List of Cases by ChapterChapter 1Development Project
- 1. List of Cases by Chapter Chapter 1 Development Projects in Lagos, Nigeria 2 “Throwing Good Money after Bad”: the BBC’s Digital Media Initiative 10 MegaTech, Inc. 29 The IT Department at Hamelin Hospital 30 Disney’s Expedition Everest 31 Rescue of Chilean Miners 32 Chapter 2 Tesla’s $5 Billion Gamble 37 Electronic Arts and the Power of Strong Culture in Design Teams 64 Rolls-Royce Corporation 67 Classic Case: Paradise Lost—The Xerox Alto 68 Project Task Estimation and the Culture of “Gotcha!” 69 Widgets ’R Us 70 Chapter 3 Project Selection Procedures: A Cross-Industry Sampler 77 Project Selection and Screening at GE: The Tollgate Process 97 Keflavik Paper Company 111
- 2. Project Selection at Nova Western, Inc. 112 Chapter 4 Leading by Example for the London Olympics— Sir John Armitt 116 Dr. Elattuvalapil Sreedharan, India’s Project Management Guru 126 The Challenge of Managing Internationally 133 In Search of Effective Project Managers 137 Finding the Emotional Intelligence to Be a Real Leader 137 Problems with John 138 Chapter 5 “We look like fools.”—Oregon’s Failed Rollout of Its ObamacareWeb Site 145 Statements of Work: Then and Now 151 Defining a Project Work Package 163 Boeing’s Virtual Fence 172 California’s High-Speed Rail Project 173 Project Management at Dotcom.com 175 The Expeditionary Fighting Vehicle 176 Chapter 6 Engineers Without Borders: Project Teams Impacting Lives 187 Tele-Immersion Technology Eases the Use of Virtual Teams 203 Columbus Instruments 215 The Bean Counter and the Cowboy 216 Johnson & Rogers Software Engineering, Inc. 217
- 3. Chapter 7 The Building that Melted Cars 224 Bank of America Completely Misjudges Its Customers 230 Collapse of Shanghai Apartment Building 239 Classic Case: de Havilland’s Falling Comet 245 The Spanish Navy Pays Nearly $3 Billion for a Submarine That Will Sink Like a Stone 248 Classic Case: Tacoma Narrows Suspension Bridge 249 Chapter 8 Sochi Olympics—What’s the Cost of National Prestige? 257 The Hidden Costs of Infrastructure Projects—The Case of Building Dams 286 Boston’s Central Artery/Tunnel Project 288 Chapter 9 After 20 Years and More Than $50 Billion, Oil is No Closer to the Surface: The Caspian Kashagan Project 297 Chapter 10 Enlarging the Panama Canal 331 Project Scheduling at Blanque Cheque Construction (A) 360 Project Scheduling at Blanque Cheque Construction (B) 360 Chapter 11 Developing Projects Through Kickstarter—Do Delivery Dates Mean Anything? 367 Eli Lilly Pharmaceuticals and Its Commitment to Critical Chain Project Management 385
- 4. It’s an Agile World 396 Ramstein Products, Inc. 397 Chapter 12 Hong Kong Connects to the World’s Longest Natural Gas Pipeline 401 The Problems of Multitasking 427 Chapter 13 New York City’s CityTime Project 432 Earned Value at Northrop Grumman 451 The IT Department at Kimble College 463 The Superconducting Supercollider 464 Boeing’s 787 Dreamliner: Failure to Launch 465 Chapter 14 Duke Energy and Its Cancelled Levy County Nuclear Power Plant 478 Aftermath of a “Feeding Frenzy”: Dubai and Cancelled Construction Projects 490 New Jersey Kills Hudson River Tunnel Project 497 The Project That Wouldn’t Die 499 The Navy Scraps Development of Its Showpiece Warship—Until the Next Bad Idea 500 Project ManageMent achieving coMPetitive advantage Jeffrey K. Pinto Pennsylvania State University
- 5. Boston Columbus Indianapolis New York San Francisco Hoboken Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo F o u r t h E d i t i o n To Mary Beth, my wife, with the most profound thanks and love for her unwavering support. And, to our children, Emily, AJ, and Joseph—three “projects” that are definitely over budget but that are performing far better than I could have hoped! VP, Product Management: Donna Battista Editor-in-Chief: Stephanie Wall Acquisitions Editor: Dan Tylman Program Manager Team Lead: Ashley Santora Program Manager: Claudia Fernandes Editorial Assistant: Linda Albelli VP, Marketing: Maggie Moylan Product Marketing Manager: Anne Fahlgren Field Marketing Manager: Lenny Raper Strategic Marketing Manager: Erin Gardner Project Manager Team Lead: Judy Leale Project Manager: Nicole Suddeth Operations Specialist: Carol Melville Cover Designer: Lumina Datamatics, Inc Cover Photo: f11photo/Fotolia
- 6. VP, Director of Digital Strategy & Assessment: Paul Gentile Manager of Learning Applications: Paul Deluca Digital Editor: Brian Surette Digital Studio Manager: Diane Lombardo Digital Studio Project Manager: Robin Lazrus Digital Studio Project Manager: Alana Coles Digital Studio Project Manager: Monique Lawrence Digital Studio Project Manager: Regina DaSilva Full-Service Project Management and Composition: Integra Printer/Binder: Edwards Brothers Cover Printer: Phoenix Color/Hagerstown Text Font: 10/12 Palatino Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Microsoft and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published as part of the services for any purpose. All such documents and related graphics are provided “as is” without warranty of any kind. Microsoft and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutor y, fitness for a particular purpose, title and non-infringement. In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the
- 7. use or performance of information available from the services. The documents and related graphics contained herein could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Microsoft and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time. Partial screen shots may be viewed in full within the software version specified. Microsoft® Windows®, and Microsoft Office® are registered trademarks of the Microsoft Corporation in the U.S.A. and other countries. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation. Copyright © 2016, 2013, 2010, 2007 by Pearson Education, Inc. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. For information regarding permissions, request forms and the appropriate contacts within the Pearson Education Global Rights & Permissions department, please visit www.pearsoned.com/permissions/. Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. Library of Congress Cataloging-in-Publication Data Pinto, Jeffrey K.
- 8. Project management : achieving competitive advantage/Jeffrey K. Pinto.—Fourth edition. pages cm Includes index. ISBN 978-0-13-379807-4 (alk. paper)—ISBN 0-13-379807-0 (alk. paper) 1. Project management. I. Title. HD69.P75P5498 2016 658.4'04—dc23 2014036595 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-379807-0 ISBN 13: 978-0-13-379807-4 http://www.pearsoned.com/permissions/ iii BrIEF COnTEnTS Preface xiii Chapter 1 Introduction: Why Project Management? 1 Chapter 2 The Organizational Context: Strategy, Structure, and Culture 36 Chapter 3 Project Selection and Portfolio Management 76 Chapter 4 Leadership and the Project Manager 115 Chapter 5 Scope Management 144 Chapter 6 Project Team Building, Conflict, and Negotiation
- 9. 186 Chapter 7 Risk Management 223 Chapter 8 Cost Estimation and Budgeting 256 Chapter 9 Project Scheduling: Networks, Duration Estimation, and Critical Path 296 Chapter 10 Project Scheduling: Lagging, Crashing, and Activity Networks 330 Chapter 11 Advanced Topics in Planning and Scheduling: Agile and Critical Chain 366 Chapter 12 Resource Management 400 Chapter 13 Project Evaluation and Control 431 Chapter 14 Project Closeout and Termination 477 Appendix A The Cumulative Standard Normal Distribution 509 Appendix B Tutorial for MS Project 2013 510 Appendix C Project Plan Template 520 Glossary 524 Company Index 534 Name Index 535 Subject Index 538
- 10. iv COnTEnTS Preface xiii Chapter 1 IntroduCtIon: Why ProjeCt ManageMent? 1 Project Profile: Development Projects in Lagos, Nigeria 2 Introduction 4 1.1 What Is a Project? 5 General Project Characteristics 6 1.2 Why Are Projects Important? 9 Project Profile: “Throwing Good Money after Bad”: the BBC’s Digital Media Initiative 10 1.3 Project Life Cycles 13 ◾ Box 1.1: Project Managers in Practice 15 1.4 Determinants of Project Success 16 ◾ Box 1.2: Project Management Research in Brief 19 1.5 Developing Project Management Maturity 19 1.6 Project Elements and Text Organization 23 Summary 27 • Key Terms 29 • Discussion Questions 29 • Case Study 1.1 MegaTech, Inc. 29 • Case Study 1.2 The IT Department at Hamelin Hospital 30 • Case Study 1.3 Disney’s Expedition
- 11. Everest 31 • Case Study 1.4 Rescue of Chilean Miners 32 • Internet Exercises 33 • PMP Certification Sample Questions 34 • Notes 34 Chapter 2 the organIzatIonal Context: Strategy, StruCture, and Culture 36 Project Profile: Tesla’s $5 Billion Gamble 37 Introduction 38 2.1 Projects and Organizational Strategy 39 2.2 Stakeholder Management 41 Identifying Project Stakeholders 42 Managing Stakeholders 45 2.3 Organizational Structure 47 2.4 Forms of Organizational Structure 48 Functional Organizations 48 Project Organizations 50 Matrix Organizations 53 Moving to Heavyweight Project Organizations 55 ◾ Box 2.1: Project Management Research in Brief 56 2.5 Project Management Offices 57 2.6 Organizational Culture 59 How Do Cultures Form? 61 Organizational Culture and Project Management 63 Project Profile: Electronic Arts and the Power of Strong Cul ture in Design Teams 64
- 12. Summary 65 • Key Terms 67 • Discussion Questions 67 • Case Study 2.1 Rolls-Royce Corporation 67 • Case Study 2.2 Classic Case: Paradise Lost—The Xerox Alto 68 • Case Study 2.3 Project Task Estimation and the Culture of “Gotcha!” 69 • Case Study 2.4 Widgets ’R Us 70 • Internet Exercises 70 • PMP Certification Sample Questions 70 • Integrated Project—Building Your Project Plan 72 • Notes 74 Contents v Chapter 3 ProjeCt SeleCtIon and PortfolIo ManageMent 76 Project Profile: Project Selection Procedures: A Cross-Industry Sampler 77 Introduction 78 3.1 Project Selection 78 3.2 Approaches to Project Screening and Selection 80 Method One: Checklist Model 80 Method Two: Simplified Scoring Models 82 Limitations of Scoring Models 84 Method Three: The Analytical Hierarchy Process 84 Method Four: Profile Models 88 3.3 Financial Models 90 Payback Period 90 Net Present Value 92 Discounted Payback 94
- 13. Internal Rate of Return 94 Choosing a Project Selection Approach 96 Project Profile: Project Selection and Screening at GE: The Tollgate Process 97 3.4 Project Portfolio Management 98 Objectives and Initiatives 99 Developing a Proactive Portfolio 100 Keys to Successful Project Portfolio Management 103 Problems in Implementing Portfolio Management 104 Summary 105 • Key Terms 106 • Solved Problems 107 • Discussion Questions 108 • Problems 108 • Case Study 3.1 Keflavik Paper Company 111 • Case Study 3.2 Project Selection at Nova Western, Inc. 112 • Internet Exercises 113 • Notes 113 Chapter 4 leaderShIP and the ProjeCt Manager 115 Project Profile: Leading by Example for the London Olympics— Sir John Armitt 116 Introduction 117 4.1 Leaders Versus Managers 118 4.2 How the Project Manager Leads 119 Acquiring Project Resources 119 Motivating and Building Teams 120 Having a Vision and Fighting Fires 121 Communicating 121 ◾ Box 4.1: Project Management Research in Brief 124
- 14. 4.3 Traits of Effective Project Leaders 125 Conclusions about Project Leaders 126 Project Profile: Dr. Elattuvalapil Sreedharan, India’s Project Management Guru 126 4.4 Project Champions 127 Champions—Who Are They? 128 What Do Champions Do? 129 How to Make a Champion 130 4.5 The New Project Leadership 131 ◾ Box 4.2: Project Managers in Practice 132 Project Profile: The Challenge of Managing Internationally 133 4.6 Project Management Professionalism 134 vi Contents Summary 135 • Key Terms 136 • Discussion Questions 136 • Case Study 4.1 In Search of Effective Project Managers 137 • Case Study 4.2 Finding the Emotional Intelligence to Be a Real Leader 137 • Case Study 4.3 Problems with John 138 • Internet Exercises 141 • PMP Certification Sample Questions 141 • Notes 142 Chapter 5 SCoPe ManageMent 144 Project Profile: “We look like fools.”—Oregon’s Failed Rollout of Its Obamacare Web Site 145
- 15. Introduction 146 5.1 Conceptual Development 148 The Statement of Work 150 The Project Charter 151 Project Profile: Statements of Work: Then and Now 151 5.2 The Scope Statement 153 The Work Breakdown Structure 153 Purposes of the Work Breakdown Structure 154 The Organization Breakdown Structure 159 The Responsibility Assignment Matrix 160 5.3 Work Authorization 161 Project Profile: Defining a Project Work Package 163 5.4 Scope Reporting 164 ◾ Box 5.1: Project Management Research in Brief 165 5.5 Control Systems 167 Configuration Management 167 5.6 Project Closeout 169 Summary 170 • Key Terms 171 • Discussion Questions 171 • Problems 172 • Case Study 5.1 Boeing’s Virtual Fence 172 • Case Study 5.2 California’s High-Speed Rail Project 173 • Case Study 5.3 Project Management at Dotcom.com 175 • Case Study 5.4 The Expeditionary Fighting Vehicle 176 • Internet Exercises 178 • PMP Certification Sample Questions 178 • MS Project Exercises 179
- 16. • Appendix 5.1: Sample Project Charter 180 • Integrated Project— Developing the Work Breakdown Structure 182 • Notes 184 Chapter 6 ProjeCt teaM BuIldIng, ConflICt, and negotIatIon 186 Project Profile: Engineers Without Borders: Project Teams Impacting Lives 187 Introduction 188 6.1 Building the Project Team 189 Identify Necessary Skill Sets 189 Identify People Who Match the Skills 189 Talk to Potential Team Members and Negotiate with Functional Heads 189 Build in Fallback Positions 191 Assemble the Team 191 6.2 Characteristics of Effective Project Teams 192 A Clear Sense of Mission 192 A Productive Interdependency 192 Cohesiveness 193 Trust 193 Enthusiasm 193 Results Orientation 194 Contents vii 6.3 Reasons Why Teams Fail 194 Poorly Developed or Unclear Goals 194 Poorly Defined Project Team Roles and Interdependencies 194 Lack of Project Team Motivation 195
- 17. Poor Communication 195 Poor Leadership 195 Turnover Among Project Team Members 196 Dysfunctional Behavior 196 6.4 Stages in Group Development 196 Stage One: Forming 197 Stage Two: Storming 197 Stage Three: Norming 198 Stage Four: Performing 198 Stage Five: Adjourning 198 Punctuated Equilibrium 198 6.5 Achieving Cross-Functional Cooperation 199 Superordinate Goals 199 Rules and Procedures 200 Physical Proximity 201 Accessibility 201 Outcomes of Cooperation: Task and Psychosocial Results 201 6.6 Virtual Project Teams 202 Project Profile: Tele-Immersion Technology Eases the Use of Virtual Teams 203 6.7 Conflict Management 204 What Is Conflict? 205 Sources of Conflict 206 Methods for Resolving Conflict 208 6.8 Negotiation 209 Questions to Ask Prior to the Negotiation 209 Principled Negotiation 210 Invent Options for Mutual Gain 212 Insist on Using Objective Criteria 213
- 18. Summary 214 • Key Terms 214 • Discussion Questions 215 • Case Study 6.1 Columbus Instruments 215 • Case Study 6.2 The Bean Counter and the Cowboy 216 • Case Study 6.3 Johnson & Rogers Software Engineering, Inc. 217 • Exercise in Negotiation 219 • Internet Exercises 220 • PMP Certification Sample Questions 220 • Notes 221 Chapter 7 rISk ManageMent 223 Project Profile: The Building that Melted Cars 224 Introduction 225 ◾ Box 7.1: Project Managers in Practice 227 7.1 Risk Management: A Four-Stage Process 228 Risk Identification 228 Project Profile: Bank of America Completely Misjudges Its Customers 230 Risk Breakdown Structures 231 Analysis of Probability and Consequences 231 Risk Mitigation Strategies 234 viii Contents Use of Contingency Reserves 236 Other Mitigation Strategies 237 Control and Documentation 237 Project Profile: Collapse of Shanghai Apartment Building 239 7.2 Project Risk Management: An Integrated Approach 241
- 19. Summary 243 • Key Terms 244 • Solved Problem 244 • Discussion Questions 244 • Problems 244 • Case Study 7.1 Classic Case: de Havilland’s Falling Comet 245 • Case Study 7.2 The Spanish Navy Pays Nearly $3 Billion for a Submarine That Will Sink Like a Stone 248 • Case Study 7.3 Classic Case: Tacoma Narrows Suspension Bridge 249 • Internet Exercises 251 • PMP Certification Sample Questions 251 • Integrated Project—Project Risk Assessment 253 • Notes 255 Chapter 8 CoSt eStIMatIon and BudgetIng 256 Project Profile: Sochi Olympics—What’s the Cost of National Prestige? 257 8.1 Cost Management 259 Direct Versus Indirect Costs 260 Recurring Versus Nonrecurring Costs 261 Fixed Versus Variable Costs 261 Normal Versus Expedited Costs 262 8.2 Cost Estimation 262 Learning Curves in Cost Estimation 266 ◾ Box 8.1: Project Management Research in Brief 270 Problems with Cost Estimation 272 ◾ Box 8.2: Project Management Research in Brief 274 8.3 Creating a Project Budget 275 Top-Down Budgeting 275 Bottom-Up Budgeting 276 Activity-Based Costing 276
- 20. 8.4 Developing Budget Contingencies 278 Summary 280 • Key Terms 281 • Solved Problems 282 • Discussion Questions 283 • Problems 284 • Case Study 8.1 The Hidden Costs of Infrastructure Projects—The Case of Building Dams 286 • Case Study 8.2 Boston’s Central Artery/Tunnel Project 288 • Internet Exercises 290 • PMP Certification Sample Questions 290 • Integrated Project—Developing the Cost Estimates and Budget 292 • Notes 294 Chapter 9 ProjeCt SChedulIng: netWorkS, duratIon eStIMatIon, and CrItICal Path 296 Project Profile: After 20 Years and More Than $50 Billion, Oil is No Closer to the Surface: The Caspian Kashagan Project 297 Introduction 298 9.1 Project Scheduling 299 9.2 Key Scheduling Terminology 300 9.3 Developing a Network 302 Labeling Nodes 303 Serial Activities 303 Concurrent Activities 303 Merge Activities 304 Burst Activities 305
- 21. 9.4 Duration Estimation 307 Contents ix 9.5 Constructing the Critical Path 311 Calculating the Network 311 The Forward Pass 312 The Backward Pass 314 Probability of Project Completion 316 Laddering Activities 318 Hammock Activities 319 Options for Reducing the Critical Path 320 ◾ Box 9.1: Project Management Research in Brief 321 Summary 322 • Key Terms 323 • Solved Problems 323 • Discussion Questions 325 • Problems 325 • Internet Exercises 327 • MS Project Exercises 328 • PMP Certification Sample Questions 328 • Notes 329 Chapter 10 ProjeCt SChedulIng: laggIng, CraShIng, and aCtIvIty netWorkS 330 Project Profile: Enlarging the Panama Canal 331 Introduction 333 10.1 Lags in Precedence Relationships 333 Finish to Start 333 Finish to Finish 334 Start to Start 334
- 22. Start to Finish 335 10.2 Gantt Charts 335 Adding Resources to Gantt Charts 337 Incorporating Lags in Gantt Charts 338 ◾ Box 10.1: Project Managers in Practice 338 10.3 Crashing Projects 340 Options for Accelerating Projects 340 Crashing the Project: Budget Effects 346 10.4 Activity-on-Arrow Networks 348 How Are They Different? 348 Dummy Activities 351 Forward and Backward Passes with AOA Networks 352 AOA Versus AON 353 10.5 Controversies in the Use of Networks 354 Conclusions 356 Summary 356 • Key Terms 357 • Solved Problems 357 • Discussion Questions 358 • Problems 358 • Case Study 10.1 Project Scheduling at Blanque Cheque Construction (A) 360 • Case Study 10.2 Project Scheduling at Blanque Cheque Construction (B) 360 • MS Project Exercises 361 • PMP Certification Sample Questions 361 • Integrated Project—Developing the Project Schedule 363 • Notes 365 Chapter 11 advanCed toPICS In PlannIng and SChedulIng: agIle and CrItICal ChaIn 366
- 23. Project Profile: Developing Projects Through Kickstarter —Do Delivery Dates Mean Anything? 367 Introduction 368 11.1 Agile Project Management 369 What Is Unique About Agile PM? 370 x Contents Tasks Versus Stories 371 Key Terms in Agile PM 372 Steps in Agile 373 Sprint Planning 374 Daily Scrums 374 The Development Work 374 Sprint Reviews 375 Sprint Retrospective 376 Problems with Agile 376 ◾ Box 11.1: Project Management Research in Brief 376 11.2 Extreme Programming (XP) 377 11.3 The Theory of Constraints and Critical Chain Project Scheduling 377 Theory of Constraints 378 11.4 The Critical Chain
- 24. Solution to Project Scheduling 379 Developing the Critical Chain Activity Network 381 Critical Chain