A Managerial Approach
A Managerial Approach
Jack R. Meredith
Broyhill Distinguished Scholar and Chair in Operations Wake Forest University
Samuel J. Mantel, Jr.
Joseph S. Stern Professor Emeritus of Operations Management University of Cincinnati
John Wiley & Sons, Inc.
To Avery and Mitchell, from “papajack.” J. R. M.
To Maggie and Patty for their help, support, and affection. S. J. M.
VICE PRESIDENT & EXECUTIVE PUBLISHER Don Fowley EXECUTIVE EDITOR Beth Golub ASSOCIATE EDITOR Jen Devine MARKETING MANAGER Carly DeCandia DESIGN DIRECTOR Harry Nolan SENIOR DESIGNER Kevin Murphy SENIOR PRODUCTION EDITOR Patricia McFadden SENIOR MEDIA EDITOR Lauren Sapira PRODUCTION MANAGEMENT SERVICES Ingrao Associates This book was set in by GGS Book Services PMG and printed and bound by RRD/Willard. The cover was printed by
This book is printed on acid free paper. Copyright © 2009 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions. To order books or for customer service, please call 1-800-CALL WILEY (225-5945). ISBN-13 978-0-470-22621-6
Printed in the United States of America 10 9 8 7 6 5 4 3 2 1
The use of projects and project management continues to grow in our society and its organizations. We are able to achieve goals through project organization that could be achieved only with the greatest of difficulty if organized in traditional ways. Though project management has existed since before the days of the great pyramids, it has enjoyed a surge of popularity beginning in the 1960s. A project put U.S. astronaut Neil Armstrong on the moon. A project named “Desert Storm” freed the nation of Kuwait. An annual project brings us Girl Scout cookies as a sign that winter is just about finished. (They were a bit optimistic this year.) The use of project management to accomplish the many and diverse aims of society’s varied organizations continues to grow. Businesses regularly use project management to accomplish unique outcomes with limited resources under critical time constraints. In the service sector of the economy, the use of project management to achieve an organization’s goals is even more common. Advertising campaigns, voter registration drives, political campaigns, a family’s annual summer vacation, and even management seminars on the subject of project management are organized as projects. A relatively new growth area in the use of project management is the use of projects as a way of accomplishing organizational change. Indeed, there is a rapid increase in the number of firms that use projects as the preferred way of accomplishing almost everything they undertake. Not even the most optimistic prognosticators foresaw the explosive growth that has occurred in the field. As the field has grown, so has its literature. There are “cookbooks” that describe in detail the specific steps required to carry out a project, but they do not address the whys nor do they usually discuss how and why the parts fit together. Another type of book focuses on specific subjects important to project managers, team building or scheduling, for example. These are quite helpful for team builders or schedulers, but team building and scheduling are only two of the serious problems a project manager must face. There are books that “talk about” project management—but only occasionally about how to manage a project. There are books on earned value calculations, cost estimating, purchasing, project management software, leadership, planning information technology (IT) projects, and similar specialized or sub-specialized subjects. These are valuable for experienced project managers who can profit from an advanced education in specific areas of knowledge, but one cannot learn to manage projects from these specialized sources. There are also handbooks—collections of articles written mainly by academics and consultants on selected topics of interest to project managers. Handbooks do not, nor do they pretend to, offer broad coverage of the things project managers need to know.
Once the project manager has been educated on the basics of project management, these handbooks often represent valuable collections of relevant readings. Unfortunately, project management seems to be reentering a stage that we thought had passed—arguments within the profession (and among those who teach it) about what we really need to know to manage projects. Must we know “how to manage people” or “how to use computers and do quantitative methods”? Lately we have been receiving email from teachers such as the one who urged us to drop “all the math” and pay more attention to conflict resolution, and another who suggested that we cut back on the “touchy-feely stuff and stick with the important things like scheduling and budgeting.” We believe that insight into human behavior, knowledge of organizational issues, and skill with certain quantitative methods are all necessary (though not necessarily sufficient) for successful project management. This book reflects that belief. It addresses project management from a management perspective rather than a cookbook, special area treatise, or collection of loosely associated articles. Such a book should address the basic nature of managing all types of projects—public, business, engineering, information systems, and so on—as well as the specific techniques and insights required to carry out this unique way of getting things done. It should deal with the problems of selecting projects, initiating them, and operating and controlling them. It should discuss the demands made on the project manager and the nature of the manager’s interaction with the rest of the parent organization. The book should cover the difficult problems associated with conducting a project using people and organizations that represent different cultures and may be separated by considerable distances. Finally, it should even cover the issues arising when the decision is made to terminate a project. This managerial perspective is the view we have taken here. As we noted earlier, we are occasionally advised to “cut the BS,” apparently a reference to any aspect of project management that is not mathematical, technical, or governed by strict rules of procedure. The argument is that “management is just common sense.” It is quite possible that such a statement is true, but if so, the word “common” is used in the sense of “common carrier”—something available to everyone. Sadly, everyone does not seem to have managerial common sense. If everyone did, there would be no market for Scott Adam’s Dilbert—selected illustrations of which are reproduced here where appropriate. The book is primarily intended for use as a college textbook for teaching project management at the advanced undergraduate or master’s level. The book is also intended for current and prospective project managers who wish to share our insights and ideas about the field. We have drawn freely on our personal experiences working with project managers and on the experience of friends and colleagues who have spent much of their working lives serving as project managers in what they like to call the “real world.” Thus, in contrast to the books described earlier about project management, this book teaches students how to do project management. As well as being a text that is equally appropriate for classes on the management of service, product, or engineering projects, we have found that information systems (IS) students in our classes find the material particularly helpful for managing their IS projects. Thus, we have included some coverage of material concerning information systems and how IS projects differ from and are similar to regular business projects.
ORGANIZATION AND CONTENT
Given this managerial perspective, we have arranged the book to use the project life cycle as the primary organizational guideline. In this seventh edition we have altered the organization slightly to demark more clearly the activities that occur before the launch of the project, setting up those activities that have to do with the context (or initiation) of the project in the
first part of the book, and those that have to do with the planning for the project in the second part. Actually executing the project to completion constitutes the third part of the book. We have found it to be a comfortable framework for the reader. Following an introductory chapter that comments on the role and importance of projects in our society and discusses project management as a potential career for aspiring managers, the book covers the context, events, and issues arising during the management of projects in the order in which they usually occur in the life of a project. Part I, Project Initiation concerns the context of the project, which is crucial for the project manager (PM) to understand if he or she is to be successful in executing the project. It begins with a description of how projects are selected for implementation, frequently based on their tie to the organization’s strategy and goals. Part I also covers the many roles and responsibilities of the project manager (PM), the skills the PM needs for handling conflict, and the various ways of setting up the project within the organization’s reporting structure (including how different ways of organizing projects tend to create different problems for PMs and their teams). Part II, Project Planning then moves into the project planning process starting with the major tools used in project planning. This is followed by project budgeting, project scheduling, and finally, resource allocation among the activities. Part III, Project Execution finally gets into the action, beginning with monitoring the activities, largely through information systems, and then controlling them to assure that the results meet expectations. Evaluating and possibly auditing the project at its major milestones or phase-gates is another, though separate, control action that senior management often employs, and last, the project must be terminated. We have relegated the discussion of two important aspects of projects that usually occur very early in the project life cycle—creativity/idea generation and technological forecasting— to the book’s website. Although few project managers engage in either of these tasks (typically being appointed to project leadership after these activities have taken place), we believe that a knowledge of these subjects will make the project manager more effective. Any way chosen to organize knowledge carries with it an implication of neatness and order that rarely occurs in reality. We are quite aware that projects almost never proceed in an orderly, linear way through the stages and events we describe here. The need to deal with change and uncertainty is a constant task for the project manager. We have tried to reflect this in repeated references to the organizational, interpersonal, economic, and technical glitches that create crises in the life cycle of every project, and thus in the life of every project manager. Finally, although we use a life-cycle approach to organization, the chapters include material concerning the major areas of the Project Management Body of Knowledge (PMBOK®) as defined by the Project Management Institute. (See Bibliography for Chapter 1.) Anyone wishing to prepare thoroughly in some of these areas may have to go beyond the information covered in this text.
Because this book is primarily a textbook, we have included numerous pedagogical aids to foster this purpose. As in earlier editions, short summaries appear at the end of the text of each chapter, followed by glossaries defining key terms and concepts introduced in the chapter. End-of-chapter materials also include review questions and problems revisiting the materials covered in the chapter. The answers (though not the detailed solutions) to the evennumbered problems are on the book’s Web site. There are also sets of conceptual discussion questions intended to broaden the students’ perspectives and to force them to think beyond the chapter materials to its implications. Finally, there are questions covering the Project Management in Practice application examples located throughout the chapters.
As in the past, we include incidents for discussion, which are brief “caselettes” oriented primarily toward the specific subjects covered in the chapter, but sometimes allow use of materials and concepts covered in earlier chapters. New to this edition is a continuing integrative class project to respond to requests from users for some type of running case throughout the chapters that builds on the chapter materials as students progress through the book. And at the end of each chapter we offer a reading and/or a case, with questions concerning the reading and/or case at the end. We have noticed that many undergraduate introductory courses, and even a few such graduate courses, have no prerequisites. We feel individuals beginning their education in the management of projects would profit with some background knowledge. Thus, in writing this text we have made some assumptions about both student and professional readers. First, we assume that all readers have taken an elementary course in management or have had equivalent experience. The reader with a background in management theory or practice will note that many of the principles of good project management are also principles of good general administrative management. Project management and administrative management are not entirely distinct. Further, we assume that readers are familiar with the fundamental principles of accounting, behavioral science, finance, and statistics as would be a typical manager. Because the assumption concerning statistics is not always met, we include Appendix A on the Web site (http://www.wiley.com/college/meredith). This appendix on probability and statistics serves as an initial tutorial or as a refresher for rusty knowledge.
In this edition, we have made a great many small updates, additions, and changes, including dropping the case in the conflict/negotiation chapter (which no one seemed to use) and adding one in the auditing/evaluation chapter, which many requested. We also dropped the project management software reading in the information systems chapter since software reviews are never up to date. As noted above, we also reorganized the structure of the text slightly by regrouping the chapters, and moving the conflict/negotiation chapter to earlier in the book. Also new is the continuing integrative class project at the end of every chapter, as noted above. The largest change however is probably the attempt to simplify our writing style, eliminating many of the references to additional ways to address some of the issues, references to the thoughts of other practitioners and researchers, and references to opposing points of view. We hope that this will not only eliminate confusion on the part of students but will also simplify their understanding of the basic material—it also helps in reducing the length and cost of the book, of course. When we started writing the first edition of this book around 1980—the first “textbook” in the field—there weren’t all that many publications addressing project management, so we tried to document and describe all of them. Over the decades however, we were overwhelmed but still tried to note in the appropriate chapters the major new publications in the field—books, articles, etc. The purpose of doing so is, of course, to give the student recourse to additional explanation and discussion, or opposing points of view, or alternative ways of achieving the same objective. However, given the tsunami of interest, and publications, in the area since 1980, we have concluded that we must be much more selective, so have tried to cut back substantially in this edition, and will probably do more in the future as well. As before, a student version of Crystal Ball®, an Excel® add-in, again comes with the book. This software makes simulation reasonably straightforward and not particularly complicated. The use of simulation as a technique for risk analysis is demonstrated in several ways in different chapters. (Because relatively few students are familiar with simulation software, step-by-step instruction is included in the text.) Microsoft Project® has become the dominant application software in the field, outselling its closest competitor about 4 to 1. As with the last edition, a free trial version of Microsoft
Project® is included with every copy of the book. Our coverage of software tends, therefore, to be centered on Microsoft Project® (and on Crystal Ball®), but includes a brief discussion of the many “add-ons” that are now available to supplement Microsoft Project® and its competitors. Because the various versions of Microsoft Project® are quite similar in the way that they perform most of the basic tasks of project management, we generally do not differentiate between the versions, referring to any and all simply as Microsoft Project (MSP). We have also added some exercises to the end-of-chapter material that can utilize computer software. Similar materials are also available on the website. Another option now available to educational institutions adopting this Wiley textbook is a free 3-year membership to the MSDN Academic Alliance. The MSDN AA is designed to provide the easiest and most inexpensive way for academic departments to make the latest Microsoft software available in labs, classrooms, and on student PCs. Microsoft Project 2007 software is available through this Wiley and Microsoft publishing partnership, free of charge with the adoption of any qualified Wiley textbook. Each copy of Microsoft Project is the full version of the software, with no time limitations, and can be used indefinitely for educational purposes. (The second and subsequent years of a department’s MSDN AA membership is $399 and may be collected from students via lab fees.) Contact your Wiley sales rep for details. For more information about the MSDN AA program, go to http://msdn.microsoft.com/academic/. There is, of course, the danger that human nature, operating in its normal discreet mode, will shift the task of learning project management to that of learning project management software. Projects have often failed because the project manager started managing the software instead of the project. Instructors need to be aware of the problem and must caution students not to fall into this trap. Of course, we have also updated and extended the end-of-chapter pedagogical material. We have updated the bibliographies, added additional questions, added new incidents, added some problems (including some now in the Budgeting chapter), and added more cost definitions to the glossary in the Budgeting chapter. In response to queries about the cases at the end of the chapters, these typically integrate materials from previous chapters rather than focusing solely on the content of the chapter where they are placed, though that will be their primary focus.
The Instructor’s Resource Guide on the Web site www.wiley.com/college/meredith provides additional assistance to the project management instructor. In addition to the answers/solutions to the problems, questions, readings, and cases, this edition includes teaching tips, a computerized test bank, additional cases, and PowerPoint slides. All of these valuable resources are available online (http://www.wiley.com/college/meredith). In addition, the student Web site contains Web quizzes, PowerPoint® slides, Appendix A: Probability and Statistics, Appendix B: Answers to the Even-Numbered Problems, Creativity and Idea Generation, Technological Forecasting, a Glossary, and a Microsoft Project Manual.
We owe a debt of gratitude to all those who have helped us with this book. First, we thank the managers and students who helped us solidify our ideas about proper methods for managing projects and proper ways of teaching the subject. Second, we thank the project teams and leaders in all of our project management classes. We are especially grateful to Margaret Sutton and Scott Shafer whose creative ideas, extensive skills with software, and ability to
sniff out inconsistencies saved us countless hours of fumbling and potential embarrassment. Last, but never least, we thank Suzanne Ingrao/Ingrao Associates, editor nonpareil and Joyce Franzen/GGS Book Services PMG for seemingly effortless production. Special thanks are due those who have significantly influenced our thinking about project management or supplied materials to help us write this book: Jeffrey Camm, James Evans, Martin Levy, John McKinney and William Meyers, all of the Univ. of Cincinnati; Larry Crowley, Auburn Univ.; Jeffrey Pinto, Pennsylvania State Univ. at Erie; Gerhard Rosegger, Case Western Reserve Univ.; Stephen Wearne, Univ. of Manchester; and the Staff of the Project Management Institute. We give a special thank you to Ronny Richardson, Southern Polytech. State Univ.; Dwayne Whitten, Texas A&M Univ.; and Bil Matthews, William Patterson University who authored and /or carefully checked the supplements to this edition. We owe a massive debt of gratitude to the reviewers for previous editions: Kwasi AmoakoGyampah, Univ. of North Carolina, Greensboro; Nicholas Aquilano, Univ. of Arizona; Bob Ash, Indiana Univ., Southeast; Bud Baker, Wright State Univ.; Robert J. Berger, Univ. of Maryland; William Brauer, Bemidji State Univ.; Maj. Mark D. Camdle, Air Force Inst. of Tech.; Howard Chamberlin, Texas A&M Univ.; Chin-Sheng Chen, Florida International Univ.; Denis Cioffi, George Washington Univ.; Desmond Cook, Ohio State Univ.; Edward Davis, Univ. of Virginia; Burton Dean, San Jose State Univ.; Michael H. Ensby, Clarkson Univ.; Richard E. Gunther, California State Univ., Northridge; William Hayden, Jr., SUNY, Buffalo; Jane E. Humble, Arizona State Univ.; Richard H. Irving, York Univ.; Roderick V. James, DeVry Univ.; David L. Keeney, Stevens Inst. of Tech.; Ted Klastorin, Univ. of Washington; David Kukulka, Buffalo State Univ.; William Leban, DeVry Univ.; Sara McComb, Univ. of Massachusetts, Amherst; Abe Meilich, Walden Univ.; Jaindeep Motwani, Grand Valley State Univ.; Barin Nag, Towson Univ.; John E. Nicolay, Jr., Univ. of Minnesota; David L. Overbye, De Vry Univ.; David J. Robb, Univ. of Calgary; Arthur C. Rogers, City Univ., Washington; Thomas Schuppe, Milwaukee School of Engineering; John Shanfi, DeVry Inst. of Tech., Irving, TX; Wade Shaw, Florida Inst. of Tech.; Richard V. Sheng, DeVry Inst. of Tech., San Marino, CA; Bill Sherrard, San Diego State Univ.; Joyce T. Shirazi, Univ. of Maryland, Univ. College; Gene Simons, Rensselaer Polytech. Inst.; Herbert Spirer, Univ. of Connecticut; Eric Sprouls, Univ. of Southern Indiana; Peter Strunk, Univ. of Cincinnati; Samuel Taylor, Univ. of Wyoming; Tony Trippe, Rochester Inst. of Tech.; Jerome Weist, Univ. of Utah; William G. Wells, Jr., The George Washington Univ.; James Willman, Univ. of Bridgeport and Charles I. Zigelman, San Diego State Univ. For this edition, we thank reviewers Steve Allen, Truman State Univ.; Robert Bergman, Univ. of Houston; Susan Cholette, San Francisco Univ.; Mike Ensby, Clarkson Univ.; Abel Fernandez, Univ. of the Pacific; Homayoun Kahmooshi, George Washington Univ.; Young Hoon Kway, George Washington Univ.; Ardeshir Lohrasbi, Univ. of Illinois, Springfield; Mary Meixell, Quinnipiac Univ.; Jaideep Motwani, Grand State Valley Univ.; Pat Penfield, Syracuse Univ.; Ed. Pohl, Univ. of Arkansas; Michael Poli, Stevens Inst. of Tech.; Amit Raturi, Univ. of Cincinnati; Ronnie Richardson, Southern Polytech. State Univ.; David Russo, Univ. of Texas, Dallas; Boong-Yeol Ryoo, Florida International Univ.; Ruth Seiple, Univ. of Cincinnati; Chris Simber, Stevens Inst. of Tech.; Susan Williams, Northern Arizona State Univ. Jack Meredith Broyhill Distinguished Scholar and Chair in Operations Wake Forest University, P.O. Box 7659 Winston-Salem, NC 27109 email@example.com www.mba.wfu.edu Samuel J. Mantel, Jr., Joseph S. Stern Professor Emeritus of Operations Management University of Cincinnati 608 Flagstaff Drive Cincinnati, OH 45215 firstname.lastname@example.org
Chapter 1 projects in Contemporary Organizations 1
1.1 The Definition of a “Project” 9 1.2 Why Project Management? 12 1.3 The Project Life Cycle 14 1.4 The Structure of This Text 18 PROJECT MANAGEMENT IN PRACTICE The Olympic Torch Relay Project 12 Demolishing San Francisco’s Bridges Safely 19 DIRECTED READING: Lessons for an Accidental Profession
PROJECT INITIATION 35
Chapter 2 Strategic Management and project Selection 37
2.1 Project Management Maturity 39 2.2 Project Selection and Criteria of Choice 40 2.3 The Nature of Project Selection Models 42 2.4 Types of Project Selection Models 44 2.5 Analysis under Uncertainty—The Management of Risk 58 2.6 Comments on the Information Base for Selection 70 2.7 Project Portfolio Process 72 2.8 Project Proposals 80 PROJECT MANAGEMENT IN PRACTICE Implementing Strategy through Projects at Blue Cross/Blue Shield 39 Project Selection for Spent Nuclear Fuel Cleanup 50 Simulating the Failure of California’s Levees 61 Using a Project Portfolio to Achieve 100% On-Time Delivery at Décor Cabinets 73 CASE: Pan Europa Foods S.A. 88 DIRECTED READING: From Experience: Linking Projects to Strategy 96
Chapter 3 the project Manager 107
3.1 Project Management and the Project Manager 109 3.2 Special Demands on the Project Manager 115 3.3 Selecting the Project Manager 127 3.4 Problems of Cultural Differences 130 3.5 Impact of Institutional Environments 134 3.6 Multicultural Communications and Managerial Behavior 140 PROJECT MANAGEMENT IN PRACTICE The Project Management Career Path at AT&T 114 A Surprise “Director of Storm Logistics” for Katrina 116 The Wreckmaster at a New York Subway Accident 124 Success at Energo by Integrating Two Diverse Cultures 133 Project Management in Brazil during Unstable Times 137 CASE: The National Jazz Hall of Fame 150 DIRECTED READING: What It Takes to Be a Good Project Manager 157
Chapter 4 Negotiation and the Management of Conflict 161
4.1 The Nature of Negotiation 164 4.2 Partnering, Chartering, and Scope Change 165 4.3 Conflict and the Project Life Cycle 169 4.4 Some Requirements and Principles of Negotiation 176 PROJECT MANAGEMENT IN PRACTICE Selling New Area Codes to Consumers Who Don’t Want Them 162 A Consensus Feasibility Study for Montreal’s Archipel Dam 175 Negotiation in Action—The Quad Sensor Project 178 DIRECTED READING: Methods of Resolving Interpersonal Conflict 183
Chapter 5 the project in the Organizational Structure 189
5.1 The Project as Part of the Functional Organization 191 5.2 Pure Project Organization 194 5.3 The Matrix Organization 196 5.4 Mixed Organizational Systems 201 5.5 Choosing an Organizational Form 202 5.6 Two Special Cases—Risk Management and The Project Office 205 5.7 The Project Team 213 5.8 Human Factors and the Project Team 217 PROJECT MANAGEMENT IN PRACTICE Reorganizing for Project Management at Prevost Car 193 Trinatronic, Inc. 204 Risk Analysis vs. Budget/Schedule Requirements in Australia 206 A Project Management Office Success for the Transportation Security Administration 210 The Empire Uses Floating Multidisciplinary Teams 216 South African Repair Success through Teamwork 221
CASE: Oilwell Cable Company, Inc. 227 DIRECTED READING: The Virtual Project: Managing Tomorrow’s Team Today 230
PROJECT PlANNINg 237
Chapter 6 project activity planning 239
6.1 Initial Project Coordination and the Project Plan 242 6.2 Systems Integration 251 6.3 The Action Plan 252 6.4 The Work Breakdown Structure and Linear Responsibility Chart 261 6.5 Interface Coordination through Integration Management 267 PROJECT MANAGEMENT IN PRACTICE Beagle 2 Mars Probe a Planning Failure 240 Child Support Software a Victim of Scope Creep 244 Shanghai Unlucky with Passengers 246 Minnesota DOT Project Planning 250 Disaster Project Planning in Iceland 260 CASE: A Project Management and Control System for Capital Projects 277 DIRECTED READING: Planning for Crises in Project Management 286
Chapter 7 Budgeting and Cost estimation 293
7.1 Estimating Project Budgets 294 7.2 Improving the Process of Cost Estimation 305 PROJECT MANAGEMENT IN PRACTICE Pathfinder Mission to Mars—on a Shoestring 294 Managing Costs at Massachusetts’ Neighborhood Health Plan 300 Completing the Limerick Nuclear Facility Under Budget 306 The Emanon Aircraft Corporation 313 CASE: Automotive Builders, Inc.: The Stanhope Project 322 DIRECTED READING: Three Perceptions of Project Cost 327
Chapter 8 Scheduling 333
8.1 Background 333 8.2 Network Techniques: PERT (ADM) and CPM (PDM) 337 8.3 Risk Analysis Using Simulation with Crystal Ball® 365 8.4 Using these Tools 371 PROJECT MANAGEMENT IN PRACTICE Replacing the Atigun Section of the TransAlaska Pipeline 335 Hosting the Annual Project Management Institute Symposium 362 CASE: The Sharon Construction Corporation 381
Chapter 9 resource allocation 383
9.1 Critical Path Method—Crashing a Project 385 9.2 The Resource Allocation Problem 392 9.3 Resource Loading 394 9.4 Resource Leveling 397 9.5 Constrained Resource Scheduling 402 9.6 Multiproject Scheduling and Resource Allocation 408 9.7 Goldratt’s Critical Chain 415 PROJECT MANAGEMENT IN PRACTICE Expediting Los Angeles Freeway Repairs after the Earthquake 384 Architectural Associates, Inc. 387 Benefit/Cost Analysis Saves Chicago’s Deep Tunnel Project 393 Benefits of Resource Constraining at Pennsylvania Electric 407 CASE: D.U. Singer Hospital Products Corp. 428
PROJECT ExECuTION 433
Chapter 10 Monitoring and Information Systems 435
10.1 The Planning-Monitoring-Controlling Cycle 436 10.2 Information Needs and Reporting 444 10.3 Earned Value Analysis 450 10.4 Computerized PMIS (Project Management Information Systems) 462 PROJECT MANAGEMENT IN PRACTICE Using Project Management Software to Schedule the Olympic Games 436 Drug Counseling Program 442 Tracking Scope Creep: A Project Manager Responds 445 Success through Earned Value at Texas Instruments 460 CASE: The Project Manager/Customer Interface 470
Chapter 11 project Control 475
11.1 The Fundamental Purposes of Control 477 11.2 Three Types of Control Processes 479 11.3 The Design of Control Systems 488 11.4 Control: A Primary Function of Management 496 11.5 Control of Change and Scope Creep 501 PROJECT MANAGEMENT IN PRACTICE Extensive Controls for San Francisco’s Metro Turnback Project 480 Schedule and Cost Control for Australia’s New Parliament House 494 Major Scope Creep in Boston’s “Big Dig” 502 Better Control of Development Projects at Johnson Controls 505 CASE: Peerless Laser Processors 510 DIRECTED READING: Controlling Projects According to Plan 515
Chapter 12 project auditing 521
12.1 Purposes of Evaluation—Goals of the System 522 12.2 The Project Audit 524 12.3 Construction and Use of the Audit Report 528 12.4 The Project Audit Life Cycle 530 12.5 Some Essentials of an Audit/Evaluation 533 12.6 Measurement 536 PROJECT MANAGEMENT IN PRACTICE Lessons from Auditing 110 Client/Server and Open Systems Projects 525 Auditing a Troubled Project at Atlantic States Chemical Laboratories 531 CASE: Theater High Altitude Area Defense (THAAD): Five Failures and Counting (B) 541 DIRECTED READING: An Assessment of Postproject Reviews 544
Chapter 13 project termination 551
13.1 The Varieties of Project Termination 552 13.2 When to Terminate a Project 555 13.3 The Termination Process 561 13.4 The Final Report—A Project History 566 13.5 A Final Note 568 PROJECT MANAGEMENT IN PRACTICE Nucor’s Approach to Termination by Addition 554 Terminating the Superconducting Super Collider Project 560
photo Credits 573 Name Index 575 Subject Index 580
Please visit http://www.wiley.com/college/meredith for Appendices. A: Probability and Statistics and Appendix B: Answers to the EvenNumbered Problems.
Projects in Contemporary Organizations
The past several decades have been marked by rapid growth in the use of project management as a means by which organizations achieve their objectives. In the past, most projects were external to the organization—building a new skyscraper, designing a commercial ad campaign, launching a rocket—but the growth in the use of projects lately has primarily been in the area of projects internal to organizations: developing a new product, opening a new branch, improving the services provided to customers. As exhilarating as outside projects are, successfully executing internal projects is even more satisfying in that the organization has substantially improved its ability to execute more efﬁciently, effectively, or quickly, resulting in an agency or business that can even better contribute to society while simultaneously enhancing its own competitive strength. Project management provides an organization with powerful tools that improve its ability to plan, implement, and control its activities as well as the ways in which it utilizes its people and resources. It is popular to ask, “Why can’t they run government the way I run my business?” In the case of project management, however, business and other organizations learned from government, not the other way around. A lion’s share of the credit for the development of the techniques and practices of project management belongs to the military, which faced a series of major tasks that simply were not achievable by traditional organizations operating in traditional ways. The United States Navy’s Polaris program, NASA’s Apollo space program, and more recently, the space shuttle and the development of “smart” bombs and missiles are a few of the many instances of the application of these specially developed management approaches to extraordinarily complex projects. Following such examples, nonmilitary government sectors, private industry, public service agencies, and volunteer organizations have all used project management to increase their effectiveness. Most ﬁrms in the computer software business routinely develop their output as projects or groups of projects. Project management has emerged because the characteristics of our contemporary society demand the development of new methods of management. Of the many forces involved, three are paramount: (1) the exponential expansion of human knowledge; (2) the growing demand for a broad range of complex, sophisticated, customized goods and services; and (3) the evolution of worldwide competitive markets for the production and consumption of goods
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
and services. All three forces combine to mandate the use of teams to solve problems that used to be solvable by individuals. These three forces combine to increase greatly the complexity of goods and services produced plus the complexity of the processes used to produce them. This, in turn, leads to the need for more sophisticated systems to control both outcomes and processes.
Forces Fostering Project Management
First, the expansion of knowledge allows an increasing number of academic disciplines to be used in solving problems associated with the development, production, and distribution of goods and services. Second, satisfying the continuing demand for more complex and customized products and services depends on our ability to make product design an integrated and inherent part of our production and distribution systems. Third, worldwide markets force us to include cultural and environmental differences in our managerial decisions about what, where, when, and how to produce and distribute output. The requisite knowledge does not reside in any one individual, no matter how well educated or knowledgeable. Thus, under these conditions, teams are used for making decisions and taking action. This calls for a high level of coordination and cooperation between groups of people not particularly used to such interaction. Largely geared to the mass production of simpler goods, traditional organizational structures and management systems are simply not adequate to the task. Project management is. The organizational response to the forces noted above cannot take the form of an instantaneous transformation from the old to the new. To be successful, the transition must be systematic, but it tends to be slow and tortuous for most enterprises. Accomplishing organizational change is a natural application of project management, and many ﬁrms have set up projects to implement their goals for strategic and tactical change. Another important societal force is the intense competition among institutions, both proﬁt and not-for-proﬁt, fostered by our economic system resulting in organizational “crusades” such as “total quality control,” “supply chain management,” and particularly prominent these days: “Six-sigma*.” The competition that all of these crusades engenders puts extreme pressure on organizations to make their complex, customized outputs available as quickly as possible. “Time-to-market” is critical. Responses must come faster, decisions must be made sooner, and results must occur more quickly. Imagine the communications problems alone. Information and knowledge are growing explosively, but the time permissible to locate and use the appropriate knowledge is decreasing. In addition, these forces operate in a society that assumes that technology can do anything. The fact is, this assumption is reasonably true, within the bounds of nature’s fundamental laws. The problem lies not in this assumption so much as in a concomitant assumption that allows society to ignore both the economic and noneconomic costs associated with technological progress until some dramatic event focuses our attention on the costs (e.g., the Chernobyl nuclear accident, the Exxon Valdez oil spill, or the possibility of global warming). At times, our faith in technology is disturbed by difﬁculties and threats arising from its careless implementation, as in the case of industrial waste, but on the whole we seem remarkably tolerant of technological change. For a case in point, consider California farm workers who waited more than 20 years to challenge a University of California research program devoted to the development of labor-saving farm machinery
*Six-sigma (see Pande et al., 2000; Pyzdek, 2003) itself involves projects, usually of a process improvement type that involves the use of many project management tools (Chapter 8), teamwork (Chapters 5 and 12), quality tools such as “benchmarking” (Chapter 11), and even audits (Chapter 12).
PROJECTS IN CONTEMPORARY ORGANIZATIONS
(Sun, 1984). The acceptance of technological advancement is so strong it took more than two decades to muster the legal attack. Consider also the easy acceptance of communication by e-mail and shopping on the Internet. Finally, the projects we undertake are large and getting larger. The modern advertising company, for example, advances from blanket print ads to regionally focused television ads to personally focused Internet ads. As each new capability extends our grasp, it serves as the base for new demands that force us to extend our reach even farther. Projects increase in size and complexity because the more we can do, the more we try to do. The projects that command the most public attention tend to be large, complex, multidisciplinary endeavors. Often, such endeavors are both similar to and different from previous projects with which we may be more or less familiar. Similarities with the past provide a base from which to start, but the differences imbue every project with considerable risk. The complexities and multidisciplinary aspects of projects require that many parts be put together so that the prime objectives—performance, time (or schedule), and cost—are met.
Three Project Objectives
While multimillion-dollar, ﬁve-year projects capture public attention, the overwhelming majority of all projects are comparatively small—though nonetheless important to doer and user alike. They involve outcomes, or deliverables, such as a new ﬂoor for a professional basketball team, a new insurance policy to protect against a speciﬁc casualty loss, a new Web site, a new casing for a four-wheel-drive minivan transmission, a new industrial ﬂoor cleanser, the installation of a new method for peer-review of patient care in a hospital, even the development of new software to help manage projects. The list could be extended almost without limit. These undertakings have much in common with their larger counterparts. They are complex, multidisciplinary, and have the same general objectives—performance (or scope), time, and cost. We refer to these as “direct” project objectives or goals. There is a tendency to think of a project solely in terms of its outcome—that is, its performance. But the time at which the outcome is available is itself a part of the outcome, as is the cost entailed in achieving the outcome. The completion of a building on time and on budget is quite a different outcome from the completion of the same physical structure a year late or 20 percent over budget, or both. Indeed, even the concept of performance or scope is more complex than is apparent. Much has been written in recent years arguing that, in addition to time, cost, and speciﬁcations, there is a fourth dimension to be considered. This fourth dimension is the expectations of the client (see Darnell, 1997), which sometimes tend to increase as the project progresses, known as “scope creep” (see Chapter 11). One might say that the expectations of the client are not an additional target, but an inherent part of the project speciﬁcations. However, to consider the client’s desires as different from the project speciﬁcations is to court conﬂict between client and project team, each of whom has unique ideas about the deliverables’ nature. Also, to separate client desires from project speciﬁcations creates conﬂict because client and team rarely act in concert. The client speciﬁes a desired outcome. Then the project team designs and implements the project. Then the client views the result of the team’s ideas. Despite this logic, differences between the client’s expectations and the project team’s designs are common. As a result, meeting the client’s desires may not be well reﬂected by the speciﬁed performance of the project. The expectations of client and project team should be aligned and integrated throughout the entire project, but rarely are. As a result of the above, we include the nebulous elements of the client’s expectations and desires along with the “speciﬁed” performance, as stated in the project proposal, as the total “required performance” objective for the project. The three direct project objectives are
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
Performance Required performance
Target Cost Budget limit
Figure 1-1 cost, time.
Direct project goals—performance,
shown in Figure 1-1, with the speciﬁed project objectives on the axes. This illustration implies that there is some “function” that relates them, one to another—and so there is! Although the functions vary from project to project, and from time to time for a given project, we will refer to these relationships, or trade-offs, throughout this book. The primary task of the project manager is to manage these trade-offs, along with a fourth, unspeciﬁed trade-off that always exists between the direct project objectives/goals and a set of ancillary (or process) objectives/goals. In a more basic sense, those with a stake in the project (the project manager, project team, senior management, the client, and other project stakeholders) have an interest in making the project a success. In a thorough, empirical research study that we will consider in more detail in Chapter 12, Shenhar et al. (1997) have concluded that project success has four dimensions: (1) project efﬁciency, (2) impact on the customer, (3) the business impact on the organization, and (4) opening new opportunities for the future. The ﬁrst two are clearly part of what we have deﬁned as the project’s direct objectives, the latter two are also speciﬁc objectives of the project and are thus direct goals. Ancillary goals include improving the organization’s project management competency and methods, individuals’ increased managerial experience gained through project management, and similar goals. One other crucial, but unstated, element of ancillary trade-offs that a PM must consider is the health of the project team as well as the rest of the organization. The PM cannot burn out the team in an attempt to achieve the direct objectives, nor destroy the organization’s functional departments in an attempt to meet the project’s direct goals. Another ancillary element is the project’s environment, that is, those things or persons outside the project, and often outside the sponsoring organization, that affect the project or are affected by it. Examples of this environment might be antipollution groups, trade unions, competitive ﬁrms, and the like. We will deal with these issues in more detail in Chapter 12. From the early days of project management, the direct project objectives of time, cost, and performance (as generally agreed to by the client and the organization actually doing the project) have been accepted as the primary determinants of project success or failure. In the past 25 years or so, other direct and ancillary objectives have been suggested. These did not replace the traditional time, cost, and performance, but were added as also relevant. For the most part, however, Chapters 1–11 will focus mainly on the traditional direct objectives.
PROJECTS IN CONTEMPORARY ORGANIZATIONS
The Project Manager
While managing the trade-offs, the project manager (PM) is expected to integrate all aspects of the project, ensure that the proper knowledge and resources are available when and where needed, and above all, ensure that the expected results are produced in a timely, cost-effective manner. The complexity of the problems faced by the PM, taken together with the rapid growth in the number of project-oriented organizations, has contributed to the professionalization of project management. One of the major international organizations dedicated to this professionalization is the Project Management Institute (PMI®, at www.pmi.org), established in 1969. By 1990, the PMI had 7,500 members. Five years later, it had grown to over 17,000, and by the end of 2007 it had exploded to over 260,000 members in more than 171 countries (see Figure 1-2). This exponential growth is indicative of the rapid growth in the use of projects, but also reﬂects the importance of the PMI as a force in the development of project management as a profession. Its mission is to foster the growth of project management as well as “building professionalism” in the ﬁeld. The Project Management Journal and PM Network magazines were founded by the PMI to communicate ideas about project management, as well as solutions for commonly encountered problems. Another PMI objective is to codify the areas of learning required for competent project management. This project management body of knowledge, PMBOK®, is meant to serve as the fundamental basis for education for project managers (Project Management Institute, 2004). To certify that active project managers understood and could utilize this body of knowledge, PMI initiated a certiﬁcate of proﬁciency called the Project Management Professional (PMP®) that includes a group of education, experience, and testing requirements to obtain. More recently, PMI has added two more certiﬁcates, one for advanced program managers, called the Program Management Professional (PgMP®), and another for developing project managers, the Certiﬁed Associate in Project Management (CAPM®), which has less educational and experience requirements. The profession has ﬂourished, with the result that
160 140 120 100 80 60 40 20 0
PMI membership (1000)
Figure 1-2 Project Management Institute growth history.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
many colleges and universities offer training in project management and some offer specialized degree programs in the area. Clearly, rapid growth in the number of project managers and of the PMI membership were the result, not the cause, of tremendous growth in the number of projects being carried out. The software industry alone has been responsible for a signiﬁcant percent of the growth. Another major source of growth has been the need to control project activity in large organizations. As the number of nonroutine activities increases in an organization, there is an increased need in senior management to understand and control the system. Project management, with its schedules, budgets, due dates, risk assessments, statements of expected outcomes, and people who take responsibility, is a way to meet this need. These forces have combined and led to the creation of a project-organized ﬁrm. Much more will be said about project-oriented organizations in Chapter 4. As we note in the coming chapters, the project manager’s job is not without problems. There is the ever-present frustration of being responsible for outcomes while lacking full authority to command the requisite resources or personnel. There are the constant problems of dealing with the parties involved in any project—senior management, client, project team, and public—all of whom seem to speak different languages and have different objectives. There are the ceaseless organizational and technical “ﬁres to be fought.” There are vendors who cannot seem to keep “lightning-strike-me-dead” promises about delivery dates. This list of troubles only scratches the surface. Difﬁcult as the job may be, most project managers take a considerable amount of pleasure and job satisfaction from their occupation. The challenges are many and the risks signiﬁcant, but so are the rewards of success. Project managers usually enjoy organizational visibility, considerable variety in their day-to-day duties, and often have the prestige associated with work on the enterprise’s high-priority objectives. The profession, however, is not one for the timid. Risk and conﬂict avoiders do not make happy project managers. Those who can stomach the risks and enjoy practicing the arts of conﬂict resolution, however, can take substantial monetary and psychological rewards from their work.
Trends in Project Management
Many new developments and interests in project management are being driven by quickly changing global markets, technology, and education. Global competition is putting pressure on prices, response times, and product/service innovation. Computer and telecommunications technologies along with greater education are allowing companies to respond to these pressures, pushing the boundaries of project management into regions where new tools are being developed for types of projects that have never been considered before. In addition, the pressure for more and more products and services has led to initiating more projects, but with faster life cycles. We consider a variety of trends in turn. Achieving Strategic Goals (Chapter 2, especially Section 2.7). There has been a greater push to use projects to achieve more strategic goals, and ﬁltering existing major projects to make sure that their objectives support the organization’s strategy and mission. Projects that do not have clear ties to the strategy and mission are terminated and their resources are redirected to those that do. An example of this is given in Section 1.7 where the Project Portfolio Process is described. Achieving Routine Goals (Section 1.1). On the other hand, there has also been a push to use project management to accomplish routine departmental tasks that would previously have been handled as a functional effort. This is because lower level management has become aware that projects accomplish their performance objectives within their budget and deadline,
PROJECTS IN CONTEMPORARY ORGANIZATIONS
and hope to employ this new tool to improve management of their functions. As a result, artiﬁcial deadlines and budgets are created to accomplish speciﬁc, though routine, tasks within the functional departments, a process called “projectizing.” However, as reported by Jared Sandberg (Sandberg, 2007) in the Wall Street Journal, there is an important danger with this new tactic. If the deadline isn’t really important and the workers ﬁnd out it is only artiﬁcial (e.g., either by meeting it but getting no appreciation or missing it but with no penalty), this will destroy the credibility of any future deadlines or budgets, much like “the boy who cried wolf.” Improving Project Effectiveness (Sections 2.1, 2.7, 4.6, 5.1, 5.5, 11.2, 11.3). A variety of efforts are being pursued to improve the results of project management, whether strategic or routine. One well-known effort is the creation of a formal Project Management Ofﬁce (PMO, see Section 4.6) in many organizations, which is responsible for the successful initiation and completion of projects throughout the organization. Another effort is the evaluation of an organization’s project management “maturity,” or skill and experience in managing projects (discussed in Section 2.1). This is often one of the responsibilities of the PMO. Another responsibility of the PMO is to educate project managers about the ancillary goals of the organization (mentioned earlier in this chapter), which automatically become a part of the goals of every project whether the project manager knows it or not. Achieving better control over each project through the use of phase gates (Sections 5.1, 5.5, 11.2), earned value (Section 10.3), critical ratios (Section 11.3), and other such techniques is also a current trend. Virtual Projects (Sections 4.3, 10.2). With the rapid increase in globalization, many projects now involve global teams with team members operating in different countries and different time zones, each bringing a unique set of talents to the project. These are known as virtual projects because the team members may never physically meet before the team is disbanded and another team reconstituted. Advanced telecommunications and computer technologies allow such virtual projects to be created, conduct their work, and complete their project successfully. Quasi-Projects (Section 1.1). Led by the demands of the information technology/systems departments, project management is now being extended into areas where the ﬁnal performance (or “scope”) requirements may not be understood, the time deadline unknown, and/or the budget undetermined. This ill-deﬁned type of project (which we call a “quasi-project”) is extremely difﬁcult to manage and is often initiated by setting an artiﬁcial due date and budget, and then completed by “de-scoping” the required performance to meet those limits. However, new tools for these kinds of quasi-projects are now being developed—prototyping, phasegating, and others—to help these teams achieve results that satisfy the customer in spite of all the unknowns.
Recent Changes in Managing Organizations
In the two decades since the ﬁrst edition of this book was published, the process of managing organizations has been impacted by three revolutionary changes. First, we have seen an accelerating replacement of traditional, hierarchical management by consensual management. Second, we are currently witnessing the adoption of the “systems approach” (sometimes called “systems engineering”) to deal with organizational or technological problems because it is abundantly clear that when we act on one part of an organization or system, we are certain to affect other parts. Third, we have seen organizations establishing projects as the preferred way to accomplish their goals. Examples vary from the hundreds of projects required to accomplish the “globalization” of a multibillion dollar household products ﬁrm to the incremental tailoring of products and services for individual customers. We elaborate on this tie between
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
the organization’s goals and the projects it selects for implementation in the following chapter. And as we will note in Chapter 4 and elsewhere, there has been a rapid and sustained growth in the number of organizations that use projects to accomplish almost all of the nonroutine tasks they undertake. While all three of these phenomena have been known for many years, it is comparatively recent that they have been widely recognized and practiced. In his fascinating book, Rescuing Prometheus (Hughes, 1998), technology historian Thomas Hughes examines four large-scale projects that required the use of a nontraditional management style, a nontraditional organizational design, and a nontraditional approach to problem solving in order to achieve their objectives. These huge projects—the Semiautomatic Ground Environment (SAGE) air defense system, the Atlas Intercontinental Ballistic Missile, the Boston Central Artery/Tunnel, and the Department of Defense Advanced Research Projects Agency’s Internet (ARPANET)—are all characterized by extraordinarily diverse knowledge and information input requirements.* The size and technological complexity of these projects required input from a large number of autonomous organizations—governmental, industrial, and academic—that usually did not work cooperatively with other organizations, were sometimes competitors, and could be philosophical and/or political opponents. Further, any actions taken to deal with parts of the total project often had disturbing impacts on many other parts of the system. Obviously, these projects were not the ﬁrst complex, large-scale projects carried out in this country or elsewhere. For example, the Manhattan Project—devoted to the development of the atomic bomb—was such a project. The Manhattan Project, however, was the sole and full-time work for a large majority of the individuals and organizations working on it. The organizations contributing to the projects Hughes describes were, for the most part, working on many other tasks. For example, Massachusetts Institute of Technology (MIT), the Pentagon, IBM, Bell Labs (now Lucent Technologies), RAND Corporation, the Massachusetts Department of Highways, and a great many other organizations were all highly involved in one or more of these projects while still carrying on their usual work. The use of multiple organizations (both within and outside of the sponsoring ﬁrm) as contributors to a project is no longer remarkable. Transdisciplinary projects are more the rule than the exception. These revolutions and modiﬁcations in the style of management and organization of projects will be reﬂected throughout this book. For example, we have come to believe that the use of a traditional, hierarchical management style rather than a consensual style to manage multiorganizational projects is a major generator of conﬂict between members of the project team. We have long felt, and are now certain, that stafﬁng multidisciplinary projects with individuals whose primary focus is on a speciﬁc discipline rather than on the problem(s) embodied in the project will also lead to high levels of interpersonal conﬂict between project team members. In Chapter 4 we will discuss some issues involved in the widespread use of projects to accomplish organizational change. As in the ﬁrst edition, we adopt a systems approach to dealing with the problems of managing projects. This book identiﬁes the speciﬁc tasks facing PMs. We investigate the nature of the projects for which the PM is responsible, the skills that must be used to manage projects, and the means by which the manager can bring the project to a successful conclusion in terms of the three primary criteria: performance, time, and cost. Before delving into the details of this analysis, however, we clarify the nature of a project and determine how it differs from the other activities that are conducted in organizations. We also note a few of the major advantages, disadvantages, strengths, and limitations of project management. At this end of this chapter, we describe the approach followed throughout the rest of the book.
*Hughes’s term for this is “transdisciplinary” (across disciplines), which is rather more accurate than the usual “interdisciplinary” (between disciplines).
THE DEFINITION OF A “PROJECT”
THE DEFINITION OF A “PROJECT”
The PMI has deﬁned a project as “A temporary endeavor undertaken to create a unique product or service” (Project Management Institute, 2004, p. 5). There is a rich variety of projects to be found in our society. Although some may argue that the construction of the Tower of Babel or the Egyptian pyramids were some of the ﬁrst “projects,” it is probable that cavemen formed a project to gather the raw material for mammoth stew. It is certainly true that the construction of Boulder Dam and Edison’s invention of the light bulb were projects by any sensible deﬁnition. Modern project management, however, is usually said to have begun with the Manhattan Project. In its early days, project management was used mainly for very large, complex research and development (R & D) projects like the development of the Atlas Intercontinental Ballistic Missile and similar military weapon systems. Massive construction programs were also organized as projects—the construction of dams, ships, reﬁneries, and freeways, among others. As the techniques of project management were developed, mostly by the military, the use of project organization began to spread. Private construction ﬁrms found that project organization was helpful on smaller projects, such as the building of a warehouse or an apartment complex. Automotive companies used project organization to develop new automobile models. Both General Electric and Pratt & Whitney used project organization to develop new jet aircraft engines for airlines, as well as the Air Force. Project management has even been used to develop new models of shoes and ships (though possibly not sealing wax). More recently, the use of project management by international organizations, and especially organizations producing services rather than products, has grown rapidly. Advertising campaigns, global mergers, and capital acquisitions are often handled as projects, and the methods have spread to the nonproﬁt sector. Weddings, scout-o-ramas, fund drives, election campaigns, parties, and recitals have all made use of project management. Most striking has been the widespread adoption of project management techniques for the development of computer software. In discussions of project management, it is sometimes useful to make a distinction between terms such as project, program, task, and work packages. The military, source of most of these terms, generally uses the term program to refer to an exceptionally large, longrange objective that is broken down into a set of projects. These projects are divided further into tasks, which are, in turn, split into work packages that are themselves composed of work units. But exceptions to this hierarchical nomenclature abound. The Manhattan Project was a huge “program,” but a “task force” was created to investigate the many potential futures of a large steel company. In the broadest sense, a project is a speciﬁc, ﬁnite task to be accomplished. Whether large- or small-scale or whether long- or short-run is not particularly relevant. What is relevant is that the project be seen as a unit. There are, however, some attributes that characterize projects.
The most crucial attribute of a project is that it must be important enough in the eyes of senior management to justify setting up a special organizational unit outside the routine structure of the organization. If the rest of the organization senses, or even suspects, that it is not really that important, the project is generally doomed to fail. The symptoms of lack of importance are numerous and subtle: no mention of it by top management, assigning the project to someone of low stature or rank, adding the project to the responsibilities of someone who is already too overworked, failing to monitor its progress, failing to see to its resource needs, and so on.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
A project is usually a one-time activity with a well-deﬁned set of desired end results. (We discuss poorly deﬁned, or “quasi-” projects a bit later.) It can be divided into subtasks that must be accomplished in order to achieve the project goals. The project is complex enough that the subtasks require careful coordination and control in terms of timing, precedence, cost, and performance. Often, the project itself must be coordinated with other projects being carried out by the same parent organization.
Life Cycle with a Finite Due Date
Like organic entities, projects have life cycles. From a slow beginning they progress to a buildup of size, then peak, begin a decline, and ﬁnally must be terminated by some due date. (Also like organic entities, they often resist termination.) Some projects end by being phased into the normal, ongoing operations of the parent organization. The life cycle is discussed further in Section 1.3 where an important exception to the usual description of the growth curve is mentioned. There are several different ways in which to view project life cycles. These will be discussed in more detail later.
Projects often interact with other projects being carried out simultaneously by their parent organization. Typically, these interactions take the form of competition for scarce resources between projects, and much of Chapter 9 is devoted to dealing with these issues. While such interproject interactions are common, projects always interact with the parent organization’s standard, ongoing operations. Although the functional departments of an organization (marketing, ﬁnance, manufacturing, and the like) interact with one another in regular, patterned ways, the patterns of interaction between projects and these departments tend to be changeable. Marketing may be involved at the beginning and end of a project, but not in the middle. Manufacturing may have major involvement throughout. Finance is often involved at the beginning and accounting (the controller) at the end, as well as at periodic reporting times. The PM must keep all these interactions clear and maintain the appropriate interrelationships with all external groups.
Though the desired end results may have been achieved elsewhere, they are at least unique to this organization. Moreover, every project has some elements that are unique. No two construction or R & D projects are precisely alike. Though it is clear that construction projects are usually more routine than R & D projects, some degree of customization is a characteristic of projects. In addition to the presence of risk, as noted earlier, this characteristic means that projects, by their nature, cannot be completely reduced to routine. The PM’s importance is emphasized because, as a devotee of management by exception, the PM will ﬁnd there are a great many exceptions to manage by.
Projects have limited budgets, both for personnel as well as other resources. Often the budget is implied rather than detailed, particularly concerning personnel, but it is strictly limited. The attempt to obtain additional resources (or any resources) leads to the next attribute—conﬂict.
THE DEFINITION OF A “PROJECT”
More than most managers, the PM lives in a world characterized by conﬂict. Projects compete with functional departments for resources and personnel. More serious, with the growing proliferation of projects, is the project-versus-project conﬂict for resources within multiproject organizations. The members of the project team are in almost constant conﬂict for the project’s resources and for leadership roles in solving project problems. The PM must be expert in conﬂict resolution, but we will see later that there are helpful types of conﬂict. The PM must recognize the difference. The four parties-at-interest or “stakeholders” (client, parent organization, project team, and the public) in any project even deﬁne success and failure in different ways (see Chapters 12 and 13). The client wants changes, and the parent organization wants proﬁts, which may be reduced if those changes are made. Individuals working on projects are often responsible to two bosses at the same time; these bosses may have different priorities and objectives. Project management is no place for the timid.
Nonprojects and Quasi-Projects
If the characteristics listed above deﬁne a project, it is appropriate to ask if there are nonprojects. There are. The use of a manufacturing line to produce a ﬂow of standard products is a nonproject. The production of weekly employment reports, the preparation of school lunches, the delivery of mail, the ﬂight of Delta-1288 from Dallas to Dulles, checking your e-mail, all are nonprojects. While one might argue that each of these activities is, to some degree, unique, it is not their uniqueness that characterizes them. They are all routine. They are tasks that are performed over and over again. This is not true of projects. Each project is a one-time event. Even the construction of a section of interstate highway is a project. No two miles are alike and constructing them demands constant adaptation to the differences in terrain and substructure of the earth on which the roadbed is to be laid. Projects cannot be managed adequately by the managerial routines used for routine work. In addition to projects and nonprojects, there are also quasi-projects: “Bill, would you look into this?” “Judy, we need to ﬁnish this by Friday’s meeting.” “Can you ﬁnd out about this before we meet with the customer?” Most people would consider that they have just been assigned a project, depending on who “we” and “you’’ is supposed to include. Yet there may be no speciﬁc task identiﬁed, no speciﬁc budget given, and no speciﬁc deadline deﬁned. Are they still projects, and if so, can project management methods be used to manage them? Certainly! The performance, schedule, and budget have been implied rather than carefully delineated by the words “this,” “meet,” and “we” (meaning “you”) or “you” (which may mean a group or team). In such cases, it is best to try to quickly nail down the performance, schedule, and budget as precisely as possible, but without antagonizing the manager who assigned the project. You may need to ask for additional help or other resources if the work is needed soon—is it needed soon? How accurate/thorough/detailed does it need to be? And other such questions. One common quasi-project in the information systems area is where the project includes discovery of the scope or requirements of the task itself (and possibly also the budget and deadline). How can you plan a project when you don’t know the performance requirements? In this case, the project is, in fact, determining the performance requirements (and possibly the budget and deadline also). If the entire set of work (including the discovery) has been assigned to you as a project, then the best approach is to set this determination as the ﬁrst “milestone” in the project, at which point the resources, budget, deadline, capabilities, personnel, and any other matters will be reviewed to determine if they are sufﬁcient to the new project requirements. Alternatively, the customer may be willing to pay for the project on a “cost-plus” basis, and call a halt to the effort when the beneﬁts no longer justify the cost.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
Project Management in Practice
The Olympic Torch Relay Project
Seattle Minneapolis Boston New York Chicago Denver Los Angeles Dallas New Orleans Miami
Getting the Olympic Flame, known as the Olympic Torch Relay, to the Salt Lake City, Utah, USA 2002 Olympic Games promised to be no simple matter. Generally, the Torch Relay has gotten longer and more complex with every Olympic event. This complexity is driven by the realization of host-country citizens that it is a rare opportunity to have the Olympic torch pass through your hometown and the corresponding goal of the Olympic Committee to touch as many lives as possible in a positive way. Planning for the 1996 Atlanta Olympic Torch Relay (see ﬁgure) took two years, cost over $20 million, and involved an 84 day, 42 state campaign using 10,000 runners to carry the torch for 15,000 miles! Accompanying the runners was a 40-vehicle caravan carrying security ofﬁcers, media personnel, medical personnel, computers, telecommunications gear, clothing, food, and spare lanterns with extra ﬂames in case the
original torch went out. The caravan included: 50 cellular telephones; 60 pagers; 120 radios; 30 cars; 10 motorcycles; and clothing for 10,000 runners, 10,000 volunteers, as well as 2,500 escort runners. However, the torch relay is also a major marketing campaign, primarily for the relay’s sponsors. Thus, accompanying the Atlanta-bound caravan were trucks hawking Olympic memorabilia: t-shirts, sweatshirts, baseball caps, tickets to the soccer matches, and on and on. In addition to retail commercialism, a number of companies were piggybacking on the torch relay to further their own commercial interests: IBM, Motorola, BellSouth, Texaco, BMW, Lee, Coca-Cola, and so on. All in all, a very successful relay!
Source: G. Ruffenach, “Getting the Olympic Flame to Atlanta Won’t Be a Simple Cross-Country Run,” The Wall Street Journal, February 26, 1996.
WHY PROJECT MANAGEMENT?
The basic purpose for initiating a project is to accomplish speciﬁc goals. The reason for organizing the task as a project is to focus the responsibility and authority for the attainment of the goals on an individual or small group. In spite of the fact that the PM often lacks authority
WHY PROJECT MANAGEMENT?
at a level consistent with his or her responsibility, the manager is expected to coordinate and integrate all activities needed to reach the project’s goals. In particular, the project form of organization allows the manager to be responsive to: (1) the client and the environment, (2) identify and correct problems at an early date, (3) make timely decisions about trade-offs between conﬂicting project goals, and (4) ensure that managers of the separate tasks that comprise the project do not optimize the performance of their individual tasks at the expense of the total project—that is, that they do not suboptimize. Actual experience with project management (such as through the currently popular Six-Sigma projects) indicates that the majority of organizations using it experience better control and better customer relations (Davis, 1974), and probably an increase in their project’s return on investment (Ibbs et al., 1997). A signiﬁcant proportion of users also report shorter development times, lower costs, higher quality and reliability, and higher proﬁt margins. Other reported advantages include a sharper orientation toward results, better interdepartmental coordination, and higher worker morale. On the negative side, most organizations report that project management results in greater organizational complexity. Many also report that project organization increases the likelihood that organizational policy will be violated—not a surprising outcome, considering the degree of autonomy required for the PM. A few ﬁrms reported higher costs, more management difﬁculties, and low personnel utilization. As we will see in Chapter 5, the disadvantages of project management stem from exactly the same sources as its advantages. The disadvantages seem to be the price one pays for the advantages. On the whole, the balance weighs in favor of project organization if the work to be done is appropriate for a project. The tremendous diversity of uses to which project management can be put has had an interesting, and generally unfortunate, side-effect. While we assert that all projects are to some extent unique, there is an almost universal tendency for those working on some speciﬁc types of projects to argue, “Software (or construction, or R & D, or marketing, or machine maintenance, or . . .) projects are different and you can’t expect us to schedule (or budget, or organize, or manage, or . . .) in the same way that other kinds of projects do.” Disagreement with such pleas for special treatment is central to the philosophy of this book. The fundamental similarities between all sorts of projects, be they long or short, product- or service-oriented, parts of all-encompassing programs or stand-alone, are far more pervasive than are their differences. There are also real limitations on project management. For example, the mere creation of a project may be an admission that the parent organization and its managers cannot accomplish the desired outcomes through the functional organization. Further, conﬂict seems to be a necessary side-effect. As we noted, the PM often lacks authority that is consistent with the assigned level of responsibility. Therefore, the PM must depend on the goodwill of managers in the parent organization for some of the necessary resources. Of course, if the goodwill is not forthcoming, the PM may ask senior ofﬁcials in the parent organization for their assistance. But to use such power often reﬂects poorly on the skills of the PM and, while it may get cooperation in the instance at hand, it may backﬁre in the long run. We return to the subject of the advantages, disadvantages, and limitations of the project form of organization later. For the moment, it is sufﬁcient to point out that project management is difﬁcult even when everything goes well. When things go badly, PMs have been known to turn gray overnight and take to hard drink! The trouble is that project organization is the only feasible way to accomplish certain goals. It is literally not possible to design and build a major weapon system, for example, in a timely and economically acceptable manner, except by project organization. The stronger the emphasis on achievement of results in an organization, the more likely it will be to adopt some form of project management. The stake or risks in using project management may be high, but no more so than in any other form of management. And for projects, it is less so. Tough as it may be, it is all we have—and it works!
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
DILBERT: © Scott Adams/Dist. by United Feature Syndicate, Inc.
All in all, the life of a PM is exciting, rewarding, at times frustrating, and tends to be at the center of things in most organizations. Project management is now being recognized as a “career path” in a growing number of ﬁrms, particularly those conducting projects with lives extending more than a year or two. In such organizations, PMs may have to function for several years, and it is important to provide promotion potential for them. It is also common for large ﬁrms to put their more promising young managers through a “tour of duty” during which they manage one or more projects (or parts of projects). This serves as a good test of the aspiring manager’s ability to coordinate and manage complex tasks and to achieve results in a politically challenging environment where negotiation skills are required.
THE PROJECT LIFE CYCLE
Most projects go through similar stages on the path from origin to completion. We deﬁne these stages, shown in Figure 1-3, as the project’s life cycle. The project is born (its start-up phase) and a manager is selected, the project team and initial resources are assembled, and the work program is organized. Then work gets under way and momentum quickly builds. Progress is made. This continues until the end is in sight. But completing the ﬁnal tasks seems to take an inordinate amount of time, partly because there are often a number of parts that must come together and partly because team members “drag their feet” for various reasons and avoid the ﬁnal steps. The pattern of slow-rapid-slow progress toward the project goal is common. Anyone who has watched the construction of a home or building has observed this phenomenon. For the most part, it is a result of the changing levels of resources used during the successive stages of the life cycle. Figure 1-4 shows project effort, usually in terms of person-hours or resources expended per unit of time (or number of people working on the project) plotted against time, where time is broken up into the several phases of project life. Minimal effort is required at the beginning, when the project concept is being developed and subjected to project selection processes. (Later, we will argue that increasing effort in the early stages of the life cycle will improve the chance of project success.) Normally there is a strong correlation between the life-cycle progress curve of Figure 1-3 and the effort curve of Figure 1-4 because effort usually results in corresponding progress (although not always). Hence the mathematical derivative of the former tends to resemble the latter (Ciofﬁ, 2004). Moreover, since the effort curve is generally nonsymmetrical, the progress curve will in general not be symmetrical either. Activity increases as planning is completed and the real work of the project gets underway. This rises to a peak and then begins to taper off as the project nears completion, ﬁnally
THE PROJECT LIFE CYCLE
100 Slow finish
% Project completion
Slow start 0 Time
Figure 1-3 The project life cycle.
Peak effort level
Level of effort
Time Planning, scheduling, monitoring, control Evaluation and termination
Figure 1-4 Time distribution of project effort.
ceasing when evaluation is complete and the project is terminated. While this rise and fall of effort always occurs, there is no particular pattern that seems to typify all projects, nor any reason for the slowdown at the end of the project to resemble the buildup at its beginning. Some projects end without being dragged out, as is shown in Figure 1-4. Others, however, may be like T. S. Eliot’s world, and end “not with a bang but a whimper,” gradually slowing down until one is almost surprised to discover that project activity has ceased. In some cases, the effort may never fall to zero because the project team, or at least a cadre group, may be maintained for the next appropriate project that comes along. The new project will then rise, phoenix-like, from the ashes of the old. The ever-present goals of meeting performance, time, and cost are the major considerations throughout the project’s life cycle. It was generally thought that performance took
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
precedence early in the project’s life cycle. This is the time when planners focus on ﬁnding the speciﬁc methods required to meet the project’s performance goals. We refer to these methods as the project’s technology because they require the application of a science or art. When the major “how” problems are solved, project workers sometimes become preoccupied with improving performance, often beyond the levels required by the original speciﬁcations. This search for better performance delays the schedule and pushes up the costs. At the same time that the technology of the project is deﬁned, the project schedule is designed and project costs are estimated. Just as it was thought that performance took precedence over schedule and cost early in the life cycle, cost was thought to be of prime importance during the periods of high activity, and then schedule became paramount during the ﬁnal stages, when the client demanded delivery. This conventional wisdom turns out to be untrue. Recent research indicates that performance and schedule are more important than cost during all stages. The reality of time-cost-performance trade-offs will be discussed in greater detail in Chapter 3. Figure 1-3 presents the conventional view of the project life cycle. There are, however, many projects that have a life cycle quite different from the S-shaped Figure 1-3, conventional wisdom to the contrary. Remember that Figure 1-3 shows “percent project completion” as a function of “time.” The life-cycle function is essentially unchanged if, for the horizontal axis, we use “resources” instead. In effect, the life cycle shows what an economist might call “return on input,” that is, the amount of project completion resulting from inputs of time or resources. While the S-shaped return curve reﬂects reality on many projects, it is seriously misleading for others. For example, consider your progress toward getting a degree, which is usually speciﬁed, in large part, by the number of credit hours for courses successfully passed. For smooth progress toward the degree, the life-cycle “curve” would probably resemble a stairstep, each level portion representing a term of study and the step up representing completion of credit toward the degree. Summer vacation would, of course, be a longer level stair continuing into the fall term. Passing a crucial licensing exam, such as the Certiﬁed Public Accountant (CPA), the bar exam for attorneys, or even an electrician’s or plumber’s certiﬁcation, might appear as a long ﬂat line along the horizontal axis with a spike at the time of passing the exam; of course, the effort curve of Figure 1-4 would look completely different. Another type of life-cycle curve might be the installation of a new technology consisting of multiple parts, where each independent part resulted in different incremental beneﬁts. In these cases, organizations prefer to install those parts resulting in “the biggest bang for the buck” ﬁrst, so the resulting life-cycle curve would show great progress at ﬁrst, and slightly less next, and continual dwindling off as the remaining parts were installed, essentially concave with “decreasing returns to scale,” as the economists call it. And there might even be an “inverse S-curve” representing fast progress at ﬁrst, a slowdown in the middle, and then speeding up again at the end. A particularly important alternative life cycle shape can be captured by the analogy of baking a cake. Once the ingredients are mixed, we are instructed to bake the cake in a 350 (F) oven for 35 minutes. At what point in the baking process do we have “cake?” Experienced bakers know that the mixture changes from “goop” (a technical term well known to bakers and cooks) to “cake” quite rapidly in the last few minutes of the baking process. The life cycle of this process looks like the curve shown in Figure 1-5. A number of actual projects have a similar life cycle, for example, some computer software projects, or chemistry and chemical engineering projects. In general, this life cycle often exists for projects in which the output is composed or constructed of several subunits (or subroutines) that have little use in and of themselves, but are quite useful when put together. This life-cycle curve would also be typical for projects where a chemical-type reaction occurs that rapidly transforms the output from useless to useful—from goop to cake. Another example is the preparation of the manuscript for the current edition of this book. A great deal of information must be collected, a great deal of rewriting must be done and new materials gathered, but there is no visible result until everything is assembled.
THE PROJECT LIFE CYCLE
% Project completion
Figure 1-5 Another possible project life cycle.
Figure 1-3 shows that, as the project nears completion, continued inputs of time or resources result in successively smaller increments of completion—diminishing marginal returns. Figure 1-5 shows the opposite. As these projects near completion, additional inputs result in successively larger increments of progress—increasing marginal returns, obviously bounded at 100 percent completion. In Chapter 7, we will see that the distinction between these types of life cycles plays a critical role in developing budgets and schedules for projects. It is not necessary for the PM to estimate the precise shape of the life-cycle curve, but the PM must know which type of project life cycle applies to the project at hand. There is another comparison between the two types of project life cycles that is instructive. For the S-shaped life cycle in Figure 1-3, percentage of project completion is closely correlated with cost, or the use of resources. In fact, this is the basis for the use of “earned value,” a technique for monitoring project progress that we will describe in more detail in Chapter 10. However, for the exponential progress curve in Figure 1-5, the expenditure of resources has little correlation with progress, at least in terms of ﬁnal beneﬁt. Finally, not only does the shape of the project life-cycle curve fail to conform to a neat, single shape—there are also several different ways in which a project life cycle can be viewed and understood. We might view the project life cycle as a control system, as a mechanism to control quality, as a way of organizing the management of risk, and as a collection of small projects within larger projects within still larger projects. Each of these views of a project’s life is useful to the project manager. These will be discussed in later chapters.
Risk During the Life Cycle
It would be a great source of comfort if one could predict with certainty, at the start of a project, how the performance, time, and cost goals would be met. In a few cases, routine construction projects, for instance, we can generate reasonably accurate predictions, but often we cannot. There may be considerable uncertainty about our ability to meet project goals. The crosshatched portion of Figure 1-6 illustrates that uncertainty. Figure 1-6 shows the uncertainty as seen at the beginning of the project. Figure 1-7 shows how the uncertainty decreases as the project moves toward completion. From project start time, t0, the band of uncertainty grows until it is quite wide by the estimated end of the project. As the project actually develops, the degree of uncertainty about the ﬁnal outcome is reduced. (See the estimate made at t1, for example.) A later forecast, made at t2, reduces the uncertainty further. It is common to make new forecasts about project performance, time, and cost either at ﬁxed intervals in the life of the project or when speciﬁc technological milestones are reached. In any event, the more progress made on the project, the less uncertainty there is about achieving the ﬁnal goal. Note that the focus in Figures 1-6 and 1-7 is on the uncertainty associated with project cost—precisely, the uncertainty of project cost at speciﬁc points in time. Without signiﬁcantly
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
Figure 1-6 Estimate of project cost: estimate made at project start.
Figure 1-7 Estimates of project cost: estimates made at time t0, t1, and t2.
altering the shapes of the curves, we could exchange titles on the axes. The ﬁgures would then show the uncertainty associated with estimates of the project schedule, given speciﬁc levels of expenditure. The relationship between time and cost (and performance) is emphasized throughout this book. Dealing with the uncertainty surrounding this relationship is a major responsibility of the PM.
THE STRUCTURE OF THIS TEXT
This book, a project in itself, has been organized to follow the life cycle of all projects. It begins with the creative idea that launches most projects and ends with termination of the project. This approach is consistent with our belief that it is helpful to understand the entire process of project management in order to understand and manage its parts. Another characteristic of the book also relates to the process of project management: some topics, such as “procurement,” can largely be treated as stand-alone issues, discussed in a single appropriate place in the book, and then dispensed with. Other topics however, such as “risk,” or “planning,” arise throughout the book and are treated wherever they are relevant, which may be quite often. To attempt to treat them in a single section, or chapter, would be misleading. In addition, although this book is intended primarily for the student who wants to study project
THE STRUCTURE OF THIS TEXT
Project Management in Practice
Demolishing San Francisco’s Bridges Safely
The Central Freeway Viaduct in downtown San Francisco suffered major structural damage during the 1989 Loma Prieta earthquake and recently had to be safely demolished. The task was complicated because the bilevel, multispan bridge passed within six feet of heavily populated buildings, ran in the vicinity of both overhead and underground utilities (gas, water, electric, and sewer lines), and crossed both commercial and residential areas with strict vibration and sound level restrictions. Thus, managing the demolition while ensuring the safety of both the on-going population and existing facilities was a major challenge. The primary tools for conducting such a delicate, but dangerous, operation were detailed planning and thorough communications with all related parties. An extensive Demolition Plan was required and included:
• • • •
a dust control plan work-hour schedule noise-level monitoring load determinations and structural analyses.
a Code of Safe Practice describing personal protective equipment for the workers, as well as a maintenance plan for the equipment; a Code of Safe Practice describing personal protective equipment for the workers, as well as a maintenance plan for the equipment;
Most of the demolition was accomplished using a breaker on the upper deck of the bridge and a pulverizer on the lower deck. First the roadway slab was demolished, then the girders were pulverized and all the debris pushed down to the ground. Then the cap, columns, and restrainers were demolished. This process continued along the length of the bridge until the entire distance was demolished. Constant monitoring was conducted for noise, vibration, safety, and procedures throughout the project. Continuous communication was made with utility companies and others concerned with a particular segment being demolished. In this fashion, the entire viaduct was demolished with no major accidents or injuries.
Source: O. Y. Abudayyeh, “Safety Issues in Bridge Demolition Projects: A Case Study,” PM Network, January 1997, pp. 43–45.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
management, we feel it can also be of value to the prospective or acting PM, and to senior managers who initiate projects and select, work with, or manage PMs. Therefore, our interests often go beyond the issues of primary concern to beginning students. Most actual projects will not be of the size and complexity addressed in many of our discussions. Though our intent was not to conﬁne our remarks only to large engineering-oriented projects, these are typically the most complex and place the greatest demands on project management. Smaller, simpler projects may therefore not require the depth of tools and techniques we will present, but the student or manager should be aware that such tools exist. Project management actually begins with the initial concept for the project. We feel that this aspect of project management is so important, yet so universally ignored in books on project management, that we included two appendices covering this area in previous editions of this book. In one appendix we discussed creativity and idea generation. In another, we described some of the techniques of technological forecasting. While our notion about the importance of these subjects is unchanged, the location of the two appendices has been moved from the end of this work to the Internet. The complete text of both appendices now appears in www.wiley.com/college/meredith/ (along with other items noted in the preface to this edition). We realize that these topics may be of more direct interest to the senior manager than the PM. Though a PM may prefer to skip this material, since what is past is past, we believe that history holds lessons for the future. Wise PMs will wish to know the reasons for, and the history behind, the initiation of their project. In years past, there were arguments between those who insisted that project management was primarily a quantitative science and those who maintained that it was a behavioral science. It has become clear that one cannot adequately manage a project without depending heavily on both mathematics and the science of human behavior. To contend that mathematics is exact and that behavioral science is “mushy” is to ignore the high level of subjectivity in most of the numeric estimates made about the times, costs, and risks associated with projects. On the other hand, to assert that “people don’t really use that stuff” (mathematical models) is to substitute wishful thinking for reality. For nonmathematicians, we have computers to help with the requisite arithmetic. For the nonbehaviorists, there is no help except hard work and an accepting attitude toward the subject. Before undertaking a journey, it is useful to know what roads are to be traveled. While each individual chapter begins with a more detailed account of its contents, what follows is a brief description of chapter contents along with their organization into three general areas: project initiation, project planning, and project execution. Following this introductory chapter, the material in Part I focuses on project initiation. We realize that many instructors (and students) would rather get to the basics of managing projects, and that can be done by moving directly to Part II of the text. However, we believe that without understanding the context of the project—why it was selected and approved, what project managers are responsible for and their many roles (such as running a team and negotiating for resources), the importance of the Project Management Ofﬁce, and where (and why) the project resides in the organization’s hierarchy—a PM is courting disaster. Chapter 2 starts with a description of the concept of project management “maturity,” or sophistication, and how ﬁrms can evaluate their own competence in project management. It then details the problems of evaluating and selecting projects, as well as the information needed for project selection, the management of risk through simulation, and some of the technical details of proposals. The chapter concludes by expanding the concept of project selection to strategic management through judicious selection of the organization’s projects by means of an eight-step procedure called the “project portfolio process.” Chapter 3, “The Project Manager,” concerns the PM’s roles, responsibilities, and some personal characteristics a project manager should possess. It also discusses problems a PM faces when operating in a multicultural environment. Next, Chapter 4
THE STRUCTURE OF THIS TEXT
covers a subject of critical importance to the PM that is almost universally ignored in project management texts: the art of negotiating for resources. The chapter also includes some major sources of interpersonal conﬂict among members of the project team. Concluding Part I of the book, Chapter 5 concentrates on establishing the project organization. Different organizational forms are described, as well as their respective advantages and disadvantages. The stafﬁng of the project team is also discussed. In Part II we consider project planning. This section of the text discusses the essentials of planning the project in terms of activities, costs, and schedule. Chapter 6 deals with project activity planning and presents tools useful in organizing and stafﬁng the various project tasks. It also contains a short discussion of phase-gate management systems and other ways of dealing with the problems that arise when multidisciplinary teams work on complex projects. Because of its importance, budgeting is addressed next in Chapter 7. Scheduling, a crucial aspect of project planning, is then described in Chapter 8, along with the most common scheduling models such as the Program Evaluation and Review Technique (PERT), the Critical Path Method (CPM), and precedence diagramming. Concluding Part II, resource allocation is covered in Chapter 9. For single projects, we discuss how the resource allocation problem concerns resource leveling to minimize the cost of the resources; but for multiple projects, we learn that the issue is how to allocate limited resources among several projects in order to achieve the objectives of each. Part III of the text then gets into actual project execution. Chapter 10 examines the information requirements of a project and the need for monitoring critical activities. Included in this chapter is a description of some common Project Management Information Systems (PMIS). In general, it is not possible to manage adequately any but the smallest of projects without the use of a computerized PMIS. There are many such systems available and several are brieﬂy discussed, but in this book all examples using PMIS will use Microsoft Project® (as well as Excel® and other software made to interact easily with Microsoft Project® and Excel®), by far the most popular project management software. While Microsoft has been a driving force in the development of project management software, there is a wide variety of PMIS available. We must add that to use any project management software wisely, the user must understand the principles of project management. Chapter 11 then describes the control process in project management. This chapter covers standards for comparison and tools to help the manager keep the project in control. Chapter 12 deals with methods for both ongoing and terminal audits and evaluations of a project, as well as identifying factors associated with project success and failure. Chapter 13 describes the different forms of project termination, such as outright shutdown, integration into the regular organization, or extension into a new project. Each of these forms presents unique problems for the PM to solve. The subject of risk management and its component parts, risk management planning, risk identiﬁcation, risk assessment, risk quantiﬁcation, risk response development, and risk monitoring and control (Project Management Institute, 2004), is given extensive coverage throughout this book. We considered the addition of a chapter speciﬁcally devoted to the management of risk, but the fact that risk and uncertainty are inherent in all aspects of project life led us to incorporate discussions of risk management when they were relevant to the problem at hand. Determination of the sources and nature of risks that might affect a project is risk identiﬁcation and, in our opinion, should be the subject of an ongoing analysis carried out by the project council, the Project Management Ofﬁce, and the project team itself. Risk identiﬁcation, therefore, should be embedded as a part of any project, and we deal with the subject in Chapter 5 when we discuss project organization. Risk analysis, a term we use to cover both risk quantiﬁcation and risk response planning, is devoted to estimating the speciﬁc impacts that various uncertainties may have on project outcomes. The techniques used to estimate and describe uncertain outcomes vary with the
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
particular problem at hand. Determination of the impact of risks on the project selection process, for example, is signiﬁcantly different from a study of the impact of risks on project budgets or schedules. Each will be considered in its appropriate place. The use of Decisioneering’s Crystal Ball® (enclosed with this volume) will greatly simplify the mathematical difﬁculties often associated with risk analysis. With this introduction, let us begin our study, a project in itself, and, we hope, an interesting and pleasant one.
This chapter introduced the subject of project management and discussed its importance in our society. It deﬁned what we mean by a “project,” discussed the need for project management, and described the project life cycle. The ﬁnal section explained the structure of this text and gave an overview of the material to be described in coming chapters. The following speciﬁc points were made in the chapter.
• • • • •
• • • •
The Project Management Institute (PMI) was founded in 1969 to foster the growth and professionalism of project management. Project management is now being recognized as a valuable “career path” in many organizations, as well as a way to gain valuable experience within the organization. Project management, initiated by the military, provides managers with powerful planning and control tools. The three primary forces behind project management are (1) the growing demand for complex, customized goods and services; (2) the exponential expansion of human knowledge; and (3) the global production– consumption environment. The three prime objectives of project management are to meet speciﬁed performance within cost and on schedule.
Our terminology follows in this order: program, project, task, work package, work unit. Projects are characterized by their importance, speciﬁc end results, a deﬁnite life cycle, complex interdependencies, some or all unique elements, limited resources, and an environment of conﬂict. Project management, though not problem-free, is the best way to accomplish certain goals. Projects often start slowly, build up speed while using considerable resources, and then slow down as completion nears. This text is organized along the project life cycle concept, starting with project initiation in Chapters 2 to 5, where selection of the project and project manager occurs and project organization begins. Project planning, Chapters 6 to 9, is concerned with activity planning, budgeting, scheduling, and resource allocation. Project execution, covered in Chapters 10 to 13, relates to actually running the project and includes activity monitoring and control, auditing and evaluation, and ﬁnally project termination.
Deliverables The desired elements of value, outcomes, or results that must be delivered for a project to be considered complete. Interdependencies Relations between organizational functions where one function or task is dependent on others. Life Cycle A standard concept of a product or project wherein it goes through a start-up phase, a building phase, a maturing phase, and a termination phase. Parties-at-Interest Individuals or groups (the stakeholders) with a special interest in a project, usually the project team, client, senior management, and speciﬁc public interest groups. Program Often not distinguished from a project, but frequently meant to encompass a group of similar projects oriented toward a speciﬁc goal. Project Management The means, techniques, and concepts used to run a project and achieve its objectives. Risk The chance that project processes or outcomes will not occur as planned. Stakeholder see “Parties-at-Interest.”
Suboptimize Doing the best within a function or area but at a cost to the larger whole. Task A subset of a project, consisting of work packages. Technology The means for accomplishing a task. Trade-off Taking less on one measure, such as performance, in order to do better on another, such as schedule or cost.
Uncertainty Having only partial or no information about the situation or outcomes, often due to ambiguity or complexity. Work Package A subelement of a task at the lowest level in the Work Breakdown Strucure, used to assign costs and values.
Material Review Questions
1. Name and brieﬂy describe the societal forces that have contributed to the need for project management. 2. Describe the life cycle of a project in terms of (1) the degree of project completion; (2) required effort. 3. Describe the limitations of project management. 4. List the seven main characteristics of a project and brieﬂy describe the important features of each. 5. Name and brieﬂy describe the three primary goals of a project. 6. Discuss the advantages and disadvantages of project management.
Class Discussion Questions
7. How do projects, programs, tasks, and work packages differ? 8. How would you deﬁne a project? 9. What are some of the interdependencies related to a project? 10. What are some sources of conﬂict the project manager must deal with? 11. Differentiate between direct and ancillary project goals. Would learning a new skill through the project be a direct or ancillary goal? Entering a new market? 12. Describe the characteristics of quasi-projects.
13. Give several examples of projects found in our society, avoiding those already discussed in the chapter. 14. Describe some situations in which project management would probably not be effective. 15. How does the rate-of-project-progress chart (Fig. 1-3) help a manager make decisions? 16. Expound on the adage, “Projects proceed smoothly until 90 percent complete, and then remain at 90 percent forever.” 17. Discuss the duties and responsibilities of the project manager. How critical is the project manager to the success of the project? 18. Would you like to be a project manager? Why, or why not?
Questions for Project Management in Practice The Olympic Torch Relay Project
19. Discuss why there are trade-offs among the three prime objectives of project management. 20. Why is the life cycle curve often “S” shaped? 21. How might project management be used when doing a major schoolwork assignment? 22. Why is there such a pronounced bend in the curve of Figure 1-2? 23. Which of the identiﬁed project attributes in Section 1.1 are always present? Which are simply frequently present? 24. Describe a project whose life cycle would be a straight line from start to ﬁnish. Describe a project with an inverse-S life cycle.
25. Is the torch relay another part of the Olympics themselves, perhaps a sub-project?
Demolishing San Francisco’s Bridges Safely
26. Is the life cycle for this project S-shaped or shaped like the right half of a U or something else? Why? 29. Would the life cycle for this project be S-shaped or the right half of a U or something else? How about the life cycle for a freeway construction project?
27. What was the main consideration in this demolition project? 28. How would a demolition project differ from a more common construction project? Consider performance, schedule, and budget.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
INCIDENTS FOR DISCUSSION
Blanka Transport, Inc.
After several years of driving long-haul trucks, Joe Blanka founded his own trucking company, Blanka Transport Inc. (BTI), which specialized in less-than-carload shipments in the midwestern part of the United States. Joe developed a successful method for scheduling BTI’s runs that met or exceeded the delivery expectations of its customers. As a result, BTI shipments were growing at a rate between 15 and 20 percent per year. The growth, however, was not evenly distributed across BTI’s territory. On some routes, capacity was overloaded in one direction and underloaded in the other. Joe noticed that the imbalance problem was not stable across time. In some months capacity was short in one direction, and in other months it was short in another direction. He thought that one way of solving the problem would be through marketing, by offering incentives to customers whose shipments would improve load balance. Another approach to the problem was to analyze and restructure the route–equipment combinations. He also thought that it might be possible to warehouse some less-urgent shipments for short periods in order to help the balance. Joe’s son, the ﬁrst member of the Blanka family to attend college, was a senior in engineering school. He had just completed a course in project management, and after brieﬂy describing some of the basic concepts to his father, he suggested that a project might be a good way to deal with the balance problem. He thought that the Marketing Manager and the
Route Manager could serve as project co-managers. He also felt that some of the older, more experienced drivers might be helpful. The objective of the project would be to decrease the size of the route imbalances by 75 percent in a 1-year period. Questions: Is this a proper approach to the problem? What, if any, helpful suggestions would you make to Joe?
Maladroit Cosmetics Company
The plant manager of the Maladroit Cosmetics Company must replace several of her ﬁlling machines that have become obsolete. She is about to take delivery of six machines at a total cost of $4 million. These machines must be installed and fully tested in time to be used on a new production line scheduled to begin operation in six months. Because this project is important, the plant manager would like to devote as much time as possible to the job, but she is currently handling several other projects. She thinks she has three basic choices: (1) she can handle the project informally out of her ofﬁce; (2) she can assign the project to a member of her staff; or (3) the company that manufactures the machines can handle the installation project for a fee close to what the installation would cost Maladroit. Questions: Which of the three choices do you recommend, and why? If the project was one small machine at a total cost of $4,000, would your answer be different? Discuss the relative importance of the capital investment required versus the role of the investment in machinery.
CONTINUING INTEGRATIVE CLASS PROJECT
It often helps in communicating the process, difﬁculties, and satisfactions of project management if the class can do a team project together during the term of the course. The instructor may have a pre-chosen project for the class to work on, perhaps in a local organization, or the school itself (where there are many excellent projects: the cafeteria, parking, library, counseling, class scheduling, etc.), but if not, the following project is offered as an alternative. The project is to prepare a “Student Study Guide” for this course, due (time requirement) on the last day of the course before the ﬁnal examination. The purpose of the guide is to help the students learn the material of the course, both by preparing the guide as well as using it to study for the ﬁnal examination. The requirements (performance, or “scope”) for the guide are as follows:
• • • • •
a copy for every student, as well as the Instructor presented in either hard copy CD, ﬂash memory, or electronic (e.g., web) form (check with your Instructor) everyone in class must participate, with one exception noted further below. if subteams are used, they must not be organized to operate independently of each other (for example, by doing all the work on one of the chapters). the project plans can be constructed manually or in Microsoft Project® or another software program (check with your instructor)
a professional-looking appearance a consistent approach throughout the chapters
In addition, one student will be appointed as “Historian,” whose job is to monitor and prepare a written report on the progress of the project over its duration. This includes both the tasks to be accomplished, but also the attitude and
spirit of the Project Manager (PM), the project team and/or subteams, and the various stakeholders in the project (team members, Instructor, future students who may use the Guide) as well as the culture and environment of the project. The main task of the Historian is to compare the reality of the class project to that described in the textbook and point out in the written report similarities and differences that will be recognizable by the PM and team members. The Historian will have no work to do on the project itself, but will need to sit in on meetings, confer with the PM and subteam heads, talk to team members occasionally, confer with the Instructor, and other such activities as needed to properly monitor task progress. The role of this person is especially critical for the class to learn how closely their project followed the typical path of a normal project, what problems arose and how they should have been handled, and so forth. As a result, this person should probably be selected by the Instructor right at the beginning of the course. There may also be some expenses (budget requirement), such as photocopying costs and travel expenses, that may require assistance from the Instructor. Usually these costs are minor, but it depends on the project. Of course, in a real project the major cost would be the labor/personnel costs of the team members doing the work, a cost that is essentially “free” here. In future chapters we will continue to develop the various elements of the project, such as selecting the PM, organizing the team, scheduling the deliverables, and monitoring
progress. However, executing the requisite tasks of the project takes the most time in a real project but is a topic that is outside the scope of this text, which concerns only the generic tasks of project management. (Every project will have different tasks associated with it, many with very technical requirements.) Therefore, it will be necessary to forge ahead and do all the preparatory project elements, particularly in Parts I and II of the book, so that progress on the project tasks can begin right away. It would, of course, be best if the class could read all the material up to Chapter 10, which initiates Part III: Project Execution, where the work begins, before actually starting the project. Unfortunately, the course would be almost over by then and it would be too late to start a project. As a result, the PM and the class will have to skip ahead and read the Continuing Integrative Class Project assignments, at least for Chapters 2–10 now; hopefully, they will discover in retrospect how they could have conducted each of the various elements of the project better. But for right now, it is most important to cover the project elements in Chapters 2 and 3—what the project will be and who will be the PM, respectively, so the project can get underway ASAP. It is best to do these two elements in the very ﬁrst class, the ﬁrst one in consultation with the Instructor, and the second one with the Instructor ABSENT from the room but with instructions for where to ﬁnd him or her once the class has selected the PM, hopefully within 20 minutes but most certainly by the end of the class. Good luck!
Cioffi, D. F. Personal communication, 2004. Darnell, R. “The Emerging Role of the Project Manager.” PM Network, July 1997. Davis, E. W. “CPM Use in Top 400 Construction Firms.” Journal of the Construction Division, American Society of Civil Engineers, 1974. Davis, E. W. Project Management: Techniques, Applications, and Managerial Issues, 2nd ed. Norcross, GA: AIIE Monograph, 1983. Gido, J., and J. P. Clements. Successful Project Management, with Microsoft Project 2003 CD-ROM. Cincinnati: Thompson/South-Western, 2004. Grey, C. F., and E. W. Larson. Project Management: The Managerial Process. New York: McGraw-Hill/Irwin, 2005. Hughes, T. P. Rescuing Prometheus. New York, Pantheon, 1998. Ibbs, C. W., and Y. H. Kwak. “Measuring Project Management’s Return on Investment.” PM Network, Nov. 1997. Ibbs, C. W., and Y. H. Kwak, “Assessing Project Management Maturity.” Project Management Journal, March 2000. Kerzner, H. Project Management: A Systems Approach to Planning, Scheduling, and Controlling, 8th ed. New Jersey: Wiley, 2003. Pande, P. S., R. P. Newman, and R. R. Cavanagh. The Six Sigma Way, New York: McGraw-Hill, 2000. Project Management Institute. A Guide to the Project Management Body of Knowledge, 3rd ed. Newtown Square, PA: Project Management Institute, 2004. Pyzdek, T. The Six Sigma Handbook, rev. ed., New York: McGraw-Hill, 2003. Sandberg, J. “Rise of False Deadline Means Truly Urgent Often Gets Done Late.” Wall Street Journal, January 24, 2007. Shenhar, A. J., O. Levy, and D. Dvir. “Mapping the Dimensions of Project Success.” Project Management Journal, June 1997. Sun, M. “Weighing the Social Costs of Innovation.” Science, March 30, 1984.
CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS
The following reading describes the common occurrence of someone suddenly being appointed a project manager and ﬁnding he or she has been inadequately trained for the task. Based on the authors’ own experiences and interviews with dozens of senior project managers, they distill twelve guidelines for new project managers. The guidelines run the gamut from project initiation, through planning, to execution and close-out. Some are technical, some are uncommon sense, and many are philosophical, and sometimes political. But they are sage advice, not only for the novice but for the experienced project manager as well.
D I R E C T E D
R E A D I N G
LESSONS FOR AN ACCIDENTAL PROFESSION
J. K. Pinto and O. P. Kharbanda: Lessons for an Accidental Profession. Reprinted with permission from Business Horizons, March–April 1995. Copyright ©1995 by Indiana University Kelly School of Business.
Projects and project management are the wave of the future in global business. Increasingly technically complex products and processes, vastly shortened time-to-market windows, and the need for cross-functional expertise make project management an important and powerful tool in the hands of organizations that understand its use. But the expanded use of such techniques is not always being met by a concomitant increase in the pool of competent project managers. Unfortunately, and perhaps ironically, it is the very popularity of project management that presents many organizations with their most severe challenges. They often belatedly discover that they simply do not have sufﬁcient numbers of the sorts of competent project managers who are often the key driving force behind successful product or service development. Senior managers in many companies readily acknowledge the ad hoc manner in which most project managers acquire their skills, but they are unsure how to better develop and provide for a supply of well-trained project leaders for the future. In this article, we seek to offer a unique perspective on this neglected species. Though much has been written on how to improve the process of project management, less is known about the sorts of skills and challenges that speciﬁcally characterize project managers. What we do know tends to offer a portrait of successful project managers as strong leaders, possessing a variety of problem-solving, communication, motivational, visionary, and team-building skills. Authors such as Posner (1987), Einsiedel (1987), and Petterson (1991) are correct. Project managers are a special breed. Managing projects is a unique challenge that requires a strategy and methodology all its own. Perhaps most important, it requires people willing to function as leaders in every sense of the term. They must not only chart the appropriate course, but provide the means, the support, and the conﬁdence for their teams to attain these goals. Effective project managers often operate less as directive and autocratic decision makers than as facilitators, team members, and cheerleaders. In effect, the characteristics we look for in
project managers are varied and difﬁcult to pin down. Our goal is to offer some guidelines for an accidental profession, based on our own experiences and interviews with a number of senior project managers—most of whom had to learn their own lessons the hard way.
“Accidental” Project Managers
Project managers occupy a unique and often precarious position within many ﬁrms. Possessing little formal authority and forced to operate outside the traditional organizational hierarchy, they quickly and often belatedly learn the real limits of their power. It has been said that an effective project manager is the kingpin, but not the king. They are the bosses, it is true, but often in a loosely deﬁned way. Indeed, in most ﬁrms they may lack