Management control of projects
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The document discusses the management control of projects. It defines a project as a set of activities intended to accomplish a specified end result of interest to management. Projects vary in size and complexity, from small annual audits to large multi-year efforts like landing astronauts on the moon. Effective project management requires formal control systems to manage resources, schedules, budgets, and ensure objectives are met. Key aspects of control include monitoring time, costs, quality, and generating positive goal-seeking behavior through appropriate control mechanisms. Control is exercised through various phases from initial planning to ongoing execution and post-performance reviews.
Management control of projects
- 1. MANAGEMENT CONTROL OF PROJECTS INTRODUCTION This Statement describes the management control of projects, as contrasted with the management control of ongoing operations. As used here, a project is a set of activities intended to accomplish a specified end result of sufficient importance to be of interest to management. Projects include construction projects, production of a sizable unique product (such as a turbine), rearranging a plant, developing and marketing a new product, consulting engagements, audits, acquisitions and divestments, litigation, financial restructuring, research & development work, development and installation of information systems, and many others. NATURE OF PROJECTS Project control begins when management has approved the general nature of what is to be done and has authorized the approximate amount of resources that are to be spent in doing this work. The project ends when its objective has been accomplished or if it has been abandoned. An important difference between a project and ongoing operations is that a project team usually is disbanded when the product is produced, whereas in ongoing operations, the organization tends to operate indefinitely. The construction of a building and the renovation of a building are projects; the routine maintenance of the building is not. The production of a motion picture is a project; the production of a daily television program is an ongoing operation. The completion of a project may lead to an ongoing operation, as in the case of a successful development project. The transition from the project organization to the operating organization involves complex management control issues. Projects vary greatly. At one extreme, a project may involve one or a few persons working for a few days or weeks, performing work similar to that done many times previously, as on an annual financial audit that is conducted by a public accounting firm. At the other extreme, a project may involve thousands of people working for several years, performing work unlike anything ever done before, as was the case with
- 2. the project to land the first men on the moon. This Statement is limited to projects that involve enough people so that a formal project organization is necessary and enough resources so that a formal management control system is necessary. The function of the management accountant is fundamental to the management control of projects. It is to provide timely and reliable information and assistance to management as a basis for planning and controlling decisions by: o developing, installing, and operating the systems used to collect and report this information; o ensuring that this information conforms to the rules prescribed in these systems; and o Assisting management in using this information in planning and controlling the project. Project Organization Structure: A project organization is a temporary organization. A team is assembled for conducting the project, and the team is disbanded when the project has been completed. Team members may be employees of the organization that authorized the project (the sponsoring organization), they may be hired for the purpose, or some or all of them may be engaged under a contract with an outside organization. The sponsor may be a single organization, or the project may be a joint venture sponsored by several organizations. If the project is conducted entirely, or partly, by an outside contractor, the sponsoring organization should ensure that there is a proper management system in place to deal with tenders and that the best tender is accepted. The sponsoring organization should designate someone to act as liaison with the project, and that person should quickly establish satisfactory working arrangements with the contractor's personnel. These arrangements are influenced by the terms of the contract, as will be discussed below. If the project is conducted by the sponsoring organization, some of the work may be assigned to support units within the organization, and similar relationships should be established with them. For example, a central drafting unit in an architectural firm may do drafting for all projects, and management control problems of such arrangements are similar to those involved in contracting with an outside drafting organization.
- 3. MAJOR CHARACTERISTICS OF PROJECTS ARE • Defined objectives • Life span with beginning and end • Involves several departments and professionals • It haven’t been done before • Has specific time, cost and performance requirements MANAGEMENT CONTROL OF PROJECTS • Projects – a set of activities, which are carried out with a desired end result. • Project goes through phases of – Planning – Implementing – Evaluation • It follows a set of budgeted activities which are schematically scheduled. • An uncontrolled project would result in loss of resources both in terms of time and money • Costs increase exponentially with a linear increase in the degree of control. • Key issues in control of a project are • Time, cost and quality of work • Optimum time of a project – it should ensure that the best possible work is carried out in the specified time. • The way control is exercised should generate, • Positive participation • Goal seeking TYPES OF CONTROL OF PROJECTS • Cybernetic control – Is a close loop control where the performance is measured against a set standard through an assessor and detector tool • First order – sets highly rigid system • Second order – allow few changes • Third order – change time to time
- 4. • Go/no-go control – cost and time overruns are periodically determined and project completed in specific time. • Post-performance control – reviews that are carried out after the project, more importance given at the initial stage. PROCESS CONTROL IN PROJECTS • Control of physical assets – involves the scheduling, maintenance and repair of physical assets (both preventive and corrective control). • Control of human resources – human resource accounting. • Control of financial resources – involves – Working capital management – Budgeting – Capital investment decisions and controls PHASES OF PROJECT CONTROL • Project planning – the process of developing the basis of managing the project including the planning objectives, procedures, organization, routines, finance and other activities. – Technical level – Operational level The final plan – consists of, – Scope – Schedule – Cost (tec+opc) – Cpm – reduces project duration at an increased cost. – Pert – problem of uncertain activity times. – Project execution – Trouble reports – emphasize the problems that have already occurred or anticipated to occur. Critical problems are identified and highlighted. – Progress reports – involves the comparison of actual and planned schedules and costs for the work carried out, also contain overhead activities that are not directly related to work. – Financial reports – it projects cost accurately where cost reimbursements are made, it gives a clear picture of how the financial resources are being spent
- 5. GMR GROUP Diversification of GMR group: Ferro-alloy manufacturing (1991-92) Sugar production (1995) Breweries (1998) A 200-megawatt (MW) power project in Chennai (mid-1990s) A barge-mounted power plant, the world’s first and largest, in Mangalore in late 2001. Highways and Urban Infrastructure. Airports Manufacturing (agri-business, mainly sugar) Net revenue of INR 45.67 billion in 2009-10 as compared to INR10.62 billion in 2005- 06 Growth rate (CAGR) of 44 per cent. Company’s assets were valued at INR149.34 billion in 2010. ORGANIZATIONAL STRUCTURE:
- 6. BUSINESS PROFILE: GMR Holdings Pvt. Ltd. Is the holding company with 2 subsidiary companies- GMR Infrastructure Ltd. & GMR Industries (Airports) Ltd Ownership structures has remained consistent with equity proposed to be distributed equally among Rao, his sons and his son-in-law. Decision making Council – Rao, Raju, Kiran, S.B & 2 independent non- family executives. Due to the rapid expansion of the group, Rao in 2006 hired strategy consultants Mckinsey & Company, so as to assign roles and responsibilities to each family member.