must be separated from any controlling influence of functional managers.
The Line-staff Organisation (Project Co-ordinator)

EXECUTIVE OFFICE
DIVISION
MANAGER
MANAGER
PROJECT MANAGER
DEPARTMENT
MANAGER
MANAGER
SECTION
OUTCOME OF ANALYSIS
Two situations can occur with this form:
1. PM serves as the focal point for activity control. Monitoring authority only. 2. PM is responsible to keep the division manager informed of the status of project and push managers to complete activities on time.
PM has more authority by division manager Can assign work to individuals in functional organisations
PROBLEMS
In the first situation
Department managers refused to take direction from the project managers
because it is seen as an admission of authority
In the second situation

Functional manager still maintains the authority
individuals performing the work are caught in a web of authority relationships functional managers are forced to share their authority with PM.
2 Pure Project Organisation

Project separated from the rest of parent organisation Own technical staff, administrative, etc. Tied to parent organisation by tenuous strands of progress reports
The Pure Product Structure

GENERAL MANAGER
PRODUCT A MANAGER
PRODUCT B MANAGER
PRODUCT C MANAGER
PRODUCT D MANAGER
PRODUCT E MANAGER
ENG.
MANU.
ENG.
MANU.
Pure Project Organisation:
ADVANTAGES
PM full line authority Members report only to PM Strong communications channels Staffs can maintain expertise on a given project Higher level of commitment, motivation, and loyalty to the project Ability to make swift decisions (rapid reaction) A focal point for out-of-company customer relations Unity of command make life easier for subordinates Flexibility in determining time, cost and performance trade-offs Pure project organisations are structurally simple and flexible & relatively easy to understand and implement Provide a holistic approach to problems
Pure Project Organisation:
DISADVANTAGES
Several projects means duplication of efforts Team members tend to fail behind in other areas of technical expertise Technology suffers because, without strong functional groups, outlook of the future to improve companys capabilities for new programmes would be hampered. Control of functional specialists requires top-level coordination. Lack of opportunities for technical interchange between projects. Lack of career continuity and opportunities for project personnel.
3 THE MATRIX

ORGANISATION
An alternative to both Coupling both advantages Avoiding the disadvantages A pure project organisation overlaid on the functional divisions thus can take a wide variety of specific forms Based on a systems approach: all different departments work closely together and with the client
THE MATRIX ORGANISATIONAL STUCTURE

GENERAL MANAGER
ENGINEERING
OPERATIONS
FINANCIAL
OTHERS
FUNCTIONAL RESPONSIBILITY
PROJECT MGR. X
PROJECT RESPONSIBILITY
PROJECT MGR. X
PROJECT MGR. X
The Matrix Organisation:
ADVANTAGES
PM maintains maximum project control over all resources, including cost and personnel. Project policies, practices, and procedures are consistent with parent firm PM has authority to commit company resources, providing that scheduling does not cause conflicts with other projects. Rapid responses to changes, conflict resolution and project needs.
ADVANTAGES
Rapid responses to customer needs. Project has access to entire reservoir of technical talent. The programme cost is minimised. Can develop a strong technical base Knowledge is available for all projects on equal basis. Conflicts are minimal Authority and responsibility are shared No worry after project end Allows a better company wide balance of resources
DISADVANTAGES
Multidimensional information flow. Multidimensional work flow. Dual reporting. Continuously changing priorities. Management goals different from project goals Difficult to monitor and control More doubt rise about who is in charge Balance of time, cost and performance, is very difficult when you have several projects, political infighting
DISADVANTAGES
Each project organisation operates independently. More effort and time are needed initially to define policies and procedures, compared to traditional form. Division of authority is complex Conflicts and their resolution may be a continuous process Team members have at least two bosses
CHOOSING AN ORGANISATIONAL FORM

No particular method, but one should consider: Nature of potential project. Characteristics of organisational structures. Advantages and disadvantages of each. Cultural preference of the parent organisation. Individuals doing the work and their responsibilities. Technology. Client. Environmental factors inside and outside organisation.
1. Functional
PREFERRED FOR: Projects where the major focus is on
in-depth application of a technology rather than minimising cost, meeting specific schedule, or achieving speedy response to change.
Projects that require large capital investment in equipment or buildings

2. Project
PREFERRED IF: Firm engages in a large number of similar projects e.g., construction projects. One-time, highly specific and unique tasks that require careful control and are not appropriate for a single functional area.
3. Matrix
PREFERRED IF: Project requires the integration of inputs from several functional areas and involves reasonably sophisticated technology but does not require all the technical specialists to work for the project on a full time basis More so when several such projects must share technical experts.
FUNCTIONS OF PROJECT MANAGER

Establishment of objectives & priorities Design of project organisation structure Client integration into the project Appointment of other contributors & establishing their term of reference Development of the brief Preparation of programme of work Activation of the framework of relationships established for the contributors
FUNCTIONS OF PROJECT MANAGER (Contd..)

Establishment of an appropriate information & communication structure Convening & chairing meetings of appropriate contributors at all stages Monitoring & controlling feasibility studies, design & production, including adherence to the budget, investment & programme plans Contribution to primary & key decisions & to making operational decisions Commissioning the completed building Evaluating the final outcome DR ASSEM AL-HAJJ, Univation, RGU
Project Management and Economics. SITP-SPDC, NIGERIA
Scope Management:
Relates to what is required to be done
Initiation, planning, definition, verification, change control

Size, location, purpose of facility
Identifying objectives clearly
Consider PM appointment alternatives and authority
Client commitment
Funding sources
Scope is the Project brief
Client & user? & Client previous involvement
Technical & economic feasibility
Plan what is to be done and how
Permits resource planning & Relates to labour cost
Schedule control: factors that create change, realising changes, managing change
Useful way of stating Time work content of an activity Management

Very important in projects
Project network diagram, activities, resources, total duration & adjustment
Processes to ensure timely completion
Activity: definition, sequencing, duration, schedule development & control
Cost Management
Processes to ensure completion within budget
Resource planning, cost estimating, cost budgeting, & cost control
Actual spending compared to budget forecast
Quality Management
To satisfy the needs for which the project is to be taken Policy, objectives, responsibilities Quality planning, control, assurance, improvement Process and product Less rework, higher productivity, lower costs, increased satisfaction Get it right first time Quality reflects the standard of specification Interaction of quality with time and cost
Procurement Management
What means will be used to achieve project Normally external to organisation Means has to be project or industry specific Procurement planning, solicitation, selection contract administration, and contract close down
Communication Management
Critical links among people, ideas, & information Timely & appropriate generation, collection, dissemination, storage & disposition of information Choice of media, writing style, presentation techniques.
Risk Management
Risk arises because there is an element of uncertainty & a variability in the outcome Risk is a measure of the consequences of the occurrence of the unexpected Many risks are covered by insurance You can not insure against delay Commercial risk, prices of components, raw material, labour rates, new legislation
Integration Management
Process to ensure that various elements of the project are properly co-ordinated
project development plan project plan execution overall change control
Value Management
There is always more than one way of achieving a function.
Considers the relation between function, cost, & worth. Challenge assumptions, eliminate redundant items, optimise resources, promote innovations.
The Management of People

Most effective use of people A range of skills is required Communication, leadership, delegation, recruitment, selection, & training Organisational planning, staff acquisition, team development Close supervision is needed when it comes to one off projects PM should have the skills & diplomacy to deal with client/client representative, professionals, contractors, subcontractors & any other operatives involved.

Project Management & Economics

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PROJECT MANAGEMENT & ECONOMICS

SESSIONS 4 - 5 THE EMERGENCE OF PROJECT MANAGEMENT

THE EMERGENCE OF PROJECT MANAGEMENT

Organisations must have structures

FACTORS INFLUENCING ORGANISATIONAL STRUCTURES

Types of Project Organisations

The Traditional Management Structure

Project as Part of Functional Organisation:

Project as Part of Functional Organisation:

Organisations grew and matured

Stockholder increased demand

Competition and profit squeeze

High cost of marketing

Unpredictability of consumer demands

FACTORS LEADING TO CHANGE

Departmental Project Management

The Line-staff Organisation (Project Co-ordinator)

In the second situation

2 Pure Project Organisation

The Pure Product Structure

Pure Project Organisation:

Pure Project Organisation:

THE MATRIX ORGANISATIONAL STUCTURE

The Matrix Organisation:

The Matrix Organisation:

The Matrix Organisation:

The Matrix Organisation:

CHOOSING AN ORGANISATIONAL FORM

Projects that require large capital investment in equipment or buildings

FUNCTIONS OF PROJECT MANAGER

FUNCTIONS OF PROJECT MANAGER (Contd..)

Initiation, planning, definition, verification, change control

Identifying objectives clearly

Consider PM appointment alternatives and authority

Scope is the Project brief

Client & user? & Client previous involvement

Technical & economic feasibility

Plan what is to be done and how

Permits resource planning & Relates to labour cost

Useful way of stating Time work content of an activity Management

Project network diagram, activities, resources, total duration & adjustment

Processes to ensure timely completion

Activity: definition, sequencing, duration, schedule development & control

Processes to ensure completion within budget

Resource planning, cost estimating, cost budgeting, & cost control

Actual spending compared to budget forecast

The Management of People

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