MIDTERM REVIEWER FOR OM AND TQM

WHAT IS PROJECT MANAGEMENT?

 A project may be defined as a series of related jobs usually directed toward some major output
and requiring a significant period of time to perform.
 Project management can be defined as planning, directing, and controlling resources (people,
equipment, material) to meet the technical, cost, and tithe constraints of the project.
 Although projects are often thought to be one-time occurrences, the fact is that many projects
can be repeated or transferred to other settings or products. The result will be another project
output. A contractor building houses or a firm producing low-volume products such as
supercomputers, locomotives, or linear accelerators can effectively consider these as projects

TOP 10 REASONS WHY PROJECT MANAGEMENT IS IMPORTANT

10. Organizations that are willing to allow planned, poorly led projects weakened themselves and
endanger employees by wasting precious resources
9. Organizations that are flattering (e.g. through reengineering, downsizing, or rightsizing) will depend on
projects and project leaders to get work done that was once handled by departments.
8. With rare exceptions, project prime movers believe that project meltdowns are the results of weak
project leadership.
7. More than one lumpy project leadership performance can give you a reputation that will repel future
project leadership.
6. Project work is often disguised by the use of the word team: if you find yourself on or leading teams,
you’re probably working with others to complete a project.
5. The abilities that tare required to organize and carry out successful projects will enhance other
aspects of your job
4. Leading successful projects is the best way to prove your promotability to the people who make those
decisions.
3. The best way to promote effective project leadership is to set examples that are so powerful and
positive that others wouldn’t dare do less.
2. Project leaders seldom get better until they know how to do it right.
1. If you’re not getting better, you’re getting worse as you det older.

STRUCTURING PROJECTS
Before the project starts, senior management must decide which of three organizational structures will
be used to the project to the parent firm pure project, functional project, or matrix project.

PURE PROJECT
Tom Peters predicts that most of the world's work will be "brainwork," done in semipermanent networks
of small project-oriented teams, each one an autonomous, entrepreneurial center of opportunity, where
the necessity for speed and flexibility dooms the hierarchical management structures we and our
ancestors grew up with. Thus, out of the three basic project organizational structures, Peters favors the
pure project (nicknamed skunk works) where a self-contained team works full-time on the project
ADVANTAGES
 The project manager has full authority over the project
 Team members report in one boss.
 They do not have to worry about dividing loyalty with a functional area manager
 Lines of communication are shortened.
 Decisions are made quickly
 Team pride, motivation, and commitment are high.
DISADVANTAGES
 Duplication of resources. Equipment and people are not shared across projects.
 Organizational goals and policies are ignored, as team members are often both physically
and psychologically removed from headquarters
 The organization falls behind in its knowledge of new technology due to weakened
functional divisions
 Because team members have no functional area home, they worry about life after project,
and project termination is delayed

FUNCTIONAL PROJECT
At the other end of the project organization spectrum is the functional project, housing the project
within a functional division.
ADVANTAGES
  A team member can work on several projects.
 Technical expertise is maintained within the functional area even if individuals leave the
project or organization.
 The functional area is a home after the project is completed. Functional specialists can
advance vertically.
 A critical mass of specialized functional-area experts creates synergy solutions to a project's
technical problems.
DISADVANTAGES
 Aspects of the project that are not directly related to the functional area get short- changed.
 Motivation of team members is often weak.
 Needs of the client are secondary and are responded to slowly.

MATRIX PROJECT
The classic specialized organizational form, "the matrix project," attempts to blend properties of
functional and pure project structures. Each project utilizes people from different functional areas. The
project manager (PM) decides what tasks and when they will be performed, but the functional managers
control which people and technologies are used. If the matrix form is chosen, different projects (rows of
the matrix) borrow resources from functional areas (columns). Senior management must then decide
whether a weak, balanced, or strong form of a matrix is to be used. This establishes whether project
managers have little, equal, or more authority than the functional managers with whom they negotiate
for resources.
ADVANTAGES
 Communication between functional divisions is enhanced
 A project manager is held responsible for successful completion of the project.
 Duplication of resources is minimized.
 Team members have a functional "home" after project completion, so they are less worried
about life-after-project than if they were a pure project organization.
 Policies of the parent organization are followed. This increases support for the project.
DISADVANTAGES
 There are two bosses. Often the functional manager will be listened to before the project
manager.
 After all, who can promote you or give you a raise? It is doomed to failure unless the PM has
strong negotiating skills
 Suboptimization is a danger, as PMs hoard resources for their own project, thus harming other
projects.

Note that regardless of which of the three major organizational forms is used, the proj ect manager is
the primary contact point with the customer. Communication and flexibility are greatly enhanced
because one person is responsible for successful completion of the project.

WORK BREAKDOWN STRUCTURE

A project starts out as a statement of work (SOW). The SOW may be a written description of the
objectives to be achieved, with a brief statement of the work to be done and a proposed schedule
specifying the start and completion dates. It could also contain performance measures in terms of
budget and completion steps (milestones) and the written reports to be supplied.
A task – is a further subdivision of a project. It is usually not longer than several months in duration and
is performed by one group or organization. A subtask may be used if needed to further subdivide the
project into more meaningful pieces.
A work package – is a group of activities combined to be assignable to a single organizational unit. It still
falls into the format of all project management, the package provides a description of what is to be
done, when it is to be started and completed, the budget, measures of performance, and specific events
to be reached at points in time. These specific events are called project milestones. Typical milestones
might be the completion of the design, the production of a prototype, the completed testing of the
prototype, and the Project approval of a pilot run.
The work breakdown structure (WBS) – defines the hierarchy of project tasks, subtasks, and work
packages. Completion of one or more work packages results in the completion of a subtask, completion
of one or more subtasks results in the completion of a task, and finally, the completion of all tasks is
required to complete the project. A representation of this structure is shown in Exhibit 3.1.

Exhibit 3.2 shows the WBS for an optical scanner project. The WBS is important in organizing a project
because it breaks the project down into manageable pieces. The number of levels will vary depending on
the project. How much detail or how many levels to use depends on the following:
 The level at which a single individual or organization can be assigned responsibility and
accountability for accomplishing the work package.
  The level at which budget and cost data will be collected during the project.

PROJECT CONTROL CHARTS

The US. Department of Defense (one of the earliest large users of project management) has published a
variety of helpful standard forms. Many are used directly or have been modified by firms engaged in
project management. Computer programs are available to quickly generate the charts described in this
section. Charts are useful because their visual presentation is easily understood. Exhibit 3.3 shows a
sample of the available charts.
GANTT CHART – sometimes referred to as a bar chart, showing both the amount of time involved and
the sequence in which activities can be performed. The chart is named after Henry L. Gantt, who won a
presidential citation for his application of this type of chart to shipbuilding during World War 1.
 Exhibit 3.3A "long lead procurement and manufacturing schedules" are independent activities
and can occur simultaneously. All other activities must be done in the sequence from top to
bottom.
 Exhibit 3.3B graphs the amounts of money spent on labor, material, and overhead. Its value is its
clarity in identifying sources and amounts of cost
 Exhibit 3.3C shows the percentage of the project's labor hours that comes from the various
areas of manufacturing, finance, and so on. These labor hours are related to the proportion of
the project's total labor cost. For example, manufacturing is responsible for 50 percent of the
project's labor hours, but this 50 percent has been allocated just 40 per cent of the total labor
dollars charged.
 Exhibit 3.3D shows the degree of completion of these projects. The dotted vertical line signifies
today. Project 1, therefore, is already late because it still has work to be done. Project 2 is not
being worked on temporarily, so there is a space before the projected work. Project 3 continues
to be worked on without interruption. The bottom of Exhibit 3.3D compares actual total costs
and projected costs. As we see, two cost overruns occurred, and the current cumulative costs
are over projected cumulative costs.
 Exhibit 3.3E is a milestone chart. The three milestones mark specific points in the project where
checks can be made to see if the project is on time and where it should be. The best place to
locate milestones is at the completion of a major activity. In this exhibit, the major activities
completed were "purchase order release," "invoices received," and "material received".

NETWORK-PLANNING MODELS

The Critical Path Method (CPM) – was developed for scheduling maintenance shutdowns at chemical
processing plants owned by Du Pont. CPM is based on the assumptions that project activity times can
be estimated accurately and that they do not vary.
– Determining scheduling information about each activity in the project is the major goal of CPM
techniques
The Program Evaluation and Review Technique (PERT) – was developed for the U.S. Navy's Polaris
missile project. PERT was developed to handle uncertain time estimates.
Critical path of activities in a project – is the sequence of activities that form the longest chain in terms
of their time to complete. If any one of the activities in the critical path is delayed, then the entire
project is delayed.

CPM WITH A SINGLE TIME ESTIMATE

Consider that you have a group assignment that requires a decision on whether you should invest in a
company. Your instructor has suggested that you perform the analysis in the following four steps:
A. Select a company.
B. Obtain the company's annual report and perform a ratio analysis
C. Collect technical stock price data and construct charts
D. Individually review the data and make a team decision on whether to buy the stock.

The following are the appropriate steps.

1. Identify each activity to be done in the project, and estimate how long it will take to complete
each activity. This is simple, given the information from your instructor. We identify the activities
as follows: A (1), B (2), C (1), D (1). The number is the expected duration of the activity.
2. Determine the required sequence of activities, and construct a network reflecting the
precedence relationships. An easy way to do this is to first identify the immediate predecessors
associated with an activity. The immediate predecessors are the immediate activities that need
to be completed immediately before an activity. Activity A needs to be completed before
activities B and C can start. B and C need to be completed before D can start.
 3. Determine the critical path. Consider each sequence of activities that runs from the beginning
to the end of the project.
4. Determine the early start/finish and late start/finish schedule. To schedule the project, find
when each activity needs to start and when it needs to finish. For some activities in a project
there may be some leeway in when an activity can start and finish. This is called the slack time
(time that an activity can be delayed; difference between early and late starts of an activity) in
an activity. For each activity in the project, we calculate four points in time: the early start, early
finish, late start, and late finish times. The early start and early finish are the earliest times that
the activity can start and be finished. Similarly, the late start and late finish are the latest times
the activities can start and finish. The difference between the late start time and early start time
is the slack time. To help keep all of this straight, we place these numbers in special places
around the nodes that represent each activity in our network diagram, as shown here. Early start
Late start Activity (duration) Early L finish.

three-time estimate approach – introduces the ability to consider the probability that a project will be
completed within a particular amount of time. The assumption needed to make this probability estimate
is that the activity duration times are independent random variables if this is true, the central limit
theorem can be used to find the mean and the variance of the sequence of activities that form the
critical path.
central limit theorem – says that the sum of a group of independent, identically distributed random
variables approaches a normal distribution at the number of random variables increases in the case of
project management problems, the random variable is the expected time (ET) for each activity. For this
the expected time to complete the critical path activities is the sum of the activity times.

TIME-COST MODELS – extension of the CPM that consider the trade-off between the time required to
complete an activity and cost. Often referred to as “crashing” the project

MINIMUM-COST SCHEDULING (TIME-COST TRADE-OFF)

The basic assumption in minimum-cost scheduling is that there is a relationship between activity
completion time and the cost of a project. On one hand, it costs money to expedite an activity; on the
other, it costs money to sustain (or lengthen) the project. The costs associated with expediting activities
are termed activity direct costs and add to the project direct cost. Some may be worker-related, such as
overtime work, hiring more workers, and transferring workers from other jobs, others are resource-
related, such as buying or leasing additional or more efficient equipment and drawing on additional
support facilities. The costs associated with sustaining the project are termed project indirect costs
overhead, facilities, and resource opportunity costs, and, under certain contractual situations. penalty
costs or lost incentive payments. Because activity direct costs and project indirect costs are opposing
costs dependent on time, the scheduling problem is essentially one of finding the project duration that
minimizes their sum, or in other words, finding the optimum point in a time-cost trade-off.
The procedure for finding this point consists of the following five steps (further explained in exhibit 3.8).
1. Prepare a CPM-type network diagram. For each activity this diagram should list:
 Normal cost (NC): the lowest expected activity costs
 Normal time (NT): the time associated with each normal cost.
 Crash time (CT): the shortest possible activity time.
 Crash cost (CC): the cost associated with each crash time
2. Determine the cost per unit of time (assume days) to expedite each activity. The relationship
between activity time and cost may be shown graphically by plotting CC and CT coordinates and
connecting them to the NC and NT coordinates by a concave, convex, or straight line-or some
other form, depending on the actual cost structure of activity performance.
3. Compute the critical path. For the simple network we have been using, this schedule would take
10 days. The activity that has the long duration is the critical path
4. Shorten the critical path at the least cost. The easiest way to proceed is to stan with the normal
schedule, find the critical path, and reduce the path time by one day using the lowest-cost
activity.
5. Plot project direct, indirect, and total-cost curves and find the minimum-cost schedule.

MANAGING RESOURCES

In addition to scheduling each task, we must assign resources. Modern software quickly highlights
overallocations situations in which allocations exceed resources. To resolve overallocations manually, you
can either add resources or reschedule. Moving a task within its slack can free up resources. Mid to high-
level project management information systems (PMIS) software can resolve overallocations through a
"leveling" feature. You can specify that low-priority tasks should be delayed until higher-priority ones are
complete, or that the project should end before or after the original deadline.

TRACKING PROGRESS
A tracking Gantt chart – superimposes the current schedule onto a baseline plan so deviations are easily
noticed. If you prefer, a spreadsheet view of the same information could be output. Deviations between
planned start/finish and newly scheduled start/finish also appear, and a "slipping filter" can be applied to
highlight or output only those tasks that are scheduled to finish at a later date than the planned
baseline. Management by exception can also be applied to find deviations between budgeted costs and
actual costs

CAUTIONS ON CRITICAL PATH ANALYSIS

This section summarizes some significant assumptions and their criticisms. The beta distribution of
activity times, the three-time estimates, the activity variances, and the use of the normal distribution to
arrive at project completion probabilities are all potential sources of misunderstandings, and with
misunderstanding comes distrust and obstruction. Thus, management must be sure that the people
charged with monitoring and controlling activity performance understand the statistics.
1. Assumption: Project activities can be identified as entities. (There is a clear beginning and ending
point for each activity.)
Criticism: Projects, especially complex ones, change in content over time, so a network made at
the beginning may be highly inaccurate later. Also, the very fact that activities are specified and a
network is formalized tends to limit the flexibility that is required to handle changing situations
as the project progresses.
2. Assumption: Project activity sequence relationships can be specified and networked
Criticism: Sequence relationships cannot always be specified beforehand. In some projects, in
fact, ordering certain activities is conditional on previous activities.
3. Assumption: Project control should focus on the critical path.
Criticism: It is not necessarily true that the longest time-consuming path (or the path with zero
slack) obtained from summing activity expected time values ultimately determines project
completion time. What often happens as the project progresses is that some activity not on the
critical path becomes delayed to such a degree that it extends the entire project. For this reason,
it has been suggested that a "critical activity” concept replace the critical path concept as the
focus of managerial control. Under this approach, attention would center on those activities that
have a high potential variation and he on the critical path or on a "near-critical path." A near-
critical path is one that does not share any activities with the critical path and, though it has
slack could become critical if one or a few activities along it become delayed.
4. Assumption: The activity time estimates, when using the three-time approach, follow the beta
distribution, with the variance of the project assumed to equal the sum of the variances along
the critical path.
Criticism: Although originally the beta distribution was selected for a variety of good reasons,
each component of the statistical treatment has been brought me question. First, the formulas
are in reality a modification of the beta distribution mean and variance which, when compared
to the basic formulas, could be expected to lead to absolute errors on the order of 10 percent for
the entire project and 5 percent for the individual activity variances. Second, given that the
activity-time dies buttons have the properties of unimodality, continuity, and finite positive end
print, other distributions with the same properties would yield different means and variances.
Third, obtaining three "valid" time estimates to put into the formulas presents operational
problems; it is often difficult to arrive at one activity time estimate, let alone three, and the
subjective definitions of the optimistic and pessimistic times do not help the matter.

 Activities – is a piece of work within a project that consume time. The completion of all the
activities of a project marks the end of the project.
 Immediate predecessor – activity that needs to be completed before another activity