MB381 FINAL EXAM

midterm study notes

Project

A **temporary** endeavor undertaken to create a unique product, service, or result

Characteristics of a project

•Has an established objective

•Has a defined life span with a beginning and an end

•Involves several departments and professionals

•Involves doing something never been done before

•Has specific time, cost, and performance requirements

Program

A group of related projects designed to accomplish a common goal over an extended period

Project Life Cycle

recognizes the lifespan of a project and the changes in level of effort and focus that occur throughout the cycle

Challenges of Project Manager

•Manages temporary, non-repetitive activities and frequently acts independently of the formal organization.

•Organizes resources for the project.

•Is the direct link to the customer.

•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.

Sociotechnical Approach: Technical Dimension

The “Science”: Consists of the formal, disciplined, purely logical parts of the process; Includes planning, scheduling, and controlling projects.

Sociotechnical Approach: Sociocultural Dimension

The “Art”: Involves the contradictory and paradoxical world of implementation; Centers on creating a temporary social system within a larger organizational environment that combines the talents of everyone to complete the project.

Agile Project Management

Methodology emerged out of frustration with using traditional project management processes to develop **software,** also referred to as “rolling wave” approach; used across industries in defining phase to manage projects with high levels of uncertainty, and combines active collaboration within small teams to complete project

Rolling Wave Development

Iterations typically last from one to four weeks, and focus on making tangible processes; once one iteration ends, it is reviewed and edited before a new iteration begins

Strategy

Deciding how the organization will compete

Strategic Management

Is the process of assessing “**what we are**” and deciding and implementing “**what we intend to be and how we are going to get there.**”

Four Activities of the Strategic Management Process

1. Review and define the organizational mission
2. Analyze and formulate strategies
3. Set objectives to achieve strategies
4. Implement strategies through projects

SMART Characteristics of Objectives

Specific, Measurable, Assignable, Realistic, Time related

Implementation Gap

The lack of understanding and consensus of organization strategy among top and middle-level managers

Organization Politics

Project selection may be based not so much on facts and sound reasoning as on the persuasiveness and power of people advocating projects; The term *sacred cow* is often used to denote a project that a powerful, high-ranking official is advocating

Resource Conflicts and Multitasking

A multi-project environment creates the problems of project interdependency and the need to share resources.  Resource sharing leads to multitasking—involves starting and stopping work on one task to go and work on another project, then returning to the work on the original task.

Types of Selection Criteria

Financial Criteria, Non-Financial Criteria, Multi-Criteria Selection Models

Payback Model

Type of financial criteria that measures the time the project will take to recover the project investment; simplest and most widely used, and emphasizes cash flows.

Payback Model Formula

Payback period (yrs)=  (Estimated project cost)/(Annual Savings)

Net Present Value (NPV)

Uses management’s minimum desired rate of return (discount rate) to compute the present value of all net cash inflows; is more realistic because it considers the time value of money, cash flows, and profitability

Net Present Value Formula

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Non-Financial Criteria

Strategic Objectives:

* To capture larger market share.
* To make it difficult for competitors to enter the market.
* To develop an enabler product, which by its introduction will increase sales in more profitable products.
* To develop core technology that will be used in next-generation products.
* To reduce dependency on unreliable suppliers.
* To prevent government intervention and regulation.

Multi-Criteria Selection: Checklist Models

* Use a **list of questions** to review potential projects and to determine their acceptance or rejection.
* Allow greater **flexibility in selecting** among many different types of projects and are easily **used across different divisions** and locations.
* **Fail to answer the relative importance** or value of a potential project to the organization and **does not allow for comparison** with other potential projects.

Multi-Criteria Selection: Multi-Weighted Scoring Models

* Use **several weighted selection criteria** to evaluate project proposals
* Include **qualitative and/or quantitative** criteria
* **Allow for comparison** with other potential projects

Project Portfolio Matrix

Bread-and-butter Projects

projects involve evolutionary improvements to current products and services.

Oyster Projects

involve technological breakthroughs with tremendous commercial potential.

White elephant Projects

showed promise at one time but are no longer viable.

Pearl Projects

represent revolutionary commercial advances using proven technology.

Defining the Project Stages

1. Defining project scope
2. establishing project priorities
3. creating the work breakdown structure
4. integrating the WBS with the organization
5. coding the WBS for information system

Project Scope

Is a definition of the **end result** or mission of your project—a product or service for your client/customer; Defines the results to be achieved in **specific**, **tangible**, and **measurable** terms.

Establishing Project Priorities

* **Project management trade-offs**
* Three major criteria (trade-offs) that a project manager has to manage are:
* **Cost** (budget)
* **Time** (schedule)
* **Performance** (scope)

Project Priority Matrix

* A project manager can manage the project trade-offs by completing a priority matrix for the project and identifying which criterion is:
* **Constrain**—original parameter is fixed.
* **Enhance**—a criterion should be optimized.
* **Accept**—a criterion is tolerable not to meet the original parameter.

Work Breakdown Structure (WBS)

* Is a hierarchical **outline** of the project with different levels of **detail**.
* Identifies the products and work elements involved in a project.
* Defines the **relationship** of the final deliverable (the project) to its sub-deliverables, and, in turn, their relationships to work packages.
* Serves as a framework for **tracking** cost and work performance.
* Is best suited for design and build projects that have tangible outcomes rather than process-oriented projects.

Work Package

Lowest level of the WBS:

* Defines **work** (what).
* Identifies **time** to complete a work package (how long).
* Identifies a time-phased **budget** to complete a work package (cost).
* Identifies **resources** needed to complete a work package (how much).
* Identifies a **single person** responsible for units of work (who).
* Identifies **monitoring points** for measuring progress (how well).

Organization Breakdown Structure (OBS)

* Depicts how the firm has organized to discharge work responsibility.
* Provides a framework to summarize organization unit work performance.
* Identifies the organization units responsible for work packages.
* Ties the organizational unit to cost control accounts.

WBS Coding System

Defines:

* Levels and elements in the WBS
* Organization elements
* Work packages
* Budget and cost information
* Allows reports to be consolidated at any level in the structure

Process Breakdown Structure (PBS)

* Is used for **process-oriented** projects.
* Is often referred to as the “waterfall method” in the software industry.

Process-oriented Project

* Is a project that the final outcome is a product of a series of steps and phases.
* Is a project that evolves over time with each phase affecting the next phase.
* Is a project that is driven by performance requirements, not by plans/blueprints.

Responsibility Matrix

* Is also called a linear responsibility chart.
* Summarizes the tasks to be accomplished and who is responsible for what on the project.
* Lists all the project activities and the participants responsible for each activity.
* Clarifies interfaces between units and individuals that require coordination.
* Provides a mean for all participants in a project to view their responsibilities and agree on their assignments.
* Clarifies the extent or type of authority exercised by each participant.

Project Communication Plan

Answers the “Who, What, When, Where, Why, How” of the project

Stakeholder Communications

Steps for Developing a Communication Plan

1. **Stakeholder** **analysis**—identify the target groups.
2. **Information** **needs**—project status reports, deliverable issues, changes in scope, team status meetings, gating decisions, accepted request changes, action items, milestone reports, etc.
3. **Sources of information**—where does the information reside?
4. **Dissemination modes**—hardcopy, e-mail, teleconferencing, SharePoint, and a variety of database sharing programs.
5. **Responsibility and timing**—determine who will send out the information and when.

Project Network

* Provides the basis for **scheduling** labor and equipment.
* Enhances **communication** among project stakeholders.
* Provides an estimate of **project duration**.
* Provides the basis for **budgeting** the cash flow.
* Identifies which activities are “**critical**” and should not be delayed.
* Highlights which activities to consider for **compressing** the project duration.
* Helps managers get and stay on the **project plan**.

Project Network Critical Path

The path with the longest duration through the network:

* The longest path through the activity network that allows for the completion of all project-related activities
* The shortest expected time in which the entire project can be completed.
* Delays on the critical path will delay completion of the entire project.

Project Network Early Start (ES)

Indicates how soon the activity can start; calculated by adding the Durations together

Project Network Early Finish (EF)

Indicates how early the activity can finish; calculated by adding the Early Start and Duration together

Project Network Late Finish (LF)

Indicates how late the activity can finish; the late finish on the last activity is the same as its early finish

Project Network Late Start (LS)

Indicates how late the activity can start; calculated by subtracting the Duration from the Late Finish

Project Network Slack

Tells the amount of time an activity can be delayed and not delayed the project; Calculated by either doing LS-ES or LF-EF

Network Sensitivity

The **likelihood the original critical path(s) will change** once the project is initiated; A network schedule that has only one critical path and noncritical activities that enjoy significant slack would be labeled ‘insensitive’.

Finish-to-Finish Relationship

Type of relationship where two or more activities can only be considered completed when both are completed.

Finish-to-Start Relationship

Type of relationship where one activity—the predecessor—must be fully complete before any following—successor—activities may begin.

Combination Relationship

Type of Relationship where multiple types of relationships are used at the same time, i.e. start-to-start and finish-to-finish.

Project Schedule Management

Types of Project Resources

* People
* Materials
* Equipment
* Facilities
* Time
* Money

Types of Project Constraints

* Technical
* Logical
* Resource
* Skills
* Time

Resource Smoothing (Resource Loading)

Attempts to even out varying demands on resources by delaying non-critical activities (using slack).

__Objectives:__

* To **lower peak resource demand** and, thus, increase resource utilization when resources are adequate over the life of the project
* To determine the resource requirements so that they will be available **at the right time**
* To allow each activity to be scheduled with the **smoothest possible transition** across resource usage levels

Resource Constrained Scheduling

Occurs when resources are not adequate to meet peak demands. 

__Consequences:__

* The late start of some activities must be delayed, and the duration of the project may be increased.

Splitting Tasks Technique

* Is a scheduling technique used to get a better project schedule and/or to increase resource utilization.
* Involves interrupting the work and sending the resource to another activity for a period of time and then having the resource resume work on the original activity.
* Can be useful if the work involved does not include large start-up or shut-down costs.
* Is considered a major reason why projects fail to meet schedule.

Common Sources of Project Cost

* Labor
* Materials
* Equipment and facilities
* Subcontractors


* Travel

Top-Down Estimates

* Are usually derived from someone who uses **experience and/or information** to determine the project duration and total cost.
* Are sometimes made by **top managers** who have very little knowledge of the component activities used to complete the project.

Bottom-Up Estimates

* Can take place after the project has been defined in detail.
* Comes from the **people** **most knowledgeable** about the estimate.
* Can serve as a **check on cost elements** in the WBS by rolling up the work packages and associated cost accounts to major deliverables.

Conditions for Top-Down Estimates

* Strategic Decision Making
* High Uncertainty
* Internal, small project
* Unstable Scope

Conditions for Bottom-Up Estimates

* Cost and Time Important
* Fixed-price Contract
* Customer wants details

Methods for Estimating Top-Down Time and Costs

* Consensus Method
* Ratio Method
* Apportion Method
* Function Point Methods for Software and System Projects
* Learning Curves

Methods for Estimating Bottom-Up Time and Costs

* Template Method
* Parametric Procedures Applied to Specific Tasks
* Range Estimating

Consensus Method

(Top-Down) Uses **pooled experience of senior and/or middle managers** to estimate the total project duration and cost; Typically used during the conceptual stage of the project

Ratio Method

(Top-Down) Uses ratios to estimate project times or costs; Used in the conceptual phase to get an **initial duration and cost estimate**

Apportion Method

(Top-Down) Used when projects **closely follow past projects** in features and costs; Common in projects that are **relatively standard** but have some small variation or customization

Function Point Method

(Top-Down) Used for software and system projects; Assumes adequate historical data by type of software using function points

Function Point

Major parameters such as number of inputs, number of outputs, number of inquiries, number of data files, and number of interfaces

Learning Curves

Each time the output quantity doubles, the unit labor hours are reduced at a constant rate

Template Method

(Bottom-Up) Used when projects are similar to past projects; Differences in the new project can be noted and past times and costs adjusted to reflect these differences; Ready in a very short time span

Parametric Procedures Applied to Specific Tasks

(Bottom-Up) Parametric techniques are applied to **specific tasks**

Range Estimating

(Bottom-Up) Works best when work packages have **significant uncertainty** associated with the time or cost to complete; **Group estimation** to determine the low, average, and high cost or duration

Phase Estimating

Hybrid Approach:

* Begins with a top-down estimate for the project and then refines estimates for phases of the project as it is implemented.
* A **detailed estimate** is developed for the immediate phase and a **macro estimate** is made for the remaining phases of the project.
* Used for projects where the final product is **not known**, and the **uncertainty** is very large

Factors Influencing the Quality of Estimates

* Planning Horizon
* Project Complexity
* People
* Project Structure and Organization
* Padding Estimates
* Organizational Culture
* Other Factors

Estimating Guidelines for Time, Costs and Resources

* Responsibility
* The use of several people to estimate
* Normal Conditions
* Time Units
* Independence
* Contingencies
* Risk assessment added to avoid surprises to stakeholders

Level of Detail for WBS

Varies with:

* The complexity of the project
* The need for control
* The project size, cost, and duration
* Other factors

Types of Costs

Direct Costs

Project Overhead Costs

General and Administrative (G&A) Overhead Costs

Direct Costs

Are clearly chargeable to a specific work package, ex.  Labor, materials, equipment, etc.

Project Overhead Costs

Identifies which organization resources are being used in the project; Can be tied to project deliverables or work packages, Ex:  Salary of the project manager, temporary rental space for the project team, supplies, specialized machinery

General and Administrative (G&A) Overhead Costs

Are not directly linked to a specific project; Usually allocate as a percentage of the total direct costs, Ex:  Advertising, accounting, salary of senior management above the project level

Project Price Breakdown

Other Types of Costs

* **Recurring costs**, such as __labor and materials__, are repeatedly incurred throughout the project life cycle.
* **Nonrecurring costs**, on the other hand, are one-time costs that are typically incurred at the beginning or at the end of the project, such as __market research and labor training.__
* **Fixed costs** do not vary with usage. For example, costs incurred in the __purchase of capital equipment__ remain fixed, regardless of the extent of equipment use.
* **Variable costs** vary directly with usage. They are typically associated with __labor and materials__.
* **Normal costs** are incurred when project tasks are completed according to the original planned duration.
* **Expedited costs** or **crash costs** are unplanned costs incurred as a result of steps taken to accelerate project completion.

Reasons for Adjusting Estimates

* Interaction costs are hidden in estimates.
* Normal conditions do not apply.
* Things go wrong on projects.
* Project scope and plans change.
* People are overly optimistic.
* People engage in strategic misrepresentation.

Risk

An **uncertain event** or condition that if it occurs, has a positive or negative effect on project objectives, such as scope, schedule, or cost

Risk Management

The art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of its objectives.

Risk Management Process

Risk Event Graph

Benefits of Risk Management

* A **proactive** rather than reactive approach
* **Reduces surprises** and negative consequences
* Prepares the project manager to take **appropriate action**
* Provides **better control** over the future
* Improves chances of **reaching project objectives** on time, within budget, and of meeting required performance.

Risk Identification

Risk Breakdown Structure (RBS)

Used in conjunction with work breakdown structure that helps to identify the risks and analyze them.

Scenario Analysis

Risk Assessment; assesses the significance of each risk event in terms of **probability** and **impact**.

Risk Assessment Form

Risk Assessment; evaluates the severity, probability of risk events and its detection difficulty.

Risk Severity Matrix

Prioritizes which risks to address; **Failure Mode and Effects Analysis (FMEA)** extends the risk severity matrix by including ease of detection in the equation:

Risk Value = Impact x Probability x Detection

Risk Response Development

* Mitigating Risk: Reducing Likelihood and Impact
* Avoiding Risk: Changing project plan
* Transferring Risk: Passing risk to another party
* Escalating Risk: Notifying appropriate people
* Retaining Risk: Making conscious decision to accept risk

Contingency Plan

An alternative plan that will be used if a possible foreseen risk event becomes a reality; A plan of action that will reduce or mitigate the negative impact of the risk event.

Risk Response Matrix