3uooess Uriven Projeot Management

Methodology
Viadimir Iiberzon, PMP
spider Project 1eam
Moscov, Russia PMI chapter
Hisfory
Success Driven Project Management (SDPM)
methodology was developed in Russia in 90-s
and since then was successfully used in many
projects, programs, and organizations and not
only in Russia
Two years ago its implementation in Petrobras Two years ago its implementation in Petrobras
(Brazil) was presented at PMI COS Conference in
Chicago
Last year its application for management of 2000
projects portfolio of Romtelecom (Romanian
Telecom company) was presented at PMI COS
Conference in Boston
Hisfory
SDPM is supported by Russian PM software
Spider Project but its basic approaches can be
used with other PM software tools and we will
discuss how to apply this methodology using
other software packages
Success Driven Project Management Success Driven Project Management
methodology has some common features with
Critical Chain Project Management approaches
but many differences too
Application of SDPM approaches showed very
good results and the number of companies that
implement SDPM is growing very fast
SDPM Ideos
Triple constraint and multiple project success
criteria make project management too
complicated. There is a need in the single and
integrated project success criterion.
Single project schedule and budget for all project Single project schedule and budget for all project
stakeholders leads to project failure. There is a
need for setting different targets for project work
force, for project management team, and project
sponsor.
SDPM Ideos
Project schedule and budget for project team
members shall be optimistic (no reserves
included), project targets (scope, time, cost) for
project management team shall include
contingency reserves, project sponsor targets contingency reserves, project sponsor targets
shall include management reserves for unknown
unknowns.
SDPM Ideos
Thus project management team shall have time
and cost buffers for managing project risks and
uncertainties. These buffers are not connected
with any activity sequence. Project buffer is a
difference between target value and the value for difference between target value and the value for
the same parameter in the optimistic schedule.
Targets shall be set using risk simulation. These
targets shall have reasonable probabilities to be
met. Risk simulation shall calculate necessary
project cost and time buffers.
SDPM Ideos
Project status information is useful but not sufficient
for decision making. Decision making shall be based
on the analysis of project trends.
Project buffers will be consumed during project
performance. Project management is about managing
these buffers. If they will remain positive to the these buffers. If they will remain positive to the
moment of project finish then project management
was successful and the targets were reached.
There is a need to have tools for measuring project
buffer penetration and project performance analysis.
The best indicator of buffer penetration and project
performance status is current probability to meet
project target.
SDPM Ideos
If the probability to meet project target is rising
then project buffer was consumed slower than we
expected, in other case project buffer was
consumed too fast and project success is
endangered. endangered.
Success probability trends are the best integrated
performance indicators they take into
consideration project risks, they depend not only
on performance results but also on the project
environment.
SDPM
SDPM methodology also includes approaches to
creating project schedule models and organizing
project data.
In this presentation we will discuss:
Organizing project data in the corporate project
management system management system
Resource Constrained Scheduling and Resource
Critical Path,
Risk Simulation methods and objectives,
Setting right project goals,
How to set and to manage Project Buffers,
Success Probabilities,
Management by Trends
Organizing project data in Organizing project data in Organizing project data in Organizing project data in
the corporate project the corporate project the corporate project the corporate project
1 11 1
the corporate project the corporate project the corporate project the corporate project
management system management system management system management system
Corporofe PM requiremenfs
Corporate requirements to the data that are used
for the portfolio/project planning and control may
be divided into two main groups:
High level requirements based on portfolio
management needs, management needs,
Low level requirements that shall be applied to
creating project schedule models.
High level requirements consider data
organization that shall be same for all portfolio
projects,
Low level requirements cover details and
instructions on creating project schedule models.
The same Project, Phase, Activity, Resource,
Material, and Department coding structures shall
be used in all projects
Resources that are used in all projects shall
belong to the corporate resource pool
Corporofe PM requiremenfs
belong to the corporate resource pool
Resources of the same type share the same
characteristics (like cost, productivities on the
same assignments, material consumption per
work hour)
WBS structures that are used in similar projects
shall be developed based on the same templates
Project costs have the same structure in all
projects (same cost components are used)
Cost accounts are the same in all projects
Corporofe PM requiremenfs
Cost accounts are the same in all projects
Activities of the same type have the same
characteristics in all projects (like unit cost,
material requirements per work volume unit, etc.)
Typical resource assignments have the same
characteristics in all projects (like productivity,
Corporofe PM requiremenfs
characteristics in all projects (like productivity,
cost and material requirements per work volume
unit)
Typical (repeating) processes are modeled in the
same way in all projects
Project archives are kept and stored as required
These requirements shall be set on the corporate
level and are mandatory for all projects in the
organization / program / portfolio
Templates, reference-books, coding systems etc.
are developed in the Project Management Office
Orgoni;ing dofo
are developed in the Project Management Office
Project Management Office creates Databases
(or Reference-books) that contain those
parameters that shall be used for planning of all
projects of the organization
Corporate Reference-books usually include:
Activity cost and material requirements per volume
(quantity of work) unit for all activity types,
Resource assignment cost and material requirements per
volume unit for all assignment types,
Corporofe Dofoboses
(Peference-8ooks)
volume unit for all assignment types,
Resource assignment productivities for all assignment
types,
Resource assignment workloads for all assignment types.
Activities, resources and resource assignments belong
to the same type if they share the same characteristics.
Project fragments usually describe typical
processes and technologies that are used more
than once as small projects.
Creating project schedule models using the library
of typical fragments helps to avoid inconsistencies
TypicoI Frogmenf Librory
of typical fragments helps to avoid inconsistencies
and assures that the project model follows
corporate standards.
A library of typical fragments is very important tool
for the development of common culture and
management standards.
An example of the typical fragment (construction of
1km road) is shown in the next slide
I km Pood Consfrucfion
It is necessary to keep project schedule archives to
be able to restore and to analyze trends of project
parameters.
If project schedule archives are available it is
possible to compare current project schedule with
Projecf Archives
possible to compare current project schedule with
the schedules created one week ago, one month
ago, etc.
Project Resource Project Resource Project Resource Project Resource
Constrained Scheduling Constrained Scheduling Constrained Scheduling Constrained Scheduling
2 22 2
Constrained Scheduling Constrained Scheduling Constrained Scheduling Constrained Scheduling
and Resource Critical Path and Resource Critical Path and Resource Critical Path and Resource Critical Path
Project scheduling without resource limitations
taken into the consideration,
Project/Portfolio resource constrained scheduling
(resource leveling),
ScheduIing Tosks
Calculation of feasible activity floats and those
activities that are critical,
Calculation of the Project/Portfolio cost, material
and resource requirements for any time period.
The problem of project schedule development
without allowing for resource constraints has a
correct mathematical solution (Critical Path
Method), which would be the same for all PM
packages, provided that initial data are identical.
CrificoI Pofh Mefhod
packages, provided that initial data are identical.
Other tasks are solved using different approaches
and yielding different results.
Resource constrained schedules produced by
different PM software are different. The software
that calculates shortest resource constrained
schedules may save a fortune to its users.
That is why we pay most attention to resource-
Pesource consfroined scheduIing
That is why we pay most attention to resource-
constrained schedule optimization.
The schedule stability is no less important,
especially at the project execution phase.
That is why our project management software
Spider Project features an additional leveling option
- the support of the earlier project version schedule
Pesource consfroined scheduIing
- the support of the earlier project version schedule
(keeping the order of activity execution the same
as in selected earlier project schedule).
Traditional notion of Critical Path works only in
case of unlimited resources availability.
Let us consider a simple project consisting of five
activities, presented at the next slide.
Activities 2 and 5 are performed by the same
SompIe Projecf before IeveIing
Activities 2 and 5 are performed by the same
resource.
Please pay attention to activities that became
critical. Now delaying each of the activities 1, 2 and
5 will delay the project finish date.
We call these activities Resource Critical and their
sequence comprises Resource Critical Path.
SompIe Projecf offer IeveIing
sequence comprises Resource Critical Path.
In many projects it is necessary to simulate financing
and production, and to calculate project schedules
taking into account all limitations (including availability
of renewable resources, material supply and financing
schedules).
Pesource CrificoI Pofh
schedules).
True critical path should account for all schedule
constraints including resource and financial limitations.
We call it Resource Critical Path (RCP) to distinguish it
from the traditional interpretation of the critical path
definition.
The calculation of RCP is similar to the calculation of
the traditional critical path with the exception that
both early and late dates (and corresponding activity
floats) are calculated during forward and backward
resource (and material, and cost) levelling.
Pesource CrificoI Pofh
This technique permits to determine feasible
resource constrained floats.
Activity resource constrained float shows the period
for which activity execution may be delayed within
the current schedule and with the set of resources
available in this project without delaying project
finish.
As you may notice in our example, Resource Critical
Path may include activities that are not linked with
logical dependencies.
Resource Critical Path is actually not the path but
the longest sequence of activities in the current
Pesource CrificoI Pofh
the longest sequence of activities in the current
schedule.
One activity may depend on another because these
activities are performed by the same resources. We
call these dependencies as Resource dependencies.
Resource dependencies may be shown in the
project schedule with the dotted arrows but they are
the result of the project levelling and not initial
information like logical dependencies.
Success Criteria Success Criteria Success Criteria Success Criteria
3 33 3
If project success criteria are set as finishing project
on time and under budget then proper decision
making will be complicated.
For example, project managers will not be able to
estimate if their decisions to spend more money and
Projecf Success Criferio
estimate if their decisions to spend more money and
finish the project earlier are reasonable.
We suggest to set one integrated criterion of the
project/program success or failure.
Many projects can be considered as business
oriented:
construction of roads, power plants, bridges, ports,
telecommunication networks, new product
development and production etc. brings economic
results and generate future profits,
Projecf Success Criferio
results and generate future profits,
Implementation of the corporate information system will
improve organization processes, etc.
In any case the delay of project finish date usually
increases project indirect cost, and acceleration
means saving some money.
So each day of project delay means some money
losses and finishing project earlier means additional
profit
We can define cost of a project day (maybe separate
and different for acceleration and delay) estimating
Projecf Success Criferio
and different for acceleration and delay) estimating
these profits and losses
This way we define the rules of the game that is
called Project Management
Another option to set the profit that should be
achieved at some point in time basing on the
forecast of the revenues that will be obtained after
the project will deliver its results.
Such success criteria will permit to weight time and
Projecf Success Criferio
Such success criteria will permit to weight time and
money making managerial decisions.
At the next slide you may see the project schedule
that is calculated without allowing for project
financing and supply restrictions. There are periods
when project has no money and necessary
materials (wall frames) to proceed.
If project manager
finds enough
money and
materials then
Projecf Success Criferio
materials then
project total profit
to the imposed
date will be close
to $219,000.
If we calculate
project resource,
supply and cost
constrained
schedule then it
Projecf Success Criferio
schedule then it
become clear that
the project will
loose $25,000 due
to necessary
delays.
Maybe it is reasonable to borrow money or to find
some other solution?
To be able to weight options and to select the best it
is necessary to consider not only expenses but also
future profits.
Projecf Success Criferio
future profits.
Proper project (program, portfolio) schedule model
is the powerful tool that helps to select the best
decisions.
Risk Analysis & Risk Analysis & Risk Analysis & Risk Analysis &
Success Driven Success Driven Success Driven Success Driven
4 44 4
Success Driven Success Driven Success Driven Success Driven
Project Management Project Management Project Management Project Management
Our experience in project planning shows that the
probability of successful implementation of
deterministic project schedules and budgets is very
low. Therefore project and portfolio planning
technology should always include risk simulation to
Why risk onoIysis
technology should always include risk simulation to
produce reliable results.
Risk simulation may be based on
Monte Carlo simulation or use
three scenarios approach.
We prefer 3 scenario approach
Pisk SimuIofion
We prefer 3 scenario approach
for the reasons explained further.
A project planner obtains three estimates
(optimistic, most probable and pessimistic) for all
initial project data (duration, volumes, productivity,
calendars, costs, etc.) and creates optimistic, most
probable and pessimistic scenarios of project
Pisk SimuIofion -
fhree scenorios opprooch
probable and pessimistic scenarios of project
performance
Risk events are selected and ranked using the
usual approach to risk qualitative analysis
Usually we recommend to include risk events with
the probability exceeding 90% in the optimistic
scenario, exceeding 50% in the most probable
scenario, and all selected risks in the pessimistic
scenario
Most probable and pessimistic project scenarios
may contain additional activities and costs due to
corresponding risk events and may employ
additional resources and different calendars.
As the result project planner obtains three expected
Pisk SimuIofion -
fhree scenorios opprooch
As the result project planner obtains three expected
finish dates, costs and material consumptions for all
project phases and the project as a whole.
They are used to rebuild probability curves for the
dates, costs and material requirements.
If probability curve is known the required probability
to meet project target defines the target that shall
be set.
The area under the probability curve to the left of
the target value determines the probability to meet
Pisk SimuIofion -
fhree scenorios opprooch
the target value determines the probability to meet
the target.
P=S(blue)/S(whole)
Target dates of most projects usually are predefined.
They may be set not only for the whole
program/project but also for its major phases.
Project planning includes determining how to
organize project/program execution to be able to
Projecf/Progrom Torgefs
organize project/program execution to be able to
meet required target dates with the reasonable
probability.
Success ProbobiIifies
Probabilities to meet approved project targets we
call Success Probabilities. These targets may be
set for all project parameters that will be controlled
(profit, expenses, duration, material consumption).
Target dates do not belong to any schedule. Usually Target dates do not belong to any schedule. Usually
they are between most probable and pessimistic
dates.
A set of target dates and costs for project phases
(analogue of milestone schedule) is the real project
baseline.
But baseline schedule does not exist!
Performonce Meosuremenf
probIems
It means that application of usual project
performance measurement approaches (like
Earned Value Analysis) is complicated.
Without certain schedule and cost baselines it is
impossible to calculate Planned and Earned Value. impossible to calculate Planned and Earned Value.
If we select some schedule (Optimistic or Most
Probable) as the project management baseline the
values of Performance Indices that are lower than 1
do not mean that the performance is worse than
expected.
We recommend to use optimistic schedule for setting
tasks for project work force and manage project
reserves.
The schedule that is calculated backward from the
target dates with most probable estimates of activity
8uffers
target dates with most probable estimates of activity
durations we call Critical schedule.
The difference between start and finish dates in current
and critical schedules we call start and finish time
buffers (contingency reserves).
The difference between activity (phase) cost that has
defined probability to be met and optimistic cost of the
same activity (phase) we call cost buffer.
There are time,
cost and material
buffers that show
contingency
SompIe CrificoI ScheduIe
contingency
reserves not only
for a project as a
whole (analogue of
Critical Chain
project buffer) but
also for any activity
in the optimistic
project schedule.
Lets look at the difference between accuracy and
precision.
Accuracy: Precision:
Monfe CorIo ond 3 Scenorios
Monte Carlo means Accuracy but lack of Precision.
3 Scenarios means Precision but lack of Accuracy.
The choice depends on management approach.
Our approach may be called Management by
Trends.
Monfe CorIo ond 3 Scenorios
Trends.
We think that trends supply management with most
valuable information on project performance.
We think that trend analysis helps to discover
performance problems ASAP and to apply corrective
actions if necessary.
It is the main reason why 3 scenarios approach was
selected.
We think that the quality of initial data for project risk
simulation is never good enough but Monte Carlo
risk simulation creates an impression of accuracy
Monfe CorIo ond 3 Scenorios
risk simulation creates an impression of accuracy
that is actually dangerous for project managers.
In any case we need Optimistic schedule and budget
for project performance management.
We need to understand what happens with success
probability during project performance and so we
need data precision.
Project/Program/Portfolio Project/Program/Portfolio Project/Program/Portfolio Project/Program/Portfolio
Performance Management Performance Management Performance Management Performance Management
5 55 5
Performance Management Performance Management Performance Management Performance Management
Performance measurement routine shall be set for
all projects belonging to the portfolio/program.
Portfolio/Program schedule is revised regularly. For
most large programs it is done weekly. To be able to
reschedule the portfolio/program it is necessary that
Performonce Meosuremenf
reschedule the portfolio/program it is necessary that
all projects belonging to the portfolio/program have
the same data date.
So the portfolio/program management team requires
from all project management teams to enter actual
data of their projects at specified dates and time (for
an example: each week on Tuesday before 12:00 the
actual status on Tuesday 08:00 shall be entered).
If different projects have different data dates then
program scheduling became impossible and most
reports will not be reliable.
So setting the rules for entering actual data is
mandatory for program/portfolio management.
Performonce Meosuremenf
mandatory for program/portfolio management.
Project/Program/Portfolio planners shall keep
performance archives to be able to get trends of
project/program/portfolio parameters.
We recommend to manage projects and portfolios
basing on the analysis of performance trends.
If some project is 5 days ahead of the baseline but
one week ago it was 8 days and one month ago 20
days then some corrective action shall be
Monogemenf by frends
days then some corrective action shall be
considered.
If the project is behind the schedule but the distance
become smaller then project team improved project
performance process and interference is not
necessary.
So trend analysis shows short term performance
results and helps to make timely management
decisions.
Usually project management team analyses trends
of main project parameters like duration, cost, profit.
Monogemenf by frends
of main project parameters like duration, cost, profit.
Earned Value Analysis is another method that is
used for estimating program/project performance.
But this method shall be used very carefully and
only in combination with other methods because:
the real situation may be distorted,
Eorned VoIue AnoIysis
the real situation may be distorted,
project managers are motivated to do expensive jobs
ASAP and cheap jobs ALAP,
it does not consider if activities that were performed
were critical or not,
it does not consider project risks.
We consider success probability trends as the really
integrated project performance measurement tool.
Success probabilities may change due to:
Performance results
Scope changes
Success ProbobiIify Trends
Scope changes
Cost changes
Risk changes
Resource changes
Thus success probability trends reflect not only project
performance results but also what is going on around
the project.
Success probability is a measure of buffer penetration.
If in the middle of the project half of project buffer was
consumed it does not mean that the project is
performed as expected.
If most risks were behind then success probability will
Meosuremenf of buffer
penefrofion
If most risks were behind then success probability will
become higher and it will tell us that project buffer
consumption was lower than expected, if success
probability went down then buffer consumption is too
high and it is necessary to consider corrective actions.
Success probability trends may be used as the only
information about project performance at the top
management level because this information is
sufficient for performance estimation and decision
making.
Success Driven Projecf
Monogemenf
making.
We call Management by Trends methodology
Success Driven Project Management.
Conclusions Conclusions Conclusions Conclusions
6 66 6
1. There is a need for common methodology,
templates, reference-books to be able to implement
corporate project management system.
2. There is a need for Project Management Office
organizational unit that develops corporate project
Success Driven Projecf
Monogemenf Tips
organizational unit that develops corporate project
management standards, collects actual information
on project performance and works with the Portfolio
Schedule Model, creating and updating portfolio
plan and analyzing portfolio performance.
3. Most norms and standards are usually applied to the
activity physical units (m, t, m3, piece, function point,
etc.). So it is necessary to plan activity schedule and
to monitor project performance basing on physical
quantities (volumes of work) measurement.
Success Driven Projecf
Monogemenf
quantities (volumes of work) measurement.
4. Portfolio and Program schedule models include the
models of individual projects and shall be resource
loaded.
5. We recommend to create a library of project
fragments that may be used for fast development of
the detailed project computer models.
6. We recommend to set reliable target dates basing
on risk analysis and simulation, but to use optimistic
Success Driven Projecf
Monogemenf
on risk analysis and simulation, but to use optimistic
project schedule for setting tasks for project work
force.
7. Time and Cost contingency buffer penetrations
shall be regularly re-estimated. If these buffers are
consumed too fast there is a need for corrective
actions.
8. We recommend to keep project archives and to
analyze trends of project parameters.
9. If trends are negative corrective actions shall be
considered even if the status is good.
10. Earned Value Analysis supplies management with
Success Driven Projecf
Monogemenf
10. Earned Value Analysis supplies management with
the useful information on project status. But it shall
be used carefully and only as the supplement to
other methods of project performance
measurement.
11. Success Probability trends are the best integrated
indicators of project health.
Positive trends show that recent project
performance is better than expected. Negative
trends show that buffers are consumed faster than
Success Driven Projecf
Monogemenf
trends show that buffers are consumed faster than
expected and corrective actions may be necessary.
Success probability trends depend not only on
project performance but also on risks that may
change during project life cycle.
Success Probability Trends may be considered as
integrated indicators necessary for proper decision
making.
Success Driven Project Management Flowchart Success Driven Project Management Flowchart Success Driven Project Management Flowchart Success Driven Project Management Flowchart
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Appendix
SDPM SDPM SDPM SDPM
7 77 7
SDPM SDPM SDPM SDPM
with MS Project 2007 with MS Project 2007 with MS Project 2007 with MS Project 2007
SDPM is fully supported by Russian PM software
Spider Project but it may be used with other PM
software also.
We will start with discussing simplified calculation of
the probability to meet project target.
SDPM wifh MSP Z007 ond ExceI
the probability to meet project target.
Lets suppose that we got optimistic, most probable
and pessimistic values of some project parameter.
It does not matter much what shape of probability
curve will be selected. Remember that our initial
data are not perfect and we plan to manage trends.
So lets suppose that the distribution is triangular.
Lets restore the triangle distribution and calculate
the probability to meet some target T.
It is an area to the left of T divided by the whole
area of the triangle. It is not hard to get the formula
shown below where X is the probability to meet
SDPM wifh MSP Z007 ond ExceI
shown below where X is the probability to meet
target T.
Now lets look at the simple sample project where
we defined optimistic, most probable and
pessimistic activity durations using PERT option.
MS Project calculated project durations for all three
versions.
SDPM wifh MSP Z007 ond ExceI
versions.
Applying PERT weights 6, 0, 0 we will make
expected schedule the same as optimistic.
Lets enter total project durations and formula for
calculating target probability into Excel.
You may see how Excel calculated probabilities to
meet different target dates.
SDPM wifh MSP Z007 ond ExceI
Optimistic schedule shall be used for setting tasks
for project workforce.
During project performance planned project duration
in optimistic, probable, and pessimistic scenarios will
change.
Entering these data in Excel we will be able to
calculate current values of success probability.
SDPM wifh MSP Z007 ond ExceI
calculate current values of success probability.
When probability value reach 1 we may be almost
sure that target date will be met.
Probability trend shows when we had problems and
when they were solved.
SDPM wifh MSP Z007 ond ExceI
0.00
0.!0
0.+0
0.o0
0.0
1.00
1.!0
Probabiiity