Initiating process group

IE4240 project management

 Learning objectives

Project Initiating Process Group – Precursor

o Project Selection

Project Initiating Process Group Activities

Project Initiating Process Group Outputs:

o Project Charter
o Stakeholders’ Register
 PM Process Groups & Knowledge Areas Mapping
Initiating (2) Planning (24) Executing (8) Monitor & Control (11) Closing (2)
Integration Develop Project Charter Develop PM Plan Direct & Manage Work Monitor & Control Work Close Project
Perform Integrated Change Control
Scope Plan Scope Mgt Validate Scope
Collect Requirements Control Scope
Define Scope
Create WBS
Time Plan Schedule Mgt Control Schedule
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Durations
Develop Schedule
Cost Plan Cost Mgt Control Cost
Estimate Cost
Determine Budget
Quality Plan Quality Mgt Perform Quality Assurance Perform Quality Control
Human Plan HRM Acquire Project Team
Resources Develop Project Team
Manage Project Team
Communications Plan Coms Mgt Manage Communications Control Communications
Risk Mgt Plan Risk Mgt Control Risks
Identify Risk
Qualitative Risk Analysis
Quantitative Risk Analysis
Plan Risk Analysis
Procurement Plan Procurement Mgt Conduct Procurement Control Procurements Close Procurement
Stakeholder Mgt Identify Stakeholders Plan Stakeholder Mgt Manage Stakeholders Control Stakeholder Engagement
The INITIATING PROCESS GROUP determines the nature and scope of the
project.

If this phase is not well thought out, it is unlikely that the project will be
successful in meeting goals/objectives.

The key project controls needed here are an understanding of the business
environment and making sure that all necessary controls are incorporated
into the project.
Project Initiating process Group - precursor

Project Selection
 Project Initiating process Group - precursor

Project Selection
When you have a number of interesting and challenging projects
to choose from, finding a project that is the right fit for your
team’s skillset, level of competence, and has the best chance of
success is the first step in effective project management.

Project Selection Methods offer a set of time-tested techniques

based on sound logical reasoning to choose a project and filter
out undesirable projects with very low likelihood of success.
Project selection methods are an important concept for practicing
project managers.
 Project Initiating process Group - precursor

Project Selection
Organizations are constantly initiating projects. Due to resource
constraints, organizations can’t handle all projects at once, so they
need to decide which project(s) will maximize profitability.

This is where project selection methods come into play. There are
two categories of project selection methods:

Benefit Measurement Methods

o For smaller projects

Constrained Optimization Methods

o For complex projects
 Benefit measurement methods
Project Selection
Benefit Measurement is a project selection technique based on the present value of estimated
cash outflow and inflow. Cost benefits are calculated and then compared to other projects to
make a decision. The techniques that are used in Benefit Measurement are as follows:

Economic Model Discounted Cash Flow Payback Period Internal Rate of Return

1 2 3 4 5 6 7 8

Cost/Benefit Ratio Scoring Model Opportunity Cost Net Present Value

 Cost/Benefit Ratio
Cost/Benefit Ratio is the ratio between the
Present Value of Inflow or the cost invested in a
project to the Present Value of Outflow, which is
the value of return from the project.
Projects that have a higher Benefit to Cost Ratio or
lower Cost to Benefit Ratio are generally chosen
over others.

Economic Model
EVA, or Economic Value Added, is a performance
metric that calculates the worth-creation of the
organization while defining the return on capital. It
is also defined as the net profit after the deduction
of taxes and capital expenditure.
If there are several projects assigned to a project
manager, the project that has the highest Economic
Value Added is picked. The EVA is always expressed
in numerical terms and not as a percentage.
 Scoring Model
The scoring model is an objective technique: the project
selection committee lists relevant criteria, weighs them
according to their importance and their priorities, then
adds the weighted values. Once the scoring of these
projects is completed, the project with the highest score is
chosen.

Discounted Cash Flow

It’s well-known that the future value of money will not be
the same as it is today. For example, $20,000 won’t have
the same worth ten years from now. Therefore, during
calculations of cost investment and ROI, be sure to
consider the concept of discounted cash flow.

Opportunity Cost
Opportunity Cost is the cost that is given up when
selecting another project. During project selection, the
project that has the lower opportunity cost is chosen.
 Payback Period

Payback Period is the ratio of the total cash to the

average per period cash. It takes into consideration the
payback period of an investment.

It is the time frame that is required for the return on an

investment to repay the original cost that was invested.

When the Payback period is used as the Project

Selection Method, the project that has the shortest
Payback period is preferred since the organization can
regain the original investment faster.

There are, however, a few limitations to this method:

It does not consider the time value of money.

Benefits accrued after the payback period are not
considered; it focuses more on the liquidity while
profitability is neglected.
Risks involved in individual projects are neglected
Net Present Value
Net Present Value is the difference between the
project’s current value of cash inflow and the
current value of cash outflow.

The NPV must always be positive.

When picking a project, one with a higher NPV is

preferred.

The advantage of considering the NPV over the

Payback Period is that it takes into consideration
the future value of money.

However, there are limitations of the NPV, too:

There isn’t any generally accepted method of

deriving the discount value used for the
present value calculation.

The NPV does not provide any picture of

profit or loss that the organization can make
by embarking on a certain project.
 Internal Rate of Return
The Internal Rate of Return is the interest rate at which the Net Present
Value is zero—attained when the present value of outflow is equal to the
present value of inflow.
Internal Rate of Return is defined as the “annualized effective
compounded return rate” or the “discount rate that makes the net present
value of all cash flows (both positive and negative) from a particular
investment equal to zero.”
The IRR is used to select the project with the best profitability; when
picking a project, the one with the higher IRR is chosen.
When using the IRR as the project selection criteria, organizations should
remember not to use this exclusively to judge the worth of a project; a
project with a lower IRR might have a higher NPV and, assuming there is
no capital constraint, the project with the higher NPV should be chosen as
this increases the shareholders’ profits.
 Constrained optimization methods
Project Selection
Constrained Optimization Methods, also known as the Mathematical Model of Project Selection,
are used for larger projects that require complex and comprehensive mathematical calculations.
The techniques that are used in Constrained Optimization Methods are as follows:

1 2 3 4 5

Linear Non Linear Integer Dynamic Multiple Objective

Programming Programming Programming Programming Programming

** These topics, however, are not discussed in detail in the PMP certification. For the exam, all
that is necessary to know is that this is the list of Mathematical Model techniques that are used
in Project Selection.
 Non-financial Considerations
Project Selection
There are non-financial gains that an organization must consider;
these factors are related to the overall organization goals. The
organizational strategy is a major factor in project selection
methods that will affect the organization’s choice in the choice of
project.

Customer service relationships are chief among these organizational

goals. An important necessity in today’s business world is to build
effective, cordial customer relationships.

Other organizational factors may include political issues, change of

management, speculative purposes, shareholders’ requests, etc.
Project Initiating process Group

Project ACTIVITIES
 Initiating (2) Planning (24) Executing (8) Monitor & Control (11) Closing (2)
Integration Develop Project Charter Develop PM Plan Direct & Manage Work Monitor & Control Work Close Project
PM Process Groups & Knowledge
Perform Integrated Change Control
Scope Plan Scope Mgt Validate Scope
Collect Requirements Control Scope
Define Scope
Create WBS
Time Plan Schedule Mgt Control Schedule
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Durations
Develop Schedule
Cost Plan Cost Mgt Control Cost
Estimate Cost
Determine Budget
Areas Mapping

Quality Plan Quality Mgt Perform Quality Assurance Perform Quality Control
Human Plan HRM Acquire Project Team
Resources Develop Project Team
Manage Project Team
Communications Plan Coms Mgt Manage Communications Control Communications
Risk Mgt Plan Risk Mgt Control Risks
Identify Risk
Qualitative Risk Analysis
Quantitative Risk Analysis
Plan Risk Analysis
Procurement Plan Procurement Mgt Conduct Procurement Control Procurements Close Procurement
Stakeholder Mgt Identify Stakeholders Plan Stakeholder Mgt Manage Stakeholders Control Stakeholder Engagement
Knowledge areas DEVELOP PROJECT CHARTER

This process group draws from the following PMBOK Knowledge Areas:

KNOWLEDGE AREAS INITIATING PROCESS GROUP

IDENTIFY
INTEGRATION DEVELOP PROJECT CHARTER STAKEHOLDERS
Perform
SCOPE
Quality
TIME
COST
QUALITY
HUMAN RESOURCES

COMMUNICATIONS
RISK MANAGEMENT
PROCUREMENT
STAKEHOLDER MGT IDENTIFY STAKEHOLDERS

Conduct
Manage
Procurement
Stakeholders
 Project Initiating Process group activities / tasks
Perform project assessment based upon available information, lessons learned from previous projects, and meetings with relevant
Task 1 stakeholders in order to support the evaluation of the feasibility of new products or services within the given assumptions and/or
constraints.
Identify key deliverables based on the business requirements in order to manage customer expectations and direct the achievement
Task 2 of project goals.

Task 3 Perform stakeholder analysis using appropriate tools and techniques in order to align expectations and gain support for the project.

Identify high level risks, assumptions, and constraints based on the current environment, organizational factors, historical data, and
Task 4 expert judgment, in order to propose an implementation strategy.

Participate in the development of the project charter by compiling and analyzing gathered information in order to ensure project
Task 5 stakeholders are in agreement on its elements.

Obtain project charter approval from the sponsor, in order to formalize the authority assigned to the project manager and gain
Task 6 commitment and acceptance for the project.

Task 7 Conduct benefit analysis with relevant stakeholders to validate project alignment with organizational strategy and expected business
value.

Inform stakeholders of the approved project charter to ensure common understanding of the key deliverables, milestones, and their
Task 8 roles and responsibilities.
Project Initiating Process Group outputs

Outputs

Project Charter Stakeholders’ Register

 Project Initiating Process Group Outputs

Project Charter
Project Charter refers to a statement of objectives in a project.
This statement also sets out detailed project goals, roles and
responsibilities, identifies the main stakeholders, and the level
of authority of a project manager.

It acts as a guideline for future projects as well as an important

material in the organization's knowledge management system.

The project charter is a short document that would consist of

new offering request or a request for proposal. This document is
a part of the project management process, which is required by
Initiative for Policy Dialogue (IPD) and Customer Relationship
Management (CRM).
Project Charter
Roles/Purpose
It documents the reasons for undertaking the
project.

Outlines the objectives and the constraints

faced by the project.

Provides solutions to the problem at hand.

Identifies the main stakeholders of the project.

Establish high level budget and spending

authority.
Project Charter
Benefits
It improves and paves way for good customer relationships.

Project Charter also works as a tool that improves project management

processes.

Regional and headquarter communications can also be improved to a

greater extent.

By having a project charter, project sponsorship can also be gained.

Project Charter recognizes senior management roles.

Allows progression, which is aimed at attaining industry best practices

Elements in project Charter
Project purpose or justification

Objectives, deliverables and

Info on project manager and success criteria
team members
Project
Charter
Assumptions and constraints

Project timeline/schedule and

budget List of project stakeholders
Effective project charter
…. need to address these key elements:

Identity of the project. Results that could be expected in terms of

Time: the start date and the deadline for performance.
the project. The expected date that the objectives is to
People involved in the project. be achieved.

Outlined objectives and set targets. Clearly defined roles and responsibilities of
the participants involved.
The reason for a project charter to be
carried out, often referred to as 'business Requirement of resources that will be
case'. needed for the objectives to be achieved.

Detailed description of a problem or an Barriers and the risks involved with the
opportunity. project.

The return expected from the project. Informed and effective communication
plan.
This outlines the need for a project charter
to take place. A business case should set
out the benefits gained from carrying out a
Project selection
Effective project charter
project charter. Benefits need not only be in
terms of finance such as revenue, cost
reduction, etc., but also the benefit that the
customer receives.
Business Case
The following are the characteristics of a
good business case:

The reasons of undertaking the project.

The benefits gained from undertaking
the project now.
The consequences of not doing the
project.
The factors that would conclude that it
fits the business goals.
How to Create a
Project Charter
Step 1: Establish the Project Vision
This doc is all about vision. What is the vision of your
project? Without identifying this overall goal you’ll
not be able to move forward with achieving it.

If vision sounds too vague a word, then just look for

what encapsulates the purpose of your project. Even
more succinct: what’s the defined end goal for the
project team?

You can then break your vision down even further

into objectives, scope and deliverables.
 Step 1: Establish the Project Vision

OBJECTIVES
Now that you’ve got the vision envisioned, it’s time to list about three to five objectives that the
project is aiming to achieve. Make sure that each of these objects are specific, measureable,
achievable, realistic and time bound (or SMART, if it helps you to remember!)

SCOPE
The next step is to figure out the scope of your project, by which you’ll outline the formal
boundaries of the project by describing how the business may change or be altered by delivery of
your project as well as what is relevant to the project and what isn’t. Clearly defining the scope at
the start of the project is key to helping maintain control of your project.

DELIVERABLES
That brings us to the deliverables. Describe each one that the project is going to produce. Now
you’re ready to take the next step.
Step 2: Catalog the Project Organization

There are four subsets to this step, as you

identify how you’re going to structure the
project.

This is done through a thorough listing of its

customers, stakeholders, roles &
responsibilities, and reporting lines.
 Step 2: Catalog the Project Organization

Customers/End Users
The customer is always right! So start by identifying who the project customers (sponsors) are.
Before that, of course, you’ll need to know what a customer or end user is in the context of your
project, which is a person or entity responsible for accepting the deliverables of your completed
project.

Stakeholders
Next, you need to identify the person(s) or entity within or outside the project who have specific
key interests or “stake” in the project.

Roles
Once you have done the above, you’ll need to assign the key roles necessary to deliver the project. That means
the project sponsor, project board and project manager, with a short summary of each role and its
responsibilities.

Structure
With these complete, you can now move on to describing what the lines of reporting will be between these
roles in a project organization chart.
Step 3: Plan the Approach to Implementation

The project charter is almost finished and you already have

a strong idea of what your project needs and how to
organize it to get the job done.

The next step is divided into four parts to help you

implement the project, namely implementation plan,
milestones, dependencies, and resource plans
Step 3: Plan the Approach to Implementation

Implementation Plan
One of your responsibilities is to create the implementation plan, which must be well thought out
and thorough. You have to list the phases, activities and timeframes of the project’s lifecycle.

Milestones
One of the more important things in the project to keep track of are milestones, which are bigger
than tasks and should be decided on sparingly. These are important events in the lifecycle of your
project, such as the completion of a key deliverable.

Dependencies
List all the key dependencies and their importance to the project. A dependence is an activity
that will likely impact the project during its lifecycle.

Resource Plan
Summarize the resources required on the project by breaking them down into labor, equipment
and materials. That way you know what you need before starting and can budget accordingly.
Step 4: List the Risk and Issues

We’ve made it, but there is one final step to take in

order to have completed the project charter process.
That’s to identify any risks, issues, assumptions and
constraints related to the project.

If you’ve followed these four steps then the end result

is a clear and thorough project charter. This is
foundational to the success of your project.

Congratulate yourself, you’ve now better managed the

scope and deliverables of your project, and on deadline
and under budget.
Project Initiating Process Group outputs

Outputs

Stakeholders’ Register
Project Initiation process Group Outputs:

Identifying
stakeholders
As per the PMBOK Guide 5th edition, “A
stakeholder is an individual, group, or
organization who may affect, be affected by
or perceive itself to be affected by a decision,
activity, or outcome of a project.”
Why identify and analyze stakeholders
and their interests?
The most important reason is that it allows you to recruit them as part
of the effort. In most cases, a participatory effort that involves
representation of as many stakeholders as possible has a number of
important advantages:

1 It puts more ideas on the table than would be the case if the
development and implementation of the effort were
confined to a single organization or to a small group of like-
minded people.

2 It includes varied perspectives from all sectors and elements of

the community affected, thus giving a clearer picture of the
community context and potential pitfalls and assets.
3 It gains buy-in and support for the effort from all stakeholders by
making them an integral part of its development, planning,
implementation, and evaluation. It becomes their effort, and they’ll
do their best to make it work.

4 It’s fair to everyone. All stakeholders can have a say in the

development of an effort that may seriously affect them.

5 It saves you from being blindsided by concerns you didn’t know

about. If everyone has a seat at the table, concerns can be aired
and resolved before they become stumbling blocks.

6 It strengthens your position if there’s opposition. Having all

stakeholders on board makes a huge difference in terms of political
and moral clout.

7 It creates bridging social capital for the community.

8 It increases the credibility of your organization. Involving and
attending to the concerns of all stakeholders establishes your
organization as fair, ethical, and transparent, and makes it more likely
that others will work with you in other circumstances.

9 It increases the chances for the success of your effort. For all of
the above reasons, identifying stakeholders and responding to
their concerns makes it far more likely that your effort will have
both the community support it needs and the appropriate focus to
be effective.
Who Are Potential
Stakeholders?
PRIMARY STAKEHOLDERS
The people or groups that stand to be directly affected, either positively or
negatively, by an effort or the actions of an agency, institution, or
organization. In some cases, there are primary stakeholders on both sides of
the equation: a regulation that benefits one group may have a negative effect
on another. A rent control policy, for example, benefits tenants, but may hurt
landlords. Case: Air BnB

SECONDARY STAKEHOLDERS
The people or groups that are indirectly affected, either positively or negatively,
by an effort or the actions of an agency, institution, or organization. A program
to reduce domestic violence, for instance, could have a positive effect on
emergency room personnel by reducing the number of cases they see. It might
require more training for police to help them handle domestic violence calls in
a different way. Both of these groups would be secondary stakeholders.
KEY STAKEHOLDERS
People who might belong to either or neither of the first two groups, are those
who can have a positive or negative effect on an effort, or who are important
within or to an organization, agency, or institution engaged in an effort.

The director of an organization might be an obvious key stakeholder, but so

might the line staff – those who work directly with participants – who carry out
the work of the effort.

If they don’t believe in what they’re doing or don’t do it well, it might as well
not have begun.

Other examples of key stakeholders might be funders, elected or appointed

government officials, heads of businesses, or clergy and other community
figures who wield a significant amount of influence.
 Team Sponsors
Members

Senior
Shareholders
Leaders

Project
Competitors Managers
Stakeholders

Suppliers Employees

Users Customers
Conduct Brainstorming sessions
Conducting a brainstorming session is a good method to
collect information on any given subject. You can use
this tool to identify stakeholders for your project. You
can hold brainstorming sessions with your team
members and experts.

During a brainstorming session, try to find the answers

to the following questions:

1 Who is directly involved with the project?

2 Who is indirectly involved with the project?

3 Who may be affected by the project?

4 Who may be affected by the project’s outcome?

5 Who gains or loses from the project’s success?

6 Who wants to complete the project successfully and who doesn’t?

7 Who are the suppliers?

8 Who is the user of the end result of the project?

9 Who are the competitors?

10 Who are the shareholders?

11 Is any local community impacted by the project or its outcome?

12 Who has the authority to influence the project or its outcome?

13 Who has the authority to make the project succeed?

14 Who can make your project fail?

STAKEHOLDER ANALYSIS/ STAKEHOLDER
MAPPING
1 Let’s suppose that you’ve identified all the stakeholders, and that you understand each of their
concerns. Now what? They all have to understand what you want to do, you have to respond
to their concerns in some way – at least by acknowledging them, whether you can satisfy them
or not – and you have to find a way to move forward with as much support from stakeholders
as you can muster.

2 Stakeholder analysis (stakeholder mapping) is a way of determining who among stakeholders

can have the most positive or negative influence on an effort, who is likely to be most affected
by the effort, and how you should work with stakeholders with different levels of interest and
influence.
3 Most methods of stakeholder analysis or
mapping divide stakeholders into one of four
groups, each occupying one space in a four-space High High
Influence, Influence,
grid
Low Interest High Interest
4 Low to high influence over the effort runs along a (Latents) (Promoters)
line from the bottom to the top of the grid, and
low to high interest in the effort runs along a line
from left to right. Both influence and interest can Low Low
Influence, Influence,
be either positive or negative, depending on the
perspectives of the stakeholders in question. Low Interest High Interest
(Apathetics) (Defenders)

5 The lines describing them are continuous,

meaning that people can have any degree of
interest from none to as high as possible,
including any of the points in between.
6 Promoters have both great interest in the
effort and the power to help make it
successful (or to derail it). High High
Influence, Influence,
Defenders have a vested interest and can Low Interest High Interest
voice their support in the community, but (Latents) (Promoters)
have little actual power to influence the
effort in any way.
Low Low
Latents have no particular interest or Influence, Influence,
involvement in the effort, but have the Low Interest High Interest
power to influence it greatly if they become (Apathetics) (Defenders)
interested.

Apathetics have little interest and little

power, and may not even know the effort
exists.
7 The people we’ve described as “key stakeholders” would generally appear in the
upper right quadrant.

8 The purpose of this kind of diagram is to help you understand what kind of
influence each stakeholder has on your organization and/or the process and
potential success of the effort. That knowledge in turn can help you decide how to
manage stakeholders – how to marshal the help of those that support you, how to
involve those who could be helpful, and how to convert – or at least neutralize –
those who may start out feeling negative.

9 An assumption that most proponents of this analysis technique seem to make is

that the stakeholders most important to the success of your effort are in the upper
right section of the grid, and those least important are in the lower left. The names
in parentheses are another way to define the same stakeholder characteristics in
terms of how they relate to the effort.
 Areas of Greatest Impacts
Stakeholders’ Potential to Add Value Costs of Change
DEGREE

INITIATE PLAN EXECUTE CLOSURE

 Inconsistency Between Management Attention and Value
of that Attention
Ability to Influence Outcome
DEGREE

Actual Management Activity Profile

INITIATE PLAN EXECUTE CLOSURE

 Stakeholder identification
Final thoughts
Stakeholder identification is a continuous process which happens until the project ends. You have to
keep looking for project stakeholders throughout the project life cycle. As the project moves forward
you may find some new stakeholders introduced to your project, and you will also notice that some
of your old stakeholders may no longer have any interest in your project. Power and interest may
also change over time; therefore, you should keep monitoring it as well.

Once you collect the list of stakeholders, you will record it in the STAKEHOLDER REGISTER. In this
register, not only do you note their names and titles, but you also must record all relevant
information about them such as their interest, power, influence, expectations, requirements,
communications requirements, etc. This will help you in drafting the stakeholder management
strategy.
Q&A