MGMT – 640

PROJECT MANAGEMENT John Shayegan

OVERVIEW
WHY THE EMPHASIS ON
PROJECT MANAGEMENT?
Many tasks do not fit neatly into business-as-usual
Organizations need to assign responsibility and authority for the
achievement of their goals

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CHARACTERISTICS OF
PROJECTS
Unique
Specific deliverables
Specific due date

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FORMAL DEFINITION OF
A PROJECT
“A project is a temporary endeavor undertaken to create a unique
product or service.”

Project Management Institute, 2007

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FORMAL DEFINITION OF
PROJECT MANAGEMENT
“The application of knowledge, skills, tools, and techniques to a broad
range of activities in order to meet the requirements of a particular
project.”

Project Management Institute, 2007

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 EXAMPLES OF PROJECTS

• Business information: install new data security system

• Physical education: develop a new fitness program for senior citizens
• Marketing: execute a sales program for a new home air purifier
• Industrial engineering: create a value chain report for every aspect of a key product from design
to customer delivery
• Chemistry: develop a quality control program for an organization’s drug production facilities
• IT: Implementation of ERP system
• Sports communication: create a promotion plan for a women’s basketball project
• Systems engineer: develop data mining software of medical papers and studies related to drug
efficacy
• Accounting: work on an audit of a major client
• Public health: design a medical marijuana educational program

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CURRENT DRIVERS FOR
PROJECT MANAGEMENT
Factors leading to the increased use of project management:
 Compression of the product life cycle
 Knowledge explosion
 Triple bottom line (planet, people, profit)
 Increased customer focus
 Small projects represent big problems
 Business process transformation

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THE CHALLENGES OF
PROJECT MANAGEMENT
Manages temporary, nonrepetitive activities and frequently acts
independently of the formal organization.
Marshals resources for the project.
Is the direct link to the customer.

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THE CHALLENGES OF
PROJECT MANAGEMENT
CONT’D
Works with a diverse troupe of characters.
Provides direction, coordination, and integration to the project team.
Is responsible for performance and success of the project.
Must induce the right people at the right time to address the right
issues and make the right decisions.

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OTHER COMMON
CHARACTERISTICS OF
PROJECTS
Multidisciplinary
Complex
Often involve conflicts
Part of programs

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PROGRAM
MANAGEMENT
Program Management– Managing a group of related projects in a
coordinated approach to maximize benefits than having to approach
the projects individually.

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PROJECT PORTFOLIO
MANAGEMENT
Portfolio Management– Focuses on selecting, prioritizing the right
projects, at the right time to ensure alignment with the organizational
goals. It also can be referred to as the centralized management of one
or more project portfolios to achieve strategic objectives.

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TRENDS IN PROJECT
MANAGEMENT
Achieving strategic goals
Achieving routine goals
Improving project effectiveness
Virtual projects
Quasi-projects

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 COMPARISON OF PROJECT
MANAGEMENT AND
GENERAL MANAGEMENT

Table 1-1
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PROJECT BUDGETS

Project budgeting differs from standard

budgeting in the way budgets are constructed
Budgets for non-projects are primarily
modifications of budgets for the same activity in
the previous period
Project budgets are newly created for each
project and often cover several “budget periods”
in the future

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PROJECT SCHEDULES
In manufacturing, the sequence of activities is set when production
line designed
 Sequence is not altered when new models are produced

Each project has a schedule of its own

 Previous projects with deliverables similar to current one may provide a rough
template
 However, specifics unique to project at hand

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PROJECT
ORGANIZATIONAL
STRUCTURE
Routine work of organizations takes place within a
well-defined structure
 The divisions, departments, sections, and similar
subdivisions of the total unit
Typical project cannot thrive in this structure
The need for technical knowledge, information,
and special skills requires that departmental lines
be crossed
 Another way of describing the multidisciplinary character
of projects
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GLOBALIZATION

When large firms establish manufacturing plants

or distribution centers in different countries, a
management team is established on site
For projects, globalization has a different
meaning
Members of project teams may be spread across
countries and speak different languages
Some project team members may never have a
face-to-face meeting
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NEGOTIATION
With little authority, the project manager depends on negotiation
skills to gain the cooperation of departments in the organization
Those departments have their own objectives, priorities, and
personnel
The project is not their responsibility and the project tends to get the
leftovers

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THREE DIFFERENT TYPES
OF NEGOTIATION
1. Win-win
2. Win-lose
3. Lose-lose

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THREE GOALS OF PROJECT
MANAGEMENT
1. Scope
2. Cost
3. Time

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 SCOPE, COST, AND TIME
PROJECT PERFORMANCE
TARGETS

Figure 1-1
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UNCERTAINTY

All projects are always carried out under

conditions of uncertainty
 Projects are all about uncertainty

Effective project management requires an ability

to deal with uncertainty
Projects are complex and include interfaces,
interdependencies, and assumptions, which may
turn out to be wrong
 People add to the uncertainty
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UNCERTAINTIES
ENCOUNTERED IN PROJECT
MANAGEMENT
Time required to complete a project
Availability and cost of key resources
Timing of solutions to technological problems
Macroeconomic variables
The whims of clients
Actions taken by competitors

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CAN UNCERTAINTY BE
ELIMINATED?
No, uncertainty cannot be eliminated
However, if managed properly, it can be minimized

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MANAGING RISK

The first step in managing risk is to identify

potentially uncertain events and likelihood of
occurrence
 Called risk analysis

Different organizations approach this differently

The essence of risk analysis is to make
assumptions about key risk parameters and to use
models to evaluate the desirability of certain
managerial decisions
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FOURTH PROJECT GOAL
There is a relationship between uncertainty and the three traditional
project goals (Scope, Schedule, Cost)
In some organizations and the textbook for this course consider Risk
as the fourth project goal
Thus, the primary role of the project manager is to effectively
manage the trade-offs between cost, time, scope, and risk

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ABILITIES NEEDED FOR
EFFECTIVE PROJECT
MANAGEMENT
Ability to resolve conflicts
Creativity and flexibility
Ability to adjust to change
Good planning skills
Negotiation skills

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THE LIFE CYCLE OF
PROJECTS
All organisms have a life cycle, they are born,
grow, wane, and die
 So do projects

Some projects follow an S-shaped curve

 They start slowly, develop momentum, and then finish
slowly
Other project follow a J-shaped curve
 They start slowly , proceed slowly, and then finish
rapidly
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STANDARD WATERFALL
LIFE CYCLE

Initiating Planning

Closing

Controlling Executing

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SELECTING PROJECTS TO
MEET ORGANIZATIONAL
OBJECTIVES
Project selection is process of evaluating projects
and choosing them so firm objectives are met
Ensure that several conditions are considered
1. Is the project potentially profitable?
2. Is the project required
3. Does firm have the skills to complete the project
4. Does the project involve building strategic
competencies
5. Does it have capacity to carry out the project
6. Can project be economically successful
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SELECTION METHODS
There are many different methods for selecting projects
They may be grouped into two fundamental types
1. Nonnumeric: does not use numbers for evaluation
2. Numeric: uses numbers for evaluation

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NONNUMERIC
SELECTION METHODS
The Sacred Cow: a pet project advocated by a
senior executive of the firm.
The operating/competitive necessity
Comparative benefits
 Rank-ordering a small number of projects is not difficult
 When the number of projects exceeds 15 or 20, the
difficulty of ordering the group rises rapidly
 A Q-sort is a convenient way to handle the task

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 THE Q-SORT METHOD

Figure 1-4
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NUMERIC SELECTION
METHODS
Financial assessment methods
1. Payback period
2. Discounted cash flow
3. Future opportunity analysis

Scoring methods
4. Unweighted 0-1 factor method
5. Weighted factor scoring method

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PAYBACK PERIOD

Initial Fixed Investment

Annual Net Cash Inflows

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 THE PAYBACK MODEL
The Payback Model
• Measures the time the project will take to recover the project
investment.
• Desires shorter paybacks.
• Is the simplest and most widely used model.
• Emphasizes cash flows, a key factor in business.
Limitations of the Payback Method
• Ignores the time value of money.
• Assumes cash inflows for the investment period (and not
beyond).
• Does not consider profitability. 1-37
 EXAMPLE COMPARING TWO
PROJECTS USING PAYBACK
METHOD

EXHIBIT 2.3A
Access the text alternative for slide images.
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DISCOUNTED CASH
FLOW

Discounted cash flow (DCF) is a valuation method used to

estimate the value of an investment based on its future cash
flows. DCF attempts to figure out the value of an
investment today, based on projections of how much money
it will generate in the future.

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DISCOUNTED CASH
FLOW
n
Ft
NPV (project)  - I 0  
t 1 (1  k )
t

where
I0 = The initial investment
Ft = The net cash flow in period t
k = The required rate of return or hurdle rate

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THE WEIGHTED SCORING
MODEL
n
Si   sij w j
j 1
where
Si = The total score of the ith project
sij = The score of the ith project on the jth criterion
wj = The weight or importance of the jth criterion
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 NET PRESENT VALUE

Net Present Value (NPV)

• Uses management’s minimum desired rate of return (discount
rate) to compute the present value of all net cash inflows.
• Prefers positive NPV to negative NPV.
• Desires higher positive NPVs.
• Is more realistic because it considers the time value of money,
cash flows, and profitability.

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WEIGHTED SCORING
MODEL
Cat Weight A B
Criteria Score Criteria Score
Score Score

Cost 8 5 40 4 32
Design 10 4 40 5 50
Scalability 10 3 30 2 20
Points 110 102

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 MULTI-WEIGHTED SCORING
MODELS: PROJECT
SCREENING MATRIX

FIGURE 2.4
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 APPLYING A SELECTION
MODEL
• Deciding whether the project fits with the organization strategy.
• Selecting a Model
Weighted scoring criteria seem the best alternative because:

They reduce the number of wasteful projects using

resources.
They help to identify project goals that can be communicated
using the selection criteria as corroboration.
They help project managers understand how their project
was selected, how their project contributes to organization
goals, and how it compares with other projects. 1-45
SAMPLE PROJECT
PROPOSAL FORM

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 RISK ANALYSIS FOR A 500-
ACRE WIND FARM

FIGURE 2.5B Access the text alternative for slide images.

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 PROJECT SCREENING
PROCESS

FIGURE 2.6 Access the text alternative for slide images.

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STEPS IN THE PROJECT
PORTFOLIO PROCESS
1. Establish a project council
2. Identify project categories and criteria
3. Collect project data
4. Assess resource availability
5. Reduce the project and criteria set
6. Prioritize the projects within categories
7. Select the projects to be funded and those to be
held in reserve
8. Implement the process
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 MANAGING THE PROJECT
PORTFOLIO SYSTEM
Senior Management Input
• Provides guidance in establishing selection criteria that strongly align
with the current organization strategies.
• Annually decides how to balance the available organizational resources
(people and capital) among the different types of projects.
Governance Team Responsibilities
• Publish the priority of every project.
• Ensure the selection process is open and free of power politics.
• Evaluate the progress of current projects.
• Constantly scan the external environment to determine if organization
focus and/or selection criteria need to be changed.
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CATEGORIES OF
PROJECTS
Derivative projects: those that are only
incrementally different from existing offerings
Platform projects: major departures from existing
offerings
 The next generation

Breakthrough projects: involving a newer

technology
 Possibly a “disruptive” technology

R&D projects: “blue sky” or visionary endeavors

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THE MATERIALS IN THIS
TEXT
Chapter 2 focuses on the behavioral and
structural aspects of projects and their
management
Chapter 3 covers the process of planning and
launching the project, construction of the WBS,
and responsibility charts
Chapter 4 discusses the construction of a project
budget and presents a method of improving one’s
estimating skills
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COPYRIGHT
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