Download Chapter 6

Chapter 6:
Project Management and
the Transformation System
Copyright 2013 John Wiley & Sons, Inc.
Overview
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Décor Cabinets
• Décor Cabinets adopted a goal of 100 percent
on time delivery
– Long-term customer loyalty
– Enhance profitability
• Having clear objective helped them assemble a
project portfolio focused on that goal
• Meant declining some seemingly profitable
project ideas
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“Big Dig”
•
•
•
Boston’s “Big Dig” highway/tunnel project is
one of the largest, most complex, and
technologically challenging highway projects
Original cost estimate was $3 billion
Final cost was over $14 billion
1. Major underestimate of initial scope
2. Lack of cost control
•
•
Estimated benefit is $500 million per year
Expected to have a 78 year payback
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Mississippi Power and Hurricane
Katrina
• Primary and secondary storm center knocked
out
• Third location had no electricity or running
water
• Within days, had 11,000 repairmen
• Needed housing, beds, food, water, 5,000
trucks, 140,000 gallons of fuel a day, 8,000
tetanus shots and much more
• Directing was a massive project
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Introduction
• Project management concerned with
managing organizational activities
• Often used to integrate and coordinate
diverse activities
• Projects are special types of processes
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Defining a Project
• Projects are a special type of process
• Projects are a set of activities that, taken
together, produce a valued output
• Each project is unique with a clear beginning
and end
• They are performed infrequently and ad hoc,
with a clear specification of the desired
objective
• Limited budget
• Extremely important to the organization
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Examples of Projects
• Constructing highways, bridges, tunnels and
dams
• Building ships, planes, rockets, or a doghouse
• Erecting skyscrapers, steel mills, and homes
• Locating and laying out amusement parks,
camping grounds, and refuges
• Organizing conferences and conventions
• Managing R&D projects
• Running political campaigns, war operations,
and advertising campaigns
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Reasons for Growth in
Project Operations
1.
2.
3.
4.
5.
6.
7.
More Sophisticated Technology
Better-Educated Citizens
More Leisure Time
Increased Accountability
Higher Productivity
Faster Response to Customers
Greater customization for customers
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Planning the Project
• Planning is probably the single most
important element in the success of the
project
• Will discuss:
– Project portfolio
– Project team
– Actual project planning tools
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The Project Portfolio
• Long-term purpose of projects is to
achieve the organization’s goals
• Accomplished through the project
portfolio
– Also know as the aggregate project plan
• It is vital to consider the interactions
among various projects
• Must manage projects as a set
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Four Categories of Project
1. Derivative projects
–
Seek to make incremental improvements in the
output and/or process
2. Breakthrough projects
– Seek the development of a new generation of
outputs
3. Platform projects
–
Fall between derivative and breakthrough projects
4. R&D projects
–
Entail working with basic technology to develop
new knowledge
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The Aggregate Project Plan
Figure 6.1
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An Example of Aggregate
Project Plan
Figure 6.2
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The Project Life Cycle
• Project progress is rarely uniform
• Tend to be either stretched or
exponential
• With stretched, the project starts slow
but gathers speed during implementation
• With exponential, there is continuous
activity but no output until everything
comes together
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Two Project Life Cycles (a)
Stretched-S and (b) Exponential
Figure 6.3
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Projects in the Organizational
Structure
• In a functional organization, projects are
frequently housed in the department with a
major interest in its success
– More generic projects might report to a vice
president
• Some organizations are structured by projects
– Called projectized organizations
• Some firms use a matrix structure to get the
benefits of both structures
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Organizing the Project Team
• A team is required to run a project
• Some team members report directly to the
project manager
– Those having long-term relationship with project
– Those needing to communicate closely with project
manager
– Those with necessary skills
• Not common for project manager to have
reward authority
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Four Major Attributes for Project
Managers
1. Credibility
2. Sensitivity
–
To both politics and personalities
3. Leadership, ethics, and managerial
style
4. Ability to handle stress
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Project Plans
• Initiation of a project should include the
development of a project charter
– Also known as the project plan
• Elements form the basis for more detailed
planning
–
–
–
–
Budgets
Schedules
Work plan
General management
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Elements of Project Charter
• Overview
– A short summary of what the client expects from
the project
• Goals, or scope
– Contains a more detailed statement of the general
goals
• Business case
– Describes the justification for the project
• General approach
– Describes both the managerial and the technical
approaches
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Elements of Project Charter (Continued)
• Contractual Aspects
– Includes a complete list and description of all
reporting requirements, customer-supplied
resources, liaison arrangements, and so on
• Schedule and milestones
– This outlines the schedule and lists milestone
events
• Resources
– The project budget and cost
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Elements of Project Charter (Continued)
• Personnel
– The project team, approvers, and other involved
departments
• Risk management plan
– This covers potential problems that could affect the
project
• Evaluation method
– Every project should be evaluated against standards
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Three Project Objectives
Figure 6.4
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Work Breakdown Structure
Figure 6.5
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Project Baseline Schedule
Figure 6.6
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Complexity of Scheduling
Project Activities
1. Large number of activities
2. Precedence relationships
3. Limited time of the project
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Tasks Involved in Planning and
Scheduling Projects
• Planning
– Determining what must be done and which tasks
must precede others
• Scheduling
– Determining when the tasks must be completed
– When they can and when they must be started
– Which tasks are critical to the timely completion of
the project
– Which tasks have slack and how much
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Scheduling the Project
• Schedule based on activities that must be
conducted to achieve the project goals
• The Length of time each activity
requires
• Order in which they must be completed
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Terminology
• Activity
– One of the project operations
• Event
– Completion of an activity
• Network
– Set of all project activities shown
graphically
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Terminology (Continued)
• Path
– A series of connected activities from start to
end
• Critical path
– Any path that delayed will delay project
• Critical activities
– The activities on the critical path
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Project Scheduling with Certain
Activity Times
• Inputs
– List of the activities that must be completed
– Activity completion times
– Activity precedence relationships
• Outputs
–
–
–
–
–
Graphical representation of entire project
Time to complete
Critical path or paths with critical activities
Slack time
Early and late start/end times
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Data for a Mortgage Refinancing
Project
Figure 6.1
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Network Diagram for Process
Improvement Project
Figure 6.8
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Activity Slack Time
TES = earliest start time for activity
TLS = latest start time for activity
TEF = earliest finish time for activity
TLF = latest finish time for activity
Activity Slack = TLS - TES = TLF - TEF
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Project Scheduling with Uncertain
Activity Times
• Inputs
– Optimistic (to), most likely (tm), and pessimistic (tp)
time estimate for each activity
– Activity precedence relationships
• Outputs
–
–
–
–
Graphical representation of project
Expected activity and path completion times
Variance of activity and path completion times
Probability project completed by specified time
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Expected Activity Time and
Variance of Activity Time
te 
t o  4t m  t p
6
 t p  to 
 

 6 
2
2
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Six Sigma Activity Times
Table 6.2
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Probability of Project Being
Completed on or Before Time 23
Figure 6.9
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Simulating Project Completion
Times
Figure 6.10
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Spreadsheet for Simulating
The Network
Figure 6.11
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Simulation Results
Figure 6.12
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Project Management Software
Capabilities
• A wide range of software packages are
available
• Selection depends on project needs and
cost
• Bigger projects need more powerful
software
• More powerful software takes longer to
learn
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Microsoft Project’s Gantt Chart
Figure 6.13
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PERT Chart Generated by
Microsoft Project
Figure 6.14
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Calendar of Activities Created
by Microsoft Project
Figure 6.15
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Goldratt’s Critical Chain
•
•
In Critical Chain, Eliyahu Goldratt applies
his theory of constraints to project
management
He focuses on three phenomena that bias
completion times:
1.
2.
3.
Inflated activity time estimates
Activity time variability with path
interdependencies
Resource dependence
Slide on each of these
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Inflated Activity Time Estimates
•
•
Workers inflate time estimates
Inflated time estimates tend to create
even more problems
1. Inflating the time estimate has no impact
on the actual probability distribution
2. Workers remain silent when finish early
3. Work tends to fill available time
4. Workers may delay start of activity
6-48
Activity Time Variability with
Path Interdependencies
• With random shocks and series
activities, early completions offset late
completions
• With random shocks and parallel
activities, early completions cannot
offset late completions
• Most projects a combination of these
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Resource Dependence
• Some activities need the same scarce
resource
• If this happens, then one activity must
wait
• As a result, resource dependency can
seriously delay a project
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Goldratt’s Approach
• The amount of safety time needed for the
critical path is less than the sum of the
individual safety times
– Same idea as with inventory
• Goldratt suggests reducing activity safety time
and using some fraction as a project buffer
• Treats longest chain of consecutively
dependent tasks as the critical chain
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Project and Feeder Buffers
Figure 6.16
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Controlling the Project: Earned
Value
• One common control system for projects
is the cost variance report
• Cost standards are determined through
engineering estimates
– They become the target cost
• Actual costs are then monitored
• Feedback is provided to the project
manager
6-53
Cost-Schedule Reconciliation
Charts
Figure 6.17
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Earned Value Chart
Figure 6.18
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