case study “McRoy Aerospace”
Contents
Preface
Chapter 1: Overview
1.0 Introduction
1.1 Understanding Project Management
1.2 Defining Project Success
1.3 Success, Trade-Offs, and Competing Constraints
1.4 The Project Manager–Line Manager Interface
1.5 Defining the Project Manager’s Role
1.6 Defining the Functional Manager’s Role
1.7 Defining the Functional Employee’s Role
1.8 Defining the Executive’s Role
1.9 Working with Executives
1.10 Committee Sponsorship/Governance
1.11 The Project Manager as the Planning Agent
1.12 Project Champions
1.13 The Downside of Project Management
1.14 Project-Driven versus Non–Project-Driven Organizations
1.15 Marketing in the Project-Driven Organization
1.16 Classification of Projects
1.17 Location of the Project Manager
1.18 Differing Views of Project Management
1.19 Public-Sector Project Management
1.20 International Project Management
1.21 Concurrent Engineering: A Project Management Approach
1.22 Added Value
1.23 Studying Tips for the PMI® Project Management Certification Exam
2
Answers
Problems
Chapter 2: Project Management Growth: Concepts and Definitions
2.0 Introduction
2.1 General Systems Management
2.2 Project Management: 1945–1960
2.3 Project Management: 1960–1985
2.4 Project Management: 1985–2012
2.5 Resistance to Change
2.6 Systems, Programs, and Projects: A Definition
2.7 Product versus Project Management: A Definition
2.8 Maturity and Excellence: A Definition
2.9 Informal Project Management: A Definition
2.10 The Many Faces of Success
2.11 The Many Faces of Failure
2.12 The Stage-Gate Process
2.13 Project Life Cycles
2.14 Gate Review Meetings (Project Closure)
2.15 Engagement Project Management
2.16 Project Management Methodologies: A Definition
2.17 Enterprise Project Management Methodologies
2.18 Methodologies Can Fail
2.19 Organizational Change Management and Corporate Cultures
2.20 Project Management Intellectual Property
2.21 Systems Thinking
2.22 Studying Tips for the PMI® Project Management Certification Exam
Answers
3
Problems
Chapter 3: Organizational Structures
3.0 Introduction
3.1 Organizational Work Flow
3.2 Traditional (Classical) Organization
3.3 Developing Work Integration Positions
3.4 Line-Staff Organization (Project Coordinator)
3.5 Pure Product (Projectized) Organization
3.6 Matrix Organizational Form
3.7 Modification of Matrix Structures
3.8 The Strong, Weak, or Balanced Matrix
3.9 Center for Project Management Expertise
3.10 Matrix Layering
3.11 Selecting the Organizational Form
3.12 Structuring the Small Company
3.13 Strategic Business Unit (SBU) Project Management
3.14 Transitional Management
3.15 Barriers to Implementing Project Management in Emerging Markets
3.16 Seven Fallacies that Delay Project Management Maturity
3.17 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 4: Organizing and Staffing The Project Office and Team
4.0 Introduction
4.1 The Staffing Environment
4.2 Selecting the Project Manager: An Executive Decision
4.3 Skill Requirements for Project and Program Managers
4
4.4 Special Cases in Project Manager Selection
4.5 Selecting the Wrong Project Manager
4.6 Next Generation Project Managers
4.7 Duties and Job Descriptions
4.8 The Organizational Staffing Process
4.9 The Project Office
4.10 The Functional Team
4.11 The Project Organizational Chart
4.12 Special Problems
4.13 Selecting the Project Management Implementation Team
4.14 Mistakes Made by Inexperienced Project Managers
4.15 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 5: Management Functions
5.0 Introduction
5.1 Controlling
5.2 Directing
5.3 Project Authority
5.4 Interpersonal Influences
5.5 Barriers to Project Team Development
5.6 Suggestions for Handling the Newly Formed Team
5.7 Team Building as an Ongoing Process
5.8 Dysfunctions of a Team
5.9 Leadership in a Project Environment
5.10 Life-Cycle Leadership
5.11 Value-Based Project Leadership
5
5.12 Organizational Impact
5.13 Employee–Manager Problems
5.14 Management Pitfalls
5.15 Communications
5.16 Project Review Meetings
5.17 Project Management Bottlenecks
5.18 Cross-Cutting Skills
5.19 Active Listening
5.20 Project Problem-Solving
5.21 Brainstorming
5.22 Project Decision-Making
5.23 Predicting the Outcome of a Decision
5.24 Facilitation
5.25 Handling Negative Team Dynamics
5.26 Communication Traps
5.27 Proverbs and Laws
5.28 Human Behavior Education
5.29 Management Policies and Procedures
5.30 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 6: Management Of your time and Stress
6.0 Introduction
6.1 Understanding Time Management
6.2 Time Robbers
6.3 Time Management Forms
6.4 Effective Time Management
6
6.5 Stress and Burnout
6.6 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 7: Conflicts
7.0 Introduction
7.1 Objectives
7.2 The Conflict Environment
7.3 Types of Conflicts
7.4 Conflict Resolution
7.5 Understanding Superior, Subordinate, and Functional Conflicts
7.6 The Management of Conflicts
7.7 Conflict Resolution Modes
7.8 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 8: Special Topics
8.0 Introduction
8.1 Performance Measurement
8.2 Financial Compensation and Rewards
8.3 Critical Issues with Rewarding Project Teams
8.4 Effective Project Management in the Small Business Organization
8.5 Mega Projects
8.6 Morality, Ethics, and the Corporate Culture
8.7 Professional Responsibilities
8.8 Internal Partnerships
8.9 External Partnerships
7
8.10 Training and Education
8.11 Integrated Product/Project Teams
8.12 Virtual Project Teams
8.13 Breakthrough Projects
8.14 Managing Innovation Projects
8.15 Agile Project Management
8.16 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 9: The Variables for Success
9.0 Introduction
9.1 Predicting Project Success
9.2 Project Management Effectiveness
9.3 Expectations
9.4 Lessons Learned
9.5 Understanding Best Practices
9.6 Best Practices versus Proven Practices
9.7 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 10: Working with Executives
10.0 Introduction
10.1 The Project Sponsor
10.2 Handling Disagreements with the Sponsor
10.3 The Collective Belief
10.4 The Exit Champion
10.5 The In-House Representatives
8
10.6 Stakeholder Relations Management
10.7 Politics
10.8 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 11: Planning
11.0 Introduction
11.1 Validating the Assumptions
11.2 Validating the Objectives
11.3 General Planning
11.4 Life-Cycle Phases
11.5 Proposal Preparation
11.6 Kickoff Meetings
11.7 Understanding Participants’ Roles
11.8 Project Planning
11.9 The Statement of Work
11.10 Project Specifications
11.11 Milestone Schedules
11.12 Work Breakdown Structure
11.13 WBS Decomposition Problems
11.14 Work Breakdown Structure Dictionary
11.15 Role of the Executive in Project Selection
11.16 Role of the Executive in Planning
11.17 The Planning Cycle
11.18 Work Planning Authorization
11.19 Why Do Plans Fail?
11.20 Stopping Projects
9
11.21 Handling Project Phaseouts and Transfers
11.22 Detailed Schedules and Charts
11.23 Master Production Scheduling
11.24 Project Plan
11.25 Total Project Planning
11.26 The Project Charter
11.27 Project Baselines
11.28 Verification and Validation
11.29 Requirements Traceability Matrix
11.30 Management Control
11.31 The Project Manager–Line Manager Interface
11.32 Fast-Tracking
11.33 Configuration Management
11.34 Enterprise Project Management Methodologies
11.35 Project Audits
11.36 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 12: Network Scheduling Techniques
12.0 Introduction
12.1 Network Fundamentals
12.2 Graphical Evaluation and Review Technique (GERT)
12.3 Dependencies
12.4 Slack Time
12.5 Network Replanning
12.6 Estimating Activity Time
12.7 Estimating Total Project Time
10
12.8 Total PERT/CPM Planning
12.9 Crash Times
12.10 PERT/CPM Problem Areas
12.11 Alternative PERT/CPM Models
12.12 Precedence Networks
12.13 Lag
12.14 Scheduling Problems
12.15 The Myths of Schedule Compression
12.16 Understanding Project Management Software
12.17 Software Features Offered
12.18 Software Classification
12.19 Implementation Problems
12.20 Critical Chain
12.21 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 13: Project Graphics
13.0 Introduction
13.1 Customer Reporting
13.2 Bar (Gantt) Chart
13.3 Other Conventional Presentation Techniques
13.4 Logic Diagrams/Networks
13.5 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 14: Pricing and Estimating
14.0 Introduction
11
14.1 Global Pricing Strategies
14.2 Types of Estimates
14.3 Pricing Process
14.4 Organizational Input Requirements
14.5 Labor Distributions
14.6 Overhead Rates
14.7 Materials/Support Costs
14.8 Pricing Out the Work
14.9 Smoothing Out Department Man-Hours
14.10 The Pricing Review Procedure
14.11 Systems Pricing
14.12 Developing the Supporting/Backup Costs
14.13 The Low-Bidder Dilemma
14.14 Special Problems
14.15 Estimating Pitfalls
14.16 Estimating High-Risk Projects
14.17 Project Risks
14.18 The Disaster of Applying the 10 Percent Solution to Project Estimates
14.19 Life-Cycle Costing (LCC)
14.20 Logistics Support
14.21 Economic Project Selection Criteria: Capital Budgeting
14.22 Payback Period
14.23 The Time Value of Money
14.24 Net Present Value (NPV)
14.25 Internal Rate of Return (IRR)
14.26 Comparing IRR, NPV, and Payback
14.27 Risk Analysis
12
14.28 Capital Rationing
14.29 Project Financing
14.30 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 15: Cost Control
15.0 Introduction
15.1 Understanding Control
15.2 The Operating Cycle
15.3 Cost Account Codes
15.4 Budgets
15.5 The Earned Value Measurement System (EVMS)
15.6 Variance and Earned Value
15.7 The Cost Baseline
15.8 Justifying the Costs
15.9 The Cost Overrun Dilemma
15.10 Recording Material Costs Using Earned Value Measurement
15.11 The Material Accounting Criterion
15.12 Material Variances: Price and Usage
15.13 Summary Variances
15.14 Status Reporting
15.15 Cost Control Problems
15.16 Project Management Information Systems
15.17 Enterprise Resource Planning
15.18 Project Metrics
15.19 Key Performance Indicators
15.20 Value-Based Metrics
13
15.21 Dashboards and Scorecards
15.22 Business Intelligence
15.23 Infographics
15.24 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 16: Trade-Off Analysis in a Project Environment
16.0 Introduction
16.1 Methodology for Trade-Off Analysis
16.2 Contracts: Their Influence on Projects
16.3 Industry Trade-Off Preferences
16.4 Conclusion
16.5 Studying Tips for the PMI® Project Management Certification Exam
Answers
Chapter 17: Risk Management
17.0 Introduction
17.1 Definition of Risk
17.2 Tolerance for Risk
17.3 Definition of Risk Management
17.4 Certainty, Risk, and Uncertainty
17.5 Risk Management Process
17.6 Plan Risk Management (11.1)
17.7 Risk Identification (11.2)
17.8 Risk Analysis (11.3, 11.4)
17.9 Qualitative Risk Analysis (11.3)
17.10 Quantitative Risk Analysis (11.4)
17.11 Probability Distributions and the Monte Carlo Process
14
17.12 Plan Risk Response (11.5)
17.13 Monitor and Control Risks (11.6)
17.14 Some Implementation Considerations
17.15 The Use of Lessons Learned
17.16 Dependencies Between Risks
17.17 The Impact of Risk Handling Measures
17.18 Risk and Concurrent Engineering
17.19 Studying Tips for the PMI® Project Management Certification Exam
Answers
Problems
Chapter 18: Learning Curves
18.0 Introduction
18.1 General Theory
18.2 The Learning Curve Concept
18.3 Graphic Representation
18.4 Key Words Associated with Learning Curves
18.5 The Cumulative Average Curve
18.6 Sources of Experience
18.7 Developing Slope Measures
18.8 Unit Costs and Use of Midpoints
18.9 Selection of Learning Curves
18.10 Follow-On Orders
18.11 Manufacturing Breaks
18.12 Learning Curve Limitations
18.13 Prices and Experience
18.14 Competitive Weapon
18.15 Studying Tips for the PMI® Project Management Certification Exam
15
Answers
Problems
Chapter 19: Contract Management
19.0 Introduction
19.1 Procurement
19.2 Plan Procurements
19.3 Conducting the Procurements
19.4 Conduct Procurements: Request Seller Responses
19.5 Conduct Procurements: Select Sellers
19.6 Types of Contracts
19.7 Incentive Contracts
19.8 Contract Type versus Risk
19.9 Contract Administration
19.10 Contract Closure
19.11 Using a Checklist
19.12 Proposal-Contractual Interaction
19.13 Summary
19.14 Studying Tips for the PMI® Project Management Certification Exam
Answers
Chapter 20: Quality Management
20.0 Introduction
20.1 Definition of Quality
20.2 The Quality Movement
20.3 Comparison of the Quality Pioneers
20.4 The Taguchi Approach
20.5 The Malcolm Baldrige National Quality Award
20.6 ISO 9000
16
20.7 Quality Management Concepts
20.8 The Cost of Quality
20.9 The Seven Quality Control Tools
20.10 Process Capability (CP)
20.11 Acceptance Sampling
20.12 Implementing Six Sigma
20.13 Lean Six Sigma and DMAIC
20.14 Quality Leadership
20.15 Responsibility for Quality
20.16 Quality Circles
20.17 Just-In-Time Manufacturing (JIT)
20.18 Total Quality Management (TQM)
20.19 Studying Tips for the PMI® Project Management Certification Exam
Answers
Chapter 21: Modern Developments in Project Management
21.0 Introduction
21.1 The Project Management Maturity Model (PMMM)
21.2 Developing Effective Procedural Documentation
21.3 Project Management Methodologies
21.4 Continuous Improvement
21.5 Capacity Planning
21.6 Competency Models
21.7 Managing Multiple Projects
21.8 End-of-Phase Review Meetings
Chapter 22: The Business of Scope Changes
22.0 Introduction
22.1 Need for Business Knowledge
17
22.2 Timing of Scope Changes
22.3 Business Need for a Scope Change
22.4 Rationale for Not Approving a Scope Change
Chapter 23: The Project Office
23.0 Introduction
23.1 Present-Day Project Office
23.2 Implementation Risks
23.3 Types of Project Offices
23.4 Networking Project Management Offices
23.5 Project Management Information Systems
23.6 Dissemination of Information
23.7 Mentoring
23.8 Development of Standards and Templates
23.9 Project Management Benchmarking
23.10 Business Case Development
23.11 Customized Training (Related to Project Management)
23.12 Managing Stakeholder Relations
23.13 Continuous Improvement
23.14 Capacity Planning
23.15 Risks of Using a Project Office
23.16 Project Portfolio Management
Chapter 24: Managing Crisis Projects
24.0 Introduction
24.1 Understanding Crisis Management
24.2 Ford versus Firestone
24.3 The Air France Concorde Crash
24.4 Intel and the Pentium Chip
18
24.5 The Russian Submarine Kursk
24.6 The Tylenol Poisonings
24.7 Nestlé’s Marketing of Infant Formula
24.8 The Space Shuttle Challenger Disaster
24.9 The Space Shuttle Columbia Disaster
24.10 Victims Versus Villains
24.11 Life-Cycle Phases
24.12 Project Management Implications
Chapter 25: Future of Project Management
25.0 Changing Times
25.1 Complex Projects
25.2 Complexity Theory
25.3 Scope Creep
25.4 Project Health Checks
25.5 Managing Troubled Projects
Chapter 26: The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective
26.0 Introduction
26.1 Naming the Project “Iridium”
26.2 Obtaining Executive Support
26.3 Launching the Venture
26.4 The Iridium System
26.5 The Terrestrial and Space-Based Network
26.6 Project Initiation: Developing the Business Case
26.7 The “Hidden” Business Case
26.8 Risk Management
26.9 The Collective Belief
26.10 The Exit Champion
19
26.11 Iridium’s Infancy Years
26.12 Debt Financing
26.13 The M-Star Project
26.14 A New CEO
26.15 Satellite Launches
26.16 An Initial Public Offering (IPO)
26.17 Signing Up Customers
26.18 Iridium’s Rapid Ascent
26.19 Iridium’s Rapid Descent
26.20 The Iridium “Flu”
26.21 Searching for a White Knight
26.22 The Definition of Failure (October, 1999)
26.23 The Satellite Deorbiting Plan
26.24 Iridium is Rescued for $25 Million
26.25 Iridium Begins to Grow
26.26 Shareholder Lawsuits
26.27 The Bankruptcy Court Ruling
26.28 Autopsy
26.29 Financial Impact of the Bankruptcy
26.30 What Really Went Wrong?
26.31 Lessons Learned
26.32 Conclusion
Epilogue (2011)
Appendix A. Solutions to the Project Management Conflict Exercise
Appendix B. Solution to Leadership Exercise
Appendix C. Dorale Products Case Studies
Appendix D. Solutions to the Dorale Products Case Studies
20
Appendix E. Alignment of the PMBOK® Guide to the Text
Author Index
Subject Index
21
Dr. Kerzner’s 16 Points to Project Management Maturity
1. Adopt a project management methodology and use it consistently.
2. Implement a philosophy that drives the company toward project management maturity and communicate it to everyone.
3. Commit to developing effective plans at the beginning of each project.
4. Minimize scope changes by committing to realistic objectives.
5. Recognize that cost and schedule management are inseparable.
6. Select the right person as the project manager.
7. Provide executives with project sponsor information, not project management information.
8. Strengthen involvement and support of line management.
9. Focus on deliverables rather than resources.
10. Cultivate effective communication, cooperation, and trust to achieve rapid project management maturity.
11. Share recognition for project success with the entire project team and line management.
12. Eliminate nonproductive meetings.
13. Focus on identifying and solving problems early, quickly, and cost effectively.
14. Measure progress periodically.
15. Use project management software as a tool—not as a substitute for effective planning or interpersonal skills.
16. Institute an all-employee training program with periodic updates based upon documented lessons learned.
22
23
Cover illustration: xiaoke ma/iStockphoto Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved Published by John Wiley & Sons, Inc., Hoboken,
New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization
through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600,
or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online
at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or
warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness
for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained
herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable
for damages arising herefrom.
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the
United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on- demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley
products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data: Kerzner, Harold.
Project management : a systems approach to planning, scheduling, and controlling / Harold Kerzner, Ph. D. Senior Executive Director for Project Management, the International Institute for Learning, New York, New York. — Eleventh edition.
pages cm
Includes bibliographical references and index.
24
ISBN 978-1-118-02227-6 (cloth); ISBN 978-1-118-41585-6 (ebk); ISBN 978-1- 118-41855-0 (ebk); ISBN 978-1-118-43357-7 (ebk); ISBN 978-1-118-48322-0
(ebk); ISBN 978-1-118-48323-7 (ebk) 1. Project management. 2. Project management—Case studies. I. Title.
HD69.P75K47 2013
658.4’04—dc23
2012026239
25
To
Dr. Herman Krier,
my Friend and Guru,
who taught me well the
meaning of the word “persistence”
26
Preface Project management has evolved from a management philosophy restricted to a few functional areas and regarded as something nice to have to an enterprise project management system affecting every functional unit of the company. Simply stated, project management has evolved into a business process rather than merely a project management process. More and more companies are now regarding project management as being mandatory for the survival of the firm. Organizations that were opponents of project management are now advocates. Management educators of the past, who preached that project management could not work and would be just another fad, are now staunch supporters. Project management is here to stay. Colleges and universities are now offering graduate degrees in project management.
The text discusses the principles of project management. Students who are interested in advanced topics, such as some of the material in Chapters 21 to 25 of this text, may wish to read one of my other texts, Advanced Project Management: Best Practices in Implementation (New York: Wiley, 2004) and Project Management Best Practices: Achieving Global Excellence, 2nd edition (Hoboken, NJ: Wiley and IIL Publishers, 2010). John Wiley & Sons and the International Institute for Learning also introduced a four-book series on project management best practices, authored by Frank Saladis, Carl Belack, and Harold Kerzner.
This book is addressed not only to those undergraduate and graduate students who wish to improve upon their project management skills but also to those functional managers and upper-level executives who serve as project sponsors and must provide continuous support for projects. During the past several years, management’s knowledge and understanding of project management has matured to the point where almost every company is using project management in one form or another. These companies have come to the realization that project management and productivity are related and that we are now managing our business as though it is a series of projects. Project management coursework is now consuming more of training budgets than ever before.
General reference is provided in the text to engineers. However, the reader should not consider project management as strictly engineering-related. The engineering examples are the result of the fact that project management first appeared in the engineering disciplines, and we should be willing to learn from their mistakes. Project management now resides in every profession, including information systems, health care, consulting, pharmaceutical, banks, and
27
government agencies. The text can be used for both undergraduate and graduate courses in business,
information systems, and engineering. The structure of the text is based upon my belief that project management is much more behavioral than quantitative since projects are managed by people rather than tools. The first five chapters are part of the basic core of knowledge necessary to understand project management. Chapters 6 through 8 deal with the support functions of managing your time effectively, conflicts, and other special topics. Chapters 9 and 10 describe factors for predicting success and management support. It may seem strange that ten chapters on organizational behavior and structuring are needed prior to the “hard-core” chapters of planning, scheduling, and controlling. These first ten chapters are needed to understand the cultural environment for all projects and systems. These chapters are necessary for the reader to understand the difficulties in achieving cross-functional cooperation on projects where team members are working on multiple projects concurrently and why the people involved, all of whom may have different backgrounds, cannot simply be forged into a cohesive work unit without friction. Chapters 11 through 20 are more of the quantitative chapters on planning, scheduling, cost control, estimating, contracting (and procurement), and quality. The next five chapters are advanced topics and future trends. Chapter 26 is a capstone case study that can be related to almost all of the chapters in the text.
The changes that were made in the eleventh edition include:
A new section on success, trade-offs, and competing constraints A new section on added value A new section on business intelligence A new section on project governance An updated section on processes supporting project management An updated section on the types of project closure A new section on engagement project management A new section on barriers to implementing project management in emerging markets A new section on fallacies in implementing project management A new section on enterprise project management systems A new section on How Project Management Methodologies Can Fail A new section on the future of project management A new section on managing complex projects A new section on managing scope creep A new section on project health checks A new section on how to recover a troubled project
28
A new section on managing public projects A new section on managing international projects A new section on project politics A new section on twenty common mistakes in project management A new section on managing innovation projects A new section on the differences between best practices and proven practices An updated section on project sponsorship An updated section on culture, teamwork, and trust A New Section on stakeholder relations management A new section on value-based leadership An updated section on validating project assumptions A new section on validating project objectives A new section on the WBS dictionary A new section on validation and verification A new section on project management baselines A new section on the traceability matrix An expansion on WBS core attributes An expansion on using the WBS and WBS dictionary for verification A new section on project management metrics A new section on key performance indicators A new section on value metrics A new section on project management dashboards A new section on portfolio management A new section on complexity theory A new section on project management information systems A new section on enterprise resource planning A new section on project problem solving A new section on brainstorming A new section on project decision-making A new section on determining the impact of a decision A new section on active listening A new section on agile project management A capstone case study which can be used as a review of the entire PMBOK® Guide, 5th edition, domain areas
The text contains more than 25 case studies, more than 125 multiple-choice questions, and nearly 400 discussion questions. There is also a separate book of cases (Project Management Case Studies, fourth edition) that provides additional real-world examples.
29
This text, the PMBOK® Guide, and the book of cases are ideal as self-study tools for the Project Management Institute’s PMP® Certification exam. Because of this, there are tables of cross references on each chapter’s opening page in the textbook detailing the sections from the book of cases and the Guide to the Project Management Body of Knowledge (PMBOK® Guide) that apply to that chapter’s content. The left-hand margin of the pages in the text has side bars that identify the cross-listing of the material on that page to the appropriate section(s) of the PMBOK® Guide. At the end of most of the chapters is a section on study tips for the PMP® exam, including more than 125 multiple-choice questions.
This textbook is currently used in the college market, in the reference market, and for studying for the PMP® Certification exam. Therefore, to satisfy the needs of all markets, a compromise had to be reached on how much of the text would be aligned to the PMBOK® Guide and how much new material would be included without doubling the size of the text. Some colleges and universities use the textbook to teach project management fundamentals without reference to the PMBOK® Guide. The text does not contain all of the material necessary to support each section of the PMBOK® Guide. Therefore, to study for the PMP® Certification exam, the PMBOK® Guide must also be used together with this text. The text covers material for almost all of the PMBOK® Guide knowledge areas but not necessarily in the depth that appears in the PMBOK® Guide.
An instructor’s manual is available only to college and university faculty members by contacting your local Wiley sales representative or by visiting the Wiley website at www.wiley.com/kerzner. This website includes not only the instructor’s manual but also 500 PowerPoint slides that follow the content of the book and help organize and execute classroom instruction and group learning. Access to the instructor’s material can be provided only through John Wiley & Sons, not the author.
One-, two-, and three-day seminars on project management and the PMP® Certification Training using the text are offered by contacting Lori MIlhaven, Executive Vice President, the International Institute for Learning, at 800-325-1533, extension 5121 (email address: lori.milhaven@iil.com).
The problems and case studies at the ends of the chapters cover a variety of industries. Almost all of the case studies are real-world situations taken from my consulting practice. Feedback from my colleagues who are using the text has
30
provided me with fruitful criticism, most of which has been incorporated into the tenth edition.
The majority of the articles on project management that have become classics have been referenced in the textbook throughout the first eleven chapters. These articles were the basis for many of the modern developments in project management and are therefore identified throughout the text.
Many colleagues provided valuable criticism. In particular, I am indebted to those industrial/government training managers whose dedication and commitment to quality project management education and training have led to valuable changes in this and previous editions. In particular, I wish to thank Frank Saladis, PMP®, Senior Consultant and Trainer with the International Institute for Learning, for his constructive comments, recommendations, and assistance with the mapping of the text to the PMBOK® Guide as well as recommended changes to many of the chapters. I am indebted to Dr. Edmund Conrow, PMP®, for a decade of assistance with the preparation of the risk management chapters in all of my texts. I am also indebted to Dr. Rene Rendon for his review and recommendations for changes to the chapter on contract management.
To the management team and employees of the International Institute for Learning, thank you all for 20 years of never-ending encouragement, support, and assistance with all of my project management research and writings.
Harold Kerzner
The International Institute for Learning
31
Overview
Related Case Studies (from Kerzner/Project Management Case Studies, 4th Edition)
Related Workbook Exercises (from Kerzner/Project Management Workbook and PMP ®/CAPM® Exam Study Guide, 11th Edition)
PMBOK® Guide, 5th Edition, Reference Section for the PMP® Certification Exam
Kombs Engineering Williams Machine Tool Company* Hyten Corporation Macon, Inc. Continental Computer Corporation Jackson Industries
Multiple Choice Exam Integration Management Scope Management Human Resource Management
32
1.0 INTRODUCTION Executives will be facing increasingly complex challenges during the next decade. These challenges will be the result of high escalation factors for salaries and raw materials, increased union demands, pressure from stockholders, and the possibility of long-term high inflation accompanied by a mild recession and a lack of borrowing power with financial institutions. These environmental conditions have existed before, but not to the degree that they do today.
In the past, executives have attempted to ease the impact of these environmental conditions by embarking on massive cost-reduction programs. The usual results of these programs have been early retirement, layoffs, and a reduction in manpower through attrition. As jobs become vacant, executives pressure line managers to accomplish the same amount of work with fewer resources, either by improving efficiency or by upgrading performance requirements to a higher position on the learning curve. Because people costs are more inflationary than the cost of equipment or facilities, executives are funding more and more capital equipment projects in an attempt to increase or improve productivity without increasing labor.
Unfortunately, executives are somewhat limited in how far they can go to reduce manpower without running a high risk to corporate profitability. Capital equipment projects are not always the answer. Thus, executives have been forced to look elsewhere for the solutions to their problems.
Almost all of today’s executives are in agreement that the solution to the majority of corporate problems involves obtaining better control and use of existing corporate resources, looking internally rather than externally for the solution. As part of the attempt to achieve an internal solution, executives are taking a hard look at the ways corporate activities are managed. Project management is one of the techniques under consideration.
The project management approach is relatively modern. It is characterized by methods of restructuring management and adapting special management techniques, with the purpose of obtaining better control and use of existing resources. Forty years ago project management was confined to U.S. Department of Defense contractors and construction companies. Today, the concept behind project management is being applied in such diverse industries and organizations as defense, construction, pharmaceuticals, chemicals, banking, hospitals, accounting, advertising, law, state and local governments, and the United Nations.
The rapid rate of change in both technology and the marketplace has created enormous strains on existing organizational forms. The traditional structure is highly bureaucratic, and experience has shown that it cannot respond rapidly
33
enough to a changing environment. Thus, the traditional structure must be replaced by project management, or other temporary management structures that are highly organic and can respond very rapidly as situations develop inside and outside the company.
Project management has long been discussed by corporate executives and academics as one of several workable possibilities for organizational forms of the future that could integrate complex efforts and reduce bureaucracy. The acceptance of project management has not been easy, however. Many executives are not willing to accept change and are inflexible when it comes to adapting to a different environment. The project management approach requires a departure from the traditional business organizational form, which is basically vertical and which emphasizes a strong superior–subordinate relationship.
34
1.1 UNDERSTANDING PROJECT MANAGEMENT
In order to understand project management, one must begin with the definition of a project. A project can be considered to be any series of activities and tasks that:
PMBOK® Guide, 5th Edition 1.2 What Is a Project?
1.3 What Is Project Management?
Have a specific objective to be completed within certain specifications Have defined start and end dates Have funding limits (if applicable) Consume human and nonhuman resources (i.e., money, people, equipment) Are multifunctional (i.e., cut across several functional lines)
Project management, on the other hand, involves five process groups as identified in the PMBOK® Guide, namely:
Project initiation Selection of the best project given resource limits Recognizing the benefits of the project Preparation of the documents to sanction the project Assigning of the project manager
Project planning Definition of the work requirements Definition of the quality and quantity of work Definition of the resources needed Scheduling the activities Evaluation of the various risks
Project execution Negotiating for the project team members Directing and managing the work Working with the team members to help them improve
Project monitoring and control
35
Tracking progress Comparing actual outcome to predicted outcome Analyzing variances and impacts Making adjustments
Project closure Verifying that all of the work has been accomplished Contractual closure of the contract Financial closure of the charge numbers Administrative closure of the papework
Successful project management can then be defined as having achieved the project objectives:
Within time Within cost At the desired performance/technology level While utilizing the assigned resources effectively and efficiently Accepted by the customer
The potential benefits from project management are:
Identification of functional responsibilities to ensure that all activities are accounted for, regardless of personnel turnover Minimizing the need for continuous reporting Identification of time limits for scheduling Identification of a methodology for trade-off analysis Measurement of accomplishment against plans Early identification of problems so that corrective action may follow Improved estimating capability for future planning Knowing when objectives cannot be met or will be exceeded
Unfortunately, the benefits cannot be achieved without overcoming obstacles such as:
Project complexity Customer’s special requirements and scope changes Organizational restructuring Project risks Changes in technology Forward planning and pricing
Project management can mean different things to different people. Quite often, people misunderstand the concept because they have ongoing projects within their
36
company and feel that they are using project management to control these activities. In such a case, the following might be considered an appropriate definition:
Project management is the art of creating the illusion that any outcome is the result of a series of predetermined, deliberate acts when, in fact, it was dumb luck.
Although this might be the way that some companies are running their projects, this is not project management. Project management is designed to make better use of existing resources by getting work to flow horizontally as well as vertically within the company. This approach does not really destroy the vertical, bureaucratic flow of work but simply requires that line organizations talk to one another horizontally so work will be accomplished more smoothly throughout the organization. The vertical flow of work is still the responsibility of the line managers. The horizontal flow of work is the responsibility of the project managers, and their primary effort is to communicate and coordinate activities horizontally between the line organizations.
Figure 1–1 shows how many companies are structured. There are always “class or prestige” gaps between various levels of management. There are also functional gaps between working units of the organization. If we superimpose the management gaps on top of the functional gaps, we find that companies are made up of small operational islands that refuse to communicate with one another for fear that giving up information may strengthen their opponents. The project manager’s responsibility is to get these islands to communicate cross-functionally toward common goals and objectives.
FIGURE 1–1. Why are systems necessary?
37
PMBOK® Guide, 5th Edition 1.7.2 Project Management Skills
The following would be an overview definition of project management:
Project management is the planning, organizing, directing, and controlling of company resources for a relatively short-term objective that has been established to complete specific goals and objectives. Furthermore, project management utilizes the systems approach to management by having functional personnel (the vertical hierarchy) assigned to a specific project (the horizontal hierarchy).
The above definition requires further comment. Classical management is usually considered to have five functions or principles:
PMBOK® Guide, 5th Edition 2.1.3 Organizational Structures
Planning Organizing Staffing Controlling Directing
You will notice that, in the above definition, the staffing function has been omitted. This was intentional because the project manager does not staff the project. Staffing is a line responsibility. The project manager has the right to request specific resources, but the final decision of what resources will be committed rests with the line managers.
We should also comment on what is meant by a “relatively” short-term project. Not all industries have the same definition for a short-term project. In engineering, the project might be for six months or two years; in construction, three to five years; in nuclear components, ten years; and in insurance, two weeks. Long-term projects, which consume resources full-time, are usually set up as a separate division (if large enough) or simply as a line organization.
38
Figure 1–2 is a pictorial representation of project management. The objective of the figure is to show that project management is designed to manage or control company resources on a given activity, within time, within cost, and within performance. Time, cost, and performance are the constraints on the project. If the project is to be accomplished for an outside customer, then the project has a fourth constraint: good customer relations. The reader should immediately realize that it is possible to manage a project internally within time, cost, and performance and then alienate the customer to such a degree that no further business will be forthcoming. Executives often select project managers based on who the customer is and what kind of customer relations will be necessary.
FIGURE 1–2. Overview of project management.
Projects exist to produce deliverables. The person ultimately assigned as the project manager may very well be assigned based upon the size, nature, and scope of the deliverables. Deliverables are outputs, or the end result of either the completion of the project or the end of a life-cycle phase of the project. Deliverables are measurable, tangible outputs and can take such form as:
Hardware Deliverables: These are hardware items, such as a table, a prototype, or a piece of equipment. Software Deliverables: These items are similar to hardware deliverables but are usually paper products, such as reports, studies, handouts, or documentation. Some companies do not differentiate between hardware and software deliverables. Interim Deliverables: These items can be either hardware or software deliverables and progressively evolve as the project proceeds. An example might be a series of interim reports leading up to the final report.
39
Another factor influencing the selection of the project manager would be the stakeholders. Stakeholders are individuals or organizations that can be favorably or unfavorably impacted by the project. As such, project managers must interface with these stakeholders, and many of the stakeholders can exert their influence or pressure over the direction of the project.
Some stakeholders are referred to as “active” or “key” stakeholders that can possess decision-making authority during the execution of the project. Each stakeholder can have his or her own set of objectives, and this could place the project manager in a position of having to balance a variety of stakeholder interests without creating a conflict-of-interest situation for the project manager.
Each company has its own categorization system for identifying stakeholders. A typical system might be:
Organizational stakeholders Executive officers Line managers Employees Unions
Product/market stakeholders Customers Suppliers Local committees Governments (local, state, and federal) General public
Capital market stakeholders Shareholders Creditors Banks
40
1.2 DEFINING PROJECT SUCCESS In the previous section, we defined project success as the completion of an activity within the constraints of time, cost, and performance. This was the definition used for the past twenty years or so. Today, the definition of project success has been modified to include completion:
PMBOK® Guide, 5th Edition 2.2.3 Project Success
Within the allocated time period Within the budgeted cost At the proper performance or specification level With acceptance by the customer/user With minimum or mutually agreed upon scope changes Without disturbing the main work flow of the organization Without changing the corporate culture
The last three elements require further explanation. Very few projects are completed within the original scope of the project. Scope changes are inevitable and have the potential to destroy not only the morale on a project, but the entire project. Scope changes must be held to a minimum and those that are required must be approved by both the project manager and the customer/user.
Project managers must be willing to manage (and make concessions/trade-offs, if necessary) such that the company’s main work flow is not altered. Most project managers view themselves as self-employed entrepreneurs after project go-ahead, and would like to divorce their project from the operations of the parent organization. This is not always possible. The project manager must be willing to manage within the guidelines, policies, procedures, rules, and directives of the parent organization.
All corporations have corporate cultures, and even though each project may be inherently different, the project manager should not expect his assigned personnel to deviate from cultural norms. If the company has a cultural standard of openness and honesty when dealing with customers, then this cultural value should remain in place for all projects, regardless of who the customer/user is or how strong the project manager’s desire for success is.
41
As a final note, it should be understood that simply because a project is a success does not mean that the company as a whole is successful in its project management endeavors. Excellence in project management is defined as a continuous stream of successfully managed projects. Any project can be driven to success through formal authority and strong executive meddling. But in order for a continuous stream of successful projects to occur, there must exist a strong corporate commitment to project management, and this commitment must be visible.
42
1.3 SUCCESS, TRADE-OFFS, AND COMPETING CONSTRAINTS
Although many projects are completed successfully, at least in the eyes of the stakeholders, the final criteria from which success is measured may be different than the initial criteria because of trade-offs. As an example, the triangle shown in Figure 1–2 is referred to as the triple constraints on a project, namely time, cost, and performance, where performance can be scope, quality, or technology. These are considered to be the primary constraints and are often considered to be the criteria for a project against which success is measured.
Today, we realize that there can be multiple constraints on a project and, rather than use the terminology of the triple constraints, we focus our attention on competing constraints. Sometimes the constraints are referred to as primary and secondary constraints. There may be secondary factors such as risk, customer relations, image, and reputation that may cause us to deviate from our original success criteria of time, cost, and performance. This will be covered later in Section 2.10. These changes can occur any time during the life of a project and can then cause trade-offs in the triple constraints, thus requiring that changes be made to the success criteria. In an ideal situation, we would perform trade-offs on any or all of the competing constraints such that acceptable success criteria would still be met.
As an example, let’s assume that a project was initiated using the success criteria of the triple constraints as shown in Figure 1–3. Part way through the project, the environment changes, a new senior management team is brought in with their own agenda, or a corporate crisis occurs such that the credibility of the corporation is at stake. In such a case, the competing constraints shown in Figure 1–3 can be more important than the original triple constraints. For simplicity’s sake, a triangle was used for the competing constraints in Figure 1–3. However, there can be significantly more than three competing constraints in which some geometric shape other than a triangle might work best.
FIGURE 1–3. Competing constraints.
43
Secondary factors are also considered to be constraints and may be more important than the primary constraints. For example, years ago, in Disneyland and Disneyworld, the project managers designing and building the attractions at the theme parks had six constraints:
Time Cost Scope Safety Aesthetic value Quality
At Disney, the last three constraints of safety, aesthetic value, and quality were considered locked-in constraints that could not be altered during trade-offs. All trade-offs were made on time, cost, and scope. Some constraints simply cannot change while others may have flexibility.
Not all constraints are equal in importance. For example, in the initiation phase of a project, scope may be the critical factor and all trade-offs are made on time and cost. During the execution phase of the project, time and cost may become more important and then trade-offs will be made on scope. A more detailed discussion of trade-offs can be found in Chapter 16.
44
1.4 THE PROJECT MANAGER– LINE MANAGER INTERFACE
We have stated that the project manager must control company resources within time, cost, and performance. Most companies have six resources:
PMBOK® Guide, 5th Edition 1.7.2 Project Management Skills
Money Manpower Equipment Facilities Materials Information/technology
Actually, the project manager does not control any of these resources directly, except perhaps money (i.e., the project budget).1 Resources are controlled by the line managers, functional managers, or, as they are often called, resources managers. Project managers must, therefore, negotiate with line managers for all project resources. When we say that project managers control project resources, we really mean that they control those resources (which are temporarily loaned to them) through line managers.
Today, we have a new breed of project manager. Years ago, virtually all project managers were engineers with advanced degrees. These people had a command of technology rather than merely an understanding of technology. If the line manager believed that the project manager did in fact possess a command of technology, then the line manager would allow the assigned functional employees to take direction from the project manager. The result was that project managers were expected to manage people.
Most project managers today have an understanding of technology rather than a command of technology. As a result, the accountability for the success of the project is now viewed as shared accountability between the project manager and all affected line managers. With shared accountability, the line managers must now have a good understanding of project management, which is why more line
45
managers are now becoming PMP®S. Project managers are now expected to focus more so on managing the project’s deliverables rather than providing technical direction to the project team. Management of the assigned resources is more often than not a line function.
Another important fact is that project managers are treated as though they are managing part of a business rather than simply a project, and as such are expected to make sound business decisions as well as project decisions. Project managers must understand business principles. In the future, project managers may be expected to become externally certified by PMI® and internally certified by their company on the organization’s business processes.
In recent years, the rapid acceleration of technology has forced the project manager to become more business oriented. According to Hans Thamhain,
The new breed of business leaders must deal effectively with a broad spectrum of contemporary challenges that focus on time-to-market pressures, accelerating technologies, innovation, resource limitations, technical complexities, social and ethical issues, operational dynamics, cost, risks, and technology itself as summarized below:
High task complexities, risks and uncertainties Fast-changing markets, technology, regulations Intense competition, open global markets Resource constraint, tough performance requirements Tight, end-date-driven schedules Total project life-cycle considerations Complex organizations and cross-functional linkages Joint ventures, alliances and partnerships, need for dealing with different organizational cultures and values Complex business processes and stakeholder communities Need for continuous improvements, upgrades and enhancements Need for sophisticated people skills, ability to deal with organizational conflict, power, and politics Increasing impact of IT and e-business2
Dr. Thamhain further believes that there are paradigm shifts in technology- oriented business environments that will affect the business leaders of the future, including project managers. According to Dr. Thamhain, we are shifting from . . .
. . . mostly linear work processes to highly dynamic, organic and integrated management systems
46
. . . efficiency toward effectiveness
. . . executing projects to enterprise-wide project management
. . . managing information to fully utilizing information technology
. . . managerial control to self-direction and accountability
. . . managing technology as part of a functional speciality to management of technology as a distinct skill set and professional status3
Another example of the need for the project manager to become more actively involved in business aspects has been identified by Gary Heerkens. Heerkens provides several revelations of why business knowledge has become important, a few of which are4:
It really doesn’t matter how well you execute a project, if you’re working on the wrong project! There are times when spending more money on a project could be smart business—even if you exceed the original budget! There are times when spending more money on a project could be smart business—even if the project is delivered after the original deadline! Forcing the project team to agree to an unrealistic deadline may not be very smart, from a business standpoint. A portfolio of projects that all generate a positive cash flow may not represent an organization’s best opportunity for investment.
It should become obvious at this point that successful project management is strongly dependent on:
A good daily working relationship between the project manager and those line managers who directly assign resources to projects The ability of functional employees to report vertically to line managers at the same time that they report horizontally to one or more project managers
These two items become critical. In the first item, functional employees who are assigned to a project manager still take technical direction from their line managers. Second, employees who report to multiple managers will always favor the manager who controls their purse strings. Thus, most project managers appear always to be at the mercy of the line managers.
Classical management has often been defined as a process in which the manager does not necessarily perform things for himself, but accomplishes objectives through others in a group situation. This basic definition also applies to the project manager. In addition, a project manager must help himself. There is nobody else to help him.
47
If we take a close look at project management, we will see that the project manager actually works for the line managers, not vice versa. Many executives do not realize this. They have a tendency to put a halo around the head of the project manager and give him a bonus at project completion when, in fact, the credit should be shared with the line managers, who are continually pressured to make better use of their resources. The project manager is simply the agent through whom this is accomplished. So why do some companies glorify the project management position?
To illustrate the role of the project manager, consider the time, cost, and performance constraints shown in Figure 1–2. Many functional managers, if left alone, would recognize only the performance constraint: “Just give me another $50,000 and two more months, and I’ll give you the ideal technology.”
The project manager, as part of these communicating, coordinating, and integrating responsibilities, reminds the line managers that there are also time and cost constraints on the project. This is the starting point for better resource control.
Project managers depend on line managers. When the project manager gets in trouble, the only place he can go is to the line manager because additional resources are almost always required to alleviate the problems. When a line manager gets in trouble, he usually goes first to the project manager and requests either additional funding or some type of authorization for scope changes.
To illustrate this working relationship between the project and line managers, consider the following situation:
Project Manager (addressing the line manager): “I have a serious problem. I’m looking at a $150,000 cost overrun on my project and I need your help. I’d like you to do the same amount of work that you are currently scheduled for but in 3,000 fewer man-hours. Since your organization is burdened at $60/hour, this would more than compensate for the cost overrun.”
Line Manager: “Even if I could, why should I? You know that good line managers can always make work expand to meet budget. I’ll look over my manpower curves and let you know tomorrow.”
The following day . . .
Line Manager: “I’ve looked over my manpower curves and I have enough work to keep my people employed. I’ll give you back the 3,000 hours you need, but remember, you owe me one!”
Several months later . . .
48
Line Manager: “I’ve just seen the planning for your new project that’s supposed to start two months from now. You’ll need two people from my department. There are two employees that I’d like to use on your project. Unfortunately, these two people are available now. If I don’t pick these people up on your charge number right now, some other project might pick them up in the interim period, and they won’t be available when your project starts.”
Project Manager: “What you’re saying is that you want me to let you sandbag against one of my charge numbers, knowing that I really don’t need them.”
Line Manager: “That’s right. I’ll try to find other jobs (and charge numbers) for them to work on temporarily so that your project won’t be completely burdened. Remember, you owe me one.”
Project Manager: “O.K. I know that I owe you one, so I’ll do this for you. Does this make us even?”
Line Manager: “Not at all! But you’re going in the right direction.” When the project management–line management relationship begins to
deteriorate, the project almost always suffers. Executives must promote a good working relationship between line and project management. One of the most common ways of destroying this relationship is by asking, “Who contributes to profits—the line or project manager?” Project managers feel that they control all project profits because they control the budget. The line managers, on the other hand, argue that they must staff with appropriately budgeted-for personnel, supply the resources at the desired time, and supervise performance. Actually, both the vertical and horizontal lines contribute to profits. These types of conflicts can destroy the entire project management system.
The previous examples should indicate that project management is more behavioral than quantitative. Effective project management requires an understanding of:
Quantitative tools and techniques Organizational structures Organizational behavior
Most people understand the quantitative tools for planning, scheduling, and controlling work. It is imperative that project managers understand totally the operations of each line organization. In addition, project managers must understand their own job description, especially where their authority begins and ends. During an in-house seminar on engineering project management, the author asked one of the project engineers to provide a description of his job as a project engineer. During
49
the discussion that followed, several project managers and line managers said that there was a great deal of overlap between their job descriptions and that of the project engineer.
Organizational behavior is important because the functional employees at the interface position find themselves reporting to more than one boss—a line manager and one project manager for each project they are assigned to. Executives must provide proper training so functional employees can report effectively to multiple managers.
50
1.5 DEFINING THE PROJECT MANAGER’S ROLE
The project manager is responsible for coordinating and integrating activities across multiple, functional lines. The integration activities performed by the project manager include:
PMBOK® Guide, 5th Edition 2.2.1 Stakeholders
Chapter 4 Project Integration Management
Integrating the activities necessary to develop a project plan Integrating the activities necessary to execute the plan Integrating the activities necessary to make changes to the plan
These integrative responsibilities are shown in Figure 1–4 where the project manager must convert the inputs (i.e., resources) into outputs of products, services, and ultimately profits. In order to do this, the project manager needs strong communicative and interpersonal skills, must become familiar with the operations of each line organization, and must have knowledge of the technology being used.
FIGURE 1–4. Integration management.
An executive with a computer manufacturer stated that his company was looking externally for project managers. When asked if he expected candidates to have a command of computer technology, the executive remarked: “You give me an individual who has good communicative skills and interpersonal skills, and I’ll give that individual a job. I can teach people the technology and give them technical
51
experts to assist them in decision making. But I cannot teach somebody how to work with people.”
The project manager’s job is not an easy one. Project managers may have increasing responsibility, but very little authority. This lack of authority can force them to “negotiate” with upper-level management as well as functional management for control of company resources. They may often be treated as outsiders by the formal organization.
In the project environment, everything seems to revolve about the project manager. Although the project organization is a specialized, task-oriented entity, it cannot exist apart from the traditional structure of the organization. The project manager, therefore, must walk the fence between the two organizations. The term interface management is often used for this role, which can be described as managing relationships:
PMBOK® Guide, 5th Edition Chapter 4 Integration Management
Within the project team Between the project team and the functional organizations Between the project team and senior management Between the project team and the customer’s organization, whether an internal or external organization
To be effective as a project manager, an individual must have management as well as technical skills. Because engineers often consider their careers limited in the functional disciplines, they look toward project management and project engineering as career path opportunities. But becoming a manager entails learning about psychology, human behavior, organizational behavior, interpersonal relations, and communications. MBA programs have come to the rescue of individuals desiring the background to be effective project managers.
In the past, executives motivated and retained qualified personnel primarily with financial incentives. Today other ways are being used, such as a change in title or the promise of more challenging work. Perhaps the lowest turnover rates of any professions in the world are in project management and project engineering. In a project environment, the project managers and project engineers get to see their project through from “birth to death.” Being able to see the fruits of one’s efforts is highly rewarding. A senior project manager in a construction company commented
52
on why he never accepted a vice presidency that had been offered to him: “I can take my children and grandchildren into ten countries in the world and show them facilities that I have built as the project manager. What do I show my kids as an executive? The size of my office? My bank account? A stockholder’s report?”
The project manager is actually a general manager and gets to know the total operation of the company. In fact, project managers get to know more about the total operation of a company than most executives. That is why project management is often used as a training ground to prepare future general managers who will be capable of filling top management positions.
53
1.6 DEFINING THE FUNCTIONAL MANAGER’S ROLE
Assuming that the project and functional managers are not the same person, we can identify a specific role for the functional manager. There are three elements to this role:
PMBOK® Guide, 5th Edition Chapter 9 Human Resources Management
9.1.2 HR Planning: Tools and Techniques
The functional manager has the responsibility to define how the task will be done and where the task will be done (i.e., the technical criteria). The functional manager has the responsibility to provide sufficient resources to accomplish the objective within the project’s constraints (i.e., who will get the job done). The functional manager has the responsibility for the deliverable.
In other words, once the project manager identifies the requirements for the project (i.e., what work has to be done and the constraints), it becomes the line manager’s responsibility to identify the technical criteria. Except perhaps in R&D efforts, the line manager should be the recognized technical expert. If the line manager believes that certain technical portions of the project manager’s requirements are unsound, then the line manager has the right, by virtue of his expertise, to take exception and plead his case to a higher authority.
In Section 1.1 we stated that all resources (including personnel) are controlled by the line manager. The project manager has the right to request specific staff, but the final appointments rest with line managers. It helps if project managers understand the line manager’s problems:
Unlimited work requests (especially during competitive bidding) Predetermined deadlines All requests having a high priority Limited number of resources Limited availability of resources Unscheduled changes in the project plan
54
Unpredicted lack of progress Unplanned absence of resources Unplanned breakdown of resources Unplanned loss of resources Unplanned turnover of personnel
Only in a very few industries will the line manager be able to identify to the project manager in advance exactly what resources will be available when the project is scheduled to begin. It is not important for the project manager to have the best available resources. Functional managers should not commit to certain people’s availability. Rather, the functional manager should commit to achieving his portion of the deliverables within time, cost, and performance even if he has to use average or below-average personnel. If the project manager is unhappy with the assigned functional resources, then the project manager should closely track that portion of the project. Only if and when the project manager is convinced by the evidence that the assigned resources are unacceptable should he confront the line manager and demand better resources.
The fact that a project manager is assigned does not relieve the line manager of his functional responsibility to perform. If a functional manager assigns resources such that the constraints are not met, then both the project and functional managers will be blamed. One company is even considering evaluating line managers for merit increases and promotion based on how often they have lived up to their commitments to the project managers. Therefore, it is extremely valuable to everyone concerned to have all project commitments made visible to all.
Some companies carry the concept of commitments to extremes. An aircraft components manufacturer has a Commitment Department headed by a second-level manager. The function of the Commitment Department is to track how well the line managers keep their promises to the project managers. The department manager reports directly to the vice president of the division. In this company, line managers are extremely careful and cautious in making commitments, but do everything possible to meet deliverables. This same company has gone so far as to tell both project and line personnel that they run the risk of being discharged from the company for burying a problem rather than bringing the problem to the surface immediately.
In one automotive company, the tension between the project and line managers became so combative that it was having a serious impact on the performance and constraints of the project. The project managers argued that the line managers were not fulfilling their promises whereas the line managers were arguing that the project managers’ requirements were poorly defined. To alleviate the problem, a new form
55
was created which served as a contractual agreement between the project and the line managers who had to commit to the deliverables. This resulted in “shared accountability” for the project’s deliverables.
Project management is designed to have shared authority and responsibility between the project and line managers. Project managers plan, monitor, and control the project, whereas functional managers perform the work. Table 1–1 shows this shared responsibility. The one exception to Table 1–1 occurs when the project and line managers are the same person. This situation, which happens more often than not, creates a conflict of interest. If a line manager has to assign resources to six projects, one of which is under his direct control, he might save the best resources for his project. In this case, his project will be a success at the expense of all of the other projects. TABLE 1–1. DUAL RESPONSIBILITY
Responsibility Topic Project Manager Line Manager Rewards Give recommendation: Informal Provide rewards: Formal Direction Milestone (summary) Detailed Evaluation Summary Detailed MeasurementSummary Detailed Control Summary Detailed
The exact relationship between project and line managers is of paramount importance in project management where multiple-boss reporting prevails. Table 1–2 shows that the relationship between project and line managers is not always in balance and thus, of course, has a bearing on who exerts more influence over the assigned functional employees. TABLE 1–2. REPORTING RELATIONSHIPS
56
PMBOK® Guide, 5th Edition 2.1.3 Organizational Structure
PMBOK® Guide, 5th Edition 2.1.3 Organizational Structure
57
1.7 DEFINING THE FUNCTIONAL EMPLOYEE’S ROLE
Once the line managers commit to the deliverables, it is the responsibility of the assigned functional employees to achieve the functional deliverables. For years the functional employees were called subordinates. Although this term still exists in textbooks, industry prefers to regard the assigned employees as “associates” rather than subordinates. The reason for this is that in project management the associates can be a higher pay grade than the project manager. The associates can even be a higher pay grade than their functional manager.
In most organizations, the assigned employees report on a “solid” line to their functional manager, even though they may be working on several projects simultaneously. The employees are usually a “dotted” line to the project but solid to their function. This places the employees in the often awkward position of reporting to multiple individuals. This situation is further complicated when the project manager has more technical knowledge than the line manager. This occurs during R&D projects.
The functional employee is expected to accomplish the following activities when assigned to projects:
Accept responsibility for accomplishing the assigned deliverables within the project’s constraints Complete the work at the earliest possible time Periodically inform both the project and line manager of the project’s status Bring problems to the surface quickly for resolution Share information with the rest of the project team
58
1.8 DEFINING THE EXECUTIVE’S ROLE
In a project environment there are new expectations of and for the executives, as well as a new interfacing role.5 Executives are expected to interface a project as follows:
In project planning and objective-setting In conflict resolution In priority-setting As project sponsor6
Executives are expected to interface with projects very closely at project initiation and planning, but to remain at a distance during execution unless needed for priority-setting and conflict resolution. One reason why executives “meddle” during project execution is that they are not getting accurate information from the project manager as to project status. If project managers provide executives with meaningful status reports, then the so-called meddling may be reduced or even eliminated.
59
1.9 WORKING WITH EXECUTIVES
Success in project management is like a three-legged stool. The first leg is the project manager, the second leg is the line manager, and the third leg is senior management. If any of the three legs fail, then even delicate balancing may not prevent the stool from toppling.
The critical node in project management is the project manager–line manager interface. At this interface, the project and line managers must view each other as equals and be willing to share authority, responsibility, and accountability. In excellently managed companies, project managers do not negotiate for resources but simply ask for the line manager’s commitment to executing his portion of the work within time, cost, and performance. Therefore, in excellent companies, it should not matter who the line manager assigns as long as the line manager lives up to his commitments.
Since the project and line managers are “equals,” senior management involvement is necessary to provide advice and guidance to the project manager, as well as to provide encouragement to the line managers to keep their promises. When executives act in this capacity, they assume the role of project sponsors, as shown in Figure 1–5,7 which also shows that sponsorship need not always be at the executive levels. The exact person appointed as the project sponsor is based on the dollar value of the project, the priority of the project, and who the customer is.
FIGURE 1–5. The project sponsor interface.
60
The ultimate objective of the project sponsor is to provide behind-the-scenes assistance to project personnel for projects both “internal” to the company, as well as “external,” as shown in Figure 1–5. Projects can still be successful without this commitment and support, as long as all work flows smoothly. But in time of crisis, having a “big brother” available as a possible sounding board will surely help.
PMBOK® Guide, 5th Edition 2.2.1 Project Stakeholders
When an executive is required to act as a project sponsor, then the executive has the responsibility to make effective and timely project decisions. To accomplish this, the executive needs timely, accurate, and complete data for such decisions. Keeping management informed serves this purpose, while the all-too-common practice of “stonewalling” prevents an executive from making effective project decisions.
It is not necessary for project sponsorship to remain exclusively at the executive levels. As companies mature in their understanding and implementation of project management, project sponsorship may be pushed down to middle-level management. Committee sponsorship is also possible.
61
1.10 COMMITTEE SPONSORSHIP/GOVERNANCE
All projects have the potential of getting into trouble but, in general, project management can work well as long as the project’s requirements do not impose severe pressure upon the project manager and a project sponsor exists as an ally to assist the project manager when trouble does appear. Unfortunately, in today’s chaotic environment, this pressure appears to be increasing because:
Companies are accepting high-risk and highly complex projects as a necessity for survival Customers are demanding low-volume, high-quality products with some degree of customization Project life cycles and new product development times are being compressed Enterprise environmental factors are having a greater impact on project execution Customers and stakeholders want to be more actively involved in the execution of projects Companies are developing strategic partnerships with suppliers, and each supplier can be at a different level of project management maturity Global competition has forced companies to accept projects from customers that are all at a different level of project management maturity and with different reporting requirements
These pressures tend to slow down the decision-making processes at a time when stakeholders want the projects and processes to be accelerated. One person, while acting as the project sponsor, may have neither the time nor capability to address all of these additional issues. The result will be a project slowdown and can occur because of:
The project manager being expected to make decisions in areas where he or she has limited knowledge The project manager hesitating to accept full accountability and ownership for the projects Excessive layers of management being superimposed on top of the project management organization Risk management being pushed up to higher levels in the organization hierarchy resulting in delayed decisions The project manager demonstrating questionable leadership ability on some of
62
the nontraditional projects
The problems resulting from these pressures may not be able to be resolved, at least easily and in a timely manner, by a single project sponsor. These problems can be resolved using effective project governance. Project governance is actually a framework by which decisions are made. Governance relates to decisions that define expectations, accountability, responsibility, the granting of power, or verifying performance. Governance relates to consistent management, cohesive policies, and processes and decision-making rights for a given area of responsibility. Governance enables efficient and effective decision-making to take place.
Every project can have different governance even if each project uses the same enterprise project management methodology. The governance function can operate as a separate process or as part of project management leadership. Governance is designed not to replace project decision-making but to prevent undesirable decisions from being made.
Historically, governance was provided by a single project sponsor. Today, governance is a committee and can include representatives from each stakeholder’s organization. Table 1-3 shows various governance approaches based upon the type of project team. The membership of the committee can change from project to project and industry to industry. The membership may also vary based upon the number of stakeholders and whether the project is for an internal or external client. On long-term projects, membership can change throughout the project. TABLE 1–3. TYPES OF PROJECT GOVERNANCE
Structure Description Governance Dispersed locally
Team members can be full-or part-time. They are still attached administratively to their functional area.
Usually a single person is acting as the sponsor but may be an internal committee based upon the project’s complexity.
Dispersed geographically
This is a virtual team. The project manager may never see some of the team members. Team members can be full-or part-time.
Usually governance by committee and can include stakeholder membership.
Colocated All of the team members are physically located in close proximity to the project manager. The project manager does not have any responsibility for wage and
Usually a single person acting as the sponsor.
63
salary administration. Projectized This is similar to a colocated team but
the project manager generally functions as a line manager and may have wage and salary responsibilities.
May be governance by committee based upon the size of the project and the number of strategic partners.
Governance on projects and programs sometimes fails because people confuse project governance with corporate governance. The result is that members of the committee are not sure what their role should be. Some of the major differences include:
Alignment: Corporate governance focuses on how well the portfolio of projects is aligned to and satisfies overall business objectives. Project governance focuses on ways to keep a project on track. Direction: Corporate governance provides strategic direction with a focus on how project success will satisfy corporate objectives. Project governance is more operation direction with decisions based upon the predefined parameters on project scope, time, cost, and functionality. Dashboards: Corporate governance dashboards are based upon financial, marketing, and sales metrics. Project governance dashboards have operations metrics on time, cost, scope, quality, action items, risks, and deliverables. Membership: Corporate governance committees are composed of the seniormost levels of management. Project government membership may include some membership from middle management.
Another reason why failure may occur is when members of the project or program governance group do not understand project or program management. This can lead to micromanagement by the governance committee. There is always the question of what decisions must be made by the governance committee and what decisions the project manager can make. In general, the project manager should have the authority for decisions related to actions necessary to maintain the baselines. Governance committees must have the authority to approve scope changes above a certain dollar value and to make decisions necessary to align the project to corporate objectives and strategy.
64
1.11 THE PROJECT MANAGER AS THE PLANNING AGENT
The major responsibility of the project manager is planning. If project planning is performed correctly, then it is conceivable that the project manager will work himself out of a job because the project can run itself. This rarely happens, however. Few projects are ever completed without some conflict or trade-offs for the project manager to resolve.
PMBOK® Guide, 5th Edition Chapter 9 Project Human Resources Management
In most cases, the project manager provides overall or summary definitions of the work to be accomplished, but the line managers (the true experts) do the detailed planning. Although project managers cannot control or assign line resources, they must make sure that the resources are adequate and scheduled to satisfy the needs of the project, not vice versa. As the architect of the project plan, the project manager must provide:
Complete task definitions Resource requirement definitions (possibly skill levels) Major timetable milestones Definition of end-item quality and reliability requirements The basis for performance measurement Definition of project success
These factors, if properly established, result in:
Assurance that functional units will understand their total responsibilities toward achieving project needs. Assurance that problems resulting from scheduling and allocation of critical resources are known beforehand. Early identification of problems that may jeopardize successful project completion so that effective corrective action and replanning can be taken to prevent or resolve the problems.
Project managers are responsible for project administration and, therefore, must have the right to establish their own policies, procedures, rules, guidelines, and
65
directives—provided these policies, guidelines, and so on, conform to overall company policy. Companies with mature project management structures usually have rather loose company guidelines, so project managers have some degree of flexibility in how to control their projects. However, project managers cannot make any promises to a functional employee concerning:
Promotion Grade Salary Bonus Overtime Responsibility Future work assignments
These seven items can be administered by line managers only, but the project manager can have indirect involvement by telling the line manager how well an employee is doing (and putting it in writing), requesting overtime because the project budget will permit it, and offering individuals the opportunity to perform work above their current pay grade. However, such work above pay grade can cause severe managerial headaches if not coordinated with the line manager, because the individual will expect immediate rewards if he performs well.
Establishing project administrative requirements is part of project planning. Executives must either work with the project managers at project initiation or act as resources later. Improper project administrative planning can create a situation that requires:
A continuous revision and/or establishment of company and/or project policies, procedures, and directives A continuous shifting in organizational responsibility and possible unnecessary restructuring A need for staff to acquire new knowledge and skills
If these situations occur simultaneously on several projects, there can be confusion throughout the organization.
66
1.12 PROJECT CHAMPIONS Corporations encourage employees to think up new ideas that, if approved by the corporation, will generate monetary and nonmonetary rewards for the idea generator. One such reward is naming the individual the “project champion.” Unfortunately, the project champion often becomes the project manager, and, although the idea was technically sound, the project fails.
Table 1–4 provides a comparison between project managers and project champions. It shows that the project champions may become so attached to the technical side of the project that they become derelict in their administrative responsibilities. Perhaps the project champion might function best as a project engineer rather than the project manager. Table 1–4. PROJECT MANAGERS VERSUS PROJECT CHAMPIONS
Project Managers Project Champions Prefer to work in groups Committed to their managerial and technical responsibilities Committed to technology Seek to achieve the objective Are willing to take risks Seek to exceed the objective Think in terms of short time spans Manage people Are committed to and pursue material values
Prefer working individually Committed to the corporation Committed to the profession Are unwilling to take risks; try to test everything Seek what is possible Seek perfection Think in terms of long time spans Manage things Are committed to and pursue intellectual values
This comparison does not mean that technically oriented project managers- champions will fail. Rather, it implies that the selection of the “proper” project manager should be based on all facets of the project.
67
1.13 THE DOWNSIDE OF PROJECT MANAGEMENT
Project management is often recognized only as a high-salaried, highly challenging position whereby the project manager receives excellent training in general management.
For projects that are done for external sources, the project manager is first viewed as starting out with a pot of gold and then as having to manage the project so that sufficient profits will be made for the stockholders. If the project manager performs well, the project will be successful. But the personal cost may be high for the project manager.
There are severe risks that are not always evident. Some project management positions may require a sixty-hour workweek and extensive time away from home. When a project manager begins to fall in love more with the job than with his family, the result is usually lack of friends, a poor home life, and possibly divorce. During the birth of the missile and space programs, companies estimated that the divorce rate among project managers and project engineers was probably twice the national average. Accepting a project management assignment is not always compatible with raising a young family. Characteristics of the workaholic project manager include:
Every Friday he thinks that there are only two more working days until Monday. At 5:00 P.M. he considers the working day only half over. He has no time to rest or relax. He always takes work home from the office. He takes work with him on vacations.
68
1.14 PROJECT-DRIVEN VERSUS NON–PROJECT-DRIVEN
ORGANIZATIONS On the micro level, virtually all organizations are either marketing-, engineering-, or manufacturing-driven. But on the macro level, organizations are either project-or non–project-driven. The PMBOK® Guide uses the terms project-based and non– project-based, whereas in this text the terms project-driven and non–project- driven or operational-driven are used. In a project-driven organization, such as construction or aerospace, all work is characterized through projects, with each project as a separate cost center having its own profit-and-loss statement. The total profit to the corporation is simply the summation of the profits on all projects. In a project-driven organization, everything centers around the projects.
PMBOK® Guide, 5th Edition 2.0 Organizational Influences
1.5.2 Organizations and Project Management
In the non–project-driven organization, such as low-technology manufacturing, profit and loss are measured on vertical or functional lines. In this type of organization, projects exist merely to support the product lines or functional lines. Priority resources are assigned to the revenue-producing functional line activities rather than the projects.
Project management in a non–project-driven organization is generally more difficult for these reasons:
Projects may be few and far between. Not all projects have the same project management requirements, and therefore they cannot be managed identically. This difficulty results from poor understanding of project management and a reluctance of companies to invest in proper training. Executives do not have sufficient time to manage projects themselves, yet refuse to delegate authority. Projects tend to be delayed because approvals most often follow the vertical
69
chain of command. As a result, project work stays too long in functional departments. Because project staffing is on a “local” basis, only a portion of the organization understands project management and sees the system in action. There is heavy dependence on subcontractors and outside agencies for project management expertise.
Non–project-driven organizations may also have a steady stream of projects, all of which are usually designed to enhance manufacturing operations. Some projects may be customer-requested, such as:
The introduction of statistical dimensioning concepts to improve process control The introduction of process changes to enhance the final product The introduction of process change concepts to enhance product reliability
If these changes are not identified as specific projects, the result can be:
Poorly defined responsibility areas within the organization Poor communications, both internal and external to the organization Slow implementation A lack of a cost-tracking system for implementation Poorly defined performance criteria
Figure 1–6 shows the tip-of-the-iceberg syndrome, which can occur in all types of organizations but is most common in non–project-driven organizations. On the surface, all we see is a lack of authority for the project manager. But beneath the surface we see the causes; there is excessive meddling due to lack of understanding of project management, which, in turn, resulted from an inability to recognize the need for proper training.
FIGURE 1–6. The tip-of-the-iceberg syndrome for matrix implementation.
70
In the previous sections we stated that project management could be handled on either a formal or an informal basis. As can be seen from Figure 1–7, informal project management most often appears in non–project-driven organizations. It is doubtful that informal project management would work in a project-driven organization where the project manager has profit-and-loss responsibility.
FIGURE 1–7. Decision-making influence.
71
72
1.15 MARKETING IN THE PROJECT-DRIVEN ORGANIZATION
Getting new projects is the lifeblood of any project-oriented business. The practices of the project-oriented company are, however, substantially different from traditional product businesses and require highly specialized and disciplined team efforts among marketing, technical, and operating personnel, plus significant customer involvement. Projects are different from products in many respects, especially marketing. Marketing projects requires the ability to identify, pursue, and capture one-of-a-kind business opportunities, and is characterized by:
PMBOK® Guide, 5th Edition 1.4.3 Projects and Strategic Planning
A systematic effort. A systematic approach is usually required to develop a new program lead into an actual contract. The project acquisition effort is often highly integrated with ongoing programs and involves key personnel from both the potential customer and the performing organization. Custom design. While traditional businesses provide standard products and services for a variety of applications and customers, projects are custom- designed items to fit specific requirements of a single-customer community. Project life cycle. Project-oriented businesses have a well-defined beginning and end and are not self-perpetuating. Business must be generated on a project-by-project basis rather than by creating demand for a standard product or service. Marketing phase. Long lead times often exist between the product definition, start-up, and completion phases of a project. Risks. There are risks, especially in the research, design, and production of programs. The program manager not only has to integrate the multidisciplinary tasks and project elements within budget and schedule constraints, but also has to manage inventions and technology while working with a variety of technically oriented prima donnas. The technical capability to perform. Technical ability is critical to the
73
successful pursuit and acquisition of a new project. In spite of the risks and problems, profits on projects are usually very low in
comparison with commerical business practices. One may wonder why companies pursue project businesses. Clearly, there are many reasons why projects are good business:
Although immediate profits (as a percentage of sales) are usually small, the return on capital investment is often very attractive. Progress payment practices keep inventories and receivables to a minimum and enable companies to undertake projects many times larger in value than the assets of the total company. Once a contract has been secured and is being managed properly, the project may be of relatively low financial risk to the company. The company has little additional selling expenditure and has a predictable market over the life cycle of the project. Project business must be viewed from a broader perspective than motivation for immediate profits. Projects provide an opportunity to develop the company’s technical capabilities and build an experience base for future business growth. Winning one large project often provides attractive growth potential, such as (1) growth with the project via additions and changes; (2) follow-on work; (3) spare parts, maintenance, and training; and (4) being able to compete effectively in the next project phase, such as nurturing a study program into a development contract and finally a production contract.
Customers come in various forms and sizes. For small and medium businesses partic-ularly, it is a challenge to compete for contracts from large industrial or governmental organizations. Although the contract to a firm may be relatively small, it is often subcontracted via a larger organization. Selling to such a diversified heterogeneous customer is a marketing challenge that requires a highly sophisticated and disciplined approach.
The first step in a new business development effort is to define the market to be pursued. The market segment for a new program opportunity is normally in an area of relevant past experience, technical capability, and customer involvement. Good marketers in the program business have to think as product line managers. They have to understand all dimensions of the business and be able to define and pursue market objectives that are consistent with the capabilities of their organizations.
Program businesses operate in an opportunity-driven market. It is a common mistake, however, to believe that these markets are unpredictable and
74
unmanageable. Market planning and strategizing is important. New project opportunities develop over periods of time, sometimes years for larger projects. These developments must be properly tracked and cultivated to form the bases for management actions such as (1) bid decisions, (2) resource commitment, (3) technical readiness, and (4) effective customer liaison. This strategy of winning new business is supported by systematic, disciplined approaches, which are illustrated in Figure 1–8.
FIGURE 1–8. The phases of winning new contracts in project-oriented businesses.
75
1.16 CLASSIFICATION OF PROJECTS
The principles of project management can be applied to any type of project and to any industry. However, the relative degree of importance of these principles can vary from project to project and industry to industry. Table 1–5 shows a brief comparison of certain industries/projects. TABLE 1–5. CLASSIFICATION OF PROJECTS/CHARACTERISTICS
For those industries that are project-driven, such as aerospace and large construction, the high dollar value of the projects mandates a much more rigorous project management approach. For non–project-driven industries, projects may be managed more informally than formally, especially if no immediate profit is involved. Informal project management is similar to formal project management but paperwork requirements are kept at a minimum.
76
1.17 LOCATION OF THE PROJECT MANAGER
The success of project management could easily depend on the location of the project manager within the organization. Two questions must be answered:
What salary should the project manager earn? To whom should the project manager report?
Figure 1–9 shows a typical organizational hierarchy (the numbers represent pay grades). Ideally, the project manager should be at the same pay grade as the individuals with whom he must negotiate on a daily basis. Using this criterion, and assuming that the project manager interfaces at the department manager level, the project manager should earn a salary between grades 20 and 25. A project manager earning substantially more or less money than the line manager will usually create conflict. The ultimate reporting location of the project manager (and perhaps his salary) is heavily dependent on whether the organization is project-or non–project- driven, and whether the project manager is responsible for profit or loss.
FIGURE 1–9. Organizational hierarchy.
77
PMBOK® Guide, 5th Edition 2.0 Organizational Influences
Project managers can end up reporting both high and low in an organization during the life cycle of the project. During the planning phase of the project, the project manager may report high, whereas during implementation, he may report low. Likewise, the positioning of the project manager may be dependent on the risk of the project, the size of the project, or the customer.
Finally, it should be noted that even if the project manager reports low, he should still have the right to interface with top executives during project planning although there may be two or more reporting levels between the project manager and executives. At the opposite end of the spectrum, the project manager should have the right to go directly into the depths of the organization instead of having to follow the chain of command downward, especially during planning. As an example, see Figure 1–10. The project manager had two weeks to plan and price out a small project. Most of the work was to be accomplished within one section.
78
The project manager was told that all requests for work, even estimating, had to follow the chain of command from the executive down through the section supervisor. By the time the request was received by the section supervisor, twelve of the fourteen days were gone, and only an order-of-magnitude estimate was possible. The lesson to be learned here is:
FIGURE 1–10. The organizational hierarchy: for planning and/or approval?
The chain of command should be used for approving projects, not planning them.
Forcing the project manager to use the chain of command (in either direction) for project planning can result in a great deal of unproductive time and idle time cost.
79
1.18 DIFFERING VIEWS OF PROJECT MANAGEMENT
Many companies, especially those with project-driven organizations, have differing views of project management. Some people view project management as an excellent means to achieving objectives, while others view it as a threat. In project- driven organizations, there are three career paths that lead to executive management:
Through project management Through project engineering Through line management
In project-driven organizations, the fast-track position is in project management, whereas in a non–project-driven organization, it would be line management. Even though line managers support the project management approach, they resent the project manager because of his promotions and top-level visibility. In one construction company, a department manager was told that he had no chance for promotion above his present department manager position unless he went into project management or project engineering where he could get to know the operation of the whole company. A second construction company requires that individuals aspiring to become a department manager first spend a “tour of duty” as an assistant project manager or project engineer.
Executives may dislike project managers because more authority and control must be delegated. However, once executives realize that it is a sound business practice, it becomes important, as shown in the following letter8:
In order to sense and react quickly and to insure rapid decision-making, lines of communication should be the shortest possible between all levels of the organization. People with the most knowledge must be available at the source of the problem, and they must have decision-making authority and responsibility. Meaningful data must be available on a timely basis and the organization must be structured to produce this environment.
In the aerospace industry, it is a serious weakness to be tied to fixed organization charts, plans, and procedures. With regard to organization, we successfully married the project concept of management with a central function concept. What we came up with is an organization within an organization—one to ramrod the day-to-day problems; the other to provide support for existing projects and to anticipate the requirements for future projects.
80
The project system is essential in getting complicated jobs done well and on time, but it solves only part of the management problem. When you have your nose to the project grindstone, you are often not in a position to see much beyond that project. This is where the central functional organization comes in. My experience has been that you need this central organization to give you depth, flexibility, and perspective. Together, the two parts permit you to see both the woods and the trees.
Initiative is essential at all levels of the organization. We try to press the level of decision to the lowest possible rung of the managerial ladder. This type of decision-making provides motivation and permits recognition for the individual and the group at all levels. It stimulates action and breeds dedication.
With this kind of encouragement, the organization can become a live thing— sensitive to problems and able to move in on them with much more speed and understanding than would be normally expected in a large operation. In this way, we can regroup or reorganize easily as situations dictate and can quickly focus on a “crisis.” In this industry a company must always be able to reorient itself to meet new objectives. In a more staid, old-line organization, frequent reorientation usually accompanied by a corresponding shift of people’s activities, could be most upsetting. However, in the aerospace industry, we must be prepared for change. The entire picture is one of change.
81
1.19 PUBLIC-SECTOR PROJECT MANAGEMENT
For several decades, public-sector projects were managed by contractors whose primary objective was a profit motive. Many times, contractors would make trade- offs and accompanying decisions just to support the profit motive. At the end of the project, the contractor would provide the public-sector agency with a deliverable, but the contractor would walk away with the project management best practices and lessons learned.
Today, public-sector agencies are requesting the contractor to share with them all project management intellectual property accumulated during the course of the project. Also, more agencies are becoming experienced in project management to the point where the projects are managed with internal personnel rather than contractors.
As more and more government agencies adopt the project management approach, we discover that public-sector projects can be more complex than private-sector projects and more difficult to manage. According to David Wirick9:
THE CHALLENGES OF PUBLIC- SECTOR PROJECT MANAGEMENT Private-sector project managers like to assume that their work is more demanding than projects in the public sector. They assume that their projects are more complex, subject to tougher management oversight, and mandated to move at faster speeds. Although private-sector projects can be tough, in many cases, it is easier to accomplish results in the private sector than in the public sector.
Public-sector projects can be more difficult than many private-sector projects because they:
Operate in an environment of often-conflicting goals and outcome Involve many layers of stakeholders with varied interests Must placate political interests and operate under media scrutiny Are allowed little tolerance for failure
82
Operate in organizations that often have a difficult time identifying outcome measures and missions Are required to be performed under constraints imposed by administrative rules and often-cumbersome policies and processes that can delay projects and consume project resources Require the cooperation and performance of agencies outside of the project team for purchasing, hiring, and other functions Must make do with existing staff resources more often than private-sector projects because of civil-service protections and hiring systems Are performed in organizations that may not be comfortable or used to directed action and project success Are performed in an environment that may include political adversaries
If these challenges were not tough enough, because of their ability to push the burden of paying for projects to future generations, public-sector projects have a reach deep into the future. That introduces the challenges of serving the needs of stakeholders who are not yet “at the table” and whose interests might be difficult to identify. Some also cite the relative lack of project management maturity in public organizations as a challenge of public-sector projects.
In addition to these complications, public projects are often more complex than those in the private sector. For some projects, the outcome can be defined at the beginning of the project. Construction projects are one example. For other projects, the desired outcome can only be defined as the project progresses. Examples of those are organizational change projects and complex information technology projects. Although the first type of project can be difficult and require detailed planning and implementation, the second type, those whose outcomes are determined over the course of the project, are regarded as more challenging. They require more interaction with stakeholders and more openness to factors outside of the control of the project team.
Because of the multiple stakeholders involved in public-sector projects, the types of projects the public sector engages in, and the difficulty of identifying measurable outcomes in the public sector, more public-sector projects are likely to be of the latter variety and more difficult. Project complexity and tools for managing complexity and chaos will be discussed later in this book.
As a result of the distinguishing characteristics of public-sector organizations, public-sector projects require the management, not only of the
83
project team, but of an entire community. Little is accomplished in the public sector by lone individuals or even by teams working in isolation. Instead, public-sector projects engage broad groups of stakeholders who not only have a stake in the project but also have a voice and an opportunity to influence outcomes. In public-sector projects, even though the project manager may be ultimately accountable, governance of the project and credit for successes must be shared.
The good news for public-sector project managers is that the community of stakeholders, which may seem to be a burden, can also be an opportunity and a source of resources and support. Many of those stakeholders stand ready to provide help to the project manager as he or she attempts to navigate the constraints affecting the project. Others can be enlisted to support the project, and their authority can make the difference between project success and failure.
THE COMING STORM In addition to the existing challenges of public-sector projects listed previously, some factors will place soon more stress on public-sector organizations and demand even more emphasis on solid project management. Some of the emerging challenges for public-sector organizations will include:
Modest or stagnant economic growth Globalization and the loss of the industrial revenue base and, increasingly, the service-sector revenue base A decline in real wages and pressures for tax reform Private-sector practices that pass the corporate safety net back to individuals, who may then look to government for such essential security mechanisms as health coverage Difficulty in passing on the need for government revenue to taxpayers and a general loss of confidence in government Structural limitations on revenue generation, such as Proposition 13 and property tax indexing The redirection of scarce public revenues to homeland security and defense without the imposition of war taxes The erosion of public-sector income as entitlement programs drain revenues in response to an aging population An age imbalance, with fewer workers in the workforce to support an
84
expanding number of retirees and children Longer life expectancy, which further burdens entitlement and health programs Increasing costs of health care well beyond the level of inflation Long-delayed investments in our national infrastructure, including roads, bridges and water systems
In combination, these factors constitute a looming storm that will require us to question our assumptions about government operations and services. Doing far more with much less will require new thinking about how government performs its work. It will require more innovation than the development of new services. It will take radical rethinking of what government does and how it goes about getting it done.
WHY DO PUBLIC-SECTOR PROJECTS FAIL? Public-sector projects fail for all of the normal reasons that any project fails. Projects in all sectors of the economy fail because they:
Fail to identify the needs of customers or users of the product or the project Create overly optimistic schedules and fail to anticipate the impact of late deliverables Do not get the resources necessary to complete the project Do not devote enough time to project planning Are subject to changing management priorities Employ technology that does not work as expected Do not get good performance from vendors Get overwhelmed by competing projects and do not apply solid project prioritization Do not adequately identify, analyze, and address project risks Make assumptions that are not validated and agreed to Dissolve in the face of conflict among stakeholders Get overtaken by unexpected events [More will be said in Chapter 14 about the challenges of managing uncertainty and chaos.] Do not apply solid and repeatable project management methods Do not have the benefit of an experienced project manager Do not engage and involve stakeholders throughout the project
85
Do not identify lessons learned from prior projects Define an overly broad project scope that cannot be well-defined
In addition, public-sector projects can fail for a set of reasons related to the unique character of public-sector projects. In that regard, they:
Run afoul of political processes Lack the necessary resources because of requirements to use existing staff rather than to contract for the right expertise Are constrained by civil-service rules that limit assignment of activities to project staff Lose budget authorization Lose support at the change of administration due to electoral cycles Are overwhelmed by administrative rules and required processes for purchasing and hiring Fail to satisfy oversight agencies Adopt overly conservative approaches due to the contentious nature of the project environment Are victimized by suboptimal vendors who have been selected by purchasing processes that are overly focused on costs or that can be influenced by factors that are not relevant to performance Are compromised by the bias of public-sector managers and staff toward compliance over performance Fail to identify project goals given the wide array of project stakeholders in the public sector and the challenges of identifying public-sector goals and metrics for success
86
1.20 INTERNATIONAL PROJECT MANAGEMENT
As the world marketplace begins to accept project management and recognizes the need for experienced project managers, more opportunities have become available for people aspiring to become project managers. The need is there and growing. According to Thomas Grisham10:
International business and project management practice have converged in the last 10 years. Organizations are tending toward hiring multitalented people who are self-motivated, intelligent, and willing to take responsibility. Some of the reasons are:
The need for leaner and flatter organizations to reduce cost The need for leadership skills throughout the organizational food chain from top to bottom—lead one day, follow the next, and be comfortable personally in either role The need for knowledge workers throughout the organization Globalization and the need to improve quality while reducing cost Kaizen to keep quality high while reducing cost Diversity
Years ago, companies had three pay grades for project managers; junior project managers, project managers, and senior project managers. Today, we are adding in a fourth pay grade, namely global project managers. Unfortunately, there may be additional skills needed to be a global project manager. Some of the additional skills include managing virtual teams, understanding global cultural differences, working in an environment where politics can dictate many of the decisions, and working under committee governance rather than a single sponsor.
87
1.21 CONCURRENT ENGINEERING: A PROJECT MANAGEMENT APPROACH
In the past decade, organizations have become more aware of the fact that America’s most formidable weapon is its manufacturing ability, and yet more and more work seems to be departing for Southeast Asia and the Far East. If America and other countries are to remain competitive, then survival may depend on the manufacturing of a quality product and a rapid introduction into the marketplace. Today, companies are under tremendous pressure to rapidly introduce new products because product life cycles are becoming shorter. As a result, organizations no longer have the luxury of performing work in series.
Concurrent or simultaneous engineering is an attempt to accomplish work in parallel rather than in series. This requires that marketing, R&D, engineering, and production are all actively involved in the early project phases and making plans even before the product design has been finalized. This concept of current engineering will accelerate product development, but it does come with serious and potentially costly risks, the largest one being the cost of rework.
Almost everyone agrees that the best way to reduce or minimize risks is for the organization to plan better. Since project management is one of the best methodologies to foster better planning, it is little wonder that more organizations are accepting project management as a way of life.
88
1.22 ADDED VALUE People often wonder what project managers do with their time once the project plan is created. While it is true that they monitor and control the work being performed, they also look for ways to add value to the project. Added value can be defined as incremental improvements to the deliverable of a project such that performance is improved or a significant business advantage is obtained, and the client is willing to pay for this difference. Looking for added-value opportunities that benefit the client is a good approach whereas looking for “fictitious” added- value opportunities just to increase the cost of the project is bad.
In certain projects, such as in new product development in the pharmaceutical industry, project managers must be aware of opportunities. According to Trevor Brown and Stephen Allport11:
The critical issues facing companies which understand the importance of building customer value into new products is how to incorporate this into the development process and invest appropriately to fully understand the opportunity. In practice, project teams have more opportunity than is generally realized to add, enhance, or diminish value in each of the four perspectives . . . corporate, prescriber, payer and patient. The tools at the project teams” disposal to enhance customer value include challenging and improving established processes, adopting a value-directed approach to the management of development projects, and taking advantage of tried and tested methodologies for understanding product value.
Project managers generally do not take enough time in evaluating opportunities. In such a case, either the scope change is disapproved or the scope change is allowed and suddenly the project is at risk when additional information is discovered. Opportunities must be fully understood.
89
1.23 STUDYING TIPS FOR THE PMI® PROJECT MANAGEMENT
CERTIFICATION EXAM This section is applicable as a review of the principles or to support an understanding of the knowledge areas and domain groups in the PMBOK® Guide. This chapter addresses some material from the PMBOK® Guide knowledge areas:
Integration Management Scope Management Human Resources Management
Understanding the following principles is beneficial if the reader is using this textbook together with the PMBOK® Guide to study for the PMP® Certification Exam:
Definition of a project Definition of the competing constraints Definition of successful execution of a project Benefits of using project management Responsibility of the project manager in dealing with stakeholders and how stakeholders can affect the outcome of the project Responsibility of the project manager in meeting deliverables The fact that the project manager is ultimately accountable for the success of the project Responsibilities of the line manager during project management staffing and execution Role of the executive sponsor and champion Difference between a project-driven and non–project-driven organization
Be sure to review the appropriate sections of the PMBOK® Guide and the glossary of terms at the end of the PMBOK® Guide.
Some multiple-choice questions are provided in this section as a review of the material. There are other sources for practice review questions that are specific for the PMP® Exam, namely:
90
Project Management IQ® from the International Institute for Learning (iil.com) PMP® Exam Practice Test and Study Guide, by J. LeRoy Ward, PMP, editor PMP® Exam Prep, by Rita Mulcahy Q & As for the PMBOK® Guide, Project Management Institute
The more practice questions reviewed, the better prepared the reader will be for the PMP® Certification Exam.
In Appendix C, there are a series of mini–case studies called Dorale Products that reviews some of the concepts. The minicases can be used as either an introduction to the chapter or as a review of the chapter material. These mini–case studies were placed in Appendix C because they can be used for several chapters in the text. For this chapter, the following are applicable:
Dorale Products (A) [Integration and Scope Management] Dorale Products (B) [Integration and Scope Management]
Answers to the Dorale Products minicases appear in Appendix D.
The following multiple-choice questions will be helpful in reviewing the above principles:
1. The traditional competing constraints on a project are:
A. Time, cost, and profitability
B. Resources required, sponsorship involvement, and funding
C. Time, cost, and quality and/or scope
D. Calendar dates, facilities available, and funding
2. Which of the following is not part of the definition of a project?
A. Repetitive activities
B. Constraints
C. Consumption of resources
D. A well-defined objective
3. Which of the following is usually not part of the criteria for project success?
A. Customer satisfaction
B. Customer acceptance
91
C. Meeting at least 75 percent of specification requirements.
D. Meeting the triple-constraint requirements
4. Which of the following is generally not a benefit achieved from using project management?
A. Flexibility in the project’s end date
B. Improved risk management
C. Improved estimating
D. Tracking of projects
5. The person responsible for assigning the resources to a project is most often:
A. The project manager
B. The Human Resources Department
C. The line manager
D. The executive sponsor
6. Conflicts between the project and line managers are most often resolved by:
A. The assistant project manager for conflicts
B. The project sponsor
C. The executive steering committee
D. The Human Resources Department
7. Your company does only projects. If the projects performed by your company are for customers external to your company and a profit criterion exists on the project, then your organization is most likely:
A. Project-driven
B. Non–project-driven
C. A hybrid
D. All of the above are possible based upon the size of the profit margin.
92
ANSWERS 1. C
2. A
3. C
4. A
5. C
6. B
7. A
93
PROBLEMS 1–1 In the project environment, cause-and-effect relationships are almost always readily apparent. Good project management will examine the effect in order to better understand the cause and possibly prevent it from occurring again. Below are causes and effects. For each one of the effects, select the possible cause or causes that may have existed to create this situation:
Effects
1. Late completion of activities
2. Cost overruns
3. Substandard performance
4. High turnover in project staff
5. High turnover in functional staff
6. Two functional departments performing the same activities on one project
Causes
a. Top management not recognizing this activity as a project
b. Too many projects going on at one time
c. Impossible schedule commitments
d. No functional input into the planning phase
e. No one person responsible for the total project
f. Poor control of design changes
g. Poor control of customer changes
h. Poor understanding of the project manager’s job
i. Wrong person assigned as project manager
j. No integrated planning and control
k. Company resources are overcommitted
l. Unrealistic planning and scheduling
m. No project cost accounting ability
n. Conflicting project priorities
o. Poorly organized project office
(This problem has been adapted from Russell D. Archibald, Managing High-Technology Programs and Projects, New York: John Wiley, 1976, p. 10.)
1–2 Because of the individuality of people, there always exist differing views of what management is all about. Below are lists of possible perspectives and a selected group of organizational members. For each individual select the possible ways that this individual might view project management:
Individuals
1. Upper-level manager
2. Project manager
94
3. Functional manager
4. Project team member
5. Scientist and consultant
Perspectives
a. A threat to established authority
b. A source for future general managers
c. A cause of unwanted change in ongoing procedures
d. A means to an end
e. A significant market for their services
f. A place to build an empire
g. A necessary evil to traditional management
h. An opportunity for growth and advancement
i. A better way to motivate people toward an objective
j. A source of frustration in authority
k. A way of introducing controlled changes
l. An area of research
m. A vehicle for introducing creativity
n. A means of coordinating functional units
o. A means of deep satisfaction
p. A way of life
1–3 Consider an organization that is composed of upper-level managers, middle-and lower-level managers, and laborers. Which of the groups should have first insight that an organizational restructuring toward project management may be necessary?
1–4 How would you defend the statement that a project manager must help himself?
1–5 Will project management work in all companies? If not, identify those companies in which project management may not be applicable and defend your answers.
1–6 In a project organization, do you think that there might be a conflict in opinions over whether the project managers or functional managers contribute to profits?
1–7 What attributes should a project manager have? Can an individual be trained to become a project manager? If a company were changing over to a project management structure, would it be better to promote and train from within or hire from the outside?
1–8 Do you think that functional managers would make good project managers?
1–9 What types of projects might be more appropriate for functional management rather than project management, and vice versa?
1–10 Do you think that there would be a shift in the relative degree of importance of the following terms in a project management environment as opposed to a traditional management environment?
a. Time management
b. Communications
c. Motivation
95
1–11 Classical management has often been defined as a process in which the manager does not necessarily perform things for himself, but accomplishes objectives through others in a group situation. Does this definition also apply to project management?
1–12 Which of the following are basic characteristics of project management?
a. Customer problem
b. Responsibility identification
c. Systems approach to decision-making
d. Adaptation to a changing environment
e. Multidisciplinary activity in a finite time duration
f. Horizontal and vertical organizational relationships
1–13 Project managers are usually dedicated and committed to the project. Who should be “looking over the shoulder” of the project manager to make sure that the work and requests are also in the best interest of the company? Does your answer depend on the priority of the project?
1–14 Is project management designed to transfer power from the line managers to the project manager?
1–15 Explain how career paths and career growth can differ between project-driven and non– project-driven organizations. In each organization, is the career path fastest in project management, project engineering, or line management?
1–16 Explain how the following statement can have a bearing on who is ultimately selected as part of the project team:
“There comes a time in the life cycle of all projects when one must shoot the design engineers and begin production.”
1–17 How do you handle a situation where the project manager has become a generalist, but still thinks that he is an expert?
CASE STUDY WILLIAMS MACHINE TOOL COMPANY
For 85 years, the Williams Machine Tool Company had provided quality products to its clients, becoming the third largest U.S.-based machine tool company by 1990. The company was highly profitable and had an extremely low employee turnover rate. Pay and benefits were excellent.
Between 1980 and 1990, the company’s profits soared to record levels. The company’s success was due to one product line of standard manufacturing machine tools. Williams spent most of its time and effort looking for ways to improve its bread-and-butter product line rather than to develop new products. The product line was so successful that
96
companies were willing to modify their production lines around these machine tools rather than asking Williams for major modifications to the machine tools.
By 1990, Williams Company was extremely complacent, expecting this phenomenal success with one product line to continue for 20 to 25 more years. The recession of the early 1990s forced management to realign their thinking. Cutbacks in production had decreased the demand for the standard machine tools. More and more customers were asking for either major modifications to the standard machine tools or a completely new product design.
The marketplace was changing and senior management recognized that a new strategic focus was necessary. However, lower-level management and the work force, especially engineering, were strongly resisting a change. The employees, many of them with over 20 years of employment at Williams Company, refused to recognize the need for this change in the belief that the glory days of yore would return at the end of the recession.
By 1995, the recession had been over for at least two years yet Williams Company had no new product lines. Revenue was down, sales for the standard product (with and without modifications) were decreasing, and the employees were still resisting change. Layoffs were imminent.
In 1996, the company was sold to Crock Engineering. Crock had an experienced machine tool division of its own and understood the machine tool business. Williams Company was allowed to operate as a separate entity from 1995 to 1996. By 1996, red ink had appeared on the Williams Company balance sheet. Crock replaced all of the Williams senior managers with its own personnel. Crock then announced to all employees that Williams would become a specialty machine tool manufacturer and that the “good old days” would never return. Customer demand for specialty products had increased threefold in just the last twelve months alone. Crock made it clear that employees who would not support this new direction would be replaced.
The new senior management at Williams Company recognized that 85 years of traditional management had come to an end for a company now committed to specialty products. The company culture was about to
97
change, spearheaded by project management, concurrent engineering, and total quality management.
Senior management’s commitment to product management was apparent by the time and money spent in educating the employees. Unfortunately, the seasoned 20-year-plus veterans still would not support the new culture. Recognizing the problems, management provided continuous and visible support for project management in addition to hiring a project management consultant to work with the people. The consultant worked with Williams from 1996 to 2001.
From 1996 to 2001, the Williams Division of Crock Engineering experienced losses in 24 consecutive quarters. The quarter ending March 31, 2002, was the first profitable quarter in over six years. Much of the credit was given to the performance and maturity of the project management system. In May 2002, the Williams Division was sold. More than 80% of the employees lost their jobs when the company was relocated over 1,500 miles away.
*Case Study also appears at end of chapter.
1. Here we are assuming that the line manager and project manager are not the same individual. However, the terms line manager and functional manager are used interchangeably throughout the text.
2. H. J. Thamhain, Management of Technology (Hoboken, NJ: Wiley, 2005), pp. 3–4.
3. See note 2; Thamhain; p. 28.
4. G. Heerkens, The Business-Savvy Project Manager (New York: McGraw- Hill, 2006), pp. 4–8.
5. The expectations are discussed in Section 9.3.
6. The role of the project sponsor is discussed in Section 10.1.
7. Section 10.1 describes the role of the project sponsor in more depth.
8. Letter from J. Donald Rath, Vice President of Martin-Marietta Corporation, Denver Division, to J. E. Webb, of NASA, October 18, 1963.
9. D. W. Wirick, Public-Sector Project Management (Wiley, Hoboken, NJ, 2009), pp.8–10, 18–19.
10. T. W. Grisham, International Project Management, (Wiley, Hoboken, NJ,
98
2010), p. 3.
11. T. J. Brown and S. Allport, “Developing Products with Added Value,” in P. Harpum (Ed.), Portfolio, Program, and Project Management in the Pharmaceutical and Biotechnology Industries (Wiley, Hoboken, NJ, 2010), p. 218.
99
Project Management Growth: Concepts and Definitions
Related Case Studies (from Kerzner/Project Management Case Studies, 4th Edition)
Related Workbook Exercises (from Kerzner/Project Management Workbook and PMP®/CAPM® Exam Study Guide, 11th Edition)
PMBOK® Guide, 5th Edition, Reference Section for the PMP® Certification Exam
Goshe Corporation MIS Project Management at First National Bank Cordova Research Group Cortez Plastics L. P. Manning Corporation Project Firecracker Apache Metals, Inc. Haller Specialty
Multiple Choice Exam Integration Management Scope Management
100
Manufacturing Creating a Methodology*
101
2.0 INTRODUCTION The growth and acceptance of project management has changed significantly over the past forty years, and these changes are expected to continue well into the twenty-first century, especially in the area of multinational project management. It is interesting to trace the evolution and growth of project management from the early days of systems management to what some people call “modern project management.”
PMBOK® Guide, 5th Edition Chapter 4 Integration Management
The growth of project management can be traced through topics such as roles and responsibilities, organizational structures, delegation of authority and decision- making, and especially corporate profitability. Twenty years ago, companies had the choice of whether or not to accept the project management approach. Today, some companies foolishly think that they still have the choice. Nothing could be further from the truth. The survival of the firm may very well rest upon how well project management is implemented, and how quickly.
102
2.1 GENERAL SYSTEMS MANAGEMENT
Organizational theory and management philosophies have undergone a dramatic change in recent years with the emergence of the project management approach to management. Because project management is an outgrowth of systems management, it is only fitting that the underlying principles of general systems theory be described. Simply stated, general systems theory can be classified as a management approach that attempts to integrate and unify scientific information across many fields of knowledge. Systems theory attempts to solve problems by looking at the total picture, rather than through an analysis of the individual components.
General systems theory has been in existence for more than four decades. Unfortunately, as is often the case with new theory development, the practitioners require years of study and analysis before implementation. General systems theory is still being taught in graduate programs. Today, project management is viewed as applied systems management.
In 1951, Ludwig von Bertalanffy, a biologist, described so-called open systems using anatomy nomenclature. The body’s muscles, skeleton, circulatory system, and so on, were all described as subsystems of the total system (the human being). Dr. von Bertalanffy’s contribution was important in that he identified how specialists in each subsystem could be integrated so as to get a better understanding of the interrelationships, thereby contributing to the overall knowledge of the operations of the system. Thus, the foundation was laid for the evolution and outgrowth of project management.
In 1956, Kenneth Boulding identified the communications problems that can occur during systems integration. Professor Boulding was concerned with the fact that subsystem specialists (i.e., physicists, economists, chemists, sociologists, etc.) have their own languages. He advocated that, in order for successful integration to take place, all subsystem specialists must speak a common language, such as mathematics. Today we use the PMBOK® Guide, the Project Management Body of Knowledge, to satisfy this need for project management.
General systems theory implies the creation of a management technique that is able to cut across many organizational disciplines—finance, manufacturing, engineering, marketing, and so on—while still carrying out the functions of management. This technique has come to be called systems management, project management, or matrix management (the terms are used interchangeably).
103
2.2 PROJECT MANAGEMENT: 1945–1960
During the 1940s, line managers used the concept of over-the-fence management to manage projects. Each line manager, wearing the hat of a project manager, would perform the work necessitated by their line organization, and when completed, would throw the “ball” over the fence in hopes that someone would catch it. Once the ball was thrown over the fence, the line managers would wash their hands of any responsibility for the project because the ball was no longer in their yard. If a project failed, blame was placed on whichever line manager had the ball at that time.
The problem with over-the-fence management was that the customer had no single contact point for questions. The filtering of information wasted precious time for both the customer and the contractor. Customers who wanted firsthand information had to seek out the manager in possession of the ball. For small projects, this was easy. But as projects grew in size and complexity, this became more difficult.
Following World War II, the United States entered into the Cold War. To win a Cold War, one must compete in the arms race and rapidly build weapons of mass destruction. The victor in a Cold War is the one who can retaliate with such force as to obliterate the enemy.
The arms race made it clear that the traditional use of over-the-fence management would not be acceptable to the Department of Defense (DoD) for projects such as the B52 Bomber, the Minuteman Intercontinental Ballistic Missile, and the Polaris Submarine. The government wanted a single point of contact, namely, a project manager who had total accountability through all project phases. The use of project management was then mandated for some of the smaller weapon systems such as jet fighters and tanks. NASA mandated the use of project management for all activities related to the space program.
Projects in the aerospace and defense industries were having cost overruns in excess of 200 to 300%. Blame was erroneously placed upon improper implementation of project management when, in fact, the real problem was the inability to forecast technology. Forecasting technology is extremely difficult for projects that could last ten to twenty years.
By the late 1950s and early 1960s, the aerospace and defense industries were using project management on virtually all projects, and they were pressuring their
104
suppliers to use it as well. Project management was growing, but at a relatively slow rate except for aerospace and defense.
Because of the vast number of contractors and subcontractors, the government needed standardization, especially in the planning process and the reporting of information. The government established a life-cycle planning and control model and a cost monitoring system, and created a group of project management auditors to make sure that the government’s money was being spent as planned. These practices were to be used on all government programs above a certain dollar value. Private industry viewed these practices as an overmanagement cost and saw no practical value in project management.
105
2.3 PROJECT MANAGEMENT: 1960–1985
The growth of project management has come about more through necessity than through desire. Its slow growth can be attributed mainly to lack of acceptance of the new management techniques necessary for its successful implementation. An inherent fear of the unknown acted as a deterrent for managers.
Between the middle and late 1960s, more executives began searching for new management techniques and organizational structures that could be quickly adapted to a changing environment. The table below identifies two major variables that executives consider with regard to organizational restructuring.
Type of Industry Tasks Environment A Simple Dynamic B Simple Static C ComplexDynamic D ComplexStatic
Almost all type C and most type D industries have project management–related structures. The key variable appears to be task complexity. Companies that have complex tasks and that also operate in a dynamic environment find project management mandatory. Such industries would include aerospace, defense, construction, high-technology engineering, computers, and electronic instrumentation.
Other than aerospace, defense, and construction, the majority of the companies in the 1960s maintained an informal method for managing projects. In informal project management, just as the words imply, the projects were handled on an informal basis whereby the authority of the project manager was minimized. Most projects were handled by functional managers and stayed in one or two functional lines, and formal communications were either unnecessary or handled informally because of the good working relationships between line managers. Many organizations today, such as low-technology manufacturing, have line managers who have been working side by side for ten or more years. In such situations, informal project management may be effective on capital equipment or facility development projects.
By 1970 and again during the early 1980s, more companies departed from informal project management and restructured to formalize the project management process, mainly because the size and complexity of their activities had grown to a point where they were unmanageable within the current structure. Figure 2–1 shows
106
what happened to one such construction company. The following five questions help determine whether formal project management is necessary:
FIGURE 2–1. Average project size capability for a construction company, 1960– 1984.
Are the jobs complex? Are there dynamic environmental considerations? Are the constraints tight? Are there several activities to be integrated? Are there several functional boundaries to be crossed?
If any of these questions are answered yes, then some form of formalized project management may be necessary. It is possible for formalized project management to exist in only one functional department or division, such as for R&D or perhaps just for certain types of projects. Some companies have successfully implemented both formal and informal project management concurrently, but these companies are few and far between. Today we realize that the last two questions may be the most important.
The moral here is that not all industries need project management, and executives must determine whether there is an actual need before making a commitment. Several industries with simple tasks, whether in a static or a dynamic environment, do not need project management. Manufacturing industries with slowly changing technology do not need project management, unless of course they have a requirement for several special projects, such as capital equipment activities, that could interrupt the normal flow of work in the routine manufacturing operations.
107
The slow growth rate and acceptance of project management were related to the fact that the limitations of project management were readily apparent, yet the advantages were not completely recognizable. Project management requires organizational restructuring. The question, of course, is “How much restructuring?” Executives have avoided the subject of project management for fear that “revolutionary” changes must be made in the organization. As will be seen in Chapter 3, project management can be achieved with little departure from the existing traditional structure.
Project management restructuring has permitted companies to:
Accomplish tasks that could not be effectively handled by the traditional structure Accomplish onetime activities with minimum disruption of routine business
The second item implies that project management is a “temporary” management structure and, therefore, causes minimum organizational disruption. The major problems identified by those managers who endeavored to adapt to the new system all revolved around conflicts in authority and resources.
Three major problems were identified by Killian1:
Project priorities and competition for talent may interrupt the stability of the organization and interfere with its long-range interests by upsetting the normal business of the functional organization. Long-range planning may suffer as the company gets more involved in meeting schedules and fulfilling the requirements of temporary projects. Shifting people from project to project may disrupt the training of new employees and specialists. This may hinder their growth and development within their fields of specialization.
Another major concern was that project management required upper-level managers to relinquish some of their authority through delegation to the middle managers. In several situations, middle managers soon occupied the power positions, even more so than upper-level managers. Despite these limitations, there were several driving forces behind the project management approach.
As the driving forces overtook the restraining forces, project management began to mature. Executives began to realize that the approach was in the best interest of the company. Project management, if properly implemented, can make it easier for executives to overcome such internal and external obstacles as:
Unstable economy Shortages
108
Soaring costs Increased complexity Heightened competition Technological changes Societal concerns Consumerism Ecology Quality of work
Project management may not eliminate these problems, but may make it easier for the company to adapt to a changing environment.
If these obstacles are not controlled, the results may be:
Decreased profits Increased manpower needs Cost overruns, schedule delays, and penalty payments occurring earlier and earlier An inability to cope with new technology R&D results too late to benefit existing product lines New products introduced into the marketplace too late Temptation to make hasty decisions that prove to be costly Management insisting on earlier and greater return on investment Greater difficulty in establishing on-target objectives in real time Problems in relating cost to technical performance and scheduling during the execution of the project
Project management became a necessity for many companies as they expanded into multiple product lines, many of which were dissimilar, and organizational complexities grew. This growth can be attributed to:
Technology increasing at an astounding rate More money invested in R&D More information available Shortening of project life cycles
To satisfy the requirements imposed by these four factors, management was “forced” into organizational restructuring; the traditional organizational form that had survived for decades was inadequate for integrating activities across functional “empires.”
By 1970, the environment began to change rapidly. Companies in aerospace, defense, and construction pioneered in implementing project management, and other
109
industries soon followed, some with great reluctance. NASA and the Department of Defense “forced” subcontractors into accepting project management. The 1970s also brought much more published data on project management. As an example2:
Project teams and task forces will become more common in tackling complexity. There will be more of what some people call temporary management systems as project management systems where the men [and women] who are needed to contribute to the solution meet, make their contribution, and perhaps never become a permanent member of any fixed or permanent management group.
The definition simply states that the purpose of project management is to put together the best possible team to achieve the objective, and, at termination, the team is disbanded. Nowhere in the definition do we see the authority of the project manager or his rank, title, or salary.
Because current organizational structures are unable to accommodate the wide variety of interrelated tasks necessary for successful project completion, the need for project management has become apparent. It is usually first identified by those lower-level and middle managers who find it impossible to control their resources effectively for the diverse activities within their line organization. Quite often middle managers feel the impact of a changing environment more than upper-level executives.
Once the need for change is identified, middle management must convince upper- level management that such a change is actually warranted. If top-level executives cannot recognize the problems with resource control, then project management will not be adopted, at least formally. Informal acceptance, however, is another story.
As project management developed, some essential factors in its successful implementation were recognized. The major factor was the role of the project manager, which became the focal point of integrative responsibility. The need for integrative responsibility was first identified in research and development activities3:
