![done right, as the success of these projects will spawn the need and support the willingness
of firms and governments to invest in subsequent projects.2 What is a Project? The Need for
Projects LO 1.1 nderstand why project management is becoming such a powerful and
popular practice U in business. Projects are one of the principal means by which we change
our world. Whether the goal is to split the atom, tunnel under the English Channel,
introduce Windows 10, or plan the 2018 Winter -Olympic Games in Pyeongchang, South
Korea, the means through which to achieve these challenges remains the same: project
management. Project management has become one of the most popular tools for
organizations, both public and private, to improve internal operations, respond rapidly to
external opportunities, achieve technological breakthroughs, streamline new product
development, and more robustly manage the challenges arising from the business
environment. Consider what Tom Peters, best-selling author and management consultant,
has to say about project management and its place in business: “Projects, rather than
repetitive tasks, are now the basis for most valueadded in business.”3 Project management
has become a critical component of successful business operations in worldwide
organizations. One of the key features of modern business is the nature of the opportunities
and threats posed by external events. As never before, companies face international
competition and the need to rapidly pursue commercial opportunities. They must modify
and introduce products constantly, respond to customers as fast as possible, and maintain
competitive cost and operating levels. Does performing all these tasks seem impossible? At
one time, it was. Conventional wisdom held that a company could compete using a low-cost
strategy or as a product innovator or with a focus on customer service. In short, companies
had to pick their competitive niches and concede others their claim to market share. In the
past 20 years, however, everything turned upside down. Companies such as General
Electric, Apple, Ericsson, Boeing, and Oracle became increasingly effective at realizing all of
these goals rather than settling for just one. These companies seemed to be successful in
every aspect of the competitive model: They were fast to market and efficient, cost-
conscious, and customer-focused. How were they performing the impossible? Obviously,
there is no one answer to this complex question. There is no doubt, however, that these
companies shared at least one characteristic: They had developed and committed
themselves to project management as a competitive tool. Old middle managers, reported
Fortune magazine, are dinosaurs, [and] a new class of manager mammal is evolving to fill
the niche they once ruled: project managers. Unlike his biological counterpart, the project
manager is more agile and adaptable than the beast he’s displacing, more likely to live by his
wits than throwing his weight around.4 Effective project managers will remain an
indispensable commodity for successful organizations in the coming years. More and more
companies are coming to this conclusion and adopting project management as a way of life.
Indeed, companies in such diverse industries as construction, heavy manufacturing,
insurance, health care, finance, public utilities, and software are becoming project savvy and
expecting their employees to do the same. What is a Project? LO 1.2 Recognize the basic
properties of projects, including their definition. Although there are a number of general
definitions of the term project, we must recognize at the outset that projects are distinct
from other organizational processes. As a rule, a process refers to ongoing, day-to-day](https://image.slidesharecdn.com/michiganstateuniversityprojectmanagementquestions-230526090215-74f967b3/85/Michigan-State-University-Project-Management-Questions-docx-20-320.jpg)
![activities in which an organization engages while producing goods or services. Processes
use existing systems, properties, and capabilities in a continuous, fairly repetitive m -
anner.5 Projects, on the other hand, take place outside the normal, process-oriented world
of the firm. -Certainly, in some organizations, such as construction, day-to-day processes
center on the creation 3 4 Chapter 1 • Introduction and development of projects.
Nevertheless, for the majority of organizations project management activities remain
unique and separate from the manner in which more routine, process-driven work is
performed. Project work is continuously evolving, establishes its own work rules, and is the
antithesis of repetition in the workplace. As a result, it represents an exciting alternative to
“business as usual” for many companies. The challenges are great, but so are the rewards of
success. First, we need a clear understanding of the properties that make projects and
project management so unique. Consider the following definitions of projects: A project is a
unique venture with a beginning and end, conducted by people to meet established goals
within parameters of cost, schedule, and quality.6 Projects [are] goal-oriented, involve the
coordinated undertaking of interrelated activities, are of finite duration, and are all, to a
degree, unique.7 A project can be considered to be any series of activities and tasks that: • •
• • • 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, such as money, people, equipment Are multifunctional (i.e., cut across several
functional lines)8 [A project is] [o]rganized work toward a predefined goal or objective that
requires resources and effort, a unique (and therefore risky) venture having a budget and
schedule.9 Probably the simplest definition is found in the Project Management Body of
Knowledge (PMBoK) guide of the Project Management Institute (PMI). The PMI is the
world’s largest professional project management association, with more than 475,000
members worldwide as of 2017. In the PMBoK guide, a project is defined as “a temporary
endeavor undertaken to create a unique product, service, or result” (p. 553).10 Let us
examine the various elements of projects, as identified by this set of definitions. • Projects
are complex, one-time processes. A project arises for a specific purpose or to meet a stated
goal. It is complex because it typically requires the coordinated input of n - umerous
members of the organization. Project members may be from different departments, other
organizational units, or one functional area. For example, a project to develop a new
software application for a retail company may require only the output of members of the
information systems group working with the marketing staff. On the other hand, some
projects, such as new product introductions, work best with representation from many
functions, including marketing, engineering, production, and design. Because a project is
intended to fulfill a stated goal, it is temporary. It exists only until its goal has been met, and
at that point it is dissolved. • Projects are limited by budget, schedule, and resources.
Project work requires that members work with limited financial and human resources for a
specified time period. They do not run indefinitely. Once the assignment is completed, the
project team disbands. Until that point, all its activities are constrained by limitations on
budget and personnel availability. Projects are “resource-constrained” activities. • Projects
are developed to resolve a clear goal or set of goals. There is no such thing as a project team
with an ongoing, nonspecific purpose. The project’s goals, or deliverables, define the nature](https://image.slidesharecdn.com/michiganstateuniversityprojectmanagementquestions-230526090215-74f967b3/85/Michigan-State-University-Project-Management-Questions-docx-21-320.jpg)
Michigan State University Project Management Questions.docx
- 1. (Mt) – Michigan State University Project Management Questions List of Cases by Chapter Chapter 1 Chapter 7 Development Projects that are Transforming Africa 1 President Obama Signs the Program Management Improvement and Accountability Act 8 London’s Crossrail: Europe’s Largest Construction Project MegaTech, Inc. 30 The IT Department at Hamelin Hospital 30 Disney’s Expedition Everest 31 “Throwing Good Money after Bad”: the BBC’s Digital Media Initiative 32 10 Chapter 8 Chapter 2 The Airbus A 380: A Failure of Strategy? 38 Electronic Arts and the Power of Strong Culture in Design Teams 67 Rolls-Royce Corporation 71 Classic Case: Paradise Lost—The Xerox Alto 72 Project Task Estimation and the Culture of “Gotcha!” 73 Widgets ’R Us 73 Chapter 3 Project Selection Procedures: A Cross-Industry Sampler Project Selection and Screening at GE: The Tollgate Process Keflavik Paper Company 115 Project Selection at Nova Western, Inc. 116 80 100 NASA Taps a Leader with the Right Stuff to Run Their Mars 2020 Project 120 Leading by Example for the London Olympics—Sir John Armitt 131 The Challenge of Managing Internationally 138 Brazilian Construction Giant Caught in Wide-Spread Corruption Scandal 143 In Search of Effective Project Managers 146 Finding the Emotional Intelligence to Be a Real Leader 147 Volkswagen and It’s Project to Cheat Emissions Tests 147 Problems with John 149 Berlin’s Brandenburg Willy Brandt International Airport Statements of Work: Then and Now 164 Defining a Project Work Package 174 Nicaragua’s Canal and Sustainability Challenges 185 Boeing’s Virtual Fence 188 California’s High-Speed Rail Project 190 Project Management at Dotcom.com 192 The Expeditionary Fighting Vehicle 193 Chapter 6 Team-Building Events – Heli-skiing and Zombie Apocalypses 203 Tele- Immersion Technology Eases the Use of Virtual Teams 220 Engineers Without Borders: Project Teams Impacting Lives 225 Columbus Instruments 232 The Bean Counter and the Cowboy 233 Johnson & Rogers Software Engineering, Inc. 234 New York City’s Second Avenue Subway—Two Miles Completed for Only $5 Billion Spent 274 The Hidden Costs of Infrastructure Projects—The Case of Building Dams 303 Sochi Olympics—What’s the Cost of National Prestige? 305 Chapter 9 Preparing for a Major Golf Tournament—It’s a Long Road to the First Tee 313 Moving the Historic Capen House 345 Chapter 10 Kiruna, Sweden—A Town on the Move! 350 Project Scheduling at Blanque Cheque Construction (A) Project Scheduling at Blanque Cheque Construction (B) Chapter 4 Chapter 5 Samsung’s Galaxy Note 7 – Failure to Manage a New Product for Risk 241 Japan Decommissions a $9 Billion Nuclear Reactor That was Hardly Used 248 Collapse of Shanghai Apartment Building 257 Classic Case: de Havilland’s Falling Comet 263 The Building that Melted Cars 266 Classic Case: Tacoma Narrows Suspension Bridge 267 156 379 380 Chapter 11 General
- 2. Electric—Using Agile Methods to Speed New Product Delivery 387 Eli Lilly Pharmaceuticals and Its Commitment to Critical Chain Project Management 405 It’s an Agile World 416 Ramstein Products, Inc. 417 Chapter 12 Environmental Concerns and Political Leadership Impact Fossil Fuel Project Cancellations 420 The Problems of Multitasking 446 “First Come, First Served”: Resource Challenges For Sunrise Restoration 447 Chapter 13 U.S. Army Can’t Track Spending on its Spending Tracker Project 452 Earned Value at Northrop Grumman 471 The IT Department at Kimble College 483 The Superconducting Supercollider 484 “Dear Mr. President—Please Cancel our Project!”: The Honolulu Elevated Rail Project 485 Chapter 14 Amazon’s Golden Touch Fails with a High-Tech Gadget 496 Aftermath of a “Feeding Frenzy”: Dubai and Cancelled Construction Projects 508 New Jersey Kills Hudson River Tunnel Project 516 The Project That Wouldn’t Die 517 The Navy Struggles to Avoid Cancellation of its Littoral Combat Ship Program 518 Fifth Edition Project Management Achieving Competitive Advantage Jeffrey K. Pinto Pennsylvania State University New York, NY To Mary Beth, my wife and best friend, 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! Vice President, Business, Economics, and UK Courseware: Donna Battista Director of Portfolio Management: Stephanie Wall Director, Courseware Portfolio Management: Ashley Dodge Senior Sponsoring Editor: Neeraj Bhalla Editorial Assistant: Linda Albeli Vice President, Product Marketing: Roxanne McCarley Product Marketer: Kaylee McCarley Product Marketing Assistant: Marianela Silvestri Manager of Field Marketing, Business Publishing: Adam Goldstein Field Marketing Manager: Nicole Price Vice President, Production and Digital Studio, Arts and Business: Etain O’Dea Director of Production, Business: Jeff Holcomb Managing Producer, Business: Melissa Feimer Content Producer: Sugandh Juneja Operations Specialist: Carol Melville Design Lead: Kathryn Foot Manager, Learning Tools: Brian Surette Content Developer, Learning Tools: Lindsey Sloan Managing Producer, Digital Studio and GLP, Media Production and Development: Ashley Santora Managing Producer, Digital Studio and GLP: James Bateman Managing Producer, Digital Studio: Diane Lombardo Digital Studio Producer: Regina DaSilva Digital Studio Producer: Alana Coles Digital Content Project Lead: Courtney Kamauf Project Managers: Tierra Ross Elcano and Sasibalan C., SPi Global Interior Design: SPi Global Cover Design: SPi Global Cover Art: Benedek/E+/Getty Images Printer/Binder: LSC Communications, Inc./Kendallville Cover Printer: Phoenix Color/Hagerstown 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 statutory, 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 use or performance of information available from the services. The documents and related
- 3. 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® and Windows® 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 © 2019, 2016, 2013 by Pearson Education, Inc. or its affiliates. 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 otherwise. For information regarding permissions, request forms, and the appropriate contacts within the Pearson Education Global Rights and Permissions department, please visit www.pearsoned.com/permissions/. Acknowledgments of third- party content appear on the appropriate page within the text. PEARSON and ALWAYS LEARNING are exclusive trademarks owned by Pearson Education, Inc. or its affiliates in the U.S. and/or other countries. Unless otherwise indicated herein, any third-party trademarks, logos, or icons that may appear in this work are the property of their respective owners, and any references to third-party trademarks, logos, icons, or other trade dress are for demonstrative or descriptive purposes only. Such references are not intended to imply any sponsorship, endorsement, authorization, or promotion of Pearson’s products by the owners of such marks, or any relationship between the owner and Pearson Education, Inc., or its affiliates, authors, licensees, or distributors. Library of Congress Cataloging-in- Publication Data on File 1 18 ISBN 10: 0-134-73033-X ISBN 13: 978-0-134-73033-2 BRIEF CONTENTS Preface xiii Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Introduction: Why Project Management? 1 The Organizational Context: Strategy, Structure, and Culture 38 Project Selection and Portfolio Management 80 Leadership and the Project Manager 120 Scope Management 156 Project Team Building, Conflict, and Negotiation 203 Risk Management 241 Cost Estimation and Budgeting 274 Project Scheduling: Networks, Duration Estimation, and Critical Path 313 Project Scheduling: Lagging, Crashing, and Activity Networks 350 Advanced Topics in Planning and Scheduling: Agile and Critical Chain 386 Resource Management 420 Project Evaluation and Control 452 Project Closeout and Termination 496 Appendix A The Cumulative Standard Normal Distribution Appendix B Tutorial for MS Project 2016 529 Appendix C Project Plan Template 539 Glossary 543 Company Index 553 Name Index 555 Subject Index 559 528 iii CONTENTS Preface xiii Chapter 1 INTRODUCTION: WHY PROJECT MANAGEMENT? 1 PROJECT PROFILE: Development Projects that are Transforming Africa The Need for Projects 3 What is a Project? 3 General Project Characteristics 1 5 PROJECT PROFILE: President Obama Signs the Program Management Improvement and Accountability Act 8 Why are Projects Important? 9 PROJECT PROFILE: London’s Crossrail: Europe’s Largest Construction Project 10 Project Life Cycles 12 BOX 1.1: Project Managers in Practice Determinants of Project Success 14 15 BOX 1.2: Project Management Research in Brief 18 Developing Project Management
- 4. Maturity 19 Employability Skills 23 Communication 23 Critical Thinking 23 Collaboration 23 Knowledge Application And Analysis 23 Business Ethics And Social Responsibility 23 Information Technology Application And Computing Skills Data Literacy 24 Project Elements and Text Organization 24 24 Summary 28 • Key Terms 29 • Discussion Questions 29 Case Study 1.1 MegaTech, Inc. 30 • Case Study 1.2 The IT Department at Hamelin Hospital 30 • Case Study 1.3 Disney’s Expedition Everest 31 • Case Study 1.4 “Throwing Good Money after Bad”: the BBC’s Digital Media Initiative 32 • Internet Exercises 35 • PMP Certification Sample Questions 35 • Answers 35 • Notes 35 Chapter 2 THE ORGANIZATIONAL CONTEXT: STRATEGY, STRUCTURE, AND CULTURE 38 PROJECT PROFILE: The Airbus A 380: A Failure of Strategy? Implementing Strategy Through Projects 40 Projects and Organizational Strategy 41 Stakeholder Management 43 Identifying Project Stakeholders 44 Managing Stakeholders 47 Organizational Structure 49 Forms of Organizational Structure 50 Functional Organizations 50 Project Organizations 53 Matrix Organizations 54 Moving to Heavyweight Project Organizations iv BOX 2.1: Project Management Research in Brief Project Management Offices 59 38 57 58 Contents Organizational Culture 62 How Do Cultures Form? 64 Organizational Culture and Project Management 66 PROJECT PROFILE: Electronic Arts and the Power of Strong Culture in Design Teams 67 Summary 68 • Key Terms 70 • Discussion Questions 70 • Case Study 2.1 Rolls-Royce Corporation 71 • Case Study 2.2 -Classic Case: Paradise Lost—The Xerox Alto 72 • Case Study 2.3 Project Task Estimation and the Culture of “Gotcha!” 73 • Case Study 2.4 Widgets ’R Us 73 • Internet Exercises 74 • PMP Certification Sample Questions 74 • Answers 75 • Integrated Project—Building Your Project Plan 76 • Notes 78 Chapter 3 PROJECT SELECTION AND PORTFOLIO MANAGEMENT 80 PROJECT PROFILE: Project Selection Procedures: A Cross-Industry Sampler 80 Introduction: Project Selection 81 Approaches to Project Screening and Selection 84 Method One: Checklist Model 84 Method Two: Simplified Scoring Models 85 Limitations of Scoring Models 87 Method Three: The Analytical Hierarchy Process Method Four: Profile Models 91 Financial Models 93 Payback Period 94 Net Present Value 95 Discounted Payback 97 Internal Rate of Return 97 Choosing a Project Selection Approach 99 88 PROJECT PROFILE: Project Selection and Screening at GE: The Tollgate Process Project Portfolio Management 101 Objectives and Initiatives 102 The Portfolio Selection Process 103 Developing a Proactive Portfolio 105 Keys to Successful Project Portfolio Management 108 Problems in Implementing Portfolio Management 108 100 Summary 110 • Key Terms 111 • Solved Problems 111 • Discussion Questions 112 • Problems 112 • Case Study 3.1 Keflavik Paper Company 115 • Case Study 3.2 Project Selection at Nova Western, Inc. 116 • Internet Exercises 118 • Notes 118 Chapter 4 LEADERSHIP AND THE PROJECT MANAGER 120 PROJECT PROFILE: NASA Taps a Leader with the Right Stuff to Run Their Mars 2020 Project 120 Introduction: Successful Projects Need Leaders Leaders Versus Managers 122 How the Project Manager Leads 124 Acquiring Project Resources 124 Motivating and Building Teams 125 Having a Vision and Fighting Fires 125 Communicating 126 122 BOX 4.1: Project Management Research in Brief Traits of Effective Project Leaders 129 Conclusions about Project Leaders 130 129 v vi Contents PROJECT PROFILE: Leading by Example for the London Olympics—Sir John Armitt 131 Project Champions 132 Champions—Who Are They? 133 What Do Champions Do? 134 How
- 5. to Make a Champion 135 The New Project Leadership 136 BOX 4.2: Project Managers in Practice 137 PROJECT PROFILE: The Challenge of Managing Internationally Project Management Professionalism 138 Project Management and Ethics 140 Unethical Behaviors in Project Management 138 142 PROJECT PROFILE: Brazilian Construction Giant Caught in Wide-Spread Corruption Scandal 143 Summary 144 • Key Terms 145 • Discussion Questions 146 • Case Study 4.1 In Search of Effective Project Managers 146 • Case Study 4.2 Finding the Emotional Intelligence to Be a Real Leader 147 • Case Study 4.3 Volkswagen and Its Project to Cheat Emissions Tests 147 • Case Study 4.4 Problems with John 149 • Internet Exercises 152 • PMP Certification Sample Questions 152 • Answers 153 • Notes 153 Chapter 5 SCOPE MANAGEMENT 156 PROJECT PROFILE: Berlin’s Brandenburg Willy Brandt International Airport Introduction: The Importance of Scope Management Conceptual Development 158 The Statement of Work 161 The Project Charter 164 PROJECT PROFILE: Statements of Work: Then and Now 156 158 164 The Scope Statement 164 The Work Breakdown Structure 165 Purposes of the Work Breakdown Structure 165 The Organization Breakdown Structure 170 The Responsibility Assignment Matrix 173 PROJECT PROFILE: Defining a Project Work Package 174 Work Authorization 175 Scope Reporting 176 BOX 5.1: Project Management Research in Brief 177 Control Systems 178 Configuration Management 179 Project Closeout 180 Project Management and Sustainability 181 Managing Projects for Sustainability 183 PROJECT PROFILE: Nicaragua’s Canal and Sustainability Challenges 185 Summary 186 • Key Terms 187 • Discussion Questions 188 • Problems 188 • Case Study 5.1 Boeing’s Virtual Fence 188 • Case Study 5.2 California’s High-Speed Rail Project 190 • Case Study 5.3 Project Management at Dotcom.com 192 • Case Study 5.4 The Expeditionary Fighting Vehicle 193 • Internet Exercises 195 • PMP Certification Sample Questions 195 • Answers 196 • MS Project Exercises 196 • Appendix 5.1: Sample Project Charter 196 • Integrated Project—Developing the Work Breakdown Structure 199 • Notes 200 Contents Chapter 6 PROJECT TEAM BUILDING, CONFLICT, AND NEGOTIATION PROJECT PROFILE: Team-Building Events – Heli- skiing and Zombie Apocalypses 203 203 Introduction 205 Building the Project Team 205 Identify Necessary Skill Sets 205 Identify People Who have the required Skills 206 Talk to Potential Team Members and Negotiate with Functional Heads 207 Build in Fallback Positions 207 Assemble the Team 208 Characteristics of Effective Project Teams 208 A Clear Sense of Mission 208 A Productive Interdependency 209 Cohesiveness 209 Trust 209 Enthusiasm 210 Results Orientation 210 Reasons Why Teams Fail 210 Poorly Developed or Unclear Goals 211 Poorly Defined Project Team Roles and Interdependencies 211 Lack of Project Team Motivation 211 Poor Communication 212 Poor Leadership 212 Turnover Among Project Team Members 212 Dysfunctional Behavior 212 Stages in Group Development 213 Stage One: Forming 213 Stage Two: Storming 214 Stage Three: Norming 214 Stage Four: Performing 214 Stage Five: Adjourning 214 Punctuated Equilibrium 215 Achieving Cross-Functional Cooperation 216 Superordinate Goals 216 Rules and Procedures 217 Physical Proximity 217 Accessibility 217 Outcomes of Cooperation: Task and Psychosocial Results 218 Virtual Project Teams 218 PROJECT PROFILE: Tele- Immersion Technology Eases the Use of Virtual Teams 220 Conflict Management 221 What Is Conflict? 221 Sources of Conflict 222 Methods for Resolving Conflict 224 PROJECT
- 6. PROFILE: Engineers Without Borders: Project Teams Impacting Lives 225 Negotiation 226 Questions to Ask Prior to the Negotiation Principled Negotiation 227 Invent Options for Mutual Gain 229 226 vii viii Contents Insist on Using Objective Criteria 230 Summary 231 • Key Terms 232 • Discussion Questions 232 Case Study 6.1 Columbus Instruments 232 • Case Study 6.2 The Bean Counter and the Cowboy 233 • Case Study 6.3 Johnson & Rogers Software Engineering, Inc. 234 • Exercise in Negotiation 236 • Internet Exercises 237 • PMP Certification Sample Questions 237 • Answers 238 • Notes 238 Chapter 7 RISK MANAGEMENT 241 PROJECT PROFILE: Samsung’s Galaxy Note 7—Failure to Manage a New Product for Risk 241 Introduction: What is Project Risk? 243 BOX 7.1: Project Managers in Practice Risk Management: A Four-Stage Process Risk Identification 246 245 246 PROJECT PROFILE: Japan Decommissions a $9 Billion Nuclear Reactor that was Hardly Used 248 Risk Breakdown Structures 249 Analysis of Probability and Consequences Risk Mitigation Strategies 252 Use of Contingency Reserves 254 Other Mitigation Strategies 255 Control and Documentation 255 249 PROJECT PROFILE: Collapse of Shanghai Apartment Building Project Risk Management: An Integrated Approach 257 259 Summary 261 • Key Terms 262 • Solved Problem 262 • Discussion Questions 262 • Problems 262 • Case Study 7.1 Classic Case: de Havilland’s Falling Comet 263 • Case Study 7.2 The Building that Melted Cars 266 • Case Study 7.3 Classic Case: Tacoma Narrows Suspension Bridge 267 • Internet Exercises 269 • PMP Certification Sample Questions 269 • Answers 270 • Integrated Project—Project Risk Assessment 271 • Notes 273 Chapter 8 COST ESTIMATION AND BUDGETING 274 PROJECT PROFILE: New York City’s Second Avenue Subway – Two Miles Completed for Only $5 Billion Spent 274 Cost Management 276 Direct Versus Indirect Costs 277 Recurring Versus Nonrecurring Costs 278 Fixed Versus Variable Costs 279 Normal Versus Expedited Costs 279 Cost Estimation 279 Learning Curves in Cost Estimation 283 Software Project Estimation—Function Points 286 BOX 8.1: Project Management Research in Brief Problems with Cost Estimation 287 289 BOX 8.2: Project Management Research in Brief Creating a Project Budget 291 Top-Down Budgeting 292 Bottom-Up Budgeting 293 Activity-Based Costing 293 Developing Budget Contingencies 295 290 Summary 297 • Key Terms 298 • Solved Problems 298 • Discussion Questions 299 • Problems 300 • Case Study 8.1 The Hidden Costs of Contents Infrastructure Projects—The Case of Building Dams 303 • Case Study 8.2 Sochi Olympics—What’s the Cost of National Prestige? 305 • Internet Exercises 307 • PMP Certification Sample Questions 307 • Answers 308 • Integrated Project—Developing the Cost Estimates and Budget 309 • Notes 311 Chapter 9 PROJECT SCHEDULING: NETWORKS, DURATION ESTIMATION, AND CRITICAL PATH 313 PROJECT PROFILE: Preparing for a Major Golf Tournament – It’s a Long Road to the First Tee 313 Introduction 315 Project Scheduling 315 Key Scheduling Terminology 317 Developing A Network 319 Labeling Nodes 319 Serial Activities 320 Concurrent Activities 320 Merge Activities 321 Burst Activities 321 Duration Estimation 324 Constructing the Critical Path 328 Calculating the Network 328 The Forward Pass 329 The Backward Pass 331 Probability of Project Completion 333 Laddering Activities 335 Hammock Activities 336 Options for Reducing the Critical Path 337 BOX 9.1: Project Management Research in Brief 338 Summary 339 • Key Terms 340 • Solved Problems 340 • Discussion Questions 342 • Problems 342 • Case Study 9.1 Moving the Historic Capen House 345 • Internet Exercises
- 7. 347 • MS Project Exercises 347 • Answers 348 • PMP Certification Sample Questions 348 • Notes 349 Chapter 10 PROJECT SCHEDULING: LAGGING, CRASHING, AND ACTIVITY NETWORKS 350 PROJECT PROFILE: Kiruna, Sweden – A Town on the Move! Introduction 352 Lags in Precedence Relationships 352 Finish to Start 352 Finish to Finish 353 Start to Start 353 Start to Finish 354 Gantt Charts 355 Adding Resources to Gantt Charts 356 Incorporating Lags in Gantt Charts 357 BOX 10.1: Project Managers in Practice 357 Crashing Projects 359 Options for Accelerating Projects 359 Crashing the Project: Budget Effects 364 350 ix x Contents Activity-On-Arrow Networks 367 How Are They Different? 367 AOA Versus AON 372 Controversies in the Use of Networks Conclusions 374 373 Summary 375 • Key Terms 375 • Solved Problems 376 • Discussion Questions 377 • Problems 377 • Case Study 10.1 Project -Scheduling at Blanque Cheque Construction (A) 379 • Case Study 10.2 Project Scheduling at Blanque Cheque Construction (B) 380 • MS Project Exercises 380 • PMP Certification Sample Questions 381 • Answers 382 • Integrated Project—Developing the Project Schedule 383 • Notes 384 Chapter 11 ADVANCED TOPICS IN PLANNING AND SCHEDULING: -AGILE AND CRITICAL CHAIN 386 PROJECT PROFILE: General Electric – Using Agile Methods to Speed New Project Delivery 387 Introduction 387 Agile Project Management 388 What Is Unique About Agile PM? Tasks Versus Stories 391 Key Terms in Agile PM 391 Steps in Agile 393 Sprint Planning 393 Daily Scrums 393 The Development Work 394 Sprint Reviews 394 Sprint Retrospective 395 Keys to Success with Agile 395 Problems with Agile 396 389 BOX 11.1: Project Management Research in Brief 397 Extreme Programming (XP) 397 Theory of Constraints and Critical Chain Project Scheduling 398 Theory of Constraints 398 The Critical Chain Solution to Project Scheduling 399 Developing the Critical Chain Activity Network 402 Critical Chain Solutions Versus Critical Path Solutions 404 PROJECT PROFILE: Eli Lilly Pharmaceuticals and Its Commitment to Critical Chain Project Management 405 Critical Chain Solutions to Resource Conflicts 406 Critical Chain Project Portfolio Management 407 BOX 11.2: Project Management Research in Brief Critiques of CCPM 410 411 Summary 411 Questions 414 World 416 • Exercises 418 • Key Terms 413 • Solved Problem 413 • D iscussion • Problems 414 • Case Study 11.1 It’s an Agile Case Study 11.2 Ramstein Products, Inc. 417 • Internet • Notes 418 Chapter 12 RESOURCE MANAGEMENT 420 PROJECT PROFILE: Environmental Concerns and Political Leadership Impact Fossil Fuel Project Cancellations 420 Introduction 422 The Basics of Resource Constraints 422 Time and Resource Scarcity 423 Contents Resource Loading 425 Resource Leveling 426 Step One: Develop the Resource-Loading Table 430 Step Two: Determine Activity Late Finish Dates 430 Step Three: Identify Resource Overallocation 432 Step Four: Level the Resource-Loading Table 432 Resource- Loading Charts 435 BOX 12.1: Project Managers in Practice 438 Managing Resources in Multiproject Environments 439 Schedule Slippage 439 Resource Utilization 439 In-Process Inventory 440 Resolving Resource Decisions in Multiproject Environments 440 Summary 442 • Key Terms 443 • Solved Problem 443 • Discussion Questions 444 • Problems 444 • Case Study 12.1 The Problems of Multitasking 446 • Case Study 12.2 “First Come, First Served”: Resource Challenges for Sunrise Restoration† 447 • Internet Exercises 448 MS Project Exercises 448 • PMP Certification Sample Questions 449 • Answers 450 • Integrated Project—Managing Your Project’s Resources 451 • Notes 451 Chapter 13 PROJECT
- 8. EVALUATION AND CONTROL 452 PROJECT PROFILE: U.S. Army Can’t Track Spending on its Spending Tracker Project 452 Introduction 453 Control Cycles—A General Model 454 Monitoring Project Performance 454 The Project S-Curve: A Basic Tool 455 S-Curve Drawbacks 457 Milestone Analysis 457 Problems with Milestones 459 The Tracking Gantt Chart 459 Benefits and Drawbacks of Tracking Gantt Charts 460 Earned Value Management 460 Terminology for Earned Value 461 Creating Project Baselines 462 Why Use Earned Value? 462 Steps in Earned Value Management 464 Assessing a Project’s Earned Value 465 Using Earned Value to Manage a Portfolio of Projects 470 Flow of Earned Value System 470 PROJECT PROFILE: Earned Value at Northrop Grumman 471 Issues in the Effective Use of Earned Value Management Human Factors in Project Evaluation and Control 474 Critical Success Factor Definitions 476 Conclusions 477 472 Summary 478 • Key Terms 479 • Solved Problem 479 • Discussion Questions 480 • Problems 481 • Case Study 13.1 The IT Department at Kimble College 483 • Case Study 13.2 The Superconducting S-upercollider 484 • Case Study 13.3 “Dear Mr. President—Please cancel our project!”: The Honolulu Elevated Rail Project 485 • Internet Exercises 487 • MS Project Exercises 487 • PMP Certification Sample Questions 488 • Answers 489 • Appendix 13.1: Earned Schedule 489 • Notes 494 xi xii Contents Chapter 14 PROJECT CLOSEOUT AND TERMINATION 496 PROJECT PROFILE: Amazon’s Golden Touch Fails with a High-Tech Gadget Introduction 497 Types of Project Termination 496 498 BOX 14.1: Project Managers in Practice 498 Natural Termination—the Closeout Process 500 Finishing the Work 500 Handing Over the Project 500 Gaining Acceptance for the Project 501 Harvesting the Benefits 501 Reviewing How It All Went 502 Putting It All to Bed 504 Disbanding the Team 504 What Prevents Effective Project Closeouts? 505 Early Termination for Projects 505 Making the Early Termination Decision 507 PROJECT PROFILE: Aftermath of a “Feeding Frenzy”: Dubai and Canceled Construction Projects 508 Shutting Down the Project 509 Allowing for Claims and Disputes 510 BOX 14.2: Project Management Research in Brief Preparing the Final Project Report 513 Conclusion 514 511 Summary 514 • Key Terms 515 • Discussion Questions 515 • Case Study 14.1 New Jersey Kills Hudson River Tunnel Project 516 • Case Study 14.2 The Project That Wouldn’t Die 517 • Case Study 14.3 The Navy Struggles to Avoid Cancellation of its Littoral Combat Ship Program 518 • Internet Exercises 519 • PMP Certification Sample Questions 520 • Answers 521 • Appendix 14.1: Sample Pages from -Project Sign-off Document 522 • Notes 526 Appendix A The Cumulative Standard Normal Distribution 528 Appendix B Tutorial for MS Project 2016 529 Appendix C Project Plan Template 539 Glossary 543 Company Index Name Index Subject Index 553 555 559 PREFACE Project management has become central to operations in industries as diverse as construction and information technology, architecture and hospitality, and engineering and new product development; therefore, this text simultaneously embraces the general principles of project management while addressing specific examples across the wide assortment of its applications. This text approaches each chapter from the perspective of both the material that is general to all disciplines and project types and that which is more specific to alternative forms of projects. One way this is accomplished is through the use of specific, discipline-based examples to illustrate general principles as well as the inclusion of cases and Project Profiles that focus on more specific topics, such as, Chapter 5’s treatment of IT
- 9. “death march” projects (see Box 5.1 below). Scope Reporting 177 BOX 5.1 Project Management Research in Brief Information Technology (IT) Project “Death Marches”: What Is Happening Here? Every year, billions of dollars are spent on thousands of information technology (IT) projects worldwide. With the huge emphasis on IT products and advances in software and hardware systems, it is no surprise that interest in this field is exploding. Under the circumstances, we would naturally expect that, given the importance of IT projects in both our corporate and everyday lives, we are doing a reasonably good job of implementing these critical projects, right? Unfortunately, the answer is a clear “no.” In fact, IT projects have a terrible track record for delivery, as numerous studies have shown. How bad? The average IT project is likely to be 6 to 12 months behind schedule and 50% to 100% over budget. Of course, the numbers vary with the size of the project, but the results still suggest that companies should expect their IT projects to lead to wasted effort, enormous delays, burnout, and many lost weekends while laboring for success with the cards stacked the other way. What we are referring to here are “death march” projects. The death march project is typically one in which the project is set up for failure through the demands or expectations that the company places on it, leaving the intention that the project team will pull off a miracle. The term death march invokes images of team members wearily trudging along mile after mile, with no possibility of successful conclusion in sight. Death march projects are defined as projects “whose parameters exceed the norm by at least 50%.” In practical terms, this can mean: • The schedule has been compressed to less than half the amount estimated by a rational estimating process (e.g., the schedule suggests it should take one year to complete the project, but top management shrinks the schedule to six months). • The project team staffing has been reduced to half the number that normally would be assigned to a project of this size and scope (e.g., a project manager needing 10 resources is instead given only 5). • The budget and other necessary resources are cut in half (e.g., as a result of downsizing and other cost-cutting exercises in the company, everyone is expected to “do more with less”, or competitive bidding to win the contract was so intense that when the smoke cleared the company that won the project did so at such a cut-rate price that it cannot possibly hire enough people to make it work). The result of any or all of these starting conditions is a virtual guarantee that the project will fail. The prevalence of death march projects begs the question: Why are death march projects so common, and why do they continue to occur? According to the research, there are a number of reasons: 1. Politics—the project may be the result of a power struggle between two ambitious senior executives, or it may have been set up to fail as a form of revenge upon some manager. In these cases, the project manager just gets caught in the blast zone. 2. Naïve promises made by marketing executives or inexperienced project managers— inexperience can result in all sorts of promises made, including those that are impossible to fulfill. In order to impress the boss, a new project manager may promise more than he can deliver. Marketing managers who are concerned with sales and how to improve them may think, “what’s a little exaggerated promise if it closes the deal?” 3. Naïve optimism of youth—a technical hotshot who is ambitious and feeling particularly cocky one day may make exaggerated promises that quickly result in the project team getting in over its head. Optimism is no substitute for careful planning. 4. The “start-up” mentality of fledgling
- 10. entrepreneurial companies—start-up firms come loaded with energy, enthusiasm, and an aggressive, get-it-going attitude. When that mentality translates into projects, however, problems can occur. Entrepreneurial approaches to managing projects may ignore critical planning and detailed advance preparation that no experienced project Students in sacrifice. project management classes come from a wide and diverse cross section of unimanager would versity and career tracks. Schools of health, administration, business, 5. Themajors “Marine Corps” mentality, aka “real programmers don’t needpublic sleep”—this attitude emphasizes bravado as aarchitecture substitute for evaluation. The hyperoptimistic schedule or budget is not an accident, it is a deliberate manifestation of all an aggressive and the built environment, engineering, information systems, and hospitality are adding attitude project that says, “If you can’t handle it, you don’t belong here”. management courses to their catalogs in response to the demands from organizations and profes6. Intense competition caused by globalization—the appearance of new, international competitors often comes as a rude awakensionaling groups their value for students’ careers. Whyforhas become when it that is firstsee experienced. Many firms respond withfuture radical moves that push rapidproject technicalmanagement advances or “catching up” behaviors, in numerous newinterest death march projects. a discipline ofresulting such tremendous and application? The simple truth is that we live in a “pro7. Intense competition caused by the appearance of new technologies—as new opportunities emerge through new technologies, jectized” world. Everywhere we look, we see people engaged in project management. In fact, project some firms jump into them eagerly without first understanding their capacities, scalability for larger projects, and limitations. management become anofintegral part of practically every firm’s business model. The result ishas an endless game exploiting “opportunities” without fully comprehending them or the learning curve for using new technologies. This text takes a holistic, integrated approach to managing projects, exploring both technical Intense pressure caused by unexpected government regulations—government-mandated death march projects occur through a and8.managerial challenges. It not only emphasizes individual project execution, but also provides a failure of top management to anticipate new regulations or mandates, or worse, to put off any efforts to comply with them until strategic perspective, withNew which to or manage projects at laws, bothforthe program deadlines have alreadydemonstrating been set, even if theythe see means them coming. pollution carbon-energy controls example, may lead to huge projects with looming deadlines because the company put off any efforts to self-regulate until the last minute. and portfolio levels. 9. Unexpected and/or unplanned crises—any number of crises can be anticipated with sufficient advance planning. Examples of crises that can severely affect project delivery are the loss of key project team personnel midway through the project’s development or the bankruptcy of a key supplier. Some crises, of course, are unpredictable by definition, but all too often the crisis that xiii xiv Preface At one time, project management was almost exclusively the property of civil and construction engineering programs where it was taught in a highly quantitative, technical manner. “Master the science of project management,” we once argued, “and the ‘art’ of project management will be equally clear to you.” Project management today is a complex “management” challenge requiring not only technical skills but a broad-based set of people
- 11. skills as well. Project management has become the management of technology, people, culture, stakeholders, and other diverse elements necessary to successfully complete a project. It requires knowledge of leadership, team building, conflict resolution, negotiation, and influence in equal measure with the traditional, technical skill set. Thus, this textbook broadens our focus beyond the traditional project management activities of planning and scheduling, project control, and termination, to a more general, inclusive, and, hence, more valuable perspective of the project management process. NEW TO THIS EDITION New Features • • • • • • • • • • • • Sustainability in Project Management Employability Skills Project Management Ethics MS Project 2016 Step-by-Step Tutorials New Project Managers in Practice Profiles Project Portfolio selection Expanded discussion of Agile project management Updated problems in chapters Updated Internet Exercises Expanded PMP Certification Exam sample questions New project management cases All MS Project examples and screen captures updated to MS Project 2016 Updated Project Profiles and Cases Chapter 1: Introduction: Why Project Management? • Development Projects that are Transforming Africa • President Obama Signs the Program Management Improvement and Accountability Act • London’s Crossrail: Europe’s Largest Construction Project Chapter 2: The Organizational Context: Strategy, Structure, and Culture • The Airbus A-380: A Failure of Strategy? • Electronic Arts and the Power of Strong Culture in Design Teams Chapter 3: Project Selection and Portfolio Management • Project Selection Procedures: A Cross- Industry Sampler Chapter 4: Leadership and the Project Manager • NASA Taps a Leader with the Right Stuff to Run Their Mars 2020 Project • Leading by Example for the London Olympics—Sir John Armitt • Brazilian Construction Giant Caught in Wide-Spread Corruption Scandal Chapter 5: Scope Management • Berlin’s Brandenburg Willy Brandt International Airport • Nicaragua’s Canal and Sustainability Challenges • Boeing’s Virtual Fence • California’s High-Speed Rail Project • The Expeditionary Fighting Vehicle Chapter 6: Project Team Building, Conflict, and Negotiation • Team Building Events – Heli-Skiing and Zombie Apocalypses • Engineers Without Borders: Project Teams Impacting Lives Preface Chapter 7: Risk Management • Samsung’s Galaxy Note 7 – Failure to Manage a New Product for Risk • Japan Decommissions a $9 Billion Nuclear Reactor that was Hardly Used • Collapse of Shanghai Apartment Building • The Building That Melted Cars Chapter 8: Cost Estimation and Budgeting • New York City’s Second Avenue Subway – Two Miles Completed for Only $5 Billion Spent • Sochi Olympics—What’s the Cost of National Prestige? • The Hidden Costs of Infrastructure Projects: The Case of Building Dams Chapter 9: Project Scheduling: Networks, Duration Estimation, and Critical Path • Preparing for a Major Golf Tournament – It’s a Long Road to the First Tee • Moving the Historic Capen House Chapter 10: Project Scheduling: Lagging, Crashing, and Activity Networks • Kiruna, Sweden – A Town on the Move! Chapter 11: Critical Chain Project Scheduling • General Electric – Using Agile Methods to Speed New Project Delivery • Eli Lilly Pharmaceutical’s Commitment to Critical Chain Project Scheduling Chapter 12: Resource Management • Environmental Concerns and Political Leadership Impact Fossil Fuel Project Cancellations • “First Come, First Served”: Resource Challenges for Sunrise Restoration Chapter 13: Project Evaluation and Control • U.S. Army Can’t Track Spending on its Spending Tracker Project • Earned Value Management at Northrop Grumman • Dear Mr. President—Please cancel our project!:
- 12. The Honolulu Elevated Rail Project Chapter 14: Project Closeout and Termination • Amazon’s Golden Touch Fails with a High-Tech Gadget • Aftermath of a “Feeding Frenzy”— Dubai and Cancelled Construction Projects • New Jersey Kills Hudson River Tunnel Project • The Navy Struggles to Avoid Cancellation of its Littoral Combat Ship Program SOLVING TEACHING AND LEARNING CHALLENGES Projects continue to drive innovation and advances in human development globally. Evidence from businesses, government offices, public and private organizations, and volunteer groups all point to the way in which project- based work has become central to the challenges new generations of college graduates will face. Many students initially have a difficult time understanding why projects form such a central theme in their current academic undertakings and how these project challenges will continue to grow as they move into the workforce. In project management courses in business, engineering, health administration, hospitality, and science programs, the challenge faculty and students often face is to personalize these ideas to the roles their students are preparing to undertake. Moreover, one of the principal challenges of effectively teaching project management is to understand that project management duties are broad and diverse; most particularly, they require computational, software, and organizational/behavioral knowledge. Some of our students are quickly able to understand the computational elements of using mathematical models to select projects, developing schedules and networks, using Microsoft Project and other software packages, and tracking projects, while finding the “people” skills in leading a project team daunting. Alternatively, other students are comfortable with financial and managerial concepts but experience more difficulty in transitioning to statistical, software, or arithmetic challenges. The fascinating nature of project management is that it requires students to develop a mastery of both the “people” and “numbers” sides of the discipline. Short of the CEO’s office, in no other position in an organization are the duties as broad and diverse as those found in the project manager role—developing xv xvi Preface strategies, financing, planning, budgeting, negotiating, leading, controlling, and motivating—these are all routine responsibilities of project managers. To illustrate the computational challenges of project management, we provide many chapters, cases, and examples of how to use financial models to select a project portfolio, how to develop project -networks and identify the critical path, how to use MS Project to engage its planning and tracking tools, and how to employ earned value and other methods for accurately determining the status of projects. Managerial challenges are addressed through chapters, profiles, and cases that highlight leadership, stakeholder management, team development, conflict and negotiation, ethical challenges, and project sustainability. Project management is a dynamic undertaking. We employ a simple visual device (see Figure 1.12 below) to demonstrate the manner in which technical and managerial challenges intermingle, as the project moves through its development cycle. Referring to this visual can help students understand the project life cycle and project manager duties across its development. Foundation Planning Implementation Termination FIGURE 1.12 To support these teaching initiatives, the text employs a wide variety of pedagogical approaches, including tutorials and screen captures of Microsoft Project for scheduling and project status updating, problems, an integrated project plan to show students how to develop and plan their own projects, templates for planning and project
- 13. charters, and other devices to support student learning and computational skills. Additionally, the text uses cases and profiles of current examples of projects from a wide variety of industries. Just as projects are ubiquitous across a wide variety of industries, the cases and examples in this text cover new product development, construction and infrastructure, hospitality, software and programming, as well as many other project examples. The cases and profiles were deliberately created to demonstrate the breadth of project challenges in order to reinforce for students that regardless of their undergraduate degree or career aspirations, they will be heavily involved in project-based work. • Project Profiles—Each chapter contains one or more Project Profiles that highlight current examples of project management in action. Some of the profiles reflect on significant achievements; others detail famous (and not-so-famous) examples of project failures. Because they cover diverse ground (IT projects, construction, new product development, and so forth), there should be at least one profile per chapter that is meaningful to the class’s focus. There is a deliberate effort made to offer a combination of project success stories and project failures. While successful projects can be Preface xvii instructive, we often learn far more from examining the variety of reasons why projects fail. As much as possible, these stories of success and failure are intended to match up with the chapters to which they are attached. For example, as we study the uses of projects to implement corporate strategy, it is useful to consider the current status of Airbus’s A380, the massively expensive, double-decker aircraft that appears to be ripe for early cancellation because of mediocre sales. • Cases—At the end of each chapter are some final cases that take specific examples of the material covered in the chapter and apply them in the alternate format of case studies. Some of the cases are fictitious, but the majority of them are based on real situations, even where aliases mask the real names of organizations. These cases include discussion questions that can be used either for homework or to facilitate classroom discussions. There are several “classic” project cases as well, highlighting some famous (and infamous) examples of projects whose experiences have shaped our understanding of the discipline and its best practices. Project Termination Issues Emotional Intellectual Staff Client Fear of no future work Change in attitude Loss of interest in remaining tasks Loss of interest in project Loss of project–derived motivation Change in personnel dealing with project Loss of team identity Unavailability of key personnel Selection of personnel to be reassigned Diversion of effort Internal External Identification of remaining deliverables Agreement with client on remaining deliverables Certification needs Agreement with suppliers on outstanding commitments Identification of outstanding commitments Communicating closure Control of charges to project Closing down facilities Screening of partially completed tasks Determination of requirements for audit trail data Closure of work orders and work packages Disposal of unused material • Integrated Project Exercises—Many of the chapters include an end-of-chapter feature that is unique to this text: the opportunity to develop a detailed project plan. A very beneficial exercise in project management classes is to require students, either in teams or individually, to learn the mechanics of developing a detailed and comprehensive project plan, including scope, scheduling, risk assessment, budgeting, and cost estimation. The Integrated Project exercises afford students the opportunity to develop such a plan by assigning these
- 14. activities and illustrating a completed project (ABCups, Inc.) in each chapter. Thus, students are assigned their project planning activities and have a template that helps them complete these exercises. Lastly, this text supports the employability skills goal that Pearson actively promotes in its publications by linking to important materials and knowledge from the Project Management Institute, the world’s largest professional project management association. The text uses terminology for their Project Management Body of Knowledge (PMBoK), employs the PMBoK glossary of terms, and includes an expanded set of sample Project Management Professional (PMP) certification exam questions at the end of most chapters. Faculty can demonstrate that these chapters highlight critical wbs/ and ve Work ally warn es? What eakdown ctively? nical%20 creating a gy Sector the critihat would considerployment ult/files/ cumentaement for is project n? xviii Preface project management duties but also point to the professionalism opportunities from project management careers. Internet Exercises 195 c. 5.19 5.20 5.21 EPT: anager for nd wants in. How 5.22 5.23 WBS) t of Work roceeding ope for his e doing? y have all scope reporting methods • Inclusion of Sample PMP Certification Exam Questions—The d. Identifying all necessary vendors for any outsourcing that must be done Project Management Professional (PMP) certification represents A hospital expansion is being planned for a community. the highest standard of professional qualification for a practicAs part of the scope of this project, it will be necessary to close down the access routes into the emergency room for ing project manager and is administered by the Project Managemajor remodeling. However, because this is the only hosment Institute. As of 2017, there were more than 775,000 PMPs pital for trauma cases within 50 miles, it is not possible to worldwide. In order to attain PMP certification, it is necessary completely shut down the emergency room. The project team will have to find a means to remodel the emergency for candidates to undergo a comprehensive exam that tests their room while allowing for continuous operation of the unit. knowledge of all components of the PMBOK. This text includes This is an example of what? an expanded set of sample PMP certification exam questions at a. Negotiation points with the owner b. Constraints the end of most of the chapters, in order to give readers an idea of c. Initial assumptions the types of questions typically asked on the exam and how those d. Milestone development topics are treated in this book. A Responsibility Assignment Matrix (RAM) does NOT include: a. Who does what activity on the project b. Job roles and responsibilities for groups c. Job roles for team members d. Project reporting relationships The work authorization system ensures that: management are in high demand, and those numbers continue to grow draCareers in project a. All the work and only the work gets performed matically. Data collected in 2016 by the U.S. Bureau of Labor Statistics and the Anderson Economic b. Work gets performed in the right order and at the Group assessed the popularity of jobs in project-based industries and concluded that there are right time c. Work is done completely and according to specifications for jobs and career growth in the discipline of project management. outstanding opportunities d. Project managers are allowed total control over project Moreover, it is expected that future demand for project managers will continue to grow faster than budgets and resource assignments demand workers in other professions. Further, this demand for trained project managers is curThe project plan should be all thefor following EXCEPT: a. Approved by all stakeholders rently
- 15. expected to far outstrip the current supply of qualified individuals capable of performing b. A formal document these roles. Thistoinformation all points to one critical conclusion: project management careers are c. Distributed to stakeholders according the project’s communications in planexceptionally high demand and are expected to remain that way for the next decade (at least, d. Used to manage project execution through 2027). Eleven countries studied by the Anderson Economic Group, including the United The process for reviewing and accepting project deliverStates and Canada, Brazil, Germany, China, India, and Japan, are all projecting millions of project ables is called: a. Scope verificationmanagement jobs available in the next decade, spanning a diverse set of industries, including conb. Scope definition struction, healthcare, new product development, services and hospitality, and Information Technolc. Work Breakdown Structure (WBS) ogy (IT). Finally, two critical pieces of information highlight this accelerating demand for project d. Scope authorization A project charter should always include:professionals: first, the percentage of those in project-oriented occupations will become management a. The scope management plan a larger proportion of total employment, with anticipated growth from 5.6% in 2006 to 8.3% in 2017. b. Stakeholder sign-offs Second, c. The business need behind thewages project in 2017 for project management-oriented professionals reflect far higher average d. The Work Authorization documentation salaries than non-project-oriented professionals, with a premium of 82% over non-project workers. DEVELOPING EMPLOYABILITY SKILLS the Work t in itself nes d regardcultural • Integration with the PMBOK—As a means to demonstrate the coverage of the critical PMBOK elements, readers will find that the chapters in this text identify and cross-list the corresponding knowledge areas from the latest, fifth edition of PMBOK. Further, all terms (including the Glossary) are taken directly from the most recent edition of the PMBOK. Moving as quickly as possible to the determination of 5.24 Clearly, the data make a strong case that project management skills are a critical means by which students can enhance their employability. This text reinforces Pearson’s commitment to producing not only innovative educational content but ensuring that the material covered in their products addresses the critical skills that employers are looking for. As part of a recent, large-scale study, involving hundreds of respondents from universities and public and private organizations, Pearson identified a set of “employability skills,” those abilities that businesses deem crucial for their new hires. These skills include: 1) communication, 2) critical thinking, 3) collaboration, 4) knowledge application and analysis, 5) business ethics and social responsibility, 6) information technology application and computer skills, and 7) data literacy. We have modeled the text material, exercises, tutorials, and case material to address each of these seven employability skills in order to provide students with the maximum advantage when transitioning from the classroom to the business enterprise. With this textbook, Project Management: Achieving Competitive Advantage, students receive the dual benefit of acquiring the latest information PM and employability skills10/25/17 in a 1:26 discipline that is in extraordinarily high demand. Preface INSTRUCTOR TEACHING RESOURCES At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable format. If assistance is needed,
- 16. our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit https://support.pearson.com/getsupport for answers to frequently asked questions and toll-free user support phone numbers. This program comes with the following teaching resources: Supplements available to instructors at www.pearsonhighered.com/irc Features of the Supplement Instructor’s Solution Manual authored by Jeffrey Pinto • Chapter-by-chapter summaries • Teaching outlines • Solutions to all questions and problems in the book Test Bank authored by Jennifer Morin from -University of Central Florida 1400 multiple-choice, true/false, short answer, and graphing questions with these annotations: • Difficulty level (1 for straight recall, 2 for some analysis, 3 for complex analysis) • Section number and name • Learning outcome • Application type • AACSB learning standard (Ethical Understanding and Reasoning; Analytical Thinking; Information Technology; Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge) Computerized TestGen® TestGen allows instructors to • Customize, save, and generate classroom tests • Edit, add, or delete questions from the test item files • Analyze test results • Organize a database of tests and student results. PowerPoint Presentations authored by Jennifer Morin from University of Central Florida Slides include all the graphs, tables, and equations in the textbook. PowerPoints meet accessibility standards for students with disabilities. Features include, but are not limited to: • Keyboard and screen reader access • Alternative text for images • High color contrast between background and foreground colors ACKNOWLEDGMENTS In acknowledging the contributions of past and present colleagues to the creation of this text, I must first convey my deepest thanks and appreciation for the 30-year association with my original mentor, Dr. Dennis Slevin of the University of Pittsburgh’s Katz Graduate School of Business. My collaboration with Denny on numerous projects has been fruitful and extremely gratifying, both professionally and personally. In addition, Dr. David Cleland’s friendship and partnership in several ventures has been a great source of satisfaction through the years. A frequent collaborator who has had a massive influence on my thinking and approach to understanding project management is Professor Peter W. G. Morris, lately of University College London. Working with him has been a genuine joy and constant source of inspiration. Additional mentors and colleagues who have strongly influenced my thinking include Rodney Turner, Janice Thomas, David Frame, Nuno Gil, Ralf Müller, Andrew Davies, Jonas Soderlund, Young Kwak, Rolf Lundin, Lynn Crawford, Christophe Bredillet, Graham Winch, Terry Williams, Terry Cooke-Davies, and Karlos Artto. Each of these individuals has had a profound impact on the manner in which I view, study, and write about project management. I am also grateful for the collaboration with Jennifer Morin and Gada Baz, who contributed cases to this edition of the text. I have enjoyed very much working with them and appreciate their commitment to the book. xix xx Preface Over the years, I have also been fortunate to develop friendships with some professional project managers whose work I admire enormously. They are genuine examples of the best type of project manager: one who makes it all seem effortless while consistently performing minor miracles. In particular, I wish to thank Mike Brown of Rolls-Royce for his friendship and example. I would also like to thank friends and colleagues from the Project Management Institute, including Lew Gedansky, Harry Stephanou, and Eva Goldman, for their support for and
- 17. impact on this work. I am indebted to the reviewers of this text whose numerous suggestions and critiques have been an invaluable aid in shaping its content. Among them, I would like to especially thank the following: Kwasi Amoako-Gyampah— University of North Carolina, Greensboro Ravi Behara—George Mason University Jeffrey L. Brewer—Purdue University Dennis Cioffi—George Washington University David Clapp—Florida Institute of Technology Bruce DeRuntz—Southern Illinois University at Carbondale Ike Ehie—Kansas State University Michael H. Ensby—Clarkson University Lynn Fish—Canisius College Linda Fried—University of Colorado, Denver Mario Guimaraes—Kennesaw State University Richard Gunther—California State University, Northridge Brian Gurney—Montana State University, Billings Gary Hackbarth—Iowa State University Mamoon M. Hammad—George Washington University Scott Robert Homan—Purdue University John Hoxmeier—Colorado State University Alex Hutchins—ITT Technical Institute Richard Jensen—Hofstra University Robert Key—University of Phoenix Homayoun Khamooshi—George Washington University Dennis Krumwiede—Idaho State University George Mechling—Western Carolina University Julia Miyaoka—San Francisco State University LaWanda Morant—ITT Technical Institute Robert Morris—Florida State College at Jacksonville James Muller—Cleveland State University Kenneth E. Murphy—Willamette University John Nazemetz—Oklahoma State University Patrick Penfield—Syracuse University Ronald Price—ITT Technical Institute Ronny Richardson—Southern Polytechnic State University John Sherlock—Iona College Gregory Shreve—Kent State University Randall G. Sleeth—Virginia Commonwealth University Kimberlee Snyder—Winona State University Jeff Trailer—California State University, Chico Leo Trudel—University of Maine Preface Oya Tukel—Cleveland State University Darien Unger—Howard University Amy Valente—Cayuga Community College Stephen Whitehead—Hilbert College I would also like to thank my colleagues in the Samuel Black School of Business at Penn State, the Behrend College. Extra-special thanks go to Kerri Tomasso for her help in preparing the final manuscript and for her integral role in permissions research and acquisitions. I am especially indebted to Khurrum Bhutta, who checked this edition for accuracy. I am very grateful for his time and effort, and any errors that may remain are entirely my own. In developing the cases for this edition of the textbook, I was truly fortunate to develop wonderful professional relationships with a number of individuals. Andrea Finger and Kathleen Prihoda of Disney were wonderfully helpful and made time in their busy schedules to assist me in developing the Expedition Everest case for this text. Theresa Hinkler, Bill Mowery, Mathew Paul, Christopher Fultz, Robert Tanner, and James Devine provided me with invaluable information on their job responsibilities and what it takes to be a successful project manager. Finally, I wish to extend my sincere thanks to the people at Pearson for their support for the text during its development, including Neeraj Bhalla, editor, and Sugandh Juneja, content producer. I also would like to thank the Pearson editorial, production, and marketing staffs. FEEDBACK The textbook team and I would appreciate hearing from you. Let us know what you think about this textbook by writing to college.marketing@pearson.com. Please include “Feedback about Pinto” in the subject line. If you have questions related to this product, please contact our customer service department online at https://support.pearson.com/getsupport. Finally, it is important to reflect on an additional salient issue as you begin your study of
- 18. project management; most of you will be running a project long before you are given wider management responsibilities in your organizations. Successful project managers are the lifeblood of organizations and bear the imprint of the fast track. I wish you great success! Jeffrey K. Pinto, Ph.D. Andrew Morrow and Elizabeth Lee Black Chair Management of Technology Samuel Black School of Business Penn State, the Behrend College jkp4@psu.edu xxi ABOUT THE AUTHOR Dr. Jeffrey K. Pinto is the Andrew Morrow and Elizabeth Lee Black chair in the Management of Technology in the Sam and Irene School of Business at Penn State, the Behrend College. Dr. Pinto held previous academic appointments at the University of Cincinnati and the University of Maine. In 2016, he was a visiting scholar at the Kemmy School of Business, University of Limerick, Ireland. He is the program chair for Penn State’s Master of Project Management program. The author or editor of 28 books and over 150 scientific papers that have appeared in a variety of academic and practitioner journals, books, conference proceedings, video lessons, and technical reports, Dr. Pinto’s work has been translated into nine languages. He served as editor of the Project Management Journal, is past department editor for R&D and engineering projects with IEEE Transactions on Engineering Management, and serves on several other journal editorial boards. With over 30 years’ experience in the field of project management, Dr. Pinto is a two-time recipient of the Distinguished Contribution Award from the Project Management Institute for outstanding service to the project management profession. He received PMI’s Research Achievement Award in 2009 for outstanding contributions to project management research. In 2017, he received the Research Achievement Award from the International Project Management Association in recognition of his career research contributions to the field of project management. Dr. Pinto has taught and consulted widely in North America, South America, and Europe on a variety of topics, including project management, new product development, supply chain -management, information systems implementation, organization development, leadership, and conflict resolution. xxii 1 ■ ■ ■ Introduction Why Project Management? Chapter Objectives After completing this chapter, you should be able to: 1.1 Understand why project management is becoming such a powerful and popular practice in business. 1.2 Recognize the basic properties of projects, including their definition. 1.3 Understand why effective project management is such a challenge. 1.4 Understand and explain the project life cycle, its stages, and the activities that typically occur at each stage in the project. 1.5 Understand the concept of project “success,” including various definitions of success, as well as the alternative models of success. 1.6 Understand the purpose of project management maturity models and the process of benchmarking in organizations. 1.7 Recognize how mastery of the discipline of project management enhances critical employability skills for university graduates. PROJECT MANAGEMENT BODY OF KNOWLEDGE CORE CONCEPTS COVERED IN THIS CHAPTER 1. 2. 3. 4. Definition of a Project (PMBoK sec. 1.2) Definition of Project Management (PMBoK sec. 1.3) Relationship to Other Management Disciplines (PMBoK sec. 1.4) Project Phases and the Project Life Cycle (PMBoK sec. 2.1) The world acquires value only through its extremes and endures only through moderation; extremists make the world great, the moderates give it stability.1 PROJECT PROFILE Development Projects that are Transforming Africa The African continent is on the verge of massive changes, and projects are helping to raise the standard
- 19. of living for its inhabitants. The current population of 1.2 billion is expected to double by 2050, growing at some 42 million people per year. Managing the means to accommodate this expansion is the goal of a number of governmental agencies, non-governmental organizations (NGOs), and international bodies. In order to bring prosperity to a continent that has suffered through decades of misrule, colonial exploitation, and regional conflicts, dozens of important infrastructure projects are being undertaken to improve standards of living and accommodate the needs of this rapidly-increasing population. Among the major infrastructure projects that offer great promise are: 1. The North-South Corridor – In 2009, the Common Market of Eastern and Southern Africa began work on a series of road and railways designed to link seven countries and covering more than 6,000 miles. At a cost of over $1 billion, 1 2 Chapter 1 • Introduction FIGURE 1.1 South Africa’s Jasper Solar Farm Source: Mikeledray/Shutterstock 2. 3. 4. 5. 6. 7. the North-South Corridor is expected to improve the flow of people and goods across national boundaries, -generating commerce and trade. Technology Hubs – A Chinese development firm, Zendai Property, announced in 2013 the investment of $8 billion to build a hub for Chinese firms investing in African infrastructure. This hub, named Modderfontein New City, is being constructed outside of Johannesburg, South Africa. Kenya is getting its own technology hub, a $14.5 billion software center named Konza Technology City, which is situated outside Nairobi, the Kenyan capital. The Kenyan government refers to Konza as the start of the “silicon savannah.” Tanzania’s Bagamoyo Port is slated to become Africa’s largest port, with a capability of handling more than 20 million containers each year. The Chinese construction firm that has invested $11 billion in the project expects to have the port completed and operational by 2045. Giant Dams – The Grand Ethiopian Renaissance Dam (budgeted at $4.8 billion) is intended to provide hydroelectric power to Ethiopia and several neighboring countries. Congo’s Grand Inga Dam, with its expected cost of over $100 billion, will become the largest energy-generating dam in the world and is slated for completion in 2025. South Africa’s Jasper Solar Farm – Opened in 2015, the solar farm produces enough energy to power 80,000 homes. It is the largest solar power project on the African continent. The “New Suez Canal” – Construction started on the expansion of the existing Suez Canal in 2014, with the goal of adding a new 22-mile shipping lane. The expansion is expected to double Egypt’s annual revenue from canal traffic. Expansion of Cement Production – Dangote Cement, headquartered in Lagos, Nigeria, in 2015 signed contracts with a Chinese firm to increase its cement manufacturing capacity across 15 countries to 100 million tons by 2020. This huge increase in cement production will fuel additional infrastructure projects on the African continent for decades to come. Raising the standard of living for an entire continent with a large expected population increase is a challenging goal. In order to accommodate the needs of these population changes, as well as improve the living standards for the entire continent, it is vital that projects be undertaken that can provide value both commercially and environmentally. Successful project management offers the means to get the best out of “good intentions” by ensuring that these and other funded projects are implemented as efficiently and effectively as possible. When development projects are viewed as the roots for future expansion, it is easy to understand their importance. Future improvements in living standards depend on the current projects being
- 20. done right, as the success of these projects will spawn the need and support the willingness of firms and governments to invest in subsequent projects.2 What is a Project? The Need for Projects LO 1.1 nderstand why project management is becoming such a powerful and popular practice U in business. Projects are one of the principal means by which we change our world. Whether the goal is to split the atom, tunnel under the English Channel, introduce Windows 10, or plan the 2018 Winter -Olympic Games in Pyeongchang, South Korea, the means through which to achieve these challenges remains the same: project management. Project management has become one of the most popular tools for organizations, both public and private, to improve internal operations, respond rapidly to external opportunities, achieve technological breakthroughs, streamline new product development, and more robustly manage the challenges arising from the business environment. Consider what Tom Peters, best-selling author and management consultant, has to say about project management and its place in business: “Projects, rather than repetitive tasks, are now the basis for most valueadded in business.”3 Project management has become a critical component of successful business operations in worldwide organizations. One of the key features of modern business is the nature of the opportunities and threats posed by external events. As never before, companies face international competition and the need to rapidly pursue commercial opportunities. They must modify and introduce products constantly, respond to customers as fast as possible, and maintain competitive cost and operating levels. Does performing all these tasks seem impossible? At one time, it was. Conventional wisdom held that a company could compete using a low-cost strategy or as a product innovator or with a focus on customer service. In short, companies had to pick their competitive niches and concede others their claim to market share. In the past 20 years, however, everything turned upside down. Companies such as General Electric, Apple, Ericsson, Boeing, and Oracle became increasingly effective at realizing all of these goals rather than settling for just one. These companies seemed to be successful in every aspect of the competitive model: They were fast to market and efficient, cost- conscious, and customer-focused. How were they performing the impossible? Obviously, there is no one answer to this complex question. There is no doubt, however, that these companies shared at least one characteristic: They had developed and committed themselves to project management as a competitive tool. Old middle managers, reported Fortune magazine, are dinosaurs, [and] a new class of manager mammal is evolving to fill the niche they once ruled: project managers. Unlike his biological counterpart, the project manager is more agile and adaptable than the beast he’s displacing, more likely to live by his wits than throwing his weight around.4 Effective project managers will remain an indispensable commodity for successful organizations in the coming years. More and more companies are coming to this conclusion and adopting project management as a way of life. Indeed, companies in such diverse industries as construction, heavy manufacturing, insurance, health care, finance, public utilities, and software are becoming project savvy and expecting their employees to do the same. What is a Project? LO 1.2 Recognize the basic properties of projects, including their definition. Although there are a number of general definitions of the term project, we must recognize at the outset that projects are distinct from other organizational processes. As a rule, a process refers to ongoing, day-to-day
- 21. activities in which an organization engages while producing goods or services. Processes use existing systems, properties, and capabilities in a continuous, fairly repetitive m - anner.5 Projects, on the other hand, take place outside the normal, process-oriented world of the firm. -Certainly, in some organizations, such as construction, day-to-day processes center on the creation 3 4 Chapter 1 • Introduction and development of projects. Nevertheless, for the majority of organizations project management activities remain unique and separate from the manner in which more routine, process-driven work is performed. Project work is continuously evolving, establishes its own work rules, and is the antithesis of repetition in the workplace. As a result, it represents an exciting alternative to “business as usual” for many companies. The challenges are great, but so are the rewards of success. First, we need a clear understanding of the properties that make projects and project management so unique. Consider the following definitions of projects: A project is a unique venture with a beginning and end, conducted by people to meet established goals within parameters of cost, schedule, and quality.6 Projects [are] goal-oriented, involve the coordinated undertaking of interrelated activities, are of finite duration, and are all, to a degree, unique.7 A project can be considered to be any series of activities and tasks that: • • • • • 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, such as money, people, equipment Are multifunctional (i.e., cut across several functional lines)8 [A project is] [o]rganized work toward a predefined goal or objective that requires resources and effort, a unique (and therefore risky) venture having a budget and schedule.9 Probably the simplest definition is found in the Project Management Body of Knowledge (PMBoK) guide of the Project Management Institute (PMI). The PMI is the world’s largest professional project management association, with more than 475,000 members worldwide as of 2017. In the PMBoK guide, a project is defined as “a temporary endeavor undertaken to create a unique product, service, or result” (p. 553).10 Let us examine the various elements of projects, as identified by this set of definitions. • Projects are complex, one-time processes. A project arises for a specific purpose or to meet a stated goal. It is complex because it typically requires the coordinated input of n - umerous members of the organization. Project members may be from different departments, other organizational units, or one functional area. For example, a project to develop a new software application for a retail company may require only the output of members of the information systems group working with the marketing staff. On the other hand, some projects, such as new product introductions, work best with representation from many functions, including marketing, engineering, production, and design. Because a project is intended to fulfill a stated goal, it is temporary. It exists only until its goal has been met, and at that point it is dissolved. • Projects are limited by budget, schedule, and resources. Project work requires that members work with limited financial and human resources for a specified time period. They do not run indefinitely. Once the assignment is completed, the project team disbands. Until that point, all its activities are constrained by limitations on budget and personnel availability. Projects are “resource-constrained” activities. • Projects are developed to resolve a clear goal or set of goals. There is no such thing as a project team with an ongoing, nonspecific purpose. The project’s goals, or deliverables, define the nature
- 22. of both the project and its team. Projects are designed to yield a tangible result, either as a new product or service. Whether the goal is to build a bridge, implement a new accounts receivable system, or win a presidential election, the goal must be specific and the project organized to achieve a stated aim. • Projects are customer-focused. Whether the project is responding to the needs of an internal organizational unit (e.g., accounting) or intended to exploit a market opportunity external to the organization, the underlying purpose of any project is to satisfy customer needs. In the past, this goal was sometimes overlooked. Projects were considered successful if they attained technical, budgetary, and scheduling goals. More and more, however, companies have realized that the primary goal of a project is customer satisfaction. If that goal is neglected, a firm runs the risk of “doing the wrong things well”—pursuing projects that may be done efficiently but that ignore customer needs or fail commercially. What is a Project? GENERAL PROJECT CHARACTERISTICS Using these definitional elements, we can create a sense of the key attributes that all projects share. These characteristics are not only useful for better understanding projects, but also offer the basis for seeing how project-based work differs from other activities most organizations undertake. Projects represent a special type of undertaking by any organization. Not surprisingly, the challenges in performing them right are sometimes daunting. Nevertheless, given the manner in which business continues to evolve on a worldwide scale, becoming “project savvy” is no longer a luxury: it is rapidly becoming a necessity. Projects are characterized by the following properties:11 1. Projects are ad hoc endeavors with a clear life cycle. Projects are nontraditional; they are activities that are initiated as needed, operate for a specified time period over a fairly well understood development cycle, and are then disbanded. They are temporary operations. 2. Projects are building blocks in the design and execution of organizational strategies. As we will see in later chapters, projects allow organizations to implement companywide strategies. They are the principal means by which companies operationalize corporate-level objectives. In effect, projects are the vehicles for realizing company goals. For example, Intel’s strategy for market penetration with ever newer, smaller, and faster computer chips is realized through its commitment to a steady stream of research and development projects that allows the company to continually explore the technological boundaries of electrical and computer engineering. 3. Projects are responsible for the newest and most improved products, services, and organizational processes. Projects are tools for innovation. Because they complement (and often transform) traditional process-oriented activities, many companies rely on projects as vehicles for going beyond conventional activities. Projects are the stepping-stones by which we move forward. 4. Projects provide a philosophy and strategy for the management of change. “Change” is an abstract concept until we establish the means by which we can make real alterations in the things we do and produce. Projects allow organizations to go beyond simple statements of intent and to achieve actual innovation. For example, whether it is Chevrolet’s Volt electric car or Samsung’s newest smartphone upgrade, successful organizations routinely ask for customers’ input and feedback to better understand their likes and dislikes. As the vehicle of change, the manner in which a company develops its projects has much to say about its ability to innovate and its commitment to change. 5. Project management entails crossing functional and organizational boundaries. Projects
- 23. epitomize internal organizational collaboration by bringing together people from various functions across the company. A project aimed at new product development may require the combined work of engineering, finance, marketing, design, and so forth. Likewise, in the global business environment many companies have crossed organizational boundaries by forming long-term partnerships with other firms in order to maximize opportunities while emphasizing efficiency and keeping a lid on costs. Projects are among the most common means of promoting collaboration, both across functions and across organizations. 6. The traditional management functions of planning, organizing, motivation, directing, and control apply to project management. Project managers must be technically well versed, proficient at administrative functions, willing and able to assume leadership roles, and above all, goal- oriented: The project manager is the person most responsible for keeping track of the big picture. The nature of project management responsibilities should never be underestimated, because these responsibilities are both diverse and critical to project success. 7. The principal outcomes of a project are the satisfaction of customer requirements within the constraints of technical, cost, and schedule objectives. Projects are defined by their limitations. They have finite budgets, definite schedules, and carefully stated specifications for completion. For example, a term paper assignment in a college class might include details regarding form, length, number of primary and secondary sources to cite, and so forth. Likewise, in the Disney’s Expedition Everest case example at the end of this chapter the executive leading the change process established clear guidelines regarding performance expectations. All these constraints both limit and narrowly define the focus of the project and the options available to the project team. It is the very task of managing successful project development within such specific constraints that makes the field so challenging. 5 6 Chapter 1 • Introduction 8. Projects are terminated upon successful completion of performance objectives or earlier in their life cycle, if results no longer promise an operational or strategic advantage. As we have seen, projects differ from conventional processes in that they are defined by limited life cycles. They are initiated, completed, and dissolved. As important alternatives to conventional organizational activities, they are sometimes called “temporary organizations.”12 Projects, then, differ from better-known organizational activities, which often involve repetitive processes. The traditional model of most firms views organizational activities as consistently -performing a discrete set of activities. For example, a retail-clothing establishment buys, stocks, and sells clothes in a continuous cycle. A steel plant orders raw materials, makes steel, and ships finished products, again in a recurring cycle. The nature of these operations focuses our attention on a p - rocess orientation; that is, the need to perform work as efficiently as possible in an ongoing manner. When its processes are well understood, the organization always seeks better, more efficient ways of doing the same essential tasks. Projects, because they are discrete activities, violate the idea of repetition. They are temporary activities that operate outside formal channels. They may bring together a disparate collection of team members with different kinds of functional expertise. Projects function under conditions of uncertainty, and usually have the effect of shaking up normal -corporate activities. Because of their unique characteristics, they do not conform to common standards of operations; they do things differently and often reveal new and better ways of doing things. Table 1.1
- 24. offers some other distinctions between project-based work and the more traditional, process-based activities. Note a recurring theme: projects operate in radical ways that consistently violate the standard, process-based view of organizations. Consider Apple’s use of projects to push the development of a constantly-changing range of product and service offerings. When it was first introduced in 2003, the iPod was Apple’s portable MP3 player that could be integrated with Apple’s popular iTunes site to record and play music downloads. From its introduction in 2003 to 2015, when Apple stopped reporting sales of the product, consumers had bought more than 400 million iPods, generating $65 billion in revenue for the firm. Customers have also purchased more than 45 billion songs through Apple’s iTunes online store. In fact, Apple’s iTunes division became the largest U.S. market for music sales; by 2015 it was accounting for 29% of all music sold in the United States and 64% of the digital music market. More recently, as steadily declining sales raised concern that the music downloads market has become saturated and less profitable, Apple introduced its Apple Music site to attract fans of music streaming, competing directly with Spotify and Pandora, among other music streaming services. By 2017 Apple Music had enrolled over 20 million subscribers, making it the second-largest streaming service in the world. Each of these steps demonstrates Apple’s commitment to using new project ventures as a means of avoiding a business as usual mentality, as it seeks to remain on the leading edge of the industry.13 TABLE 1.1 Differences Between Process and Project Management14 Process Project Repeat process or product New process or product Several objectives One objective Ongoing One shot—limited life People are homogenous More heterogeneous Well- established systems in place to integrate efforts Systems must be created to integrate efforts Greater certainty of performance, cost, schedule Greater uncertainty of performance, cost, schedule Part of line organization Outside of line organization Bastions of established practice Violates established practice Supports status quo Upsets status quo Source: R. J. Graham. (1992). “A Survival Guide for the Accidental Project Manager,” Proceedings of the Annual Project Management Institute Symposium. Drexel Hill, PA: Project Management Institute, pp. 355–61. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI. What is a Project? A similar set of events is currently unfolding, centered on Apple’s successive upgrades of its iPad tablet. Among the numerous features offered by the iPad is the ability to download books, including college textbooks, directly from publishers, effectively eliminating the traditional middlemen— bookstores—from the process. So radical are the implications of the iPad and competing tablets like Microsoft’s Surface Pro and Samsung’s Galaxy to capture a share of this market that large bookstores have been forced to adapt their business models to the new electronic reality of book purchases by offering their own readers; for example, Kindle for Amazon. Some experts are suggesting that within a decade tablets and other electronic readers will make traditional books obsolete, capturing the majority of the publishing market. These are just some examples of the way that project-driven technological change, such as that at Apple, is reshaping the competitive landscape. Given the enthusiasm with which project management is being embraced by so many organizations, we should note that the same factors that make project management a unique undertaking are also among the main reasons why successful project management is so difficult. The track record of project
- 25. management is by no means one of uninterrupted success, in part because many companies encounter deep-rooted resistance to the kinds of changes needed to accommodate a project philosophy. Indeed, recent research into the success rates for projects offers some grim conclusions: • A study of more than 300 large companies conducted by the consulting firm KPMG found that software and/or hardware development projects fail at the rate of 65%. Of companies studied, 65% reported projects that went grossly over budget, fell behind schedule, did not perform as expected, or all of the above. Half of the managers responding indicated that these findings were considered “normal.”15 • A study by the META Group found that “more than half of all (information technology) IT projects become runaways— overshooting their budgets and timetables while failing to deliver fully on their goals.” According to the Gallup Business Review, the U.S. economy loses somewhere between $50 and $150 billion every year because of failed IT projects.16 • Joe Harley, the Chief Information Officer at the Department for Work and Pensions for the UK government, stated that “only 30%” of technology-based projects and programs are a success—at a time when taxes are funding an annual budget of £14 billion (over $22 billion) on public sector IT, equivalent to building 7,000 new primary schools or 75 hospitals a year.17 • The United States National Nuclear Security Administration has racked up $16 billion in cost overruns on 10 major projects that are a combined 38 years behind schedule, the Government Accountability Office reports. For example, at Los Alamos National Laboratory a seven-year, $213 million upgrade to the security system that protects the lab’s most sensitive nuclear bomb-making facilities did not work. A party familiar with the organization cites a “pervasive culture of tolerating the intolerable and accepting the unacceptable.”18 • One out of six IT projects has an average cost overrun of 200% and a schedule overrun of 70%. Around 45% of companies admit that they are unclear about the business objectives of their IT projects. The Chaos Summary 2015 survey of 50,000 projects worldwide by The Standish Group reported similar findings: The majority of all projects were rated either as “challenged” due to late delivery, being over budget, or delivering less than required features, or “failed” when they were canceled prior to completion or the product developed was never used. Researchers have concluded that the average success rate of business- critical application development projects is 29%. Their statistics have remained remarkably steady since 1994.19 • The Special Inspector General for Afghanistan Reconstruction (SIGAR) reported that the U.S. spent more than $110 billion on postwar reconstruction projects, with some estimates suggesting that over one-third of the costs of these projects was lost due to waste, fraud, and poor planning or project execution. In a recent interview, John Sopko, the Special Investigator General, noted that because of project waste along with contracting and performance errors, “We’ve built an Afghanistan they can’t afford.” As one example, he cites the $400 million purchase of aircraft for an Afghanistan Air Force; aircraft the government couldn’t use that were ultimately scrapped for a near total loss.20 These findings underscore an important point: although project management is becoming popular, it is not easy to assimilate into the conventional processes of most firms. For every firm discovering the benefits of projects, many more underestimate the problems involved in becoming project savvy. 7 8 Chapter 1 • Introduction These studies also point to a core truth about project management: we should not overestimate the benefits to be gained from
- 26. project management while underestimating the commitment required to make a project work. There are no magic bullets or quick fixes in the discipline. Like any other valuable activity, project management requires preparation, knowledge, training, and commitment to basic principles. Organizations wanting to make use of project-based work must recognize, as Table 1.1 demonstrates, that its very strength often causes it to operate in direct contradiction to standard, process-oriented business practices. PROJECT PROFILE President Obama Signs the Program Management Improvement and Accountability Act For those who ever wondered just how seriously the U.S. federal government takes project management, it is interesting to discover that they are making a law to regulate it. In one of the final acts of President Obama’s administration, he signed into law the Program Management Improvement and Accountability Act (PMIAA) in December, 2016. This act of Congress is intended to enhance both accountability and best practices in project and program management throughout the federal government. The legislation, strongly endorsed by the Project Management Institute (PMI), was approved by both chambers of Congress with overwhelming bi-partisan support. The PMIAA reforms federal program management policy in four important ways: 1. Creating a formal job series and career path for program managers in the federal government. 2. Developing a standards-based program management policy across the federal government. 3. Recognizing the essential role of executive sponsorship and engagement by designating a senior executive in federal agencies to be responsible for program management policy and strategy. 4. Sharing knowledge of successful approaches to program management through an interagency council on program management. Among the reasons cited for formalizing the importance of project/program management is that only 64 percent of government strategic initiatives ever meet their goals and business intent, while government entities waste $101 million for every $1 billion spent on project and programs. Research also shows that developing best practices can result in improved efficiency and less money being wasted. Most importantly, organizations see more projects delivering expected value to stakeholders on time and within budget.21 FIGURE 1.2 President Obama signing the PMIAA into Law Source: REX/Shutterstock Why are Projects Important? Why are Projects Important? LO 1.3 Understand why effective project management is such a challenge. There are a number of reasons why projects and project management can be crucial in helping an organization achieve its strategic goals. David Cleland, a noted project management researcher, suggests that many of these reasons arise from the very pressures that organizations find themselves facing.22 1. Shortened product life cycles. The days when a company could offer a new product and depend on having years of competitive domination are gone. Increasingly, the life cycle of new products is measured in terms of months or even weeks, rather than years. One has only to look at new products in electronics or computer hardware and software to observe this trend. Interestingly, we are seeing similar signs in traditional service-sector firms, which also have recognized the need for agility in offering and upgrading new services at an increasingly rapid pace. 2. Narrow product launch windows. Another time- related issue concerns the nature of opportunity. Organizations are aware of the dangers of missing the optimum point at which to launch a new product and must take a proactive view toward the timing of product introductions. For example, while reaping the profits
- 27. from the successful sale of Product A, smart firms are already plotting the best point at which to launch Product B, either as a product upgrade or a new offering. Because of fierce competition, these optimal launch opportunities are measured in terms of months. Miss your launch window, even by a matter of weeks, and you run the risk of rolling out an also- ran. 3. Increasingly complex and technical products. It has been well-documented that the average automobile today has more computing power than the Apollo 11 space capsule that allowed astronauts to walk on the moon. This illustrates a clear point: the world today is complex. Products are complicated, technically sophisticated, and difficult to produce efficiently. The public’s appetite for the next big thing continues unabated and substantially unsatisfied. We want the new models of our consumer goods to be better, bigger (or smaller), faster, and more complex than the old ones. Firms constantly upgrade product and service lines to feed this demand. This causes multiple problems in design and production as we continually seek to push the technical limits. Furthermore, in anticipating future demand many firms embark on expensive programs of research and development while attempting to discern consumer tastes. The effect can be to erroneously create expensive and technically sophisticated projects that we assume the customer will want. For example, Rauma Corporation of Finland developed a state-of-the-art loader for the logging industry. Rauma’s engineers loaded the product with the latest computerized gadgetry and technologies that gave the machine a space-age feel. Unfortunately, the chief customer for the produ…