Overview of Project Management

Basics of Project Management:

Concept of Project
Project is defined as temporary but interrelated tasks undertaken to give a unique product
or service or result. Projects are different from other ongoing operations in an organization,
because unlike operations, projects have a definite beginning and an end - they have a
limited duration. Projects are critical to the realization of performing organization’s business
strategy because projects are a means by which the strategy of the company is
implemented.
A project is a temporary endeavor, having a defined beginning and end (usually constrained
by date, but can be by funding or deliverables), undertaken to meet unique goals and
objectives, usually to bring about beneficial change or added value. The temporary nature of
projects stands in contrast to business as usual (or operations), which are repetitive,
permanent or semi-permanent functional work to produce products or services.
A project is an investment made on a package of interrelated timebound activities;
consequently, a project becomes a time-bound task. Every project has two phases basically;
the first is preparation and construction, and the second, its operation. Project planning
deals with specified tasks, operations or activities which must be performed to achieved the
project Notes 5 goals. Any project that we may consider has an objective, or a set of
objectives, to achieve. It has to be operated within a given set of rules, regulations,
constraints and restrictions. Implementation of projects needs resources or inputs. Every
project converts the given inputs into outputs through a process of implementation. The
outputs in the short run lead to outcomes, which, in the long run, should result in impact.
A project can be defined as a complex of non-routine activities that must be completed with
a set amount of resources and within a set time limit. The following figure explains the basic
tenets of project management.
Typical examples of projects include: construction of a house, performing a marriage,
overhauling a machine, maintenance of equipment, commissioning of a factory, conducting
national elections, research on developing a new technology, launching a new weapon
system, conducting a war, pre-crisis planning for preventing a riot, recruitment of a project
manager, etc. Each of the above cases involves investment of resources on a package of
inter-related, time-bound activities, thereby constituting a project.
Projects also involve one or more elements that have not been done in the past, and are
therefore unique. A product or service may be unique even if the category to which it
belongs is large. For example, although several residential complexes have been built in the
past, creation of a new house will be a project because each facility can have elements such
as a unique - location, customized or adapted design, regionally available resources, and/or
discrete owners.
Attributes/Characteristics of a Project:
Some characteristics of projects are:

1. Focus: A project has a fixed set of objectives/mission/goal. Once these objectives, goals,
or missions’ targets have been achieved, the project will become extinct from the
organizational pyramid.

2. Life Span: A project cannot continue indefinitely. It is either executed, terminated, or

dead. Every project is invariably time bound. The time limits are well defined through
schedules.

3. Team Spirit: Every project encourages team spirit among the group of people who
participate in it and are instrumental in achieving its goal. This team consists of different
individuals from varied disciplines who give their knowledge, experience, and credence
towards a total performance.

4. Lifecycle: Like any other product, a project is also reflected and influenced by the lifecycle
phases and to which the success or failure of the project can be ascribed. Unswervingly,
from conception to commission, a project has to run through six phases that are intertwined
with various stages.

5. Unique Activities: Every project has a set of activities that are unique, which means it is
the first time that an organization handles that type of activity. These activities do not
repeat in the project under similar circumstances, i.e., there will be something different in
every activity or even if the activity is repeated, the variables influencing it change every
time. For example, consider a ship building yard that builds ships for international clients.
Even though the organization builds many ships, each time there will be a difference in
some variable such as the vessel’s design, time allowed for construction, etc.

6. Attainment of Specific Goal: Organizations take up projects to perform a particular task

or attain a specific goal. These tasks differ from project. The projects in an organization
could be constructing a new facility, computerizing the accounts department or studying the
demand for a new product that the organization plans to launch in the market. All these
projects have a specific goal or result to attain and hence it can be said that every project is
goal-oriented.

7. Sequence of Activities: A project consists of various activities that are to be performed in

a particular sequence to deliver the end-product. This sequence depends on the technical
requirements and interdependency of each of the activities.

8. Specified Time: very project has a specified start date and completion date. This time
limit is either self- imposed or it is specified by the client. The life span of a project and run
from a few hours to a few years. A project coms to a close when it delivers the product and/
or service as per the client’s requirements or when it is confirmed that it is no longer
possible for the project to deliver the final product and/or service as required by the client.
9. Interrelated Activities: Projects consists of various technically interrelated activities.
These activities are considered interrelated as the deliverable (Output) of one activity
becomes the input for another activity of the project. For example, the project of building a
multi- storied luxury hotel. This project consists of various activities such as making a
building plan, landscaping, constructing the building, designing the interiors, furnishing the
rooms, etc. All these activities are interrelated and are equally important for the completion
of the project.

10. Transience creates Urgency: To be worthwhile and to repay the investment, the
development objectives must be achieved by a certain time. Sometimes those time
constraints are very tight, there is a very narrow market window for the output from the
project. If the market window is missed, the project has no value. However, more often, the
market window is broader and though the project will be worth less if it is late, the loss in
value from later delivery has to be balanced against a potential greater value if more time is
spent developing the project’s output. Unfortunately, the timescale often receives undue
emphasis. There are time pressure in routine operations. However, because they are
routine, it is known how much can be done in a given time, and so there is less likelihood of
committing to impossibly tight timescales.

11. Uniqueness Create risk and Uncertainty: The project must have a plan. As the work is
unique, it will only be done once; the planning effort will only be received once. It is
essential to coordinate the input of resources and ensure that the product is delivered at
such a time and cost as to make a profit. However, the plan needs to be more strategic,
focusing on the coordination and integration. The detail levels of the plan need to be almost
flexibly defined as the project progresses. And necessarily, the uncertainty and the risk must
be overtly managed as part of the complete project management process.

The features of transience, uniqueness and the stresses they create, urgency, integration
and uncertainty, define projects and project management. Project and project management
are not defined by the so called ‘triple constraint’ of time, cost and functionality; all
managers have to manage those, from both projects and operations.

12. Subcontracting: This is not a frill in the life of a project. Subcontracting is a subset of
every project and without which no project can be completed unless it is of proprietary
from or tiny in nature. Subcontracting is an inescapable fact of projects and is one of the
healthy antidotes for fruitful completion of the project, if dosage appropriately, well in time.
For example, DDA, HUDA< etc., undertake to construct housing colonies for the general
public.

Importance of Project Management

Project management is no longer a special- need management. It is rapidly becoming a
standard way of doing business. An increasing percentage of the typical firm’s effort is being
devoted to projects. Thee future promises an increase in the importance and the role of
projects in contributing to the strategic direction of organizations.

1) Compression of Product Life Cycle: One of the most significant driving forces behind the
demand for project management is the shortening of the product life cycle. Time to market
for new products with short life cycles has become increasingly important. A common rule
of thumb in the world of high-tech product development is that a six-month project delay
can result in a 33 per cent loss in product revenue share. Speed, therefore, becomes a
competitive advantage; more and more organizations are relying on cross- functional
project teams to get new products and services to the market as quickly as possible.

2) Global Competition: Today’s open market demands not only cheaper products and
services but also better products and service. This has led to the emergence of the quality
movement across the world with ISO 9000 certification a requirement for doing business.
Quality management and improvement invariably involve project management. For many,
their first exposure to project management techniques has been in quality workshops.

Project management, with its triple focus on time, cost and performance, is proving to be an
efficient, flexible way to get things done.

3) Knowledge Explosion: The growth in new knowledge has increased the complexity of
projects because projects encompass the latest advances. For example, building a road 30
years ago was a somewhat simple process. Today, each area has increased in complexity,
including materials, specifications, codes, aesthetics, equipment and required specialists.
Similarly, in today’s digital, electronic age it is becoming hard to find a new product that
does not contain at least one microchip. Product complexity has increased the need to
integrate divergent technologies. Project management has emerged as an important
discipline for achieving this task.

4) Corporate Downsizing: The last decade has seen a dramatic restructuring of

organizational life. Downsizing and sticking to core competencies have become necessary
for survival for many firms. Middle management is a skeleton of the past. In today’s flatter
and leaner organizations, where change is a constant, project management is replacing
middle management as a way of ensuring that things get done. Corporate downsizing has
also led to a change in the way organizations approach projects. Companies outsource
significant segments of project work and project managers have to manage not only their
own people but also their counter- parts in different organizations.

5) Increased Customer Focus: Increased competition has placed a premium on customer

satisfaction. Customers no longer simply settle for generic products and services. They want
customized products and services that cater to their specific needs. This mandate requires a
much closer working relationship between the provider and the receiver. Account
executives and sales representatives are assuming more of a project manager’s role as thy
work with their organization to satisfy the unique needs and requests of clients.

Increased customer attention has also prompted the development of customized products
and services.

6) Rapid Development of Third World and Closed Economies: The collapse of the Soviet
Empire and the gradual opening of Asian Communist countries have created an explosion of
pent-up demand within these societies for all manner of consumer goods and infrastructure
development. Western firms are scrambling to introduce their products and services to
these new markets and many firms are using project management techniques to establish
distribution channels and foreign bass of operations. These historical changes have created
a tremendous market for core project work in the areas of heavy construction and
telecommunications as Eastern European and Asian countries strive to revitalize their
inefficient industries and decrepit infrastructures.

Project Management Process

Project management processes can be split into five groups each consisting of one or more
processes. They are:

1) Initiation Process,
2) Planning Process,
3) Implementation Process,
4) Controlling Process,
5) Closing Process.

All these processes are interrelated as the output of one process becomes the input for the
others. In the central process groups (Planning, implementation and control), all the links
are looped. The planning process provides a documented project plan to the
implementation process which in turn provides documented updates to the planning
processes as the project progresses.

1) Initiation Process: Initiation is the process of formally identifying the presence of a new
project or the passing of the ongoing project to the next phase. This phase relates the
project to the ongoing work of the project organization.

2) Planning Process: Project planning is one of the most significant activities management
because it includes activities that were not included earlier, as a result of which it contains
more processes than others. The process of planning is not specific- a single project can get
different plans from different teams. There ear two kinds of planning processes:
• Core Process: These are the processes that are interdependent and must be performed in
a sequence in almost all the projects.
• Facilitating Process: These are intermittent processes that are performed as and when
they are required in the project planning phase.

3) Implementation Process: Implementation process also involves core processes and

facilitating processes.

i) Core Process
Project Plan Implementation: It is the process of implementing the project plan. A major
portion of the project budget is spent on this process. This process requires the project
manager, the top management and the project team to support one another and co-
ordinate their activities.

ii) Facilitating Process

a) Scope verification: It is the process of getting the project scope formally approved by the
key stakeholders of the project. It ensures the satisfactory accomplishment of all the project
deliverables. When the project is terminated before schedule, the scope verification should
contain the extent and level of completion.

b) Quality Assurance: It is the process of evaluating the total performance of the project
regularly, in order to ensure that the project confirms to thee quality standards. Quality
assurance goes on throughout the project life cycle. It is usually conducted by the quality
assurance department or any other department responsible for quality. Quality assurance is
generally done by the major stakeholders of the project.

c) Team Development: It is the process of making the required information available to

project stakeholders’ ability to contribute as individuals and at the same time increasing the
efficiency of the tam to function as a group.

d) Information Distribution: It is the process of making the required information available to

project stakeholders. It involves executing the communications management plan and also
meeting unexpected requests for information.

e) Solicitation: It is the process of gathering information in the form of bids, quotations and
proposals from qualified vendors to satisfy the project needs. Usually, it is the vendors who
put in a majority of the effort in this process. The process requires procurement documents
and a list of qualified vendors.

f) Vendor selection: It is the process of accepting bids, quotations or proposals and

evaluating vendors.

g) Contract Administration: It is the process of ensuring that the vendors deliver materials as
per the requirements of the contract. When the projects is big and involve more than one
vendor, managing communications and interactions among vendors becomes crucial.

4) Controlling Process: Controlling is important in project management because it helps to

measure project performance regularly so as to determine the deviations from the plan and
rectify the problems. This minimizes cost over-runs, time lapse, schedule slippages and
maintains the overall quality of products. Controlling processes too involve core processes
and facilitating processes.

5) Closing Process: Closing a project is also a major activity in the life cycle. Every project has
to come to an end after it has attained its objectives. Closing has special significance in
project management because it marks the formal acceptance of the project by the client
and the archiving of the project reports for future reference. The closing process involves
administrative closure and contract closure, Administrative closure is the process of
generating, collecting and conveying all project related information to formally complete
the project. Contract closure of final settlement of contract along with the resolution of any
open issues.
Project Life Cycle
The project life cycle is a collection of generally sequential project phases. The number of
project phases is determined by the control needs of the project organization. The project
life represents the linear progression of a project, from defining the project, through
developing a plan, implementing the plan and closing the project.

A project life cycle usually specifies:

1) The technical work that must be carried out in various phases of the project.
2) The list of individuals and their roles in each phase of the project.

Projects are “born” when a need is identified by the customer – the people or the
organization willing to provide funds to have the need satisfied.

The customer must first identify the need or problem. Sometimes the problem is identified
quickly, as in the case of a disaster such as an earthquake or explosion. In other situation. In
other situations, it may take months for a customer to clearly identify a need, gather data
on the problem and define certain requirements that must be met by the persons, project
team or contractor who will solve the problem.

Stages in Project Life Cycle:

The project life cycle typically passes through four stages, viz., Initiating, planning, executing
and closing. The following figure shows the Project Life Cycle.

The starting point begins the moment the project is given the goahead. Project efforts starts
slowly, build to a peak and then declines to delivery of the project to the customer. The
stages in the project life cycle are discussed below:

a) Project Initiation Stage: In this stage, the specifications of the project are defined
along with the clear cut project objectives. Project teams are formed and their major
responsibilities are assigned. More specifically, this stage defines the goals,
specifications, tasks and responsibilities.

b) Project Planning Stage: In this stage, the effort level increases and plans are
developed to determine what the project will entail, when it will be scheduled,
whom it will benefit, what quality level should be maintained and what the budget
will be. More specifically, this stage will include planning schedules, budgets,
resources, risks and staffing.

c) Project Execution Stage: In this stage, a major portion of the project work takes
place. The physical product is produced (For eg., house, bridge, software program,
report, etc). Time, cost and specification measures are used for control. More
specifically, this stage will take care of status reports, changes, quality and forecasts.
d) Project Closure stage: This is the final stage which includes two activities, viz.,
delivering the outcome of the project to the customer and redeploying the project
resources. Delivery of the project might include customer training and transferring
documents. Redeployment usually involves releasing project equipment/ materials
to other projects and finding new assignments for team members. More specially,
this stage will undertake activities relating to training the customer, transfer of
documents, releasing resources, releasing staff and learning lessons

Project Stakeholders:
Depending on the nature of the project, there are a number of different groups outside
the organization that influence the success of the project. Examples of project
stakeholders include the customer, the user group, the project manager, the
development team, the testers, etc. Stakeholder is anyone who has an interest in the
project. Project stakeholders are individuals and organizations that are actively involved
in the project, or whose interests may be affected as a result of project execution or
project completion.

They may also exert influence over the project’s objectives and outcomes. The project
management team must identify the stakeholders, determine their requirements and
expectations, and, to the extent possible, manage their influence in relation to the
requirements to ensure a successful project. Each of the group of stakeholders brings
different expertise, standards, priorities, and agendas to the project. The sheer Notes
223 breadth and complexity of the relationships that need to be managed distinguishes
project management from regular management. The project stakeholders include the
following:

 Project Managers: They compete with each other for the available scarce
resources and the support of top management. They also have to share
resources and exchange information.

 Project Team: The project team manages and completes project work. Most
participants want to do a good job, but they are also concerned with their other
obligations and how their involvement on the project will contribute to their
personal goals and aspirations.

 Administrative Support Group: Administrative support groups, such as human

resources, information systems, purchasing agents, and maintenance, provide
valuable support services. At the same time they impose constrains and
requirements on the project such as the documentation of expenditures and the
timely and accurate delivery of information.

 Functional Managers: Functional managers, depending on how the project is

organized, can play a minor or major role toward project success. In matrix
arrangement, they may be responsible for assigning project personnel, resolving
technical dilemmas, and overseeing the completion of significant segments of
project work. Even in dedicated project teams, the technical input from
 functional managers may be useful, and acceptance and completed project work
may be critical to in-house project. Functional managers want to co-operate up
to a point, but only up to a certain point. They are also concerned with
preserving their status within the organization and minimizing the disruptions
the project may have on their own operations.

 Top Management: Top management approves funding of the project and

establishes priorities within the organization. They define success and adjudicate
rewards for accomplishments. Significant adjustments in budget, scope, and
schedule typically need their approval. They have a natural vested interest in the
success of the project, but at the same time want to be responsive to what is
best to the entire organism.

 Project sponsors: Project sponsors champion the project and use their influence
to get approval of the project. Their reputation is tied to the success of the
project, and they need to be kept informed of any major developments. They
defend the project when it comes under attack and are a key project partner.

 Sub-contractors: Subcontractors may do all the actual work, in some cases, the
project team merely coordinating their contributions. In other cases, they are
responsible for ancillary segments of the project scope. Poor work and schedule
slips can affect work of the core project team. While contractors’ reputations
rest with doing good work, they must balance their contributions with their own
profit margins and their commitments to other clients.

 Government Agencies: Government agencies place constraints on project work.

Permits need to be secured. Construction work has to be built to code. Products
have to meet safety standards, for example, Occupational Safety and Health
Administration standards.

 Other Organizations: Other organizations, depending on the nature of the

project may directly or indirectly affect the project. For example, suppliers
provide necessary resources for completion of the project work. Delays,
shortages, and poor quality can bring a project to a standstill. Public interest
groups may apply pressure on government agencies. Customers often hire
consultants and auditors to protect their interests on the project.

 Customers: Customers define the scope of the project, and ultimate project
success rests in their satisfaction. Project managers need to be responsive to
changing customer need and requirements and to meeting their expectations.
Customers are primarily concerned with getting good deal and this naturally
breed tension with the project team.
Project Management Structures:
Organizational structure consists of activities such as task allocation, coordination and
supervision, which are directed towards the achievement of organizational aims. It can also
be considered as the viewing glass or perspective through which individuals see their
organization and its environment. An organization can be structured in many different ways,
depending on their objectives. The structure of an organization will determine the modes in
which it operates and performs. Organizational structure allows the expressed allocation of
responsibilities for different functions and processes to different entities. Organizational
structure affects organizational action in two big ways. First, it provides the foundation on
which standard operating procedures and routines rest. Second, it determines which
individuals get to participate in which decision-making processes, and thus to what extent
their views shape the organization’s actions.

A project management structure provides a framework for launching and implementing

project activities within a parent organization. A good structure appropriately balances the
needs of both the parent organization and the project by defining the interface between the
project and parent organization in terms of authority, allocation of resources, and eventual
integration of project outcomes into mainstream operations. Many organizations have
struggled with creating a system for organizing projects while managing ongoing operations.
One of the major reasons for this struggle is that projects contradict fundamental design
principles associated with traditional organizations as the projects are unique in nature.
Second reason is that most projects are multidisciplinary in nature because they require the
coordinated efforts of a variety of specialists to be completed. Let us understand how
projects are organized in different organizational structures.

a) Organizing Projects within the Functional Organization

Employees within the functional divisions of an organization tend to perform a specialized
set of tasks. This leads to operational efficiencies within that group. However it could also
lead to a lack of communication between the functional groups within an organization,
making the organization slow and inflexible. As a whole, a functional organization is best
suited as a producer of standardized goods and services at large volume and low cost.
However, once management decides to implement a project, the different segments of the
projects are delegated to the respective functional units with each unit responsible for
completing its segment of the project. Coordination is maintained through normal
management channels. The functional organization is also commonly used when, given the
nature of project, one functional area plays a dominant role in completing the project or has
a dominant interest in the success of the project. Under these circumstances, a high ranking
manager in that area is given the responsibility of coordinating the project. The following
figure shows how project is managed within the functional organization.
The advantages in using the existing functional organization include

1. No change in the design and operation of parent organization.

2. Maximum flexibility in the use of staff.
3. In-depth expertise of the functional department can be used for projects
4. Post-project transition is easy.
The disadvantages in using the existing functional organization include

1. Lack of focus on the part of functional departments as they have their own routine
work.
2. Integration across functional units is very difficult.
3. Projects may take longer time due to slow response by functional departments.
4. Motivation level among the people assigned to the project is very weak as they lack
ownership.

b) Organizing Projects as Dedicated Teams

In this structure, a dedicated independent project teams are created. These teams operate
as separate units from the rest of the parent organization. Usually, a full time project
manager is designated to pull together a core group of specialists who work full time on the
project. The project manager recruits necessary personnel from both within and outside the
parent company. Project managers get maximum freedom in this structure. The following
figure shows how projects are organized with dedicated teams.
The advantages of dedicated team structure include
1. It is very simple to establish.
2. Fast completion of the projects is ensured.
3. High level cohesiveness would emerge.
4. Cross functional integration is possible.

The disadvantages of dedicated team structure include

1. It is expensive
2. It creates internal strife in the organization. It is referred as Projectitis (a gap gets
created between the project teams and the people in the parent organization and
project members feel they are only important for the organization).
3. Sometimes, the technological expertise of the specialized project teams may be very
limited and that will affect the project outcomes.
4. Post project transition is very difficult as after the completion of the project, a
dilemma of what to do with personnel arises.

c) Organizing Projects within a Matrix Structure

Matrix management is a hybrid organizational form in which a horizontal project
management structure is overlaid on the normal functional hierarchy. In matrix system,
there are two chains of command, one along functional lines and the other along project
lines. Instead of delegating segments of a project to different units or creating an
autonomous team, project participants report simultaneously to both functional and project
managers. Matrix structure is designed to optimally utilize resources by having individuals
work on multiple projects as well as being capable of performing normal functional duties.
At the same time, the matrix approach attempts to achieve greater integration by creating
and legitimizing the authority of a project manager. The following figure shows how projects
are managed in matrix structure.
There are different forms of matrix systems depending on the relative authority of the
project and functional manager. Functional, lightweight or weak matrix is titles given to
matrices in which the balance of authority strongly favors the functional manager. Balanced
or middleweight matrix is used to describe the traditional matrix arrangement. Project,
heavy weight, or strong matrix is used to describe a matrix in which the balance of authority
is strongly on the side of the project manager.

Weak/Functional Matrix
A project manager with only limited authority is assigned to oversee the cross- functional
aspects of the project. The functional managers maintain control over their resources and
project areas.

Balanced/Functional Matrix
A project manager is assigned to oversee the project. Power is shared equally between
the project manager and the functional managers. It brings the best aspects of functional and
projective organizations. However, this is the most difficult system to maintain as the sharing
power is delicate proposition.

Strong/Project Matrix
A project manager is primarily responsible for the project. Functional managers provide
technical expertise and assign resources as needed.

Among these matrixes, there is no best format; implementation success always

depends on organization’s purpose and function.

The advantages of matrix structure include

1. Efficient allocation of resources to multiple projects is possible
2. Strong project focus can be ensured.
3. Post project transition is relatively easier.
4. Flexibility in utilization of resources and expertise is possible.
The disadvantages of matrix structure include
1. Dysfunctional conflict may arise between function managers and project managers.
2. Infighting may occur among project managers who are primarily interested in what is
best for their project.
3. As the management principle unity of command is violated, project participants have
two bosses at the least and hence it will create stressful situations.
4. In case of balanced matrix form, the projects get slow down.

d) Organizing projects within network organizations

There have been a lot of changes in the organizational structures and the recent one being
the network structure. Corporate downsizing and cost control have combined to provide
what we call network organizations. Network organization is an alliance of several
organizations for the purpose of creating products or services for customers. This
collaborative structure typically consists of several satellite organizations bee hived around
a hub or core firm. The following figure shows the network structure of Amazon.com, a
networked organization.

Another example is the film industry where studios such as MGM, Warner Brothers, and
20th Century Fox owned large movie lots and employed thousands of full time specialists.
Today movies are made by a collection of individuals and small companies who come
together to make films project by project. This structure allows each project to be staffed
with the talent most suited to its demands rather than choosing from only those people the
studio employs.

The advantages of networked organizations include

 1. It reduces cost as overhead costs are dramatically cut.
2. High level of expertise and technology can be brought by outsourcing and it will have
positive impact on the project.
3. Lot of flexibility is there as the organizations are no longer constrained by their own
resources but can pursue a wide range of projects by combining their resources with
talents of other companies.

The disadvantages of networked organizations include

1. Coordination breakdown may result when coordinating professionals from different
organizations.
2. Control may be lost on the projects as the core team depends on other organizations
on which they do not have direct authority.
3. Interpersonal conflicts may arise as project participants do not share the same
values, priorities, and culture.

Implications of Organizational Culture on Project Structure:

Organizational culture refers to the values, environmental factors, work ethics, goals and
social norms present within a company. The structure of the company and its various
projects is shaped by organizational culture. Projects that align well with the organizational
culture are easier to implement and have a greater chance of success, whereas projects that
do not fit into the cultural norms of the business will be much harder to pull off. As a
business owner, understanding the implications of organizational culture on project
structure can help you figure out which projects are worth pursuing.

Management Style
Different managers approach the supervision of their employees and team members in
varied ways. Some managers use an autocratic style, which means that the culture of the
organization is likely to have a clear hierarchy and is heavily dependent on tight control of
resources and competencies. Other managers tend to have a more democratic style of
leadership and this has strong implications for the structure of projects. Democratic
management empowers team members to come up with their own solutions and be
innovative in their approaches to solving problems.

Reaching Compromises
Along with management style comes the ability of project teams to reach compromises. The
organizational culture may encourage autonomous decision making, or it might leave major
decisions to the project's leader, who might not take kindly to input from others. Having
several layers of management further complicates this if the managers do not employ open-
door policies.

Planning and Design

Organizations that have a strict hierarchy tend to be more bureaucratic, which often
amounts to additional red tape to in trying to accomplish projects. Horizontally focused
organizations, however, impart a culture of teamwork and stakeholder building in their
structures. Stakeholders are all the folks within a business or project team that contribute to
its success. Involving stakeholders in planning and designing projects, their timelines and
objectives, often helps to make the actual work on the project easier. People like to feel as
though they have a say in how things are managed.

Time Management
Organizational culture can also affect the time management of projects. Some business
settings and management styles prefer tradition and doing things within a prescribed
method. Innovative organizational cultures, on the other hand, encourage creativity and
trial by fire. The trade off is that an innovative company often lacks efficiency, with
traditional companies able to produce more in a shorter amount of time because of their
strict scheduling practices.

Main Causes of Project Failure:

In this article, we’ll identify 10 causes of project failure. Knowing about these will help you
prepare for your next PM job:

1. Poor Preparation
You need to have a clear picture of what you’re going to do, in advance – as much as
possible. Otherwise, you may find yourself up stream without a paddle. You need to
know what project success looks like at the beginning and don’t loose focus of it.
Hence, if you don’t have a clear focus at the at the earliest stage of the process, you are
making things harder on yourself. Have a meeting, even if it is lengthy, with
stakeholders to discuss their expectations on cost, time and product quality. Know how
you will execute your tasks in order to meet everyone’s expectations.

2. Inadequate Documentation and Tracking

This is the responsibility of the project manager. Tracking milestones is how you are
going to know whether you are meeting expectations. Proper recording and monitoring
lets the PM identify where more resources are needed to complete a project on time.

3. Bad Leadership
When we see this word, leader, we usually think, the project manager. However, the
people at each management-level have a responsible to ensure that the project is
successful. Management should not micromanage but provide support to ensure that
the PM can follow through with the expectations placed upon them.

4. Failure to Define Parameters and Enforce Them

When you’re a leader, PM, it’s imperative that you’re able to work well with your team.
If and when tasks or goals are not met to standard, there should be ramifications. Rank
tasks by priority and assign them to the most proficient individual.

5. Inexperienced Project Managers

A project manager has a lot of responsibility. You need to assign people to
management roles who have matching education and experience. In some cases, and
 perhaps more often than not, inexperienced managers are given projects. They may be
very capable of managing projects, but the key is to keep them at a level where they
can succeed. Otherwise, you will set them up for failure. On the other hand, there’s
nothing wrong with a challenge, just don’t make it beyond their reach.

6. Inaccurate Cost Estimations

There may be times when your cost estimates are completely off. As you know, when
resources run-out, the project stops. Prevent this by identifying the lack of resources
early on.

7. Little Communication at Every Level of Management

Whether it’s between upper management, middle or with the team, it’s disastrous to
have poor communication. Everyone should feel free to come forward to express their
concern or give suggestions. When everyone is on the same page and there’s
transparency, workflow is at an optimum level.

8. Culture or Ethical Misalignment

Company culture must be comprised of competence, pro-activeness, and
professionalism. If it isn’t, team members will not be motivated to do their best.
Basically, everyone involved must be invested in their part of the project to successfully
complete it.

9. Competing Priorities
When there’re not enough resources, there’s bound to be competition between
personnel resources and funding. Having good cost estimations at the start will
eliminate this problem.

10. Disregarding Project Warning Signs

When a project is on the verge of failing, there will have always been warning signs.
Taking action immediately can save the project. Otherwise, the whole endeavor goes
down the drain.

Well there you have it, reasons for project failure. This is the time when you should consider
ways to prevent this failure. Adequate employee training, project management software
and management transparency will lead you to project success. Finding the right project
management software is one of the easiest steps to take so that you’re on right track – the
successful project track. A tool such as these eliminates project failure. They serve to easily
manage tasks like time tracking, cost tracking, cost estimations and more. Here are a few
that can set your project on the road to success.
 Project Definition:

Steps in Defining Project:

In this lesson, let us understand the steps in defining the project. One of the best ways to
meet the needs of the customer and major project stakeholders is to use an integrated
project planning and control system that requires selective information. Following are the
steps in defining projects.

Step 1: Defining the Project Scope:

The first step in defining the project is defining its scope. Project scope is a definition of the
end result or mission of the project – a product or service for the customer or client. The
primary objective is to define as clearly as possible the deliverables for the end user and to
focus project plans. The scope should be developed under the direction of the project
manager and customer. The project manager is responsible for seeing that there is
agreement with the owner on project objectives, deliverables at each stage of the project
and technical requirements. The project scope definition is a document that will be
published and used by the project owner and project participants for planning and
measuring project success. Scope describes what the organization expects to deliver to the
customer when the project is complete. The project scope should define the results to be
achieved in specific, tangible and measurable terms.

To ensure that the scope definition is complete, the following project scope checklist may be
used:

a) Project Objectives: The first step of project definition is to define the overall objective
to meet the customers’ needs. The project objective answers the questions of what,
when and how much.

b) Deliverables: The next step is to define major deliverables – the expected outputs over
the life of the project. For example, deliverables in the early design phase of a project
might be a list of specifications.

c) Milestones: A milestone is a significant event in a project that occurs at a point in time.

The milestone schedule show only major segment of work. It represents first, rough
estimates of time, cost and resources for the project. The milestone schedule is built
using the deliverables as a platform to identify major segments of work and an end
date. IT should ne natural, important control points in the project and should be easy
for all the project participants to recognize.

d) Technical Requirements: Technical requirements to complete the project successfully

should be clearly spelt out.

e) Limits and exclusions: The limits of scope should be defined. Failure to define limits can
lead to false expectations and to expending resources and time on the wrong problem.
Exclusions further define the boundary of the project by starting what is not included.
 f) Reviews with customer: Completion of the scope checklist ends with a review with the
customer – internal and external. The main concern here is the understanding and
agreement of expectations. The main concern is the understanding and agreement of
expectations.

The above checklist is generic and different industries and companies will develop unique
checklists and templates to fit their needs and specific kinds of projects. Many projects
suffer from scope creep, which is the tendency for the project scope to expand over time –
usually by changing requirements, specifications, and priorities.

Step 2: Establishing Project Priorities

Quality and the ultimate success of a project are traditionally defined as meeting and/or
exceeding the expectations of the customer and/or upper management in terms of cost
(budget), time (schedule), and performance (scope) of the project. The interrelationship
among these criteria varies. One of the primary jobs of a project manager is to manage the
trade-offs among time, cost and performance. To do so, project managers must define and
understand the nature of the priorities of the project. They need to have a candid discussion
with the project customer and upper management to establish the relative importance of
each criterion. One technique that is useful for this purpose is completing a priority matrix for
the project that identifies which criterion is constrained, which should be enhanced and which
can be accepted.
Constrain
The original parameter is fixed. The project must meet the completion date,
specification and scope of the project or budget.

Enhance
Given the scope of the project, which criterion should be optimized? In case of time
and cost, this means either reducing cost or shortening schedule. In case of performance,
enhancement means adding value to the project.

Accept
When trade-offs have to be made, it will be decided which will be accepted like slipping of
schedule or reduce the scope and performance or go over budget.

Step 3: Creating the Work Breakdown Structure

The Work Breakdown Structure (WBS) is a tree structure, which shows a subdivision
of effort required to achieve an objective; for example a program, project, and contract. The
WBS may be hardware, product, service, or process oriented. A WBS can be developed by
starting with the end objective and successively subdividing it into manageable components
in terms of size, duration, and responsibility (e.g., systems, subsystems, components, tasks,
subtasks, and work packages), which include all steps necessary to achieve the objective. The
WBS provides a common framework for the natural development of the overall planning and
control of a contract and is the basis for dividing work into definable increments from which
the statement of work can be developed and technical, schedule, cost, and labor hour
reporting can be established. Work Breakdown Structure (WBS) is defined by PMBOK Guide
as: “A deliverable-oriented hierarchical decomposition of the work to be executed by the
project team to accomplish the project objectives and create the required deliverables.” The
following figure shows the hierarchical breakdown of the WBS.

Purpose for Creating a WBS for Projects

There are three reasons to use a WBS in your projects.

a) The first is that is helps more accurately and specifically define and organize the
scope of the total project. The most common way this is done is by using a
hierarchical tree structure. Each level of this structure breaks the project deliverables
or objectives down to more specific and measurable chunks.
b) The second reason for using a WBS in your projects is to help with assigning
responsibilities, resource allocation, monitoring the project, and controlling the
project. The WBS makes the deliverables more precise and concrete so that the
project team knows exactly what has to be accomplished within each deliverable.
This also allows for better estimating of cost, risk, and time because you can work
from the smaller tasks back up to the level of the entire project.
c) Finally, it allows you double check all the deliverables’ specifics with the stakeholders
and make sure there is nothing missing or overlapping.

The first step to creating your WBS is to get all your team, and possibly key stakeholders,
together in one room. Although your team is not listed as an input or tool in the above
sections, they are probably your most vital asset to this process. Your team possesses all the
expertise, experience, and creative thinking that will be needed to get down to the specifics
of each deliverable. Next, we have to get the first two levels setup. The first level is the
project title, and the second level is made up of all the deliverables for the project. At this
stage it is important to function under the 100% Rule. This rule basically states that the WBS
(specifically the first two levels) includes 100% of all the work defined in the project scope
statement and management plan. Also, it must capture 100% of all the deliverables for the
project including internal, external, and interim. In reality the WBS usually only captures
between 90-95%, and 100% is our goal. The following diagram shows the WBS.

Step 4: Integrating the WBS with the organization

An integral part of WBS is to define the organizational units responsible for performing the
work. In practice, the outcome of the process is the organization breakdown structure (OBS).
The OBS depicts how the firm has organized to discharge work responsibility. The purpose of
the OBS are to provide a framework to summarize organization unit work performance,
identify organization units responsible for work packages and tie the organizational unit to
cost control accounts. Cost accounts group similar work packages. The OBS defines the
organization sub-deliverables in a hierarchical pattern in successively smaller and smaller
units.

As in the WBS, the OBS assigns the lowest organizational unit the responsibility for work
packages within a cost account. The intersection of work packages and the organizational unit
creates a project control point (cost account) that integrates work and responsibility. Control
can be checked from two directions – outcomes and responsibility. In the execution phase of
the project, progress can be tracked vertically on deliverables (client’s interest) and tracked
horizontally by organizational responsibility (management’s interest).

Step 5: Coding the WBS for the Information System

Coding system is very important to gain the maximum benefit of a work breakdown system.
The codes are used to define levels and elements in the WBS, organization elements, work
packages, budget and cost information. The codes allow reports to be consolidated at any
level in the structure. The most commonly used scheme is numeric indention. Some
organizations use alphabet letters and most of the organizations use the combination of
both.

Project Roll-Up
The intersection of WBS and OBS represents a control point called cost account by project
managers. The work packages and cost accounts serve as a database from which all other
planning, scheduling and controlling processes are coordinated. Cost accounts include one or
more work packages.

Each work package has time, budget, resource, responsibility and control points that can be
used to track project progress. Starting with the work package, costs and resources can be
rolled up into higher elements which are referred as project rollup. The ability to consolidate
and integrate using the rollup process demonstrates the potential value of the WBS for
managing the project.

Role of Project Rollup in Identifying Project Cost and Schedule

Problems
A project rollup is a very complete breakdown of a project’s current status as it
illustrates results in terms of deliverables, organizational units and cost accounts. This allows
a project manager to quickly determine project status at all levels of WBS and Organizational
Breakdown Structure.

Process Breakdown Structure

The WBS is best suited for design and builds projects that have tangible outcomes. The project
can be decomposed or broken down into major deliverables, sub-deliverables, and further
sub-deliverables and ultimately to work packages. It is more difficult to apply WBS to less
tangible, process-oriented projects in which the final outcome is a project of a series of steps
or phases.

Here, the difference is that the project evolves over time with each phase affecting the next
phase. IT project typically fall in this category. Project projects are driven by performance
requirements, not by plan/ blueprints. The following figure shows the process breakdown
structure.
Responsibility Matrix
A Responsibility Matrix (RM) describes the participation by various roles in completing
tasks or deliverables for a project or business process. It is especially useful in clarifying roles
and responsibilities in cross-functional/departmental projects and processes.

Role Distinction: There is a distinction between a role and individually identified people: a
role is a descriptor of an associated set of tasks; may be performed by many people; and
one person can perform many roles. For example, an organization may have 10 people who
can perform the role of project manager, although traditionally each project only has one
project manager at any one time; and a person who is able to perform the role of project
manager may also be able to perform the role of business analyst.

Project Identification :– Selection of product identification of market preparation of

feasibility study/report Project formulation -–Evaluation of risks preparation of Project
report.
Selection of location & site of the project – Factors affecting location – policies of Central –
State Government towards location – Legal aspects of project management.

Project Planning
Estimating Project Times and Costs:

Importance of Estimating Time and Cost:

• To support good decisions
• To schedule work to be done
• To determine how long the project should take
• To determine the project’s cost
• To determine whether the project is worth doing
• To develop cash flow needs
• To determine how well the project is progressing
• To develop time-phased budgets and establish the project baseline

Factors Influencing the Quality of Estimates:

Past experience is a good starting point for developing time and cost estimates but these
must be further refined for the current project. The following factors will have a strong
influence on the accuracy of estimates:

Planning Horizon:
This refers to the accuracy of time and cost estimates. They should improve as the project
moves from the conceptual phase to the point where individual work packages are defined.

Project Duration:
Long-duration projects increase the uncertainty in estimates. The price of technology may
decrease over time, however labor, equipment, and operations are likely to increase over
this same period; but at what rate? How can these be accurately estimated?

People:
The “people” factor can introduce challenges in the estimating process. A close match of
skills to the task will influence productivity and learning time and, conversely, the opposite
is also true. Staff turnover and whether people have worked on projects together in the past
also influences accurate estimating.

Project Structure and Organization:

Project structure refers to matrix, functional, and projectized. The “speed” advantage of a
focused dedicated team comes at a higher cost than a matrix team; however the matrix
team will not deliver as quickly due to competing demands and divided focus.

Padding Estimates:
When asked to estimate, most are inclined to “pad” estimates in order to increase the
probability of being on budget and reducing the risk of being late. Padding, however,
defeats the chance of truly arriving at realistic estimates, which is greatly needed in order to
be competitive.

Organization Culture:
Some organizations tolerate padding, others encourage it, still others oppose it. It takes
time to properly prepare estimates. It is the bedrock of effective project management.
Other (Non-project) Factors:
Equipment downtime, holidays, vacations, staff reduction, strikes, and legal limits influence
project estimates.

Estimating Guidelines for Time, Cost, and Resources:

• Responsibility: Those who are the most familiar with the tasks should make the estimates.
If others are consulted instead, it will be difficult to hold those doing the work responsible
for not achieving the estimated time.

• Use several people to participate. Estimates have a better chance of being reasonable
and realistic when several people with relevant experience and knowledge of the task are
used.

• Normal conditions: Base estimates on normal conditions, efficient methods and

processes, and a normal level of resources.

• Time Units: Use consistent time units (hours, days, weeks, etc.) whenever possible when
estimating task time.

• Independence: Treat each task independently. Do not aggregate time or cost upward.
Each task is to have its own values.

• Contingencies: Work package estimates should not include allowances for contingencies.
Remember, the estimate should assume normal conditions but expect that not all work
packages will materialize as planned.

• Adding risk assessment to the estimate: This helps avoid surprises to the stakeholders.
Unexpected time delays or cost increases should be identified as possible risks to the
project. Use a PERT time estimates for optimistic, most likely, and worse case scenario for
tasks that are vulnerable.

PERT: Program (or Project) Evaluation and Review Technique

E.g. Your project goal is to install new technology and because this is not a proven process it
carries more risk when determining how long it will take.

Optimistic = 5 days. Most likely = 8 days. Pessimistic = 15 days.

TE = (O + 4M + P) ÷ 6 -or- ( 5 + 32 + 15 ) ÷ 6 = 8.6 days

The Macro or Top-Down VS The Micro or Bottom-Up Estimating:

Categories of estimates:
• The Macro or Top-Down approach can provide a quick but rough estimate
– Done when the time and expense of a detailed estimate are an issue
 – Usually occurs during conception stage when a full design and WBS are not
available
– Requires experienced personnel to do the estimate
– Can be highly inaccurate
• A Micro or Bottom-Up approach can provide a fairly accurate estimate, but is time
consuming
– Takes into account the project design and a “roll-up” of WBS elements
– May require multiple personnel and time to complete
– If done properly, a bottom-up estimate can yield accurate cost and time
estimates

Steps to developing the estimates

 Start with a Macro estimate then refine with a Micro estimate
 Develop the general project definition
 Perform a macro cost and time estimate
 Develop the detailed project definition and WBS
 Roll-up the WBS elements as part of a micro estimate
 Establish the project schedules
 Reconcile differences between the macro and micro estimates

Macro Estimates
 Scaling: Given a cost for a previous project then an estimate for a new project can
be scaled from the known cost. E.g NASA, at times, uses spacecraft weight to
estimate total cost.
 Apportion: Given a similar previous project, costs for major subunits of the new
project would be proportional to similar subunits in the previous project.
 Weighted Variables: Certain types of projects can be characterized by specific
parameters (e.g. number of inputs, number of detector channels). Historical costs &
times for single units of these parameters are weighted by the numbers required for
the new project.
 Learning Curve: If the same task is repeated a number of times there will be a cost /
time savings relative to the first time the task is done.

Micro Estimates
 Template: Uses historical data to establish detailed costs and schedules for project
subunits. A new project composed of some combination of these subunits can then
be quickly estimated.
 Ratio: Similar to the Macro ratio method but applied to specific tasks associated with
project subunits. For example, if it takes 1 day to build & test a particular sensor
unit, then an instrument with 10 sensors would take 2 technicians, 5 days to
complete.
 WBS Roll-up: Times and costs associated with the lowest level WBS work packages
are estimated and then these are added or rolled-up to yield the costs for higher
level units. This method provides the most accurate estimates at the expense of
time devoted to developing the estimate.
Phased Approach:
• On a phased project, details over the entire life-cycle may not be immediately
available.
• During the each phase details for the remaining phases are refined, modified or
changed.
• In this case an alternate approach may be appropriate.
1. Develop the general project definition
2. Perform a macro cost and time estimate for all phases
3. Develop a detailed definition and WBS for the immediate phase
4. Roll-up the WBS elements as a micro estimate for the immediate phase
5. Establish a detailed schedule for the immediate phase
6. Reconcile differences between previous macro & current micro estimates
7. Refine the macro cost and time estimate for the remaining phases
8. Refine the schedule for the remaining phases
9. Repeat items 3-8 just prior to next phases for the entire life-cycle

Methods for Estimating Project Times & Cost:

Two key features of a project are on-time and on-budget delivery. The project manager can
only fulfill these objectives if the estimates leading to the project schedule and budget are
accurate. Methods for estimating project times and costs focus on simplifying the process
and breaking it down into little steps. Such methods allow project managers to estimate the
cost and duration of small tasks more reliably. Estimates of many small tasks will be both
high and low, and some will cancel out, reducing the overall error.

1. Work Breakdown Structure

Dividing the project into smaller tasks lets a project manager get an overview of
duration and cost. One method that accomplishes such a simplification is the work
breakdown structure. It guides a project manager through a structured process by
starting with the whole project on the top level. The project manager divides the
project into several sections on a second level. These sections can overlap but
represent separate activities. Typical project parts for the second level are planning,
purchasing equipment, production, shipping and commissioning. On a third level, the
project manager further divides the sections. Purchasing equipment can become a
list of the equipment he has to purchase. The project manager adds levels until he
has tasks and activities for which he can assign an accurate cost and duration.

2. Task Costs
Once he has broken the project up into small tasks, the project manager can assign
costs. For equipment that he has to purchase, he can contact suppliers to get
accurate estimates. For other tasks, he can estimate the number of hours and use an
hourly rate. Another method of assigning costs is to use historical data. If the
company has completed a similar project, the cost of equipment may be available.
Finally, the project manager can estimate overhead by applying a percentage based
on how much overhead costs such projects typically generate.
 3. Activity Durations
The project manager can use the same method as he uses for costs to assign activity
duration. He can check with suppliers to get delivery times and use historical records
to estimate how long a task takes. For common tasks, such as pouring concrete or
paving a parking lot, he can use industry norms to derive duration, based on the
cubic feet of concrete or the square footage of the parking lot. For labor-intensive,
non-standard activities, he can check with the people who will carry out the work.

4. Costs and Schedule

Once he has established activity costs and a project schedule, the project manager
has to link the estimates so he can arrive at an approximate cash flow. He has to look
at the activities that he has scheduled and the costs he has assigned to each activity
to schedule payments. While companies are interested in the total cost of the
project, they also have to be able to schedule their cash flow. This method allows the
project manager to estimate the payments that he has to make each pay period.

Level of Detail:
• Top management may center on the total project and major project milestones.

• Middle management may center more on one segment of the project or a limited number
of milestones as they have a reflection on their area of the organization.

• First-line (or functional) managers may only be interested in the individual work package
tasks that must be performed in their down line.

• The beauty of the WBS is the ability to aggregate information so that each level of
management can obtain the kind of information they want and need in order to make
decisions.

• Excessive detail is unproductive paperwork and may foster a focus on departmental

outcomes rather than the team work required across all departments.

• Insufficient detail generates a lack of focus on the project goals and commits a wasted
effort on non-essential activities.

• Fortunately, the WBS is very flexible in that functional units may expand their portion of
the structure to meet their special needs.
E.g. the marketing department may want to further break down (or decompose) their new
product promotion into TV, radio, billboards, Internet, periodicals, and newspapers. Work
packages for each would then be developed so that each promotion medium can be
assigned to individuals and easily estimated for time and cost. Aggregated up, the marketing
department would then obtain the estimated time and cost for the entire promotion effort.

Types of Costs:
• Direct Costs are clearly chargeable to a specific work package and include labor, materials,
equipment, and any other resources defined by the project.
• Direct Project Overhead Costs are those incurred costs that are directly tied to a specific
project deliverable or work package. These include salary, rents, supplies, specialized
machinery, etc. Using certain direct overhead costs provides a more accurate project cost
rather than using a blanket overhead rate (sometime called a “loaded labor rate”) for the
entire project.

• General and Administrative Overhead Costs represent costs not directly linked to the
project but are carried for the duration of the project. These include organization costs
across all products and projects such as advertising, accounting, and management above the
project level. A specific percentage of these costs are allocated to the project.

Developing a Project Plan

Developing the Project Network:

The Project Network

A flow chart that graphically depicts the sequence, interdependencies, and start and finish
times of the project job plan of activities that is the critical path through the network.

• Provides the basis for scheduling labor and equipment.

• Enhances communication among project participants.
• Provides an estimate of the project’s duration.
• Provides a basis for budgeting cash flow.
• Identifies activities that are critical.
• Highlights activities that are “critical” and can not be delayed.
• Help managers get and stay on plan.

From Work Package to Network:

• Networks are developed from the WBS
• Work packages are the lowest level of the WBS where the activities can be found. • An
activity is an element in the project that consumes time.
• How does the management process often fail?
o One group define the work packages and another defines the activities
o WBS is poorly constructed and not deliverable oriented.
• So what is actually “networked?” All the work packages.

Basic Rules to Follow in Developing Project Networks:

1. Networks typically flow from left to right.
2. An activity cannot begin until all preceding connected activities are complete.
3. Arrows indicate precedence and flow
and can cross over each other.
4. Each activity must have a unique identify number that is greater than any of its
predecessor activities.
5. Looping is not allowed.
6. Conditional statements are not allowed.
 7. Use common start and stop nodes.

Activity-on-Node (AON) Fundamentals:

1. Activities that must be completed immediately before an activity are called
predecessor activities.

2. Activities that must follow immediately after an activity are called successor
activities.

3. Activities that can occur while an activity is take place is known as a concurrent or
parallel relationship.

Network Computation Process:

1. Activity time estimates are taken from the work package duration estimates and
aggregated up as total time for that network “node.”

2. A forward pass detects the earliest start ES and earliest finish EF times of each activity to
determine the earliest that the project can be finished.

3. A backward pass detects the latest start LS and the latest finish LF times of each activity in
the network.

Forward Pass Computation:

• Add activity times along each path in the network (ES + Duration = EF).
• Carry the early finish (EF) to the next activity where it becomes its early start (ES) unless…
• The next succeeding activity is a merge activity, in which case the largest EF of all
preceding activities is selected.

Backward Pass Computation:

• Subtract activity times along each path in the network (LF - Duration = LS).
• Carry the late start (LS) to the next activity where it becomes its late finish (LF) unless
• The next succeeding activity is a burst activity, in which case the smallest LF of all
preceding activities is selected.

Extended Network Techniques to Come Close to Reality:

• Laddering –
Activities are broken into segments so the following activity can begin sooner and not delay
the work.

• Lags –
The minimum amount of time a dependent activity must be delayed to begin or end.
• Lengthy activities are broken down to reduce the delay in the start of successor activities.
• Lags can be used to constrain finish-to-start, start-to-start, finish-to-finish, start-to-finish,
or combination relationships.

Rationale for Reducing Project Duration:

• Time Is Money: Cost-Time Tradeoffs
– Reducing the time of a critical activity usually incurs additional direct costs.
• Cost-time solutions focus on reducing (crashing) activities on the
critical path to shorten overall duration of the project.
– Reasons for imposed project duration dates:
• Time-to-market pressures
• Unforeseen delays
• Incentive contracts (bonuses for early completion)
• Imposed deadlines and contract commitments
• Overhead and public goodwill costs
• Pressure to move resources to other projects

Options for Accelerating Project Completion:

• Resources Not Constrained
– Adding resources
– Outsourcing project work
– Scheduling overtime
– Establishing a core project team
– Do it twice—fast and then correctly

• Resources Constrained
– Fast-tracking
– Critical-chain
– Reducing project scope
– Compromise quality

Project Scheduling

Master Project Plan:

• Define project
• Estimate durations and costs
• Develop project network
• Schedule resources and costs

Project network times are not a schedule until resources have been assigned.

The implicit assumption is that resources will be available in the required amounts when
needed.
Adding new projects requires making realistic judgments of resource availability and project
durations.

Cost estimates are not a budget until they have been time-phased.

Types of Project Constraints:

• Technical or Logic Constraints
Constraints related to the networked sequence in which project activities must occur.

• Physical Constraints
Activities that cannot occur in parallel or are affected by contractual or environmental
conditions.

• Resource Constraints
The absence, shortage, or unique interrelationship and interaction characteristics of
resources that require a particular sequencing of project activities

• Kinds of Resource
Constraints People, materials, equipment

Classification of Scheduling Problems:

1. Classification of Problem
 Using a priority matrix will help determine if the project is time or resource constrained.

2. Time-Constrained Project
 Must be completed by an imposed date.
 Time is fixed, resources are flexible: additional resources are required to ensure project
meets schedule.

3. Resource-Constrained Project
 Is one in which the level of resources available cannot be exceeded.
 Resources are fixed, time is flexible: inadequate resources will delay the project.

Resource Allocation Methods:

1. Limiting Assumptions
• Splitting activities is not allowed—once an activity is start, it is carried to completion.
• Level of resources used for an activity cannot be changed.

2. Risk Assumptions
• Activities with the most slack pose the least risk.
• Reduction of flexibility does not increase risk.
• The nature of an activity (easy, complex) doesn’t increase risk.

Splitting Activities:
• This is a scheduling technique used to obtain a better project schedule but has a down
side in that it can also increase resource utilization.
 • Involves interrupting work on an activity to use the resource on another activity,
then returning the resource to finish the interrupted work.
• Is feasible only when startup and shutdown costs are low.
• Is considered the major reason why projects fail to meet schedule objectives.

• Consider having a bridge designer take time off to work on a design problem on another
project. This designer may easily love 4 days shifting conceptual gears in and out of two
activities. The cost may be hidden, but the cost of splitting is real.

• Schedulers and planners should avoid splitting activities as much as possible except when:
• There is no alternative for resolving a scare resource problem.
• Costs of splitting are known to be small and insignificant to the project.

Benefits of Scheduling Resources:

• If a project is truly dealing with limited or scarce resources, the schedule will end up being
a resource-constrained schedule, not time-constrained.

• Schedule should be created before the project begins. This allows time to consider other
reasonable alternatives such as Cost-Time tradeoffs and Changes in Priorities.

• Resource scheduling also provides information for time-phased work package budgets in
order to assess the impact of unforeseen events as well as the amount of flexibility in
available resources.

Multiple Project Resource Schedules – Problem

• Overall project slippage – a delay on one project can create delays for other projects as
well.

• Inefficient resource allocation – the peaks and valleys of resource demand creates
scheduling problems and delays for multiple projects.

• Resource bottlenecks – shortage of critical resources required for multiple projects will
cause delays and schedule extensions.

• Managing the Solution: Many companies create project offices (PMOs) or specific
departments to oversee resource scheduling across multiple projects.
• First come first serve
• Project selection system
• Project priority models (described in Chapt-2)
• Centralize project management and treat all projects as part of a “megaproject” or
program.
• Outsource projects to reduce the number of project handled internally.
 Managing Risk
Risk Management process:
 Project Organization
The Project Manager:
Role and Responsibilities of the project Manager:

A project manager is a person who has the overall responsibility for the successful initiation,
planning, design, execution, monitoring, controlling and closure of a project. Construction,
petrochemical, architecture, information technology and many different industries that
produce products and services use this job title.

The project manager must have a combination of skills including an ability to ask
penetrating questions, detect unstated assumptions and resolve conflicts, as well as more
general management skills.

Key among a project manager's duties is the recognition that risk directly impacts the
likelihood of success and that this risk must be both formally and informally measured
throughout the lifetime of a project.

Risks arise from uncertainty, and the successful project manager is the one who focuses on
this as their primary concern. Most of the issues that impact a project result in one way or
another from risk. A good project manager can lessen risk significantly, often by adhering to
a policy of open communication, ensuring every significant participant has an opportunity to
express opinions and concerns.
A project manager is a person who is responsible for making decisions, both large and small.
The project manager should make sure they control risk and minimise uncertainty. Every
decision the project manager makes must directly benefit their project.

Project managers use project management software, such as Microsoft Project, to organise
their tasks and workforce. These software packages allow project managers to produce
reports and charts in a few minutes, compared with the several hours it can take if they do it
by hand.

Roles and Responsibilities

The role of the project manager encompasses many activities including:

• Planning and Defining Scope

• Activity Planning and Sequencing
• Resource Planning
• Developing Schedules
• Time Estimating
• Cost Estimating
• Developing a Budget
• Documentation
• Creating Charts and Schedules
• Risk Analysis
• Managing Risks and Issues
• Monitoring and Reporting Progress
• Team Leadership
• Strategic Influencing
• Business Partnering
• Working with Vendors
• Scalability, Interoperability and Portability Analysis
• Controlling Quality
• Benefits Realisation

Finally, senior management must give a project manager support and authority if he or she
is going to be successful.

Project Manager Duties

The specific duties of a project manager vary from industry to industry, company to
company, and sometimes even from project to project.
But there are some key duties and responsibilities that, if performed well, will help you
successfully complete your projects.

Let's take a look at some of the more important project manager responsibilities and duties
using the four functions of management as a framework...

• Planning
• Organizing
 • Leading
• Controlling

Planning
Planning is an essential duty of a project manager. Determining what needs to be done, who
is going to do it, and when it needs to be done are all part of the planning process. Keep in
mind that planning is an iterative process that takes place throughout the life of the project.
Some key planning duties include...

• Define and clarify project scope

• Develop the project plan
• Develop the project schedule
• Develop policies and procedures to support the achievement of the project
objectives

Organizing
Organizing is about setting up the project team's structure. A major driver in this aspect is
the company's existing structure. Companies are usually set up as functional, matrix, or
projectized organizations. When organizing your project, you will need to take the
company's structure into account.
Some of the key organizing duties include...

• Determine the organizational structure of the project team

• Identify roles and positions
• Identify services to be provided by external companies
• Staff project positions

Leading
Leading refers to carrying out the project plan in order to achieve the project objectives.
Leading the project is one of the more challenging aspects for new project managers
because it involves a lot of "soft skills." Skills such as communicating clearly, team
motivation, and conflict resolution.
Some key duties for leading projects include...

• Setting team direction

• Coordinating activities across different organizational functions
• Motivating team members
• Assigning work

Controlling
Controlling is all about keeping the project on track. Project control can be performed using
a three-step process...

• Measuring: Checking project progress toward meeting its objectives

• Evaluating: Determining the cause of deviations from the plan
• Correcting: Taking corrective actions to address deviations
Some key controlling duties include...
• Defining project baselines
• Tracking project progress
• Project status reporting
• Determining and taking corrective actions

Skills of the Project Manager:

Leadership
Project leadership was a hot topic this year. Being able to lead your team as well as manage
them is a trend that shows no sign of abating (and that’s a good thing). It’s really important
to be able to inspire others, set the vision and lead effectively, so if that’s not your strong
point resolve to work on it now.

Coaching
Most of the people on your project team won’t work for you (if, indeed, any of them do).
That makes it really important that you are good at managing in a matrixed environment
but also that you are good at coaching. Why? Because they may not have much project
experience and you’ll have to coach them to top performance.
If you are worried about not being a good coach you might be surprised to learn that
coaching skills are something that might be closer in reach than you expect. If you sit with a
child during homework and help them come to the right answers then you are doing a form
of coaching. Some training in this area will help you apply those skills in the workplace to
help your team perform their best.

Good Communicator
The ability to communicate with people at all levels is almost always named as the second most
important skill by project managers and team members. Project leadership calls for clear
communication about goals, responsibility, performance, expectations and feedback.

There is a great deal of value placed on openness and directness. The project leader is also
the team's link to the larger organisation. The leader must have the ability to effectively
negotiate and use persuasion when necessary to ensure the success of the team and
project. Through effective communication, project leaders support individual and team
achievements by creating explicit guidelines for accomplishing results and for the career
advancement of team members.

Scheduling
It should go without saying that project scheduling is a core project management skill.
However, speaking to people who manage project managers during end-of-year review time
I have heard that some of them aren’t up to scratch in this area.
Get to grips with project scheduling because a) it’s your job and b) it will help you deliver
things more successfully for others (which is also your job).
Ability to Delegate Tasks
Trust is an essential element in the relationship of a project leader and his or her team. You
demonstrate your trust in others through your actions - how much you check and control their work,
how much you delegate and how much you allow people to participate. Individuals who are unable
to trust other people often fail as leaders and forever remain little more that micro-managers, or
end up doing all of the work themselves. As one project management student put it, A good leader is
a little lazy. An interesting perspective!

Change management
Just as you can always expect to hit something unexpected, you can also always expect
something to change on your project. As the project customer and stakeholders get a better
idea of what you are delivering they are likely to have some ‘good ideas’ to put forward. Or
you’ll realise that you can’t do things exactly as you had planned and need to change your
approach. Or you’ll find that it is impossible to deliver everything in the timescales and you
need to drop something out of scope. For whatever reason, as a project manager you have
to be able to handle changes.

Change management isn’t difficult. It’s mainly about recording and assessing each change
request, and making sure that it is approved or rejected by someone in authority. Get your
team to do a full analysis of the impact of the change on the project and the approve/reject
decisions should be straightforward as you’ll easily be able to see whether the change will
cost you money or time. Then your sponsor can make a decision about whether it is worth
going ahead.

Managing Project Teams:

Managing a Project Team

Managing project teams is the art and science of managing relatively short-term efforts
having finite beginning and ending points. The concept of project management involves two
equally important components of hardware and software. The hardware of tools and systems make
it a science. However, there are other things in managing projects than just applying analytical tools
to help monitor, track and control. In managing a project team, a Project Manager needs to possess
excellent analytical and organizational skills. A technical proficiency in the specialist area of their
project is also a distinct advantage. Remember, though, that projects achieve their outcomes
through people – a variety of people working together in a coordinated way to produce the desired
results. How are you encouraging peak performance from your project team? As with any manager
getting the best out of their people, you will need to pay attention to your general leadership and
management skills. Some of these skill areas that you will need to pay attention to are:

Clarifying project team member roles

Setting team and individual goals
Monitoring and measuring team and individual performance
Feeding back team and individual performance
Resolving conflicts between team members constructively
Delegating responsibilities and tasks
Motivating using a combination of intrinsic and extrinsic rewards
 Developing the skills of team members
Coaching team members

Effective teams are so much more productive than groups working on the same task because
they are able to leverage off each others’ strengths and compensate for each others’
weaknesses. Making sure that you have the right mix of team members in your project team is
therefore an important consideration. Conducting a team profiling exercise is also an effective
method for getting each project team member to appreciate their respective strengths and
weaknesses.

The five stage team development model:

Every team goes through the five stages of team development. First, some background on team
development. The first four stages of team growth were first developed by Bruce Wayne
Tuckman and published in 1965. His theory, called “Tuckman’s Stages” was based on research
he conducted on team dynamics. He believed (as is a common belief today) that these stages
are inevitable in order for a team to grow to the point where they are functioning effectively
together and delivering high quality results. In 1977, Tuckman, jointly with Mary Ann Jensen,
added a fifth stage to the 4 stages: “Adjourning.” The adjourning stage is when the team is
completing the current project. They will be joining other teams and moving on to other work in
the near future. For a high performing team, the end of a project brings on feelings of sadness as
the team members have effectively become as one and now are going their separate ways.

The five stages:

 Stage 1: Forming
 Stage 2: Storming
 Stage 3: Norming
 Stage 4: Performing
 Stage 5: Adjourning
This article provides background on each stage and an example of a team going through all five
stages.

Stage 1: Forming
The “forming” stage takes place when the team first meets each other. In this first meeting, team
members are introduced to each. They share information about their backgrounds, interests and
experience and form first impressions of each other. They learn about the project they will be
working on, discuss the project’s objectives/goals and start to think about what role they will play
on the project team. They are not yet working on the project. They are, effectively, “feeling each
other out” and finding their way around how they might work together.

During this initial stage of team growth, it is important for the team leader to be very clear about
team goals and provide clear direction regarding the project. The team leader should ensure that
all of the members are involved in determining team roles and responsibilities and should work
with the team to help them establish how they will work together (“team norms”.) The team is
dependent on the team leader to guide them.

Stage 2: Storming
As the team begins to work together, they move into the “storming” stage. This stage is not
avoidable; every team – most especially a new team who has never worked together before –
goes through this part of developing as a team. In this stage, the team members compete with
each other for status and for acceptance of their ideas. They have different opinions on what
should be done and how it should be done – which causes conflict within the team. As they go
progress through this stage, with the guidance of the team leader, they learn how to solve
problems together, function both independently and together as a team, and settle into roles and
responsibilities on the team. For team members who do not like conflict, this is a difficult stage to
go through.

The team leader needs to be adept at facilitating the team through this stage – ensuring the team
members learn to listen to each other and respect their differences and ideas. This includes not
allowing any one team member to control all conversations and to facilitate contributions from all
members of the team. The team leader will need to coach some team members to be more
assertive and other team members on how to be more effective listeners.

This stage will come to a closure when the team becomes more accepting of each other and
learns how to work together for the good of the project. At this point, the team leader should start
transitioning some decision making to the team to allow them more independence, but still stay
involved to resolve any conflicts as quickly as possible.

Some teams, however, do not move beyond this stage and the entire project is spent in conflict
and low morale and motivation, making it difficult to get the project completed. Usually teams
comprised of members who are professionally immature will have a difficult time getting past this
stage.

Stage 3: Norming
When the team moves into the “norming” stage, they are beginning to work more effectively as a
team. They are no longer focused on their individual goals, but rather are focused on developing
a way of working together (processes and procedures). They respect each other’s opinions and
value their differences. They begin to see the value in those differences on the team. Working
together as a team seems more natural. In this stage, the team has agreed on their team rules
for working together, how they will share information and resolve team conflict, and what tools
and processes they will use to get the job done. The team members begin to trust each other
and actively seek each other out for assistance and input. Rather than compete against each
other, they are now helping each other to work toward a common goal. The team members also
start to make significant progress on the project as they begin working together more effectively.

In this stage, the team leader may not be as involved in decision making and problem solving
since the team members are working better together and can take on more responsibility in these
areas. The team has greater self-direction and is able to resolve issues and conflict as a group.
On occasion, however, the team leader may step in to move things along if the team gets stuck.
The team leader should always ensure that the team members are working collaboratively and
may begin to function as a coach to the members of the team.

Stage 4: Performing
In the “performing” stage, teams are functioning at a very high level. The focus is on reaching the
goal as a group. The team members have gotten to know each other, trust each other and rely
on each other.

Not every team makes it to this level of team growth; some teams stop at Stage 3: Norming. The
highly performing team functions without oversight and the members have become
interdependent. The team is highly motivated to get the job done. They can make decisions and
problem solve quickly and effectively. When they disagree, the team members can work through
it and come to consensus without interrupting the project’s progress. If there needs to be a
change in team processes – the team will come to agreement on changing processes on their
own without reliance on the team leader.
In this stage, the team leader is not involved in decision making, problem solving or other such
activities involving the day-to-day work of the team. The team members work effectively as a
group and do not need the oversight that is required at the other stages. The team leader will
continue to monitor the progress of the team and celebrate milestone achievements with the
team to continue to build team camaraderie. The team leader will also serve as the gateway
when decisions need to be reached at a higher level within the organization.

Even in this stage, there is a possibility that the team may revert back to another stage. For
example, it is possible for the team to revert back to the “storming” stage if one of the members
starts working independently. Or, the team could revert back to the “forming” stage if a new
member joins the team. If there are significant changes that throw a wrench into the works, it is
possible for the team to revert back to an earlier stage until they are able to manage through the
change.

Stage 5: Adjourning
In the “adjourning” stage the project is coming to an end and the team members are moving off
into different directions. This stage looks at the team from the perspective of the well-being of the
team rather than from the perspective of managing a team through the original four stages of
team growth.

The team leader should ensure that there is time for the team to celebrate the success of the
project and capture best practices for future use. (Or, if it was not a successful project – to
evaluate what happened and capture lessons learned for future projects.) This also provides the
team the opportunity to say good-bye to each other and wish each other luck as they pursue their
next endeavor. It is likely that any group that reached Stage 4: Performing will keep in touch with
each other as they have become a very close knit group and there will be sadness at separating
and moving on to other projects independently.

Situational Factor Affecting Team Development:

Experience and research indicate that high-performing project teams are much more likely
to develop under the following conditions:

• There are 10 or fewer members per team

• Members volunteer to serve on the project team
• Members serve on the project from beginning to end.
• Members are assigned to the project full-time.
• Members are part of an organizational culture that fosters cooperation and trust all
relevant functional areas are represented on the team
• The project involves a compelling objective
• Members are located within conversational distance of each other

In reality, is rare that a project manager is assigned a project that meets all of these
conditions. It is important for project managers and team members to recognize the situational
constraints; they are operating under and do the best they can. It would be naive to believe that
every project theme has the same potential to evolve into a high performing team. Under less than
ideal conditions it may be a struggle just to meet project objectives. Ingenuity, discipline and
sensitivity to team dynamics are essential to maximize the performance of the project team.
TEAM EFFECTIVENESS MODEL
Teams can continuously improve their effectiveness by focusing on improving their functioning in
five key areas: Goals, Roles, Procedures, Relationships and Leadership:

Goals: What the team aspires to achieve

Roles: The part each member plays in achieving the team goals
Procedures: The methods that help the team conduct its work together Relationships: How the team
members ‘get along” with each other
Leadership: How the leader supports the team in achieving results.

Conflict and Projects:

Conflict within projects can manifest itself in many different ways.
At the highest level, disagreements can lead to the pursuit of remedies through legal
channels and cost organisations large amounts of money. A good project manager knows
when to intervene and take action when conflict occurs.

At a lower level, conflict within a team may need to be dealt with by the leader or manager
using softer skills and techniques. They must recognise that the pressures associated with
achieving quality objectives will inevitably lead to conflict. It is people who achieve these
objectives for you, but people are complex and will require motivation and support. The
detrimental aspects of conflict can be minimised, if the project manager anticipates the
potential conflicts and understands their determinants.

Conflict can arise from any of the following players: managers, senior management, client,
team members and subcontractors.
Potential causes of conflict are:
 Diversity of disciplinary expertise
 Task interdependency
 Poor leadership by the project manager
 Insufficient authority given to the project manager
 Lack of communication or an understanding of objectives
 Lack of organisation structures and role ambiguity
 Human emotion
 The prospect of change
A very common cause of conflict in a project environment can occur in the relationship
between project manager and functional manager. This relationship needs to be open,
communicative and focused (a relationship based upon negotiation and understanding).

The Conflict Cycle

The cycle of conflict can be an unbroken loop that is fuelled by a disputant’s sense of being
wronged. However the cycle can be broken at two key places: beliefs and response
(behaviour). These places serve as ‘gateways’ to break destructive attitudes and behaviours

The skills required for dealing with conflict will depend on the conflict-handling mode that is
most appropriate for the situation.

Ideally we should deal with conflict by understanding beliefs/attitudes. This in effect is

trying to understand the other party’s point of view and coming to resolution before a
conflict has effectively started.
The problem solving strategies of conflict management address needs, and create
opportunities for those needs to be satisfied. When individuals choose to continue conflict,
no one’s basic needs are fulfilled. Basic psychological needs are the root of almost all
conflict. The impulse to meet these needs during a conflict are so strong that we can act
irrationally, even violently, if they are not satisfied.

Conflict Resolution Approaches

If conflict cannot be dealt with at the belief stage, then it may be necessary to try and break
the cycle at response/behaviour stage. To reach a resolution that is amenable to both
parties a balance of assertiveness and cooperation is required.

 Avoidance – the conflict is ignored as the leader may feel that the conflict is not
worth the effort to resolve at this time. They may address at a later stage if necessary.
 Accommodation – agreement through yielding or conforming to the positions of
others; cooperation in an effort to create harmony, even at the expense of your own
ideas and values.
 Compromise – involves a search for a solution which is mutually acceptable (give and
take to get to the middle ground). Compromise may be one of the best ways of
dealing with conflict when time is short, or when total agreement is impossible.
 Competition – This is the offensive, aggressive approach to conflict resolution. One of
the criticisms of competition is that it takes advantage of the oppositions weakness,
by resorting to various strategies and tactics which have a disarming nature.
 Collaboration – a total membership approach to conflict resolution. All involved
accept the fact that there is conflict, take time to share values/needs, discover
possible solutions, selects the best solution for all, forms a team plan, implements and
evaluates the outcomes.

There is no single best approach that will help a project manager deal with every conflict
situation. It is up to each project manager to develop a situational style which incorporates
many different ways of dealing with conflict. Effective project leadership is leadership which
is adaptive.

Managing Virtual Project teams:

Let’s face it; virtual teams (where we work with colleagues in remote locations, be they
close by or in different countries) are now a reality in the workplace. If this trend in the
workplace environment continues, virtual working will increasingly influence the way we
operate, and the ‘effective virtual team worker’ will be a valued asset. A key benefit to
forming virtual teams is the ability to cost-effectively tap into a wide pool of talent from
various locations. There are several definitions of the virtual team worker, but within the
context of this article, we are talking about people who work on project teams and who
display the following attributes:

• They work primarily from a particular office (maybe a home office, or maybe a fixed
work location), and they are not expected to travel each week as a part of their job
(i.e. road warrior) or be physically in the office on a daily basis.
 • They likely work from home one or more days per week.

Most project managers with a few years experience or more are likely to have managed a
project where some or even all of the project members were remotely located. How
different is managing a virtual project team from a co-located team? Are there additional
considerations or risks involved in managing a virtual team? Before we answer these
questions, one must first understand the dynamics of the virtual team worker.

Being a virtual team worker is not for everyone or every organization. A virtual team worker
is more likely than the collocated worker to suffer from feelings of isolation if the set-up is
not right, and they need to be more self-managing and focus their efforts in a particular
way. In order to effectively manage their virtual project team members, the project
manager needs first to understand how to achieve this. We contend that there are five
primary aspects in which a project manager should direct their efforts to ensure effective
project management of the virtual team;
1) Manage Goals
2) Manage Communications
3) Keep People Motivated
4) Regularly Assess the Effectiveness of the Remote Communications, and
5) Use Collaboration Tools.

Manage Goals: Setting clear goals and objectives are important in any project. When a
portion of the team is virtual, this is all the more important. The virtual team workers
cannot physically walk into your office to ask clarifying questions, review goal statements
posted on the walls or physically attend team focus meetings. Setting clear goals,
expectations, and how each virtual member’s contributions align to the goals is crucial. In
order to allow inclusion of virtual team members, consider adding the project team goal
statements on the front page of team work sites or find other ways of making them readily
available.

Manage Communications: If you have read any of our previous articles, or indeed other
project management material, you may recall that project management time is arguably
90% communication. There is no difference for this between collocated or virtual teams.
The key difference for virtual team working is that project managers need to understand the
specific communication needs of the virtual team workers, as well as their own
communication style. Apart from perhaps an initial face-to-face meeting (which we
recommend, if it is feasible), virtual team workers are connected to each other through
electronic forms of communication (email, instant messaging, conference calls,
videoconferences). The constraint of being bound together by a “virtual” communication
medium places a risk on project performance that needs to be managed. In order to
mitigate this risk, the project manager needs to understand the importance of selecting the
appropriate communication medium for each message. Be highly perceptive of cultural
differences if your team is multi-national, and how different cultures may prefer different
communication mediums. Is something during your project significant enough to warrant a
video conference (e.g. the achievement of a Milestone)? Only through video conferencing
can you detect positive or negative body language. On phone calls (which are a common
form of virtual communication), pay attention to the tone of voice being used; be perceptive
to any signs of discontent or frustration. You can also hear if anyone is “tapping on a
keyboard” during a conference call. Check that people are paying attention by making any
conference call interactive.

Keep People Motivated: Any feelings of isolation and disconnection from the team have a
direct correlation to the motivation of the virtual team member. It is also possible that “out
of sight” means less focus on the virtual project, and more on activities with people who are
physically next to you. The project manager should look for ways to keep the virtual team
workers engaged and motivated throughout the project. Regular phone calls, perhaps
combined with web meetings, are a useful way to achieve this. Many of the same steps you
take to motivate a collocated team can be used, but you need to adjust your style for the
“virtual space”. A few tips are to add pictures of the team in the teamwork site, use video
conferences whenever possible (remembering that they are more expensive than phone
calls, so you may need to budget for this), hold a “virtual team lunch” to discuss lessons and
updates, and make an allowance if you can for face-to-face time to celebrate successes
and/or other major project milestones.

Regularly Assess the Effectiveness of the Remote Communications: The virtual working
arrangement does not suit everyone. People work differently, they have different work
styles, and they have varying degrees of comfort with using electronic communications
technology. In order to effectively manage the communications of a virtual team, the
project manager needs to accurately assess each person’s level of comfort or willingness to
be in a virtual setting, and look for any behavior that may signal that a virtual team worker is
suffering from “disconnection”. If so, assess the problem, have a conversation with the team
member, and be prepared to implement appropriate actions to overcome the issue.

Use Virtual Collaboration Tools: This subject is broad enough to be an article by itself. A
virtual team worker needs to have the means to work effectively in a virtual
project. Phones with conferencing ability, online web meeting spaces, a global time clock (if
the team is global), and mobile computers are some of the requirements. Modern online
communication systems allow you to see if someone is “online” or not, or in a meeting
(which can guide you as to whether to chat using an instant messaging tool). In the same
manner as you ensure your team members software is compatible (particularly if they work
for different organizations), the project manager needs to ensure the team members are
trained in and have a comfort using such technologies.

Avoid These 7 Project Management Pitfalls

Working as a team is great, until its not.

Most companies these days encourage people to work together in teams with the goal of
achieving better results through collaboration. However, it is not as simple as it sounds due
to the complexity inherent in team collaboration. Every team is bound to have its own
issues and concerns related to the completion and the timely delivery of its project(s).
Do you know what specific issues and concerns prevent your project team from succeeding?
In this post we’ll discuss seven common pitfalls that prevent teams from successfully
delivering project results.
Unrealistic Targets and Deadlines
One of the biggest factors which give teams nightmares is expecting them to meet
unrealistic targets and deadlines. Of course, sometimes there are regulatory deadlines that
must be met to achieve compliance, but that is not the type of deadline we’re talking about
here.

To begin, set your project up for success by consulting a calendar. A quick look at the
calendar before kicking off a project will enable you to determine if it is a good time to start
a project. If the end of a quarter is typically filled with reporting deadlines or specific
deliverables, then starting a project at that time doesn’t make sense.

Part of project success is setting the right expectations for stakeholders. After you have
completed your project scope document and built your project plan, compare the project
timeline with the deadline to determine if the dates are in alignment. If the timeline exceeds
the project deadline, now is the time to add resources, cut scope or negotiate a new end
date.

Unclear Objectives

Objective and scope statements are the foundation upon which all projects are managed.
Teams refer to these documents to help them understand a project’s:
 Overall goals and objectives

 Responsible parties
 Requirements
 Deliverables
 Budget
When defining the scope of a project, consult with your project sponsor and each
stakeholder to identify their needs and expectations. Doing so will enable you to:
 Expose missing requirements
 Provide a more realistic timeline
 Avoid scope creep
 Reduce the number of change orders
Once you’ve developed a proper scope statement, make sure it is reviewed and approved
by your project sponsor and individual stakeholders. Keep in mind that the success of your
project will be measured by the ability of your team to meet the requirements and
deliverables as defined in the project scope statement.
A Poorly Conceived Project Plan
A project without a plan is like taking a road trip without checking a map. Without a map,
you are liable to take several wrong turns before arriving at your destination. However,
having a project plan in and of itself is not enough. Take the time to think through all of the
tasks that must be performed to satisfy your project requirements. A well-thought out
project plan should not only list the tasks to be completed but answer questions such as:
 How long will it take to perform each task?

 What order should the tasks be performed?

 Are there tasks that can be performed in parallel?
 Do certain tasks require the completion of other tasks?
 Who should be assigned to the task and are they available?
You can’t answer those questions in a vacuum. Creating a realistic project plan requires
consulting with your team members and your project sponsor as well as any colleagues who
have managed similar projects.
Scope Creep

Scope creep is the scourge project management! Scope creep typically happens due to
missing requirements or an insufficient change management process. Even in the best
projects, scope may need to change when new information is received or conditions
change.

To handle scope creep, first assess how the change will impact the project’s scope, budget
and timeline. If the project timeline cannot be expanded, will adding more resources or
decreasing scope keep the project on track? Once the impact has been assessed, document
the change and its impacts and then present the tradeoffs to your project sponsor and other
stakeholders for their approval and sign off.

Inadequate Resources
It’s been shown time and again that overtime has a negative impact on the quality of project
deliverables. Don’t expect your team to make up for a lack of resources. When you’re
developing your project schedule, consider:
 Vacations and other time out of the office

 Concurrent project demands

 Meetings, time tracking and other responsibilities that will impact their availability to
do project work
Remember that a forty-hour workweek does not equate to forty hours of project time.
Poor Communication

At the center of team collaboration is communication. It is important to keep the

communication flowing at all times, as a lack of it can impact the quality of your deliverables
and lead to missed dates.

Choose the right medium for your communicating with your team. For example, email is not
the best method for discussing Issues that arise during the course of the project. Following a
discussion thread in email is time consuming and not the most efficient way to resolve an
issue. Email is best used for passing along important messages to the team.

Schedule regular check-ins with the team. The frequency of your meeting schedule will
depend in part on the tools you are using to track your project tasks and the complexity of
your project. If you utilize a project management tool that enables team members to
update their status in real time, post questions and comments, and track their time, you can
reduce the number and frequency of your meetings.

Lack of Accountability
You and your team are responsible for the success or the failure of the projects you
undertake. Accountability requires both transparency and communication. Team members
are more likely to follow through on their commitments if their progress (or lack there of) is
visible and they are responsible for reporting the status of their tasks. Meet regularly with
the project team to review project status and deal with any roadblocks that are impacting
the team’s ability to complete their tasks.

Project Evaluation

Progress and Performance Management and Evaluation:

Structure of a Project Monitoring Information System

• Creating a project monitoring system involves determining:
– What data to collect
– How, when, and who will collect the data
 – How to analyze the data
– How to report current progress to management

Project Monitoring Information System

• Information System Structure
– What data are collected?
• Current status of project (schedule and cost)
• Remaining cost to compete project
• Date that project will be complete
• Potential problems to be addressed now
• Out-of-control activities requiring intervention
• Cost and/or schedule overruns and the reasons for them
• Forecast of overruns at time of project completion
– Collecting data and analysis
• Who will collect project data?
• How will data be collected?
• When will the data be collected?
• Who will compile and analyze the data?
– Reports and reporting
• Who will receive the reports?
• How will the reports be transmitted?
• When will the reports be distributed?

Project Control Process

Project Controls
It is a management action, either planned to achieve the desired result or taken as a
corrective measure prompted by the monitoring process. Project controls are mainly
concerned with the metrics of the project, such as quantities, time, cost and other resources.
Apart from these, project revenues and cash flow can also be part of the project metrics under
control.

The successful performance of a project depends on appropriate planning. The execution of

a project is based on a robust project plan and can only be achieved through an effective
schedule control methodology. The development of a suitable Project Control system is an
important part of the project management effort. Furthermore, it is widely recognized that
planning and monitoring plays a major role as the cause of project failures. It has been
proved time and again that Project performance can be improved if dedicated Project
Controls systems are in place.

Project Control Process

Control is the process of comparing actual performance against plan to identify
deviations, evaluate possible alternative courses of actions, and take appropriate corrective
action. The steps in the project control process for measuring and evaluating project
performance are listed below:
 Setting a baseline plan.
Measuring the actual performance
Comparing actual with baseline plans.
Taking corrective action.

Step 1: Setting a Baseline Plan

The baseline plan provides with the elements for measuring performance. The baseline is
derived from the cost estimates; information relating to duration is derived from the work
breakdown structure (WBS) database; and time-sequence data are derived from the network
and resource scheduling decisions. The WBS defines the work in discrete work packages that
are tied to deliverables and organization units. In addition, each work package defines the
work, duration, and budget. From the WBS, the project network schedule is used to phase all
work, resources, and budgets into a baseline plan.

Step 2: Measuring the Actual Performance

Time and budgets are quantitative measures of performance that readily fit into the
integrated information system. Qualitative measures such as meeting customer technical
specifications and product function are most frequently determined by on-site inspection or
actual use. Measurement of time performance is relatively easy and obvious. Examples: the
critical path, early on schedule or late; is the slack of near critical-paths decreasing to cause
new critical activities, etc. For measuring performance, earned value is necessary to provide
a realistic estimate of performance against a time-phased budget. Earned value will be
defined as the budgeted cost of the work performed (EV).

Step 3: Comparing Actual with Baseline Plan

All the baseline plans seldom materialize as expected and hence, it becomes imperative to
measure deviations from plan to determine if action is necessary. Periodic monitoring and
measuring the status of the project allow for comparisons of actual versus expected plans. It
is crucial that the timing of status report be frequent enough to allow for early detection of
variations from plan and early detection of causes. Usually, status reports should take place
every one to four weeks to be useful and allow for proactive correction.

Step 4: Taking Corrective Action

If deviations from plans are significant, corrective actions will be needed to bring the project
back in line with original or revised plan. In some cases, conditions or scope can change,
which, in turn, will require a change in the baseline plan to recognize new information.

Cycle Time Performance:

There are two types of cycle time—project cycle and process cycle. The project life cycle
defines the beginning and the end of a project. Cycle time is the time it takes to complete
the project life-cycle. Cycletime measures are based on standard performance. That is, cycle
times for similar types of projects can be benchmarked to determine a Standard Project Life-
Cycle Time. Measuring cycle times can also mean measuring the length of time to complete
any of the processes that comprise the project life-cycle. The shorter the cycle times, the
faster the investment is returned to the organization. The shorter the combined cycle time
of all projects, the more projects the organization can complete.

5 benefits of a fully integrated information system

One common problem for many organisations is how to efficiently manage the continually
expanding amounts of data they have to store regarding employees, clients and suppliers.
Despite technology being implemented across many organisations in order to assist with the
management of data, it is not the case for all of them and many of those that do have an
adequate information system, are not maximising its potential to make the overall business
more efficient.

Through having an effective information system and fully integrating data, organisations can
receive multiple benefits than enable them to achieve business objectives whilst remaining
cost-effective.

The top five benefits of a fully integrated information system are:

1. Real Time Data

Through having integrated information in one system, all of the data is up to date. This is
essential for all elements of the organisation ranging from marketing communications
through to finance.

2. Better Communication
Team members will be able to communicate better through having exactly the same
information available to them at each time. Its saves having to mis-match data between
systems and departments.

3. Reduced Risk of Errors

Due to the fact that data will not have to be replicated, there is less chance of human errors
being made which leads to more accurate information available.

4. Greater Productivity
Employees can spend more time on tasks that will help the business to grow, rather than
having to replicate data and wait for information to be sent to them from other
departments.

5. One Secure Location

Through having all of the necessary data stored in one information system, relevant data is
easier for employees to access. Many leading business systems allow restrictions on what
individual employees are allowed to access so sensitive information can be seen only by
those who need it.

Fully integrated, complete business systems such as Sage 200 have benefits across the
entire organisation. It is a common misconception that such systems are only relevant to
those in accounting roles. Eventura tailor systems to suit the individual organisation and
ensure that the system works to the best of its ability for the clients overall organisation.
This often includes the implementation of a CRM system which is beneficial for sales,
marketing and admin functions as well as individual modules dependant on client
requirements and operations.

Project Audit and Closure

Project Audits
Project audits are more than the status reports which check on project performance.
Project audits use performance measures and forecast data. But project audits are more
inclusive. Project audits review why the project was selected. It includes a reassessment of
the project’s role in the organization’s priorities. It includes a check on the organizational
culture to ensure that it facilitates the type of project being implemented. It assesses if the
project team is functioning well and it is appropriately staffed. Audits of projects in process
should include a check on external factors that might change where the project is heading on
the right path – for example, technology, government regulations, and competitive products.
It includes a review of all factors relevant to the project and to managing future projects. It
can be performed while a project is in process and after a project is completed. There are only
a few minor differences between these audits.

In-Process Project Audits

In-process project audits allow for corrective changes, if they are needed, on the audited
projects or others in progress. It concentrates on project’s progress and performance and
checks if conditions have changed.

These audits tend to include more detailed and depth than in-process project audits.
Project audits of completed projects emphasize improving the management of future
projects. These audits are more long term oriented than in-process audits. Post project audits
check on the project performance, but the audit represents a broader view of the project’s
role in the organization.

Factors Influencing Audit Depth and Detail

The depth and detail of the project audit depends on many factors:

Organization size
Project importance
Project type
Project risk
Project size
Project problems

Project Audit Guidelines

The Guidelines for conducting project audits include the following:

a) The philosophy must be that the project audit is not a punishing exercise.
 b) Comments about individuals or groups participating in the project should not be
revealed.
c) Audit activities should be intensely sensitive to human emotions and reactions.
d) Accuracy of data should be verifiable or noted as subjective or judgmental.
e) Senior management should announce support for the project audit and see that the
audit group has access to all information, project participants and project customers.
f) Objective of the project audit is to learn and conserve valuable organizational
resources.
g) The audit should be completed quickly.
h) The audit leader should be given access to senior management above the project
managers.

Project Audit Process

Following the steps in the project audit process:

Step 1: Initiation and Staffing

Initiation of the audit process depends primarily on organization size and project size along
with the other factors. However, every effort should be made to make the project audit a
normal process rather than a surprise notice. In small organizations and project where face
to face contact at all levels is prevalent, an audit may be informal and only represent another
staff meeting. But even in these environments, the content of a formal project audit should
be examined and covered with notes made of the lessons learned.

In medium sized organizations that have several projects occurring simultaneously, initiation
can come from a formal project review group, from the project priority team or be automatic.
A major tenet of the project audit is that the outcome must represent an independent,
outside view of the project. Maintaining independence and an objective view is difficult, given
that audits are frequently viewed as negative by project stakeholders.

It is imperative that the audit leader possesses the following characteristics:

• No direct involvement or direct interest in the project
• Respect of senior management and other project stakeholders
• Willingness to listen
• Independence and authority to report audit results without fear of recrimination
from special interests.
• Perceived as having the best interest of the organization in making decision.
• Broad based experience in the organization or industry.

Step 2: Data Collection and Analysis

The traditional content model for a project audit represents two perspectives. One
evaluates the project from the view of the organization. The second perspective represents
the project team’s evaluative view. The organization perspective is developed by a small
group primarily made up of persons not having a direct interest in the project. The project
team perspective is developed by a group composed primarily of team members along with
persons independent of the project to ensure the evaluation is objective. Each organization
and project is unique. Therefore, many factors need to be considered like the industry, project
size, newness of technology and project experience that can influence the nature of the audit.

Step 3: Reporting
The major goal of the audit report is to improve the way future projects are managed.
Concisely, the report attempts to capture needed changes and lessons learned from a current
or finished project. The report serves as a training instrument for project managers of future
projects. Audit reports needs to be customized to the specific project and organizational
environment. Nevertheless, a generic format for all audit reports and the managers who read
and act on their content. Usually, the following items are included in the reports:

• Classification of project based on nature, type, size, number of staff and technology
level.
• Analysis of information gathered such as project’s mission, objectives, procedures,
systems and organizational resources used.
• Recommendation of positive successes that should be continued and used in future
projects.
• Lessons learned to avoid pitfalls in future.
• Appendix of data or details of analysis of the project.

Project Closure
Every project comes to an end eventually. On some projects the end may not be as
clear as would be hoped. Although the scope statement defines a clear ending for a project,
the actual ending may or may not correspond. Fortunately, a majority of projects are blessed
with a well-defined ending. Regular project audits and a priority team will identify those
projects that should have endings different from those planned.

Thus, closure is the final stage in the project life cycle and is triggered when the
sponsor formally accepts the project. The objectives of this stage are to: transition the
product, services and deliverables to operations and support; logically complete
administrative and logistical close-out activities including contracts; release project resources
and capture performance information that will help improve future projects.

Conditions for Project Closure

a) Normal
The most common condition for project closure is simply a completed project. In the case of
‘turnkey’ projects, such as building a new production facility or creating a customized
information system, the finish is marked by the transfer of ownership to the customer. For
many development projects, the end involves handing over of the final design to production
and the creation of a new product or service line.

For other internal projects, such as system upgrades or creation of new inventory control
systems, the end occurs when the output is incorporated into ongoing operations. Some
modifications in scope, cost, and schedule probably occurred during implementation.
b) Premature
For a few projects, the project may be completed early with some parts of the project being
eliminated. If early project closure happens, it should have the support of all project
stakeholders. The decision should be left to the audit group, project priority team or senior
management.

c) Perpetual
Some projects never seem to end. The project appears to develop a life of its own. Although
these projects are plagued with delays, they are viewed as desirable when they are finally
completed. The major characteristic of this kind of project is constant ‘add-ons’. The owner
or others continuously require more small changes that will improve the project outcome-
product or service. These changes typically represent ‘extras’ perceived as being part of the
original project intent.

d) Failed Project
In rare circumstances, projects simply fail, for a variety of reasons.

e) Changed Priority
The priority team continuously revises project selection priorities to reflect changes in
organizational direction. Normally these changes are small over a period of time, but
periodically major shifts in organization require dramatic shifts in priorities. In this transition
period, projects in process may need to be altered or cancelled. Thus, a project may start with
a high priority but see its rank erode or crash during its project life cycle as conditions change.

Closure Process
As the project nears the end of its life cycle, people and equipment are directed to other
activities or projects. Carefully managing the closure phase is as important as any other phase
of the project. Getting the project manager and team members to wrap up the odds and ends
of closing down the project is sometimes difficult. The typical close-out plan includes answers
to questions like:
What tasks are required to close the project?
Who will be responsible for these tasks?
When will closure begin and end?
How will the project be delivered?

Implementing the closedown plan includes several wrap-up activities. Many

organizations develop lengthy lists for closing projects as they gain experience. These are very
helpful and ensure everything is taken care of. Implementing closedown includes the
following five major activities:

• Getting delivery acceptance from the customer.

• Shutting down resources and releasing to new ones.
• Reassigning project team members.
• Closing accounts and seeing all bills are paid.
• Evaluating the project team, project team members, and the project manager.
Team, Team Member and Project Manager Evaluation
Auditing includes performance evaluations of the project team, individual team members,
and the project manager.

Team Evaluation
Some conditions should be established or agreed upon before auditing the project team.
Some conditions include the following:

• Whether standards for measuring performance exist? Are the goals clear for the team
and individuals? Challenging? Attainable? Lead to positive consequences?
• Whether individual and team responsibilities and performance standards are known to
all team members?
• Whether team rewards are adequate? Do they send a clear signal that senior
management believes in synergy of teams?
• Whether a clear career path for successful project managers is in place?
• Whether the team has discretionary authority to manage short-term difficulties?
• Whether there is a relatively high level of trust emanating from the organization
culture?

Team evaluation should be beyond time, cost, and specifications. Whether there are
any other conditions beyond these three criteria? The “characteristics of highly effective
teams” can easily be adapted as measurements of team effectiveness.These “in-place
conditions” will support any evaluation approach for teams and their members.

Team’s project performance should be evaluated in one of two ways:

• Team members should evaluate themselves and each other.

• Team members should evaluate each other and team leaders should evaluate individual
team members.

Do’s of Team Evaluation

Each team member should also be allowed to evaluate him or herself.To begin with,
team members and leaders use the Project Team Evaluation Templates. Following are the
guidelines for evaluating project teams:

a) Analyze Evaluations - Analyze how individual team members evaluated themselves and
each other to get a better feel for how the team feels as a whole.

b) Analyze the Difficulties - How difficult have team projects been? Were tasks new or
known? In either case did the team rise to the degree of difficulty? If not, why? If you
feel the team lacked on certain tasks, instead of berating the team in your evaluations,
discuss a past project where they performed well, point out what was different this
time around.
 c) Analyze Performance - How well did the team perform? Don’t confuse performance
with potential. Stick to the actual results of the team.

d) Analyze Achievement - Did the team achieve the project goal? If so, point out
contributions and results.

e) Life Cycle - How well did the team perform within the life cycle of the project? Were
deadlines met? If not, identify overruns. Try to analyze what happened if the life cycle
of the project was longer than anticipated. What could have been done differently?

f) Judge Individuality - By looking at individual evaluations, analyze what each individual

contributed to the project. How well did each team member do? Keep in mind that
some team members succeed in some areas while others succeed in different areas.
Did the individuals perform at a level that was helpful to the team as a whole?

g) Be honest - You probably are pleased with your team most of the time. Don’t use this
as your guide in evaluating your team. All employees have room for improvement
including teams. Not every project is a job well done. This is by far the hardest part of
evaluating your team. If negatives are identified and must be discussed, start by talking
about a past project that flowed well. Next, discuss past success and compare it to the
current project. How could things have been improved upon?

Do not’s of Team Evaluation

Following are the not to be followed while evaluating project teams:

• Don’t be too lenient. Don’t be the project manager who says everything is fine when it’s
not.
• Everyone has room to improve. If you don’t identify these areas, your team will never
improve.
• Don’t judge everything on an “average” basis. Some things worked and some things
didn’t. If a team feels they are average in performance, what are you really telling them?
• Do not judge individuals’ performance based on their personality
• If a team member or the team as a whole did one wrong thing, don’t make this the focus
of your evaluation. Evaluate performance for the entire project.

Evaluations are not the most popular thing for project managers. Evaluating team project
performance is a key if team has to succeed or improve on future projects. Keep in mind
that if weak areas are not identified, your team may just think everything is fine. If you feel
you need help on evaluating your team, talk with mentors, other project managers and
human resources department.

Team Member and Project Manager Evaluation

Team evaluation is crucial, but at some point a project manager is likely to be asked to
evaluate the performance of individual members. Such an evaluation will typically be required
as part of the closure process and will then be incorporated in the annual performance
appraisal system of the organization. These evaluations constitute a major element of an
individual’s personnel file and often form the basis for making the decisions about
promotions, future job assignments, merit pay increases, and other rewards.

Peer Evaluation
Peer evaluations offer an opportunity for team to comment on the performance of their
peers. For example, the team may ask its members at a midpoint in the project to self-
evaluate their improving team effectiveness. The goal is to provide information during the
project that will allow the participants to modify their behaviour for the success of the
project. In the recent times, 360 degree feedback is gaining momentum in the organizations.
360 degree feedback is a multi-rater approach and involves soliciting feedback relating to
the performance of team members from all the stakeholders of the project. This includes
not only the project and area managers but also peers, subordinates and customers.

Financial Analysis

Commercial or Financial Profitability

From the national development point of view, there are always more projects
compared to the availability of resources and hence the necessity to appraise projects for
selection arises. While the obvious choice will be the projects with higher returns, the
complexity arises because of the need to appraise projected outcome based on forecasts in a
world of uncertainly, particularly in the context of endemic inflation. In the case of large
projects, particularly public sector projects involving the building up of infrastructure it is
essential to assess the social merits of the investment proposals.

Projects emanate from diverse and dispersed sources, such as individuals firms or
institutions, and government at the state and central levels. In situations where the state
government is not the owner of the business, the traditional yard stick of commercial or
financial profitability is used for selection of projects for implementation. The financial
benefits get related to the financial costs of the project and if there is a net surplus the project
merit choice. While the process of selection of individual projects thus meets the profit
criteria of the individual investors or promoters, the combination of choices may not
necessarily result in the most socials profitable allocation of resources. For developing
economies this is the very important factor but it cannot be ignored.

Commercial or financial profitability as the sole deciding factor has two major
limitations viz.

a) Financial or market values seldom match with social values and

b) What is beneficial to one segment of society may not necessary be so to the entire
society.

In financial analysis the market values of input and outputs are reckoned and
compared. And since market distortions are many, these fail to reflect the relative worth on
the society’s value scale. From society’s stand point, goods and services should be valued in
terms of relative contributions to consumption. In the same manner the social value of
resource should be reckoned in terms of its opportunity cost, represented by the output or
consumption value that it is capable of yielding in its next best alternative use.

In a free market economy the dominance of the forces of demand and supply has the
effect of the market prices being kept close to social valuation. In a developing economy
however there are several distortions entering into the market prices and they are far
removed from their social valuation. The distortions arise from the monopolistic status of
many large enterprises a system of administered prices in a controlled economy and from
various government policy measures such as taxes, duties, controls and foreign exchange
regulations.

A project may confer considerable good to society that does not get reflected in
financial projections. Others though financially very rewarding may have some harmful
effects on society that the financial results fail to interpret. These effects that are outside the
purview of financial projections are known as externalities and are essential ingredients in
the social profitability computations. The emphasis in social cost benefit analysis is the import
on the whole society and not one segment.

Social Cost Benefit Analysis (SCBA)

Cost-benefit analysis is a process for evaluating the merits of a particular project or
course of action in a systematic and rigorous way. Social cost-benefit analysis refers to cases
where the project has a broad impact across society and, as such, is usually carried out by the
government. While the cost and benefits may relate to goods and services that have a simple
and transparent measure in a convenient unit (e.g. money), this is frequently not so, especially
in the social case. In its essence cost-benefit analysis is extremely, indeed trivially, simple:
evaluate costs C and benefits B for the project under consideration and proceed with it if, and
only if, benefits match or exceed the costs.

Social Cost Benefits Analysis means to analyze the social cost and total social benefits
if we accept any project. We all know that for completing the big project, we need big
investment. In social cost benefit analysis (SCBA), we see whether return or benefits on this
investment are more than its cost from point of view of society in which we are living. In public
investment, we analyze and compare government expenditure with total benefits to society
through SCBA. It is also a good technique of financial evaluation of a project because we reject
those projects whose benefits to society are less than their total cost because all the resources
are drawn from the society.

The market prices, in the case of developing countries particularly, are substantially at
variance with their appropriate social prices. The social costs and benefits will be presented
in terms of the domestic currency equivalent of the foreign exchange value, also referred to
as unit of account or numeral.
 Materials Management in Project Planning:

Procurement:
Project Procurement Plan
Planning of project procurements is carried out within the procurement process and results
in developing a plan. A procurement plan is a convenient tool for organizing and managing
activities and tasks related to the procurement management process. A template of the plan
is to be designed by the purchasing department in cooperation with the project manager. A
project procurement plan should be reviewed and approved by the project manager before
any supplier relationships get started.
A project procurement plan template documents:
 Deliverables to be procured by proposed agreements/contracts.

 Effective resource management strategies for negotiating and managing the

agreements/contracts.
 The need for staged delivery and desirability of testing the procured items before
introducing them into the implementation process (this item is optional).
 The chosen procurement method (payments, expressions of interest, request for
price/quote, request for tender).
 Key stages of the process for selecting suppliers and vendors.
 The model of procurement funding.
 The sample of procurement contract/agreement.
 References to quality approvals, quality assurance and risk management.

Project Procurement Management: 5 Steps Of The Process

The Process For Managing Procurements In 5 Steps
Managing project procurements and acquisitions requires the project manager to efficiently
collaborate with the purchasing department on the process of planning and managing
procurements. Project procurement management is a section of the Implementation
Plan to determine how “the ordered products necessary for producing deliverables can be
delivered on time and within the allocated budget”. Note that the “Procurement
Management” section of the Implementation Plan will be necessary only for projects that
have to deal with substantial buy-in of expertise or capital items. For any other projects
where there is no high level of procurement expenditure it is enough to include a
procurement item list and a vendors list in the project implementation plan.

The procurement process includes five major steps, as follows:

 Specification. This step involves the purchasing department in communicating with the
project manager to develop and approve a list of procurement items necessary for
project implementation. The department must specify the approved items to external
vendors.
  Selection. This step of the project procurement process requires the department to
find potential suppliers which can procure the necessary items, according to the
specifications. For this purpose the department needs to set vendor selection criteria,
which may include such measures as Delivery, Service Quality, Cost, and Part
Performance.
 Contracting. The department must communicate with the suppliers on delivery dates
and payment conditions in order to ensure “on-time” delivery of the ordered items
within the stated project budget. All the conditions should be listed in a procurement
contract. Also a detailed delivery schedule should be negotiated with the procurers and
approved by the purchasing department.
 Control. Success of the procurement management process depends on how the
purchasing department controls the delivery and payment processes. Through
arranging regular meetings with the vendors, tracking delivery progress, reviewing the
ordered items against the approved product specifications, and making necessary
changes to the procurement contract, the department can control the process and
ensure successful accomplishment.
 Measurement. The final step of the project procurement management process refers
to using a system of performance indicators and measures for assessing the
effectiveness and success of the entire process. The project manager needs to set up
such a system and the purchasing department needs to use it in measuring the process.
Special meetings and workshops can be conducted to view KPIs, intermediate results of
staged delivery, performance of procurers, adherence to product specifications,
communications with suppliers, and the like. In case any deviations or gaps are
revealed the department should notify the project manager and make necessary
changes to the procurement plan.

Financing of the Project

Project Funding
An overview of finance sources for projects

There are a wide variety of funding sources available for projects or programmes although the
options available depend on the nature of the company. Key sources are through loans, equity,
investors, grants/funds and private finance.

Sources of short-term project finance

Overdrafts are useful sources of short-term finance due for repayment in less than a year. Interest is
only charged when the facility is used and the interest payments are tax-deductible. They can be
arranged at short notice and are flexible in the amount borrowed at any time.

Loans generally have higher rates of interest and are less flexible as payments need to be made for a
pre-agreed amount and at a pre-agreed time. Loans can be repaid in stages or at the end of the loan
period. The interest is also tax deductible and return on the loan can exceed the interest payments.
The cost of borrowing money can be compared with the return from a project by calculating the
Internal Rate of Return.

Sources of long–term project finance

Sale and leaseback

Assets can be sold to a financial institution and then leased back for a certain term. This releases
capital in assets, which can be used for investment, but should be offset by the rental payments and
loss of capital growth should the assets increase in value.

Loan Capital

Debentures Some loans are secured by a fixed or floating charge against a company’s assets and are
known as debenture loans. Debenture holders receive their interest payment before any dividend is
paid to shareholders and if the business fails the holders will be preferential creditors. Parts of the
funds raised for the cricket stadium at Trent Bridge in Nottingham were financed by debentures
(biz/ed, 1996-2012).

Business Angels These are private investors who invest directly in a company in exchange for an
equity stake and perhaps a place on the board. They normally invest in the region of £10k to £100k
and they invest in order to receive a capital gain, they are usually experienced entrepreneurs and
can be a source of useful knowledge for the business.

Venture Capital Venture Capitalists usually offer 100k or more to companies that other financial
institutions might consider too risky. They exchange their capital for an equity share and
involvement at a strategic level often through a non-executive position on the board. Their prime
aim is to increase the value of their shares so that they can sell them at a profit. The British Venture
Capital Assocation (BVCA) represents most UK based private equity and Venture Capital firms. See
the BVCA website.

Share Capital

Share Capital is raised through the company shareholders. In exchange for their investment they
receive a share of the profits through a dividend. They may also receive a capital gain through sale of
their shares are some future date. There are two main types of shares. Ordinary shares are held by
the owners of the business who have a right to a share of the company profits through dividends,
which vary in value depending on performance. As owners of the company they have voting rights at
Annual and Extra-Ordinary General Meetings, however they are liable should the company become
insolvent and are therefore accepting a level of risk with their investment. Preference shares are less
risky as the holders of preference shares are not owners of the company. They offer a guaranteed
dividend although this may be less than that received by ordinary shareholders. As preference
shareholders are not owners of the company they have limited voting rights.

Retained profits Not all profits are distributed to shareholders: the company retains a proportion as
reserves. This is usually the most significant source of equity finance, costs far less than external
sources that charge interest and can be distributed as the company sees fit.

Issuing shares Shares can be issued through new issues or rights issues.
What is Risk Analysis?

Risk Analysis is a process that helps you identify and manage potential problems that could
undermine key business initiatives or projects.

To carry out a Risk Analysis, you must first identify the possible threats that you face, and
then estimate the likelihood that these threats will materialize.

Risk Analysis can be complex, as you'll need to draw on detailed information such as project
plans, financial data, security protocols, marketing forecasts, and other relevant
information. However, it's an essential planning tool, and one that could save time, money,
and reputations.

When to Use Risk Analysis

Risk analysis is useful in many situations:

 When you're planning projects, to help you anticipate and neutralize possible problems.

 When you're deciding whether or not to move forward with a project.

 When you're improving safety and managing potential risks in the workplace.

 When you're preparing for events such as equipment or technology failure, theft, staff
sickness, or natural disasters.

 When you're planning for changes in your environment, such as new competitors
coming into the market, or changes to government policy.

How to Use Risk Analysis

To carry out a risk analysis, follow these steps:

1. Identify Threats

The first step in Risk Analysis is to identify the existing and possible threats that you might
face. These can come from many different sources. For instance, they could be:

 Human – Illness, death, injury, or other loss of a key individual.

 Operational – Disruption to supplies and operations, loss of access to essential assets, or
failures in distribution.

 Reputational – Loss of customer or employee confidence, or damage to market

reputation.

 Procedural – Failures of accountability, internal systems, or controls, or from fraud.

 Project – Going over budget, taking too long on key tasks, or experiencing issues with
product or service quality.

 Financial – Business failure, stock market fluctuations, interest rate changes, or non-
availability of funding.

 Technical – Advances in technology, or from technical failure.

 Natural – Weather, natural disasters, or disease.

 Political – Changes in tax, public opinion, government policy, or foreign influence.

 Structural – Dangerous chemicals, poor lighting, falling boxes, or any situation where
staff, products, or technology can be harmed.

You can use a number of different approaches to carry out a thorough analysis:

 Run through a list such as the one above to see if any of these threats are relevant.

 Think about the systems, processes, or structures that you use, and analyze risks to any
part of these. What vulnerabilities can you spot within them?

 Ask others who might have different perspectives. If you're leading a team, ask for input
from your people, and consult others in your organization, or those who have run similar
projects.

2. Estimate Risk

Once you've identified the threats you're facing, you need to calculate out both the
likelihood of these threats being realized, and their possible impact.

One way of doing this is to make your best estimate of the probability of the event
occurring, and then to multiply this by the amount it will cost you to set things right if it
happens. This gives you a value for the risk:

Risk Value = Probability of Event x Cost of Event

As a simple example, imagine that you've identified a risk that your rent may increase
substantially.
You think that there's an 80 percent chance of this happening within the next year, because
your landlord has recently increased rents for other businesses. If this happens, it will cost
your business an extra $500,000 over the next year.

So the risk value of the rent increase is:

0.80 (Probability of Event) x $500,000 (Cost of Event) = $400,000 (Risk Value)

Sensitivity Analysis
Those in project management must be aware of the means of modeling risks to their
project. Sensitivity analysis is one such method. It is implemented to analyze the various
risks to the project by looking at all aspects of the project and their potential impact on the
overall goal. Knowing the level of impact various elements have on a project can assist
management with setting priorities to more quickly achieve the end result.
Project management can easily convey the results of a sensitivity analysis through the use of
a tornado diagram. The differences among the risks can be easily seen since the analysis is a
quantitative value. Rather than qualifiers describing the risks, the impact of each is
quantified in a numerical value. This facilitates comparisons between the various elements
to quickly discern which risks are worth taking. Project management can use the sensitivity
analysis to create priorities in dealing with elemental risks to the project. By knowing which
affects the objective the most, more efforts can be concentrated to lessen that risk.
Lowering risk potential allows for projects to flow in a smoother fashion with fewer
unexpected delays.