DMB1206 – PROJECT MANAGEMENT

Set – 1

1. Write down the principles of project management.

Ans: Every project takes place in its own specific context. It brings together a group of people as a
project team and gives responsibilities and roles to people. While every project is unique in its own
way, there are certain basic principles which define project management in clearer terms. All these
factors need to be identified and considered in order to complete a project successfully. Figure 1.6
depicts the basic principles of project management.

Fig: Basic Principles of Project Management

Let us now discuss each of these principles in detail.

Objectives

The main point of any project is to achieve specified goals and objectives. Once these objectives have
been fulfilled, the project is said to be complete. It is, therefore, essential that the goals and objectives
should be clearly defined, measurable, and achievable. In the absence of a focused approach, chances
of project failure will increase.

Once the objectives of a project have been established, they should be clearly communicated and
agreed with all the working on the project.

Constraints
A constraint is any factor which can limit or have an impact on a project. Some typical constraints are
funding, the scope of the project, available resources, and time. In order to clearly define the
boundaries, it is important to understand what the constraints of any project are.

Projects which do not consider their constraints are often regarded as failures and tend to incur a
significant cost to their business.

Lifecycle

Projects have a definite start and finish point within which their objectives need to be fulfilled. This is
known as the project life cycle. Apart from the above principles, there are five dimensions that must
be managed on a project. They are scope, quality, cost, schedule, and staff. These dimensions are not
independent. For example, if you add staff, the schedule may be shortened (although not necessarily),
and the cost may increase. A more common trade-off is to shorten the schedule or increase scope, and
sacrifice quality. The trade-offs among these five dimensions are not simple or linear. For each
project, we need to decide which dimensions are critical and how to balance the others so we can
achieve the key project objectives. Figure depicts the five dimensions of a project.

Fig : The Five Dimensions of a Project

Each of these five dimensions can take one of three roles on any given project: a driver, a constraint,
or a degree of freedom. A driver is a key objective of the project. A constraint is the limiting factor
beyond the control of a project team. Any project measurement that is neither a driver nor a constraint
becomes a degree of freedom. A constraint gives the project team virtually no flexibility. A driver has
low flexibility and a degree of freedom that provides wider latitude to balance that dimension against
the other four.

Performance management baseline

Projects typically have three basic components: cost, schedule, and scope. Each of these components
should have a baseline or plan against which performance can be measured. When these baselines are
integrated, it’s called a performance management baseline — then, if you have a change in any one of
these components, its impact will be reflected in the others.

Say you have a scope change. With your performance management baseline, you can see how this
will impact your project schedule and cost, allowing you to better monitor the overall effect of
changes on a project. A performance management baseline improves decision-making, as you can
view the whole picture and identify all impacts of potential decisions.

2. What is the application of the leadership style narrated by Daniel Goleman?

Ans: Daniel Goleman identified six distinct leadership styles. He found that leaders use six different
leadership styles in various situations. Table 4.1 gives the summary of these styles, time to apply, and
the demerits and its impact on the performance of people at work.

Daniel Goleman’s 2000 article in the Harvard Business review described these six leadership styles
and underlined that using each style is a strategic choice. Instead of finding one style that fits you or
matches your behavior or personality, you should try to use the optimum leadership style for each
situation. The strategic choice would mean to purposely select which style to use and not be reactive
to situations spontaneously and emotionally, which leads us back to the concept of Emotional
Intelligence above. Use the four competencies of Emotional Intelligence to determine which style
should be used, how you can use it, and then execute. It is worth repeating that all these styles should
be used on different occasions and to different degrees.
Table : Daniel Goleman’s Six Leadership Styles

Let us now discuss applications of leadership styles in brief.

1. Coercive style: In this style, a leader issues orders without any discussion with the members. Used
when there is a deficiency of time or when subordinates do not know how to find the solution.

2. Authoritative style: In this style, the project manager shares his or her vision with the team but
permits them to use their respective ideas to come up with a solution.

3. Affiliative style: In this style, the team leader encourages each member to think of themselves as
'one of the members of the family'. Open communication and good team work are some
characteristics of this style.

4. Democratic style: In this style, everyone has a say in the decision making. While this style is time
consuming, team morale is usually high.

5. Pace-setting style: In this style, high-performance standards are set for team members. The team
leader concentrates on high productivity without focusing on quality.

6. Coaching style: This type of leader is always ready to teach the team members and permit them to
work on their strengths and weaknesses. The leader encourages all team members to do better and is
supportive in case of any failure. Such a leader delegates and assigns challenging tasks to team
members.

3. Explain all the factors affecting the risk analysis of any country.

Ans:

Category Risk Factors

Political climate 1. Stability, maturity, and functioning of the political system
2. Representativeness and collectiveness of the
government
3. The scale of domestic conflict: racial relations; civil war
or insurgence; conditions of international relations;
sanctions imposed due to political reasons; border disputes
or military conflict with neighbouring countries,, etc

Economic environment 1. Economic development stages: GDP growth; GDP per

capita
 2. Economic stability: inflation, unemployment and
provision of social security
3. Taxation: consistency in tax charges, tax levels, tax
incentives for foreign investment and industries
4. Macroeconomic Management: Formulation;
implementation and efficiency of monetary policy and fiscal
policy

Financial conditions 1. Stability, regulation, and supervision of the financial

system
2. Capital market functioning: efficiency, liquidity,
resiliency, and transparency of the capital market
3. Operation of foreign exchange market: Stability,
resilience, and central bank intervention
4. Corporate sector: Maturity, information disclosure, and
corporate governance.

Social Institution 1. Legal system: Independence, transparency and

enforcement, crime and security in the society
2. Legislations and regulations: Consistency, fairness, and
effectiveness
3. Work organisation and corporate governance:
Functioning, compatibility, and harmony
4. Influence of Interest groups: Professional groups, trade
unions, and employers organisations

Market risk

The price fluctuations or volatility increases and decreases in the day-today market. It is defined as
that portion of total variability of return caused by the alternating forces of bull and bear market.
When the security index moves upward haltingly for a significant period of time, it is known as bull
market. In bull market, the index moves from a low level to the peak. Bear market is just a reverse to
the bull market.

Interest rate risk

Interest rate risk is simply the risk to which an institution is exposed because future interest rates are
uncertain. The assets and liabilities of a financial institution have different maturity and liquidity.
Financial institutions create assets and at the same time create liabilities. These loans are invested by
the financial institutions at a certain rate of interest and similarly interest cost has to be paid to the
lenders of deposit.

The mismatches of interest rates of the assets and liabilities expose to interest rate risk. For example:
An Indian bank borrows Rs. 200 crore from the market for 4 years @ 10% (Floating p.a.) and creates
a loan asset of the same amount for 4 Year period @ 13% (Fixed p.a.). If, there is a an upward trend
of interest rate after 2 years and the rate of interest goes up to 15% then Interest Loss = Crores = 200
(15% – 13%)

Purchasing power risk

Variations in the returns are caused also by the loss of purchasing power of currency. Inflation is the
reason behind the loss of purchasing power. The level of inflation proceeds faster than the increase in
capital value. Purchasing power risk is the probable loss in purchasing power of the returns to be
received. The rise in price penalises the returns to the investor, and every potential rise in price is a
risk to the investor.

Liquidity risks

Liquidity risk is that part of an asset’s total inconsistency of returns which consequences from price
discounts given or sales commissions paid in order to sell the asset without delay. It is a condition
wherein it may not be possible to sell the asset. Assets are inclined at great inconvenience and cost in
terms of money and time. Any asset that can be bought and sold promptly is said to be liquid. Failure
to realise with minimum discount to its value of an asset is called liquidity risk.

Assignment Set – 2 Questions

4. What is Project Management Information System (PMIS)? What are its uses?

Ans: Project Management Information System (PMIS) is the system tools and techniques used in
project management to deliver information. Project managers use the techniques and tools to collect,
combine, and distribute information through electronic and manual means. PMIS is used by the upper
and lower management to communicate with each other.

It is a Management Information System (MIS) related to a project. A PMIS consists of people,

equipment, and procedure to collect, process, store, combine, and communicate the needed
information to users (stakeholders) for carrying out project management functions.

Project Management Information System (PMIS) helps in planning, executing and closing project
management goals. Project managers use PMIS for budget framework such as estimating costs at the
time of planning process. Furthermore, the PMIS is employed to build a specific schedule and
classify the scope baseline. The project management team collects information into one database
while executing the project management goals. It is used to compare the baseline with the actual
achievement of each activity, manage materials, collect financial data, and keep a record for reporting
purposes. The PMIS is used to assess the goals to ensure if the tasks were accomplished when project
is closed after that, it is employed to make a final report of the project close. To understand this
concept better, we should first understand the distinction between data and information.

Data

Data are values of qualitative or quantitative variables belonging to a set of items. They represent
something in the real world, expressed as a number or a statement or a picture and act as an input to
MIS.

Information

Information may be defined as,

(i) data within a context,

(ii) data in a relationship, or

(iii) processed data. It does not convey much. But, when we say it denotes an age of a student of a
class, it gets some meaning. Log of daily production figures in a year do not convey much. But when
we calculate their average, standard deviation, range, and trend, we get much more meaning out of
them.

System

A system consists of a set of sub-systems/components that work together to achieve a common goal.
It comprises of interacting or interdependent components forming an integrated whole.
Most systems share common characteristics including:

 Systems have structure, defined by components/elements and their composition

 Systems have behaviour, which involves inputs, processing and outputs of material, energy,
information, or data
 Systems have interconnectivity, the various parts of a system have functional as well as
structural relationships to each other
 Systems may have some functions or groups of functions

Uses

 Project management information systems benefit your organization through better collaboration
and agile processes.

 Understanding details of your project, especially large projects, helps you stay on schedule.

 You can track individual activities and tasks in your project with information systems.

5. Write down the types of project performance evaluation techniques.

Ans: Performance evaluation is an important tool for the assessment of a system or service according
to the measurements specified. We can define it as the systematic process of assessment of
effectiveness against predetermined norms, standards, or expressed goals. In management evaluation
of any service, process or activity typically refers to "determining its worth".

Evaluations of project performance are an independent study which is systematically conducted from
time to time to identify the progress of a project and often these studies are conducted by including
both experts from within and outside the project.

Evaluation inspects the output of a project, programme or policy against its objectives. It also adds
the additional value by providing lessons from experience to help future management or development
of a specific project, programme or policy. Evaluation is planned from the beginning of the project,
and normally includes the following steps:

 It establishes accurately what is to be evaluated and how past outturns can be measured;
 It chooses the alternative condition of the world and/or alternative management decisions as
counterfactuals;
 It evaluates the actual outcome with the target outcome, and with the effects of the chosen
alternative condition of the world and/or management decisions;
  It provides the results and recommendations; and
 Disseminates the results and recommendations.

Types of project performance evaluation

The following are the types of project performance evaluation techniques:

(i) Process (or implementation) evaluation: It is also called formative evaluations which are
designed to improve the implementation of a program, policy or strategy as it unfolds. In this type of
evaluation we measure the level to which a program is effective as it was planned. It usually
considers the program activities’ conformance to statutory and regulatory requirements, program
design, and professional standards or customer expectations.

(ii) Outcome evaluation: It is also called summative evaluations which are designed to judge a
program, policy or strategy’s relevance, success and/or cost-effectiveness which includes its relative
contribution to the intended outcomes. This type of evaluation measures the level to which a program
attains its outcome-oriented objectives. It mainly focuses on outputs and outcomes including
unintended effects to evaluate program effectiveness but may also consider program process to
understand how outcomes are produced.

(iii) Impact evaluation: This is a type of outcome evaluation that measures the net effect of a
program by evaluating program outcomes with an estimate of what would have happened in the
absence of the program. This type of evaluation is used when external factors are known to influence
the program’s outcomes, in order to isolate the program’s contribution to achievement of its
objectives.

(iv) Cost-benefit and cost-effectiveness analyses: Cost-benefit and costeffectiveness analyses

compare a program’s outputs or outcomes with the costs (resources expended) in order to produce
them. When applied to existing programs, they are also regarded as a variety of program evaluation.
It measures the cost of meeting a single goal or objective, and can be used to identify the least cost
alternative to meet that goal. This analysis aims to recognize all relevant costs and benefits, generally
expressed in dollar terms.

6. Differentiate between CPM and PERT.

Ans:
  For projects considered uncertain, the PERT model was developed and for projects which are
comparatively risk-free the CPM model was developed. Both the approaches start with the
development of the network and a focal point on the critical path.
 Tthe PERT approach is 'probabilistic' while the CPM approach is 'deterministic'.
 This does not, however, mean that in CPM analysis we work with single time estimates.
Actually the main focus of CPM analysis is on variations in activity times as a consequence of
changes in resource assignments.
 These variations are planned plus related to resource assignments as well as are not caused by
random factors outside the control of management as in the case of PERT analysis. The major
focus of CPM analysis is on time cost relationships and it seeks a project schedule that
minimises total cost.

PERT Program (Project) Evaluation and Review Technique (PERT) is an activity to understand the
planning, arranging, scheduling, coordinating and governing of a project. This program helps to
understand the technique of a study taken to complete a project, identify the least and minimum time
taken to complete the whole project. PERT was developed in the 1950s, with the aim of the cost and
time of a project.

CPM Critical Path Method or CPM is a well-known project modelling technique in project
management. It is a resource utilising algorithm that was developed in the 1950s by James Kelly and
Morgan Walker.

CPM is mainly used in projects to determine critical as well as non-critical tasks that will help in
preventing conflicts and reduce bottlenecks.

In essence, CPM is about choosing the path in a project that will help in calculating the least amount
of time that is required to complete a task with the least amount of wastage.

PERT vs CPM

Abbreviation

PERT –  Project Evaluation and Review Technique CPM –  Critical Path Method

What does It Mean? 

PERT –  PERT is a popular project management technique CPM – CPM is a statistical algorithm which has a
that is applicable when the time required to finish a project is certain start and end time for a project 
not certain

Model Type 

PERT – PERT is a probabilistic model CPM – CPM is a deterministic model

Focus 

PERT – The main focus of PERT is to minimise the time CPM – The main focus of CPM is on a trade-off
required for completion of the project between cost and time, with a major emphasis on
cost-cutting.

Orientation type

PERT – PERT is an event-oriented technique CPM – CPM is an activity-oriented technique