Mot spring 2010 text (1)

Organizations Through the Eyes of a Project

Manager

Harvey F. Hoffman, Ed.D.

TCI
320 West 31st Street
New York, NY 10001
(212) 594-4000 X 318
hhoffman@tcicollege.net

All material copyrighted 2001. Material may not be duplicated without permission in
writing from H. Hoffman.

1

TABLE OF CONTENTS

Page

Preface 11

Acknowledgement 13

Dedication 13

CHAPTER 1 14

Organizational Expectations and Professionalism 14

Employer Expectations - TACT 16

Employee Expectations 21

Professionalism 25

Dissemination of Information 26

Service 27

Education 27

Managing Oneself 28

Professional Ethics 29

Certifications and Licenses 32

Trades and Crafts 32

Chapter 1 Questions 35

CHAPTER 2 44

The Organization 44

Core Identity 45

Objectives and Goals 50

Strength, Weakness, Opportunity, Threat (SWOT) 50

2

Sidebar: A Personal SWOT Analysis 55

Activities 57

Standards 58

Policy, Process, Procedure, Rule 61

Sidebar: Public versus Private Companies 64


CHAPTER 3 71

Project Management Organizational Overview 71

Why Project Management? 81

Project Manager's Responsibilities 83

Organizational Charts 86

Functional Organization 87

Project Management Structure 88

Matrix Organization 89

Line Organization 91


Chapter 4 100

Management Concepts 100

Management 101

Managers and Supervisors 105

Historical Management Overview 107

Classical Management 109

Human behavioral management 117

3

Human Resources School 120

Herzberg’s Hygiene Factors 120

Maslow’s Hierarchy 123

Douglas McGregor’s Theory X and Theory Y worker 125

Acceptance Theory of Authority 127

Management by Objective 128

Deming’s Ideas 129

Recent management views 133

Management Styles 135

Power 137

Teams 140

Project Managers Lead Teams 144

Leadership 146

Leadership versus management 149

Competitive Advantage 153


Chapter 5 158

Project Planning 158

Planning 158

Request for a Proposal and Request for a Quote 160

Project Charter 164

The Project Plan 169

Plan Benefits 173

4

The Project Plan Troika 174

Exhibit 5-1 -- Typical Hardware or Software Product Specification Outline 189

Exhibit 5-2 - Sample Statement of Work Outline 191

Exhibit 5-3 -- Sample Work Breakdown Structure (WBS) 196

Exhibit 5-4 – Example of a Statement of Work 200


Chapter 6 212

Project Time Management 212

Project Time Management 212

Rudiments of Schedule Preparation 215

Creating a Schedule 222

Microsoft Project 226

Task Entry 226

Working Time 228

WBS Number 230

Task Duration 231

Task Dependencies 233

Responsibility Assignment Matrix (RAM) 235

Critical Path 241

Schedule Progress 242

Printing Niceties 244

Sidebar: The 8-Hour Day 244

Summary 246

5


Chapter 7 256

Project Estimation and Cost 256

Direct and Indirect Costs 257

Material and Material Handling Costs 257

Travel and Living Charges 258

Other Direct Costs (ODC) 258

Sales Commission 259

Profit 259

Indirect Costs 260

Overhead and G&A Costs 261

Bottom-up estimating 263

Villa-Tech Bid Example 268

Overhead rates 269

General and Administrative Costs 271

Burdened Wage 273

Functional Manager Estimates 274

Risk Analysis 275

Villa-Tech Project Cost Summary 279

Project Spending Profile 280

Bottom up Estimate Summary 281

Top Down Estimate 282

Rule of Thumb Cost Estimating Approach 282

6

Parametric Modeling 283

Analogous Estimating Technique 286

Learning Curve 287

Project Estimating Summary 295

Cost Management 298

Financial and Schedule Analysis 299

Stakeholders Requiring Special Attention 302


Chapter 8 313

Project Communications 313

Communications Management 314

Communication Pathways 317

Organization Communications Protocol 319

Communications Process 319

Conducting Effective Meetings 321

Memos 325

Listening 327

Verbal Communications 329

Telephone Protocol 329

Face-to-face meetings 330


Chapter 9 335

Quality 335

7

The Quality Gurus 337

Quality and the Project Manager 344

Quality Policy 346

Quality Planning, Assurance, and Control 349

Quality Planning 353

IEEE Software Quality Plans 357

Capability Maturity Model® (SW-CMM®) for Software361

ISO Standards 365

Six Sigma 368

Quality Assurance 371

Quality Control 375

Responsibility for Quality 378


Chapter 10 383

Project Risk 383

Risk Management Process 383

Risk Identification at the Proposal Stage 385

Contract 385

Technical Risk 386

Technical and Operational Performance 392

Damages 394

Labor Rates and Forward Pricing Projections 394

Business risk issues 395

8

Terms and Conditions 397

Other Costs 398

Mitigating Risk at the Proposal Stage 399

Risk Management During the Project 401

Mitigating Risk 405


Chapter 11 409

Project Tracking, Reporting and Procurement 409

Project tracking and reporting 409

Project Tracking Example 413

Summary of Monitoring and Tracking Activities 440

Subcontracting 440

Selecting Qualified Vendors 442

Preparing and Evaluating a Bid 443

Contract Administration 447

Project Completion 448

Post Project Review – Lessons Learned 449


Chapter 12 461

Epilogue 461

Project Management Perspectives Within the Organization 462

Project Management Career 464

Project Management Social and Technical Skills 465

9

Social and People Skills 466

Technical skills 468

Appendix 1 - Typical Employee Performance Appraisal Forms 472

Appendix 2 - Ethical Codes of Selected Professional Organizations 484

Appendix 3 - Wilderness Survival Answer And Rationale Sheet 491

AppENDIX 4 – ISO 9000 QUALITY MANAGEMENT PRINCIPLES 494

REFERENCES 502

10

PREFACE

I know I could never forgive myself if I elected to live without humane purpose, without
trying to help the poor and unfortunate, without recognizing that perhaps the purest joy
in life comes with trying to help others. – Arthur Ashe

<>
During the first year of my tenure as the Dean of Technology at Technical Career
Institutes (TCI), I spoke with human resource personnel from more than twenty
companies that hired the college’s graduates. Each company praised the technical
abilities of the TCI students, but they indicated that the students required improvement
in their social skills and understanding of an organization’s operation. The department
chairs and I discussed the type of course that would help our students and the outline
for this book evolved. The book reflects my experiences as an engineer, department
manager, and project manager in my 30-year career in industry.

Today medium to large organizations routinely use project managers. Technology
students will likely encounter a project manager in their first job. They may be part of a
project team or if the organization does not use the project manager methodology, they
will meet this person as a supplier or customer. Most undergraduates have little
understanding of how an organization operates or of an organization’s expectations.
Who makes which decisions and why? Who manages the group? How do you get
things done? What does the culture permit? Seasoned employees realize that
employment success depends not only on technical abilities, but also on the ability to
interact well with colleagues and quickly learning the organization’s “ropes.”

This book serves five purposes. First, it introduces students to project based
information technology, manufacturing, and research and development business
environments. Second, the student will learn business and industry's vocabulary,
processes and procedures, and expectations. Third, they will be able to ask intelligent
questions regarding the operation of that organization during a job interview. Fourth,
they will be better able to evaluate different organizational management styles to decide
what is best for them. Fifth, and perhaps most important, the student will be ready to
step into a new job and have some understanding of the organization’s expectations.

To successfully accomplish the first objective, we will examine the project manager's
role. A large number of organizations use the project manager (PM) model to cut
across the entire set of departments in an effort to get a job done on time, within
budget, and without compromising quality targets. Understanding this person's
function will enable the new employee to quickly adjust and contribute to the work
environment.

In the discussions that ensue, ethical questions may arise. This book will familiarize
students with ethical issues that arise in the business and industry context. Questions

11

both in the text and at the end of the chapter will promote class discussions and serve
to sensitize students to the moral dimensions of an organization’s issues.

The text material will assist the student in their preparations for the Project +
certification examination offered by CompTIA and the Certified Associate in Project
Management (CAPM) offered by the Project Management Institute. These certification
programs prepare new practitioners for introductory project management positions with
titles such as coordinator, expeditor, planner, project administrator, or project
management assistant.

The viewpoint taken will follow the Project Management Institute’s Project Management
Body of Knowledge (PMBOK). The text material covers many of the topics required by
the CompTIA Project+ examination.

TCI instructors have successfully used the text material for a one-term 45-hour
introductory project management course. Instructors select from the following
sequence of topics:

1. The organization’s expectations, project management overview
2. Organization structures and professionalism
3. Management concepts (Fayol, Taylor, Weber, the Gilbreths, Maslow, Herzberg,
McGregor)
4. Leadership, teams, project lifecycle
5. Project planning, project objectives, statement of work, work breakdown
structure
6. Time management – schedule, milestone charts, critical path analysis
7. Introduction to Microsoft Project
8. Project cost management
9. Cost estimating, learning curves
10. Project communications – assessment and reporting
11. Quality planning, assurance, control
12. Risk management
13. Project monitoring and tracking

I recommend allocating six-hours to the Microsoft Project software application. During
the first three-hours I introduce the student to the fundamental techniques of preparing
a schedule using this software. We work in a computer laboratory during this session
and each student uses a computer. In the second three-hour session, I assign an in-
class student project. I find that organizing the students into groups of 2 to 3 people
works best for student learning. The students share a computer during this session.

The topic of quality contains a rich amount of material. It is ideal for students to prepare
reports and make class presentations. Consequently, I have allotted up to six class
hours to the quality discussion. I lecture for 1½-hours and allocate the remainder of the
time to three person team presentations.

12

Many of the quotes at the beginning of each chapter have influenced my thinking over
the years. Others I discovered while doing this research. I hope that it will positively
influence the reader.

Harvey Hoffman
Somewhere between Manhattan and Fairfield, CT on the Metro-North train.

ACKNOWLEDGEMENT

I would like to thank the reviewers of the initial text drafts for their valuable and insightful
comments. TCI teachers, Roy Lau, Pedro Lopez, Gilbert Chan, Steve Maybar, and Dr.
Bert Pariser class tested versions of the manuscript and provided constructive critique
of the work. I am also indebted to the TCI students who suffered through the MOT-200
notes phase and the CD-ROM PDF file. I am grateful for their suggestions, which
helped me a great deal.

Finally, I want to express my appreciation and thanks to Cristina Hernandez of the Art
History department at Mt. San Antonio College and Tony Mattrazzo, a Public Relations
Specialist at the New York State Archives Cultural Education Center for the images that
they furnished for this project.

DEDICATION

I have worked with nontraditional college students for many years. I dedicate this book
to the hard work and perseverance of this group of dedicated people.

! To the nontraditional college age men and women who commute to college after
or sometimes before a day’s work.
! To the student-parents who have concerns about the whereabouts of their
children while they attend school.
! To the student care givers who worry about the health and welfare of their
children, parents, friends or relatives.
! To the significant-others, spouses and children that give up time during the
evenings and weekends so that the nontraditional student can complete
homework or prepare for a test.

Keep plugging. It may take a while, but graduation will come -- and success will feel so
good!

13

CHAPTER 1

Organizational Expectations and Professionalism

Whether you think you can
or
whether you think you can't ....
You are right. - Henry Ford

<>
Chapter objectives

After studying this chapter, you should be able to:

Understand an organization’s expectations
Understand the components of an employee assessment
Understand the elements of professionalism

Characteristics of the business environment during the 1990s included rampant

technical innovation, a global economic perspective, a free-market, and a requirement

for continuous employee learning. The 2000's began with a 30-year low unemployment

rate (4.1%) and black and Hispanic workers had the lowest rate (8% and 6.4%,

respectively) since the Labor Department began breaking out statistics (Stevenson, p.

A1). Even during these good times, numerous layoffs, downsizings, restructurings, and

delayerings occurred due to corporate mergers and reorganizations. These

organizations focused on productivity to ensure quarterly sales growth and regular profit

increases. The economy is cyclical and cooled down in 2001 with telecommunications,

Internet, data processing, dot-com and other companies slashing their workforce. (See

for example Washtech.com Technology Layoffs Watch at

14

http://www.washtech.com/specialreports/layoffs_bydate.html.) Unemployment

skyrocketed. Knowledge workers that maintained up-to-date skills kept their full-time

jobs. Others survived on a mixture of part-time and contract work. Those not updating

their knowledge base had difficulty obtaining employment. The lesson is clear –

people must take responsibility for continually managing their careers.

Business and industry provides a service or a product to both internal and external

customers and exists not only to make money, but more to the point -- to make a profit.

Today's corporation requires employees that are responsive to the customer's needs --

employees that will delight the customer while maintaining sensitivity to the bottom-line.

Table 1-1 compares the forces and factors confronting the modern corporation and

today's employee with those of some years ago.

Today, corporations move quickly through uncharted water, moving in a direction

toward a defined corporate mission, but frequently making seemingly chaotic

excursions from the azimuth. Employees must empower themselves. They must

embark on a lifelong journey that includes updating their skills and pursuing new

opportunities that meet their professional objectives. Maintaining accountability to

yourself increases your value to the corporation. Demanding new work experiences,

requesting challenges, developing new skills makes you a more valuable person to the

organization. Paradoxically, the selfish attitude of looking out for number one makes

you a number one company resource!

15

Table 1-1 Forces and Factors Confronting the Corporation and Students

Traditional Today

Corporation Long term profits Immediate profits! Quarter to quarter
earnings growth
Insulated Competitive
Hierarchical Flat – fewer managers
Parent Employer
Rich Lean – fewer employees that do more,
increased employee responsibility
Thorough Fast and good
Stable Changing, hectic, chaos, turbulent

Employee Specialized talents Broad capability
Dependent Empowered
Comfortable Stressed
Loyal to company Loyal to self
Entitled Accountable
Learn then earn Learn to earn – lifelong learning
Adapted from Goldman (http://www.asee.org/assessments/html/goldman.htm)

Employer Expectations - TACT

Put yourself in the position of a corporate chief executive officer. Suppose your

company has merged with another resulting in a duplication of some jobs and services.

Keeping every person employed represents an unacceptable expenditure of funds.

Stockholders demand profits and expect increased employee productivity because of

the merger. Suppose the company has decided to reduce the workforce by 5%. What

guidelines would you propose to your managers to help them decide on the employees

to include in a layoff?

16

The acronym TACT representing Technical Competence, Attitude,
Communication, and Teamwork identifies four broad categories of employer

expectations (Figure 1-1). Certainly technical competencies would probably be most

people's first choice on the list of important employee capabilities. Every employee

must have the unique training, knowledge, and skills to perform the required tasks.

Does the person have up-to-date skills? If not, out the door. However, this guideline

lists technical competence as one of four employee expectations -- attitude,

communication, and teamwork skills complete the set. Employers want a reliable

person who will come to work with a positive, can-do attitude. Following the conclusion

of a task, supervisors and managers expect employees to move onto the next activity

without coaxing.

Some time ago, a newspaper advertised for web masters and web designers with the

following words:

"We need a variety of risk taking, fun loving, creative people who will

thrive in a start-up environment. If you are looking for a traditional or

comfortable place to work 9-to-5, FORGET IT! We need cutting edge, off-

the-wall, 24/7 type people who don't worry about job descriptions to

become a part of our team" (Connecticut Post, September 3, 2000,

Section I, p. 2).

The emphasis in this advertisement is attitude, enthusiasm, and a willingness to work.

The employer expects technical capability, but clearly, it is not the only job requisite.

17

Employers will take the zeal and raw talent that a person brings and train them to do the

job, if they show promise.

Business depends on accurate and complete verbal and written communication with

customers, clients, colleagues, subordinates and supervisors. They expect prompt

information transfer so that managers and supervisors remain informed of all major

issues. Customer reports, manufacturing and production difficulties, vendor delays,

engineering problems, and purchasing issues must be quickly documented so that

people take appropriate actions and make timely responses.

The day of the lone wolf is gone. Business and industry work in teams operating with

inter-department groups, cross-functional teams, "tiger teams", "skunk works", joint

ventures, and corporate teams. Companies place a premium on "people skills".

Teams meet regularly to share information and discuss resolutions of common issues.

Members depend on one another to meet commitments that support design,

development and production schedules. Teams consist of a broad spectrum of ethnic,

racial, regional and international personnel. Employees must work comfortably and

compatibly with a diverse mix of individuals. People must respect each other’s gender

and age differences. A diverse workforce provides the wide range of skills and insights

demanded by today's global marketplace. Unprecedented challenges confront

American companies. They must be faster, smarter, and more flexible than the

competition. Companies must take advantage of all of the knowledge inherent in a

diverse workforce and individuals must respond by welcoming the opportunity to

18

maximize the benefits derived from working with people from a wide range of cultures,

ages, and backgrounds.

Selecting the best employees requires a detailed review of their previous efforts. The

human resource department maintains past employee performance evaluation records.

Examining this data will permit managers to make conclusions regarding the

employee’s potential for contributing to future activities.

19

Figure 1- 1 Employer Expectations for a Desirable Employee – Remain on the TACT Target

TECHNICAL
COMPETENCE

• Knowledge of ATTITUDE
profession and
its tools • Punctual
• Good judgment • Attendance COMMUNI-
• Creative • Dress CATIONS
• Problem solver Appropriately TEAMWORK
• Analytical and • Initiative ♦ Interact with others
• Verbal
Decisive • Self Starter ♦ Meet commitments
• Written
• Continued growth • Seeks ♦ Respect diversity
• No
in job and additional
surprises ♦ Cooperate
professional responsibilities
knowledge • Adaptable
• Accountable for • Flexible
their career • Dependable
success • Reliable
• Lifelong learners

20

Employee Expectations

People represent an organization's greatest asset. The way they perform has a direct

affect on profitability. Performance reviews and evaluations give employers an

opportunity to shape the development of employees, improve work standards, and

define areas of responsibility. It promotes accountability, and identifies future goals and

expectations.

Employees are judged on their contributions to the projects to which they are assigned.

Employee performance reviews include two parts. First, the ongoing informal oral or

written communication that takes place throughout the year between employee and

supervisor. Second the formal discussion between the employee and supervisor that

includes a review of the written results in a periodic employee evaluation report.

The periodic evaluation review represents a communications tool between the employer

and employee. The document informs the employee of the manager or supervisor's

expectations. It provides an opportunity to establish or identify employee goals, and

identifies the assistance that the company can provide to assist the employee in

attaining them (training, education, etc.). If required, the review usually identifies areas

for improvement that will enable the employee to reach a satisfactory level of job

performance. The organization informs employees of its professional expectations at

the same time it tells employees about their performance relative to these indicators.

Based on this evaluation the employer frequently makes decisions about employee

21

salary increases, promotions, and training. The performance review and employee

appraisal measures on-the-job performance and may indicate future job direction. The

review clarifies employee duties and usually summarizes major employee

accomplishments since the last review. Reviews should identify areas for improvement

and recommend methods to improve to improve performance. The supervisor and

employee should discuss training and development needs for both current and future

assignments.

Frequently, employers evaluate new employees more often during the first year than

those employed for a longer term. New employees may receive reviews three months,

six months, and one-year following the date of hire. These reviews encourage

supervisors and managers to closely associate with new employees and understand

their capabilities while clarifying expectations. Longer-term employees may receive

only an annual review.

Examining the employee review forms in Appendix 1 confirms that technical capability

is important, but not the sole criteria for long-term success. Companies value and

measure many different aspects of the individual’s contirubtions. These include:

• Quality (accurate, complete, timely, consistent).

• Quantity of work (keeping pace with the workload, providing the "extra effort"

when needed).

• Dependable (consistent attendance, punctual, reliable).

• Independent (ability to work with a minimum of supervision)

22

• Organizational ability (setting priorities, meeting commitments).

• Team player (cooperative, interacts well with customers, suppliers, and

colleagues).

• Communication (good verbal and written communication skills, shares

information with co-workers).

• Motivation (committed to work and profession, self-starter, positive attitude).

• Judgement (tactful, displays appropriate sensitivity, makes sound decisions).

• Handles stress (can work under deadlines, remains calm, controls temper).

• Problem solving (quick insight into problems, offers appropriate solutions, able to

analyze complex interdependencies)

• Creative (willing to try new solutions, develops new ideas).

• Decisive (controls analysis paralysis tendencies, takes action).

• Dress (reports for work properly attired, clean).

The employee's salary and salary increase will reflect the employee's total performance

as perceived by managers and supervisors. Selecting people for a promotion -- or a

layoff is a complex decision that depends on a broad range of factors only one of which

is technical competence. Since all companies keep records of these evaluations, you

may recommend that managers use performance evaluations as the basis for

employment decisions. Over time, the employee's complete picture becomes clear and

the company takes action based on the overall performance record.

23

The following excerpt from an article that appeared on the web

(http://biz.yahoo.com/rf/000816/l1688665.html -- August 16, 2000) illustrates the

importance of the employer’s perception of the individual’s capabilities and attitude.

FedEx May Cut 200 Information Technology Jobs

NEW YORK, Aug 16 (Reuters) - FedEx Corp could cut 200 jobs by next
month from its information technology operations, a company
spokesman said Tuesday.

``Some of our projects are not adding value,'' said Jess Bunn, a FedEx
spokesman in the Memphis headquarters. ``We're looking for better
ways to serve our customers and add values, so there's the possibility of
about 200 layoffs.''

Layoffs will probably begin by mid-September.

In the next two weeks employees will be evaluated based on their
contributions to short-term tasks and objectives as well as long-term
goals and strategies, their contribution to leadership, cooperation in
teamwork and performance, other FedEx officials said.

The information technology workers develop and maintain computer
software and hardware to help FedEx run its operations

FedEx intended to make layoff decisions based on a variety of employee

characteristics. Technical performance is necessary but not sufficient to keep a job.

Social skills and willingness to “do whatever it takes” will help keep a job and enable

people to advance in the organization.

24

Professionalism

The ideas of technical competency, responsibility to clients, customers and employers,

lifelong learning, attitudes and behavior stems from the broad concept of

professionalism. The Institute of Electronic and Electrical Engineers (IEEE) defines a

profession as a learned occupation requiring systematic knowledge and training, and

commitment to a social good. There must exist a specialized body of knowledge

unique to the profession, which should be intellectual in character. It can be developed

by a group of people in the initial stages, but educational institutions must transmit this

knowledge to succeeding generations of practitioners (Adams & Kirchof).

Characteristics of a profession include the following:

♦ Predominantly intellectual and varied in character, as opposed to routine, menial,

manual, mechanical, or physical work

♦ Sanctioning organization's members share common training, values, and skills

♦ Competencies require knowledge of an advanced type in a field of science or

learning

♦ Recognized educational institutions of higher learning provide the coursework in

the learned disciplines

♦ Participation in the establishment and maintenance of educational institutions

that meet minimum acceptable standards that teach the body of knowledge

♦ Continuous learning

♦ Involvement in activities that required the consistent exercise of discretion and

judgement

25

♦ A well defined and growing body of literature

♦ Refereed (i.e. articles and research requiring peer review before publication)

journals

♦ Service motive

Using these characteristics, the community of people that share common training,

values and skills create a sanctioning or authenticating organization that promotes the

profession.

Dissemination of Information

Every professional organization defines itself by its mission, guiding philosophy, and

unique occupational body of knowledge. Perhaps the dissemination of information is

the primary vehicle used to promote the organization and the profession. Journals

publish peer-reviewed research and development results. Colleagues with similar

backgrounds first read these papers. Reviewers respond to the author(s) with

comments intended to improve or clarify the work. The author(s) make the corrections

and resubmit the manuscript. Papers require up to a year in the review process before

final publication. Monthly magazines offered by professional organizations print articles

of general interest, which do not pass through such an extensive review process. Even

so, it may take from three to six months before publication confirmation.

Frequently the organization distributes a newspaper with current information containing

articles of an ephemeral nature, conference announcements, awards, election

information, and employment advertisements. Editorial comments may appear in the

26

newspapers that reflect members' opinions about national political issues that relate to

the organization's mission. Local chapters of national organizations may also publish a

monthly or quarterly newsletter.

Service

Professional organizations have a wide range of activities. While individuals receive

compensation for their work as provided to customers and clients, they seldom receive

payment for service to the profession. Service activities include volunteering for local

chapter or regional activities or supporting national seminar/symposium meetings.

Authors of papers submitted to professional organizations do not receive financial

compensation, but do receive the appreciation and sometimes the accolades of their

colleagues. Professionals serving on accreditation committees that review the quality of

programs offered by educational institutions do so on a voluntary basis. They seek to

support and further their chosen profession. Many companies financially support and

endorse educational programs, seminars and symposiums offered by professional

organizations. They do so to improve the profession and the knowledge of the

practitioners in their employ.

Education

Organizations participate in a process to promote the quality of education and training

received by prospective members and students. As an example, the Institute of

Electrical and Electronic Engineers (IEEE), American Society of Mechanical Engineers

(ASME) and other engineering organizations collaborate under the Accreditation Board

27

for Engineering and Technology (ABET) umbrella to improve the education of technical

personnel in engineering and related disciplines. Upon request, ABET representatives

visit colleges offering engineering and technology programs. The team conducts a

detailed review of the program to ascertain that the institution meets minimum

standards established by ABET and its member bodies (i.e. the engineering societies).

Periodic follow-up reviews encourage the institution to maintain a quality program.

ABET accreditation is a voluntary process that helps to assure that graduates of an

accredited program are prepared for careers in engineering and engineering

technology. With support from organizations like ABET, professions encourage

institutions to provide education that meets the career’s changing needs, modernize

institutional facilities, employ competent faculty that participate in on-going learning, and

introduce new technology into the courses.

Managing Oneself

"Success in the knowledge economy comes to those who know themselves -- their

strengths, their values, and how they best perform" (Drucker, 1999). We no longer

enjoy the days of job security in exchange for moderate performance and corporate

loyalty. We each must manage our careers to maintain our employability. Perhaps

lifelong education is the most important factor in developing a career-resilient

workforce. Waterman, et al, refers to the new professional as people dedicated to the

idea of continuous learning and as people who "take responsibility for their own career

management. For each individual, this means staying knowledgeable about market

trends and understanding the skills and behaviors the company will need down the

28

road." With constant changes in technology, professionals must regularly assess their

skills and take action to upgrade themselves and direct their careers so that they can

function with a maximum of effectiveness. Koonce (1995) advises “ the best way to

stay employed today and in the future is to look upon yourself as being in business for

yourself even if you work for someone else” (p.20).

For the most part, professional employees are engaged in "at will" employment. That

is, the employer can terminate the employee at any time and the employee can likewise

leave the employer at any time. Business and industry constantly asks the questions

"What have you done for me lately?" and "Are you worth paying for?" Professionals

must engage in ongoing and lifelong education to enable them to respond affirmatively.

Professional Ethics

Professions want the public to perceive their members as following a principled

standard of behavior in dealing with clients, customers and colleagues. Consequently,

professional organizations define a standard of behavior in the form of a code of ethics

to which members must adhere. Ethic deals with people’s behavior towards others.

Ethics attempts to arrive at acceptable principles of obligation and general value

judgements, which serves to help us determine human actions and conduct that are

morally right, good, and responsible. Several professional organizations' ethical codes

are shown in Appendix 2. A common thread among these ethical codes requires a

practitioner to accept responsibility for actions taken in the conduct of professional

activities. The professional must demonstrate responsibility to the public; the employer,

29

customer, client, and colleague; as well as to yourself. The profession requires

practitioners to engage in lifelong continuing education to maintain skills that will enable

them to perform with competence and the exercise of good judgement. Ethical

discussions are particularly relevant with the development of new technologies such as

the Internet and networking computers in the office. Ethical questions continually arise

with regard to product safety; worker safety; privacy in the workplace; employee and

consumer rights; corporation's moral responsibility; obligations of employers to their

employees, employment at will; business's social responsibilities; and corporate self-

regulations vs. government regulation.

During the course of their work, technologists will confront ethical dilemmas. The

decisions you make could quite conceivably affect a user’s health and safety, a

prospective promotion or even your job. Technologist must make a decision even if

situations arise that contain ambiguities and uncertainties. Space shuttle Challenger

engineers’ suspected a safety problem regarding the cold temperature performance of

a gasket on a space shuttle. Failure to act on this issue resulted the loss of lives and a

major setback to the U.S. space program. Automotive engineers suspected the

placement of a gas tank in at least two vehicles could lead to an explosion on impact.

Automotive organizations failoure to quicly act on this information also cost lives. From

time to time, engineers discover deficiencies in a building's structural integrity and

choose not to act because it would breach client confidentiality to report the information

to a third party. Ethical considerations arise if you identify potential conflicts between

your interests and those of your client. Suppose you see hours charging more hours

30

than they actually work on a job. Do you report them? Do you do it yourself if no one

would report your indiscretion? Ethical dilemmas frequently confront us and we have

to first recognize it and then decide on a course of action.

Sometimes the questions are not easily resolved and the professional may undergo

substantial inner turmoil in making decisions (figure 1-2). Decisions may result in

significant consequences to the employee's future. Employees have resigned from

their job because of an ethical conflict. Some have lost their job. The federal

government has created the “whistleblower’s” to protect federal employees job after

making a charge involving an ethical question.

As practicing members of a profession, we have responsibilities to a wide range of

people. Employers, customers, clients, and colleagues have concerns and

expectations about the professional's performance and ethical standards. Even in the

sports arena, which is not a profession in the sense that we use it in this book, Michael

Jordan on assuming the position of president of basketball operations at the

Washington Wizards, commented that "It's my job to make sure they [the team players]

put the effort on the court to show respect for the people paying to watch them"

(Sandomir).

The professional occupational organization spells out ethical responsibilities. If ever a

conflict arises in your mind between the employer's requests and demands and the

professional organization's code of behavior review the organization's ethics code and

31

perhaps talk with a colleague to clarify your position. As a new member of a profession,

consider joining and supporting your professional organization.

Certifications and Licenses

In an effort to promote quality professional service, some organizations promote

member licensing or certifications by state government or private organizations to

signify member competence in the general discipline or specialty areas. Professional

organizations frequently establish committees that accept complaints from the public

regarding members' performance or behavior. This internal self-policing program has

the power to discipline the member. The results of a disciplinary review may extend

from no action to censure or even to license or certification revocation.

Trades and Crafts

The foregoing discussion does not intend to demean the competency, importance or

quality of trades and craft workers. This community participates in training and

apprenticeship programs. Some trades and crafts have sanctioning organizations that

promote the vocation. A trade emphasizes manual dexterity and physicals skills rather

than intellectual activity. While some trades require a license or certification to practice,

few trade organizations monitor their members and have a code of conduct. Few

vocations, other than professions, monitor the education providers’ program quality

using voluntary service on accreditation committees. Trades and crafts tend not to have

peer-reviewed publications. Some students confuse the word expert with professional.

A professional should be an expert, but an expert need not be a professional. The two

32

words are not synonyms. Plumbers, carpenters, electricians, machinists, auto

mechanics, and cab drivers perform vital services and some in these occupations earn

more than lawyers, engineers, teachers or physicians. While they can be experts in

their discipline, in the strict sense used in this book, we don’t call them professionals.

33

Figure 1-2 -- A Cauldron of Difficult Decisions Confronting Employees

Ideals
Standards
Responsibility Bias
Fraud Virtue
Duty
Morality
Plagiarism Dishonesty Professional
Community Honor Public Welfare

34

Chapter 1 Questions

1) Explain the statement used in the text “The selfish attitude of looking out for number
1 makes you a number 1 company resource.”
2) Do you consider people practicing the following occupations as "professionals"?
Explain your answer.
a) Electrician
b) Plumber
c) Nuclear physicist
d) Social worker
e) Electrical or mechanical engineer
f) Stock broker
g) Librarian
h) Physician
i) Lawyer
j) Teacher
k) Union member
l) Locomotive engineer
m) Welder
n) Military officer
o) Police officer
p) Politician

3) We sometimes hear the phrase, "That person did or did not behave professionally."
Write a short essay describing your concept of professionalism.

4) The text describes characteristics of a profession. With which characteristics do you
agree or disagree? Explain your answer.

5) What are the common features of the ethical codes of conduct shown in Appendix
2? With which principles do you agree or disagree? Explain your answer.

6) "The ends justify the means." Explain this statement. Do the ethical codes of
conduct in Appendix 2 permit this philosophy? Describe circumstances under
which this statement would be appropriate.

7) Limit personal phone calls at work to emergencies only. Do you agree or disagree?

8) Morning social discussions with work associates

a) Improves morale and should be engaged in every day.
b) Reduces company productivity.
c) Should not be conducted in front of a manager.

35

9) Examine the three employee evaluations in Appendix 1.

a) What are the common characteristics found in each?
b) What are the major differences among them?
c) What additional job performance criteria would you include in the evaluation?
d) Describe your view of the perfect employee performance evaluation.

10) In the December 27, 1999 issue of Sports Illustrated, Jeff Pearlman wrote an article
about John Rocker of the Atlanta Braves. The article describes Rocker, as a 25
year old, hard-throwing 6'4", 225-pound left-hand relief pitcher. In the article,
Rocker bashed African Americans, Asians, Koreans, Vietnamese, Indians,
Russians, Hispanics, single mothers, Asian drivers, AIDS patients, gays and those
people of a race or sexual orientation different from his. He called an overweight
black teammate "a fat monkey."

Bud Selig, the baseball commissioner, ordered Rocker to undergo psychological
evaluation and then punished Rocker for his comments with a $20,000 fine, a two
month suspension and ordered him to undergo "sensitivity training." In an article in
The New York Times, Jeffrey L. Seglin commented,

Perhaps without the added burden of tabloid headlines, many businesses
face similar situations: A star employee's privately tolerated
"idiosyncrasies" spin out of control, and management must respond
publicly. "In the business world, there's a very good chance that
somebody like this would be fired immediately," said Joseph L. Badaracco
Jr., professor of business ethics at the Harvard Business School. "The
hideous content of his views would badly damage the company's
reputation, so they'd want to disassociate themselves."

In a subsequent chance meeting with Rocker after publishing the article,
reporter Jeff Pearlman said the pitcher threatened him and tried to get him
banned from the Atlanta clubhouse. Neither the team nor Major League
Baseball took further action against Rocker. Outfielder Brian Jordan said
"You've got one guy being a cancer time and time again. Eventually, it's
going to have an effect on the team."

The Atlanta Braves traded Rocker to the Cleveland Indians in June, 2001.

a) Comment on the statements made by John Rocker.
b) Should John Rocker be penalized for exercising his right of freedom of speech
as provided for in the first amendment to the U.S. Constitution?
c) Suppose you were John Rocker's manager, what would you do to stabilize the
situation? In your discussion, consider the impact on his teammates, other
teams, the sport, and the public.

36

d) Suppose a "star employee" working at a company, voices derogatory comments
about some other employee? In your opinion, what position should a company
take?

11) Suppose the Rekcor Company manufactured the finest Framistan (a fictitious
component) at the lowest prices. If you were a purchasing agent from another
company and you discovered that several employees from the Rekcor Company
were intolerant of some of your personal beliefs, would you purchase Framistans
from this company? Explain your position.

12) The human resource department at Magna-Net has a policy requiring all non-union
technical employees to work one unpaid overtime hour daily. Tundra Industries
permits flexible hours and does not have a formal policy to check the coming and
going of its employees.

a) For which employer would you prefer to work? Why?
b) What are the advantages and disadvantages of both policies? Formulate your
response first from the employer's viewpoint and then from the employee's
perspective.
c) Which employer treats its staff in a more professional manner? Explain your
answer.
d) Why would Magna-Net institute such a policy?

13) Do you agree with the statement “Personal ethical practices and business ethical
practices have little in common”? Explain your answer.

14) Class Exercise
As stated in chapter 1, organizations emphasize cooperation among team
members. This class exercise examines both an individual's and a group's response
to an unusual set of questions. At the end of the exercise, you will compare your
individual score with that of the group. Divide the class into groups of 3 to 4 people
and follow the directions. Do not peek at the answers shown in appendix 3 until the
group has completed the worksheet. Correct the worksheet after the group has
completed their responses.

WILDERNESS SURVIVAL WORK SHEET

Here are twelve questions concerning personal survival in a wilderness situation. Your
first task is individually to select the best of the three alternatives given under each item.
Try to imagine yourself in the situation depicted. Assume that you are alone and have
a minimum of equipment, except where specified. The season is fall. The days are
warm and dry, but the nights are cold.

37

<>
After you have completed this task individually, you will again consider each question as
a member of a small group. Your group will have the task of deciding, by consensus,
the best alternative for each question. Do not change your individual answers, even if
you change your mind in the group discussion. Both the individual and group solutions
will later be compared with the "correct" answers provided by a group of naturalists who
conduct classes in woodland survival.

38

Question Your Answer Your Group’s
Answer
1. You have strayed from your party in trackless
timber; you have no special signaling equipment.
The best way to attempt to contact your friends is to:

a. Call "help" loudly but in a low register
b. Yell or scream as loud as you can
c. Whistle loudly and shrilly

2. You are in "snake country". Your best action to
avoid snakes is to:

a. Make a lot of noise with your feet
b. Walk softly and quietly
c. Travel at night

3. You are hungry and lost in wild country. The best
rule for determining which plants are safe to eat
(those you do not recognize) is to:

a. Try anything you see the birds eat
b. Eat anything except plants with bright red berries
c. Put a bit of the plant on your lower lip for five
minutes; if it seems all right, try a little

4. The day becomes dry and hot. You have a full
canteen of water (about one liter) with you. You
should:

a. Ration it - about a cupful a day
b. Not drink until you stop for the night, then drink
what you think you need
c. Drink as much as you think you need when you
need it

5. Your water is gone; you become very thirsty. You
finally come to a dried-up watercourse. Your best
chance of finding water is to:

a. Dig anywhere in the streambed
b. Dig up plant and tree roots near the bank
c. Dig in the streambed at the outside of a bend

39

Answer
6. You decide to walk out of the wild country by
following a series of ravines where a water supply is
available. Night is coming on. The best place to
make camp is:

a. Next to the water supply in the ravine
b. High on a ridge
c. Midway up the slope

7. Your flashlight glows dimly as you are about to
make your way back to your campsite after a brief
foraging trip. Darkness comes quickly in the woods
and the surroundings seem unfamiliar. You should:

a. Head back at once, keeping the light on, hoping
the light will glow enough for you to make out
landmarks
b. Put the batteries under your armpits to warm
them, and then replace them in the flashlight.
c. Shine your light for a few seconds, try to get the
scene in mind, move out in the darkness, and repeat
the process.

8. An early snow confines you to your small tent.
You doze with your small stove going. There is
danger if the flame is

a. Yellow
b. Blue
c. Red

9. You must ford a river that has a strong current,
large rocks, and some white water. After carefully
selecting your cross spot, you should:

a. Leave your boots and pack on
b. Take your boots and pack off
c. Take off your pack, but leave your boots on

40

Answer

10. In waist-deep water with a strong current, when
crossing the stream, you should face:

a. Upstream
b. Across the stream
c. Downstream

11. You find yourself rim-rocked; your only route is
up. The way is mossy, slippery rock. You should try
it:

a. Barefoot
b. With boots on
c. In stocking feet

12. Unarmed and unsuspecting, you surprise a large
bear prowling around your campsite. As the bear
rears up about ten meters from you, you should:
a. Run
b. Climb the nearest tree
c. Freeze, but be ready to back away slowly

Score:

Number You Have Correct:

Average Score For Your Group (Sum of
individual scores/ number of group members):

Group Score:

Difference Between Group Score And Average:

41

Self-check test

Circle the correct answer to each of the following questions or fill in the blanks.

1) Which of the following are services?
a) Mail delivery
b) Valet parking
c) Teaching
d) Taxi ride
e) Wedding pictures
f) Newspaper
2) Which of the following are products?
a) Physician’s diagnosis
b) Life insurance
c) Fruits and vegetables
d) Tire
e) Tire changer
3) What are characteristics of today’s organizations?
a) Stable
b) Specialized
c) Accountable
d) Stressed employees
e) Dynamic
4) Identify expectations that employers have of good employees
a) Excellent Attitude
b) Excellent communication skills
c) Limit personal activities (personal telephone calls, web surfing, etc.) to 30
minutes during the workday
d) Ethical practice
e) Ready and willing to contribute to a team effort
f) Sexy dresser
g) Come late – leave early
h) Outstanding technical capability
5) How often do long-term employees receive formal written employee evaluations?
a) Daily
b) Weekly
c) Monthly
d) Annually
6) Which are not examples of professional organizations?
a) A trade union
b) AFL-CIO
c) Automobile Workers Union
d) American Management Association
e) American Medical Association
f) American Bar Association

42

g) Institute of Electrical and Electronic Engineers
7) Characteristics of a profession include
a) Predominantly intellectual activity
b) Learning a skill that will last a lifetime
c) Common body of knowledge that is taught in institutions of higher education
d) Code of ethics
e) Journals publishing peer reviewed articles
f) Uniform
g) Use of Specific tools
8) Select the best answer that describes a professional code of ethics.
a) A principled standard of behavior in dealing with the employer, customers and
colleagues.
b) A standard of behavior that deals with customers.
c) A set of rules to be used at the discretion of the professional.
d) A certification that permits a person to practice a profession.

43

CHAPTER 2

The Organization

You miss 100 percent of the shots you never take.

-- Wayne Gretzky, Professional Hockey Player

<>

Chapter goals


Understand an organization’s core identity
Explain the difference between objectives and goals
Explain SWOT
Apply the SWOT concept to your own personal life
Understand organizational standards, policies and procedures

The word organization is used throughout this book to mean a group of people working

together for common purposes. The group creates a structure in which individuals

cooperate to conduct activities. An organization may have a profit or non-profit financial

orientation. It may consist of voluntary or paid workers or a combination of both. The

organization may originate from the public (e.g., federal, state, local government

agencies) or private sectors. It may have religious or secular purposes. It may consist

of professionals or hobbyists. It may employ people represented by a labor

organization, non-union personnel, or consultants. The organization may exist in a

44

local geographic area or have multiple sites around the world. Project management

ideas discussed in this book apply to all organizations. Organizations consisting of a

single independent contractor as well as large international corporations with multi-

million dollar contracts can use the concepts discussed.

Core Identity

An organization’s core identity consists of three items: a mission, a value ideology, and

a vision. Not all organizations think about and intentionally create an identity. If

management does not prepare and articulate a core identity, the corporate culture will

force an identity to bubble up and surface. Lacking leadership, the identity that evolves

may or may not inspire and guide the employees in the direction that management

prefers.

Mission: The mission statement explains the organization's purpose. It is a statement

of why the organization is in business. The mission is a raison d'être (reason for

existence), not a goal or a business strategy. The mission statement serves as the

basis for establishing the organization’s strategic objectives. David Packard described

Hewlett Packard's mission in 1960:

"I want to discuss why a company exists in the first place. In other words,

why are we here? I think many people assume that a company exists

simply to make money. While this is an important result of a company's

existence, we have to go deeper and find the real reasons for our being.

As we investigate this, we inevitably come to the conclusion that a group

of people get together and exist as an institution that we call a company

45

so they are able to accomplish something collectively that they could not

accomplish separately -- they make a contribution to society, a phrase

which sounds trite but is fundamental…You can look around [in the

general business world] and see people who are interested in money and

nothing else, but the underlying drives come largely from a desire to do

something else: to make a product , to give a service -- generally to do

something which is of value" (Collins & Porras, 1996, p. 68).

Hewlett Packard doesn't exist to make electronic test and measurement equipment but

to make technical contributions for the advancement and welfare of humanity. This

mission is not time dependent. It will last for as long as Hewlett Packard’s senior

management regards it as important. Other corporate missions include:

Konosuke Matsushita (Panasonic): Recognizing our responsibilities as

industrialists, we will devote ourselves to the progress and development of

society and the well being of people through our business activities,

thereby enhancing the quality of life throughout the world.

Mary Kay Cosmetics: to enrich women’s lives

Sony: To experience the joy of advancing and applying technology for the

benefit of the public

ExxonMobil: to Provide quality petrochemical products and services in the

most efficient and responsible manner to generate outstanding

customer and shareholder value.

Staples: Slashing the cost and hassle of running your office!

46

New Jersey Transit: to Provide safe, reliable, convenient and cost

effective transit service with a skilled team of employees, dedicated

to our customers’ needs and committed to excellence.

Samsung: We will devote our people and technologies to create superior

products and services, thereby contributing to a better global

society.

Reader's Digest: to create products that inform, enrich, entertain and inspire

people of all ages and cultures around the world. We are committed to

understanding, anticipating and satisfying consumers' needs. This takes

precedence in all that we do.

Southwest Airlines: dedication to the highest quality of customer service

delivered with a sense of warmth, friendliness, individual pride, and

company spirit.

Kellogg: committed to building long-term growth in volume and profit and to

enhancing its worldwide leadership position by providing nutritious food

products of superior value

3Com: to connect more people and organizations to information in more

innovative, simple and reliable ways than any other networking company in

the world.

Adolor Corporation: committed to the development of the next generation of

novel analgesics and related therapeutics for the treatment of pain based

upon recent advances in proprietary medicinal chemistry and recombinant

opiate receptor technology

47

Abbott Laboratories: to improve lives worldwide by providing cost-effective health

care products and services.

Millennium Restaurant (San Francisco, CA.): We believe that a gourmet dining

experience can be created out of vegetarian, healthy, and environmentally

friendly foods.

Value Ideology: The "core ideology provides the glue that holds an organization

together as it grows, decentralizes, diversifies, expands globally and develops

workplace diversity" (Collins & Porras 1996). These represent the values and belief

systems underlying the company. Core values will not change over time. The Walt

Disney Company is famous for its values of imagination and wholesomeness. Hewlett

Packard emphasizes a respect for the individual and a commitment to community

responsibility. Merck's core values include corporate social responsibility, honesty and

integrity, and profit from work that benefits humanity. Sony's values include the

elevation of the Japanese culture and national status, being a pioneer -- not following

others, doing the impossible, and encouraging individual ability and creativity. The

organization's core values should be so fundamental that the company should follow

them even if at some point one or more of them became a competitive disadvantage.

Vision: "A vision is an attempt to articulate what a desired future for a company would

look like. It can be likened to '… an organizational dream -- it stretches the imagination

and motivates people to rethink what is possible [Belgard, Fisher, & Rayner 1988].'

48

Martin Luther King's most famous speech is literally labeled, I have a dream, because

he elucidated his vision of a nonracist America" (Jick 1989). The vision represents

something the organization aspires "to become, to achieve, to create -- something that

will require significant change and progress to attain" (Collins & Porras 1996). The

Microsoft vision is " A computer on every desk and in every home, all running Microsoft

software in every computer." This is certainly a lofty ideal. In the 1960’s, everyone

knew and understood the National Aeronautics and Space Administration's (NASA)

mission -- Get to the moon and back before the end of the decade. Does NASA have a

vision today? Do you know it? No? Perhaps that is part of the reason NASA has

funding problems in the congress.

Vision statements may incorporate four elements: 1) customer orientation, 2) employee

focus, 3) organizational competencies, and 4) standards of excellence (Jick 1989, p.3).

A vision should be vivid and evoke emotion. It should motivate people. It should be

powerful enough to engage all those in the organization to willingly align themselves in

the effort to achieve this mission. The vision should be

♦ Clear, concise, easily understandable

♦ Memorable

♦ Exciting and inspiring

♦ Challenging

♦ Excellence-centered

♦ Stable, but flexible

♦ Implementable and tangible (Jick 1989, p. 2).

49

Know the Company's Core Identity: Before joining an organization investigate its core

identity. Ask questions and make certain that you feel personally comfortable with the

organization. Confirm that it shares your values and purpose. Try to ascertain that the

organization accepts a diversity of people and opinions. When joining an organization,

don't expect to create a new core. If the core values are compatible with your values

then press on. If not, look into another organization. Sometimes you cannot determine

whether employees practice the core values described in the company’s literature. If

after joining the organization you discover a value gap exists with which you cannot live

then look for a new opportunity.

Objectives and Goals

Once the organization establishes the fundamental elements of mission, values, and

vision, the employees can establish and pursue objectives and goals. The

organization’s goals represent a general statement of purpose and direction. They do

not include the setting of specific targets (objectives). Goals may be divided into

strategic (long-term) and tactical (short-term) categories. Upper management

determines long-term strategic goals that will guide the organization over a longer

period – perhaps three to five years. Frequently they use a SWOT (Strengths,

Weaknesses, Opportunities, Threats) analysis as an aid in determining direction.

Strength, Weakness, Opportunity, Threat (SWOT)

50

A SWOT analysis helps find the best match between external trends (opportunities and

threats) and internal capabilities.

• A strength is a resource the organization can use to achieve a desired result.

• A weakness is an organizational limitation that will keep it from achieving this

result.

• An opportunity represents a situation that would increase demand for the

organization’s product or service that it offers.

• A threat represents a potentially damaging situation in the organization’s

environment. The threat may be a restriction, a barrier, a constraint, or a political

or economic situation that might cause problems in successfully delivering the

organization’s products or services.

An effective set of strategic goals takes advantage of opportunities by using the

organization’s strengths and wards off threats by overcoming them or by correcting

weaknesses.

The SWOT analysis requires an impartial examination of the organization and its

environment. SWOT analysis participants review markets; competition; technological,

political, social, environmental issues, and economic trends; marketing and distribution

system; research and development (R&D) status; reputation; and resources including

financial, availability of labor, computing, facilities, employee competencies and

credentials, inventories, and management skills. The SWOT team categorize this data

into strengths, weaknesses, opportunities or threats. Sometimes, information can be

51

considered both a strength and a weakness. Based on this analysis, management

creates strategic goals as illustrated in Figure 2-1.

Middle managers develop tactical goals to meet near term demands. Typical tactical

goals might include increasing the dollar volume of sales; to reduce fixed costs; to

increase the number of pounds of material produced, to increase enrollment; to

increase worker productivity. Following the establishment of general goals, managers

develop a plan to establish objectives to achieve a desired result.

Objectives represent observable and measurable results that contribute towards

meeting the general organizational goals as shown in Figure 2-1. They are measured

in terms of what, when, where, and how much. Objectives describe conditions that will

exist after the work is performed. In many organizations, managers establish

objectives. In others, the people doing the work participate in setting objectives

recognizing that approval of the objectives rests with the immediate supervisor or

manager. Typical objectives includes challenging a sales person to increase the sales

of books in Bergen County, New Jersey from $5,000 per month to $8,000 per month by

the end of the year or demanding that an office reduced its mobile telephone costs in

the Fairfield County, Connecticut area from $5,000 per month to $3,000 per month by

the end of the first quarter. Organizations use the acronym SMART to help establish

objectives.

Specific - Identify a single task.

52

Measurable - Establish a measurable indicator of progress.

Assignable - Make the task assignable to someone for completion.

Realistic - State what can realistically be achieved with budgeted time

and other resources.

Time-related - State the time duration.

53

Figure 2-1 SWOT Process

54

Sidebar: A Personal SWOT Analysis

Organizations frequently use the SWOT analysis method to evaluate past efforts and

determine its future. This process requires a great deal of soul searching. Frequently

organizations send their executives away from the office in which they work. They go to

a neutral ground devoid of the daily business interruptions. At this retreat, they begin

a no-holds barred brainstorming session. They agree to consider all ideas with no

consequences or repercussions following the meeting.

Each of the participants brings different life experiences to the session. They interpret

experiences differently. They will not all agree with each other. However, all

participants must agree to respect each other and give one another the opportunity to

articulate their thoughts and perspectives. Many of the comments will be of a sensitive

nature. Participants agree to respect information revealed at this meeting and not seek

retribution following the meeting. Sometimes organizations cannot really recognize or

accept honesty and genuine open thought.

Individuals can benefit from a similar analysis. All of us can profit from an introspective

self-examination of our lives. Think about your vision. Put it down in on paper. If you

have not thought about it before, do it now. Does it relate to self-satisfaction, marriage,

education, money, your career … something else? Then categorize your strengths and

weaknesses. Consider the opportunities in your life. Identify the situational threats that

might prevent you from attaining this vision. Be brutally honest with yourself. Write

them down and don’t show it to anyone else.

55

Now think about several broad actions that you need to take to pursue this vision.

Perhaps it involves the development of a certain skill set or a college education or a

move to a new location. These are your goals.

If you have reached this point, you’ve done the hard part. Only the specific tasks

remain. For each of the goals that you identified you have to identify objectives that will

assist you in achieving these goals. List the actions that you think are required to

achieve the goals. Associate with the tasks, some way of recognizing that you have

accomplished the task. Each task should have a well-defined result or outcome that will

clearly indicate satisfactory completion. Ideally, you should be able to accomplish each

separate objective within a month or less. It’s too easy to postpone the start of

objectives that take longer than a month. An overall sequence of objectives may take

many months.

You may use the chart in Table 2-1 to assist yourself in developing this personal action

plan. Add more goals if required. Periodically examine your progress toward achieving

these objectives and make needed corrections.

56

Table 2-1 Personal Action Plan

Personal Vision:

Goal or Broad-based Endeavor #1:

Objectives to Achieve Goal #1:

Specific Objective Measured Outcome Time for
Completion

Goal or Broad-based Endeavor #2:

Objectives to Achieve Goal #2:

Specific Objective Measured Outcome Time for
Completion

Activities

Activities are work steps that must be accomplished before a objective or standard can

be achieved. Examples of activities include: prepare a specification, get a specification

approved, complete a design, purchase a component, or install a telephone.

Resources represent the raw material used by the organization to complete activities.

Resources include people, money, materials, machine, facilities, information,

technology, time, and energy, etc. needed to accomplish activities. People exercise

57

control of an activity by comparing current performance to expected performance in

time and making required changes. Many managers create a model for expected

performance by collecting data for similar previous activities. They record information

about the resources used to complete the activity for a given level of quality. This

compiled data serves as the basis for their estimate of the resources required to

complete an activity.

Standards

Expected performance leads to the idea of standards. The International Organization

for Standardization (ISO) (http://www.iso.ch/iso/en/ISOOnline.frontpage) defines

standards as

Documented agreements containing technical specifications or other

precise criteria to be used consistently as rules, guidelines, or definitions

of characteristics, to ensure that materials, products, processes and

services are fit for their purpose. For example, the format of the credit

cards, phone cards, and "smart" cards that have become commonplace is

derived from an ISO International Standard. Adhering to a size standard

such as optimal thickness (0.76 mm) means that the cards can be used

worldwide.

ISO further states that “International standards contribute to making life simpler, and to

increasing the reliability and effectiveness of the goods and services we use.’

58

Managers and supervisors usually have a notion as to the resources required to

complete an activity. The estimate for these resources stems from either a

performance standard based on the organization’s experience or generally accepted

industry practice. If a standard doesn’t exist then the organization establishes it. As an

example, suppose baseball wants to create a batting standard of performance. The

baseball industry assembles a committee with outstanding knowledge about batting and

impeccable baseball credentials. This committee meets, creates and adopts the

standard of batting excellence shown in Table 2-2.

Based on this standard, we categorize ballplayers based on hitting ability. Table 2-3

illustrates the categories as applied to the 1999 New York Yankees baseball team.

Each team member is assigned a quality rating. If after using this standard for some

time, the sports community decides that the standard does not reflect their intended

needs, then the committee members would meet again to modify the standard. All

professional communities continually examine and update old standards, and create

new standards as technology and general expectations change.

59

Table 2-2 Standard of Batting ‘Excellence'

Last Season’s Batting Hitting Ability Hitting Quality Rating
Average
.326 or higher Outstanding A
.301 to .325 Excellent B
.276 to .300 Good C
.251 to .275 Fair D
.250 or Below Poor F
The player must have had at least 150 turns at bat to qualify for a rating.

Table 2-3 1999 New York Yankees Batting Averages

Player 1999 Batting No. of times At 1999 Hitting
Average Bat Quality Rating

D. Jimenez .400 20 NR
D. Jeter .349 627 A
B. Williams .342 591 A
D. Cone .333 3 NR
O. Hernandez .333 3 NR
D. Strawberry .327 49 NR
A. Watson .300 10 NR
C. Knoblauch .292 603 C
P. O'Neill .285 597 C
R. Ledee .276 250 C
C. Davis .269 476 D
T. Martinez .263 589 D
C. Curtis .262 195 D
L. Sojo .252 127 D
S. Brosius .247 473 F
J. Posada .245 379 F
J. Girardi .239 209 F
J. Leyritz .235 200 F
S. Spencer .234 205 F
C. Bellinger .200 45 NR
A. Pettitte .200 5 NR
J. Manto .182 33 NR
T. Tarasco .161 31 NR
A. Soriano .125 8 NR
R. Clemens .000 4 NR
H. Irabu .000 4 NR
M. Stanton .000 1 NR
R signifies that the ballplayer was not rated due to an insufficient number of times at bat.

60

The baseball batting example may be considered a production standard. Many types of

standards exist. The size, shape, form, and weight of sporting equipment follow

prescribed standards. Technical standards exist that define electrical, mechanical, and

software interfaces. Standards establish requirements for the composition and

structure of material. Workmanship standards detail methods for evaluating welds,

soldering connections, wiring harnesses, etc. Documentation standards clarify the

formats used for submitting manuscripts. Standards establish expectations. If the

items organizations use meet established standards and these standards meet the

requirements set forth by the customer, then we have confidence that the product or

service will be adequate. Independent organizations such as the U.S. Military, U.S.

Department of Agriculture, IEEE, ANSI, Software Engineering Institute, Underwriters

Laboratory, and the International Organization for Standardization (ISO) publish

standards for a variety of applications.

Policy, Process, Procedure, Rule

Organizations use several other common organizational terms. Policies are broad

guidelines created to help the organization achieve its plans. A process is a method of

reaching a desired outcome within an organization. Davenport (1993) defines a

process as "a structured, measured set of activities designed to produce a specified

output for a particular customer or market. It implies a strong emphasis on how work is

done within an organization." Davenport & Short (1990) define a business process as

"a set of logically related tasks performed to achieve a defined business outcome."

They state that processes have two important characteristics: (1) they have internal or

61

external customers, and (2) they cross department boundaries. Recall that a person or

group delivers a product or service. If the delivery of this product or service goes to

someone within the same organization, we refer to that person or group as an internal

customer. A person or group performing the work that is unaffiliated with the buyer of

the product or service corresponds to an external customer. Procedures outline the

steps required to achieve a goal. Rules are definite, specific instructions. Standards,

policies, procedures, and rules are necessary to implement plans. As shown in figure

2-2 policies created by senior management establish a process. Managers create

procedures to implement the process. Rules are the specific detailed instructions that

support the procedures.

62

Figure 2-2 Organizational Policy-to-Rule Continuum

Example
Policy – Broad
organizational Policy – Organization will have a
guidelines purchasing approval system
prepared by
senior
management

Process – a person or department
Process – a set of
must complete a purchase
procedures
requisition and secure
required to
management approval
implement
policy

Procedure –
Procedure – outlines 1. complete purchase requisition
the steps form;
required to 2. obtain supervisor and
achieve an management approval;
objective in the 3. submit to purchasing department
process

Rules – the specific Rules –
detailed 1. Specify item, part no., vendor,
instructions and preferred delivery date.
2. Purchases over $1000 require 3
bids
3. Purchases over $5000 require
Vice President approval
4. Sign form
5. Obtain approvals
6. Employees can purchase items
under $100 and receive
reimbursement from petty cash.

63

The entire planning process enables us to determine the goals and the actions

needed to achieve the desired results. Throughout any organization, all components

associated with the planning process must be in harmony at each level of management.

The planning process is dynamic and requires review and adjustment to accommodate

changing circumstances.

Sidebar: Public versus Private Companies

Pat and Sarah believed they had a wonderful idea for a fast food Middle Eastern

restaurant. Into the pockets of pita bread they wanted to insert a mix of chopped

vegetables with balls of spiced falafel (ground chick peas) and a special family devised

blend of hummus and tahina sauce. As an unusual dessert treat they wanted to offer

baklava -- a pastry covered with honey and filled with ground pistachio nuts. The mint

tea accompanying the pastry would include real peppermint leaves and could be served

iced or hot depending on the season.

Pat and Sarah took their life savings together with some money they borrowed from

their parents and opened Sa-pa’s Middle Eastern Restaurant in the city. The people in

the business district enjoyed the fresh high quality food, the excellent service, the

unique background music and the clean surroundings. In less than a year, the

business earned a profit and Pat and Sarah repaid the loan.

64

Based on this accomplishment they decided to open Sa-pa’s Too -- a second

restaurant in another part of town. With established credit, a proven successful idea,

pluck and contagious enthusiasm, they convinced a local bank to loan them the funds

to open Sa-pa’s Too. After a great deal of hard work finding a good location and setting

up the restaurant, they again earned a profit within a year. They repaid the bank loans

within two years. Pat and Sarah demonstrated that they had good business sense in

addition to wonderful recipes.

Pat and Sarah privately owned and operated the restaurants. The success of these

restaurants convinced them to expand the business and open other Sa-pa’s Too in

nearby towns and cities. This expansion effort required a great deal of money. In

order to convince prospective backers, Pat and Sarah had to develop a good business

plan. Pat and Sarah began thinking strategically. They needed a long-term vision,

goals, objectives, and values. They needed plans for recruiting and training quality

staff, obtaining standard cooking equipment, standardizing the restaurant décor, legally

protecting their ideas and recipes, identifying other prospective locations, and

developing a food distribution plan so that new Sa-pa’s Too restaurants would enjoy the

same food quality. It would take them away from direct involvement in the two

restaurants they started. They would change their careers from restaurant proprietors to

restaurant executives.

Pat and Sarah decided to sell a portion of their business and go public. They chose not

to borrow the money from a bank because they didn’t want to have monthly principal

65

and interest payments. Instead, the founders decided to give up part of their

ownership. Financial organizations, investment bankers and venture capitalists assist

people in raising money for starting a new business or expanding an existing business.

In return for the funding to greatly expand their business, the investment organization

demanded two-thirds of Pat and Sarah’s business. The investment counselors divided

the business into 30,000 shares. Pat and Sarah would keep 10,000 shares and set

aside 20,000 shares for investors. After examining the industry, similar businesses,

and their restaurant’s financial record, they collectively agreed to value each share at

$25. The investment organization prepared the documents associated with an initial

public offering (IPO) and attempted to sell the shares to people that had confidence in

the future success of other Sa-pa’s Too restaurants. If they successfully sold 20,000

shares, they would raise $500,000, which the business would use to expand and grow.

Pat and Sarah now led a publicly owned company. As a publicly traded company, Sa-

pa’s Too shareholders could sell their stock to anyone at anytime. A stockbroker would

handle the transaction by arranging the stock sale between buyer and seller. The

public determines share value by their perception of the company’s future prospects.

The company’s profits or earnings provide a good guideline for the stock price.

Suppose Sa-pa’s Too restaurant earns profits of $300,000 or a profit of $10/share after

the first year of operation. The price to earnings ratio is a commonly used method for

valuing stocks. Many companies have a price to earning ratio of from 15 to 20. That

would value Sa-pa’s Too restaurants at $150 to $200 per share, which would represent

a very healthy profit to the company’s shareholders. On the other hand if the restaurant

66

did not earn a profit or worse, lost money, then the value of the shares could plummet

to pennies.

Very often, newly formed companies (also known as start-ups) choose to compensate

key employees with a lower salary plus shares of stock as a “sweetener”. The

employee exchanges immediate income for a potential of future profits. If the company

does well, then the employee will do well because the stock price will likely increase.

This arrangement serves to motivate managers and other executives to focus on

company profits so that the value of the stock increases.

67

Chapter 2 Questions

1) If you were to start a new organization tomorrow, describe the core values you
would build into the new organization.
2) Most large organizations have a corporate persona or identity that they share with
the public. This identity becomes the public’s perception. Organizations use this
identity to shape government policy as well as to convince the public to believe in
them and use the services or products they offer.
a) Use the Internet to find the names of the 30 companies comprising the Dow
Jones Industrial average.
b) Visit the web site of two of these companies. Try to discover their corporate
identity by searching for their mission, values, and vision statements. The
information may not be specifically called out as mission, values, and vision so
you will have made a judgement about the data.
c) Repeat part (b) using two of the following organizations:
American Red Cross
Avon Products
Boy or Girl Scouts of America
Colgate-Palmolive
Eastern Mountain Sports
Lands’ End
Liz Claiborne
Patagonia
Procter & Gamble
Reebok International Ltd.
Salvation Army
W. W. Norton & Company
d) Compare the results of parts (a) and (b). Describe the similarities and
differences in the information that you obtained.
3) Use the Internet to determine the winners of the most recent Malcolm Baldrige
award.

68

Self-check test


1) An organization’s core identity consists of three items: ____________,
_______________, and _______________ .
2) Select the best answers.
a) The mission statement explains the organization's purpose .
b) A mission statement describes specific and time limited activities.
c) A mission statement represents the values and belief systems underlying the
organization.
d) The vision statement represents something the organization aspires "to become,
to achieve, to create -- something that will require significant change and
progress to attain."
3) Select the phrase that best defines an organization’s goals
a) An organization’s goals represent a general statement of purpose and direction.
b) An organization’s goals represent specific targets.
c) An organization’s goals represent its Strengths, Weaknesses, Opportunities, and
Threats.
4) Which statement characterizes an organization’s objectives?
a) Objectives represent observable and measurable results that contribute towards
meeting the general organizational goals.
b) Objectives are measured in terms of what, when, where, and how much.
c) Objectives describe conditions that will exist after the work is performed.
d) Objectives represent an organization’s Strengths, Weaknesses, Opportunities,
and Threats.
5) The acronym SMART represents the following:
i) S ______________________
ii) M ______________________
iii) A ______________________
iv) R ______________________
v) T ______________________

6) True or False: A SWOT analysis relates external trends (opportunities and threats)
and internal capabilities (strengths and weaknesses).
a) True
b) False
7) Examples of resources are
a) people
b) land
c) machines
d) materials
e) money
f) train ride

69

8) True or False: The fundamental premise behind control of an activity is the
comparison of current performance to expected performance in time and then
making required changes.
a) True
b) False
9) Which of the following can trace their assigned value to an accepted standard?
a) A team’s won-loss record.
b) U.S. Grade A meat
c) Distance in miles
d) Temperature
e) Shoe size
f) A container of milk purchased in a store
g) Lumber

70

CHAPTER 3

Project Management Organizational Overview

If I am not for myself, who will be?
If I am not for others, what am I?
And if not now, when?

Hillel, Ethics of the Fathers Ch 1-14

<>

Chapter goals


Define a project
Explain the difference between a program and a project
Understand and create an organization chart
Understand the different types of organizational structures
Explain a matrix operation

General management concerns itself with the leadership and management of the

organization as a whole. At a minimum, general management encompasses planning,

organizing, staffing, coordinating, executing, communicating, and controlling the

operations of an ongoing enterprise. However, general managers go beyond the basics

of management. This group deals with the processes, systems, and technologies that

integrates the enterprise and enables it to carry out its mission. By necessity, they

frequently involve themselves with the broader community’s external constituencies.

71

They participate in the development of philosophies, values, and strategies that create

a successful enterprise.

Project managers on the other hand, have a narrower view. To be sure, they use

general management skills, but they use the processes and procedures developed by

others to accomplish a very specific effort. They work on projects. A project is an

endeavor undertaken to create a unique product or service. Today, almost all types of

industry commonly use the project management methodology including defense,

information technology, construction, electronic systems, pharmaceutical, chemical, and

others. Typically, projects begin after signing a contract with a customer; or they are

internally initiated with the intent of introducing a new product to the marketplace

(Shenhar, p. 33). The organization use internally funded projects to leapfrog the

competition with a new creation or play “catch-up ball” and just stay abreast of the

competitor.

Every project has a definite beginning and a definite end. Projects do not go on

forever. Projects start with an identifiable need. Staff members prepare a requirement

list or perhaps a detailed specification document. The organization’s purchasing

department distributes the requirements to potential internal or external suppliers.

Organizations usually demand a response from prospective suppliers within 30 to 90

days. The interested suppliers respond to the buying organization with a bid – a

proposal describing the equipment they will deliver and the price they wish to charge.

72

The prospective buyer reviews the bid responses, selects a winner and awards a

contract. Figure 3- 1 summarizes the process.

Following contract award, a project manager assembles a team that develops the

product or service embodied in the customer’s idea and distributes the work and the

associated budget to the organization’s departments. After product or service

development and test, technicians install the product or service at the customer’s site

and confirm the system operates. Very often, the final customer requirement involves

training the customer’s staff in the correct way to use and maintain the product. This

project lifecycle summarizes the steps associated with a project. The bell shaped

pattern shown in the Figure 3-2 depicts the money spent or the labor hours worked for a

large project. Project funding starts slowly then progressively increases. The design

and development effort expends the maximum funds as the largest number of people

work on the job. Fewer people perform the installation and the chart shows less

spending. Projects usually end with an acceptance test at the customer’s site followed

by training of the customer’s staff in the use of the product or service. At this point, the

remaining people on the project return to their respective departments for

reassignment. Naturally, labor hour distributions and spending patterns vary among

projects.

A software or hardware product may require ongoing maintenance, but that is not

considered part of the original project’s activities. Many organizations have a separate

group that concern themselves with product maintenance. Customers usually receive

73

annual payment notices for periodic hardware or software maintenance and product

updates

74

Figure 3-1 The Bid Process

XYZ Company prepares a The XYZ Company purchasing
XYZ Company list of requirements or a department distributes a
identifies a need specification specification to potential
suppliers

Suppliers prepare and XYZ Company evaluates XYZ Company awards the
submit a bid to the XYZ the supplier’s bids contract to the ABC
Company Company

75

Figure 3-2 Project Lifecycle Phases

No. of people on the job
or
Labor Hours
or
Project Spending

TIME

Contract Design, Installation
Award Planning - Training Transfer to
Assembling Team & Development & Maintenance
Disbursing Work Test

A product or service provided by a project differs in some distinguishing way from

previously delivered products or services. The Project Management Body of Knowledge

(PMBOK) defines Project management as the application of knowledge, skills, tools,

and techniques in order to meet or exceed stakeholder needs and expectations from a

project. Project managers (PM) use many of the same techniques and tools employed

by general managers. After negotiating for the organization's resources required for a

project the PM assigns these resources with the intent of completing specific objectives

76

and goals. The PM has complete responsibility for the success or failure of the project.

Frequently however this person lacks the authority to insist that members of the

organization support the completion of the required activities. We will discuss the

ramifications of this apparent paradox in the next section.

Table 3-1 illustrates a family of microprocessor devices developed by Intel. Each of

these internally funded microprocessor projects started with a set of requirements. They

required a large number of software and hardware engineers and technicians to develop

a design that supported a machine code, which software designers could use to program

the device. Engineers and technicians built and extensively tested a prototype.

Following satisfactory evaluation of the test results, the design group completed the

drawings and documentation. They then transferred the product to the integrated circuit

manufacturing department for large scale production. The design, fabrication and test of

each of the microprocessors in Table 3-1 corresponds to a project.

77

Table 3-1 Thirty-years of Intel Microprocessor Projects

Microprocessor Device Year of No. of
Number Introduction Transistors
4004 1971 2,250
8008 1972 2,500
8080 1974 5,000
8086 1978 29,000
286 1982 120,000
386™ processor 1985 275,000
486™ DX processor 1989 1,180,000
Pentium® processor 1993 3,100,000
Pentium II processor 1997 7,500,000
Pentium III processor 1999 24,000,000
Pentium 4 processor 2000 42,000,000
Data taken from http://www.intel.com/research/silicon/mooreslaw.htm

A program is a group of projects managed in a coordinated way to obtain benefits not

available from managing them individually. The projects comprising a program share

some common features. The commonalities may include application or purpose,

components, development and/or fabrication tools, developer labor pool, training, and

maintenance. The organization desires to take advantage of this expertise associated

with similar projects and thus creates a program. The entire effort shown in Table 3-1

corresponds to the Intel microprocessor program conducted over a thirty-year period.

The development of many of these projects overlapped. Very possibly a single person

managed two or more of these projects simultaneously. A program manager has

responsibility for several related projects. After a project team gains experience on one

of the projects in a program, the program manager would like to assign the existing team

to other projects in the program, which they do by negotiating with the functional

managers. A team that successfully completes a project, understands each other’s

78

strengths and weaknesses. They understand the major technical aspects of the old and

new projects. The team members have acquired a knowledge of the development tools

required to perform the job and do not require extensive training. They are ready to go.

Program managers would like to apply this knowledge to other projects in the program

thereby saving money. The organization and the customer benefits from combining

several similar projects into a program by making use of the experience that the team has

gained.

Figure 3-3 illustrates another example of the difference between a project and program.

Over a fifty-year time span, the U.S. Navy's Blue Angel acrobatic flight team used eight

aircraft - Grumman F6F Hellcat, Grumman F8F Bearcat, Grumman F9F Panther,

Grumman F9F-8 Cougar, Grumman F11F-1 Tiger, McDonnell Douglas F-4J Phantom II,

McDonnell Douglas A-4F Skyhawk II, and the McDonnell Douglas F/A-18 Hornet . Each

aircraft represents a separate and distinct project. Each aircraft project went through

several phases that included initial concept, aircraft development, prototype manufacture,

and test and evaluation before it went into production. Keep in mind that a project does

not include production manufacturing and aircraft maintenance. From the U.S. Navy's

perspective, all the aircraft represents the Blue Angel aircraft program.

79

Figure 3-3 The Blue Angel’s Project and Program

Fifty years of Blue Angels Aircraft - Grumman F6F Hellcat, Grumman F8F Bearcat, Grumman F9F Panther, Grumman F9F-8 Cougar, Grumman
F11F-1 Tiger, McDonnell Douglas F-4J Phantom II, McDonnell Douglas A-4F Skyhawk II, McDonnell Douglas F/A-18 Hornet

80

Figure 3-4 Stratified Organizational Levels

Upper Management -- Policy
Middle Management - Planning
Supervisory -- Scheduling
Non-supervisory worker - Product or
Service

Figure 3-5 Functional Department View of the Organization

Engin- Manu- Pur- Human Cust- Sales
eering fac- chasing Resour- omer & …
turing ces Service Market-
ing
Upper Management
Middle Management
Supervisory
Non-supervisory
worker

Figure 3-6 Operational Islands

Engin- Manu- Pur- Human Cust- Sales
eering fac- chasing Resour- omer & …
turing ces Service Market-
ing
Upper Management
Middle Management
Supervisory
Non-supervisory
worker

Why Project Management?

81

Organizations divide into four broad management categories (Figure 3-4). Upper

management establishes organizational policy and future direction, middle

management focuses on planning, supervisory levels focus on work distribution and

scheduling, and the large non-supervisory workforce focus on completing and delivering

the product or service. As shown in figure 3-5, functional managers take responsibility

for activities in specialized departments or functions (e.g., engineering, purchasing,

manufacturing, management information systems (MIS) or information technology (IT),

sales, marketing, human resources, publications, customer service). They concentrate

on their area of expertise. Most managers wear “blinders.” Engineering has little

interest in the issues involving the manufacturing or publications department. Most

organizations have self-imposed constraints if not outright restrictions on employees

from one department involving themselves in the activities of another department.

Combining the stratified organization levels (Figure 3-4) with the functional departments

(Figure 3-5) creates a patchwork of "fiefdoms" (Figure 3-6). Few managers in the

organization take a broad view. In fact, upper management usually prefers that

functional managers tend solely to their activities. Therefore, when you examine the

organization closely, you view a vast sea of operational islands. That is, highly

territorial supervisory and non-supervisory personnel closely guarding the regions of

their special interest. This leads to the need for a manager that can integrate and meld

parts of these independent "fiefdoms" into a cohesive group that takes an interest in

completing a particular job or project. This person is the project manager.

82

The PM also provides a responsibility focal point. The ‘buck’ stops at the PM. All

stakeholders bring their questions, comments, complaints, and issues to the PM. The

PM speaks for the organization. Do not interpret this to mean that the PM acts

unilaterally without seeking guidance and assistance from other stakeholders. That

should not happen. However, the PM makes the decision after consulting with the

technical, financial, purchasing, manufacturing and sales communities; suppliers; and, if

necessary, senior management.

Project Manager's Responsibilities

The essential goal of project management is to make the most effective use of

resources such as labor, equipment, facilities, materials, money, information, and

technology so that project goals can be achieved within budget, on schedule, while

meeting performance requirements, and receiving customer acceptance. The project

manager takes into consideration the changing legal, social, economical, political, and

technological environments. The Project Manager is the focal point for integrative

responsibility. Upper management holds this person totally accountable for all project

activities. This person must coordinate across the organization's functional interfaces,

resolve conflicts, and apply integrated planning and control techniques. The PM

continually crosses organizational boundaries in an effort to acquire and deploy

resources. This person quickly develops the team into a harmonious group.

Undoubtedly, a major project manager responsibility involves securing a customer

commitment to a firm and realistic set of requirements. A good specification defines the

job scope, budgets, schedules, and quality controls. The requirement definition has

83

immense impact on the resources selected and profitability of the project. A successful

PM must have administrative expertise and an understanding of human behavior. The

person must act as an integrator, communicator, leader, and environment enhancer.

The project manager acts as the focal point to the stakeholders that include customer,

upper management, functional management, and other individuals and organizations

involved in or affected by project activities (Figure 3-7). Project managers strive to meet

or exceed stakeholders’ needs and expectations. Some PM’s believe that without a

project manager in charge the project will operate within the seven phases shown

below:

1. Wild Enthusiasm

2. Disillusionment

3. Chaos

4. Search for the Guilty

5. Punishment of the Innocent

6. Promotion of the non-Participants

7. Definition of the Requirements

84

Upper
Management
Functional
Department
Management

PM

Customer

Figure 3-7 Project Manager (PM) pulled in all directions

85

Organizational Charts

All organizations formally divide management responsibility into layers, which are

referred to as organization charts. Figure 3-8 illustrates a traditional top-down

organizational chart. Organization charts are not one size fits all. A "best" organization

chart does not exist. An organization structure successfully used for a Fortune 500

industrial company may not be suitable for the operations of a smaller business or a

different industry. Organization charts are not cast in concrete. They change

depending on business, economic or labor conditions. Organization charts frequently

reflect the chief executive’s personality and preferred way of conducting operations.

The executive office may consist of the organization’s president, vice presidents, legal

staff, and administrative staff. The organization’s staff provides advice and support.

The three types of staff personnel perform advisory, service, and control tasks. The

vice presidents report to the president and have responsibility for one or more

functional or support departments.

Depending on the organization’s size, either a vice president or a director reporting to

the vice president will lead functional and support departments. Frequently there exist

vice presidents of engineering, manufacturing, sales and marketing, information

technology, human resources, etc. Mid-level managers report to these vice presidents

and non-supervisory employees report to the mid-level managers.

86

Functional Organization

The functional organizational chart shown in Figure 3-8 identifies the disciplines

required to develop and produce a product or service. Each department manager can

trace a line back to the organization’s president. Everyone understands where he or

she stands in the “pecking” order. When a special project comes into the “house”, no

particular person receives responsibility for its completion. The managers meet and

agree to divide the work according to a plan that they devise. Each mid-level manager

establishes priorities. A dispute among departments would likely work itself up the

chain of command and require interdiction by vice presidents - probably not a very

efficient way to attack a project. Each department manager tries to maximize the

personnel usage within each department. The manager assigns personnel and

establishes priorities according to his or her own preferences.

The functional organization structure is based on specialization such as engineering,

production, marketing, accounting, logistics, etc. Individuals report to one superior.

In a multiple project environment, conflicts may develop over the relative priorities of

different projects in competition for limited resources. If the organization policy does

use a project manager, the PM has little formal project authority and relies on

negotiation, the informal power structure and interpersonal skills to realize the project

goals. Project team members place more emphasis on their functional specialties,

which can work to the detriment of the overall project. According to some managers, it

is easier to manage specialists if they are grouped together and supervised by an

individual possessing similar skills or experiences. The functional organization

87

centralizes similar resources and provides mutual support to group members by close

physical proximity. This origination structure can usually define career paths for its

participants.

Project Management Structure

Figure 3-9 illustrates a project management structured organization. This focused order

exists to manage a variety of large, long-term projects. Employees are dedicated to

specific projects and work in one of several large project groups. Each project group

contains a complement of engineers, technicians, administrators, and other

professional and nonprofessional personnel. Functional managers do not have to

make project priority decisions -- they only work on a single project. All managers report

to the project manager assigned to the project. This person has both the authority and

responsibility for project success. The project manager requests that functional

managers hire personnel to work on this specific project. At the end of the project,

employers may find themselves looking for a new job unless they can obtain a position

in another project organization.

The PM has total authority over the project and retains the flexibility to acquire

resources needed for the project from either within or outside the parent organization.

The structure promotes effective informal communications channels between the

project manager and the team. The project management structure may not promote

efficient use of resources and there may be a possible duplication of facilities. Since

every project has a beginning and end, project team members work themselves out of a

88

job, which may result in a layoff. Some fortunate employees may find a new position in

another project organization within the same parent organization.

Matrix Organization

Many organizations prefer not to duplicate personnel for each project. Instead, they

attempt to create a single "world class" functional organization and share the talent

among the various projects. This leads to the matrix organization shown in Figure 3-10.

On receiving a new project, the organization assigns a project manager. This manager

assembles a team by requesting support from the functional groups that contain the

needed personnel. Naturally, project managers negotiate with the functional managers

to obtain the best people for the project. Project manager’s familiar with the functional

department’s personnel have the best opportunity for successfully recruiting a capable

staff. PMs cultivate relationships with functional managers so that they can obtain

people suitable for the project entrusted to them.

The project manager plans and coordinates the project by working with and integrating

all groups within the organization. The PM works with the team to identify and address

the needs of all stakeholders. This person relies on organizational and people skills

more than technical ability to pursue project success. The PM focuses on work

relationships and leadership including motivation, delegation, supervision, team

building, and conflict management and resolution. Following a discussion with the

functional manager, the PM arrives at a suitable working relationship with the functional

manager to reward and discipline employees. The PM influences the stakeholders

89

using written, verbal, and listening communication skills as well as demonstrating

excellent problem solving competencies.

The matrix organization represents a combination of the functional and project

management structures. It attempts to maximize the benefits of the project

management and functional organizational structures and minimizes its weaknesses.

The matrix maintains the functional or vertical lines of authority while establishing a

relatively permanent horizontal structure to support new projects. It is designed to work

with all functional departments that support the project and reduce or eliminate

duplicate effort found on the project team. The matrix design enables the organization

to manage several projects simultaneously even though the organization may have

insufficient resources to staff each project separately.

This system may create conflict with the project workers in that there are two "bosses"

for each worker: the project manager and the functional manager. To reduce the

conflict, the roles and responsibilities of each must have a clear definition before work

begins. A strong matrix refers to the idea that the project manager enjoys greater

authority whereas in a weak matrix, authority passes to the functional manager. A

potential disadvantage to the functional department’s employee exists if the worker is

placed on a long-term project assignment. The time away from the parent functional

department may negatively affect promotional progression or possibilities of receiving

‘choice’ assignments. Table 3-1 summarizes the relationships among the functional,

project and matrix organizations.

90

Line Organization

Most people in organizations contribute directly to the organization’s product or service.

For example, consider a company that manufactures computers:

Engineers design the computing electronics boards,

Technicians and engineers test the prototype,

Technicians fabricate the printed circuit boards,

Factory workers stuff the boards with electronic components,

Factory technicians assemble the required configuration,

Test technicians test the fabricated system,

Sales people sell the product, and

Field technicians install the equipment in the buyers’ facility or home.

Without all of these people doing their job, the customer will not receive the quality

product or service they demand. On the other hand, some employees at this firm have

little to do with the final product or service. Lawyers protect and advise the company

about legal matters, nurses care for a person injured on the job, librarians assist people

in obtaining information, marketing personnel develop advertisements and create ideas

for future products, and senior management guides the organization. Important as they

might be, none of these people has anything directly to do with the actual product or

service provided to the customer.

91

Organizations use the phrase line managers to describe managers actually

contributing to making a product or performing a service. A line organization describes

the direct, straight-line relationships between different levels within the company

involved with a product line. The members of the line organization perform or manage

functions essential to the existence of the firm and product or service. The line

organization has a clear chain of command and promotes fast decision-making. The

majority of people assigned to a project manager are line workers. All the people in this

section’s first paragraph represent line workers. Lawyers, nurses, librarians, marketing

personnel, and senior managers support the organization, but do not perform work

required to get the product or service to the customer and therefore are not line people.

92

Figure 3-8 Traditional Management Structure

Functional Organization

Executive
Office
Information
Technology

Engineering Operations Financial Administration Field Service Marketing
(Director) And Sales
Division

Mechanical Technicians Marketing
Electrical Financial
Staff

Department
Software
Manufacturing Publications, Sales
Purchasing Configuration Force
Management,
Secretarial
Sections/ Digital Structures
Functions Analog Adhesives
CAD

93

Figure 3-9 Project Organization

Executive
Office

Project/Program A Information Administration
Technology (IT) Project B
Manager
Manager

Engineering Financial Sales

Publications,
Operations Field Service Configuration
Management,
Secretarial

94

Figure 3-10 Matrix Organization

Executive
Office

Information Engineering Operations Financial Administration Field Service Marketing
Technology And Sales

Project
Manager X

Project
Manager Y

95

Table 3-1 Comparison of Project Leadership for Different Organization Structures

Traditional Project Matrix
Functional Management Organization
Organization Structure
Project leadership May use a project PM PM
responsibility coordinator
Project priorities Established by PM Established by PM
Stakeholder Resolved by PM Resolved by PM
Disputes
Personnel Functional PM designates Functional
selection managers recruit managers to recruit managers recruit
personnel personnel personnel
PM responsibility High High
PM authority None High Weak
Personnel at end Remains in Possible forced Return to functional
of Project functional organizational leave groups
organization (layoffs)

96

Chapter 3 Questions

1) Explain the difference between a project and a program.
2) What is an organizational chart? What is its purpose?
3) Think of a company, religious organization, charitable organization, or a college
with which you have some familiarity. Perform a SWOT analysis. That is identify
the strengths, weaknesses, opportunities, and threats confronting the organization.
Based on your analysis, identify two strategic goals appropriate to the organization.
4) Describe the advantages and disadvantages of functional, project, and matrix
organizations.
5) If a project organization completes a project, what may happen to the members of
the organization?
6) Describe a functional manager and a line manager. Can they be the same?
Explain.
7) Do you believe that a project manager need have a technical expertise in the
organization’s specialty areas? Explain your answer.
10) Sketch a project lifecycle. Describe its meaning.

Self-check test


1) True or False:
A project is an endeavor undertaken to create a unique product.

2) Every project has a definite ___________ and a definite _______________.

3) True or False:
Project management is the application of knowledge, skills, tools, and techniques in
order to meet or exceed stakeholder needs and expectations from a project.

4) True or False:
The PM has responsibility for the success or failure of the project.

5) True or False:
A program is a group of projects managed in a coordinated way to obtain benefits
not available from managing them individually.

6) True or False:

97

A line organization describes the direct, straight-line relationships between different
levels within the company involved with a product.

7) A project manager is concerned about the following:
a) Effective use of resources
b) Completing the project within budget
c) Completing the project on schedule
d) meeting performance requirements stated in the contract
e) receiving customer acceptance
f) achieving state of the art performance
g) Giving the customer everything they asked for.

8) Examples of stakeholders are which of the following:
a) External Customer
b) Functional departments
c) IRS auditors
d) Suppliers
e) Senior management

9) Select the employee(s) that contributes to making a product or performing a service.
a) Line manager
b) Legal staff
c) Librarian
d) Company nurse
e) Purchasing staff

10) Characteristics of the functional organization include:
a) Specialty personnel
b) Colleagues sharing a common work area
c) Manager with authority to make project priority decisions
d) Technical problem solving skills

11) Morning social discussions with work associates

a) Improves morale and should be engaged in every day.
b) Reduces company productivity.
c) Should not be conducted in front of a manager.

12) Characteristics of a functional organization include the following:
a) Specialty skills
b) Minimal skills
c) Contains a broad cross section of the organization’s disciplines
d) Outstanding writing skills

98

13) . True or false: The matrix organization is designed to manage several projects
simultaneously even though the organization may have insufficient resources staff
each project separately.

14) True or false: The matrix organization may create conflict with the project workers in
that there are two "bosses" for each worker.

15) The PM focuses on work relationships and leadership and uses the following
techniques:

a) Motivation
b) Delegation
c) Supervision
d) Team building
e) Conflict management and resolution
f) Superior technical skills.

16) A project manager’s primary goals involve delivering a product or service (choose all
that apply):
a) Within budget
b) On schedule
c) Meeting the performance requirements
d) Exceeding the performance requirements described in the specification
e) Receiving customer acceptance
f) With employee satisfaction

99

CHAPTER 4

Management Concepts

There is nothing more difficult to handle, more doubtful of success, and more
dangerous to carry through than initiating changes. The innovator has for enemies all
those who have done well under the old conditions, and lukewarm defenders in those
who may prosper under the new. -- Machiavelli, The Prince, Chapter 6

<>

Chapter goals


Understand the difference between a manager and a supervisor
Understand fundamental management theories
Define efficiency and productivity
Discuss the functions of management
Discuss management styles
Explain the types of power used by managers
Compare a group and a team
Explain the difference between a manager and a leader

Class Exercise: Before reading this chapter, students in the class should perform the

following the exercise. The purpose of this exercise is to stimulate your thinking

regarding a manager's job. Divide the class into small groups consisting of three or four

students. Many students have held one or more jobs. Recall your supervisor or

manager in these jobs. Take a few minutes to answer the following questions

individually.

100

1) List the broad supervisory responsibilities that you believe this person had.

2) List the reasons that you took the job.

3) Identify the actions taken by the organization and the supervisor or manager that

would motivate you to pursue your tasks with greater diligence.

4) What did you like least about the job?

Discuss your individual responses to each question with the small group. The group

should evaluate the individual responses and select the five most significant answers to

each question. Discuss the results of your deliberations in class.

<>

Management

What does a manager do? What makes a good manager? Practitioners and theorists

have wrestled with these topics at length. Most agree that management is the process

of getting activities completed efficiently and effectively with and through other people.

The manager’s goal is to get the job done in the shortest time with a minimum of cost

and expended resources. Resources consist of people, places, and things. From the

organization's perspective, it includes time, labor, material, facilities, land, tools, money,

equipment, etc. An organization includes 1) people that do the work, 2) people that

plan and distribute the work, and 3) people that plan for the organization's future. The

101

second category includes the day-to-day managers and supervisors. The last group

consists of upper management.

Management is not a new idea. Consider the management skills required by the

ancient Egyptians to build the pyramids (Figure 4-1a). Depending on which historian

you believe, the pyramids required from 20,000 to 100,000 laborers -- an impressive

workforce. The Chinese built the Great Wall (Figure 4-1b) a length of 4000 miles

across the border between China and territories in the north. The 4000-year-old

Stonehenge (Figure 4–1 c) structure in the United Kingdom is a set of concentric rings

and horseshoe shapes. This construction likely involved moving stones weighing as

much as 25 tons from a quarry location more than twenty miles away. Once in place,

the inner stone circle was one of the earliest structures to align with the summer

solstice sunrise. Roman engineers built aqueducts (Figure 4-1d) that crossed

mountains, valleys and plains. Eleven major aqueducts built over a period of more than

500 years, stretching over hundreds of miles supplied water for the city of Rome. They

built aqueducts in numerous other parts of their empire, notably France, Spain, and

Northern Africa. In Chiapas, Mexico the Mayan civilization constructed the Temple of

the Inscriptions (Figure 4-1e) – a pyramid that covered a subterranean tomb that

houses the sarcophagus of a Mayan ruler Pakal. The temple stands 30 meters high

and approximately 60 meters wide at the base. These technically sophisticated

projects required enormous amounts of human labor and involved planning, controlling,

and coordination. In each project, the leaders established a vision and motivated the

workforce to accomplish the desired goals. Management just below the leadership

102

level worked with the technical experts to integrate their thoughts and ideas into

feasible plans of action. These managers prepared and monitored schedules. They

took responsibility for obtaining and distributing raw materials and other resources

required for the job. This participated in resolving conflicts among workers. Finally, they

concluded the job by defining success with an acceptance test – water flowing, troops

marching, or conducting a religious ceremony. In short, the jobs required management

skills.

Figure 4-1b The Great Wall

103

Figure 4-1c Stonehenge

Figure 4-1d Roman Aqueduct

104

Figure 4-1a Pyramid

All of us receive supervision at work and some of us will be managers during our

career. You will likely make employment decisions based on your perception of the

organization’s management quality. An understanding of basic management principles

will help us make informed decisions about the prospective organization. It will help

you ask the right questions at the interview so that you can determine if you would

enjoy the work environment. It will help you to decide whether you should consider a

management opportunity during your career. Project management requires us to

understand and use many of the fundamental management concepts discussed in this

section.

Managers and Supervisors

105

The difference between managers and supervisors varies among organizations.

Both a manager and supervisor represent the work group to a management level above

them. In most organizations the hierarchy begins with a supervisor, followed in turn by

a manager, middle manager, and senior manager. A project manager is at the level of

a middle manager. The supervisor must still have a good technical command of the

needed skills because they are so close to the "hands-on" work performed by the

employees. As the person moves up the management hierarchy, technical skills

become less important and interpersonal skills assume greater importance.

Managers make broad decisions with potentially wide organizational impact and

supervisors makes decisions about a particular work unit. Frequently a manager has

an external role and may visit stakeholders such as customers and suppliers while the

supervisor has a more limited role confined to the unit or department. Supervisory

management is more focused and has a short-term outlook.

The supervisor maintains the routine flow of work. Both the manager and supervisor

receive, collect and transmit information. The manager receives and transmits more

information from people outside the organization than the supervisor. The manager is a

spokesperson to the outside world. The manager disseminates the organization's

information into its environment. The manager exists at the center of organizational

decision-making. The manager may initiate change, deals with threats to the

organization, decides on organizational priorities and negotiates on behalf of the

organization.

106

Historical Management Overview

Management thought has evolved over the years. An evolutionary continuum is shown

in Figure 4-2. As people conducted social experiments and performed studies,

organizations began to modify existing management processes and procedures and

adopt new methods. Abrupt changes rarely occur, rather organizations ease into new

ideas. Researchers do not necessarily agree on the titles of the schools of

management thought discussed below. Certainly, practitioners (managers working in

business, industry, profit and non-profit organizations, and public and private sectors)

do not care about management categories. A senior executive cares about meeting

the planned quarterly financial targets and strategic goals. The mid-level executive or

project manager share concerns about achieving well defined objectives that the

customer demands. Their interests lay in using techniques to motivate the staff to

provide a product or service that satisfies the stakeholders. Managers mix and match

ideas and theories to help them get the job done. Recognizing that distinct categories

blend into one another and do not have sharply defined edges, we will attempt to

separate and classify the schools of management thought in an effort to gain insight

into the subject.

107

Figure 4-2 – Selected Contributors to Management and Leadership Thought

Other Recent Contributors -- Drucker, Peters, Blanchard

Quality – Deming, Juran, Crosby, Feigenbaum, Ishikawa, Shewart, Taguchi

Leadership Theory – Mintzberg, Bennis, Kotter

Behavioral Theory – Barnard, Follett, Herzberg, Maslow, Mayo, McGregor

Classical Management Theory (Scientific) – Gilbreth’s, Taylor

Classical Management Theory (Administrative) – Fayol, Follett, Gantt, Weber

1875 1900 1925 1950 1975 2000
108

Classical Management

During the industrial revolution (1750 to 1850), the U.S. moved from an agrarian

society to urban factory based centers. Dramatic changes in the social and economic

structure took place as new technology created the factory system of large-scale

production. Managers emphasized the division of labor and the importance of

machinery to assist labor.

Classical management theory developed during the industrial revolution and continued

into the first half of the twentieth century. Theorists believed that money motivated

employees and called the concept “economic man”. The classical period focused on

efficiency and relied on bureaucratic, scientific and administrative concepts. A common

assumption held that efficiency improvement led to productivity increases. In

technology, we define efficiency as the ratio of output to input expressed as a

percentage. In the organization, we can define efficiency as the resources spent to

complete a specific task compared with a reference standard. The resources normally

used to complete a task may be an acceptable reference point. This data may stem

from historical results based on previous projects. Reducing the time to complete that

task improves efficiency. Increased worker efficiency can result from gaining

experience on the job. Efficiency may also improve from the use of a new tool or piece

of equipment as more product will be produced within a given time period. Very often,

the use of a new tool may reduce efficiency during the short term until personnel learn

to use the equipment effectively. Good efficiency requires the ordering of job tasks in a

way that uses a minimum of resources. Increasing the efficiency of production

109

processes improves organizational productivity. Productivity measures the worker’s

output over some time. A productivity gain yields an increased amount of product or

services during a time period as compared with a previous time period.

Managers expect activities to use specific processes, procedures and methods.

Bureaucratic management relies on 1) a set of guidelines and procedures or rules, 2) a

hierarchy, and 3) a clear division of labor. Scientific management focuses on the way to

do a job that results in the highest productivity. Administrative management emphasizes

information flow in the organization’s operation. The process involves acquiring

information and then performing the operations to achieve organizational goals.

Several of the leading classical management theorists include Fredric Taylor (the father

of scientific management), Henri Fayol, Gantt, Weber, and the Gilbreths (originators of

time and motion studies).

Henri Fayol revolutionized management thinking. He identified five functions of

management that continue to serve as a basis for administrative actions. These

included planning, organizing, commanding, coordinating, and controlling. Planning

requires an understanding of the work so that the supervisor or manager can identify

the tasks to be performed and then develop a schedule to perform the work.

Organizing requires the manager to identify and assemble the resources required to

perform the work. Commanding entails assigning people to the work and confirming

that the job gets done. Coordinating involves unifying the activities, resources in a

logical manner so that the work can get done. Finally, the manager must control the

110

operation so that the work is performed and completed in accordance with the

organization's established policies and procedures. Controlling the work operation

yields output consistency from worker to worker. Luther Gulick and Lyndall Urwick

(1937) modified Fayol’s list of management functions as follows:

Planning,

Organizing

Staffing

Directing

Coordinating

Reporting

Budgeting.

The addition of staffing, reporting, and budgeting adds tasks for which managers

frequently have responsibility. Directing, a softer less military-like word, replaced

commanding. Gulick & Urwick (1937) emphasized formal authority and the role of

direct supervision. Later studies conducted by Mintzberg and Kotter found that

successful managers spend a great deal of time communicating, cultivating networks

and personal contacts and delegating work to subordinates.

Fayol embellished the baseline five management responsibilities with fourteen

management principles. These principles or general rules apply to all organizations are:

111

1. Division of work through labor specialization. Specializing encourages the

development of expertise associated with the performance of specific tasks.

2. Authority and Responsibility. Authority should reside with the people having

the responsibility for the task. Recognized personnel should have the right to

give orders and the power to demand that the employee comply. One individual

receives recognition by the organization to assume responsibility for making

certain that activities associated with a given job get done. Project managers

frequently have the responsibility, but not the authority for completing a job.

3. Discipline. The manager expects and insists that employees obey the rules

and has the means to enforce this demand.

4. Unity of command. Each employee should have one boss.

5. Unity of direction. A single project plan controlled by a single individual.

6. Subordinate Individual Interests to the organization's needs. Pursue only

work-related activities at work.

7. Employee Compensation. Employees receive fair payment for services

performed.

8. Centralization. Consolidation of management functions. Decisions are made

from the top.

9. Scalar Chain (line of authority). Use of a formal chain of command from the

top to the bottom of the organization. This creates a pyramid-like top down

structure that is standard operating practice in today’s organizations.

112

10. Order. All materials and personnel have a designated location. The six-sigma

quality concept implemented by Motorola and other major organizations used

this as a starting point.

11. Equity. Equality of treatment (but not necessarily identical treatment)

12. Personnel Stability. Limited personnel turnover. Changing personnel requires

retraining and will lower productivity. In good economic times, people tend to

change jobs more often than in business slumps.

13. Initiative. Think out a plan and make it happen. Many managers take the

initiative and use the credo “Do it now and ask forgiveness later.”

14. Esprit de corps. Encourage harmony and cohesion among personnel.

The most widely known of these fourteen management principles include 1) division of

work through specialization, 2) authority should be equal to responsibility 4) unity of

command, 5) unity of direction, and 9) the scalar chain of command. Classical

theorists believed that understanding and applying these principles in a rational manner

leads to the successful resolution of management problems.

Henry Gantt is best known for developing a chart used for scheduling tasks over time.

Today managers use the Gantt chart more extensively than most other project

management tools. Microsoft Project and Primavera are two software products

commonly used to develop schedules. Gantt also recommended motivational schemes

that emphasized rewards for good work rather than penalties for poor work. He

advocated a compensation incentive system with a guaranteed minimum wage and

113

bonus systems for people on fixed wages. Gantt believed in the importance of

leadership and management skills in building effective industrial organizations.

At about the same time that Fayol described the manager's job, Frederic Taylor

introduced scientific management. Both Fayol and Taylor were task- and thing-

oriented, rather than people-oriented. Scientific management focuses on worker and

machine relationships. Taylor’s scientific model evolved from the factory mass

production experience and relied on standardization of work, control of quality, a

division of labor, and a structural hierarchy. He analyzed the work that had to be

completed and then organized work activities into a group of basic operations. This

concept worked reasonably well with industrial and repetitive tasks. Taylor strongly

believed that managers and supervisors should cooperate with and motivate people to

perform. In the effort to improve production efficiency, he advocated improving the

tools employees used to perform the work and then selecting and training personnel in

their use. He argued that good working conditions and the use of economic incentives

to motivate employees would help gain their cooperation.

Frank and Lillian Gilbreth further advanced the scientific model by performing detailed

time and motion studies. They focused on 1) identifying the fundamental motions in

work, 2)studying the way these motions combine to perform a task, and 3) assigning a

time duration for each separate motion. Frank Gilbreth collected data by filming

individual physical labor movements during the performance of a workers job. They

then analyzed the workers movements. They showed managers how to break down a

114

job into its component parts and reassemble the motions to minimize the time to

perform tasks. Using the resultant information, the manager prepared a more efficient

procedure that the employee followed. These procedures not only reduced the time to

complete a job but it helped to make the times consistent from worker to worker. The

result enabled managers to accurately estimate time to complete a job, which

customers appreciated. Workers found this mechanized method for performing work

highly restrictive and boring.

Max Weber promoted bureaucracy as the most logical form for large organizations.

During the early part of the twentieth century, the word bureaucracy did not have the

negative connotation with which we now associate it. Documented processes,

procedures and a hierarchical structure governed by an impersonal authority typify a

bureaucracy. Authority stems from the individual’s position in the organization’s

hierarchy and not on an individual’s personality or charisma. The worker’s title defines

the person’s authority. Characteristics of a bureaucracy include the following:

• Well-defined and specialized jobs

• Qualifications for job tested

• Formal behavior rules

• Hierarchical system of supervision

• Unity of command

115

• Preparation and use of written processes and procedures (e.g., an

employee’s handbook, industrial safety directions, or directions on handling

hazardous material – HAZMAT)

• Skill based training

• Work assignments and personnel recruitment based on technical expertise

• Continuity of operations despite personnel changes

• Promotions based on competence

• Continued employment based on merit

Weber believed that organizations would become successful by applying these

bureaucratic rules. Bureaucracies established concepts of fairness and equality of

opportunity. Bureaucracies excel at businesses involving routine tasks that can be

specified in writing and do not change quickly.

The industrial revolution and the progress made by science and technology in the

1900’s gave credence to the idea of a single best way to manage. Scientific

management seemed to reinforce this idea. The training that engineers and scientists

receive leads them to expect a single answer to a problem. In mathematics and

science courses technology students tend to present a single number as the solution to

a question. They are comfortable with the existence of a single, best way to accomplish

an objective. During the twentieth century, it was common for engineers and scientists

to move up the ranks and become managers. So, the idea of a single best way to

accomplish a task moved with them. In the real world however, there frequently exists

116

an array of solutions to business and management problems -- perhaps some better

than others, but many completely acceptable because they lead to job completion. One

of Mary Parker Follett's important contributions to management theory was the Law of

the Situation that emphasizes there is no one best way to do anything - it all depends

on the situation. Contingency theory or situational theory developed by Fielder uses

Follett’s concepts. Today this is considered mainstream management thinking. Precise

management formulas do not exist. If they did, far more managers would be

successful. The techniques recommended by the classical theorists should be used as

guidelines to manage organizations.

Human behavioral management

Human behavioral management studies began in the 1920s and dealt with the human

aspects of organizations. This group of theorists based their studies on psychological

concepts. The philosophy of "social man" began to compete with the concept of

"economic man." The movement began with the Hawthorne Studies. From 1924 to

1933 at the Hawthorne Plant of the Western Electric Company in Cicero, Illinois,

researchers, T.N. Whitehead, Elton Mayo, George Homans, and Fritz Roethlisberger

conducted a series of industrial psychological experiments. One study examined the

effect of changing the electric lighting illuminating the employees work area. The

researchers established two groups -- a control group wherein the workplace lighting

was held at a constant level and an experimental group that had varying illumination

strengths. The researchers expected that the group of women workers receiving

improved illumination would have greater productivity. The surprising results showed

117

that the productivity of both groups improved. The researchers concluded that the

increased attention given to both groups making them both feel very special led to the

improved productivity. Mayo identified the “Hawthorne Effect” which is the productivity

improvement that results when people know they are being studied.

The researchers at the Hawthorne plant conducted many experiments relating worker

and group output to working conditions. Their efforts highlighted the importance of

informal groups (i.e. groups arising out of the formal organization, but not specifically

created by management) and the benefits of listening to employees’ feelings and

opinions. Work breaks, the freedom to talk, and approved requests for supervisory

changes positively influenced individuals work behavior. Over a period of years, the

researchers found workplace changes other than increased wages influenced

productivity. Some of these changes included varying workday and workweek lengths,

varying starting and stopping times, and providing lunches paid for by the company.

Concerns about today’s families’ complicated work/life agenda have forced

organizations to seek methods of improving worker satisfaction while improving

productivity. Verespej (2000, p. 25) reports about a problem that a company had with

mandatory worker overtime on weekends. “Taking the suggestion of its manufacturing

employees, the company switched to a schedule where workers put in a full workweek

over four days. That allowed to company to schedule overtime, when needed, on

Fridays, and let employees save weekends for family activities and, occasionally, have

a three-day weekend.” Similarly, Hewlett Packard (HP) decided to reconsider its

traditional 8 to 5 workday thinking. Verespej (2000) relates

118

“self-directed work teams in one HP financial-services center opted to

switch to a four-day-week, 10-hour-day schedule to process the high

number of transactions. The results: Overtime dropped 50%, workers

had more ‘quiet’ time to develop process improvements, and the number

of transactions processed daily per person increased by 70%.”

The Hawthorne studies did not find a direct cause-and-effect relationship between

working conditions and productivity. Worker attitude was important. The researchers

found that employee's complaints may be a symptom of some underlying problem on

the job, at home, or in the person's past. These findings led to the consideration of the

psychological and group dynamics aspects of group productivity. People are not the

rational and economic beings assumed by classical theorists. Social interaction is

important in the workplace and people work well if they feel valued. The studies at the

Hawthorne plant gave birth to the human relations movement and behavioral science

approaches to management. In the 1940’s, group dynamics studies encouraged

increased individual participation in decision-making and group performance did

improve.

Scientific management promotes a way of thinking about managing, which is

appropriate for an assembly line operation. Many of today's organizations are

knowledge based and service oriented. Industries characterized by rapidly changing

technology or not well-understood processes require a different management approach.

The "cookbook" approach may not work for many of these areas. Managing technology

119

and technologists demands solutions that use unconventional or "out of the-box"

thinking.

Human Resources School

During the 1950’s, researchers began to examine employee motivations in an effort to

increase productivity and efficiency. The behavioral approach did not always increase

productivity. Thus, motivation and leadership techniques became a topic of great

interest. Modern theorists such as Maslow, McGregor, Herzberg, Bennis and others

emphasize the importance of social relations in organizations, understanding workers

and managers as human beings with social and emotional needs. The human

resources school believes that employees are creative and competent, and that much

of their talent is largely unused by employers. Employees want meaningful work; they

want to contribute; they want to participate in decision-making and leadership functions.

Herzberg’s Hygiene Factors

Herzberg proposed a theory for motivating workers that introduced organizational

motivating agents, which he called hygiene factors. Hygiene Factors are:

! Administrative Policies

! Working Conditions

! Salary

! Personal Life

! Peer, Superior, Subordinate Relationships

120

! Status within the organization

! Security

Herzberg concluded that positive hygiene factors are necessary, but not sufficient for a

contented worker. Poor hygiene factors may destroy the employee’s motivation. An

improvement of hygiene factors will not likely increase worker motivation. Positive

results stems from the opportunity to achieve and experience self-actualization or

personal fulfillment. In order to gain maximum worker productivity and efficiency, the

person should experience a sense of self-worth or personal growth and responsibility

from their work. Positive motivating agents may include

! Recognition for a job well done

! Work content that is meaningful to the employee and to the employer

! Delegation of responsibility

! Ongoing professional growth

121

Figure 4-3 Abraham Maslow’s Hierarchy of Motivational Needs

Self-
Actualization

Esteem

Social

Safety

Basic Physiological Needs

Maslow’s Hierarchy

Abraham Maslow formulated a theory of human motivational needs shown in Figure 4-

3. He argued that people want to satisfy an orderly progression of needs, specifically

physiological, safety, social, and feelings of esteem, before they can achieve self-

actualization as shown in the pyramid. Each layer in the pyramid builds upon the one

that precedes it. Table 4-1 extends this concept to the workplace wherein we note that

workers have a hierarchy of fundamental needs.

123

Table 4- 1 Workplace Equivalents of Maslow's Basic Need Hierarchy

BASIC HUMAN LIFE EXAMPLES WORKPLACE
NEEDS ENVIRONMENT EXAMPLES
Physiological Air, water, food, housing, and Adequate Wages;
clothing Satisfactory Work
Environment – Light,
Temperature & Ventilation
Safety Protection from danger, security, Freedom to change positions;
stability, and freedom from threat Complaint system; Worker
of physical harm Protection from hazards (e.g.,
Government work regulations
- Occupational Safety and
Health Administration
(OSHA) rules, environmental
protection (EPA)); Collective
bargaining agreement; health
and disability insurance;
retirement packages.
Social Love, affection, approval, friends, Social interaction; company
and affiliations. sponsored functions; team or
work groups; professional,
trade or craft organization
functions.
Esteem Respect, dignity, attention, and Signs of accomplishment
appreciation (college degree, titles,
awards, honors, peer
recognition, publications)
Self Actualization Self-fulfillment, growth, learning, Participation in decision-
realizing one's potential through making; creating something;
competence, creativity, and participation in lifelong
achievement learning.

Maslow suggests that people follow a track extending from the lowest element in the

hierarchy (physiological) to the highest (self-actualization). The pursuit of self-

actualization is an ongoing activity, in which people attempt to attain perfection through

self-development. Integrity, responsibility, high-mindedness, simplicity and naturalness

characterize the highest state of self-actualization. Self-actualizers focus on problems

124

external to themselves. Reviewing Table 4- 1, we note that people reach the highest

level of motivation only after achieving some measure of accomplishment.

Douglas McGregor’s Theory X and Theory Y worker

Douglas McGregor examined the attitudes and perceptions of managers and workers.

He posed the idea that two diametrically opposed belief systems existed among

managers and workers in a company, which he called theory X and theory Y.

McGregor compared two workers and the resulting management implications. First, the

theory X worker had the following characteristics:

! People are inherently lazy and require supervision

! People dislike work and prefer to avoid work whenever possible.

! To induce adequate effort, the supervisor must threaten punishment and

exercise careful supervision.

! The average worker avoids increased responsibility and seeks to be directed.

This view of people affects management style. Theory X managers rely on an

authoritarian style or a top down approach. They use external motivation techniques

that include strict rules, performance incentives, rewards, and threats to job security.

In contrast, McGregor’s Theory Y worker has the following characteristics:

! People are creative.

! People want to do the job and do not need continuous supervision.

125

! People want to be active and find the physical and mental effort on the job

satisfying.

! People willingly participate in a task.

! People not only accept responsibility, but actively seek increased authority.

People are not necessarily resistant to the needs of the organization. They are

concerned with self growth and fulfillment

! People seek opportunities for personal improvement and gain self-respect.

The Theory Y manager believes that people are self-starters and advocates worker

participation in decision-making. The manager expects that workers will tend to work

toward objectives without coercion and control. Theory Y managers try to establish

cordial worker-manager relationships. They develop an environment where the workers

can achieve their objectives by directing their efforts toward organizational goals. They

permit workers to design their own jobs. Knowledge workers including highly trained

and creative workers require this type of guidance. Using coercive or dictatorial

management style practices will find employees leaving for other job opportunities.

Nonetheless, caution is advised. Some professionals will want to “tweak” a design or

improve the operation of a system beyond the requirement or insist on finding a better

way to achieve a desired result or simply exercise scientific curiosity regardless of cost.

These people take great pride in their work and desire to express their individualism

and talent. Project managers must balance the completion of the task within schedule

and budget with the employee’s ego and personality.

126

In recent years, Sotiriou and Wittmer (2001) have corroborated many of the ideas

advanced by Maslow, Herzberg, and McGregor. They found that a challenging project

is the single most important factor influencing the behavior of project team members.

The other influence methods ranked in order of importance include project authority,

project management expertise, similar future work, salary promotion, friendship, and

coercion. The findings from the studies conducted by Sotiriou and Wittmer (2001)

showed that the project manager’s leadership techniques include negotiation,

personality, persuasive ability, and management competence. Finally, team members

valued professional integrity – fair, honest, consistent, trustworthy leaders that

members can count on during the project,

Acceptance Theory of Authority

Chester Barnard, a former CEO of New Jersey Bell Telephone, developed the concepts

of strategic planning and the acceptance theory of authority. Strategic planning guides

the organization in pursuit of major goals. Barnard believed that the most important

functions of the executive were to (l) establish and maintain an effective communication

system, (2) hire and retain effective personnel, and (3) motivate those personnel. He

advanced the idea that managers only have as much authority as employees allow

them to have. Employee acceptance of authority depends on the following four

conditions:

! Understanding what the manager wants them to do.

! Ability to comply with the directive.

127

! Belief that the request is inline with the organization’s goals.

! Belief that the manager’s request is not in conflict with their personal objectives.

Barnard believed that each individual accepts orders without consciously questioning

authority up to a point. The organization must provide inducements to broaden each

employee's band of acceptance so that the manager's orders would be followed.

Management by Objective

Peter Drucker has interpreted management theory for more than 50 years. During the

1940’s and 1950’s, he advanced the ideas that management would have to treat

workers as individuals, that organizational culture would influence production, and

foreign competition would become a significant factor in American business. During the

1960’s and beyond, Peter Drucker stressed management fundamentals including

strategic management ideas and introduced the phrase management by objective

(MBO) also known as managing by results. MBO is the annual process of selecting a

set of objectives [targets that meet the SMART criteria] that an employee would attempt

to achieve during the year. Organizations used MBO techniques to establish objectives

for the staff in an effort to assess accomplishment. Technical and business managers

frequently believe that you can only improve what you can measure. Performance

measurement indicators include financial margins, revenue per employee, price to

earnings ratio, asset turnover, debt/equity ratio, current ratio, working capital, unit costs,

inventory turns, manufacturing cycle time, forecast accuracy, units produced, win/loss

rates, service margins, service call response rates, customer retention, number of new

128

customers, headcount, retention rate, hire cycle time, learning rate, recruitment, labor

costs, skills learned, absenteeism, overtime, on-time delivery, etc. The annual

objectives that employees develop usually include a combination of these performance

measurement indicators.

MBO gained popularity because 1) it was designed to produce tangible outcomes, 2) It

could be used at any or all levels in the organization, and 3) It was relatively simple and

inexpensive to implement following training. As a measure of performance, it attempted

to keep people focused on producing results. Results are evaluated against outcomes.

The supervisor periodically meets with the subordinate to review progress in achieving

the objectives. Some organizations link salary increments to MBO success.

Drucker (1986) further emphasizes that management must be tough outside (focused

on its mission and on the results of the organization), and inside (focused on the

structure, values, and relationships that enable the individual to achieve). Drucker

asserts that management is a discipline and not a science – it is a practice.

Deming’s Ideas

During the 1950’s, Japanese industry exported a variety of products to the U.S. Poor

quality characterized many of these products. It was during this time that Japanese

industry embraced and incorporated W. Edwards Deming’s ideas of statistical quality

control. He stressed both the human factors as well as the technological aspects of

production. He introduced the concept of Total Quality Management (TQM) with the

129

intent to actively involve workers in discovering ways of improving the quality of the

products and services they delivered in an ongoing manner. He encouraged industry to

continually examine the product at the various stages of production and gather data to

determine if the production process veered away from predetermined limits. If it did, he

urged the worker and management to identify and implement appropriate changes to fix

the problem. In the 1970’s, Japanese car quality became legendary and forced the

U.S. auto industry to wake up and improve. In part, these improvements came from the

implementation of Deming’s and Juran’s ideas of statistical process control. Forty years

after Japanese industry began to use Deming’s recommendations, the ideas of worker

involvement and statistical process control were accepted and introduced into U.S.

industry.

In the 1980’s, Deming consulted with executives from Ford Motor Co. and General

Motors about their decision to adopt the continual improvement philosophy. In

Deming's system of management, continual improvement becomes a way of life in

which everyone wins -- the organization, its people, suppliers, and customers.

Managers and workers cooperate in process improvement teams and try to change

adversarial attitudes. They use statistical methods that involve collecting and analyzing

data. This helps the organization determine if a problem occurs randomly or is

embedded in the process. Analyzing and acting on the data leads to a resolution path.

Deming strongly opposed MBO. While he cared about results, he was equally

concerned about the method used to try to achieve those results. He believed that

130

working to achieve quotas, fulfill numerical objectives, and otherwise manage by

numbers was destructive to the overall organization. This is decidedly different from the

views of many management theorists and practitioners.

The 14 points describe Deming’s controversial fundamental philosophy and represent

his program for improvement. The Deming-Shewhart Cycle (plan, do, check, act),

discussed further in chapter 9, describes his approach towards continuous

improvement. Management selects areas for improvement and develops measurement

strategies and planning goals. Cross-functional teams using a Total Quality

Management (TQM) format coordinate improvement for each area of interest. The

teams develop tests and gather data to confirm the presents of problems. They

generate and then implement action plans to make improvements. The teams evaluate

the results of their efforts. They fine-tune the corrections and evaluate further until they

achieve satisfactory results. The team attacks newly recognized issues and problems

as they are discovered.

131

W. Edwards Deming -- 14 Points for Management

Excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming.

1. Create constancy of purpose toward improvement of product and service, with the
aim to become competitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management
must awaken to the challenge, must learn their responsibilities, and take on
leadership for change.

3. Cease dependence on inspection to achieve quality. Eliminate the need for
inspection on a mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimize
total cost. Move toward a single supplier for any one item, on a long-term
relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve
quality and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership. The aim of supervision should be to help people and machines
and gadgets to do a better job. Supervision of management is in need of overhaul
as well as supervision of production workers.

8. Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers between departments. People in research, design, sales, and
production must work as a team, to foresee problems of production and in use that
may be encountered with the product or service.

10. Eliminate slogans, exhortations, and targets for the work force asking for zero
defects and new levels of productivity. Such exhortations only create adversarial
relationships, as the bulk of the causes of low quality and low productivity belong to
the system and thus lie beyond the power of the work force.

11. a) Eliminate work standards (quotas) on the factory floor. Substitute leadership.

b) Eliminate management by objective. Eliminate management by numbers,
numerical goals. Substitute leadership.

12. a) Remove barriers that rob the hourly worker of his right to pride of workmanship.
The responsibility of supervisors must be changed from sheer numbers to quality.

132

b) Remove barriers that rob people in management and in engineering of their right
to pride of workmanship. This means, inter alia, abolishment of the annual
merit rating and of management by objective.

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The
transformation is everybody's job.

Recent management views

In the mid-1960s, the contingency view of management or situational approach

emerged. This view integrated management thought by advocating the use of any

management approach that the manager deems appropriate to the situation. The

manager is an actor and should assume a behavior that deals with the situation’s

circumstances.

New management viewpoints have emerged during the last twenty years. Total Quality

Management emphasizes achieving customer satisfaction by providing high quality

goods and services. Reengineering the organization redesigns the processes that are

crucial to customer satisfaction.

Tom Peters promotes the idea of managing in chaos. He insists that the starts, stops,

spurts, and other movements of the technological revolution demands personal and

corporate flexibility. The outpouring of information and data, the constant flow of

governmental, personnel, and technological changes requires a flat organization

wherein people have the authority to respond quickly to competitive pressures.

133

Managing in the future will face some unusual challenges. AT&T, IBM and other

organizations are experimenting with alternative workplaces (see Apgar, 1998).

Nontraditional work practices include a variety of techniques such as desk and

equipment sharing, and “hoteling”. “Hotel” workspaces include shared space,

equipment, and services. Satellite offices for people working in companies with many

offices located in different geographic areas would use “hotel” workspaces. As a result

of the telecommunications revolution, many of us have heard about employees working

at home, also known as telecommuting. For most of us, this represents a new way of

operating. Managers and organizations accustomed to face-to-face interaction would

have to adjust. Apgar (1998) points out that “managers and employees are moving up

the curve toward information-age literacy, which is characterized by flexibility,

informality, the ability to change when necessary, respect for personal time and

priorities, and a commitment to using technology for improving performance.”

Managers will have to adjust their way of monitoring employee and project progress.

This may affect employee evaluations and salary reviews. Customers, suppliers and

other stakeholders will require education in this new approach.

Managers are still learning to manage diversity. Cultural, ethnic, and gender

differences require special management considerations. Not long ago, I attended an

annual corporate status review for a privately held technology company. The chief

executive officer (CEO) addressed the assembly of employees. The company

consisted of about 400 employees with a minority population of perhaps 5%. The

executive, known for his sense of humor, decided to break the ice by telling a joke that

134

made fun of Jews. There was some nervous laughter following the joke’s punch line.

The CEO was clearly surprised that his joke did not get the expected response and

remarked, “Well, if you didn’t get it, see me in private.” After the meeting, several non-

Jewish upper managers commented in private on the insensitivity of the CEO’s joke.

They lost respect for this person. This joke contributed to a decision by one of the

handful of Jewish employees at the company -- a key manager -- that this was not a

friendly place in which to work and the person left within a year.

The global organization with transnational operations requires new management

approaches. Managing in tomorrow’s environment will require a new set of rules, which

have yet to be formulated.

Management Styles

Four generic management styles have evolved -- Autocratic, Laissez Faire,

Democratic, and Participative. The autocratic manager is the traditional figure of a

boss who exercises tight control over the employees. This manager expects the

employee to follow through on a directive regardless of the employee’s thoughts or

wishes. “ I call the plays and don’t bother me with facts.” In today’s environment, this

stereotypical theory X manager could demoralize the organization. Perhaps this

extreme management style could successfully manage a low risk project with an

inexperienced staff that will execute a project plan as presented. The autocratic style

could lead to resentment if the staff’s contribution is not recognized. Highly skilled

people desire and expect managers to listen to their voices. Not considering or

135

continually rejecting employee’s thoughts and opinions may lead to dissatisfied

employees and incorrect decisions.

Applied to organizational management practice, the French term Laissez-faire means

the manager provides little guidance to the staff and employees are free to pursue

almost anything they wish. Projects that require considerable creativity benefit from a

minimum of management oversight. As an example, people involved in a research and

development, laboratory research or a university environment require a freethinking,

tolerant, hands-off atmosphere. A laissez-faire management style will prove disastrous

for high visibility, schedule driven projects requiring quick decisions and fast actions.

A democratic management style invites employee involvement. The management and

staff collectively discuss and evaluate issues and reach decisions. This management

style aligns itself with the American culture. A democratic manager lets the forces

within the group work toward a decision. Democratic managers empower employees

by giving them more decision making power and by seeking ideas from every worker.

Since the employees participate in the decision making process they will assume

ownership and commit to the final plan of action. Democratic leadership implies

majority rule or rule by consensus. Sometimes the majority rule may not lead to the

best solution – especially if a very vocal, but uninformed person takes a leadership role.

A further disadvantage involves time. If full discussions of the issues take place,

decisions may take a longer time.

136

The participative manager also encourages employees to participate in making the

decision. This manager asks for and receives input from the group. The atmosphere is

one of trust, honesty, and open communication. The leader demonstrates to followers

that their inputs are valued. However, participative leadership is not the same as

democratic leadership as the manager makes the decision. Most managers are

unwilling to give up the right to make the decision.

A person’s management style depends on their personality and the situation. Rarely

does a manager use one style all the time. A manager must be flexible and use a style

appropriate to the stakeholder and to the situation.

Power

Managers use power to directly influence the success of the project and elicit employee

cooperation. Power is based on the subordinate's perception of the leader and can be

categorized as shown below (the first five were developed by French & Raven):

• Reward power: the subordinate’s belief in the manager’s ability to obtain

rewards (e.g. financial compensation, promotion, recognition, privileges) for

those who comply with specific requests.

• Coercive power: the subordinate’s belief in the manager’s ability to punish or to

bring about negative outcomes (e.g. withholding salary raises and/or promotions,

formal reprimands).

137

• Formal power: the right to exercise power because of the individual's

designated position in the organization

• Referent power: a subordinate's identification with the leader because of

attractiveness, reputation, or charisma

• Expert power: competence, special knowledge or expertise in a well-defined

discipline.

• Control of Information power: possession of knowledge that others do not

have. Information can be communicated or withheld at will.

Legitimate forms of power (formal, reward, and coercive) stems from the person’s

position within the organization. Although the project manager exerts this type of power,

it sometimes may not influence knowledge worker’s behavior as much as expected.

Creative people and knowledge workers frequently respond better to expert power

rather than “bureaucrats”.

Expert power results from internal and/or external recognition that a person has

achieved. Employees recently transferred to a project management role as a

consequence of demonstrating outstanding technical ability will discover a very

uncomfortable lesson. A project manager cannot stay technically current and manage

the project. In any project of some complexity, the project manager will regularly

interact with customers, suppliers, functional managers, upper management and other

stakeholders. There is much to do and there will not be time to stay technically current.

Technical analyses and designs must be left to the functional personnel. People

138

entering the project management discipline via the technical ladder find it very

frightening to leave their technical background behind them. They spent their careers to

that point accumulating, developing and honing their technical skills. Exchanging

technical expertise for management competencies may be a sufficient reason to

discourage this job change for some people.

Table 4-2 illustrates how others might view the project manager’s power from their

organizational perspective. These evaluations represent subjective conclusions. A

technical functional manager may have little regard for a PMs technical ability, but high

regard for that person’s ability to control a customer. Upper management may highly

value a PM’s ability to plan and coordinate efforts and motivate people. As the primary

contact between the organization and external stakeholders, suppliers believe the PM

wields great influence on selecting organizations for future contract awards. Suppliers

hungry for new work will make great efforts to deliver goods and services in a timely

fashion to impress the PM.

139

Table 4-2 -- Project Managers Power Impact

GROUP POWER EXERTED ON
Power Upper PM’s Functional Functional External Suppliers
Type Management Direct Managers Department Customers (Vendors)
Reports Personnel
Formal None Maximum Moderate Minimal Maximum Maximum
Reward None Maximum Minimal Minimal Minimal Maximum
Coercive None Maximum Minimal Minimal Minimal Maximum
Expert Minimal Maximum Minimal Minimal Moderate Moderate
Referent None Maximum Maximum Maximum Moderate Moderate

Adapted from J.R. Adams & B.B. Campbell, Roles and Responsibilities of the Project Manager in
Principles of Project Management, J.S. Pennypacker, Editor, 1996, PMI Publications

Teams

During the 1980’s and 1990’s, management discovered the benefits of using teams to

get a job done. Katzenbach and Smith (1993) define a team as a small number of

people with complementary skills who are committed to a common purpose, set of

performance objectives, and approach for which they hold themselves mutually

accountable.

They are empowered by the organization to establish objectives within the framework of

the project’s objectives. Competitive demands requires quick decisions by

knowledgeable employees who work close to the source of problems. Empowered

teams promote fast decision making capability. Empowerment is the delegation of

authority to an individual or team. The team receives organizational approval, trust and

encouragement to make the decisions necessary to accomplish the job. Successful

teams depend on good communication methods to share information and demand

outstanding problem-solving skills. Effective supervisors empower employees by giving

them more decision making power and by seeking ideas from every worker.

140

Katzenbach and Smith (1993) point out that not all groups are teams. They

differentiate a team from a group in the ways shown below:

Characteristics of a Working Group Characteristics of a Team

! Strong, clearly focused leader ! Shared leadership roles
! Individual accountability ! Individual and mutual accountability
! The group/s purpose is the same as ! Specific team purpose that the
the broader organizational mission team itself delivers
! Individual work output ! Collective work output
! Runs efficient meetings ! Encourages open-ended discussion
and active problem solving
meetings
! Measures its effectiveness indirectly by ! Measures performance directly by
its influence on others (e.g., financial assessing collective work output
performance of the business)
! Discusses, decides, and delegates ! Discusses, decides, and does real
work together

In a sense, the leader of the team acts as a facilitator. A group achieves synergy

(results greater than the sum of its parts) if its members become a team. A team

begins as a collection of individuals brought together in a work situation. Tuckman

identified the process of uniting the group to form an effective team. The group

members must successfully move through four stages of development identified by

forming, storming, norming, and performing.

Forming: the members of the group come together and begin to get acquainted.

Depending on their personality some are eager to meet and work, some

act formally and tentatively, some are hostile, some focus on the task and

others focus on people. The group decides and agrees on their objectives

141

and the basic operational ground rules, such as meeting dates and times,

attendance requirements, how decisions will be made, and so on.

Storming: members still view themselves as part of their parent department rather than

part of the team. Individual personalities surface and generate

interpersonal conflict. Individuals begin to compete for attention and

influence. Emotions are stirred and depending on the personality type

conflicts may arise. Individuals reveal personal agendas as they assert

their feelings, ideas and viewpoints. Interpersonal skills are critical.

Members learn to appreciate each other’s capabilities. The group must

agree on the distribution of power, responsibility and authority among its

members. A sense of humor helps you get through this stage. This is a

stage of low morale and productivity. Success cannot begin until the next

stage.

Norming: The individuals blend together into a project team and realize that they can

achieve work if they accept other viewpoints. The project manager can

help this process in a structured manner by establishing an esprit d' corps

and a cohesive group. Individuals begin to think of one another. They

become more sensitive to each other's needs, and begin to share ideas,

information, and opinions. Members spend less energy on conflict. Task

considerations start to override personal objectives and concerns. Plans

142

develop. Both formal and informal procedures for problem solving,

decision-making and conflict resolution develop. Productivity increases

Performing: The group emerges as a team. Flexibility is the key and hierarchy is of

little importance. Team roles are strongly connected to the task that is

performed. Members work and problem solve together. Structural and

interpersonal issues have been resolved. Members trust, support, and

feel comfortable with each other. Everyone cares about doing a good job.

If previous phases did not conclude, the team will return to Storming and

Norming resulting in wasted time and energy.

In 1983, General Motors began to plan the Saturn Corporation, which would build and

sell small cars using an entirely new set of employment practices. Saturn decided to

compete with the Japanese cars using self-directed work teams of 10 to 15 members,

who were cross-trained and rotated responsibility for the tasks in their unit. Each team

would hire new members and elect their team leaders. Teams had responsibility for

quality assurance, job assignments, record keeping, safety and health, material and

inventory control, training, supplies, and housekeeping.

These self-governing work teams would follow the construction of an automobile

through the entire assembly line. The objective of the changes was to increase product

quality, decrease boredom, and increase worker job satisfaction. Saturn incorporated

143

robots and other forms of automation into the production line to help reduce boredom

and fatigue and ensure high quality standards.

This successful approach at Saturn helped to alter the rigid department boundaries

within the auto industry. This team-based structure consisting of knowledgeable

employees who work close to the source of problems promotes quick decisions. Labor

and management leaders had to learn to overcome resistance to sharing power. The

team concept forced management to redefine the organization’s mission, objectives,

and hierarchical structures.

Project Managers Lead Teams

Teams succeed if the team is taken seriously, given a clear purpose, given authority to

make decisions, have the appropriate technical skill mix and can work together.

Effective teams share clear and well-understood objectives that are accepted by its

members. Frequently organizational outcomes benefit from teamwork and individual

member satisfaction improves. Nonetheless, implementing a program of teambuilding

is far from easy.

The project manager assembles and leads a team. The PM shares project related

knowledge and information so that the team can solve problems. The team members

possess the technical knowledge and skills. Power becomes the PM’s ability to facilitate

and communicate to and on behalf of the team. The PM acts as the liaison with

stakeholders such as upper management, other internal teams, customers, and

144

suppliers. The PM represents the team's interests, obtains needed resources, clarifies

expectations, gathers information, and keeps the team informed.

Implicit to the success of any team is the mutual trust and respect between the PM and

the team. They must each have credibility, integrity, character, and reliability. Lacking

any of these elements will cause unneeded tension in the group and possibly cause it

to return to the storming stage.

Chris Argyris sums up the elements of an effective team in his book, Organization and

Innovation. He states

! Contributions made within the group are additive.

! The group moves forward as a unit; there is a sense of team spirit, high

involvement.

! Decisions are made by consensus.

! Commitment to decisions by most members is strong.

! The group continually evaluates itself.

! The group is clear about its goals.

! Conflict is brought out into the open and dealt with.

! Alternative ways of thinking about solutions are generated.

! Leadership tends to go to the individual best qualified.

! Feelings are dealt with openly.

145

Successfully dealing with and implementing these factors turns the group into a team.

Jon R. Katzenbach argues for more attention to the "four Cs" of effective teamwork --

communication, cooperation, collaboration, and compromise.

Leadership

Management and leadership concepts are intertwined. John Kotter, a well-known

leadership theorist, believes that today's managers must know how to lead as well as

manage. Questions arise: What is leadership. How does it relate to management?

Leadership means different things to different people. The following quotes present

various thoughts and opinions on leadership. Do you agree? What do you think

leadership is?

Getting the job done using whatever means required! -- 1999 Fairfield University
leadership class.

Damn the torpedoes--full speed ahead! -- Vice Admiral David Glasgow Farragut
at the Battle of Mobile Bay in August, 1864

Leadership is the ability to inspire other people to work together as a team,
following your lead, in order to attain a common objective, whether in business,
in politics, in war, or on the football field. … Leadership cannot really be taught. It
can only be learned. -- Harold Geneen, Managing.

Leadership is the capacity and will to rally men and women to a common
purpose and the character which inspires confidence. – Bernard Montgomery,
British Field Marshall

Leadership is a dynamic relationship based on mutual influence and common
purpose between leaders and collaborators in which both are moved to higher
levels of motivation and moral development as they affect real, intended change.
-- Kevin Freiberg and Jackie Freiberg, NUTS! Southwest Airlines' Crazy Recipe
for Business and Personal Success, Bard Press, 1996, p. 298

146

Take the course opposite to custom and you will almost always do well. -- Jean
Jacques Rousseau

There are many elements to a campaign. Leadership is number one. Everything
else is number two. - Bertolt Brecht

A leader is a man who has the ability to get other people to do what they don't
want to do and like it. - Harry Truman

Coaches who can outline plays on the blackboard are a dime a dozen. The ones
who succeed are those who can get inside their players and motivate them. -
Vince Lombardi

Leaders have a significant role in creating the state of mind that is the society.
They can serve as symbols of the moral unity of the society. They can express
the values that hold the society together. Most importantly, they can conceive
and articulate goals that lift people out of their preoccupations, carry them above
the conflicts that tear a society apart, and unite them in the pursuit of objectives
worthy of their best efforts. - John Gardner

We herd sheep, we drive cattle, we lead people. Lead me, follow me, or get out
of my way. -- George S. Patton

Pull the string, and it will follow wherever you wish. Push it, and it will go nowhere
at all. -- Dwight D. Eisenhower

Leadership is an influence relationship among leaders and followers who intend
real changes that reflect their mutual purposes. -- Joseph C. Rost

A leader is responsible for lean and simple statements of policy consistent with
beliefs and values, vision and strategy. Policy gives practical meaning to values.
Policies must actively enable people whose job it is to carry them out. -- Max De
Pree

Leadership is the art of accomplishing more than the science of management
says is possible. – General Colin Powell

Many great minds have different views of leadership. As Bennis and Stogdill state

below, defining leadership is not easy.

Always, it seems, the concept of leadership eludes us or turns up in another form
to taunt us again with its slipperiness and complexity. So we have invented an
endless proliferation of terms to deal with it … and still the concept is not
sufficiently defined. – Bennis, 1959

147

There are almost as many definitions of leadership as there are persons who
have attempted to define the concept. -- Stogdill, 1974

Kotter provides the definition of leadership that we will use in this book. This definition

emphasizes the idea that a leader promotes change.

Leadership refers to a process that helps direct and mobilize people and/or their
ideas…. Leadership does not produce consistency and order; it produces
movement. … Leadership

1. Establishes direction - develops a vision of the future along with strategies
for producing the changes need to achieve that vision
2. Aligns people -- communicates the direction to those whose cooperation
may be needed so as to create coalitions that under the vision and that
are committed to its achievement
3. Motivates and inspires -- keep people moving in the right direction despite
major political, bureaucratic, and resource barriers to change by appealing
to very basic, but often untapped, human needs, values, and emotions.
-- John Kotter, A Force for Change.

Kotter suggests that a leader must develop a future orientation – anticipate industry

trends and challenge the status quo. Think about the great leaders about whom you

have read. In biblical times, figures such as Moses, Jesus, and later Mohammed

presented a vision, communicated ideas to people and motivated their followers to

cause change. Winston Churchill had a vision to save his country from the onslaught

of tyranny and oppression. He rallied the British people during World War II against a

horrific leader – Adolph Hitler. After September 11, 2001 President George W. Bush

spoke about a vision of ridding this world of terrorism. Toward this end, he

communicated this vision to other world leaders as well as the American people in an

effort to build coalitions to attack terrorist forces. Modern business leaders such as

Jack Welch (General Electric), Steve Jobs (Apple), Michael Dell (Dell Computers), and

Bill Gates (Microsoft) had visions of where to take their organizations. They

148

communicated this vision to their employees and then motivated them to implement

their vision.

After defining a vision, leaders set out to inform and persuade the organization or group

to follow their beliefs and philosophy. During the 1960’s, Martin Luther King had a

vision of a nonracist America that he communicated to the American people through

speeches, marches, sit-ins and his writings. He mobilized his “troops” to action by

inspiring them. King motivated the American people and their political representatives

to take action and pass legislation in support of his vision.

Leadership applies to all of us in our daily work, not only political, military, and business

figures. At the very least, we lead our lives by creating a vision of where we want to go

and then communicating that vision to people that need to know it. We then need to

motivate and inspire ourselves to pursue and attain this goal.

Leadership versus management

Are managers leaders? Kotter (1990) draws the following distinction between

management and leadership:

! Management is more formal and scientific than leadership. It relies on universal

skills such as planning, budgeting, and controlling. Management is an explicit set

of tools and techniques, based on reasoning and testing, than can be used in a

variety of situations.

! Leadership, in contrast to management, involves having a vision of what the

organization can become.

149

! Leadership requires eliciting cooperation and teamwork from a large network of

people and keeping the key people in that network motivated, using every

manner of persuasion.

Management theorists draw an important distinction between leadership and

management. The leader creates a vision for the organization and gains support among

the people in the organization. The leader specifies the objectives as well as the

strategy for attaining those objectives. In contrast to the leader, the manager’s key

function involves implementing the vision by establishing supporting objectives and

using skills such as planning, organizing, directing and controlling. The manager

chooses the means to achieve the end that the leader formulates. Leadership deals

with change, inspiration, motivation, and influence. Management deals more with

carrying out objectives. Table 4- 3, reproduced from Kotter, compares the leader's

and manager's organizational approaches.

Some researchers believe that a leader’s fundamental orientation differs from a

manager’s. Table 4-4 compares the beliefs and attitudes of an administrator, manager,

and leader. For the examples shown, what would you do? Does the leader's response

follow Bennis and Nanus’ maxim “Managers are people who do things right, and

leaders are people who do the right thing.”?

150

Table 4-3 - Manager/Leader Organizational approach

Leader Manager

Plans and budgets:
Establishes direction:
establishes detailed steps
Creating an develops a vision and
and timetables for achieving
Agenda the strategies needed
needed results; allocates
for its achievement
necessary resources
Involves aligning people: Organizes and staffs:
Communicates direction by Establishes structure for
Developing a
words and deeds to all those achieving the plans; staffs;
Network
whose cooperation may be delegates responsibility and
for
needed to help create teams authority for implementation;
Achieving the
and coalitions that understand develops policies and
Agenda
the vision and strategies, and procedures to guide people;
accept their validity. creates monitoring systems
Motivates and inspires:
Energizes people to overcome
Controls and solves problems:
major political, bureaucratic,
Monitors results against plans
Execution and resource barriers to
and then plans and organizes to
change
close the gap.
change by satisfying basic
human needs.
Produces a degree of
Produces change, often to a predictability and order:
dramatic degree. Has the potential to
consistently produce key
Outcomes Has the potential of producing results expected by various
extremely useful change, such stakeholders (such as meeting
as new products desired by deadlines for customers
managers. and paying dividends to
stockholders)

(John P. Kotter, A Force for Change: How Leadership Differs From Management, New
York: The Free Press, 1990)

151

Table 4-4 Primary Beliefs -- Management Orientation

Administrator Manager Manager/Leader
Rewarding Get just what the policy Fair pay for fair work Major rewards for major
Subordinates provides for results/accomplishments
Decision-making The decision is made by the Stick with policy except where Special circumstances
Basis policy / procedure exceptions are fully justified require different decisions
Strategic Internal Internal except when major External
Orientation external events intervene
Innovation / Change is threatening Tries to plan out major Improvements come
Creativity changes through change
Handling One variable at a time Handle multiple variable if not Balances/blends multiple,
Variables too complex complex variables
Efficiency / Covers every detail in depth Doing things right Doing the right things
Effectiveness
Time Frame for Short-range month to Medium-range Strategic
Thinking month, year to year 2-4 years 5-10 years
Big vs. Small Concentrates on details Details as they fit into a Concepts and a big picture
Picture system
Organization Bureaucratic, many levels Traditional Flat, few levels
Structure
Security Level Low, protect my rear Average, except when things Very secure and confident
go wrong
Management You can’t fight city hall Your progress depends upon Win-win atmosphere
Atmosphere you
Policies Cast in concrete, takes an Exceptions can be made but Use only as a guide to most
Act of God to change must be heavily justified actions
People Emphasis on controls and Emphasizes team effort Lead by example
time spent
Change Maintain status quo, don’t Changes made if major Change is encouraged
rock the boat or make problems dictate or when continuously
waves pressure builds up
Conflict Avoid conflicts at any cost Address if they become major Recognizes they will occur-
concentrates on resolving
them for improvements
Subordinate Is to the policy Mixed between the policy and Is to the leader
Loyalty the manager
Risk Taking Avoids at all costs Accepts minimal risk Encourages planned risk
taking
Information Little Need to know basis Open and frank
Sharing
Approach to Avoid like the plague Solve as they develop- Problems are normal part of
Problems reactive the job-proactive
Handling Protect my rear and offer Emphasize why it happened, Learn from them, don’t
Mistakes excuses, pin the guilty not who caused it dwell on them once solved
Authority Emphasizes formal authority Authority goes with the Maximum use of informal
and power position authority

From McConkey, D. D. (September-October, 1989). Are you an administrator, a manager or a leader?.
Business Horizons. pp. 15-21

152

Competitive Advantage

Industry Week annually selects the 100 best managed companies. “”Each company is

a leader in its industry and demonstrates superior management skills in areas such as

financial performance, innovation, leadership, globalization, alliances and partnerships,

employee benefits and education, and community involvement “ (Hasek, p. 49, 2000).

Warren Bennis and Raj Aggarwal state that all of the companies understand that the

key to competitive advantage in this century will be the capacity of top leadership to

create social architecture capable of penetrating intellectual capital.” Aggarwal went on

to say “the best managed companies are able to integrate and implement the new-

economy virtues of speed and e-commerce with the old-economy virtues of generating

profit, market share, and excellent customer service.” (Hasek, p. 49, 2000). Major

management challenges confront organizations in this century.

153

Chapter 4 Questions

1. What type of manager would a stereotypical ex-military officer make? Would this

person be a good candidate to manage a drug research organization? Explain your

answer.

2. Presidents Carter and Reagan had distinctly different management and

leadership styles. Use the Internet to obtain examples of each of these president’s

style. Which person would you rather work for? Why?

3. McClelland & Burnham in the article Power is the great motivator states, " A

high need for power is an important characteristic of successful managers.”

Comment on the statement: Managers with a high need for power frequently use it

for the benefit of the organization rather than for self-aggrandizement.

4. How well does the following quote describe the managers that you know?

Explain.

“Leaders articulate and define what has previously for new attention. By
so doing, they consolidate or challenge prevailing wisdom remained
implicit or unsaid; then they invent images, metaphors, and models that
provide a focus. In short, an essential factor in leadership is the capacity
to influence and organize meaning for the members of the organization.”
(Warren Bennis and Burt Nanus, Leaders, Harper & Row, 1985, p. 33)

5. The chapter talks about accountability. Describe the difference between “the

boss holds me accountable” and “we (or I) hold ourselves (or myself) accountable.”

154

6. Management theory has evolved based on influences from classical

management, behavioral approaches, and quantitative methods. Many have

contributed to the development of management as a discipline. Research and

discuss someone who has contributed to the development of management theory.

Limit the paper to 500 words. Examples of possible people include the following:

Chester Barnard Elton Mayo
W. Edwards Deming Max Weber
Peter Drucker Frederick W. Taylor
Henri Fayol Max Weber
Mary Parker Follett Henry Mintzberg
Henry Gantt Peter Drucker
Frank Gilbreth Warren Bennis
Lillian Gilbreth John Kotter
Douglas MacGregor McClelland
Peter Block Chris Argyris
James Kouzes and Barry Posner

7. What is meant by “Managers are people who do things right, and leaders are
people who do the right thing.”?

8. What does leadership mean to you? Do you think there is a difference between
management and leadership? Explain.

9) Use the Internet or library to respond to this research question.
a) Compare and contrast the leadership and management (e.g., vision, planning,
organizing, and controlling) styles exhibited by Al Dunlap (formerly of the
Sunbeam Corporation) and Howard Shultz (Starbucks Corporation CEO) .

b) Characterize Dunlap and Shultz according to McGregor's Theory X and Theory Y
leadership style. Explain your answer.

Self-check test


1) When did classical management theory begin?

155

a) 1200’s
b) 1650’s
c) 1750’s
d) 1850’s
e) 1950’s
2) Define efficiency.
3) Define productivity.
4) What are characteristics of bureaucratic management?
a) Quick reaction to competitive issues
b) Wasting time
c) Written processes and procedures
d) Hierarchical structure
e) Impersonal authority
f) Large number of employees
5) Which type of work is appropriate for a bureaucratic organization?
a) Installing tires on an automobile
b) Bank teller
c) Designing jewelry
d) Train conductor
e) Writer
6) Select the basic management functions established by Fayol?
a) Planning
b) Organizing
c) Staffing
d) Commanding
e) Directing
f) Coordinating
g) Reporting
h) Delegating
i) Budgeting.
7) What are three of fourteen management principles discussed by Fayol?
a) division of work through specialization
b) time and motion
c) authority should be equal to responsibility
d) unity of command
e) unity of direction
f) the scalar chain of command
8) What is Fredric Taylor known for?
a) Time and motion
b) Father of scientific management
c) Hawthorne experiments
9) What is a time and motion study?
10) What is the Hawthorne Effect?
11) What are the five basic human needs described by Maslow? Give examples of
each.
12) What are characteristics of a theory X worker?

156

13) What are characteristics of a theory Y worker?
14) What are four generic management styles?
15) What are the five types of power used by people in organizations?
16) What is the difference between a team and a group?
17) What are the four stages of development that a team passes through?
18) Is conducting a meeting an example of leadership or management? Explain.

157

CHAPTER 5

Project Planning

Character cannot be developed in ease and quiet.
Only through experience of trial and suffering can the soul
be strengthened, vision cleared, ambition inspired, and success achieved.
-- Helen Keller

<>

Chapter objectives


Understand project scope
Understand the use of a project charter
Understand the components of a project plan
Understand and prepare a project statement of work
Understand and prepare a project work breakdown structure

Planning

Henri Fayol identified five functions of management that included planning, organizing,

commanding, coordinating, and controlling. Hallows (1998) identified four-project

phases: (1) understanding the project, (2) defining the project, (3) planning the project,

and (4) running the project. The Project Management Institute has identified six project

management phases (Initiating, planning, executing, controlling, closing, and project-

driven organization environment) for eight project management knowledge areas

(scope, time, cost, quality, human resources, communications, risk, procurement).

158

Common to these approaches is the need to plan. Once the organization commits to

an endeavor, planning becomes paramount.

Planning is the process of establishing courses of action to accomplish predetermined

objectives (Badiru, 1991). Establishing a project foundation in the form of a plan

before committing the organization’s resources maximizes the likelihood of developing

and delivering a customer’s product or service on time, within budget and meeting the

technical specifications. The project manager manages the preparation of a project

plan and then manages to the plan. This chapter deals with the activities that precede

the start of the project. The planning discussion that follows applies to

♦ Electronic, mechanical, electro-mechanical and software based products,

♦ Small systems consisting of the integration of these components,

♦ Construction of facilities to house the components and systems, and

♦ Services required to support the design, fabrication, installation, training and

maintenance of these components, systems and services.

Planning lies at the heart of managing a project’s scope. Without a thorough and

mutually agreed upon plan, scope management becomes impossible. Scope

management includes the processes required to ensure that the project includes all the

work, and only the work required, to complete the project successfully (PMBOK).

Scope management extends the length and breadth of the job and encompasses all

activities. At some point in most projects, the buyer or seller requests changes. The

change may evolve for several reasons. Technology improvements occurring between

159

project conception and approval may force changes. Obsolescent components or new

software versions may demand changes. Customer requirements may change.

Frequently the discussions that take place during the proposal evaluation phase or the

initial product development improves the customer’s understanding of the product’s

use. Following this education, the customer sometimes requests the developer to

incorporate “minor” product modifications without a corresponding price change. Scope

change control becomes paramount. The organization must include a method for

evaluating changes and determining the cost. Armed with the facts, the organization

can make an informed decision. Agreeing to changes– whether initiated by a customer

or the internal organization – without thoroughly understanding their impact is the path

to breaking the budget and late delivery.

Request for a Proposal and Request for a Quote

A product or service acquisition process begins with a customer (or a buyer) sending a

description of its needs to several suppliers (also called a seller or vendor) in the form

of either a Request for a Proposal (RFP) or a Request for a Quote (RFQ).

Frequently, organizations use an RFQ for seeking bids for familiar, standard items and

an RFP for consulting, advertising, maintenance, or items requiring development. Many

organizations establish a minimum dollar amount (e.g., $2500), below which neither an

RFQ nor RFP are required. A customer distributing an RFP for a high technology

product or service may do so for the following reasons:

(1) the customer believes that the product is not readily available off-the-shelf

from suppliers and requires a special development effort,

160

(2) if it is readily available, it may require the addition of special features,

which the customer chooses not to add themselves, or

(3) the product demands technical expertise during the installation or initial

operating phases.

The planning process begins during the preparation of the RFP or RFQ response. The

RFP response requires a very detailed description of the deliverable items including a

technical discussion describing the unique features of the design and the activities that

the organization will perform to ensure delivery within the customer’s requested

timeframe. The proposal frequently includes discussions detailing the product history

and description, the unique technical features, a descriptions of the organization’s

technical competencies, management philosophy, quality assurance approach, and

training capabilities. The RFP response also includes sections entitled statement of

work (SOW) that includes a work-breakdown structure (WBS) and schedule, and a

specification compliance matrix. The specification compliance matrix lists every

buyer requirement with a seller statement agreeing to meet or not meet the

requirement. Sometimes the seller meets the intent of the specification requirement,

but not its literal interpretation. In this case, the seller provides a brief description of the

course of action they recommend. Larger organizations attach a set of the terms and

conditions to the RFP or RFQ response – a legal statement attached to the bid that

among other things limits the organization’s liability and establishes a return policy.

Finally, the RFP or RFQ includes a cost proposal that contains a price for each item

on the list of deliverables. Often during the proposal process, a proposal team

161

identifies several technical options that may enhance the baseline product or service.

Separately identify these options. Do not mix the option price with the baseline product

or service price.

Managing the preparation of an RFP response is a project. Responding to an RFP

requires a significant organizational team effort that a project manager leads. The effort

costs time and diverts resources designated for other activities. Suppliers interested in

providing the buying organization products or services may spend approximately 2% of

the final sales price on the preparation of a RFP response package. Organizations

evaluate the likelihood of a win before pursuing the RFP. No one wants to invest

resources in a hopeless cause. Larger organizations use a formal evaluation approach

sometimes called an opportunity review board (ORB) for this purpose. Senior

executives make the decision to pursue an RFP for a variety of reasons. Most

important, they believe that the organization has a greater than 50% chance of winning.

Sometimes an organization submits a bid for strategic reasons. Perhaps the

organization wishes to break into a new market and desires to establish a presence for

name recognition purposes or an important customer wants the organization to submit

a bid. Most organizations will expend the effort to satisfy an existing good customer.

The response to an RFQ requires much less of an effort than a response to an RFP.

The respondent prepares a price for each item on the list of deliverables, adds the

organization’s standard terms and conditions, and a cover letter (also known as a letter

of transmittal). During the response preparations, the supplier may decide that they

162

must spend funds to develop new software, hardware or both. If so, many

departments must participate. The project manager contacts the departments

contributing to the effort, such as engineering (mechanical, electrical, chemical,

software, networking, etc.), purchasing, training, service, quality assurance, technical

support, etc. For either an RFP or RFQ the PM prepares a Responsibility

Assignment Matrix (RAM) which identifies the tasks required during the effort, the

person responsible for the task and the task due date. The project manager provides

each functional department manager and other stakeholders, baseline information

required to perform their task, which includes the customer’s technical specification,

quantity of units required, documentation requirements, a schedule, installation needs,

testing demands, special standards, quality assurance requirements, etc. For the work

required to meet the customer’s specification, each department provides a labor

estimate in hours, hardware and software material costs, travel and living estimates,

special tools or capital equipment required, consultant fees, and documentation

preparation labor hours. The RFQ sums up the costs in a manner that will be

discussed later, and provides a bottom line number. The details are not usually

provided to the customer. The RFP may provide bottom-line prices for the first and

subsequent systems plus support service prices or a detailed price breakdown that

reflects the customer’s demands.

163

Project Charter

Projects funded by an external customer, receive automatic recognition from the

organization. Money is honey! Organizations react to cash. Following a contract

award, senior management immediately assigns a PM with the responsibility to do

whatever must be done to satisfy the customer with a product or service that meets the

customer’s technical specification while delivering it on time and within budget. Ideally,

the person that led the RFP or RFQ preparation receives the project. That person has

gained familiarity with the effort and should take responsibility for the execution of the

plan. There is no need for a document entitled project charter, if the contract includes a

technical specification and a SOW.

A contract without a definition is like a car without a destination. The motor runs and

you go everywhere and nowhere at the same time. Absolutely do not begin a

project without a written agreement that includes a specification and

SOW -- or a project charter! With the lack of a specification, people will do their

own thing. Designers will proceed with their interpretation of the customer’s needs.

Purchasing will buy their customary material. Manufacturing will build product following

standards that they select. Invariably the customer will have a different view and the

completed work will require modifications wasting schedule time and labor. The

absence of a project definition guarantees cost overruns and delays -- project failure.

164

Projects that receive internal funds require a project charter. This charter represents

formal recognition within the organization of the existence of this project. As defined

by the Project Management Institute the document includes three items:

1. The business need that the project addresses,

2. A product description, and

3. A signature from a senior executive.

A senior manager’s signature denotes organizational commitment and acceptance of

the effort. An approved charter authorizes the project manager to proceed and apply

organizational resources to project activities.

The charter as recommended by the Project Management Institute is necessary but not

sufficient to describe the project. The project charter should also include a schedule,

budget, and a summary of the resources required to complete the project. Some

authors have broadened the concept of a project charter (e.g., (Hayes, 2000). Tryon

and Associates (1998) promote the use of the following 10-part project charter

template:

• Project Description - a brief explanation of why the project was initiated, a

description of project intent and the identity of the initial Project Owner.

• Opportunity Statement - The business reasons for doing this project.

165

• Impact Statement - The influence this project may have on business,

operations, schedule, other projects, current technology and other

systems.

• Constraints and Assumptions - Limitations or restrictions placed on the

project along.

• Project Scope – A precise definition of project boundaries. Specific scope

components may include the business areas or functions to be examined

by the project (Domain of Study), the work that will be performed (Domain

of Work) and the actual results that will be produced (Deliverables).

Project Scope should identify both what IS in scope and what IS NOT

scope.

• Project Objectives - A list of measurable criteria that defines project

success.

• Project Justifications - A recap of known costs and benefits from

performing the project. These financials must be reforecast during the life

of the project and should be compared to actuals at the conclusion of the

project.

• Project Approach - The general strategy for how the project will be done

along with non-technical descriptions of any methods, processes or tools

that will be used during the project.

166

• Project Organization - Identification of the roles and responsibilities. The

Project Organization should identify the people who will play assigned

roles.

• Management Commitment – Signatures of senior management signifying

agreement with the plan.

The outline from Tryon and Associates (1998) goes well beyond the traditional view of

the project charter. Some organizations use it as the basis for a thorough internal

project plan (Hayes, 2000).

Plans for internally funded projects differ from those associated with externally funded

contract awards. The traditional project charter used for an internally funded project

succinctly describes the job. Externally funded projects require far more extensive

planning and preparation. Figure 5-1 compares internally funded versus externally

funded efforts. The next section offers a plan outline that establishes the baseline for

project planning.

167

Figure 5-1 Project Planning Process

Project Plan
Externally Funded
Internally Funded

Receipt of RFP or
Identify need for
RFQ
product or service

Assemble RFP or
RFQ Response Team Prepare Project
Charter and other
Supporting
Prepare Response Documents
Sections
♦ Letter of Transmittal
♦ Management
♦ Specification (if not Submit Project
included in RFP/RFQ) Charter to Senior
♦ Statement of Work Management for
♦ Specification Approval
Compliance Matrix
(Responds to Spec in
RFP/RFQ) Receive
Management
Submit Package to Commitment
customer

Answer customer
questions
Begin Work

Receive Contract
Award
168
( )

The Project Plan

Whether the job receives internal organizational funds or external funds, the project

plan answers the standard news reporter’s questions: Who, What, Why, Where,

When, and How.

Who will do the work? Who is assigned to the project? Do we have adequate

personnel to perform the tasks? Will we hire consultants, permanent staff

or temporary workers?

What must be done? What is the budget? What is the budget for each task?

What resources are required to complete the project: What will the people

assigned to the project do? What are the deliverables? What equipment do

we have to purchase? What documentation is required? What is the chain

of command?

Why is the organization doing this?

Where will the work be done?

When are the activities scheduled to start and finish?

How will the activities be done?

The project manager defines the project’s scope by listing the technical requirements

and objectives. The PM prepares a schedule, which identifies the dates for starting and

completing activities and milestones. A milestone represents the identification of a

significant event. Examples of milestones include the start or end of a project, the start

169

or end of a design review, the completion of a major system evaluation, shipping a

product, or installing a product.

The plan identifies assumptions made by the different stakeholders. People make all

kinds of assumptions during a proposal bid. Managers realize that the organization

must acquire labor skills to complete a task. They must inform senior management and

the human resource department of the need. A department anticipates outsourcing

tasks to other organizations, but senior management may have other plans.

Designers may assume that the organization will purchase new software or hardware

required for an analysis. Software developers may assume the availability of an

updated database application. If the department purchases the latest and greatest

equipment, did they also remember to obtain training, maintenance and product

updates? Managers may assume that the customer will furnish equipment to facilitate

installation and system testing. It may be a correct assumption, but inform the

customer of the expectation. Very often there are internal disconnects due to a lack of

communication. The PM must obtain the information from stakeholders and put it into

the plan.

The project plan identifies schedule, budget, and performance constraints. The

schedule must clearly pinpoint tasks that precede others. Sometimes additional

funding is contingent upon reaching a certain performance criterion. Functional

managers should identify design, operational, or testing sequences. Uninterruptible

sequences represent important constraints.

170

All plans include reporting requirements. On a periodic basis, stakeholders review

technical, financial, and schedule status. Plans often schedule technical interchange

meetings (TIM) that clarify issues arising during the design and development phases.

The proposal specifies the frequency of reporting and the type of information provided

to the customer. Senior management usually wants to review technical, financial, and

schedule status on a monthly basis. Functional department personnel frequently

participate in these status meetings and the plan should make them aware of this need.

While the PM has responsibility for creating a plan, this person requests functional

managers to contribute to the process. Product or service expertise comes from the

functional area and not project management. The PM depends on functional or

department managers to provide particulars. As part of their input, technical personnel

identify risk areas, uncertainties or conflicts, which the PM factors into the price and

schedule during the proposal preparation. (Refer to Chapter 10 for further information

about risk.) At the onset of the proposal effort, the PM initially creates a top-level

schedule that complies with the customer’s delivery requests. Functional managers

provide detailed task descriptions to implement objectives, requirements and

milestones. They prepare detailed schedules and labor allocations consistent with

project constraints. After reviewing the data, the PM gains an understanding of possible

schedule conflicts arising from competing department demands. Internal stakeholders

must resolve schedule or technical complications that surface. The PM must inform

senior management of exceedingly troublesome technical, schedule or budget issues.

171

Ethical conflicts can arise during the preparation of plans for an RFP submission.

Suppose a project manager receives draft proposal material from members of the

organization that shows the organization cannot meet the customer requested schedule

delivery date or perhaps a technical requirement cannot be met. Does the PM proceed

without informing the customer? Does the PM submit the proposal response and agree

to the customer’s schedule request or technical requirements knowing the slim

likelihood of meeting these targets? Does the fear that your competitor may agree to

an impossible situation govern your organization’s actions? These are not easy

questions to answer.

Consider this actual scenario. A customer intentionally inserted several technical

requirements into an RFP that were impossible to achieve. After discovering the

questionable specifications during the proposal response phase, a responding

organization wrestled with the actions to take. They ruminated over the answers to

these questions:

Has the organization misunderstood the customer’s requirement?

Does the customer realize what they requested?

What will competitors do?

Should the organization point out the problem in the proposal response?

Should the organization agree to everything in the proposal and hope to

renegotiate after the contract award?

172

The RFP team members met and agreed upon a response strategy. They decided to

state in the proposal response that they could not meet certain technical and schedule

requests and instead offered an alternative approach. They won the contract. During

a kick-off meeting following the contract award, the organization raised the question to

the customer “Did the contractor realize that they inserted impossible conditions in the

proposal document? “ The customer’s response astounded them. The contractor

intentionally inserted certain impossible to meet conditions to see the bidding

organization’s response. First, they wanted to see if the bidders would recognize the

issues. Were they technically savvy? Then they looked at the response and eliminated

companies that gave them a “line of goods.” Sometimes honesty prevails.

Plan Benefits

A plan defines the project. It clarifies stakeholders’ expectations, reduces ambiguity

and uncertainty and eliminates conflict among functional managers. Who does what

and by when? By describing the functional managers’ roles, a plan improves an

operation’s efficiency. A plan defines the resources required by the organization to

perform the work. A properly prepared plan distributes the expected labor and material

expenditures over time, which provides a basis for monitoring and controlling work. A

plan identifies the critical areas and permits the organization to focus its efforts on

monitoring them. Stakeholders use the plan embedded in the proposal as a

communications tool. The PM monitors technical, schedule and budget status based

on the agreed upon plan.

173

The Project Plan Troika

So, how does a PM create a project plan? We address all of the news reporter’s

questions in three documents – (1) a formal product or system definition in the form of

a list of requirements or a specification, (2) a Statement of Work (SOW) that includes a

Work Breakdown Structure (WBS) and a schedule, and (3) a budget for each task

assigned to organization departments and to subcontractors. The PM submits the

system definition and the SOW to the external customer. Usually department budget

data remain within the organization and are not submitted to the customer.

1) Requirements/specification

This document represents a quantitative definition of the deliverables as delineated

in the contract, sales order or an internal project agreement. The company

receiving the contract award agrees to deliver a product or service that meets the

customer’s requirements. Organizations call this list of requirements a product or

service specification. The PM assigned to the job distributes the specification to all

stakeholders. A PM monitors the project and continually reminds development

personnel of the minimum technical requirements. The organization receiving the

award has an obligation to deliver a product or service that meets the minimum

requirements and not a bit more. Improving on the specification may be a challenge

and great technical fun, but it costs labor effort and time for which the customer did

not agree to pay. The PM is interested in maximizing the organization’s profit and

certainly not losing money (especially for a non-profit organization).

174

Exhibit 5-1 illustrates a typical hardware or software product specification. The

specification includes critical performance factors describing product or system

speed, size, capacity, scalability, upgradability, reliability, and required software and

hardware interfaces. Products delivered to environmentally unfriendly regions

require special consideration. A computing system that must operate at the North

Pole or the heat of a desert demands special consideration. Likewise, a system

delivered to an offshore oilrig may have to withstand the rigors of high humidity and

salt-water conditions. A medical project development such as a pacemaker will

require careful design and quality components to ensure high reliability. The

developers of the space shuttle Challenger ‘O’ ring assembly (Morton-Thiokol)

assumed a Florida ambient temperature of greater than 50° F. On that tragic day in

1986, the temperature at Cape Canaveral dipped below 40° F. The rubber ‘O’ ring

joining the two rocket sections became brittle. During the launch, a crack appeared,

internal flammable gases escaped and ignited after a few seconds into the mission.

The rocket exploded and lives were lost. The engineers built the system to a

specification, but NASA officials and Morton-Thiokol executives chose to ignore the

specification limitations. Customers and development organizations must carefully

define a product’s design parameters and constraints taking into consideration all of

the possible applications – especially critical life critical issues.

175

Stakeholders involved in a sole source contract frequently develop a specification

together and complete it before work begins on the project. The product definition

attempts to anticipate all questions that designers might ask.

If a product or system definition doesn’t exist, create one and circulate it among the

stakeholders for approval. Invite the stakeholders to comment on the draft

document. Request the reviewers to complete their efforts within a reasonable

time. Comments not received by that date will signify tacit approval of the definition.

This is hardball, but if you are the project manager, it’s you’re neck that’s on the line.

Developing a system, product, etc. without a definition guarantees breaking the

budget and ensures late delivery. A stakeholder may complain after the project

start, “I didn’t realize that we were doing this.” Well, if it’s in the specification and

they didn’t comment on it, they lost all rights to complain. We have all heard about

the proverbial camel -- a horse built by a committee without a specification.

Everyone on the committee had a different view of the horse and no one took the

time to write it down. A product definition baseline must exist and it’s up to the

project manager to make it happen.

2) Statement of Work (SOW)

The SOW is a detailed narrative description of the products and services supplied

under the contract. The specification describes what will be supplied; the SOW

states the quantity and defines the supporting material and services. The SOW also

details responsibilities for supplying material, products, and services that may not be

176

explicitly included in the list of deliverables. A schedule accompanies the SOW that

lists the tasks and the time relationships among the tasks.

A SOW includes a methodology for proving to a customer that the product or service

meets the specification. Where do we conduct the verification tests – at the

development site, at the customer’s site, both locations? How extensive should the

testing be? The buyer and seller must agree on these issues during price

negotiations.

Two actual examples serve to illustrate the importance of clear definition. A medium

sized industrial company delivered a large system to a desert site in Nevada. The

installation process required two employees to remain at the site for a month. The

contract did not clearly identify which organization would supply utilities such as

electricity and water, nor did it take into consideration basic human needs like a

portable toilet and a cabin for protection from the intense sun. The resolution of this

oversight delayed the schedule by two weeks until the portable generator, fuel,

water supply and a trailer were brought to the site. The lack of clarity in the SOW

forced the company to pay for these items, which reduced the job’s profit.

On another occasion, a manufacturer delivered a water monitoring system to a site

in China. Technicians from the company installed the system on the bank of a river,

but the statement of work did not describe the system acceptance testing at the

customer’s site. Seller and buyer had two different ideas about a system

177

acceptance test. The buyer wanted to confirm the operation of the system using a

six-month evaluation period and the seller expected to install the system and

perform a three-day brief confirmation of operation. Clearly a disconnect. A very

expensive disconnect for the seller because the customer expected the seller to

participate in this six-month on-site evaluation. Even if the seller could provide a

technician to live in a remote area in China for six-months, they did not want to incur

the costs and the loss of an employee for this extended stay. The resolution of this

dilemma required the seller to extend the product warranty for two-years beyond the

original warranty.

A SOW exists to clarify both buyer and seller’s expectations and should anticipate

all eventualities. During the preparation of the SOW, the PM contacts all internal

stakeholders to discuss the product. This enables the PM to understand as many of

the possible problems that could arise during the development, delivery, installation,

and operation of the product or service. The statement of work reflects

stakeholders’ comments. Adding work or deliverables to the contract will have an

upward influence on the price quoted to the customer.

The key elements of the SOW include

a) General statement describing the scope of work (refer to the functionality

section of the specification)

b) List of deliverables -- includes hardware, software, construction items,

documentation, supplied utilities, training, etc.

178

c) Reference to related studies, documentation, standards, and commercial

or military specifications that apply to this project

d) Data and Documentation requirements

e) Support equipment for contract end item

f) Customer furnished material (property, facilities, equipment, services,

documentation) required by the contractor

g) Overall schedule of performance

h) Testing (define expectations at the developer’s location and the

customer’s site)

i) Governmental regulations and permit responsibilities

j) Method of shipping.

k) Explanatory exhibits, attachments and appendices

l) Standard Terms and Conditions used by a supplier for all proposals

The very detailed SOW template in Exhibit 5- 2 outlines many of the items that

define a product or service job. Exhibit 5-4 illustrates an actual statement of work.

The SOW describes a short project with the objective of delivering and installing a

standard database software package to a medical office. The document uses a

subset of items described in 5- 2. The actual SOW is tailored for this specific

project. It does not contain every item listed in Exhibit 5-2. The PM takes

responsibility for the preparation of the SOW. It may read like a legal document and

that’s because it is. In large organizations, the PM frequently obtains assistance

from the legal staff. If this is not possible then the PM must examine the agreement

179

and confirm that it protects the organization while delivering the product that the

customer requires.

Critically examine the sample statement of work in Exhibit 5-4. Identify the

paragraphs that describe the customer’s responsibilities. A typical area of confusion

surrounds software maintenance. This is customarily part of the buyer’s

responsibility. Unsophisticated customers frequently believe that software does not

require maintenance. A month or two after the installation of a database application

software, customers may complained to the supplier that the package runs slow.

Failure to maintain the system will result in poor performance. Sellers protect the

organization by warning the customer that the system requires maintenance. This

minimizes misunderstandings as well as notifies the customer to budget funds for

this effort in the future.

180

One bite at
a time!

How do you
eat an
elephant?

In one old joke, an insect asks “How do you eat an elephant?” A second replies

”One bite at a time.” A gruesome story perhaps, but it serves to make the point that

successfully completing a huge project requires dividing the job into a large number

of bite sized pieces to which we apply adequate resources. Viewing a job as an

entire entity seems overwhelming. We need to define a process that breaks the

project into manageable steps. The Work Breakdown Structure (WBS)

accomplishes this task. Although frequently not explicitly called out, a WBS is an

integral part of the SOW. The WBS consists of a grouping of tasks that organizes

and defines the total scope of the project. The WBS is prepared in outline form so

181

that each descending level represents an increasingly detailed definition of the

project (table 5-1). The lowest level or highest number of the WBS defines a work

package or assignment performed by a team member. The tasks may involve

labor, or purchases for products or services. The WBS becomes the basis for the

performance schedule.

Table 5-1 Work Breakdown Structure Hierarchy

WBS No. Project Task WBS Level
1 Project 1
1.1 Task #1 2
1.1.1 Subtask 3
1.1.1.1 Work Package 4
1.2 Task #2 2
1.2.1 Subtask 3
1.2.1.1 Work Package 4

Sometimes a buyer provides a WBS, which is called a Contractual Work Breakdown

Structure (CWBS). The CWBS generally includes less detail than the WBS used by

the seller to manage the project. The customer uses the CWBS to define the level

of reporting that they want the seller to provide.

Think about a WBS as a list all of the tasks needed to complete a job. As an

example, an organizer planning a wedding would begin by listing the activities

associated with the bride, groom, bride’s parents, groom’s parents, catering hall,

caterer, musicians, invitations, and church, synagogue or mosque facilities. To

obtain specific information about each activity the organizer requests information

from the different activity leaders – menu details from the caterer, songs and

182

dances from the musicians, requirements for chairs, tables, linen, cutlery, glass

ware from the catering hall, etc. Through the process of involving the people that

will take responsibility for the tasks, the organizer obtains a very detailed list of

activities that must be completed to successfully conduct a wedding.

The PM performs the same effort for a project as the wedding organizer. First, the

PM outlines all the known activities. The PM might base this list on experience or

from historical records of other similar projects. For further details, the PM goes to

the functional managers that thoroughly understand the specialized activities and

request them to identify and their tasks. The PM adds the inputs from the functional

managers to the previously created outline.

The completed WBS represents the basis for task assignments and the schedule.

A typical WBS used for an electromechanical and/or light construction development

project is shown in Exhibit 5-3. The final price represents a summation of the costs

for each task listed in the WBS. The PM creates a schedule by assigning a time

span for each task listed in the WBS following consultation with the functional

managers. Usually the PM assigns responsibility for each task assignment and

deliverable item to a person or department as part of the schedule. The next

chapter focuses on schedule preparation. The WBS facilitates status reporting by

permitting the PM to track time, cost, and performance progress versus each task in

the plan.

183

The WBS represents a planning tool that enables the PM to gain project personnel

commitment. Each task item has a name or department associated with it, thus

minimizing the possibility of omitting deliverable items and clarifying stakeholder

responsibilities. Including a task in the WBS permits status tracking and ensures

some level of visibility.

A well-written SOW minimizes stakeholder interpretation. Avoid imprecise

language such as nearly, approximately, almost. Quantify expectations. Clearly

state alternatives and consequences. Obtain customer review and approval of

specifications, documentation, schematic, tests, etc. Preclude delaying tactics by

requiring a limited number of customer review and approval cycles. Delineate

responsibilities where questions could arise.

The conclusion of the statement of work includes the sellers terms and conditions.

Section 15 of Exhibit 5-4 (the sample statement of work) lists typical terms and

conditions. Paragraphs in this section state the sellers standard business policies

regarding hardware and software warranties, return policy, and liability limitations in

the event things don’t go as planned. Suppose an installation of the software

package doesn’t go as smoothly as predicted. Perhaps a development problem or a

supplier labor issue caused a 30-day delay before project completion. The

consequences of the late installation to the buyer can result in a significant loss due

to missed business opportunities. As an example, a nuclear power plant’s

revenues exceed $1 million per day. A company failing to deliver a software or

184

hardware product essential to the operation of the business on schedule, will force

the plant to lose a significant sum of money – possibly resulting in a demand from

the buyer for damages. Usually a clause in the terms and conditions limits the

seller’s liability to the purchase price of the system.

Other clauses of the terms and conditions define ownership of the product,

documentation and patent rights. Many people are unaware that purchasing

software only gives them a license to use the software application. The purchaser

does not own the software and cannot make copies for sale. Frequently the license

gives them permission to install the software on a single computer. This information

lies within the terms and conditions. Most often, the seller’s organization has a

standard set of terms and conditions and the PM need only insert those at the end

of the proposal.

3) Department Tasks and budgets

Multiple departments and external suppliers contribute to performing tasks in the

WBS. After consultation with functional managers, the PM assigns a budget in labor

hours or dollars to each department performing work on a task. Each employee

recognizes they have a limited time to complete an assigned task and their progress

will be monitored. Towards this end, every person that works on a project task

records his or her working time on the project. The employee enters the amount of

time worked on a project task on a time card, which the time recording system

ultimately places into a computer database. A typical time card may look like

185

Figure 5-2. Each project and each task within the project have assigned numbers.

Administrators assign number identifications to describe projects because they are

shorter and less confusing than project names. Every employee inserts the project

and task numbers on which they worked during the week. On a daily basis, they

enter the number of hours worked on the task.

At the end of the week, the PM examines the collective number of hours worked on

each task on the job. This bookkeeping procedure represents the basis for fiscal

control. If people assigned to a specific project task, do not work it, then the PM

must find out why. If people charge the job but have not accomplished the expected

work, the PM again must find out why. Are employees mischarging their time or is

the task more difficult than anticipated? Certainly if the customer is charged for

each hour worked on the job, the organization has a responsibility to make certain

of the billing statement’s accuracy.

Project planning is essential. The first two elements of the plan – specification and

SOW – serve as the basis for a project proposal submittal to the customer. The third

element – task budgets -- provides the basis for the project proposal price. After a

customer awards a contract to an organization, the three plan elements become the

basis for assigning project resources, monitoring project progress and controlling

project spending.

186

The PM exists to deliver a product or service requested by a customer on time, within

budget and technically satisfactory. Only a well thought out plan enables the PM to

execute Fayol’s other management responsibilities -- organizing, coordinating, and

controlling.

187

Figure 5- 2 – Typical Employee Time Card

Blank Card

Employee Name: ______________ Employee ID No.: _____________
Department No.: _____________ Week Ending Date: ____________

Project No. Total
Task No. Hours

Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday

Total
Overtime
Hours

Completed Card

Employee Name: John Sanchez Employee ID No.: 451880
Department No.: 814 Week Ending Date: October 2

Project No. 3705 7829 3712 Total
Task No. 12 43 2 Hours

Sunday
Monday 4 2 2 8
Tuesday 8 8
Wednesday 3 4.5 .5 8
Thursday 2 5 1 8
Friday 1 6 1 8
Saturday

Total Hours 10 17.5 12.5 40
Overtime
Hours

188

Exhibit 5-1 -- Typical Hardware or Software Product Specification Outline

Specification Title:
Date:
Specification Number (if required):
Specification Revision No.:
Author (s):
Name & address of organization preparing document:

1. Product Or Service Description – including intended usage
2. Definition Of Terminology
3. Requirements
3.1. System Architecture
3.2. Software Required
3.3. Components Required
3.4. Unique Hardware Or Software Features
3.5. Test Features
3.6. Product or System Self-Test Capability
3.7. Factory Test
3.8. On-Line Test
4. Interfaces
4.1. Software
4.2. Hardware
4.3. Equipment
4.4. Operator
4.5. Input/Output Devices
4.6. Electrical
4.7. Mechanical
5. Product Or Service Characteristics
5.1. Physical
5.1.1. Size
5.1.2. Weight
5.1.3. Power
5.2. Performance Characteristics
5.2.1. Speed
5.2.2. Response Time
5.2.3. Data Rates
5.2.4. Electrical Performance
5.2.5. Mechanical Performance
5.2.6. Start-Up and Shut-Down Characteristics
5.2.7. Capacities (e.g.. electrical, mechanical, memory)
5.3. Reliability
5.4. Maintainability
5.5. Environmental

189

5.5.1. Temperature
5.5.2. Humidity
5.5.3. Vibration levels
5.5.4. Shock
5.5.5. Natural Environments (e.g., earthquake levels)
5.5.6. Electromagnetic interference
5.5.7. Nuclear Effects
5.6. Safety Considerations
5.7. Quality Assurance Provisions

190

Exhibit 5-2 - Sample Statement of Work Outline

1. Top level functional description (reference specification for details)

2. List of required customer supplied items
a) Items required for development purposes
b) Items Required for factory acceptance test (FAT), Installation, site
acceptance test (SAT)

3. List of contractor supplied deliverables and quantity
a) Site construction equipment
b) Hardware
c) Software
d) Manuals, documentation & data
No. of copies of documents
Documentation examples include the following:
i) Site architectural drawings
ii) System interconnection drawings
iii) Design review documentation
iv) Functional design specification
v) Assembly drawings
vi) Electrical schematics
vii) Intermediate & final product test results
viii) Factory acceptance test
ix) Site acceptance test
x) System software specification
xi) Software license rights
xii) Software source code rights (sometimes a provision exists to store
source code in escrow)
xiii) Software user manuals
xiv) Maintenance manual
xv) Block diagrams
xvi) Installation & operating manuals
xvii) Training manual
xviii) Original Equipment Manufacturer (OEM) manuals and
documentation for items such as a computer, I/O devices (printer,
bar code reader, display, etc.) and third party software as received
from the manufacturer.
xix) List of required or recommended spare parts
xx) Reliability analysis
xxi) Environmental analyses
xxii) Performance bond
xxiii) Certifications required

4. Customer/Subcontractor Reviews

191

a) Quantity & location of Technical Interchange Meetings (TIM), Design
Reviews, etc.
b) Preliminary list of discussion Items (schematics, drawings, hardware
specifications, software specifications, documents, testing, QA policies,
etc.) for each meeting.
c) Define contents and expected outcomes of Preliminary Design Review
(PDR) and Critical Design Review (CDR).
d) No. of times customer may review documentation
e) Policy on travel and living expenses (who pays at what price?) to attend
reviews.

5. Preferred Vendors - Identify/Comment

6. Applicable Reference Documents and Appropriate Standards
a) Quality Assurance standards (e.g., ISO 9000, IEEE)
b) Hardware standards (e.g., UL license, CE compliance, electromagnetic
interference)
c) Software standards (e.g., IEEE 730, Software Engineering Institute)
d) Construction (e.g., building codes) standards
e) Fabrication (e.g., welding and soldering) standards
f) Environmental (e.g., Federal Environmental Protection Agency and/or
local requirements)
7. Schedule
a) Create a WBS
b) Link tasks
c) Assign Start & Finish Dates
d) Identify Critical Dates
e) Specify customer approval dates
f) Identify critical path

8. Define Task Responsibility
a) Contractor - responsible for the design, production, integration, calibration,
factory testing, installation and training for the proposed system.
b) Customer - responsible for all site preparations needed for the installation
and operation of the system. Customer personnel responsible for
ensuring the readiness of the installation site, and for providing all heavy
equipment and professional riggers required to receive, transport, and
assemble the system at the installation site.
c) Identify party or parties responsible for the readiness of the installation
site. These matters include
i) Designating heavy equipment and professional riggers to unload
system components from delivery truck(s), transport system
components through the facility, and reassemble system
components at the installation site.
ii) Ensuring floors, thresholds, loading dock ramps, freight elevators,
cranes, forklifts, etc., have sufficient loading capacity to allow heavy

192

equipment to unload and transport system components without
exceeding maximum weight limits, and to enable the system to be
installed and operated.
iii) Ensuring loading docks, doorways, hallways, rooms, etc., have
sufficient size to allow heavy equipment to unload and transport
system components through the facility, and to enable the system
to be installed and operated.
iv) Examining and if necessary, moving ductwork, piping, security
cameras or other obstructions before delivery and installation to
allow the unloading, transport and assembly of system
components.
v) Ensuring readiness of all system facility requirements (i.e.,
electrical power, heating, air conditioning, etc.), for system
installation and operation.
vi) Ensuring that facility labor is available at the time of installation.
d) Define responsibility for site modifications in areas such as
i) Plumbing
ii) Electrical
iii) Heating, Ventilation, and Air conditioning
iv) Gas lines
v) Fuel storage and distribution
vi) Chemical material storage and distribution
vii) Hazardous material storage

9. Acceptance criteria agreement
a) Sub-assembly acceptance
b) System Factory Acceptance
c) Site Acceptance

10. Method of Shipment
a) Air, Train, Truck, Courier
b) Identify freight cost responsibility
c) Clarify FOB location.
d) Identify customer responsibilities relating to off-loading, rigging, forklift,
overhead crane, positioning, leveling, placing equipment positioned in the
area desired for installation and use.
e) Identify moment when title to and risk of loss passes to buyer. Is it at the
factory or when delivered to transportation center, or site?

11. Discuss site installation issues
a) Required customer support
b) Data Migration for database products
c) Product Calibration

12. Training
a) Course description

193

b) No. of people attending
c) Location of course
d) Define facilities and resources required
e) Define supplier of facilities and resources

13. Warranty and Support
a) Define equipment warranty term and coverage.
b) State start of warranty (e.g., within two months of delivery to customer or
following SAT)
c) Policy on software updates.
d) Prohibit buyer from installing user-written programs on penalty of voiding
warranty
e) Define specific warranty exclusions (reference Exhibit 5-4 – Example of a
Statement of Work)

14. Permits, licenses and special training
a) Identify responsibility for obtaining permits and licenses required for the
installation and operation of the proposed system.
b) Identify employee site training requirements

15. Union and Organized Labor Considerations
a) Assign the customer responsibility for making in-house labor
arrangements necessary for the installation and operation of the proposed
system.
b) Assign responsibility for special local, state, federal, and country
requirements (e.g., OSHA)

16. Price and Payment Terms
State that the final sale price may vary if the customer makes changes to the
specification or makes other testing, documentation, training, and/or support
service requests. Limit the proposal term to a comfortable period (e.g., sixty
days). Beyond this time, changes in market material or labor costs may
necessitate a price re-examination. For quotes submitted to non-USA
customers, state that the quote is based on U.S. dollars. Identify responsibility
for payment of local taxes, permits and fees. Require payment for goods and
services within 30 days of invoice. Consider using a payment milestone
schedule, such as the following:
Approval of Design 10%
Material Procurement 25%
Completion of Factory Acceptance Test 25%
Delivery to site 30%
Completion of Site Acceptance Test 10%

17. Ownership of Data, etc.

194

a) State that the contractor retains all ownership and rights to the contractor-
manufactured software supplied. Buyer purchases a license to use the
supplied software and cannot resell the product.
b) State that specifications, drawings, manufacturing data, and other
information given to the buyer by the seller remains the property of the
seller. Without the seller’s written consent, the information shall not be
reproduced or copied.
c) State that the contractor retains all ownership of patents and copyrights
that may be issued as a result of the contract.

18. Late Delivery or Technical Performance Failure Penalties

19. General Corporate Terms and Conditions

195

Exhibit 5-3 -- Sample Work Breakdown Structure (WBS)

Project Widget
Project Number: 1175

WBS No. Tasks or Work Packages

1 System
1.1 Define the System Performance Requirements
1.1.1 Distribute Specification
1.1.2 Distribute Statement of Work
1.2 System Architecture Definition
1.2.1 Major Trade-off Studies – Review of alternative approaches
1.3 Define Major Electrical/Mechanical Assemblies
1.4 Cable Definition
1.5 Unique Algorithm Development
1.6 Define Software/Firmware Functions and Architecture
1.7 Technical Analyses
2 Design Assembly #1
2.1 Hardware
2.1.1 Define Hardware/Software Interfaces
2.1.2 Electrical/Electronic Design
2.1.2.1 Define Subassemblies/Modules/Functions
2.1.2.2 Module/Function Specification
2.1.2.3 Make/Buy/Subcontract Trade Studies
2.1.2.4 Design
2.1.2.4.1 Electrical Schematic and/or Wiring Drawing
2.1.2.4.2 Harness & Connector Definition
2.1.2.5 Fabricate subassemblies
2.1.2.6 Assemble the Units
2.1.2.7 Software Integration
2.1.2.8 Calibrate & Test
2.1.3 Mechanical
2.1.3.1 Define Assemblies/Subassemblies
2.1.3.2 Assembly/subassembly Specifications
2.1.3.3 Make/Buy/Subcontract Trade Studies
2.1.3.4 Design
2.1.3.5 Fabricate Components and subassemblies
2.1.3.6 Assemble the Subassemblies
2.1.3.7 Integrate components and subassemblies
2.2 Software
2.2.1 Define Hardware/Software Interfaces
2.2.2 Define Software Modules in a Software quality assurance plan (SQAP)
2.2.3 Prepare a Software Requirements Specification – SRS

196

2.2.4 Make/Buy/Subcontract trade-off Studies
2.2.5 Prepare a Software Design Document – SDD
2.2.6 Integrate Software with Hardware
2.2.7 Prepare Software Verification and Validation Plan – SVVP
2.2.8 Perform Verification and Validation tests and prepare a report
2.2.9 Provide to Software Library and Distribute Software
3 Design Assembly #2 - WBS tasks for subsequent assemblies
4 Project Management
4.1 Interdepartmental Coordination
4.2 Work Authorization Preparation
4.3 Cost Management
4.4 Technical Management
4.4.1 Establish Specifications
4.4.2 Engineering Task Definition And Partitioning
4.4.3 Parts Coordination
4.4.4 Internal Specification Review
4.4.5 Engineering Document Release
4.4.6 Engineering Support To Production
4.4.7 Assembly Fabrication & Rework
4.4.8 Coordinate Resolution Of Vendor Problems
4.5 Schedule Management
4.6 Material Procurement
4.7 Prepare and Coordinate Subcontracts
4.8 Internal Hardware/Software Design Reviews
4.9 Customer Reviews & Technical Interchange Meetings
4.9.1 System Requirements Review (SRR)
4.9.2 Preliminary Design Review (PDR)
4.9.3 Critical Design Review (CDR)
4.9.4 Interim Technical Interchange Meetings (TIM)
4.10 International, Federal, State, and Local Code Issues
5 Engineering Equipment
5.1 Identify Equipment Needed for System Design and/or Test (e.g., CAE or CAD
software, test equipment, other application software, software platform)
5.2 Equipment Acquisition Plan (buy, borrow, lease, in-house)
6 Support Equipment
6.1 Identify Equipment Needed to Support/Maintain System in Field
6.2 Equipment Acquisition Plan for fielded system.
7 Site Construction
7.1 Plan Development
7.1.1 Architect’s Plans
7.2 Identify Zoning Issues
7.2.1 Obtain Permits
7.3 Prepare Bid for Subcontractor’s
7.4 Bid Process to Select Construction Subcontractor(s)
7.5 Construction
7.5.1 Roads

197

7.5.2 Earth Moving
7.5.3 Facility
7.5.3.1 Foundation and Structure
7.5.3.2 Electrical
7.5.3.3 Plumbing
7.5.3.4 Heating, Ventilation, and Air-conditioning (HVAC)
7.5.4 Beautification –Trees, Shrubs, Lawns
8 System Integration & Test
8.1 Prepare Factory Acceptance Test
8.2 Prepare Site Acceptance Test
8.3 Collect and Assemble Component Items
8.4 Interconnect All Assemblies
8.5 Install special Hardware
8.6 Perform Software-Hardware Integration
8.7 Verify Quality Assurance Documentation
8.8 Calibrate System
8.9 Perform Temperature Tests
8.10 Perform Shock and Vibration Tests
8.11 Perform Reliability Tests
8.12 Perform Factory Acceptance Test
8.13 Crate and Ship
9 Site Installation and Test
9.1 Special Site Training (e.g., Hazardous Material - HAZMAT)
9.2 Confirm Resolution of Labor Issues
9.3 Unpack System
9.4 Interconnect All Assemblies
9.5 Calibrate System
9.6 Perform Site Acceptance Test
10 Data
10.1 Technical Publications
10.2 User’s Manual
10.3 Training Manual
10.4 Engineering Data
10.5 Electrical Schematics
10.6 Printed Circuit Board Art Work Drawings
10.7 Mechanical Assembly Drawings
10.8 Software Requirements Specification
10.9 Software Design Document
10.10 Software Verification and Validation Plan/Report
10.11 Software Source Code
10.12 Environmental Test Reports
10.13 Factory Acceptance Test Report
10.14 Site Acceptance Test Report
10.15 Management Data
10.16 Labor Hours Data
10.17 Material Cost Data

198

10.18 Schedule
10.19 Engineering Analyses and Support data
10.20 Quality Plan/Report
10.21 Reliability Plan/Report
10.22 Maintainability Plan/Report
10.23 Failure Mode and Effects Analysis
10.24 User Guide
10.25 Training manual
10.26 Repair manual
10.27 Data/software repository
11 Operational & Site Activation
11.1 Site Construction/Conversion
11.2 Vehicle Purchase and Conversion
11.3 Site Equipment Rental/Purchase
12 Services and Training
12.1 Software/Hardware Field Installation
12.2 Warranty
12.3 Hardware
12.4 Software
12.5 Maintenance
12.6 Training
12.6.1 Identify and Obtain Required Training Equipment
12.6.2 Make/buy Training Decision
12.6.3 Design and Develop Training Material In-house
12.6.4 Subcontract Training Material
12.6.5 Conduct Training
13 Industrial Facilities
13.1 Factory Construction/Conversion/Expansion
13.2 Manufacturing Equipment Acquisition/Modernization
13.3 Factory Maintenance
14 Spares and Repair Parts

199

Exhibit 5-4 – Example of a Statement of Work

The following representative statement of work describes a fictitious medical practice
software appointment scheduling and invoicing application entitled SoftApps. The
fictitious company SoftHuge developed and manufactures the software. Although
complex, SoftApps is a standard off-the-shelf product. The document states that
SoftHuge offers to install both the hardware and software, transfer existing data from an
existing legacy software application presently operating in the office to the new system,
test the resulting system, train the staff, deliver documentation and provide a warranty
to the customer. The customer’s name is MedPrac.

While a relatively short project, the SOW describes in detail both SoftHuge’s and the
customer’s obligations and responsibilities. Most brand names used in this document
to describe products are fictitious. The SOW establishes the deliverables and
delineates the expectations so as to minimize surprises.

The author provides this statement of work purely for educational purposes and does
not advocate its use without obtaining appropriate technical guidance and legal
representation. Every project and contract award requires unique tailoring.

200

Statement of Work

1 Product Description
SoftHuge Industries offers software and hardware to MedPrac that will perform billing,
scheduling, document control and patient history software management for medical and
dental offices. The software package called SoftApps developed by SoftHuge
Industries provides full financial and receivables tracking, electronic billing/claims
submission, medical records, managed care data, and appointments management.
Some of the unique software features contained in SoftApps include:

♦ Relational database structure
♦ Real-time data processing
♦ Patient account retrieval by a variety of search criteria
♦ Family billing capability
♦ Preparation of a budget payment plan specific to each patient
♦ Capacity for up to 50 insurance fee schedules
♦ Sequential billing of up to six insurance carriers per patient
♦ Open item posting
♦ Insurance payment accuracy audit against carrier fee schedules
♦ Automatic reporting and resubmission of delinquent claims
♦ Collection notes on patient accounts
♦ User defined billing cycles
♦ User defined linkage between procedure codes and appropriate diagnosis codes
♦ Insurance specific diagnosis and procedure codes
♦ On demand insurance forms, itemized statements and receipts
♦ On demand reprinting/resubmission of insurance form or patient statement
♦ Electronic payment posting
♦ Treatment plans
♦ Cross checking of diagnosis to procedure codes
♦ Reconciliation of actual payments to expected payment
♦ Built in Automatic Re-bill capability

SoftApps calculates your practice’s procedures and fees. The system can submit your
office’s claims to major medical insurance commercial carriers electronically. There
are multiple levels of system security, and the administrator or provider can designate
each user's level of access. This protects patient confidentiality and limits access to
clinical, bookkeeping, and financial data entry to unauthorized personnel.

Areas of particular interest to mental health practices are:

♦ Integrated word processing and medical records features allows for recording
treatment plans and progress notes, and can generate letters and reports to
referring physicians or other appropriate sources.
♦ Track and record patient outcomes.

201

♦ Multiple providers' schedules can be easily viewed at one time.
♦ Setup future appointments for patients who want the same times/day(s) of the
week.
♦ Track referral sources
♦ Automatically provides warnings when the number of remaining allowable visits
is approaching the limit.
♦ Track medications, dosages, and prescriptions
♦ Track patients paying on sliding fee schedules based upon income, family size,
etc.

2 Installation Schedule
Following the contract award, SoftHuge Industries will organize a meeting with
MedPrac’s personnel to conduct a detailed review of the project activities. The kick-off
meeting will review MedPrac’s detailed requirements, computer hardware and existing
database software, schedule, prospective software customizations, initial software
installation, data transfer from the your practice’s existing system, testing, and training.

The two organizations will develop a process to ensure prompt responses to questions
arising during the project as well as timely reviews of the hardware and software plans.
The meeting will finalize the support that SoftHuge Industries personnel will need from
MedPrac during the installation and test periods. Following this discussion, the
SoftHuge Industries project manager will provide MedPrac with an in-depth schedule.
Task priorities and schedule may change as a result of discussions between MedPrac
and SoftHuge Industries’ personnel.

In general, the program will proceed according to the following phases:

TASK WEEKS ARO*
Phase I Planning - Organization & 2
Review/Agreement on Plan
Phase 2 Hardware Procurement 3-7
Phase 3 Hardware & Software Customization (if None required
required)
Phase 4 Hardware & Software Installation & Testing 8-10
Phase 5 Data Migration 11-12
Phase 6 Site Acceptance Test 13
Phase 7 Training 14-15
Phase 8 First Year Warranty Support 14-65
*ARO – After Receipt of Order

3 Deliverables
Deliverables include the following:

202

Software
SoftApps version 10.8 application software
Report Writer

Hardware
1 - Server computer
Dual Pentium IV, 1.5 GHz. processors
256 Mbytes memory
1 Mbytes cache memory
40 gigabyte RAID hard drive
24X DVD
Ethernet interface
FAX Interface
56K Modem interface
Printer interface
19” monitor
Laser printer – 20 PPM
Mouse
Keyboard

Documentation
SoftApps user manual
10 - SoftApps System Operation training manuals
10 -- SoftApps Database Administration training manuals
Third party supplied hardware documentation

Services
SoftApps installation resident on server computer
Installation of MedPrac supplied Elcaro database management system
Creation of operational and test environments
Data migration of MedPrac data into new system
Site test
Verification of printer, network, modem, and FAX interfaces.
Verification of customer data transfer
Verification of standard SoftApps screens
One-year service and maintenance agreement for SoftHuge provided hardware
and software
Two training courses with up to 10 students in each course:
SSO-1234 [SoftApps System Operation]
SDA-5678 [SoftApps Database Administration]

4 Installation and Database Security Guidelines

203

The effort includes installation of SoftApps on MedPrac’s computer, creation of training
and production environments, and the initial relational database tuning. SoftHuge
Industries will install the system on MedPrac’s server. At extra cost, SoftHuge
personnel can install SoftApps on MedPrac’s client computers. SoftHuge Industries
personnel will require assistance from MedPrac’s personnel on these tasks.

MedPrac must assist SoftHuge Industries personnel to ensure strict controls between
the operational and test versions of databases. The data migration (transfer of existing
data to new system) phase requires that MedPrac establish a cut-off date after which
data will not change. MedPrac will collect and store new data for future system entry.
MedPrac must provide SoftHuge personnel a comma delimited ASCII file of the data to
be migrated to the new system. SoftHuge personnel will transfer MedPrac’s data into
the new database.

SoftHuge personnel will require a workplace area at MedPrac’s faculty during portions
of the project.

SoftHuge expect MedPrac to perform several tasks during and after the installation.
These customer performed tasks include the following:

♦ Maintain a copy of all operational databases.
♦ Ensure that backups of all database software are made on a regular basis.
♦ Develop a database recovery policy.
♦ Develop and implement adequate office security features to protect the database
integrity, confidentially, and availability.
♦ Appoint a database administrator. This person should support SoftHuge
personnel during the installation and data migration phases.

The customer accepts responsibility for installing the network, attaching the computers
to the network, and maintaining the network.

5 Relational Database

The Elcaro relational database management system will be provided by MedPrac
unless otherwise arranged. SoftHuge Industries requires Elcaro version x.y.z and
SQL*NET version v.w. Elcaro will be installed as part of the normal system installation.

6 Manuals and Documentation

SoftHuge Industries will supply the SoftApps user manual, ten - SoftApps System
Operation training manuals, and ten -- SoftApps Database Administration training
manuals. Additional User or training manuals may be purchased at a cost of $150 per
copy. All third party supplied hardware documentation will be delivered to MedPrac as
received by SoftHuge.

204

SoftHuge Industries will provide one copy of the following SoftApps documentation:
Software Requirements Specification (SRS), Software Design Documentation (SDD),
Software Verification and Validation Plan (SVVP), Software Verification and Validation
Report (SVVR).

7 Software Customizations

The baseline effort provides a standard off-the-shelf software product. SoftHuge
Industries has a staff of outstanding software engineers and technicians dedicated to
developing and maintaining database products. The technical database product
support staff, database trainers, and project managers are supported by knowledgeable
health practice and medical insurance professionals. Consequently, SoftHuge
Industries’ engineers can provide software customizations as an extra cost option, if
requested to do so by the customer.

8 Factory Acceptance Test
Specific factory acceptance tests will not be performed on this product.

9 Site Acceptance Test
A standard SoftApps site acceptance test will be used to verify SoftApps installation
and performance at MedPrac’s site as part of the installation process.

10 Maintenance and Support
SoftHuge Industries provides upgrades to SoftApps as part of its annual maintenance
program. The first year warranty service, included in the price, begins following
completion of the SoftHuge Industries site acceptance test. During the software
maintenance and support warranty period, the customer’s staff may contact the
SoftHuge Industries technical staff from 8:30 AM to 5:00 PM (Eastern Time) on
business days. The cost for subsequent years is detailed in the price quote. SoftHuge
Industries can provide a quote for 24-hour/7 day per week SoftApps support service.

The SoftApps support software service agreement includes the following services:

♦ Toll free telephone assistance during the warranty period
♦ SoftApps software and documentation updates
♦ Immediate notification of critical software problems

As a courtesy to SoftHuge customers purchasing the service agreement, SoftHuge
Industries software engineers can provide limited assistance on third party software
associated with the SoftApps package (e.g., Windows and Elcaro). Elcaro relational
database maintenance support is not part of this service agreement. If requested,
SoftHuge Industries will provide a quote for a separate Elcaro database maintenance
service contract. As part of this extra cost option, SoftHuge Industries engineers will
perform the following work on a periodic basis:

Monitor Performance

205

Monitor file I/O
Monitor tables and Indices
Monitor space utilization

Database tuning
Distribute table spaces among different disks based upon usage
Re-size table and index storage parameters based upon statistics
Add/remove indices for faster response to complex queries
Adjust system parameters based on changing needs

Database maintenance
De-fragment table spaces
Cleanup temporary (unused) space
Archive unused data
Backup system

11 License
SoftHuge Industries provides the license to use its software products and copies of the
executable files. SoftHuge Industries retains all ownership rights to the software.

SoftHuge does not transfer either the title or the intellectual property rights to MedPrac.
MedPrac may not sell, redistribute or reproduce the Software, nor decompile, reverse
engineer, disassemble or otherwise convert the Software to a any other form. SoftHuge
owns all trademarks and logos and the customer may not copy or use them in any
manner.

12 SoftHuge Industries Quality Assurance Program

The SoftHuge Industries software quality assurance program requires the completion of
a Software Quality Assurance Plan (SQAP) for each project. The SQAP describes the
methodology SoftHuge uses to produce the software and related documentation. The
SQAP for SoftApps includes a Software Verification and Validation Plan (SVVP) and a
Software Verification and Validation Report (SVVR).

The SVVP ensures the software meets the requirements in the Software Requirement
Specification (SRS) and the design in the Software Design Description (SDD). The
SVVP also ensures compatibility between the software and the user documentation.
These quality assurance documents (SQAP, SVVP, and SVVR) are placed in storage
for five years.

13 Service Support

SoftHuge employs a corrective action system to accept and act on customer complaints
and process related problems. This software support program includes telephone
support, software and documentation updates released during the support period, and
notice of any critical software problems. Service support is included for the first year of

206

operation following the site test. The customer may purchase support for subsequent
years.

14 Training

SoftHuge Industries maintains a Training Department that will conduct two training
course for up to 10 students in each course at your facility. The courses will be SSO-
1234 [SoftApps System Operation] and SDA-5678 [SoftApps Database Administration].

15 Terms and Conditions
15.1 Software Product Conditions

SoftHuge Industries agrees to grant and the customer agrees to accept a
nontransferable and nonexclusive License from SoftHuge Industries on the following
terms and conditions:

15.1.1 The customer shall have the right to use SoftApps software solely for internal
purposes on designated computers.

15.1.2 Title to and ownership of the SoftApps software shall remain with SoftHuge
Industries.

15.1.3 MedPrac agrees not to provide or make available the SoftApps software to any
person other than MedPrac or SoftHuge Industries employees without the prior
written approval of SoftHuge Industries.

In the event, MedPrac neglects or fails to perform or observe any of its obligations
under this agreement, all licenses granted to MedPrac shall immediately terminate.
Within two (2) weeks after any such termination, MedPrac shall return the SoftApps
software, all documentation to SoftHuge Industries and cease using the SoftApps
software.

15.2 Cancellation or Changes
MedPrac may cancel this order on written notice to SoftHuge Industries and upon
payment to SoftHuge Industries of the cancellation charges specified below.
MedPrac agrees to pay SoftHuge Industries 75% of the contract price for goods and/or
services if the cancellation occurs 31 days or more after order placement.
MedPrac agrees to pay SoftHuge Industries 50% of the contract price for goods and/or
services if the cancellation occurs 30 days or less after order placement. MedPrac may
not cancel the order after shipment. MedPrac may not reschedule or change any order
without SoftHuge Industries’ prior written consent.

15.3 Price and Payment
Terms of payment are cash upon delivery as described in the attached quotation. A
finance charge of 1 1/2% per month will be assessed on any amounts outstanding
beyond 30-day payment terms. Price is in U.S. currency.

207

15.4 Taxes
Prices are exclusive of all federal, state, or local property, license privilege, sales, use,
excise, and other taxes and government charges. Customer shall be responsible for all
such taxes.

15.5 Title and Risk of Loss
Title to and risk of loss for Domestic U.S. shipments shall pass to the customer at the
customer’s shipping address.

15.6 Limitation of Liability
Under no circumstances, including negligence, shall SoftHuge be liable for any special
or consequential damages that result from the use of, or the inability to use SoftApps
materials. In no event shall SoftHuge’s total liability from all damages, losses, and
causes exceed the amount paid to SoftHuge on this contract.

The seller and its subcontractor’s liability for damages arising out of or connected with
the sales contract shall not exceed the purchase price of such goods and/or services.

15.7 Right to Use Software
Software supplied by SoftHuge Industries may only be used on the computer system
specified. It shall not be made available to any other person or entity without prior
approval of SoftHuge Industries.

15.8 Delays
SoftHuge Industries shall not be liable for delays in performing or failure to perform its
obligations under the sales agreement resulting directly or indirectly from acts of God;
Customer actions; governmental priorities; fires; strikes or other labor disputes;
accidents; floods; war; riot; terrorism; delays in obtaining or inability to obtain materials,
components, labor, fuel or supplies; or any other circumstances beyond SoftHuge
Industries’ control. In the event of any such failure or delay, the time for SoftHuge
Industries’ performance shall be extended by a period equal to the time lost due to such
failure or delay. SoftHuge Industries shall notify the customer promptly of any material
delay.

15.9 Patents
SoftHuge Industries owns all patents associated with developments made under this
Sales Contract.

15.10 Ownership of SoftHuge Industries’ Data, Etc.
Any drawings, manufacturing data, documentation or other information delivered to
MedPrac by SoftHuge Industries are the property of SoftHuge Industries and may not
be reproduced or copied, and shall not be used except in connection with the goods
and/or services described in this agreement.

15.11 Warranty

208

15.11.1 Basic Warranty
Equipment manufactured and software developed by SoftHuge Industries is warranted
against defects in materials and workmanship for a period of twelve months from the
date of shipment, provided that the equipment/software has been used properly.
Equipment and/or software provided by SoftHuge Industries from other manufacturers
carry the warranties provided by those manufacturers.

During the warranty period, MedPrac will return the equipment to the factory for repair
or replacement. The transportation cost, to and from SoftHuge Industries including
insurance, will be paid by SoftHuge Industries.

15.11.2 Warranty Exclusions
Warranty service is contingent upon the proper use of all equipment and does not cover
equipment which has been modified without SoftHuge Industries' written approval, or
which has been subjected to unusual physical or electrical stress as determined by
SoftHuge Industries Service personnel. SoftHuge Industries shall be under no
obligation to furnish warranty service: (1) if adjustment, repair, or parts replacement is
required because of accident, neglect, misuse, causes other than ordinary use; (2) if
the equipment is maintained or repaired by other than SoftHuge Industries personnel
without the prior approval of SoftHuge Industries; (3) if the SoftApps software has been
modified or a software application has been added to SoftApps by the customer’s
personnel.

209

Chapter 5 Questions

1) Define organizational planning.

2) Define scope management.

3) What are the essentials of a project plan?

4) Why is project planning so important?

5) Why is managing the project scope important?

6) What is the difference between an RFP and a RFQ? Which is easier to assemble
and why?
7) Why does a customer distribute an RFP?

8) What should an RFP response contain?

9) Describe the circumstances under which an organization decides to respond to an
RFP or RFQ.
10) Explain why it is necessary to involve other departments and functional managers in
the preparation of a labor estimate and a schedule.
11) Describe the use of a project charter.
12) What should a project charter contain?
13) The ABC organization has received a contract from the XYZ organization to develop
a Widfram. Must the project manager develop a project charter? Explain your
answer.

14) Explain why it is necessary to involve other departments and functional managers in
the preparation of a labor estimate and a schedule.

15) A technical person at the Zeta Corp0oration has an idea for an improvement to a
product presently manufactured by the organization. She would like to prepare a
prototype unit. Describe the information that she should present to the Vice
President to seek funding approval for this project.

16) What is a milestone?
17) List five benefits of a project plan.

18) Identify the three documents required for a project plan.

19) What is the fundamental purpose of a statement of Work?

210

20) Identify 10 items included in a statement of work and describe their importance.

21) The text requests the reader to critically examine the sample statement of work in
Exhibit 5-4 and identify the paragraphs that describe the customer’s responsibilities.
What are they?
22) Describe the document that a project manager must have before preparing a project
schedule.
23) Professionals frequently complete a timecard describing their daily activities. Why is
this important?
24) Describe the importance of a work breakdown structure.

25) Prepare a list of tasks to make a breakfast for six people. We will offer hot oatmeal,
eggs, bread, fresh orange juice, a fruit cup, coffee, and cake. We wish to serve the
breakfast soon. Identify the tasks that can be completed together. Organize the list
into a work breakdown structure and assign personnel to each task. Estimate the
time required to complete each task and sketch a schedule for the breakfast.

26) Describe the contents of a project specification.
27) Discuss the value of a project specification.
28) What environmental characteristics may be considered in a product or system
specification?

Note: Widget, Plamfly, Widram are fictitious products and companies created for
illustrative purposes.

211

CHAPTER 6

Project Time Management

Out of clutter, find simplicity
From discord, find harmony
In the middle of difficulty lies opportunity.
-- Albert Einstein, Three Rules of Work

<>

Chapter objectives


Understand the relationship between the project schedule and the work
breakdown structure
Understand the need for a project schedule
Read and interpret a project schedule
Analyze a project schedule to determine task priorities
Identify and find the critical path
Prepare a project schedule

Project Time Management

Project time management includes the processes required to ensure timely completion

of the project (PMBOK, 1996). The schedule represents the fundamental tool used by

a project manager to plan and then control activities. At a minimum, it consists of the

following:

212

1) A list of tasks required to complete the project,

2) Task duration, and

3) Task dependencies.

Frequently, PMs include as part of the schedule the department or personnel

responsible for task completion. Sometimes, the PM creates a separate document

called a Responsibility Assignment Matrix (RAM) that lists the people or the department

responsible for each WBS element. These tools represent ways of communicating

project information with the project team.

Task dependencies require knowledge of the predecessor and successor tasks

associated with a given task. This chapter will enable the reader to read, interpret and

prepare a project schedule. It will accomplish this by actively engaging the reader in the

process of preparing a Gantt chart.

The time management process begins with the creation of the Work Breakdown

Structure discussed in chapter 5. The PM and the functional managers identify the

specific activities needed to produce and deliver the project deliverables. With every

activity defined, the project team determines duration and sequence relationships. To

accomplish this with the highest confidence in its accuracy, the PM requests assistance

from the functional managers. They estimate the length of time for each task and

recommend the appropriate sequence relationship. That is, they identify the task or

tasks that should precede or follow any given task. Teams use their collective expert

213

judgement to estimate activity durations. Some organizations keep history files of past

project experiences to support the estimating process.

You want
it when?

Schedule

Requesting assistance from the functional managers and using their recommendations

promotes harmony and encourages ownership of the project among the stakeholders.

The stakeholders assume responsibility for their labor and time duration estimates. If

the PM assigns task durations without consultation with the functional managers, their

response will be “Well, you assigned the dates, you meet it!” Therefore, it is imperative

that discussions take place, issues raised, and disagreements voiced and resolved

before the project begins. The output of this phase will be a schedule with which

stakeholders can live.

214

The schedule establishes a basis for communications among stakeholders. It provides

the entire picture for all participants to view and promotes understanding of activity

relationships. The schedule permits the determination of the project’s critical path. The

critical path represents the subset of project activities that leads to the shortest project

completion time. Extending the length of time for any of the activities on the critical

path increases the overall project duration. Knowledge of the tasks on the project’s

critical path enables project managers to establish task priorities. Stakeholders

understand the need to assign resources (money, labor, facilities, tools, and equipment)

in support of critical path items. Employees can anticipate both project and functional

managers to pay close attention to personnel working on tasks in the critical path. If

issues arise, they want to know about it so they can resolve the problems using the

appropriate resources. Understanding the schedule clarifies and highlights short-term

project objectives. This knowledge informs and consequently aligns personnel with

regard to the project’s needs.

Rudiments of Schedule Preparation

The schedule development process involves defining the activities to be accomplished,

assigning responsibility for completing activities to stakeholders, identifying logical

activity sequences, establishing activity dependencies by identifying successor and

predecessor tasks, and designating task durations. Managers use a Gantt or bar chart

that lists all tasks on the left. A horizontal bar is associated with each task and

illustrates the task duration. An example of a Gantt chart using Microsoft Project is

shown in Figure 6- 1.

215

Figure 6-1 – Gantt Chart Gantt Chart Wizard
Icon

Gantt
Chart
Option

216

Figure 6-2 – Milestone Schedule

217

Organizations commonly use the Microsoft Project software tool for developing

schedules and assigning resources. Figure 6-2 illustrates a schedule consisting solely

of milestones. The diamond ! signifies a milestone. The milestone chart provides an

overview of the entire project and lists only the expected beginning or ending dates of

significant activities. The summary solid rectangular line in Figure 6-2 serves to indicate

the duration of all of the activities falling under it.

Traditional Gantt charts use a horizontal rectangle to denote the duration of a task.

The length of the rectangle indicates the length of time the task takes. The user must

observe the units on the time scale to assess the actual task time. The horizontal time

axis in Figure 6-2 denotes quarters or 3-month intervals. The user has the ability to

make these intervals finer or coarser to suit their needs.

A rectangle partially filled with a solid bar illustrates that work has begun on this task.

If the bar extends across the entire task then work on the activity has completed.

218

Usually, the start of a task depends on the conclusion of a prior activity. This common

finish to start (FS) relationship looks like

Task A
Finish to Start (FS) Relationship

Task B

The arrow extending from task A to task B signifies that task B begins after Task A

finishes. The tasks are sequential. Task B requires the completion of task A. The

vertical down arrow identifies the dependency of task B on task A. Task B need not

follow immediately after the conclusion of Task A. The Gantt chart concept permits a

delay before the next task begins as shown below.

Finish to Start Relationship includes a
delay in the start of Task B
Task A

Task B

As an example of finish to start relationships, when baking bread, the baker must mix

the ingredients before kneading. The baker places the dough in the oven after rising

has completed. To ensure a successful product, the baker cannot deviate from the

task sequence. The schedule below illustrates the bread baking sequence. All of these

relationships follow a finish to start sequence. Time always appears on the schedule’s

219

horizontal axis. For a very short duration project, the user can adjust the time axis to

read hours or even minutes.

Mix bread ingredients

Knead Dough

Bread rises

Bake

Time

Other relationships exist between tasks such as a start-to-start (SS) relationship. In the

diagram below, Task D begins only if task C begins.

Task C

Task D

An example of a start-to-start operation involves laying tar on a road surface. Workers

place asphalt on the road surface and then distribute it evenly in an interactive manner.

220

The asphalt and tar smoothing process begins immediately following the placement of

the material on the road surface and continues concurrently until task completion.

The finish-to-finish relationship demands linked tasks finish together as in tasks E and

F.

Task E

Task F

Finish-to-Finish (FF) tasks frequently involve inspections or testing. The electrical

house-wiring task in the fabrication of a new house cannot be considered complete until

the town or city inspects it. Only then can the contractor feel confident about releasing

the electricians. An example in the software development industry involves

programming. Writing software code and preparing the documentation represents two

processes of many in a large software project. The successful execution of the

Software Verification and Validation Plan enables Quality Assurance personnel to

confirm correct software operation. Only at that point will the software design manager

acknowledge completion of the software design process.

Some tasks have no predecessors and can proceed at the same time, also referred to

as in parallel, with other tasks. These activities begin at the discretion of the project

221

planner. If possible, link tasks. This enables the planner to easily shift the schedule if

the team decides to insert an additional task into the plan.

Schedule planners regard some task dependencies as mandatory because the

processes that they describe force the relationship. Project teams use their experience

and judgement to establish task linkages.

Creating a Schedule

In order to obtain the maximum benefit from the text, the remainder of this chapter

requires the reader to use Microsoft Project. Consider this non-technical project

example to illustrate the schedule development process using Microsoft Project. A local

charity decides to conduct a fund raising event. The event will feature a motivational

speaker. The charity seeks to use neighborhood facilities and the organization wishes

to hold the event in 4 months. Organization committees will decide the food service

and the price of tickets.

A charity executive committee meets to identify the tasks required to conduct this event.

They accomplish this by engaging in a brainstorming session and creating lists of tasks

in a random fashion. After this initial attempt to identify the work, they organize the

activities into logical groupings. The executive committee selects a person who agrees

to take responsibility for leading the effort -- a project manager. The PM integrates the

lists of activities and resolves the organization’s competing needs for common

resources into a viable plan. The PM presents the draft schedule and submits it to

222

organization members (functional managers, committee members and other

stakeholders) for comments and corrections. After incorporating the stakeholders’

responses, the PM presents a baseline operational schedule to the team.

The PM prepared the baseline work breakdown structure for the charity event shown in

Exhibit 6-1. The table in Exhibit 6-1also includes an estimate of the labor hours that the

stakeholders have provided. Note that 0d in Microsoft Project designates a milestone.

Tasks consisting of lower level tasks do not have associated labor hours. Microsoft

Project will automatically compute the time required for the higher-level tasks from the

entries associated with lower level tasks. For example, WBS numbers 8.4.1, 8.4.2 and

8.4.3 determine the hours in 8.4. After reviewing the list of tasks, enter the data into

Microsoft Project following the directions in the next section.

223

Exhibit 6-1 - WBS for a Charity Organization Speaking Event

LINE WBS TASK NAME OR DESCRIPTION LABOR PREDECESSOR
NO. NO. HOURS LINE
1 Executive Group Agrees to hold 0d
1 Charity Speaker Event
2 Executive Group Organizes 60h 1
committees and prepares draft
2 schedule
3 3 Activity & committee budgets
4 3.1 Prepare Budgets 10h 2
3.2 Budget acceptable -- Go/no-go 0d 4
5 decision
6 3.3 Distribute Budgets to Committees 24h 5
7 4 Agree on Event Date - 12/4/04 0d 6
8 5 Site selection committee
5.1 Contact neighborhood fraternal 40h 7
9 association hall for availability
10 5.2 Confirm Event date 8h 9
11 5.3 Site Status Decision 0d 9,10
12 6 Speaker selection Committee
13 6.1 Evaluate potential speakers 80h 6
14 6.2 Select speaker 24h 13
15 6.3 Make offer to speaker 24h 14,16
16 6.4 Confirm date availability with speaker 8h 14
17 6.5 Speaker Decision 7d 15
18 7 Critical Review Meeting
19 7.1 Organizational meeting
7.1.1 Status - Budget, event date, site, 8h 6,11,17
speaker agreement, committees in
20 place
21 7.1.2 Final Go/No-go decision 0d 20
22 8 Publicity Committee
23 8.1 Prepare information circular 40h 6,21
24 8.2 Mail flyer to organization members 24h 23
25 8.3 Distribute flyer to community stores 40h 23
26 8.4 Event Advertisement
27 8.4.1 Prepare advertisements 80h 6,21
28 8.4.2 Place ad in Newspaper 8h 27
29 8.4.3 Place ad on Radio & TV 8h 27
30 9 Ticket committee
31 9.1 Print event tickets 80h 6,21
32 9.2 Event ticket distribution 160h 31

224

Exhibit 6-1 - WBS for a Charity Organization Speaking Event (continued)

NO. NO. HOURS LINE
33 10 Food and refreshment committee
34 10.1 Decide on Food and refreshments 2h 21,6
35 10.2 Purchases
36 10.2.1 Food 3h 34,44SS-3d
37 10.2.2 Wine & Liquor 1d 34,44SS-3d
38 10.2.3 Refreshments
39 10.2.3.1 Snacks, cake, soda, coffee, tea 1.5h 34,44SS-3d
40 10.2.4 Supplies
10.2.4.1 Paper plates, cups, napkins & 0.5h 34,44SS-3d
41 utensils
42 10.2.4.2 Trash bags 0.5h 34,44SS-3d
43 11 Event Day Activities
44 11.1 Day of Event Kick-off Status Meeting 30m 30,22,21
11.2 Day of event preparations - Set-up
45 committees
46 11.2.1 Set-up Tables 45m 44
47 11.2.2 Set-up Chairs 45m 46
48 11.2.3 Set-up Table Place Settings 1h 47
49 11.2.4 Set-up cocktail hour area 1h 44
50 11.2.5 Audio system
51 11.2.5.1 Install 2h 44
52 11.2.5.2 Test 30m 51

225

Exhibit 6- 1 - WBS for a Charity Organization Speaking Event (continued)

NO. NO. HOURS LINE
53 11.3 Food and refreshment committee
11.3.1 Obtain pots, pans, and serving 30m 44
54 dishes
55 11.3.2 Prepare & cook food 4h 54
56 11.3.3 Set up food and refreshment tables 3h 44
57 11.3.4 Refreshment and food distribution 3h 55,56
58 12 Event Activities
59 12.1 Ticket Collection 3h 44
60 12.2 Cocktail hour 1h 49
61 12.3 Speaker meets reception committee 0.5h 60
62 12.4 Introduction of speaker to audience 0.2h 61
63 12.5 Speaker’s talk 1h 62
64 12.6 Thank speaker 0.1h 63
65 13 Clean-up Committee
66 13.1 Obtain trash bags 0.2h 64
67 13.2 Clean hall 2h 66
68 13.3 Teams Collapse and Rest 1h 67

Microsoft Project

Load Microsoft Project on your computer and select the Gantt chart option (refer to

Figure 6-1). The Gantt chart icon appears in the column on the left side of the screen.

Click on Project - Project Information and enter the project start date -- August 1, 2004.

Select Schedule from: Project Start Date. This last statement references all activities

to the project’s start date.

Task Entry

Enter each activity listed in Exhibit 6-1 under the column called Task Name or load the

file called Charity Event on the disk supplied with the text. For the moment, disregard

the WBS number. Do not skip lines between tasks. Figure 6- 3 illustrates the entry of

226

some of the activities into the column called Task Name. If you need to add or delete

lines, use the INS (insert) key or the DEL key, respectively. Save your data every 10

minutes to avoid losing information. Use the save without a baseline option. Call the

file Charity Event.

227

Figure 6-3 – Project Task Name Data Entry

Project
Indent or Tools Information
Format
outdent

Working Time

Microsoft Project defaults to an 8-hour workday (8:00 a.m. to 12:00 noon and 1:00 p.m.

to 5:00 p.m.). Other than defining Saturday and Sunday as non-working days, the

program makes no assumptions regarding other non-working days. To modify non-

working days (e.g., to accommodate vacation, holidays, organization events, creating a

228

six or seven day week, etc.) or the number of hours in a working day, click on Tools –

Change Working Time and make changes as required. Use the pop-up window buttons

or type the correct working time. Press OK to save your preferences.

The project organization’s schedule planner controls the horizontal length of the chart

by choosing to view it in days, weeks, months, or quarters. Microsoft Project offers a

variety of options that enables the planner to use two time scales simultaneously

(Major and Minor Scale) and choose the scale’s units. Choose your preference by

selecting Format – timescale. For this exercise, make the selections shown in Figure 6-

4.

Figure 6- 4 -- Microsoft Project Timescale Selection

229

WBS Number

Designate a column to the left of the task name for the WBS number. To do this,

highlight the task column by clicking once on the word Task Name. Select Insert –

column. Under the Column Definition window (Figure 6- 5), use the drop down menu

listed under Field name and select WBS. Click OK.

Figure 6-5 – Creation of WBS column using the Drop-down Menu

After completing the entry of the list of project activities and inserting the column for the

WBS number, assign a WBS level number to the tasks in Exhibit 1. As an example,

highlight the task Prepare Budgets on line 4. Move the cursor and click on the right

arrow indent shown in Figure 6-6. The task entitled Prepare Budgets moves to the right

and the WBS number on line 4 changes to a 3.1. Repeat the process for all second

through fifth level tasks shown in exhibit 6-1. A level 3 task such as 6.1.2 requires two

clicks on the right arrow. If you inadvertently click too many times, use the left arrow to

reduce the WBS level.

230

Figure 6-6 – Task Names with WBS Completed WBS Column Entry

Indent

Task Duration

Duration on the Microsoft Project Gantt chart corresponds to the number of labor hours

required to complete an activity. A job that takes a person 6 hours to complete will

reduce to 3 hours, if we decide to put assign 2 people to do the work. Just a word of

caution. In its default mode, Microsoft project halves the time to complete work if two

people are assigned to a job, life does not always work in that linear fashion. A woman

requires nine months to deliver a baby. Placing two women on the job will likely have

231

very little influence on the results. Indeed, placing additional people onto a job will

frequently not provide a proportional relationship in time saved. More often than not,

the time to complete the task will reduce, but not necessarily inversely proportional to

the number of people assigned to the job.

The standard Microsoft Project day lasts 8-hours. Consequently, unless the user

changes the day’s length, the application automatically distributes a task requiring

greater than 8 hours (after taking into consideration the applied resources) over multiple

days. Exhibit 6-1 offers recommendations for the duration of the charity event activities.

Enter duration data only for the non-bold tasks. As previously stated, Microsoft Project

automatically calculates the duration time for tasks in bold print. Planners refer to

these bold print tasks as roll-up activities. They correspond to summations of the lower

level WBS elements that make up that task.

As you enter the durations, use the abbreviation w, d, h, and m corresponding to

weeks, days, hours, and minutes. (1w corresponds to 1 week, 3d corresponds to 3

days, 2h corresponds to 2 hours, and 20 m corresponds to 20 minutes.) Change the

duration times if you wish. Do not enter any dates in the start or finish columns. Figure

6-7 illustrates the entry of the duration data onto the Gantt chart.

232

Figure 6-7 – Task Duration entered into the Gantt Chart

Task Dependencies

The next step in the development of a schedule involves establishing task

dependencies. The planner must identify the tasks that precede or follow other

activities. As in estimating labor time, this step depends on the planner’s opinions,

perceptions, and preferences. Microsoft Project Gantt chart includes a Predecessor

column, which the planner completes.

The predecessor column in Exhibit 6-1 identifies tasks that precede a given line. As an

example, WBS no. 8.1 on line 23 (Prepare information circular) can only begin

233

following the completion of the tasks on line numbers 6 and 21. If during the actual

project either of these activities incurs delay, then WBS 8.1 will not begin on time. It

must await the completion of the tasks Distribute Budgets to Committees and Final

Go/No-go decision. The PM then must inquire into the nature of the delay and make

decisions to get the job back on schedule. As the planner inserts the predecessor line

numbers into the schedule, a light line drops from the predecessor task to the

successor task. Figure 6-9 illustrates the insertion of the predecessor tasks into the

Charity Event schedule.

As you enter dependency information into the chart, most should be relatively

straightforward. Creating a schedule making extensive use of dependencies permits

an easily modifiable chart. The planner may desire to insert at task. If the planner

previously linked all tasks, then the tasks automatically shift to accommodate the added

task and the changed dependencies.

Sometimes the plan includes a firm date as in the date of the charity event in our

example. The executive committee scheduled December 4 for the gala event. We

cannot change this date – “it’s cast in concrete.” Consequently, during the preparation

of the schedule, we inserted December 4 as a hard date in the Gantt chart for line

number 44 (WBS number 11.1). The Microsoft Project indicator column (the column

headed by the encircled (i) signifies a schedule constraint in line 44.

234

The Food and Refreshment committee decided to purchase the food 3 days before the

actual event day. The predecessor constraint includes the type of food decision (line

34, WBS no. 10.1) and the day of the event minus 3. That is, the food purchases

precede or lead the event day as determined by line 44 by 3 days. SS-3 means that

the food purchases start 3 days before the start of the event day activities. Therefore,

the purchases on line numbers 36,37,39,41,and 42 reads 34,44SS-3.

There may be times for which a successor task must lag the predecessor task by 3

days. To delay a successor task the entry would look like 44SS+3.

Responsibility Assignment Matrix (RAM)

Frequently project planners prepare a Responsibility Assignment Matrix (RAM) as

shown in Exhibit 6-2. This is an ideal tool to assign people to tasks and make them

aware of the due date. The creator of the list distributes it to all team members. This

avoids any misunderstandings. Some planners use the schedule to record

responsibility. To do this, place the cursor on a task and double-click on the task name.

Select the Resource tab in the Task Information window. Enter the group, department

or person’s name in the Resource Name line that will assume responsibility for

performing the task (figure 6-8). The number 100% signifies that the Resource will

work on the job 100% of their time. If, for example, the resource spends 50% of its time

on the task, the 60-hour calendar time doubles and the schedule stretches. Experiment

with this feature.

235

Figure 6-8 – Task Information Window

236

Figure 6-9 - Charity Event Schedule Includes Predecessor Information

237

Exhibit 6-2 – Responsibility Assignment Matrix (RAM)

WBS NO. TASK NAME OR DESCRIPTION Task Responsibility
1 Executive Group Agrees to hold Charity Executive Committee
Speaker Event
2 Executive Group Organizes committees and Executive Committee
prepares draft schedule
3 Activity & committee budgets
3.1 Prepare Budgets Project Manager
3.2 Budget acceptable -- Go/no-go decision
3.3 Distribute Budgets to Committees
4 Agree on Event Date - 12/4/04 Executive Committee
5 Site selection committee Site Selection
Committee
5.1 Contact neighborhood fraternal association hall
for availability
5.2 Confirm Event date
5.3 Site Status Decision
6 Speaker selection Committee Speaker Selection
Committee
6.1 Evaluate potential speakers
6.2 Select speaker
6.3 Make offer to speaker
6.4 Confirm date availability with speaker
6.5 Speaker Decision

Critical Path

As previously stated, the critical path controls the project’s completion date. The project

manager identifies those tasks that cannot be delayed without affecting the finish date.

Those tasks demand the PMs close attention. Microsoft Project permits the

determination of this path. Click the Gantt chart wizard icon (Figure 6-1) and follow

directions. Microsoft highlights the resulting critical path in red. The PM usually

informs the managers and personnel working on the tasks in the critical path of the

importance to project success of their start and completion dates.

241

Schedule Progress

After the PM develops the baseline schedule and gains agreement among the

stakeholders of its value, the PM uses it to track progress. Microsoft Project permits the

user to enter the percent completion for each task on the chart. Double clicking the

task, once again brings up the Task Information window. On the General tab, the

percent complete entry area permits the PM to enter any value between 0 and 100%

(Figure 6-10). A solid line appears in the horizontal task bar that corresponds to the

amount of work completed.

Different philosophies exist among PMs with regard to this value. Some permit the

functional manager or person responsible for the task to select any numerical estimate

that approximates the percent of the task completed. While this offers the functional

manager great flexibility in selecting the progress, it is very subjective. Can the

manager really distinguish between 17% and 19% task completion? Therefore, some

PMs restrict the selected completion estimate to only five values – 0, 25, 50, 75, and

100%. Still others believe in assigning only three numbers – 0, 50, and 100%. In this

last case, if the functional department did not begin the task then the schedule reflects

the completion of 0% of the task. The PM assigns 50% completion as soon as the

functional department begins the task. Only following the completion of the task does

the PM assign 100%. Selecting the percent of task completion is very subjective. This

last approach attempts to simplify the percent complete selection. However, if a

scheduled task lasts for more than 4 weeks, the PM may not have an accurate

242

indication of the progress for most of this time. At the end of a long working period, the

PM could face an unpleasant surprise.

During the schedule preparation phase, the PM requests functional managers to

examine long duration efforts and separate them into their constituent parts. One or two

week task durations are best – certainly not more than 4 weeks. The PM requests that

functional managers arrange that each activity have an easily measured and well-

defined output. This gives the PM maximum insight into the job’s progress. A major

contributor to project success involves clarifying stakeholder expectations so that

everyone understands their roles and the work expected of them.

Figure 6-10 Task Information Window Used to Enter Percent Task Completion

243

Printing Niceties

The planner can tidy up the completed schedule by adding the project name to the

head of each printed sheet, the date the planner prepared the schedule and the

planner’s name to the printed output. To enter this information, click Page Setup on the

File menu. After clicking the Header, Footer, or Legend tab and selecting the Left,

Center, or Right tab add the project information in the text box.

Sidebar: The 8-Hour Day

Most planners use an 8-hour day for the purposes of schedule preparation. Do we

really work on the job for 8 hours? If we work from 8 a.m. to 5 p.m. and take an hour

for lunch, we remain at the job for 8 hours. Eight hours a day, five days a week over 52

weeks results in 2080 labor hours during a year. Perhaps you are thinking to yourself,

“Well we don’t work during vacation and holidays.” The benefit packages in most

organizations include two weeks or 80 hours of vacation time and 10 paid holidays

(e.g., Memorial day, Independence day, Labor day, Thanksgiving, and Christmas)

during the year. Think about all the non-productive work time that we engage in during

the workday – department meetings, coffee breaks, office chitchat, talking with your

colleagues about the latest political scandal or baseball scores. How about sick days

and personal days? Table 6-1illustrates that we average less than seven productive

work hours per day after taking into consideration non-productive work associated

activities. Microsoft project can adjust the schedules by changing the work hours from

8 to 7 hours per day. A schedule that uses a 7-hour day will extend the completion time

by 12% as compared with a schedule based on 8 working hours per day. However,

244

very few executives will accept this change or the argument just advanced. They will

argue that 1) the organization compensates workers for 8-hour days and expects 8

hours of work, 2) the planner should adjust the schedule for holidays and vacations,

and 3) don’t plan for sick and personal time because employees may then take it as a

matter of course.

245

Table 6-1 Approximate Annual Labor Hours

TASK DAILY WEEKLY ANNUALLY
Department meeting 1 50
Vacation 80
Designated Holidays 80
(10 Days including New 80
Years Day, Christmas, July 4,
Labor Day, Memorial Day,
Thanksgiving day, etc.)
Personal and sick time 30
Training 30
Coffee break 2/3 (40 minutes) 3 150

Total non-working time 420

Baseline Employment Hours 40 2080

Baseline Working Hours 1660

1660 labor hours per year averages 6.5 hours per day.

Summary

The Gantt or Bar Chart tool assists project managers to organize jobs. The schedule

forms the basis for all project planning and predicting. PMs should never unilaterally

assign activity labor hours or time durations during the preparation of the schedule.

Functional managers must contribute to the schedule’s development. Participation in

the estimation process forces “ownership” and requires functional managers to take

responsibility for their decisions. The PM leads the team in identifying the work

activities, assigning priorities, developing task dependencies and time durations. The

PM uses the schedule as a communications tool. Team members gain an

understanding of their project roles and responsibilities by reading the specification and

246

developing estimates. During the project, monitoring the schedule on a daily basis

informs all participants of potential trouble spots.

The PM and the project team benefits from the use of scheduling tools. The schedule

provides management with the ability to plan for best possible use of resources in order

to achieve a given objective within time, cost and resource limitations. The schedule

facilitates “what if “ exercises. With an understanding of the critical activities, slack

time, uncertainties and the crucial task elements, the PM and the functional managers

can experiment with the schedule by applying a variety of resources at different times to

determine the overall project impact.

The project schedule planning process takes place during the proposal phase. It

consists of the following steps:

1. PM highlights the deliverables and distributes the specification to the functional

managers

2. Establish project start and completion dates

3. Create a project Responsibility Assignment Matrix (RAM) to complete the

proposal

4. Kick off meeting to review assignments

5. Identify capital equipment required

6. Functional managers submit to PM department names/titles of personnel

necessary to accomplish each task

7. Functional managers submit to PM task duration estimate

247

8. Task dependency decisions

- Which tasks can be done in parallel?

- Which tasks require the completion of other tasks before they can start?

9. PM prepares draft WBS

10. Functional managers review draft schedule.

248

Chapter 6 Questions

GANTT Charts
1) Identify whether the following statements are True or False:
a) The vertical axis on the Gantt chart matrix lists all the tasks to be performed.
b) Each row in a Gantt chart contains a single task that must be completed during
the work effort.
c) Each row in a Gantt chart contains a WBS number.
d) The horizontal axis on the Gantt chart has columns indicating estimated task
duration and sometimes the name of the person or department assigned to the
task.
e) A solid bar on the horizontal axis indicates progress for project task under-way.

2) Select the best answer. A critical path
a) Contains the maximum schedule slack time.
b) Involves a set of unrelated tasks.
c) Consists of a set of dependent tasks, which together take the longest time to
complete.
d) Consists of tasks all performed by a single department or person.

3) Tasks falling on the critical path
a) Should receive special attention by both the project manager and the personnel
assigned to them.
b) Require minimal attention.
c) Will be performed by an external organization.
d) Will be performed by the PM department.

4) The schedule development process involves
a) Defining the activities to be accomplished
b) Assigning responsibility for completing activities to stakeholders
c) Identifying logical activity sequences
d) Establishing activity dependencies by identifying successor and predecessor
tasks
e) Designating task durations.
f) All of the above

5) Plan for remodeling a bathroom

The following list represents typical tasks involved in remodeling a bathroom. Use the
task list and prepare a schedule by performing the following:

a) Establish a start date for this project.

249

b) After reviewing the tasks shown in the accompanying table, identify the
milestones.
c) Assign duration times for each task.
d) Assign responsibility for each task.
e) Assign task interdependencies
f) Prepare a schedule by entering the data in parts a) through e) using Microsoft
project.
g) Determine the project’s critical path.

250

Bathroom Remodeling Task List
Task no. Task Description Duration Dependency
1 Decision to Redesign bathroom
2 Design Concept & Layout
3 Obtain Construction Permit
4 Component selection
5 Plumbing fixture selection
6 Electrical fixture selection
7 Wall and floor cabinet selection
8 Tile selection
9 Window selection
10 Shower closure
11 Seek design input from contractors
12 Receive contractor bids
13 Plumber
14 Electrician
15 Tile layer
16 Carpenter
17 Painter
18 Award Contract(s)
19 Payment #1
20 Procure Material
21 Bath & faucets
22 Shower & faucets
23 Toilet
24 Sink & faucets
25 Tile
26 Floor cabinet
27 Medicine cabinet
28 Towel rack
29 Toilet paper holder
30 Soap dish
31 Tooth brush holder
32 Window
33 Shower door
34 Payment #2
35 Order and receive trash debris container
36 Remove existing walls and floor
37 Remove old fixtures
38 Plumbing
39 Electrical
40 Equipment delivery

251

Bathroom Remodeling Task List (continued)

Task no. Task Description Duration Dependency
41 Rough installation
42 Carpentry
43 Window
44 Install plumbing pipes
45 Install electrical wiring, switches, fixtures
46 Install wallboard
47 Install wall and floor tile
48 Install accessories
49 Install plumbing fixtures
50 Test and evaluate
51 Trash pick up
52 Paint
53 Town Inspection
54 Final Payment

252

6) Plan for a Computer Network Installation

The following list represents typical tasks involved in installing a computer network.
Use the list and prepare a schedule by performing the following:

a) Establish a start date for this project.
b) After reviewing the tasks shown in the accompanying table, identify the
milestones.
c) Assign duration times for each task.
d) Assign responsibility for each task.
e) Assign task interdependencies
f) Prepare a schedule by entering the data in parts a) through e) using Microsoft
project.
g) Determine the project’s critical path.

Computer Network Installation Task List

Site survey
Air conditioning
Electric capacity
Electric outlet placement
Available rooms

Plans
Define number and location of users
Air conditioning plan
Electric power distribution and outlet placement
Equipment location
Network Architecture plan
Cabling type (fiber optic, wire, RJ-45, 10baseT, category 5 etc.)
Wide area network (WAN)
Local area Network (LAN)
Server protocol
Ethernet
Token ring
TCP/IP
Novell
Routers
Bridges
Software and software tools
Firewall
Security
Virus detection
E-mail

253

World wide web
File transfer protocol
Internet service provider trade study
Internet connectivity option trade study
Dial-up access
Leased line
Infrastructure Planning
Room construction
Furniture (desks, chairs, etc.)
Cabling
Internet connections
Client workstation connections
Identify central wiring area
Local Construction code impact
Required licenses and permits
Preparation of implementation plan

Computer specification
Server
Workstation
Hubs, Bridges & routers

Design Review

Initial and Ongoing support
Assemble and train staff
Select Network management & system administration tools
Develop a user address plan
Develop Help desk procedures
Develop End user technical support policies

Purchases
Computers
Furniture
Cable and connectors
Hubs, Bridges & routers
Wire trays
Dropped ceiling equipment
Miscellaneous cabling equipment and tools

Construction
Obtain local permits and licenses
Rooms
Heating/air conditioning equipment
Install cabling trays and cabling
Electric power connections

254

Internet connections
LAN connections

Install furniture

Computer Installation
Unpack
Install software
Place and connect computers in approved locations
Assign and install user addresses

Site Test
Prepare a system test procedure
Perform test

User Training

255

CHAPTER 7

Project Estimation and Cost

Always bear in mind that your own resolution to succeed
is more important than any other one thing.
--Abraham Lincoln

<>

Chapter objectives


Understand the difference between bottom-up and top-down estimating.
Understand the elements that enter into a project’s cost
Understand the meaning of direct and indirect costs
Identify indirect cost components.
Understand the difference between cost and price.
Read and interpret the project’s financial statements
Participate in a project cost estimate effort

The PM together with the project cost estimating team establishes a budget before the

project begins. Typically, the cost estimating team consists of the project manager,

functional managers, selected commercial partners and subcontractors. This team has

the objective of approximating the costs of the resources needed to complete project

activities. Every employee action on the project has cost implications. The PM’s

team must predict the cost for the work packages. Following contract award, the PM

carefully monitors both the work progress and the expended funds. At the job’s

256

conclusion financial analysts compare the predicted costs with actual costs to

determine the accuracy of the estimate and the amount of profit the organization

earned on this job. The profit earned on the job may determine the PM’s next job -- a

harsh fact.

Direct and Indirect Costs

Project costs consist of a wide assortment of expenditures – some obvious and some

not. Perhaps the most obvious expense is the employee’s base salary. However, labor

costs represent only a portion of the cost associated with a project. Employees receive

fringe benefits and require office furniture and computers. They share tools, office

furniture, conference rooms, coffee machines and water coolers. Basic operating costs

such as rent and utility bills have to enter the equation. Accountants separate all costs

into direct and indirect categories.

Direct costs identify with a single product, project or contract. Employee salaries

involved with designing, building, testing and installing a product or providing a service

represents one of the largest direct costs. Other direct costs include project related

supplies and material and subcontracted costs. The paragraphs below examine

several of the other significant project direct costs.

Material and Material Handling Costs

All material and supplies required for a job represents a direct project cost. In addition

to purchases, this category includes the lease or rental of special hardware and/or

257

software tools and equipment. Organizations usually add a handling charge to the

material and equipment purchased for a specific job for which they expect the customer

to pay. Material handling costs cover a host of expenses that include storage,

inspection to verify receipt of the correct material, breakage, theft, restocking fees and

the cost of borrowing money to obtain the material. Many organizations charge

customers an additional 10 to 25% of the material cost to offset these expenditures.

Travel and Living Charges

Travel, living and entertainment costs include the costs associated with a business trip

or hosting customers to lunch or dinner. Charges associated with a short business trip

include air, bus, train, taxi fares; reasonable costs for breakfast, lunch, and dinner; car

rental; hotel charges; and parking fees. Travel and living charges can be direct or

indirect. Charges applied to support a specific contract or project are direct costs.

Travel and living charges placed into the indirect category may support a proposal

effort. Many organizations add a percentage of the travel and living charges to cover

the costs of making and sometimes rescheduling reservations, and penalty charges for

changing reservations.

Other Direct Costs (ODC)

Other Direct Costs (ODC) include labor supplied by people and organizations not

directly affiliated with the organization that received the contract. A typical example of

ODC includes engaging a consultant to assist the staff. Frequently organizations

bolster their technical expertise in a discipline by employing independent consultants.

258

The organization may lack manpower to complete a task or they may not have the in-

house expertise in a technology. Sometimes an organization may request the

consultant to provide an independent assessment and review of the work completed to-

date. Outsourcing is a term that organizations use if they choose to subcontract a

portion of the project’s work to external organizations. Other ODC items may include

the rental or purchase of project dedicated equipment such as copy machines,

telephones and FAX units. Project related postage or overnight mail deliveries also fall

into the ODC category. If the contract requires attendance at a conference, then

typical charges to the ODC account also include conference registration fees and

special course costs.

Sales Commission

As with many of the accounting and conventions discussed in this section,

organizations have options in regard categorizing sales commission. Some

organizations combine sales commission as part of general management and

administration others. Others place sales commission into a separate category.

Profit

Profit is the lifeblood of business. Very few reasons exist for not making a profit. Poor

estimating, inept management, or sudden market changes may result in unintentional

losses. If an organization desires to venture into a new area, they may choose to entice

a customer with a lower price than customary or perhaps offer to do the project at cost.

259

Organizations may permit some projects not to make a profit, but they cannot lose

money or they will confront challenges to their continued existence.

Industry executives managing publicly traded companies feel pressure to produce

short-term profits to satisfy Wall Street analysts and stockholder demands. In return for

ongoing short-term profits, the financial expects immediate increases in stock value. So,

a commercial profit-making organization must make a profit to remain viable. Many

dot.com businesses created in the early 2000’s failed because they did not make a

profit. How much profit does the financial community expect of businesses? General

Electric, one of the best operated businesses in the world earned a profit (net income

before taxes divided by gross revenues) of 13-15% percent from 1998-2000. During

the last few years, the Walt Disney Company’s operating profit hovered around 10%.

Organizations doing business with the US government earn about a 12% profit. At the

other extreme, during 1999 and 2000 Microsoft’s profits reached 40%. It’s your call.

Indirect Costs

Indirect costs include all costs that are not direct. Indirect costs apply to two or more

products, projects or services provided or performed by the organization. This

category includes support costs incurred for common or joint objectives. These costs

cannot be identified readily or specifically with a particular project.

Operational costs refer to the sum of direct and indirect costs associated with a

department, business unit or organization.

260

Overhead and G&A Costs

Often indirect costs are divided into two subcategories -- overhead and general

management and administrative (G&A). Overhead costs are indirect costs that support

a specific part or function of the company, but not the whole company. For example,

manufacturing organizations distribute factory maintenance costs to the various

manufacturing jobs performed in the factory. Administrators combine engineering

library costs into the engineering department overhead and not with material handling

or the accounting department. In addition to the cost/lease/rental of buildings and

equipment in which project activities take place, other basic overhead costs include the

licenses and certifications to do business; facility heating; lighting; malpractice, liability,

fire and theft insurance; building, equipment and property maintenance; costs

associated with staffing; supporting libraries; advertising costs; indirect labor such as

plant security, clerical and administrative support personnel; social security,

unemployment and worker’s compensation insurance; and fringe benefits such as

vacation, medical, dental and disability insurance, and pension costs.

General management and administrative (G&A) costs are required to support the

business as a whole and are not associated with any particular department, project, or

program. Common examples of G&A costs include the salaries of the chief executive

officer and his or her staff, legal and accounting costs, marketing expenses, research

and development costs, and bid and proposal (B&P) costs.

261

The classifications of direct versus indirect has to do with the relationship of the cost to

a final cost objective. Overhead and G&A costs are indirect because they benefit more

than one cost objective. The classification into direct or indirect does not bear on the

importance or need for the activity or position. Factory equipment maintenance,

usually an indirect cost, is just as necessary as the direct cost of the machine operator.

The organization’s accounting system collects cost information. As projects incur costs

through labor, material, equipment and other expenditures, the accounting system

assigns and distributes these costs to departments and projects. Accounting systems

create an indirect expense rate, which PMs must add to the individual’s labor rate to

determine the true cost of employing that person. The PM quotes a price to the

customer for the use of an employee that includes the employee’s salary, indirect costs,

sales commission, and profit. The formula for this calculation is:

Customer Price for Employee Labor = Employee Base Salary + Overhead costs +

G&A costs + Sales Commission + Profit

This formula describes the fully burdened labor price that the customer pays to use an

organization’s employee. Most often, organizations relate the overhead costs to a

department and calculate the overhead as a percentage of the employee’s base salary.

The Villa-Tech example later in the chapter illustrates this approach.

262

Some organizations follow an accounting policy of not applying overhead and G&A to

ODC activities. A lower sales price results if the organization wraps a profit around a

consultant’s charges, but not overhead and G&A charges. In this case, reselling a

consultant’s efforts enables the organization to make a profit without using its own

resources -- that’s a winner. Organizations do charge the customer a sales

commission and profit on ODC items.

Bottom-up estimating

Bottom-up estimates begin with a detailed WBS that the project manager develops with

the functional managers. The PM requests support from the functional managers to

estimate the cost of each work package assigned to their department. The estimate

accounts for all of the resources needed to support the design and development, test,

installation, training and any customer handholding. The PM receives the estimates for

each project element and sums the individual project element estimates into a project

total. Table 7-1 illustrates the format for collecting data using a partial WBS. Provided

the organization has a good understanding of the job, this method should result in an

accurate estimate. However, this process is labor intensive and time consuming.

A large electromechanical system may involve an enormous number of technical

specialties, departments and people. Depending on the job, the functional departments

may include many of the following disciplines:

• Electrical/electronics engineering

• Mechanical engineering

263

• Software engineering

• Networking engineering

• Systems engineering

• Model shop

• Engineering assistants

• Hardware test technicians

• Software test technicians

• Factory technicians

• Field service support

• Purchasing

• Publications

• Training

• Configuration management

• Quality assurance

• Reliability and maintainability engineering

• Specialty engineering such as hazardous material control, environmental

testing, nuclear

• Project management

• Incoming inspection

• Administrative support (secretarial and financial)

• Shipping

• Heating, ventilation and air-conditioning (HVAC)

• Legal

264

• Marketing

• Technical library

The job function for the majority of these departments is either intuitive or self-

explanatory. The engineering departments design products, equipment or provide

services within their disciplines. The model shop builds limited product runs in

distinction to the factory, which fabricates larger product quantities. The model shop

generally works closely with engineers and technologists during the construction phase

and requires less instruction than the factory. The software and hardware test group

performs product tests to verify that the product meets the customer’s requirements.

Purchasing receives approved orders for goods and services and attempts to obtain the

best price for these products. Publications accepts the documentation prepared by the

engineering organization and formats to meet the organizations standards so that the

finished document has the same look and feel as other released documents. They

sometimes review and correct grammar and spelling as well as prepare art work for the

documents. Incoming inspection examines packages to verify the contents of the

container agree with the packing slip. They then pass the packing slip to accounts

payable for payment to the supplier. The quality group addresses issues involving

quality assurance, quality control, process improvement, standards, audits, and national

or international quality certifications. Configuration management monitors the project

deliverables – documentation, hardware, software, and services such as training,

maintenance, and product repair. Sometimes a product has several variations and

configuration management keeps track of the product’s versions and releases so that

265

the customer receives the correct order. Discrepancies between the customer’s order

and the product or service delivered require discussion and resolution with the project

manager. The sales department members work directly with the customer in identifying

a prospective customer, or receiving an RFP or RFQ, or taking an order. The

marketing department leads the process of identifying future markets to enter, selecting

future products, and preparing advertisement campaigns.

The PM obtains estimates from each of these departments. Based on their

understanding of the job, the functional managers estimate department labor hours,

material purchases, the business travel (number of trips and length of stay) required for

the job, and the need for consultants. Most PMs list the data in a spreadsheet similar to

Table 1.

Labor – includes time required to gain familiarity with the documentation required for the

job; special training required to learn to use a new tool; preparation for and attendance

at design reviews and other technical interchange meetings; travel time to visit and

evaluate prospective suppliers; and design, development, and test time.

266

Table 7-1 Project Cost Summary
Department Hours
Elect Mech Soft Netw Tech Field Pubs Training Material Travel ODC Line
Eng. Eng ware ork Service Purchases & Item
Eng Eng Living Cost
Task WBS NO. Tasks or Work Packages $ $ $ $
No.

10000 1. System
11000 1.1. Define the System
Performance Requirements
11100 1.1.1. Review Specification
11120 1.1.2. Review Statement of Work
12000 1.2. System Architecture
Definition
12100 1.2.1. Major Trade-off Studies
13000 1.3. Define Major Assemblies
13020 1.3.1. Electrical Assemblies
13050 1.3.2. Mechanical Assemblies
13100 1.3.3. Cable Definition
14000 1.4. Unique Algorithm
Development
15000 1.5. Define Software/Firmware
Functions and Architecture
16000 1.6. Technical Analyses
20000 2. Assembly #1
21000 2.1. Hardware
21100 2.1.1. Define Hardware/Software
Interfaces
21200 2.1.2. Electrical
21210 2.1.2.1. Define Subassemblies
/Modules/Functions
21220 2.1.2.2. …
21230 2.1.2.3.

Subtotal

267

Villa-Tech Bid Example

To illustrate the concepts associated with developing a bid estimate for a project, we

will examine a fictitious company called Villa-Tech. The organization’s accountants

normally calculate the salary rates, overhead rates, and G&A rates and distribute this

information to the project managers. However, we will perform the computations to

enhance the student’s understanding of the technique.

Villa-Tech intends to bid on a job. The project manager has distributed the customer’s

data and a draft WBS and schedule to the functional managers. As part of an

interactive process, functional managers prepare and submit the following to the project

manager: a technical response corresponding to the contributor’s expertise, each

contributor’s sections of the WBS and schedule, and the associated cost. The PM

places this data into a spreadsheet to calculate the customer’s price.

Villa-Tech accountants have decided on the following financial ground rules:

• Material handling costs -- Add 10% to all purchases, rentals, and leases.

• Travel and living fees – Add 15% to all travel, entertainment, and living

costs.

• Profit -- !5%

• Sales commission – 6%

• Do not apply overhead and G&A to purchased material

268

• Apply the organization’s standard sales commission and profit to

purchased material

• Do not apply overhead, G&A, sales commission, and profit to travel costs.

Overhead rates

The accounting department determines that the wages paid to the engineering staff at

the Villa-Tech Company consist of electrical, mechanical, software, and networking

personnel. The annual Villa-Tech company engineering salaries totals $1,711,000

(shown in Table 7-2 ). These represent the engineering department’s direct labor costs.

Table 7-2 Villa-Tech Engineering Payroll

Engineering Department or No. of Total Engineering

Discipline Personnel Direct Labor

Electrical 4 $340,000

Mechanical 3 $261,000

Software 9 $810,000

Networking 4 $300,000

Total 20 $1,711,000

However, $1,711,000 does not represent Villa-Tech’s total cost for these employees.

Accountants at Villa-Tech aggregate all the indirect costs that support the 20 person

269

engineering staff into an engineering overhead pool as shown in Table 7-3. Although

there exists generally accepted accounting practices, organizations use different rules

for assigning overhead and distinguishing overhead from G&A costs. The approach

used here is representative of the overhead calculation.

Table 7-3 Villa-Tech’s Engineering Overhead Expenses

Expense Description Allocated Annual
Cost
Indirect Labor Administrative, clerical and secretarial $75,000
Federal, state, or Social security (FICA), unemployment and $214,320
local mandated costs worker’s compensation insurance

Fringe Benefits Vacation, medical, dental and disability $267,900
insurance, retirement pension costs.

Training Non-project or contract related training and $80,000
educational expenses

Indirect Operating Share of rent and utilities (e.g., oil, gas, $132,000
Expenses electricity, and telephone), share of
organization’s liability insurance, copy
machine lease, office supplies, postage,
depreciation of computers and associated
equipment, professional and business
organization memberships.

Maintenance & Copy machine and other equipment repair $12,000
Repair contracts, share of facility maintenance and
repair

Total Indirect $781,220
Expenses

Engineering staff salaries aside, Table 7-3 corresponds to the expenses required to

operate the engineering departments. In addition to the $1,711,000 direct labor

charges Villa-Tech spends $781,220 to support the engineering organization.

270

Accountants define the engineering overhead rate as the ratio in percent of the annual

engineering indirect expenses to the annual engineering direct labor costs or

Engineering Department Overhead Rate = Annual Engineering Indirect Expense x 100%
Annual Engineering Direct Labor Costs

The Villa-Tech engineering department overhead rate is

Engineering Department Overhead Rate = $781,220 x 100% = 45.6% .
$1,711,000

This means that almost $.46 of indirect charge is added to every $1 of direct labor

charged to the contract or project. While the overhead rate continually changes,

organizations tend to keep the overhead rate constant for the year.

General and Administrative Costs

Villa-Tech has a small executive management team. The general and administrative

costs total $2,2640,000 as shown in Table 7-4.

Table 7-4 Villa-Tech General and Administrative Expenses

Engineering Department or Discipline G&A Expenses
President/CEO & Staff $350,000
Vice President $155,000
Marketing Department $290,000
Corporate Accounting $280,000
Annual Research and Development Budget $775,000
B&P Budget $540,000
Legal staff $250,000
Total $2,640,000

271

Accountants have determined that Villa-Tech’s annual payroll is $11,200,000. An

organization’s G&A rate is the ratio of the Annual G&A expenses to the Annual direct

labor costs or

Organization’s G&A Rate = Annual G&A Expenses x 100%
Annual organization Direct Labor Costs

In this case, Villa-Tech’s G&A rate is

Organization’s G&A Rate = $2,640,000 x 100% = 23.5% .
$11,200,000

This means that $.23 ½ of G&A charge is added to every $1 of direct labor assigned

to the project or contract.

272

Table 7-5 – Villa-Tech Employee’s Burdened Hourly Wage

Departments and/or Disciplines

Electrical Mechanical Software Network Technician Field Configuration Training
Eng. Eng Eng Eng Service Management

Average $38.60 $37.50 $41.00 $36.50 $22.00 $29.75 $15.45 $31.00
Department
hourly labor
costs
Overhead – $18 $17 $19 $17 $10 $14 $7 $14
45.6%
General & $9 $9 $10 $9 $5 $7 $4 $7
Administrative –
23.5%
Sales $4 $4 $4 $4 $2 $3 $2 $3
commission –
6%
Profit – 15% $10 $10 $11 $10 $6 $8 $4 $8
Burdened $80 $77 $85 $75 $45 $61 $32 $64
Hourly Wage

Burdened Wage

Table 7-5 illustrates the method of arriving at the fully burdened hourly wage for several

disciplines and departments. In order to determine the dollar amount to charge a

customer, accountants start with the department’s average salary and add overhead,

general and administrative costs, sales commission and profit. Examining this chart

reveals that a customer will pay Villa-Tech slightly more than double an employee’s

hourly salary for the use of their services. A company cannot charge less than the

burdened hourly labor wage and remain in business for long. Unless they reduce the

overhead or G&A expenses, the only significant flexibility that a company has surrounds

the profit or sales commission they choose to apply. By its nature, overhead is difficult

to change in the short run, but profit and sales commission are easy to modify.

273

Functional Manager Estimates

After due deliberation, the Villa-Tech functional departments submit project estimates

to the project manager as shown in Table 7-6. The functional managers may have

based the response on professional judgement, historical data, a parametric approach,

a wild guess or any other means. The PM places the data into the summary chart

(Table 7-8).

274

Table 7- 6 Functional Department Estimates

Functional Department Labor Material Travel, Living ODC
Hours Purchases & &
Leases/Rentals Entertainment
Electrical Engineering 1675 $45,000 $800 $2,400

Mechanical Engineering 495 $31,000 $500 $2,100

Software Eng 2237 $37,000 $1,000 $3,700

Network Eng 234 $29,000

Technician 348 $3,000 $500

Field Service 150 $4,500 $2,500

Configuration 45
Management
Training 110 $4,500 $4,200

Total 5294 $154,000 $9,500 $8,200

Risk Analysis

An in-depth discussion of project risk occurs in chapter 10. This section identifies a

method for including risk funding into the cost estimate. Every work activity has

associated with it some measure of risk and uncertainty. Adding the costs for each

work package comprising the WBS should yield a bid estimate accurate to within +/-

10% of the actual costs -- an acceptable risk. Some individual task estimates may turn

out high and others low, but at the project’s conclusion, estimate variations average out.

Functional managers identify a limited number of tasks with time duration or cost

uncertainty ranging from 20% to 75%. The labor and material for very risky asks (that

275

is, more than 75% likely to happen) should be considered a certainty and the entire

effort placed in the baseline estimate. Certainly there should be fewer than 10 activities

involving more than a 20% risk -- otherwise, executive management might seriously

question the logic of pursuing the job at all. The cost estimator identifies these

activities in a separate chart (Table 7-7). The estimator enters the task’s nominal labor

hours, material, travel & living funds, and ODC into the chart. Quantify the risk in hours

or dollars. For each task, assign a risk probability ranging from 0.25 to 0.75. The

weighted risk is the product of the risk probability and the maximum risk in hours or

dollars. Complete this process for each risk item. The last line in Table 7-7 sums the

weighted risk hours and dollars for all of the Risk items. The PM transfers these results

to Table 7-8.

276

Table 7- 7 Including the Project’s Financial Risk in the Cost

Department Labor Hours

Risk Elect Mech Soft Net Tech Field Pubs Training Material Travel ODC
Item Eng. Eng ware work Service Purchases &
No. Eng Eng Living
Task WBS Tasks or Work Packages $ $ $
No. No.

1 WBS Item
1a Maximum
Risk in hours
or $
1b Probability of
Risk
1c Weighted
Risk – hours
or $ (= line
1b multiplied
by line 1a)
2 WBS Item
2a Maximum
Risk in hours
or $
2b Probability of
Risk
2c Weighted
Risk – hours
or $

Risk Impact
Total (1c +2c
+ …)

277

Table 7-8 Villa-Tech Project Cost Summary

Electrical Mechanical Software Network Technician Field Configuration Training Material Travel ODC
Eng. Eng Eng Eng Service Management Purchases &
Living

Project Subtotal – 1675 495 2237 234 348 150 45 110
Hours
Non-labor Project $154,000 $9,500 $8,200
Subtotal - $

Risk Impact
Subtotal 1 –
Includes Risk

Department hourly $38.60 $37.50 $41.00 $36.50 $22.00 $29.75 $15.45 $31.00
labor costs
Department Labor $64,655 $18,563 $91,717 $8,541 $7,656 $4,463 $695 $3,410
Costs - $
Material handling $15,400
charges –10%
Travel & Living $1,425
Overhead charges
– 15%
Overhead – 41% $29,483 $8,465 $41,823 $3,895 $3,491 $2,035 $317 $1,555
General & $15,194 $4,362 $21,553 $2,007 $1,799 $1,049 $163 $801
Administrative –
23.5%
Subtotal 2 $109,332 $31,389 $155,093 $14,443 $12,946 $7,546 $1,176 $5,766 $169,400 $10,925 $8,200
Sales commission – $6,560 $1,883 $9,306 $867 $777 $453 $71 $346 $10,164 $492
6%
Subtotal 3 $115,892 $33,273 $164,399 $15,309 $13,723 $7,999 $1,246 $6,112 $179,564 $10,925 $8,692
Profit – 15% $17,384 $4,991 $24,660 $2,296 $2,058 $1,200 $187 $917 $26,935 $1,639 $1,304
Total Price - $ $133,275 $38,263 $189,059 $17,606 $15,782 $9,199 $1,433 $7,029 $206,499 $12,564 $9,996

Total Project Price $640,704

278

Villa-Tech Project Cost Summary

Table 7-8 illustrates the summary of the results of the bottom-up project estimate

started in Table 7-1 for the Villa-Tech project. The PM inserted the estimates into the

Table 7-1 spreadsheet for which functional managers provided labor, material, travel

and ODC costs. After due consideration, the Villa-Tech PM together with the functional

managers deemed the risk to complete the project’s activities to be within +/-10% of the

cost and therefore, added no risk funding to the price. Summing the individual columns

in Table 7- 8 yields a price to the customer of $640,704. Villa-Tech executives consider

this price in the light of the organization’s desire and need for the job. After due

diligence they submit a bid to the customer.

Figure 7-1 -- Project Lifecycle Phases

No. of people on the job
or
Labor Hours
or
Project Spending

TIME

Contract Design, Installation
Award Planning - Training Transfer to
Assembling Team & Development & Maintenance
Disbursing Work Test

279

Project Spending Profile

The project lifecycle discussed in Chapter 3 and reproduced in Figure 7-1 provides an

approximate illustration of the project spending at any point in a large project.

Integrating or summing up the costs in Figure 7-1 with respect to time yields the

cumulative project spending profile or “S” curve shown in Figure 7-2. Projects usually

start spending money slowly. The initial project activities require planning. The PM

develops work packages to make certain that the team members perform productively.

These packages authorize employees in the various departments to start the project.

They contain brief descriptions of specific work activities, schedules, and associated

budgets. The project manager assembles a team. Employees prepare documentation

for subcontracts. These initial tasks require a relatively small number of people.

Consequently, the spending is low. The rates of spending increases during the

development effort wherein departments make major project purchases and the bulk of

the money for labor is spent. As the project enters the test and installation phases,

spending tales off. The project usually concludes with the completion of the site

acceptance test and training. These latter items involve a relatively small number of the

organization’s personnel.

280

Figure 7-2 Time Distribution of Project Labor or Cost ($)

Project
Cumulative
Labor Hours
or Cost

Time

Bottom up Estimate Summary

The accuracy of the bottom up estimate depends on the quality of the input received

from the stakeholders participating in the process. This team examines every task in

the WBS and provides expert judgement of the labor involved in completing the

activities. They estimate time and material based on their experience performing

similar activities on other projects. By submitting an estimate, the individual estimators

make a commitment to complete the job with the specified hours. Many people

participate in the exercise resulting in a highly labor intensive and expensive effort. A

concern arises if team members lack expertise in new or different technologies -- their

281

estimates lack credibility. Project cost evaluators take issue with expert judgement as it

depends on the personnel making the estimate. Individual biases may slant the

estimate and some estimators don’t document their work well. For this reason,

organizations frequently maintain a historical record of the costs of previous jobs to

support the staff’s expert judgement. Cost data associated with previously completed

work authorizations enables the team to develop an accurate new estimate for the

project under consideration. Based on this documented past experience, the team can

arrive at a reasonable rationale for the activity’s costs.

Top Down Estimate

The bottom-up approach provides an accurate approach to project estimating.

However, it is labor intensive and takes time for the team to complete. A top-down

estimate yields a project estimate in a relatively short time and uses a minimum of labor

house to support the estimate. Top-down estimates use rules of thumb, parametric

models, analogies, or commercial databases. Project planners and estimators can

choose apply these techniques to the entire job or only a portion of the project.

Rule of Thumb Cost Estimating Approach

Examples of cost estimating relationships or rules of thumb based on historical

experience include 2.5 hours of software labor time to develop a line of source code, or

two-hours of labor time to write a single page of text in a technical document, or $125 of

cost per square foot for home construction. Project planners and estimators arrive at

these values after participating in a variety of projects and develop these rules.

282

Sometimes the industry accepts these values as a good reference point, other times

the values are company specific.

Parametric Modeling

Parametric modeling involves the use of project characteristics (parameters) in a

mathematical model to predict a gross estimate for development project costs. Once a

group has achieved confidence in a parametric model, the calculation is fast and

inexpensive. Practitioners find this objective approach to cost estimating consistent and

repeatable. As with all estimates, the result depends on the quality of the information

inserted into the system. The model requires calibration by the user, which limits its

effectiveness to the use of old technology. If the technical staff decides to use new

technology, the results will require some tinkering to accommodate the new approach.

Only after project completion and the insertion of the actual labor results into the model

will the parametric system provide a more accurate labor estimate with the use of the

new technology. Some organizations use the results obtained from parametric model

estimates as independent assessments of cost estimates prepared by other methods.

Managers call this a “sanity check” on the calculations obtained from a bottom-up

estimate.

Several commercial databases using parametric models exist. These include Cocomo

and the Price system. The Martin Marietta Price Systems (formerly RCA Price and

then GE Price) models both hardware and software. As with all parametric models, the

283

systems require extensive training and user calibration before application on actual

bids.

The PRICE H Model provides hardware system cost estimates based on

• quantitative parameters such as system complexity, quantity, weight, and size

• qualitative parameters such as environmental specification, equipment function,

packaging and level of integration and

• schedule driving parameters such as months to first prototype, manufacturing

rate, and amount of new design.

The PRICE-S system calculates software development costs from system concept

through operational test and evaluation. Costs are calculated and reported for design

engineering, programming, data, project management, quality assurance, and

configuration management.

Cocomo is a model designed by Barry W. Boehm to give a labor estimate for

developing a software product. The team developed the first COnstructive COst MOdel

after studying about 60 projects at TRW. Boehm states that "Basic COCOMO is good

for rough order of magnitude estimates of software costs, but its accuracy is necessarily

limited because of its lack of factors to account for differences in hardware constraints,

personnel quality and experience, use of modern tools and techniques, and other

project attributes known to have a significant influence on costs (1981)." Teams at

USC revised the software cost estimation model in the 1990’s to reflect the changes in

284

professional software development practices that evolved since its development in the

1970s. COCOMO II provides a range for project cost and schedule. The software tool

permits a planner to examine the effects of adjusting requirements, resources, and

staffing on costs and schedules (e.g., for risk management or job bidding purposes).

The following list of organizations provides those interested in pursuing additional

information about parametric estimating techniques a starting point:

Galorath Incorporated -- www.galorath.com/SEER_tools.html

Mainstay Software Corporation -- www.mainstay.com

NASA/Air Force Cost Model -- www.jsc.nasa.gov/bu2/NAFCOM.html

PRICE Systems -- www.pricesystems.com

Quantitative Software Management -- www.qsm.com

Acquisition Reform Network -- www-far.npr.gov

COCOMO Models -- sunset.usc.edu/COCOMOII/suite.html

Cost Estimating Resources-- www.jsc.nasa.gov/bu2/resources.html

Defense Acquisition Desk book -- www.deskbook.osd.mil

DOD Acquisition Reform -- www.acq.osd.mil/ar/ar.htm

National Performance Review (NPR) -- www.npr.gov

Software Engineering Institute (SEI) -- www.sei.cmu.edu

Software Engineering Laboratory (SEL) -- sel.gsfc.nasa.gov

Software Technology Support Center (STSC) -- www.stsc.hill.af.mil

International Society of Parametric Analysts (ISPA) -- http://www.ispa-cost.org

Tecolote Research, Inc.-- http://www.aceit.com/Products/ace.htm

285

Analogous Estimating Technique

Analogous estimating uses the actual cost of a previous, similar project as the basis for

estimating the cost of the current project. The approach assumes that comparable

elements of the new and existing systems and subsystems cost the same. The project

planner together with other stakeholders concludes that a prospective job opportunity is

a constant percentage more or less difficult than a similar previous job. Based on their

collective experience, they arrive at a percentage that expresses the degree of difficulty

as compared to the reference project. The estimator multiplies the cost of the

reference job by this number to arrive at a cost for the opportunity under consideration.

Managers sometimes use this technique to estimate total project costs if only a limited

amount of detailed information exists about the project. Here again, people may have

difficulty estimating new technologies because of the lack of a precedent reference

project.

As an example of analogous estimating, suppose a company receives an RFQ to quote

on the purchase, installation, networking and test of 100 computers. The estimator

assigned to the project recalls that a previous network installation of 150 computers in

an office building actually cost $750,000 inclusive of all direct and indirect costs.

Based on the principle of analogous estimating, the planner concludes that since 100

computers represents two-thirds of the previous job; a reasonable estimate would be

two-thirds of $750,000 or $500,000. This approach is fast, easy, and economical but is

286

heavily dependent on the accuracy of the information about prior work. It also requires

the expertise of people qualified to evaluate and compare different jobs.

Learning Curve

This last project can also use another approach to estimate the opportunity. The

concept of a learning curve recognizes that employee productivity improves as the

person gains familiarity with the sequence of activities involved in the production

process. Task repetition results in a learning effect. “Practice makes perfect.” Up to a

point, people gain familiarity with a process, they become more skilled and the time

taken to complete the process decreases. Musicians and athletes understand the

learning experience well. As they train, their confidence grows; they gain speed,

improve reliability and gain accuracy. Plotting the number of wrong notes that a student

learning a musical instrument plays while practicing a new piece might look like the data

in Table 7-9.

Table 7-9 – Improvements Resulting from Practicing an Instrument

No. of Repetitions No. of Incorrect Musical Notes
1 20
2 12
3 9
4 7
5 6
6 6
7 5
8 4

The student experienced a learning effect. Initially unfamiliar with the piece, the student

gained confidence and expertise after each repetition and the number of incorrect notes

287

decreased. The majority of the learning benefit occurred over the first few attempts, but

continual slight improvement occurred over time.

T. P. Wright published an article in the February 1936 Journal of the Aeronautical

Science describing the learning curve concept as applied to the aircraft industry. In the

article, he described a theory for obtaining cost estimates based on repetitive

production of airplane assemblies. Ever since, estimators have applied learning

curves to all types of work ranging from simple to complex tasks.

The learning curve states that each time the quantity produced doubles, the cumulative

average time to produce a unit reduces by a constant percentage of the previous

cumulative time. As an example, suppose a technician performs a site acceptance test

on a recently installed computing system. The functional manager estimates that the

first system requires 100 hours to test and prepare a written report. The manager

believes that subsequent tests will follow an 80% learning curve. Applying the learning

curve concept results in an 80 hour per system average test time for the first two

systems and a 64 hour per system average test time for the first four systems. Table

7-10 shows the results of this 80% learning curve.

Table 7-10 80% Learning Curve Applied to a Computer System Test

No. of Learning Curve Average Estimated Cumulative Estimated
Units Factor time to Test units Time to Test n Units
Tested - n (Hours/unit) (hours)
1 100 100

288

2 80% 80 160
4 80% 64 256
8 80% 51.2 409.6
16 80% 40.96 655.36

The first unit required 100 hours to test. The second unit, doubling the previous

quantity of one, results in an average of 80 hours of test time to test each unit for a total

of 160 hours for the 2 units. Doubling the tested systems to 4 units reduces the

average time to test and prepare a report to 80% of 80 hours or 64 hours, which results

in a total estimated time of 256 hours. The learning curve process continues as shown

in the remainder of table 7-10.


Learning Curve Average
No. of Cumulative Estimated
Factor Estimated time to
Units Time to Test n Units
Test units
Tested – n (hours)
(Hours/unit)
1 100 100
2 90% 90 180
4 90% 81 324
8 90% 72.9 583.2
16 90%
65.61 1049.76

Table 7-12 100% Learning Curve Applied to a Computer System Test – No Learning

Tested – n (Hours/unit) (hours)

289

1 100 100
2 100% 100 200
4 100% 100 400
8 100% 100 800
16 100%
100 1,600


Tested - n (Hours/unit) (hours)
1 100 100
2 50% 50 100
4 50% 25 100
8 50% 12.5 100
16 50%
6.25 100

Table 7-11 illustrates the time required to perform the identical tests using a 90%

learning curve. Note that the average test time increases compared with the 80%

curve. The learning curve upper limit of 100% means that learning does not take place

at all. Each system takes the same labor time as the first system (see Table 7-12). A

50% learning curve results (Table 7-13) if the worker takes no additional time to test the

next doubled number of systems. Using a 50% learning curve is akin to a perpetual

motion machine. It is difficult to conceive of testing n systems for the price of one.

The estimator can use the log-log graph in Figure 7- 3 to calculate the labor hours to

complete a repetitive task. Suppose the first system requires 100 hours, we can

estimate the labor to complete ten systems using the monograph. For a ten system

290

production run, the average number of hours to complete a system using a 75, 80, and

85% learning curve is approximately 39, 49 and 60 hours respectively. The cumulative

numbers of hours to complete ten systems assuming the 75, 80, and 85% learning

curves are 390, 490, and 600 hours. Of course, if no learning took place, the ten-

system completion total would be 1000 hours.

291

Figure 7-3 – Learning Curve Parametric Graph

Figure 7-4 illustrates the use of the learning curve graph to calculate the labor hours for

multiple prototype systems with an initial system estimate other than 100 hours.

Suppose a planner uses the graph to estimate the labor hours required to build 2, 5 and

10 computer prototype systems. Figure 7-3 provides data for units based on a 100-

hour first unit . The estimator feels confident that the first system will take 150 hours.

Create an adjustment factor, which is the ratio of the system number 1 labor estimate

to the system 1 baseline reference of 100 hours (150/100). From Figure 7-3, we read

292

that for a 5 prototype run, the average number of labor hours per system with a 75%

learning curve is 52 hours. Adjust the average number of hours to compensate for the

150 hour initial system effort. Do this by multiplying 52 hours by the 1.5 adjustment

factor, which results in an average of 78 hours per system. The total number of hours

to produce 5 systems is found by multiplying 78 hours by 5 or 390 hours.

293

Figure 7- 4 Use of the Learning Curve Parametric Graph

Number of Systems 1 2 5 10
Produced

Labor hours required 150 150 150 150
for system #1
Ratio of labor 1.5 1.5 1.5 1.5
estimate for system
no. 1 to reference
(100 hours)
From Figure 3 - 100 75 52 39
Average number of
labor hours per
system with a 75%
learning curve
Adjusted Average 150 113 78 59
number of Labor
hours with a 75%
learning curve
Total Labor hours 150 126 390 590
with a 75% learning
curve

294

Learning curves usually range from 75% to 90%. A 90% learning curve represents a

cautious selection that anticipates a modest amount of learning, whereas a 75% curve

represents an aggressive estimate that expects the stakeholders to learn rapidly. The

selection of the learning curve can dramatically affect the labor estimate and therefore

the price of a project. Even if the technician or engineer does not contribute to the

estimate for a repetitive task, you can assume that the project manager has applied this

curve to the estimate. The PM will expect to see reductions in the labor effort as the

repetitive work progresses. If you are the technologist performing this repetitive task,

anticipate a visit from the PM if the reduction doesn’t correspond to the estimate’s

predictions.

Project Estimating Summary

Accurately predicting the cost of a project is vital to the survival of any organization. The

project manager has the responsibility for assembling and gathering

! Labor estimates,

! Material costs,

! New equipment and tool costs,

! Special training costs

! Amount of business related travel,

! Consultant usage costs,

! Other required project resources,

! Quantitative estimates of risk, and

! Coordinating prospective subcontractor bids.

295

To remain competitive, organizations must arrive at the lowest price yet deliver a

technically superior product or service in the fastest time with the best quality – the

modern technology mantra faster, cheaper, better. A challenge to be sure and the

team led by the PM must make it happen.

The estimating process begins with the decision to submit a bid. After reviewing the

specifications and other project documentation, the estimator meets with the functional

managers to decide on the methodology used to calculate the price -- top-down or

bottom-up, and learning curve percentage. The project estimator compiles and

analyzes data on all the factors that can influence costs—such as materials, labor,

location, and equipment. Since most organizations earn only a relatively small profit

margin on many projects, it is vital to obtain an accurate answer. The accuracy of the

resultant effort will determine the project’s financial success. As a top-down estimate

requires appropriate historical data as well as software and personnel training, smaller

organizations that have not acquired the software may decide to use a bottom-up

approach – sometimes in combination with an analogous method to complete the

estimate. Many senior executives use their own favorite rules of thumb to test the

“sanity” of the organization’s final estimate.

Estimating the impact of a new technology on a project represents a challenge to

almost all of the cost estimating approaches discussed. Technical staff unfamiliar with

the use of a new tool will usually require more time than expected to gain the required

expertise. The staff may require formal training in the use of new or different versions

296

of existing products. Cutting edge efforts may even use tools or equipment that have

“bugs” – usage problems not yet worked out. Manufacturers sometimes offer “Beta”

software packages, which means they have not yet formally released the product for

sale because minor technical issues remain. The use of unproven software will slow

down the project. Teams must make allowances for new tools, equipment and

technologies. Aggressive labor estimates in these cases will likely come back to haunt

the organization. Project cost estimating is as much an art as a skill. It improves with

experience.

If time permits, the use of multiple estimating techniques will corroborate the

technologist’s expert judgement. Anticipate a management review of the estimate.

Executives will examine the resulting estimate from a broad perspective. They will likely

not examine the details that support the estimate. Instead, they will pay particular

attention to the final price and compare it to the organization’s intelligence on the

competition’s submittal and the customer’s expectations. Management will also take a

close look at the anticipated profit percentage and the risk exposure. Quantify the risk.

As part of the risk analysis, be prepared to discuss the following issues:

! Technical and performance concerns,

! Schedule challenges,

! Organizational labor availability,

! Costs and availability of equipment and tools,

! Cost and availability of other required resources,

! Required personnel training,

297

! Supplier problems,

! Competitive situations, and

! Other cost drivers.

After reviewing and digesting this information, management will decide to go with the

estimating team’s recommendation, adjust the price, or possibly no-bid the job.

Cost Management

You win the contract. Congratulations, but you have no time for celebrating; now your

organization must perform. Although not the only concern, making a profit is high on

the list. In the preceding sections, we discovered that most corporate profits are only in

the 10-15% region. The PM must protect against excessive spending and this requires

careful cost control procedures. Cost control requires cooperation from every

stakeholder. At a minimum, it includes these items:

! Organization Support

! Preparation and distribution of budgets together with Work Authorizations

based on the WBS

! Monitoring schedule, technical performance progress and budget

! Data Accumulation and Reporting

! Cost and schedule variance analyses

! Baseline Maintenance and Control -- manage the customer

298

Financial and Schedule Analysis

Project cost management begins with a set of expectations that includes a realistic and

accurate estimation of project costs together with an equally valid schedule. It certainly

is not a good first step if suppliers and functional managers gasp and throw up their

hands in horror on first examining the budget and schedule. The PM also has the right

to expect that stakeholders feel committed to support the project by providing

appropriate resources at the times designated by the schedule. People work on the job

when required. Material arrives on time. Suppliers deliver equipment on time.

Personnel obtain the requisite training to use equipment and tools on time. After the

PM creates and distributes budgets to the functional managers for each of the work

packages (detailed short tasks) identified in the work breakdown structure, he/she

expects that stakeholders will act responsively to meet the schedule’s demands.

Unfortunately, this frequently doesn’t happen. So the PM carefully monitors the budget

and schedule to identify issues at an early stage. The internal organization completes

and submits timecards so that financial administrators can determine who is working on

the job and how much time they are spending.

299

Figure 7-5 Comparison of Project’s Budgeted Funds versus Actual Expenditures –
Overspending

Project
Cumulative Budgeted Funds
Labor Hours
or Cost

Costs in excess of the budget –
a potential problem

Actual
Expenditures
to Date –
Curve A

Today’s
date Time

Financial analysts total labor, material purchases, ODC, travel, etc. data on a weekly

basis. At the beginning of the project, the PM calculated a spending profile budget.

Each week, financial administrators compare the budgeted time distribution of funds to

the actual expenditures. If actual charges are too high (figure 7-5), it could signify that a

technical problem exists (bad news!) or on the positive side, it could mean that the

300

schedule is farther along than initially planned. In the former case, the PM seeks to

identify the reasons and then tries to secure greater expertise for the group to enable

them to resolve the issues as soon as possible.

Figure 7-6 Comparison of Project’s Budgeted Funds versus Actual Expenditures --
Under spending

Project
Cumulative Budgeted Funds
Labor Hours
or Cost

Under spending the budget – a
potential problem

Actual Expenditures to Date –
Curve A

Time

301

If the actual time and material project charges are lower than the budget (figure 7-6)

different issues exist. Perhaps the functional managers overestimated the work

complexity and accomplished the expected amount of work spending less money than

anticipated. (The probability of this happening is only slightly better than a used car

salesperson telling the truth.) The more probable reason for a budget under run falls

into one or more of these categories:

! Fewer people have worked the job than promised and the project is behind

schedule

! The purchasing department has not ordered equipment and material

! Suppliers have not shipped equipment or material

Examining the schedule’s progress should reveal the problem areas. The PM then

examines the root cause for these issues and focuses on resolving them. Many PMs

use the earned value method, which provides the project manager with a powerful

quantitative tool to monitor schedule and financial progress. Earned value does require

that the organization have extensive software and administrative capabilities as a great

deal of information must be collected and analyzed in a short time. An enterprise

resource planning (ERP) system provides the ideal vehicle to collect data.

Stakeholders Requiring Special Attention

Many project managers periodically visit or at a minimum maintain contact with

suppliers of critical material and equipment used on the project. The PM contacts these

vendors regularly to discuss technical and schedule progress in an effort to confirm that

302

no surprises await them. If technical or schedule issues surface, the PM needs time to

prepare “work-arounds.” The PM may devise alternative plans, modify schedules,

reshuffle labor, or even consider withdrawing the contract from the subcontractor if the

problems warrant the action.

Engineers and technicians enjoy tinkering. They love to experiment, to “tweak” just a

bit more performance from the system. While scientific curiosity may be an admirable

technical trait, uncontrolled it can cost time and money. The PM must sometimes

remind the technologist to provide customers with the products and services

contractually agreed upon. The customer should get what they paid for and not a bit

more – if more means additional cost or schedule. Keep the delivery objective in sight.

Conversely, if the functional manager or project manager requests a work change, it

behooves the technologist to request added budget and schedule. After all, the

technician or engineer developing the product or service will also be judged on their

adherence to the schedule and budget.

Perhaps the most difficult aspect of cost control involves customer management. .

Invariably customers discover at some point in the project that they require a contract

change -- perhaps some additional features, or an additional piece of equipment, or

another report or a newer software version. The changes from an innocent realization

that the customer missed something in the specification of the original contract may

have huge ramifications. Once the project has started and the team proceeds, they

303

quickly complete tasks. A contract change would require redoing some of the work

thereby incurring additional labor charges. Items returned to a supplier may incur

restocking fees. The use of a new or revised software package may bring with it

unforeseen system integration issues that cost time. The PM walks a delicate line –

balancing contractual agreements with the desire to “delight the customer.” The PM

wishes to satisfy the customer in hopes of obtaining repeat business but yet wishes to

make a profit on this project. Keep in mind that the substance of the PM’s annual

review or financial bonus frequently depends on the project’s success. The project

must turn a profit.

A common approach to resolving the issues involves good old “horse trading.” The PM

exchanges an existing contractual item for the change that the customer desires. The

PM should attempt to exchange items of similar cost. Say a customer desires to

replace an old but reliable software package with a recently released version. The

functional manager would love to use this package since it contains several new

features that customer’s have requested. A “win-win” situation emerges. Management

may view this as an opportunity to invest a small amount of money to update the

organization’s product. Perhaps the new software version incorporates features that

the organization would develop as part of the project. Using the new software might

save money. Sometimes the organization can agree to a customer demand in

exchange for relieving a difficult contractual specification.

304

The PM’s rule of thumb should not change the SOW without a corresponding increase

in contract funding. Some government contractors have used this idea to their

advantage. Recognizing that the vast majority of contracts involve changes after

contract award, they would bid the job with little or no profit. After they won the

contract, the organization would “get well” by charging very significant sums for the

changes that almost certainly follow the award.

305

Chapter 7 Questions

1) Explain the statement that a project manager has responsibility for the following --

technical content, project cost, and schedule.

2) What quantitative measures can a project manager use to determine that project

activities are progressing satisfactorily?

a) Examine budget

b) Compare labor and material budget with actual expenditures

c) Compare schedule plan to actual progress

d) Ask the functional managers

e) Ask the company’s vice president

3) Explain the difference between bottom-up and top-down estimating.

4) True or false: A project manager uses a learning curve to estimate the labor time

required to perform repetitive activities.

5) The time required for a person to perform an activity a second time will usually take

more or less time than required to perform the activity the first time.


6) Describe the difference between direct and indirect costs.

7) Explain the purpose of a material-handling fee. Do you think it justified? Explain.

8) Give examples of Other Direct Costs (ODC) that may be charged to a project.

9) Describe the difference between overhead and general and administrative (G&A)

costs.

306

10) Your boss has developed the following documentation preparation time rules of

thumb:

Each Power Point slide requires 45 minutes per page including research time.

Each text page requires 6 hours.

Each graphic (picture, drawing, etc.) requires 2 hours.

The contract requires the preparation of a training manual. Based on similar

previous jobs, the trainers estimate that a manual will contain 25 pages of text and

12 graphic illustrations. They estimate that they will require 37 slides to teach the

course associated with the product. Estimate the time (in hours) to complete the

training manual document and the training class presentation.

11) Why does the use of a new hardware or software tool entail some measure of risk?

How should the project or functional managers minimize this risk?

12) A small service business wishes to determine the amount of money to charge its

customers. The service manager calculates that the average salary the company

pays its technicians is $32 per hour. The company’s accountant informs the service

manager that the overhead expense and general and administrative (G&A) rates are

50 and 25%, respectively. The company president informs the service manager

that they expect a 20% profit. What labor charge should the service manager

charge the company’s customers on an hourly basis?

13) Explain the difference between the price a customer pays for the product or service

and the developer’s cost.

307

14) As the project manager for a medium sized company, you have collected the

following data from the organization’s functional department managers during a

proposal preparation effort.

Functional Average Labor Dept. Material Travel, Living Consultants
Department Salary - Hours Overhead Purchases & & -$
$ Rate Leases/Rentals - Entertainment
- % $ -$
Electrical $45.50 1775 55 $45,000 $800 $4,400
Engineering
Mechanical $42.75 225 55 $31,000 $500 $5,100
Engineering
Software $48.10 2400 45 $37,000 $1,000 $6,200
Eng
Network Eng $53.00 160 48 $29,000

Technician $31.60 310 35 $1,000 $500

Field Service $29.30 145 40 $1,500 $2,500

Training $28.75 90 30 570 $4,200

The company’s accountant informs you that the organization’s general and

administrative (G&A) rate is 33%. The software department has indicated that they

have a 10% risk associated with the development process. No other department has

identified significant risk. The company’s vice-president expects to earn a 15% profit

and has asked you to prepare a chart that summarizes the project’s costs and the price

to the customer. She would like to discuss the project with you tomorrow afternoon.

a) What information will you bring to the meeting with the vice president?

308

b) Will you request support personnel to accompany you to the meeting? If so, who

and why will you bring them?

c) Prepare the financial material that you will show to the vice president that leads

to the suggested customer price. Keep in mind that the material must be clear –

almost self-explanatory. Minimize written material and try to organize the

material in charts.

15) Team Project: The following problem simulates a small business activity. You will

create a three member team corresponding to the three owners of CompRep -- a

small system maintenance and repair company. The principals represent three

different perspectives. Gayle provided the majority of risk funding to start the

business and becomes involved in major business decisions. She invested

$100,000 into the business at its founding. As the major investor, she is interested

in protecting her investment and expects to see at least a 10% annual return on her

money. Keisha provides the technical expertise. She is thoroughly familiar with the

construction, maintenance, repair, and networking software associated with

computers. Keisha has passed the A+, N+, Project +, MCP, MCSE, CNA and

CCNA certification examinations. Her motto is “Never fear, Keisha is here.” She

receives a salary of $45,000 per year. Tamir is in charge of sales. During the past

three years, maintenance and repair contract sales have grown consistently from

$200,000 in the first year to last year’s $450,000 total. Tamir works on a 6%

commission of the gross sales price. He wants to offer the customer a low contract

price to get their business. After all, no sale means no commission and no salary

for Tamir.

309

The CompRep owners have decided to bid on a two-year computer maintenance

and repair project for a local school district. The school district has 780 computers

located in two buildings that are 10 miles apart. The schools are open for operation

180 days per year. The school district has determined that on the average, 1% of

the computers fail each week of operation. The chart below illustrates the historic

component failure rate for the computers.

Component Distribution of Present Year Average Labor
component and Average to diagnose
module Failures Material cost - and repair -
-% $ Hours
Power supply 45 75 1.2
Memory chip 15 68 0.6
Floppy disk 8 27 1.5
Hard drive 5 179 2.5
Sound card 3 79 0.8
Video card 3 119 0.8
Mother board 5 375 2.5
Network interface card 6 65 0.9
Other interface cards 9 55 1.0
Cables and connectors 1 30 1.0

The CompRep facility lies mid-way between the two schools. The contract demands

a 24-hour repair turn-around time. Service personnel may gain access to the school

from Monday to Friday between the hours of hours of 8:00 a.m. to 4:00 p.m.

Component distributors guarantee to deliver replacement components within 48

hours of placing an order. The existing business presently grosses $450,000

310

annually. The owners wish to expand the business and winning this contract

represents a significant step in this direction.

As the owners of this company, your team must calculate a competitive price to

submit to the school district. In addition to Keisha and Tamir, CompRep also

employs another computer technician and a receptionist on a full time basis for a

total of four full-time employees. Half-time employees include a bookkeeper and a

computer technician. As your team goes through the bid process, questions will

arise that will require the principles to make certain assumptions. Note these

questions and the assumptions reached about CompRep and its business.

Item Quantity Annual Comment
Expense
-$
Salaries of Full-time employees 4
Salaries of Part-time employees 2
Legal expenses $1,500 Retainer – review
documents
Advertising expenses $7,500
Rent $30,000
Utilities $8000
Liability insurance $4000
Office supplies
Professional and local
organization membership
Facility maintenance and repair $1000
Office equipment costs FAX, copy machine,
cell phone, office
phone

a) Complete the annual costs omitted in the chart.

b) Calculate CompRep’s annual payroll.

311

c) Calculate the overhead and G&A expenses. Assume that FICA and Medicaid

taxes total 10% of the employees’ annual salary.

d) Decide if you need to stock certain hardware components. If stock is required,

identify which components and the quantity to purchase.

e) What profit should CompRep seek?

f) What was the cost of living increase last year? How would you find this out?

g) As this is a two-year contract, separate the costs into year 1 and year 2 to take

into account the likelihood of inflation increases in labor and material.

h) Based on the data provided, how many trips to each school are required during

the year? What is the annual transportation cost? Use a travel expense of $.33

per mile in your calculations.

i) How much labor time is required to fulfill the contract requirements?

j) What price will CompRep submit to the customer for the two-year computer

maintenance and repair contract? Support your team’s decision with the

appropriate spreadsheet calculations.

312

CHAPTER 8

Project Communications

There is a w and e but no i in teamwork.

<>

Chapter objectives


Understand the role of communications in projects.
Prepare crisp, informative and to-the-point memos.
Conduct a worthwhile meeting.
Understand how to follow-up on meeting actions

Communications represents a process for exchanging information among people. In

organizations, we use a variety of means to inform and influence others that includes

the following:

♦ Written messages such as memos and reports

♦ Discussions that use verbal and nonverbal information exchanges

♦ Telephone conversations

313

♦ Radio and video conferencing

♦ Meetings

♦ Lectures

♦ Graphics (charts, illustrations, photographs, clip-art, graphs)

Project communication includes the processes required to ensure timely and

appropriate generation, collection, dissemination, storage, and ultimate disposition of

project information (PMBOK). Technical project managers spend a large portion of the

day receiving or distributing information. The delivery of this information frequently

demands project managers with excellent social as well as technical skills. Knowing

how and when to say and present information is just as important as knowing what to

say.

Communications Management

During the early project phases, project managers promote the exchange of technical

requirements, data, interface descriptions, assignment responsibilities, schedules, work

authorizations and contractual documents among stakeholders. Throughout the job,

the PM prepares performance and status reporting information after receiving data from

the stakeholders. Members of the organization submit interim reports to management,

regulatory agencies, suppliers, and the customer. All stakeholders need to be quickly

informed about significant issues that arise during the project. The PM controls and

coordinates this information flow. The end of the job brings with it a flurry of

documentation preparation that includes test reports, final product or service

314

descriptions, training and maintenance manuals, and financial analyses. Delivery and

installation of the newly developed product requires a good deal of interaction between

project and customer personnel. Finally just before closing out the project, the staff

prepares a list of “lessons learned” and shares the information with colleagues. In this

way, everyone benefits from one another’s experience.

Table 8-1 illustrates the varied type of information exchanged by technologists during

the project. Depending on the recipient, technologists prepare material in different

ways. Personnel frequently submit monthly reports and descriptions of problems and

issues by E-mail. Many use overhead transparencies or present a Power Point

presentation for larger audiences. Unbelievably, governmental agencies and some

large organizations still insist on typewriters for completing some standard forms.

315

Table 8-1 Information transfer considerations

Feature Examples

Target audience Colleagues, manufacturing, customers, technicians,

management, government regulators, suppliers

Material Type Data sheets, specifications, documents, drawings,

graphics, reports, proposals, letters, orders,

statements, invoices, schematics, manuals, contracts,

samples, memos, technical information, directions,

standard forms

Transfer Time Urgency Overnight, immediate, future

Transfer Method E-mail, US mail, overnight delivery, courier service,

telephone conference, voice mail, video, meetings,

lecture

Electronic format ASCII files, rtf, Word files, Macintosh or PC, voice,

video, other application specific software.

Electronic images Gif, jpeg, bmp, tif

Media Paper, vellum, electronic (e.g., zip drive, floppy disk,

magnetic tape), computer display, overhead

transparencies, 35 mm slides.

316

Communication Pathways

A project usually requires decisions and actions from a large number of areas. Most

information exchange takes place in a lateral direction -- among colleagues in functional

groups. Figure 8-1 illustrates the usual communication pathways followed by project

stakeholders. For example, only the project manager should speak with the customer.

The PM provides the customer’s point of contact with the organization. Commitment to

perform a task or agreement for a change normally comes from the PM. If a topic of

discussion with the customer involves details with which the PM does not feel

comfortable, then the PM frequently requests a technical person to participate in

discussions. PMs lead management briefings. Functional groups, manufacturing, and

suppliers support the effort as required. If required to hire permanent or temporary

workers, then each of the internal stakeholders work with the human resource

department directly.

317

Customers
Executive
Management,
Sales & Marketing

Functional
Groups

Project Management
Project Manager Office

Operations - Human Resources
Manufacturing
Purchasing
Incoming Inspection

Suppliers

Figure 8-1 Communication Pathways

318

Organization Communications Protocol

In their zeal to impress all people in the organization with their unbounded knowledge,

new employees sometimes let the ease of adding names to the E-mail list overcome

good judgement. Always inform your immediate supervisor first about anything and

everything. Report problems, issues, customer compliments or complaints, late

deliveries, system failures, machine breakdowns, whatever else … to your supervisor.

The novice technician loves to announce to the immediate world that they have

discovered the “next best thing to sliced bread.” They have solved problems that have

troubled the organization since the founders began operation. Wait. Informing your

boss’s boss before informing your boss violates courtesy as well as an unwritten

organizational cardinal rule. Weber’s organizational hierarchy still applies. Follow the

chain of command and give your supervisor the courtesy of assessing your finding.

Then let your supervisor suggest the time, place and the people to whom to announce

the information.

Personnel in the organization have an assortment of political agendas. Upsetting your

supervisor may impede your advancement. Making your boss look good may bring

choice job opportunities and a better chance for a salary increase. Remember the

functional manager assigns work and recommends people for promotion and salary

adjustments. Develop your supervisor into an ally. Become a team player. Tread

lightly and share the glory until you have learned to operate in the political

organizational jungle.

Communications Process

319

The project manager has the responsibility for the flow of information. S/he makes

needed information available to project stakeholders in a timely manner (PMBOK). The

PM decides on the message content, to whom to send the message, the tone of the

message, and the degree of technical complexity. Highly technical information

sometimes requires translation into language that all can understand. Politically

sensitive or damaging messages require the selection of words calculated to minimize

the organization’s discomfort. Project managers use communication to build

consensus.

Depending on our backgrounds, we interpret words in different ways. Sociology

teaches us that people from different cultures have different expectations and

perceptions. In our diverse organizational environment, we interpret statements

differently. Suppose you saw the following E-mail messages:

Message #1 COME SEE ME!
BOB

Message #2 See me at your earliest convenience.
Bill

Both messages convey the same information, but after the first, you think “Uh Oh, what

have I done now.” The tone of the second message is not quite as threatening. Many

people familiar with E-mail interpret all capitals as shouting. On the other hand, Bob

may not be an experienced typist and does not want to bother with lower case letters.

320

Figure 8-2 illustrates a message interpreted differently by two people. Maria comments

that she would like to eat strawberries for lunch and Tom interprets the snack request

as strawberry pie. A minor misunderstanding, but not unusual. Use specifics in

conveying information to others in order to minimize misinterpretation. Some cultures

prefer a forthright and frank presentation. Others find that approach offensive. Think

about the people to whom we send information. Respect their sensitivities. We all

bring unique personality and background experiences to the workplace, which may

color our interpretation of the information.

Message
Source
Message
Personality Personality, Destination
Experience Perception &
Encoder and Experience
Filter Decoder and
Filter

Figure 8-2 The communication encoder decoder environment

Conducting Effective Meetings

Project managers spend a lot of time in meetings. Meetings represent a cost effective

way to convey information to a group of people. It is certainly less time consuming to

meet collectively than individually. Participants discuss the presented information and

321

begin to clarify issues. During the meeting, activities frequently arise that requires

further information. At the conclusion of the meeting, the chair reviews the activities

discussed and assigns action items. That is, the chair requests selected people to

obtain answers to questions arising during the meeting.

An effective meeting requires preparation (figure 8-3). Before calling the meeting, think

through the items you expect to accomplish. Prepare an agenda to clarify the meeting’s

purposes. The agenda should reflect the meeting’s priorities. If not officially part of the

agenda, estimate the time that you will allocate to each topic on the agenda. Select

and inform the people that you wish to attend the meeting. Include the agenda, starting

time, place and anticipated length of the meeting in your notice requesting people to

attend the meeting. The latter item acknowledges that people have busy schedules

and represents a courtesy to enable them to plan the remainder of their day. Start the

meeting on time. If people are late, conduct the meeting without them. If you begin

late, people will come late.

Distribute data, documents and special information in advance. This is especially true if

the group will review or make decisions regarding the material. If possible, try to permit

all people to comment on the material, but do not let anyone dominate the discussion.

At the start of the meeting, assign a person to take minutes. Meeting participants

should receive copies of the minutes within a reasonable time following the event. No

meeting is complete without assigning action items. During the course of most

meetings, participants raise issues requiring examination and resolution. The meeting

322

chair assigns responsibility to resolve these actions to appropriate people and expects

resolution by an agreed date. Unless the work demands a specific deadline date,

request the person assigned to the action item for a reasonable closure date. Often,

the participants decide to hold another meeting to review the progress or completion of

the action items.

323

Figure 8-3 Procedure for Effective Meetings
Distribute
Information

Select People
Data

Notify People --
Time & Place

Agenda

~-~-~~~-~-~

~-~-~~~-~-~

Hold Meeting

Review Action
Items

Minutes

~~--`..-~~ -

-`--‘~~~~+-

324

Memos

Memos represent the grease for the communication machinery that makes things

happen in today’s moderate to large size organization. A memo is a no-nonsense

communications document. It is designed to quickly inform or ask something from

people within an organization or work group. Employees use memos to tell their

supervisor that they accomplished a specific task or they have confronted a problem.

Many project managers keep a memo record of the activities performed on the project.

They create a paper trail for the actions and agreements among the project

stakeholders. While most memos are brief, they should follow good technical writing

principles. They use clear and accurate language. Memos reflect back onto the

organization and the person that wrote it. Stakeholders jump to the conclusion that the

writer of a sloppily written and unclear memo is unfocused.

E-mail messages are by far the most common form of memo. Every memo should

follow E-mail format. It should include the following basic information:

Date:

To:

From:

cc:

Subject:

Memo Body

325

The term cc comes from Carbon Copy paper. While obsolete technology, the term

persists. People placed on the cc list receive a copy of the memo. Observe the chain

of command. Gain the trust and respect of your management organization by

distributing memos to the proper personnel.

Make your memos short and to the point – no more than one page. Clearly state the

purpose in the first paragraph – preferably in the first sentence. Indeed, why do you

want to write that memo? Crystallize your objective. Ask for something. Provide

supporting and clarifying information in subsequent paragraphs. Answer the journalist's

questions: who, what, when, where, and why. Use bullet lists to get your idea across

succinctly. The memo receiver can then immediately prioritize the memo’s importance

and decide whether or not to read the additional information. Do not use jargon unless

you are certain the reader will understand it. To be on the safe side, define unusual

expressions and acronyms. Organize performance information, status reporting,

progress measurement, forecasting, and other numerical based reports into charts with

appropriate column headings. Send copies of the memo to those people that have a

need for the information.

Always be polite and upbeat. Unless the purpose of the memo is simply to inform,

conclude with action recommendations. State the actions that you plan to take next and

identify the completion dates. Managers value the professional that identifies a

problem and provides recommendations to solve it.

326

Finally, proofread the document. Does it say what you mean? Soften criticism. Delete

overly harsh comments. Do not use the memo as a cathartic psychological experience

to vent your emotions. Check your English usage. Use the spell check word processor

feature. Proofread it again. Spell check will not catch correctly spelled words used

incorrectly. Obvious grammatical errors and misspellings reflect badly on the memo

writer.

Listening

Perhaps the most difficult aspect of communication is listening. We all love to talk and

have our view heard. Do we really listen to others?

The single most important step to improve our listening skills requires us to stop talking.

Pay attention to people. Listen to their verbal statements and watch their nonverbal

gestures. Look at the speaker. Make eye contact. Your eyes pick up the nonverbal

signals that people send out when they are speaking. Show you want to listen by

putting the talker at ease and removing distractions. Stop answering the telephone and

halt other interruptions. Be patient and let the talker get the idea across. Hold your

temper and take it easy on arguments and criticism. This does not mean that you

should not react to the speaker. Show emotion. Move your face to indicate that you

follow what the speaker has to say. Ask questions. Listen to the answers and repeat

the speaker’s words to emphasize that you are listening. Remain open to new ideas.

People feel strongly about issues and want to be taken seriously. Even if you do not

agree with a person’s argument, listening to it helps to build rapport between you and

327

the other group members. During the ensuing discussions, put forth your points firmly

but in a friendly manner. Support your opinions with facts and refer back to points

made by other members of the group.

During the project lifecycle, we continually engage in negotiation -- the process

through which two people or groups with differing wishes or views strive to reach a

satisfactory agreement. The parties may not reach a level of mutual satisfaction, but

they can accommodate the decision.

You cannot begin to negotiate until you listen to the other party. Only after groups

begin to understand one another can they work toward a solution to their disagreement.

Listen and ask for your colleague’s opinions. Then build on others’ ideas and offer your

own ideas. The structure of a compromise solution frequently evolves -- borrowing from

everyone’s ideas and melding them together.

Listening is just one of the people skills that project managers develop. A project

manager gets things done through people. Respect people and foster trust. Give

support and help as needed. Make your expectations clear. Let people do their thing

and let them know how they are doing. Do not micromanage every task. Offer praise.

Praise does not cost anything and can sometimes make employees who feel

undervalued more cooperative. Establish an open and active communications policy

early in the project.

328

Verbal Communications

Telephone Protocol

Telephone conversations consume project managers for much of the day. The PM

speaks with suppliers, aids a technician in obtaining technical information, requests a

status report from a software functional manager, asks FedEx about their delivery

schedule, requests travel information, reassures a customer regarding their order,

discusses a personnel issue with a member of the human resource department,

requests financial information from an administrative assistant and talks with other

internal and external stakeholders about a myriad number of issues. The PM follows

correct telephone protocol during these telephone meetings. Identify yourself at the

beginning of the phone call. A typical greeting might be “This is Jane Dawkins

speaking. May I help you?” If you initiate the call, immediately state “Good morning,

this is José Padua. I am a project manager from Villa-Tech and I am inquiring about

______________.”

Courtesy and tact is mandatory. Perhaps the customer just finished yelling at you for

omitting an instrument from the last shipment, which caused a week slippage in their

schedule. The customer vented all their frustration on you and you feel like exploding.

Naturally, you remained calm and courteous during the customer’s tirade. You

explained that the omission was inadvertent and would never happen again. You get

off the phone drained and upset. This is a time to take a break. Do not answer

another phone until you calm down. A customer will detect your upset and stressed

329

condition if you answer the phone immediately following this episode. Avoid

jeopardizing relationships by placing yourself under further stress.

Take notes during the conversation. Develop a rapport with the caller by using their

name. At the end of the call, briefly summarize the actions that each of you will take.

The exchange may warrant a summary E-mail sent to the caller with copies to a

colleague or your supervisor. Sometimes you may want to send the summary e-mail

only to yourself as a record of the conversation. The E-mail system provides an

opportunity to maintain a historic record of the project’s communications.

Face-to-face meetings

Speaking in front of both large and small groups is a fact of organizational life. The PM

does it everyday. Your talks should inform, persuade and involve the participants.

Conduct conversations with one or two people in a businesslike manner. Stick to the

technical or business matters. Take care to minimize small talk or non-business related

discussion. This area is fraught with danger. Avoid discussions about politics, religion,

race, ethnicity, gender issues, sex and your personal or family issues. People hold very

strong opinions about politics and religion. Some group members may find even

seemingly innocent conversation on these subjects offensive. You risk creating

enemies. Do not treat customers, work associates, and suppliers as friends. They are

business associates. You might choose not to have them as friends, but frequently you

have no choice in the selection of coworkers and stakeholders.

330

Discussions about sex will likely offend someone and you risk disciplinary charges or

even dismissal. Do not comment about your colleague’s clothing or body. Your

associate could charge you with sexual harassment, which may lead to dismissal. Do

not burden the conversation participants with your family’s problems. Chances are they

have problems of their own and do not want to be involved in yours. Restrict lunch,

coffee break or dinnertime chitchat to non-provoking issues. Start the conversation with

comments about the weather. Neutral issues include topics such as sports, your

hobby, computers, software, a non-controversial book that you recently read, food,

cooking or an amusing travel story. If someone else brings up one of the forbidden

topics (politics, religion, race, ethnicity, sex and personal life), keep your mouth shut

and limit your nonverbal movements to normal breathing. Change the subject at an

opportune time.

Research shows that many people dread public speaking. An ideal way to overcome

stage fright involves the use of visuals such as overhead transparencies and Power

Point presentations to support your talk. Visual aids enable the speaker to plan and

control the talk. Follow your prepared material. Do not memorize your talk and do not

read the slide presentation. Paraphrase the words shown on the screen to prevent the

talk from sinking into boredom. Keep the audience awake. Visuals focus the

audience’s attention. They reinforce the presentation and help the audience remember

your talk. Other presentation tips include the following:

! State the purpose of the presentation.

331

! Speak loudly and vary your voice tone and volume to emphasize key points.

Speak naturally – not too fast or slowly.

! Make eye contact with individuals in the audience. Look at a person, and act as

if you are speaking directly to him or her. After a minute, pick someone else.

This helps you communicate with the audience.

! Liven up your presentation by using graphics to make a point (pictures, graphs,

charts, etc.)

! Smile

! Show enthusiasm

! Do not wander. Stick to the topic as outlined in the visuals

! Summarize your main points at the end

! Ask for something. A researcher presenting the results of a study to top

management might request funds to pursue an avenue of research. A

salesperson might ask a group of prospects for an order. A project manager

might request a customer to accept a delayed delivery in exchange for a longer

product warranty.

! Offer a question-and-answer period.

! Distribute handouts describing the talk.

332

Chapter 8 Questions

1) What type of communication techniques do organizations use?

2) Identify the steps in conducting a meeting.

3) Define action items. Give three examples.

4) Politeness and saying “please” and “thank you” when speaking with stakeholders

a) Is not necessary.

b) Is appropriate protocol in all situations?

c) Is far too formal for today’s times.

5) If a customer is abusive on the phone, the appropriate reactions are to

a) Hang up

b) Tell them that this is not your job

c) Grin and bear it

d) Transfer the call to your supervisor

e) Yell at the customer because you will not accept this from anyone.

6) When speaking on the phone with stakeholders

a) Take notes

b) Identify yourself early in the discussion

c) Summarize the action items at the end of the discussion

d) Send an e-mail summarizing the discussion

e) All of the above

7) The first paragraph in an E-mail should

a) Describe the purpose of the memo.

333

b) Ask how the family and kids are doing.

c) Set the stage -- Describe the historical background surrounding the issue.

8) Describe five group presentation suggestions.

9) You are taking a customer out to lunch. Identify five non-business topics to discuss

during the meal.

10) You are an Evangelical Christian. You have recently discovered that your work

associate professes atheism. This view is abhorrent to your thinking. You are

considering raising the issue during your lunch with the idea of converting this

person to your religious views. Identify three reasons why you should and should

not hold this conversation.

11) Which of the following are good presentation tips? (Select all that apply.)

a) Speak softly and fast so that the group will pay attention.

b) Do not offend anyone by looking directly at him or her.

c) Do not inject any humor into the discussion when dealing with serious subjects.

d) Liven up your presentation by using graphics to make a point

e) Smile

f) Show enthusiasm

g) Do not wander. Stick to the topic as outlined in the visuals

h) Summarize your main points at the end

334

CHAPTER 9

Quality

Show me someone who has done something worthwhile,
and I'll show you someone who has overcome adversity.
Lou Holtz

<>

Chapter objectives


Define quality
Understand the role of quality assurance in projects.
Understand the major contributors to the quality field
Understand the role of quality policies, planning, assurance and control in
organizations.
Compare and contrast quality planning, assurance and control in organizations.
Understand the meaning and importance of ISO, CMM, and other quality plans.
Support ISO, CMM and other quality efforts in your organization.
Contribute to the software quality assurance effort in your organization

How do you define quality? Imai (p. xxiii) states, “There is very little agreement on what

constitutes quality. In its broadest sense, quality is anything that can be improved.”

The PMBOK (p. 6) defines quality management as the processes required to ensure

335

that the project will satisfy the needs for which it was undertaken. Quality applies to

products and services. A software process is a set of activities, methods, and practices

used to develop and maintain software. Quality involves procedures, techniques and

tools used to ensure that a product meets or exceeds an agreed upon specification.

Deming suggests that quality involves product or service uniformity and repeatability.

The commuter expects the train to arrive at the station at 7:27 a.m. Arriving

significantly earlier or later leads to disappointment and dissatisfaction with the service.

Software that consistently performs as advertised satisfies the consumer and gives the

impression of a quality product. Pralahad and Krishnan argue that the emerging view of

quality requires organizations to adjust to its customers’ dynamically shifting

expectations (1999, p 110). They support Reicheld and Sasser (1990) who offered the

view that the focus of quality has shifted from zero defects in products to zero

defections of customers. Pralahad and Krishnan offer a view of quality that integrates

the ideas of conformance to requirements, organization adaptability and innovation.

Kerzner (p. 1085) sums it up with a broad definition of quality: Quality is a process to

retain existing customers, win back lost customers, and win new customers.

Intuitively we can understand that the lack of quality affects product and service cost as

well as the organization’s profits. Traditional costs of poor quality result from scrap

material costs, product rework, extensive inspection, rejects and a customer’s

excessive use of product warranty due to failures or faulty operation. Less obvious

issues that impact quality costs stem from engineering changes, long times, more

manufacturing setups than planned, labor to expedite material purchasing resulting

336

from inadequate planning, excessive test time to validate a product of service’s

operation, lost customer loyalty due to late delivery or not meeting the customer’s

expectations, and excess inventory due to excessive material orders. Quality is a very

broad term that encompasses a myriad of issues. Every employee contributes to a

product or service’s quality or lack of it.

The Quality Gurus

Today’s quality movement traces its roots back to the 1920’s with developments by Dr.

Walter A. Shewhart and Dr. Joseph Juran at Western Electric. Shewhart , the father

of modern quality control , pioneered the use of statistical techniques to control

processes in an effort to minimize defective output. He combined elements of

statistics, engineering and economics in his work. Dr. W. Edwards Deming who also

worked briefly at Western Electric based much of his work on Shewhart’s teachings.

Following World War II, Deming introduced statistical quality control concepts and the

idea of total quality management to Japan. He referred to the Shewhart Cycle as a

systematic approach to problem solving. Proponents called it the Deming-Shewhart

cycle or simply the Plan-Do-Check-Act cycle, which is the essence of continuous quality

improvement. Deming stresses that management has an obligation to constantly

improve the system of production and service. The Plan-Do-Check-Act (Figure 9-1)

cycle permits management to install a process that promotes ongoing quality

improvements. The process implies that inspecting the product or service at the end of

the job is too late and too costly. Plan-Do-Check-Act shifts the paradigm from detection

337

to continuous examination of the process thereby proactively attempting to prevent

problems.

Figure 9-1 The Deming-Shewhart Plan-Do-Check-Act Cycle

Do Plan
Movement
Toward
Continuous
Check Quality
Act Improvement

Although Deming began to discuss these concepts in the 1930’s and 1940’s, American

industry did not accept Deming’s ideas until the 1980’s. In his 1986 book Out of the

Crisis, Deming presented his 14 points, which he believed applied to small or large

organizations, and to service as well as to manufacturing organizations. The 14 points

require a good deal of discussion by members of the organization before adoption.

These points are controversial and at times contradict industry practices and the

approaches described by other gurus. Table 9-1 examines some of these differences.

338

Dr. Edward W. Deming
( Quality Management
Philosophy and Continuous
quality improvement)

Dr. Joseph M. Juran
(quality trilogy)

Dr. Philip Crosby
(zero defects and cost of quality)

Dr Armand Feigenbaum,
(Originator of "Total Quality
Control" phrase)

Dr. Kaoru Ishikawa
(Quality tools)

339

Table 9-1 – Alternative Views on Selected Items from the 14 Points

Point Deming’s Text Dissenting or Alternative Views
No.
4 End the practice of awarding business on Most organizations including the U.S.
the basis of price tag. Instead, minimize Government require a minimum of 3 bids
total cost. Move toward a single supplier for before awarding a contract. Many
any one item, on a long-term relationship of purchasing departments would look with
loyalty and trust. suspicion if a department awarded a
contract to another organization without
a bid process.
5 Improve constantly and forever the system This effort requires meetings of
of production and service, to improve employees at all levels in the
quality and productivity, and thus constantly organization and may not show
decrease costs. immediate results. Managers may
resent a subordinate making
suggestions to improve a process while
in a meeting with their superiors.
6 Institute training on the job. Many organizations offer minimal
training and expect the employee to train
themselves on their own time.
8 Drive out fear, so that everyone may work Coercive power is a commonly used
effectively for the company. technique by many managers. Some
managers and supervisors continue to
use stated or implied threats. For
example, “Four hours of free overtime
per week is expected of all employees,
”Do this task or I will assign you to
second shift,” etc.
10 Eliminate slogans, exhortations, and targets For many years, slogans such as Zero
for the work force asking for zero defects Defects (recommended by Crosby) and
and new levels of productivity. Such Quality is Job One, etc. were used by
exhortations only create adversarial industry to motivate workers.
relationships, as the bulk of the causes of
low quality and low productivity belong to
the system and thus lie beyond the power
of the work force.
11 b) Eliminate management by objective. Most production and sales organizations
Eliminate management by numbers, use numerical goals to spur on their
numerical goals. Substitute leadership. employees.
12 b) Remove barriers that rob people in American business and industry regards
management and in engineering of their the annual employee review as a “holy”
right to pride of workmanship. This means practice.
abolishment of the annual merit rating and
of management by objective.
13 Institute a vigorous program of education Many organizations offer less than 40
and self-improvement. hours of staff development per year.

340

The Union of Japanese Scientists and Engineers (JUSE) sponsored Deming’s lectures

to Japanese industry during the early 1950’s. The material so influenced Japanese

industry that they named a quality award after him. The Deming award is given

annually to organizations worldwide that meet demanding quality standards. In 1960,

Deming received the Second Order of the Sacred Treasure award for his contribution to

Japan's reindustrialization.

Dr. Joseph M. Juran followed Dr. Deming to Japan in 1954. Like Deming, Juran

received training in statistics. His lectures also sponsored by the Union of Japanese

Scientists and Engineers added to Japan’s focus on quality improvement. He also

received the Second Order of the Sacred Treasure award for his contribution to Japan's

industry. He developed the idea of a quality trilogy: quality planning, quality

improvement and quality control.

Quality Planning

• Determine customer’s needs

• Develop a product or service that responds to those needs.

• Optimize the features to meet producing organization and customer’s

needs.

Quality Improvement

• Develop a process that produces the product or service

• Optimize the process.

Quality Control

341

• Prove that the process can produce the product under operating

conditions.

• Transfer the process to operations (manufacturing).

• Optimize the manufacturing process.

Central to Juran’s message is the belief that quality requires planning. For success, the

organization should integrate quality improvements into corporate plans. Organization

wide plans should include the identification of customer’s needs; establishing optimal

quality goals; creating metrics to facilitate measurement; and developing processes

capable of meeting quality goals under actual operating conditions. Quality requires

teamwork and problem solving. Ultimately, Juran declared, quality is fitness for

purpose.

Japanese industry’s adoption of quality concepts advocated by Deming and Juran

assisted them in turning around a country decimated by war into a quality powerhouse

within a decade. During the 1950’s, Japan exported a variety of merchandise to the

United States ranging from trinkets for sale in five and dime stores to automobiles. This

inexpensive merchandise would break apart and fail in a short time. Japanese vehicles

had a reputation of turning into a “rust bucket” after a few years of use. Japanese

automakers failed to sell their cars in the U.S. market because of their poor quality and

performance. By the late 1960s - after the implementation of quality concepts into the

production system, Japanese cars became competitive against U.S. products.

Although it took some time, Japanese industry turned this reputation for poor quality

merchandise around. Assisted by a domestic oil crisis caused by the Arab-Israeli war in

342

1973 and the Iranian revolution of 1979, U.S. consumers willingly paid a premium for a

fuel efficient Japanese built automobile that met their needs and provided reliable

service.

Feigenbaum advocated the concept of total quality control. Involve all business

functions in the pursuit of quality including design, engineering, administration,

marketing, purchasing, manufacturing, production, inspection, packaging, delivery,

installation and service. Everyone had responsibility for quality not only the quality

professionals. He stresses that quality does not mean ‘best' but 'best for the customer

use and selling price'.

Crosby advocated satisfying the customers' needs and expectations by implementing

the four absolutes of quality management, which are

• Quality is conformance to requirements

• The system of quality is prevention

• The performance standard is zero defects.

• The measurement of quality is the price of nonconformance.

Crosby championed the slogans Do It Right First time and Zero defects, which many

organizations adopted. The U.S. Military placed posters around their facilities

reminding civilian and military personnel about this quality goal. Crosby’s writings

emphasized that poor-quality products could prove disastrous for the organization. He

believed that quality paid for itself in the end.

343

Ishikawa developed a tool to assist in the analysis of process quality. The "Ishikawa"

or "cause-and-effect" diagram uses statistical data to categorize the causes of

inadequate quality into

• Materials,

• Processes or work methods,

• Equipment, and

• Measurement.

For example, materials may differ when sources of supply or size requirements vary.

Equipment or machines also function differently depending on variations in their own

parts. These variations affect a product's quality. Ishikawa's work lead Japanese firms

to focus quality control attention on improvements in these four areas.

Quality and the Project Manager

Quality is paramount in the eyes of the project manager. It leads to a satisfied

customer, which makes the job easier. Producing quality products and services has a

schedule and cost impact. To some managers, quality costs additional money. They

believe that the price of goods and services may surge astronomically if the

organization follows Crosby’s goal of zero defects. Other quality practitioners argue

that quality ultimately leads to cost reduction and the practices that ensure quality

should be a way of doing business. Creating a quality product or service involves a

variety of organization wide processes and procedures. The project manager must be

aware of these practices. Aguayo points out two methods used by organizations to

improve quality – 1) inspection and 2) the constant improvement of the process and

344

products. Both approaches affect the project’s cost, schedule and resource usage.

Both approaches require planning to incorporate the process into the schedule.

The costs of quality involve evaluating products and services for conformance to a set

of standards. Many organizations rely on inspecting the product at various stages in its

production or development. In some production operations, inspectors merely remove

out-of-tolerance or faulty units from the line without considering the underlying reasons

for the failures. Modern quality approaches focus on prevention techniques. That is,

personnel continually examine the product, service or process with the idea of

improving it. Continuous quality improvement brings with it the expectation that higher

productivity, lower costs, higher profits and higher quality result from this effort. The

Japanese use a quality control method called Kaizen, which means continuous

improvement in personal life, home life, social life, and working life as a whole. As

related to the workplace, kaizen means continuing improvement involving managers

and workers, customers and suppliers alike. Implementing kaizen processes leads to

more competitive products and services. Management concepts such as total quality

management (TQM) and quality circles involve employees at all levels within the

organization meeting to examine or create processes and procedures that lead to

product or service improvement. They believe that a great number of small

improvements over time will create substantial improvement in organizational

performance (see for example http://www.kaizen-institute.com). Kaizen ideas

encourage people to continually question current practices and seek a better way of

345

doing something. The practice does not demand perfection – only continual movement

towards the ideal. The process demands contributions from the cross-functional team.

Quality Policy

Organizations start the quality process by establishing a quality policy, which is a

statement of operational practice principles. The quality policy promotes uniformity and

consistency in the processes and procedures used by the organizations. The policy

identifies specific guidelines for performing work. Functional experts prepare the

section of the quality policy manual pertaining to their jobs. After reviewing and

understanding the document, the organization’s executive management approves and

supports the policy. This commitment on management’s part is crucial to the success

of the quality process. It means that they will not dispense with quality procedures to

ship a product. Management’s commitment to quality receives the real test when the

end of the fiscal quarter approaches and they have not reached their sales goal. Will

management support the quality organization’s efforts to maintain a product or service

for which the company can feel proud or will they buckle under to the sales or

production department’s drive to meet the monthly quotas? Will employees adhere to

and implement the policies under stressful conditions? Imagine the pressure. The

customer calls hourly demanding delivery. Bonuses are at stake for the vice

presidents on down to the sales department personnel for shipping on time. Perhaps a

follow-up contract hinges on a successful delivery. This places a huge psychological

and perhaps a physical burden on the purchasing, manufacturing, engineering, and

training departments to follow the purchasing, fabrication, installation, testing, and

documentation procedures they have established. However, if the organization’s

346

reputation for delivering a reliable, robust, easy to use, unbreakable, technically

superior product is to be upheld, personnel must adhere to these quality policies.

It is common for customers to request a review of an organization’s quality policy before

placing the order. They may wish to determine if the organization performs operations

in conformity with accepted industry practices. The quality policy quickly helps outsiders

understand the organization’s procedures. Many customers are leery of placing

business with a firm that has little depth and has not trained the staff to follow standard

operating procedures. If a cadre of employees follow unwritten and undocumented

procedures to accomplish the tasks, the customer becomes uneasy. The customer has

concerns that their job will not be completed satisfactorily and within the allotted time if

one of those crucial people leaves and the remainder of the organization chooses not to

follow the undocumented task procedures. Therefore, the organization counters this

anxiety by developing a methodology that enables others to complete the task.

The organizations' quality policy manual frequently includes statements related to the

topics shown in Table 9- 2. The table illustrates the typical topics with each department

or function deals. The project manager need not be intimately familiar with these

policies, but the PM must recognize that they exist and understand whom to contact if

additional information is required. If a policy exists then the PM must include its

implementation in the overall project plan. That translates into allocating schedule,

budget and resources to complete the quality policy requirements.

347

Table 9-2 – Typical Quality Policy Items in the Organization

Department or Typical Policy Topics
Function

Executive Management Mission; vision; values; organization chart; strategy; tactics.
Human resources Personnel policy manual; job descriptions; recruitment; hiring
process including psychological testing and interview
scheduling; new employee orientation; phone list; discipline;
employee reviews; salary guidelines; employee training;
Compliance with U.S. Department of Labor and Justice
regulations and requirements
Engineering Documentation requirements; design guidelines; design
reviews; testing; component selection; preferred standards;
software selection; proposal preparation, format and review.
Project Management Documentation and activities required to begin, manage, and
terminate a project. (For example, requirements list, project
charter, SOW, schedule, WBS, periodic actual versus expected
costs, etc.)
Quality General guidelines; ISO requirements; internal quality audits;
preparation of quality records; Control of Quality Records
Other functional Training and Personnel Qualifications; ongoing training;
department guidelines Customer Supplied Products and equipment; Identification and
Control of customer Items
Manufacturing Equipment usage training; safety training; dress; fabrication
techniques; purchased material processing
Sales and Marketing Territory distribution; warranty; new product development and
introduction; pricing
Information Technology Desktop and portable computer policies; networking; Internet
(IT) access; firewall; external/internal access to E-mail; organization
web page; computing system maintenance and upgrade; data
back-up; business records and information storage.
Accounting Accounting practices
Legal Contract acceptance Review; Standardized terms and
conditions; government regulatory issues
Documentation and Preferred publishing software; format guidelines
publishing
Purchasing Supplier selection; preferred vendors; vendor negotiations;
multiple bid requirement
Incoming Inspection Control of nonconforming material and equipment
Instrument Maintenance Calibration and Control of Test Equipment; Instrument
and Repair Maintenance frequency
Field service Corrective and Preventive Actions; customer servicing; dress;
response speed to customer request

348

Table 9-2 – Typical Quality Policy Items in the Organization (Continued)

Department or Typical Policy Topics
Function

Training Developing and preparing customer courses and seminars
Safety and Handling of hazardous materials; Protection of workers from
Environmental hazardous material; worker safety policies
Handling, Storage, Material and equipment Handling; Static sensitive device
Packaging and Delivery handling; Ambient storage conditions (e.g., temperature and
humidity); Shipping and Delivery
Security Employee access to the facility
Facility Maintenance Equipment replacement schedule; Equipment maintenance
schedule; Building maintenance; Compliance with U.S.
Department of Labor Occupational Safety & Health
Administration (OSHA) requirements; compliance with U.S.
Department of Justice Americans with Disabilities Act
(ADA) requirements

Quality Planning, Assurance, and Control

At some point in an organization’s maturing process, it considers the need for quality

processes and the associated documentation. Frequently the motivation arises from a

desire to do business with customers that demand a well-defined quality policy. For

example, many European companies demand ISO 9000 compliance. Electric power

companies such as the Tennessee Valley Authority, demand that an organization have

a quality policy in place and employees use it. After they establish broad policies, many

organizations institute three quality management processes:

• Planning – selecting quality standards

349

• Assurance – a means of ensuring that organization members implement the

written plans and policies, and selected standards

• Control – quality control centers on a monitoring activity that measures and

evaluates data. On an assembly line, it includes inspections that focus upon

testing the product and rejecting faulty items. In a service environment,

organizational performance may be objectively compared with pre-established

criteria. The group then analyzes and interprets this information with an eye

towards improving the product or service.

Figure 9- 2 graphically depicts the need for organizations to build a quality structure on

well-rooted and supported quality policies. Quality planning, assurance, and control

follow from these policies. Ultimately, this combination will blossom into satisfied

customers.

The continuous quality improvement cycle shown in Figure 9-3 follows from the gurus’

work. As discussed by Deming, Juran and others, quality is a never-ending sequence

involving all employees. During the planning process, departments and functional

disciplines identify the standards, which they agree to meet. To assure a quality

product, the staff develops standard operating procedures that personnel follow. After

receiving training in the organization’s procedures, the quality assurance staff audits

personnel to verify that they are aware of the procedures and use them. Data are

collected, analyzed and compared with a reference. As part of the evaluation process,

the organization encourages staff members to suggest process improvements. After

350

discussion, the staff develops procedural changes. The staff pilots the recommended

process change while continuing to collect and analyze data. Changes that make the

product easier to produce, cheaper, better, simpler, smaller, and faster become

permanent while those that do not show an improvement are discarded. As a

consequence of operational changes, organizations periodically review and update

outmoded policies and procedures.

Figure 9-2 The Quality Tree of Organization Life

Customer
Satisfaction

Quality
Assurance
Quality Planning

Quality
Control
Quality
Planning

Quality Policies

351

Figure 9-3 Continuous Quality Improvement Cycle

Policies

• Identify organizations and
functional areas requiring
formal quality policies
• Create broad objectives
• Create quality policies

Change
Planning
Develop a model for
change if • Define Outcomes
a) performance criteria (performance criteria)
are not met, or • Establish goals
b) process modifications • Identify resources
may improve outcomes • Select external
standards
Keep successful changes. • Select and/or prepare
Discard unsuccessful internal standards
activities.

Control

• Define performance
indicators & criteria
• Measurement (Tools
and Procedures) Assurance –
• Data collection, Implementation process
reduction & analysis • Preparation of
• Data Evaluation procedures
• Staff development and
training
• Audit
• Measurement
methodology
• Feedback

352

Quality Planning

Quality planning involves identifying and selecting the quality standards relevant to the

project and determining how to satisfy them. These standards include both internally

and externally driven requirements. Internal standards comply with each department’s

methodology for performing work. They may have evolved from product testing, safety

considerations, and experience or past successful practice. Examples of internal

standards include the following:

• Physical or educational requirements required to perform a job

• Minimum test scores required to perform a job

• Checklist used to verify a hardware or software development effort during a

design review

• Software or hardware Installation procedures

• Usage of standard software, tools, system components and/or equipment

• Purchased item inspection

• Hazardous material handling

External standards may include requirements derived from professional and/or

international organizations; and local, state and federal government guidelines and

regulations. Contracts may require product deliveries that meet generally accepted

industry standards prepared by organizations such as those shown in Table 9-3. At

times, a customer may impose its own internal standard onto a contractor.

353

Table 9-3 – Typical External Standards

Standard Purpose
Software Engineering Institute (SEI) Software standards for product design,
development, test and documentation.
European Software Institute Software standards for product design,
development, test and documentation –
used primarily in Europe.
Institute of Electrical and Electronic The IEEE standards cover the fields of
Engineers (IEEE) electrical engineering, electronics, radio
and the allied branches of engineering,
and the related arts and sciences. Design
development, test, and installation of
electronic hardware, computer software,
and computer networking standards.
American Society for Quality (ASQ) Standards in the field of Quality
Management, Environmental
Management, Dependability, and
Statistics.
American National Standards Institute ANSI registers and distributes standards
(ANSI) from accredited developers.
International Organization for Covers international standardization in the
Standardization (ISO) field of Information Technology.
e.g., ISO-9001: 2000, ISO/IEC JTC 1 Information Technology includes the
specification, design and development of
systems and tools dealing with the
capture, representation, processing,
security, transfer, interchange,
presentation, management, organization,
storage and retrieval of information.
U.S. Department of Defense Military Military Standards covering everything
Standards from component selection to welds and
from specification preparation to product
testing. Design development, test , and
installation of electronic hardware,
computer software, and computer
networking used for military purposes.
Malcolm Baldrige Award Group that establishes quality standards
for business, academic, and health
organizations. Designates outstanding
examples as award recipients.
U.S. Department of Labor Occupational Occupational safety, health and
Safety and Health Administration (OSHA) ergonomic standards to protect workers in
organizations.

354

The organization’s quality plans clarify stakeholders’ expectations of the design,

development, fabrication and installation processes. Employees understand the nature

and complexity of the design review(s) at the outset of the project. Software and

hardware developers recognize that at some point in the process, the design freezes.

That is, the design can only change for good reason and must pass through an

approval cycle. Supporting documentation such as an engineering change notice (ECN)

must accompany the proposed change. These precautions exist because of the high

likelihood that a design change following the “official design release” will affect another

department’s work. The approval process forces awareness of the modification by

other departments by requesting functional managers to “sign” the paper work. This

change may trigger a variety of reactions. Depending on the nature of the change,

purchasing may have to order a different part, or the installation or maintenance

procedure changes, or software version changes may introduce compatibility problems,

etc. A formalized notification process informs all departments of the impending change

and permits them to take appropriate action.

Policy plans spell out the organization’s philosophy for managing software and

hardware documentation such as requirements statements, schematics, drawings,

manuals, specifications, test plans and test results etc. following stakeholder

acceptance. The documentation policy establishes a change “paper trail” or product

history that frequently assists the organization in identifying the reasons for problems

that arise.

355

Typically after product test, purchased material cannot change without approval from

the engineering development team. Frequently, engineers transfer the tests used to

verify the operation of the development system to the manufacturing organization. Test

technicians do not change these tests arbitrarily. Even the equipment used to test the

developed system “freezes.” The PM requests test technicians to record the test

equipment manufacturers’ model numbers and software versions so that the test can

be accurately repeated in the future. This control ensures an accurate baseline system

configuration.

Many external organizations provide outlines for establishing a quality plan. These

include the Institute of Electrical and Electronic Engineers (IEEE), the Software

Engineering Institute (SEI), the European Software Institute (ESI), the International

Organization for Standardization (ISO), and the Malcolm Baldrige Award organization.

All these organizations have their place and are important. The six sigma concept does

not have an organization that promotes it, but many companies have adopted this

approach to quality. For the most part, these programs do not conflict with one another.

Indeed, they are mutually supportive. Each of these processes affects the project

manager’s process and documentation responsibilities. The PM does not have to

perform the work, but must understand the process so that the project gets done on

time and within budget. Usually the customer accepts the quality program in-place at

the organization. Some customers demand that the contractor use one or more of

these external standards. We will briefly examine several quality plans that

organizations commonly use.

356

IEEE Software Quality Plans

The software project plan documents the work necessary to conduct, track and report

on the progress of a project. It contains a full description of how the technical staff will

perform the work. The Institute of Electrical and Electronic Engineers (IEEE)

developed a set of software lifecycle standards representing its view of best commercial

practices. Table 9-4 illustrates a list of these plans. Some software development

organizations follow a combination of these specifications. For example, they

commonly use the following five plans:

Software Quality Assurance Plan (SQAP): IEEE 730.1

Software Requirements Specification (SRS): IEEE 830

Software Design Document (SDD): IEEE1016

Software Verification and Validation Test Plan (SVVP): IEEE1012

Software Verification and Validation Report (SVVR)

357

Table 9-4 -- IEEE Software Quality Standards

IEEE Quality Standard IEEE Standard Number
Software Quality Assurance Plans 730-1998
Guide for Software Quality Assurance Planning 730.1-1995
Software Configuration Management Plans 828-1998
Software Test Documentation 829-1983
Guide for Software Requirements Specifications 830-1984
Software Unit Testing 1008-1987
Software Verification and Validation Plans 1012-1998
Recommended Practice for Software Design Descriptions 1016-1987
Software Reviews and Audits 1028-1988
Guide to Software Configuration Management 1042-1987
Software Productivity Metrics 1045-1992
Software Project Management Plans 1058-1998
Guide for Software Verification and Validation Plans 1059-1993
Software Quality Metrics Methodology 1061-1992
Software User Documentation 1063-1987
Developing Software Lifecycle Processes 1074-1991
Software Maintenance 1219-1998
Guide to the Project Management Body of Knowledge 1490-1998

The SQAP serves as a contract between the project team and the software quality

assurance department. The SQAP identifies the specific tasks the software quality

assurance department must perform to support the project team. These activities may

include the following:

• Reviewing project plans

• Identifying software standards, practices, and conventions used on the

project

• Specifying a method of verifying compliance with the selected standards,

practices, and conventions

358

• Describing the configuration management activity to ensure that project

documents (such as the project management plan, the SQAP, the test plan;

and deliverable documentation) are maintained under change control

• Performing audits to verify that all software personnel follow the software

plans

• Coordinating software review meetings

• Participating in the risk management program, and

• Monitoring the software test program.

The SRS collects and formalizes the customer’s requirements in a systematic and

comprehensive manner. The document’s goal is to define the system to meet the

user's needs, which should lead to user satisfaction. Some contracts demand that the

software developer submit the SRS to the customer for review and approval. This

procedure verifies that the developer has correctly interpreted the customer’s requests

and included all of the customer’s requirements in the document. The customer and

contractor must negotiate and resolve all discrepancies before work can proceed.

The SDD represents a detailed version of the SRS. It examines the system's functions

and sub-functions before coding. In addition to providing a detailed description of the

internal design details of each function, the SDD defines naming standards and coding

standards; specifies the software architecture; includes appropriate design analyses;

and describes interdependencies among the software functions and system interfaces.

The interfaces specified in the SRS may include operator, computer, and input/output

359

devices such as a bar code reader, terminal or printer. The interfaces frequently

consist of the linkages between third party software such as a database and a report

writer. The descriptions can take the form of narratives, flow charts, or any other

methodology on which the team agrees. This design information becomes the basis

for coding and software testing.

Following the completion of the SDD, the programmers code using the agreed upon

software tools. The software verification and validation plan (SVVP) uses the SDD as

the basis for functional testing. Verification involves reviewing, inspecting, testing,

and checking something to ascertain that processes, services or documents conform to

specific requirements. Validation requires the software developer to evaluate software

throughout the development process to ensure compliance with user requirements.

Programmers generate a plan that tests every aspect of the software and its interfaces.

The programmer prepares test cases and procedures to enable a quality assurance

technician to evaluate the software’s operation. Software developers prepare software

test documentation that contains detailed instructions and templates for every aspect of

the software test process. The tests performed by a software quality assurance

technician verify that the developers implemented the customer’s requirements as

expected. Technicians record the results of test cases. At the test’s conclusion, the

technician prepares a software verification and validation report (SVVR) that describes

to stakeholders the software package’s status. In addition to verifying that the software

program correctly implemented all of the customer’s requirements, the software test

technicians determine the robustness of the package. That is, they intentionally make

360

mistakes while using the application; they combine unusual key combinations; pursue

unintended pathways in the software package. The object of this effort is to determine

the software’s sensitivity to human error. If the software goes off to “never-never-land”

(locks up the computer or breaks down in some fashion), then further work is required

by the developers. After SVVR approval, the Q.A. Department releases the software

for manufacture and distribution.

® ®
Capability Maturity Model (SW-CMM ) for Software

The Software Engineering Institute (SEI) is a federally funded research and

development center sponsored by the U.S. Department of Defense (DOD) and

operated by Carnegie Mellon University. In the 1970’s and 1980’s, Military and

commercial software projects consistently fell behind schedule, exceeded budgets and

did not meet the customer’s operational requirements. Paulk (1995) reported that

organizations complete typical commercial software projects a year late and overrun the

planned budget by 100%. In a review of one DOD software organization’s 17 major

projects, auditors discovered that software developers missed the average 28-month

schedule by an average of 20 months. A planned four-year project took seven-years to

complete and no project was delivered on time. Clearly, a problem existed. The U.S.

Department of Defense engaged the Carnegie Mellon University to participate in the

development of a software development methodology to bring the management of

software projects under control. SEI developed a model to establish a coherent

software design process that organizations could follow. The Software Capability

Maturity Model (CMM or SW-CMM) assists managers in judging the maturity of an

361

organization’s software processes. The model does this by categorizing the processes

(Table 9-5) used by organizations on a scale from poor to outstanding or as SEI terms it

from ad hoc, chaotic processes to mature, disciplined software processes. As

described on the Software Engineering Institute web site

(http://www.sei.cmu.edu/cmm/cmm.sum.html), CMM places an organization into one of

five maturity levels. Organizations that develop software with this model have as an

objective predictability, customer responsiveness, and control so that managers can

accurately predict software development costs and delivery.

Each key process area is described in terms of the key practices that contribute to

satisfying its goals. The key practices describe the infrastructure and activities that

contribute most to the effective implementation and institutionalization of the key

process area.

362

Table 9-5 Software Capability Maturity Model (CMM)

CMM CMM Level CMM Level Characteristics Key Process Areas Organization Focus
Level Descriptor
5 Optimizing Continuous process improvement is Defect Prevention, Technology Implement continual,
enabled by quantitative feedback from the Change Management, and measurable software process
process and from piloting innovative ideas Process Change improvement
and technologies. Management.
4 Managed Detailed measures of the software process Quantitative Process Establish a quantitative
and product quality are collected. Both the Management and Software understanding of both the
software process and products are Quality Management. software process and the
quantitatively understood and controlled. software work products built
3 Defined The software process for both management Organization Process Focus, Establish an infrastructure that
and engineering activities is documented, Organization Process institutionalizes effective
standardized, and integrated into a Definition, Training Program, software engineering and
standard software process for the Integrated Software management processes across
organization. All projects use an approved, Management, Software all projects
tailored version of the organization's Product Engineering,
standard software process for developing Intergroup Coordination, and
and maintaining software. Peer Reviews.
2 Repeatable Basic project management processes are Requirements Management, Establish understanding
established to track cost, schedule, and Software Project Planning, between customer and software
functionality. The necessary process Software Project Tracking and developer. Establish basic
discipline is in place to repeat earlier Oversight, Software project management controls
successes on projects with similar Subcontract Management,
applications. Software Quality Assurance,
and Software Configuration
Management.
1 Initial The software process is characterized as
ad hoc, and occasionally even chaotic. Few
processes are defined, and success
depends on individual effort and heroics.
Source: Software Engineering Institute (http://www.sei.cmu.edu)

363

Most small organizations today remain at level one. They do not prepare technical and

managerial plans and schedules, nor do they prepare and monitor budgets.

Requirements are sometimes fuzzy. They may or may not hold formal or informal

design reviews. Slightly in excess of 200 organizations had the courage to declare their

CMM status level (Table 9-6). Approximately 37% of those place themselves in level 3

– which is quite good.

Table 9-6 The Software Engineering Community's Compiled List of Published Maturity

Levels (as of June 5, 2001)

CMM Level Number of Declared Percent Distribution

Organizations

1 -- --

2 35 17%

3 76 37%

4 40 20%

5 52 26%

Source: Software Engineering Institute (http://www.sei.cmu.edu), July 2001

The Software CMM has had a wide influence on software design processes and quality

improvements. It may be the best known and most widely used model worldwide for

software process improvement. As with all of the quality methodologies discussed, it

demands that employees receive training in its use. By following the model, software

364

developers learn that software development consists of more than code writing. The

software CMM model promotes evolutionary or incremental change as espoused by a

kaizen-style or CQI approach to organizational change. That is, it supports gradual,

cumulative improvement to business processes rather than revolutionary changes.

Following the CMM process prohibits the project manager from saying “Ship it now and

fix it in the field.” This kind of sloppy management damages the organization’s

reputation and credibility.

ISO Standards

The International Organization for Standardization (ISO) is a worldwide federation of

national standards bodies from approximately 140 countries (refer to the web site

http://www.iso.ch/iso/en/ISOOnline.frontpage). ISO’s mission “is to promote the

development of standardization and related activities in the world with a view to

facilitating the international exchange of goods and services, and to developing

cooperation in the spheres of intellectual, scientific, technological and economic activity.

ISO's work results in international agreements which are published as International

Standards.” Many of the ISO ideas link directly to the perspectives espoused by

Crosby, Deming, Feigenbaum, Ishikawa, and Juran (Smith and Angeli, 1995). In

common with the quality plans previously discussed, ISO standards strives to:

• Form a foundation for project improvement, consistency and profitability.

• Provide stability, improved products and services, customer satisfaction and

reduce waste.

• Increase employee awareness of company requirements and procedures.

365

• Establish a basis for continuing improvement

The terms ISO 9000, ISO 9001, ISO 9002, ISO 9003 and ISO 9001:2000 all deal with

quality management in organizations. People use the generic term ISO 9000

certification to mean certification against ISO 9001, ISO 9002 or ISO 9003. The

difference among the three is one of scope. The ISO website distinguishes one

standard from another in the following ways:

• ISO 9001 sets out the requirements for an organization whose

business processes range from design and development, to

production, installation and servicing;

• ISO 9002 is the appropriate standard for an organization that does not

carry out design and development. The organization may be involved in

product production, installation and servicing. Appropriate for a distributor

or manufacturer without design functions .
• ISO 9003 is the appropriate standard for an organization whose business

processes do not include design control, process control, purchasing or

servicing. The company uses inspection and testing to ensure that final

products and services meet specified requirements.

As with all quality systems, ISO 9000 compliance success requires extensive employee

training. Although the primary purpose of ISO 9000 compliance is to improve product

and service quality, the marketing aspects of achieving certification should not be

overlooked. Some organizations will only purchase products and services from those

that have achieved ISO 9000 certification. This is particularly true for the automotive

366

industry and European based organizations. You can bet that a company’s sales and

marketing department’s will use ISO 9000 certification as a marketing tool.

The International Organization for Standardization (ISO) is in the midst of a transition

period. The three levels of certification (ISO 9001, ISO 9002 or ISO 9003) have

changed to a single certification (ISO 9001: 2000). Organizations have until December

15, 2003 to make the transition to the new standard. ISO 9000:2000 has defined

eight quality management principles for performance improvements, which are

1. Customer focus

2. Leadership

3. Involvement of people

4. Process approach

5. System approach to management

6. Continual improvement

7. Factual approach to decision making

8. Mutually beneficial supplier relationships

The complete document may be found on the ISO web site

(http://www.iso.ch/iso/en/ISOOnline.frontpage).

CMM and ISO 9000 series of standards share a common concern with quality and

process management. Paulk (1994) compared the two systems. His analysis showed

that by following ISO 9000 procedures, the organization would satisfy most of the level

2 and many of the level 3 goals. Because there are practices in the CMM that are not

367

addressed in ISO 9000, it is possible for a level 1 organization to receive ISO 9001

registration. Some areas addressed by ISO 9001 are not addressed in the CMM.

Paulk (1994) states that a level 3 organization would have little difficulty in obtaining

ISO 9001 certification, and a level 2 organization would have significant advantages in

obtaining certification. The two models continue to evolve and influence each other.

An organization that complies with ISO 9000 quality plans employs processes that

describe and control every element of the project lifecycle. As part of the ISO

qualification process, an external group audits the organization to verify that the

organization performs the quality routines they purport to do. In preparation for these

external reviews, the internal quality department periodically performs audits of the

organization’s departments to verify that all department members have familiarized

themselves with the processes. ISO recognizes that every organization uses processes

unique to it. The question with regard to obtaining ISO certification is does the

organization practice what it preaches? Do the organization’s members consistently

follow the policies and procedures outlined in the quality plan? Organizations that can

satisfy these issues have minimal difficulties passing audit examinations.

Six Sigma

All of the quality plans discussed share a great many similarities. They focus on

customer satisfaction, emphasize data analysis, strive for product and process

improvements and demand senior management involvement. Six sigma also focuses

on customer satisfaction and continuous improvement to reduce defects. However,

unlike the others, six sigma quantifies the defect rate objective to 3.4 defects per million

368

installations, products manufactured, etc. The method also specifies tools designed to

both identify and correct these defects.

How good is good? Motorola (Harrold, 1999) asks if the following defect rates are

acceptable:

• 20,000 lost pieces of mail every hour.

• Unsafe drinking water almost 15 minutes every day.

• 5,000 incorrect surgery operations per week.

• 2 short or long landings at most major airports each day.

• 200,000 incorrect drug prescriptions each year.

• No electricity for almost 7 hours each month.

These numbers reflect a defect rate of about four sigma or a bit less than 1 failure in

every 100 units produced. Do you think a 1% failure rate is acceptable for a heart rate

monitor or a pacemaker? Is one airplane crash in every 200 takeoffs acceptable? Table

9-7 identifies the failure rate in several industries. A test grade of 99 out of a 100 may

be praiseworthy, but 99% is unacceptable in many industries. You may have second

thoughts about contacting the IRS for tax advice if they provide the wrong answer one

out of four times (table 9-7). Perhaps the IRS could benefit from quality training.

Indeed, the average company at 3σ could use help.

In the 1980’s Motorola decided to strive for something better and coined the term "Six

Sigma." Six sigma uses a DMAIC (Define, Measure, Analyze, Improve and Control)

program to affect positive change in business processes. The method represents an

369

alternate view to the approach shown in Figure 9- 1. The concept does not differ

dramatically from the Deming-Shewhart plan-do-study-act cycle. In addition to

Motorola, General Electric, Allied Signal, Sony and Cummins Engine, have used the six

sigma approach to achieve customer satisfaction.

Table 9-7 Typical Defect Rates in Selected Industries and Professions

Approximate
Profession Defect Failure Percent Defect
Rate Rate -%
IRS phone-in tax advice (2.2σ) 25
Restaurant bills, doctors prescription writing, 8.5
and payroll processing (2.9σ)
Average company (3.0σ) 6.7
Airline baggage handling (3.2σ) 5
Best in class companies (5.7σ) 0.002
U.S. Navy aircraft accidents (5.7σ) 0.002
Watch off by 2 seconds in 31 years (6σ) 0.00034
Airline industry fatality rate (6.2σ) 0.00032
Source: Harrold, D. (1999). Designing for Six Sigma Capability. Control Engineering Online.
http://www.controleng.com/archives/1999/ctl0101.99/01a103.htm
Although Six Sigma's tools and methods include many of the statistical tools used in

other quality approaches, here they are employed in a systematic project-oriented

fashion. Six sigma requires extensive employee education. From 1996 to 2000, GE

invested heavily in six sigma activities by training the vast majority of its employees –

almost 300,000 people. They hired outside consultants to support this effort. Former

General Electric chief executive officer (CEO), Jack Welch committed the organization

to support this effort because he strongly believed that it would pay for itself.

(Remember, rarely does a CEO in the capitalist system embark on a project without

370

expectations of a healthy return on investment.) Portions of the executives’ bonuses

were linked to the introduction of six sigma – this had to be serious business. By all

accounts, the quality program has proven very successful at GE.

The six sigma training program borrows titles from the martial arts and creates Master

Black Belts, Black Belts, and Green Belts all of whom have varying levels of

competency. The Master Black Belts are the teachers. Black Belts provide project

leadership. Green Belts work for a Black Belt and lead smaller projects. The tools that

these quality practitioners use includes: 1) Histograms that show the range and

distribution of the product’s variances, 2) Ishikawa diagrams, 3) check sheets to verify

the order and number of the tasks to perform, 4) diagrams that show the factors that

contribute the most defects, 5) graphs that plot output versus time, and 6) scatter

diagrams – a statistical technique that plots variations with respect to a reference. The

quality gurus listed in this chapter introduced many of these techniques. Six sigma built

and expanded on the concepts already widely used by different businesses and

industries. The approached integrated many of these concepts into a cohesive

package, introduced quantitative targets and further emphasized mass employee

training.

Quality Assurance

The foregoing examples of quality plans involve specific actions that employees must

follow to provide a product or service. The quality assurance process attempts to

create a culture that centers on the use of reliable processes and systems involving

371

checking and feedback. Quality assurance concentrates on policy and procedural

mechanisms for quantifying organizational performance. The typical means of

implementing quality assurance involves employee training and followed by an auditing

process.

To make certain that employees follow the recommended plans and procedures, the

QA organization encourages departments to prepare forms and procedures (Table 9-8)

that define what to do and how to do the department’s work. Usage of these forms

creates a “paper-trail” that confirms that employees used approved design, fabrication,

test, and installation methods in performing their activities. In medium to large

organizations, the quality assurance department periodically audits functional

department to verify that employees understand and follow recommended procedures.

Total quality management (TQM) is the generic concept behind quality assurance. The

continuous quality improvement process described in one form or another by all of the

gurus goes into action. With executive management’s support and blessing all

employees on a project meet on a regular basis to discuss ways of improving the

products and services they offer. Everyone has the right, in fact the responsibility, of

thinking about the product and service and saying “I think we should do this …” or “the

customer believes that the product would be better if …” or “we could save money if we

did this ….” or “the competition is doing …., why don’t we do … .” or “ this supplier’s

product gives us these problems …. consider using XYZ supplier.”

372

At a TQM meeting, don’t be shy. Express your viewpoint. Each member of the

organization from management to line worker has a unique perspective that helps to

pinpoint problems and improve the product or service. Help open up the discussion at

a TQM meeting. This will improve the CQI process. Avoid the Abilene Paradox - a

well known tale in management literature wherein a family (team members), each

privately opposed to an action, encourage others to continue, for fear of offending a

team member or appearing negative.

373

Table 9-8 -- Typical Quality Assurance Documentation

Organization Chart Procedures

Proposal Documentation Firmware Development

Statement of Work Hardware Development Procedure

Specification Document Control Procedure

Work Breakdown Structure Project Management Procedure

Schedule System Configuration Procedure

Forms Software Development (e.g., SQAP, SRS, SDD,

Project Kick off Meeting Assignments SVVP & SVVR)

Responsibility Assignment Matrix (RAM) Product or Service Test Procedures

Engineering Change Notice (ECN) Work Instruction

Product or system configuration checklist Work Authorization

Project Management Checklist Product Assembly Instructions

Guidelines Computer setup Instructions

Hardware Development Guidelines Manufacturing Equipment Instructions

Software Development Guidelines Computer Backup Instructions

Test Integration Instructions

374

Quality Control

Harold Geneen states, “In quality control, you are controlling the down side. You are

stipulating how many defects, how many minus numbers, are acceptable (p. 35).”

During the manufacturing process, quality control involves product inspection,

measurement of variation from norms, collecting and then analyzing data. At selected

stages of the design, fabrication or manufacturing process, technicians test the product

to verify it performs according to expectations. Variances outside of a preset tolerance

range require examination to determine the reason for the discrepancy. Reasons for

large variation include poor design, worn tools, unclear fabrication directions, tired

workers, suppliers providing defective material, and others. The issue requires study of

the process to determine appropriate solutions.

In a service environment, quality assurance typically makes use of customer surveys,

focus groups, and customer feedback. Surveys exist to determine if the company does

its job of “delighting the customer.” Most college students have completed course and

faculty evaluation reports. These reports represent one aspect of a college’s

continuous quality improvement system targeted at upgrading course content and

assisting faculty in improving course presentation. Restaurants place evaluation forms

on tables that help them evaluate the quality of the dining experience. They seek

comments regarding food, service or facilities that will help them better serve the diner

or reward outstanding employees. Typical restaurant surveys ask the diner to comment

on a scale from poor to excellent on items such as:

• Pleasant greeting on entering the establishment

375

• Speed of service

• Food quality

• Value

• Restaurant/restroom cleanliness

An airport in the United Kingdom conducts surveys to determine passengers'

perception of its service. They ask travelers to rate the airport from poor to excellent on

their day’s experiences in the following areas:

• Ease of finding your way through airport

• Flight information screens

• Availability of flights to a destination

• Ease of making connections with other flights

• Availability of baggage carts

• Courtesy, helpfulness of airport staff

• Restaurant facilities

• Shopping facilities

• Washrooms

• Passport and visa inspections

• Customs inspection

• Comfortable waiting /gate areas

• Cleanliness of airport terminal

• Speed of baggage delivery service

• Ground transportation to/from airport

• Parking facilities

376

• Sense of security

• Ambience of the airport

• Overall satisfaction with airport.

A Holiday Inn hotel in downtown Vancouver requests each customer to comment on

their stay by responding to a survey that rates their satisfaction from very dissatisfied to

very satisfied in a five step scale. The include the following items in the survey:

• Outside appearance of hotel

• Lobby condition

• Service at check-in (friendly, efficient, prompt)

• Guestroom

! Overall cleanliness

! Bath facilities

! Heating/air-conditioning

! Bed comfort

! Television/radio

! Condition of furniture

! Condition of bedspread/drapes/carpet

• Service of hotel staff

! Responsiveness to your needs

! Friendliness

! Attitude and appearance

• Restaurant

! Quality of food/beverage

377

! Restaurant cleanliness

! Quality of service

• Telephone services (wake-up calls, messages, long distance/ local services)

• Lighting

• Hotel safety and security (lighting, locks, safety deposit)

• Accuracy of billing

• Service at check-out (friendly, efficient, prompt)

• Value received for price paid

Whether prepared for a specific project or for a more general purpose, organizations

collect and analyze both quantitative and qualitative data. Organizations identify and

select the corrective actions to pursue as they follow the Deming-Shewhart Plan-Do-

Check-Act Cycle. In the operations area, quality control also considers post-

manufacture issues such as distribution, installation, service and product use.

Responsibility for Quality

No matter which quality approach the organization follows, the project manager has the

responsibility for implementing the selected process. The PM works with the

organization’s quality department, functional managers, suppliers, executive

management, customer and all other stakeholders to make certain that they follow the

prescribed quality policies. The PM works with the stakeholders to

• Identify quality problems

378

• Recommend solutions

• Execute solutions

• Stop work if the product or service does not conform to expectations until

satisfactory problem resolution.

• Prepare the required documentation

The costs for implementing quality measures should be included in the project’s price

during the preparation of the RFQ or RFP. Juran believed that quality does not happen

by accident, it must be planned. The PM has the responsibility to make certain that the

organization successfully carries out the plan.

379

Chapter 9 Questions

1) W. Edwards Deming, Joseph Juran, and Phillip Crosby were instrumental in the
development of quality management thought. Go to each of the following Web sites
and compare and contrast each of their philosophies: W. Edwards Deming Institute
(http://www.deming.org/), Juran Institute (http://www.juran.com/), and Philip Crosby
(http://www.philipcrosby.com/).

2) Identify four quality management theorists and briefly describe their contributions.

3) What are the three aspects of a quality program? Briefly, describe them.

4) Briefly describe four quality plans used by organizations.

5) Describe the five Software Capability Maturity Model (CMM) levels.

6) Is a quality level of one defect out of a hundred sufficient? Explain your answer.

7) At the Juran Institute’s Web site (http://www.juran.com/,), you will find several of Dr.
Juran’s articles available for download. Select one article and develop a two or three
paragraph summary of its key points.

8) Visit the Malcolm Baldrige Web site (http://www.quality.nist.gov/show.htm) and
examine the profiles and web sites of the most recent winners. What aspects of
their quality management system distinguish them?

9) A page on the Malcolm Baldrige Web site (http://www.quality.nist.gov/show.htm)
identifies the features of outstanding colleges. Compare and contrast five attributes
expected of quality colleges with a college with which you have some familiarity.

10) Do you agree with the statement “Personal quality standards and business quality
standards have little in common.”? Explain your answer.

11) Do you agree with the statement “Quality relates to the process as much as to the
goal?” Explain your answer.

12) Only idealists talk about quality. Explain why you agree or disagree with the
statement.

13) The organization that sponsors ISO 9000 is the International Organization for
Standardization. Why do they refer to themselves as ISO? If you need assistance,
look on the ISO Web site: http://www.iso.ch/.

380

14) Visit the Malcolm Baldrige Web site and determine the quality requirements that
they advocate. Compare it with any other quality plan discussed in this chapter.

15) Contact a local organization that has a quality assurance program. Example
organizations include engineering design, development and manufacturing; a
hospital; or your college. Prepare a written report to determine the employees
perceived value of the program. Interview both members of the quality assurance
organization and members of functional departments affected by the program. In
separate interviews, ask them the same questions. Sample discussion items and
questions asked of the stakeholders include the following:

Explain their quality assurance process to you. Do the stakeholders seem to
understand the program?
Does every department in the organization have a quality plan? If not, why?
Describe the conditions under which they have suspended or would suspend the
quality assurance program.
Name three benefits of the quality assurance program.
How does the quality assurance program streamline the work process?
Does the quality assurance process make the final product or service more
consistent and reliable?
Does the quality assurance process cost or save money? How much?
Describe the continuous quality improvement activities.

After you compile the information, compare and discuss the results.

16) Class Exercise - Team Quality Discussion

Divide the class into three person teams. Each team will select a topic for a report and
class presentation. The team will research, write and present a report on a subject that
deals with some aspect of quality. For example, consider discussing a major
contributor’s research in the quality field, a policy and/or procedure used to promote
quality products and services in industry, or describe an organization’s experience
before, during, or after implementing a quality program. The following partial list of
topics represents a starting point:

Individual Quality Policies and Procedures Organizations
Contributors
W. E. Deming Six Sigma Motorola
A. V. Feigenbaum ISO 9000 General Electric
Taguchi Total Quality Management United Technologies
Dodge and Romig Statistical Process Control A Malcolm Baldrige
Award Winner
Acheson Duncan Software Capability A Deming Award winner
Maturity Model (CMM)
Walter Shewhart Tennessee Valley
Authority

381

Philip Crosby
Kaoru Ishikawa
Joseph Juran

As part of your work, you may want to elucidate on the following items:
What is quality?
What is quality assurance?
Do producer and consumer definitions of quality differ?
Have organizations implemented the described plans? If so, to what degree of
success?
Describe the significant operational changes that resulted from the
implementation of the ideas discussed. Did the organization find them
beneficial?
How long did it take to implement the quality plan?
Identify the costs of quality.

Submit a report within two weeks of the assignment date. Base your class presentation
on the report. Each presentation should take no more than fifteen minutes – four
minutes for each presenter and three minutes for questions and answers. Do not read
your written report to the class, plan on a Power Point slide presentation.

Self-check test

Answer True or False

1. Quality is preventing problems rather than picking up the pieces afterward.
2. Quality can always be improved.
3. The most important reason for a quality program is to have satisfied customers.
4. Constant attention to quality is unnecessary.
5. Quality involves the little things as well as the big things.
6. A quality program must have management support to be successful.
7. Quality guidelines are best communicated by word-of-mouth.
8. Customers pay little attention to quality.
9. A quality program must integrate with the organization’s goals and profit plans.
10. Quality means conformance to standards.
11. Quality should operate in all parts of a business.
12. Quality requires commitment.

382

CHAPTER 10

Project Risk

When one door of happiness closes, another opens;
but often we look so long at the closed door
that we do not see the one which has been opened for us.
--Helen Keller

<>

Chapter objectives


Understand the concept of risk management
Understand the four processes and actions to manage risk involved in risk
management
Understand the risks during the proposal stage
Use a template to estimate the cost of risk during the proposal pricing stage
Gain familiarity with the risks that might occur during the project execution phase
Recognize the role of technology selection in the risk process
Contribute to resolving the risk management effort in your organization

Risk Management Process

Risk deals with the uncertainty of attaining a goal or objective. The PMBOK (2000, p.

127) states “Project Risk Management includes the processes concerned with

identifying, analyzing, and responding to project risk. It includes maximizing the results

of positive events and minimizing the consequences of adverse events. “ The PMBOK

suggests using the following processes and actions to manage risk:

383

• Risk Identification – determine the risks likely to affect the project and

document the characteristics of each.

• Risk Quantification - evaluate risks and risk interactions to assess the

range of possible project outcomes.

• Risk Response Development – define the steps to thwart the threats.

• Risk Response Control - respond to changes in risk over the course of the

project.

Risk management recognizes that things can go wrong throughout the project lifecycle

and demands that PMs prepare for it. During the project planning stage, the PM

together with the functional managers, suppliers and other stakeholders review the

customer’s requirements. The team assesses the ability of the system under

development to meet these requirements. As they progress during the planning stage,

the team identifies areas of concern. If they identify a customer requirement or project

objective that seems questionable, the planning team documents the issues (technical

or otherwise) and estimates their impact on the cost, schedule, and available resources.

The stakeholders prepare an action plan to mitigate the risk if any of the problem issues

arise. The PM sets aside a contingency budget to fund the inevitable problems and

issues that arise. During the project, team members track and report on the project

activities with attention paid to the emergence of the noted risk indicators. If the

anticipated problem issues arise, then the stakeholders whip out the corrective action

plans and implement them.

384

Risk Identification at the Proposal Stage

Contract

Most customers award a firm, fixed price contract. The fixed price includes all of the

costs, overhead, G&A, and profit in the final price. That is, the customer and the

contractor agree on a price and that is the price paid to the contractor no matter the

cost. The customer does not care if the contractor or developer makes a profit on the

job. The customer simply wants a finished product or service at the end of a specified

time at the agreed price. In years gone by, the government sometimes offered a “cost

plus” contract. Under a cost plus contract, the contractor received a profit (typically

10%) based on total project expenditures. Under this contract format, the contractor

had no incentive to reduce costs and frequently would load the project with unneeded

personnel. It was a wonderful way to train new employees in the organization’s

procedures. After six months to a year, the employees gained the experience to

contribute meaningfully to the organization’s activities. Some of them would likely be

transferred to different job – perhaps a fixed price contract – and replaced by another

crop of new hires. The government would pay for all of this. Not too efficient, but

permissible on a cost plus contract. In defense of this policy, some contractors refused

to bid on a new and potentially difficult development project using unproven

technologies for fear of under-estimating the costs and losing money. The government

offered the cost-plus contract to entice companies to pursue difficult new and risky

developments.

385

Sometimes circumstance demands project completion by a given date and the

customer willingly agrees to pay a premium for this outcome. The customer develops a

contract intended to motivate the developer by offering a fixed price plus an incentive

fee. That is, the customer pays the agreed price to the contractor if the contractor

completes the project on the scheduled date. However, if the contractor delivers early,

then the customer pays the contractor the agreed price plus an additional percentage of

the price, which is commonly referred to as an incentive fee. The downside of this

arrangement involves a penalty if the contractor delivers late. The penalty aspect of

this contract represents risk and the PM must carefully monitor the execution of the

plans to prevent returning money to the customer.

Technical Risk

Small information technology, electronic, mechanical and electromechanical system

and software developers frequently face a variety of technical risks in a new project.

Risk exists if your organization has not previously delivered a similar system or software

package. The use of software, hardware or manufacturing tools not previously used by

your organization entails risk. Initiating changes into the development or fabrication

process introduces risk. Frequently, the consequence of these risks surrounds

schedule, which may lead to additional labor hours to complete the task(s). It may take

longer for the staff to learn to use a new tool or to gain comfort with a new process than

anticipated. Murphy’s laws never take a vacation. [ 1) If anything can go wrong, it will.

2) Nothing is as easy as it looks. 3) Everything takes longer than you think it will.]

386

A new technology brings with it all manner of risk. By its very nature, a research project

contains very significant risk because the staff does not know if it will succeed. The

maturity of the technology used on the project has a major bearing on the system risk.

Referring to Table 10-1, the use of a leading edge technology raises the eyebrows of

most PMs. Whether software or hardware, unproven or recently introduced technology

will have bugs – unknown problems that limit the use of the application software.

Sometimes engineers on technology’s front cusp insist on using Beta software. The

term Beta signifies software in an advanced state of development but still in test and

not yet officially released for production. This software has problems. Manufacturers

release Beta software versions to knowledgeable customers to help “wring out” the

software just before production. The customer willingly accepts the risk entailed in using

unproven software to take advantage of unique features that it desires. When using

leading edge technology, functional managers and project managers anticipate setting

aside time and budget for staff training. Depending on the complexity of the new

technology or software, it may take some time for the staff to achieve proficiency in the

use of the new products. PMs understand that new technology has inadequate

documentation. Organizations frequently deliver documentation such as application

notes, operational user manuals, maintenance manuals, and training manuals

sometime after the product’s initial release.

Invariably the standard computers available in the organization will require upgrade to

operate leading edge software. New developers tend to use the latest available

387

computer features. For cutting edge software they will expect a cutting edge platform

that includes a large hard drive, gobs of memory, intensive graphics and other features.

Make certain to budget for additional computer hardware to operate the new software.

Expect reliability issues associated with the purchase and use of new

electromechanical and electronic products. Assuming there are no engineering design

issues, large production runs usually require some time to work out the manufacturing

kinks. Great demand and limited initial production translates into a high price for the

product during the first months following introduction.

Initially, a new electronic product usually has only a single supplier. Some time elapses

before other manufacturers decide to second source the product. Usually the

component price remains high during the time for which only a single source exists.

Another downside consideration of using a sole sourced item is that your organization

will have major redesign issues if the sole source supplier decides to change or

discontinue the component. If the sole source supplier experience production problems

or gains success in the marketplace and your organization is not a preferred customer,

then your organization may have difficulty acquiring the required component. Of

course, situations exist that demand the use of a sole sourced supplier. Another

company may not offer a product containing the requirements that your organization

demands. If this is the case, then you must develop a close rapport with the supplier

and stay abreast of any anticipated product specification, technology or price changes.

388

For these reasons, many project managers prefer not to use leading edge technology.

They prefer to consider state of the art or mature technologies to eliminate the risks

inherent in this technology. It does take some convincing, because most engineers and

technicians want to use “the latest and the greatest” product. They feel they become

obsolete if they do not use the most recent technological innovation.

During the state of the art years, the leading edge technology products become reliable,

available and the price stabilizes. Training becomes readily obtainable and second

sources emerge.

The PMs favorite, the mature technology, has everything going for it – product

availability, low price, reliability, multiple sources, and accurate documentation. Product

availability will likely continue for several years to come, which will satisfy system

maintenance issues. By this time, technology practitioners have received training and

the project will not incur schedule delays or budget surprises due to lack of training.

The software will work on all computers, because computer hardware will have caught

up to the features required by the software. Little, if any, risk is involved. A great

choice.

Risk begins to increase if the project personnel intend to use sunset or aged

technology. Technical personnel become harder to recruit. They voice reluctance

about working on older technology. While on the job they may seek other opportunities

within and external to the organization to enable them to work on projects with newer

389

technology. Job changing may result in schedule delays while a new person assumes a

transferees responsibilities. Component multiple sources disappear as product

demand decreases and manufacturers no longer enjoy the profits they would like.

Avoid legacy system components. Only companies specializing in obsolete product

sales will help obtain material and supplies. If a supplier has obsolete product in stock,

expect a high cost. Within your organization, few personnel will have familiarity with

obsolete components. Certainly, no one wants to work on them. Recent graduates will

not have any background in this technology and will be at a loss. In a Pentium 4 world,

would you want to work on a computer with an 80386 or 80486 processor?

Manufacturers no longer support legacy components. Few people in their organization

can help you with an application. The most recent computers may have difficulty

operating legacy software. As an example, try running DOS based software in a

Windows 2000 environment. Forget about it!

390

Table 10-1 Technology Risk

Technology Elapsed Employee Training Software or Electronic
Time in Training Availability Electronic Hardware
Years Since Hardware Product
Introduction Reliability Availability

Leading edge <1 Maximum Few courses Poor Limited
available

State of the 1-3 Moderate Courses Good Good to
art become Excellent
available

Mature 3-5 Minimal Plentiful Excellent Excellent
technology Courses

Sunset 5-8 Moderate Fewer Excellent Moderate
courses
available

Legacy >8 Seek No courses Excellent Limited
specialists Availability

391

Table 10-1 Technology Risk (Continued)

Technology Computer Electronic Documentation Product Price
Platform to Hardware Availability
Operate Second Source
Software Availability

Leading edge New or None Lack of High
Upgraded availability and
older system error prone. Few
application
engineers
available to assist
with problems.

State of the New or Likely Improving Moderate
art Upgraded
older system

Mature Standard Yes Complete with all Low
technology Platform updates

Sunset Standard Yes but Complete with all Moderate
Platform decreasing updates

Legacy Limited Limited Complete with all High
Availability Availability updates.

Technical and Operational Performance

Some customers request that the contractor demonstrate compliance with every

requirement listed in the specification. An operational performance test of this

magnitude requires significant preparation as well time to actually perform the test. It is

customarily performed during the factory or site acceptance test. Anticipate that things

will not go smoothly. This will cost schedule and labor hours.

392

At times, customers require a hardware product to achieve a minimum reliability or a

maximum repair time. Mean time before failure (MTBF) is a measure of a hardware

system’s reliability. As the name implies, it signifies the approximate theoretical time

the hardware system operates before incurring a failure.

Reliability engineers can calculate the mean time before failure (MTBF) using standard

failure rate tables. This data does not exist for newer technologies. Consequently,

technologists may not be able to accurately calculate the MTBF. This may force a “live”

MTBF test, also known as a reliability demonstration, before the customer accepts the

product. If this test includes a provision in the specification to set the elapsed time to

zero following every failure, this could severely affect the schedule and test budget.

Delete this latter provision from the customer’s list of test requirements during the

proposal phase.

A new packaging approach may bring with it difficulty in meeting a customer’s desired

mean time to repair (MTTR). A customer’s application may require quick product

repair. If so, they may include a provision in the contract designating a specific MTTR

goal - perhaps 30 minutes. Proving this may also require an extensive array of testing,

which the PM should estimate and for which the customer should pay.

The risk involved in both the MTBF and MTTR tests surrounds the possibility of test

failure. Correcting the product will inevitably cost a great deal of money. Many

organizations upon failing this type of test would rather extend the warranty or offer the

393

customer a number of replacement units in lieu of correcting the system and repeating

the reliability or time-to-repair test.

Damages

Some projects critical to an organization’s operation may cause great harm to the

business if it becomes inoperative or does not meet contract specifications after

installation. The organization may include a statement in its terms and conditions

requiring the project developer to pay for lost business or demand some other

compensation during the time the developer makes corrections. The contract may not

be worth the risk of this type of damage or the ensuing court fight. Delete this from the

customer’s terms and conditions during the proposal phase.

Labor Rates and Forward Pricing Projections

Some projects require several years to complete. This multi-year procurement brings

with it a very positive outcome – work for an extended time. However risks abound, not

the least of which is the need to reflect the increased labor costs in the estimate.

Typically, the staff receives 3-4% annual salary increases. Material costs rarely go

down. The multi-year price to the customer must reflect salary and material increases.

In addition to taking into account small labor and material price increases, some PMs

word the price statements to take into account inflation. The contractor states that all

prices are given in a particular year’s dollars – say 2003 dollars. Therefore, if rampant

inflation takes over the economy in 2004, the customer pays the additional inflationary

costs.

394

Business risk issues

From time to time, a contractor decides to move into a new business area and offers a

very low price containing little if any profit, which is intended to influence the customer

to place the order with them. Under these circumstances, the PM continually

scrutinizes labor and material expenditures during the course of the project to prevent

over-running the budget. The contractor willingly undertakes the risk of exceeding the

budget in hopes of establishing themselves as potent players in the new business area.

Sometimes a customer structures a project in phases with each successive phase

contingent upon the successful completion of the previous stage. A contractor may

decide to bid a low price on the first stage. They believe that the customer will be

reluctant to switch contractors if they successfully fulfill the terms of the first phase. The

contractor anticipates recovering the profit during subsequent project phases. This

strategy, known as cost amortization, has worked successfully many times. As long as

the contractor does not become too greedy, a customer will tend to remain with the

original contractor. The organizations involved have developed a rapport and

understand each other’s method of operating. It is easier for the customer to continue

the relationship than to seek a new developer – especially if the contractor met the

technical requirement and delivered the product on time.

Outsourcing, the process of subcontracting work to organizations not part of your

operation, has always been a way of doing business. This places a burden on the

395

PM. The subcontractors require intensive monitoring to verify that they will deliver the

product or service on schedule, technically acceptable and at the agreed price.

Organizations outsource for a variety of reasons. Some of these reasons include the

following:

• The selected contractor may not have the critical technical skills to perform some

aspect of the job.

• The selected contractor may have the technical skills and knowledge to perform

some aspect of the job, but not have the resources to complete the set of tasks

within the required schedule.

• The customer may direct the selected contractor to use a particular

subcontractor.

• The contractor may have entered into a teaming arrangement with another

organization. The agreement requires them to subcontract a portion of the job to

team members.

Organizations commonly enter into a teaming relationship to make the total package of

experience and available resources more attractive than either of the team members

alone could provide. Organizations select team members that complement one another

by providing greater technical or managerial depth than they alone could provide.

Sometimes an organization selects a team member because they understand the

customer very well and believes that the selected team member can provide insight into

the customer’s operation.

396

Outsourcing brings with it a whole host of issues and risks. Can the designated

organization that receives the outsourcing contract do the job? Do they have a history

of success with similar projects? Do they have the technical expertise available to work

on your job? Do they have the facilities, tools and other needed resources in place? Do

they have the financial resources to accomplish the task? Can they schedule your task

into their to-do list? Can they do the job within your budget and still maintain the quality

that you expect? Do they have the resources to adequately test the product or service?

Can they provide maintenance and repair services and training, if required, after they

deliver the product or service to you? Have you allocated sufficient labor to monitor the

outsourcing organization’s progress?

Terms and Conditions

Review the customer’s terms and conditions contained in the RFP or RFQ during the

proposal phase. Raise potential risk issues to executive management for discussion

and resolution. Look for an unusual warranty – for example, an extended warranty or a

warranty that includes the installation of new software versions during the first year after

delivery and installation. In addition to installation labor and software cost, this

condition may have software compatibility issues. For example, if the system that your

organization intends to deliver includes third party software in addition to the

organization’s developed software, a risk exists that the installation of new untested

software versions may not operate satisfactorily in the customer’s environment. Only

include updating software if your organization receives payment for this task – usually

on a time and material basis.

397

Make certain that a satisfactory payment schedule exists on longer development

contracts. Customers prefer to pay for the job at the conclusion. That is OK for them,

but your organization must use its own money until it receives payment. Organizations

prefer to use the customer’s money to fund the project’s progress. Include a payment

following the completion of each significant milestone or deliverable.

Companies collect patents for protection purposes. If company A appears to infringe

on one of company B’s patents, company B slaps company B with a lawsuit. After

receiving notice of the lawsuit, very often company A examines company B’s product

patents in an effort to counter sue for patent infringement. In all likelihood, the suits will

settle out of court. Customers frequently include in the terms and conditions, the right

to own all patents that emanate from a development contract. Organizations try to

keep patent rights for inventions that they develop even if the customer pays for it. The

PM settles these stipulations before the parties sign the final contract.

Other Costs

Capital expenditures involve the purchase of equipment, facilities or other non-labor

resource above a preset financial minimum that will serve several different projects.

Capital expenditures do not usually include equipment that serves a single project. The

project purchases unique tools or equipment. In an effort to reduce project costs, PMs

review required equipment and tools and try to include them as capital expenditures.

398

Mitigating Risk at the Proposal Stage

After examining the different types of risk discovered during the proposal phase, the PM

quantifies the risk by creating Table 10-2. The PM together with the functional

managers calculate the cost of a WBS item as two parts. The first part corresponds to

the likely cost of labor and material for the WBS task. The second part corresponds to

the additional cost resulting from a worst-case risk scenario. Assign a risk probability of

25%, 50% or 75% for this case. The weighted risk is the product of the probability of

risk and the risk cost estimate. The WBS item cost corresponds to the sum of the likely

WBS item cost and the weighted risk cost. The results of this calculation transfers to

the proposal cost spreadsheet shown in Chapter 7, Table 7-7 – Including the Project’s

Financial Risk in the Cost.

Senior management generally reviews the risks before submitting the project price to

the customer. Depending on their desire to win the contract or just plain “gut feel,” they

will take all or a portion of the identified risk and add it to the baseline project cost to

arrive at a total project cost, which the organization submits to the customer.

399

Table 10-2 Quantifying Risk

WBS Item Task Item Cost - Risk Cost - Probability of Weighted Risk Total Item Cost - $
Description $ $ Risk -$

Total

400

Risk Management During the Project

During the proposal phase, the project team completed the risk management analysis

that included risk identification, risk assessment, and risk abatement. As part of the

latter task, the team developed plans that defined the actions should the unwanted

events occur. This proactive planning function identified and ranked elements of risk

that could compromise a successful project outcome. Finally, the team sets aside

contingency funds to minimize the financial impact.

During the project’s execution phase, a host of issues can arise that could cause

project delays, cost overruns, and/or performance issues stemming from a failure to

achieve technical or operational requirements. Perhaps the most common reason for

delays involves changing requirements. As they learn about the capabilities of the

product or service they contracted, customers have a tendency to “fine tune” their

needs. In order to ensure a profit and deliver the project on schedule, the PM must

control the scope of the job. This translates into controlling the customer and

implementing a change control management process. Insist that the customer submit

a formal change order request that describes in detail the nature of the change. This

enables the contractor to respond with a price and schedule impact statement. Only

after the customer approves the change and agrees to a price increase do you

proceed. The PM does not agree to a verbal approval. Have an authorized customer

representative sign and date the change order and then proceed. In this manner, the

PM gains assurance that the customer understands and agrees to the cost and

401

schedule ramifications. Generally, changes made early in the schedule cost the least

to implement.

Modern systems use many complex interconnected components containing multiple

hardware and software interfaces. These interfaces frequently contain unknown quirks

and represent a source of integration problems. Once a software or hardware module

operates consistently well, urge engineers to use it on similar interfaces rather than

redesigning it for the technical challenge.

Technologists dislike preparing documentation. They love to design. They even will

accede to testing a system, but they generally dislike writing. Because of that aversion,

they will postpone writing as long as possible. The risk is not only that it may not be

done, but also that the technologist may forget important details that should be

contained in the material. Incomplete documentation may cause support (e.g.,

maintenance and training) problems down the road. During project status reviews the

PM gently reminds all associates of unfinished tasks.

Frequently the customer has the contractual right to review and approve acceptance

tests and other written material. Here again, the PM prompts the customer to expedite

documentation review and approval. Failure to do so can slow the project’s progress.

The PM may halt some activities for fear that without documentation approval some

work would require modification, thereby costing additional time and labor.

402

Rarely do we plan for staff turnover. Anticipate that a small percentage of the staff will

depart during the project effort for a variety of reasons such as illness, disability, family

leave, sabbatical or simply a different job. Today, people with skills in demand

frequently hop from job to job in an effort to broaden their technical experience base as

well as increase their salary. Leaving a position in midstream causes a significant

disruption to the workflow. The recruitment process requires time to advertise, interview

prospective applicants and select an appropriate match. The newly hired person needs

time to adjust to the company’s processes and procedures. Sometimes the new

employee must undergo a period of training. Meanwhile, tasks go undone and the

project falls behind schedule. If too many people leave, the organization should

investigate the reasons. It may face a broad salary, benefit, or working condition

problem that requires attention by the human resource department and upper

management.

A special staffing problem involves the use of consultants. At times, the team decides

to use consultants to “kick-start” the project. That is, the team brings in experts to get

the project off to a fast start. In some situations, temporary workers supplement the

existing employee base. In these cases, the PM must ensure that adequate provisions

for contractor/consultant knowledge transfer take place.

Preparing for disaster recovery represents a sound business strategy. Plan for the day

there might be a fire, flood, earthquake, or terrorist attack. Perhaps you cannot prepare

for the kind of terrorist attack that struck the World Trade Center in New York City and

403

the Pentagon on September 11, 2001, but you should protect the project and the

organization as best as possible. Consider installing a back-up power source to supply

power to a system or facility. Assume that computers will fail. Although important, it is

insufficient to simply have another copy of the computer hard drive on a zip drive or CD-

Rom within the same facility. A fire or flood could destroy both the computer hard drive

and back up, if placed in the same location. Regularly place the back-up data in an

offsite storage location away from your office or manufacturing facility. Do the same

with engineering drawings, schematics, software source code and documentation.

Some organizations use a bank vault or safe deposit box for this purpose and transfer

the material to this location weekly. Commercial repositories for data storage exist (e.g.,

Iron Mountain). Back-up computers daily or weekly. Some installations permit setting

an automatic daily hard drive backup that simplifies the process.

Other risk areas confronting the project include:

• Technical errors or misjudgements

• Task omissions

• Non-specification related design changes

• Component or equipment unavailability

• Management commitment to project

• Changes in senior management forcing extensive and frequent status reporting

• Estimating and scheduling errors

• Collective bargaining unit actions

• Late delivery of supplier deliverables

404

• Priority changes that result in loss of resources

• Delayed approvals and acceptances

• Weather and other random events

• Incorrect learning curve selection

• Unavailable or unreliable tools and methods

• Project Team Factors - experience, skills, background, and dedication of the

project team.

Mitigating Risk

The project team attempts to produce a desired outcome while minimizing the risk of

failure. Interpret failure to mean any of the following project outcomes:

• Late delivery

• Unacceptable product or service installation at customer’s site

• Over budget

• Product or service technical inadequacies

• Unacceptable technical performance

• Product or service unreliability

• Inadequate product or service maintainability

• Inadequate documentation

• Inadequate customer training

• Inadequate after delivery support

• Product or service safety issues

405

• Unacceptable attitude toward customer

• Slow help-desk response

Risk management first involves identifying the risk areas before the project begins –

that is, during the proposal phase. Once identified, the PM and the team tracks these

risk items during project execution. Invariably, new risk elements of emerge. Staying

on top of the project enables the team to take action before activity-delaying problems

occur. The PM works closely with team members to change the development process

and reallocate resources to help control and minimize the risk. These actions help

direct a project team to select the best path, thereby improve the team's ability to effect

a positive outcome and meet project objectives.

406

Chapter 10 Questions

1. With what does risk management deal?

2. Identify four processes and actions to manage risk.

3. Describe the difference between a “cost plus” contract and a “firm, fixed price

award”. Which would you prefer and why?

4. Senior management dictates the use a new project scheduling and project tracking

software tool. Describe the issues associated with the use of this new tool. As the

PM of a new project that must use this tool, what steps can you take to minimize the

risks?

5. The engineering staff has decided to use a new composite material to construct an

enclosure for the system under contract. The engineering department believes the

new product has superior properties (inexpensive, lightweight, strong, and

malleable) when compared with traditional materials used for this application. What

issues do you think may arise from using this new material? Describe steps you can

take to minimize these problems.

6. Discuss the advantages and disadvantages associated with using new technology.

7. Engineering recommends the purchase of a newly introduced attachment to a

personal computer that would be ideal for use on the project for which you are the

PM. The device will reduce the size, weight, and manufacturing time for the new

system under design. If used, engineering estimates 10% reduction in the cost of

the material used on this project. Sentrex Technologies, a multibillion dollar

407

company and long established company, manufacturers the unit. At this time, they

are the only company that manufacturers the unit.

a. Does the use of this device represent a risk?

b. If risks exist, describe it. What can the project manager and the engineering

organization do to mitigate the risk(s)?

8. Describe the advantages and disadvantages of using newer versus older technology

in systems.

9. Discuss the difference between MTBF and MTTR.

10. Describe the circumstances under which an organization might offer a product or

service with little or no profit. Under these circumstances what must a PM do?

11. Describe the circumstances under which a company might team with another

organization to deliver a product or service. What risks does this entail? What can

a PM do to mitigate these risks?

12. What does outsourcing mean? Identify the risks associated with outsourcing?

What can a PM do to mitigate these risks?

13. Describe the process of preparing for risks during the proposal phase.

14. What is the purpose of contingency funds?

15. How can an organization plan for staff turnover?

16. What does controlling the customer mean? How does a PM do it?

17. What steps can people take to protect against natural or man-made disasters?

408

CHAPTER 11

Project Tracking, Reporting and Procurement

There is nothing in this world constant, but inconstancy. –

Jonathan Swift in Critical Essay upon the Faculties of the Mind (1707)

Change alone is unchanging.

- Heraclitus (circa 535- 475 B.C.E),

Herakleitos & Diogenes, pt. 1, fragment 23

Chapter objectives


Understand the importance of project tracking.
Recognize the constituencies from whom a PM requests information
Understand the contents of reports to prepare.
Understand the frequency of reporting.
Understand the information required to begin to track the project.
Analyze project tracking data.
Recognize when a project is in financial or technical trouble.
Identify the stakeholders responsible for financial or technical problems.
Understand the steps used to end a project.
Prepare yourself to lead a lessons learned session.

Project tracking and reporting

Following the proposal and contract award, the moment comes to execute all the

organization’s promises. Once the project is underway, project tracking and

reporting becomes uppermost on the list of the PMs activities. During this stage, the

409

project manager acts primarily as a functional department observer. The project

manager monitors status information and keeps the customer happy – and far away

from the technical organization. The PM tracks the project’s progress against the

implementation plan. Throughout the process, the PM watches for the signs of risk

issues emerging. Many PMs obtain information using the practice of management by

wandering around. Just talking with people uncovers a variety of concerns and issues

that people don’t put on paper. Most PMs try to cultivate relationships with project team

members, product or service users, suppliers, customers and senior management.

They visit team members, subcontractors and other project related personnel to assess

project progress. Talking informally with these people frequently uncovers issues that

might otherwise take time to surface. Few managers discuss employee attitude,

morale, job iniquities, etc. during status reviews. If these managers raise these issues

during reviews, they have generally reached a crisis level. Wandering around can

enable the PM to evaluate project status from a qualitative as well as a quantitative

perspective.

Typical monitoring activities include attendance at functional department meetings,

customer reviews, project status reviews and executive management briefings. The

PMs attendance at functional department briefings is usually inversely proportional to

the PMs workload. However, attendance is mandatory if the team identified some level

of activity risk during the proposal phase. For high risk project activities, daily

monitoring includes reviewing status information and meeting with key project leaders

to understand the progress of activities and making changes to priorities if required. For

410

lower risk project activities, the PM might limit monitoring to include a review of monthly

status reports, attending regularly scheduled briefings by project staff, and conducting

random visits to the project site to assess progress.

Project tracking serves the needs of senior management, the functional managers and

the customers to understand the issues associated with the job. Before commencing

tracking, the PM should gain familiarity with the project history, management, and

development methodology. After completing these preliminary steps the PM has the

background to proceed with project tracking, which involves

• Monitoring and reviewing the project accomplishments and results against plan

estimates of project scope, resources, schedule, and cost

• Verifying that the organization receives material procurements on time

• Maintaining contact with subcontractors and receiving the status of their

assigned work.

• Developing work-around plans to correct technical, schedule, cost, and

subcontracting plans that go awry.

• Verifying that resources become available when required

• Acting on feedback from the user or external customer.

Project tracking and reporting compares planned versus actual status for the following:

• Project schedule and milestones (including changes to scheduled dates for key

deliverables or milestones and planned completion date)

• Project budget (including cash flow and funding sources)

411

• Project scope, objectives, or requirements (if any changes occur)

The PM maintains awareness of changes to project sponsorship, management, or other

relevant organizational adjustments that may affect the work. Most status briefings and

reports begin with a summary of accomplishments since the last reporting period.

Reports frequently conclude with a summary of past, current and future issues including

steps to mitigate actual or potential problems and an updated risk analysis.

Project tracking methods and requirements vary based on project size, budget,

complexity, and impact on the affected organizations. The management of a project

includes processes for tracking and communicating project status and performing risk

assessments. The project manager has responsibility for tailoring the frequency of

reporting to meet the specific needs of the project. All projects terminate with a final

report that summarizes final costs, issues, and lessons learned.

Table 11- 1 illustrates guidelines for the frequency of monitoring project activities. Most

PMs examine schedule progress and actual spending versus planned spending on a

weekly basis. The PM contacts functional departments and suppliers at least weekly to

stay abreast of developing technical, resource and procurement issues. As discussed

in previous chapters, both under and overspending represent areas of concern. Does

the progress correspond to the spending or does overspending indicate a technical

issue? Does the lack of spending indicate that people are not working on the job?

Weekly stakeholder meetings can root out the answers to these questions. The PM

uses common sense in deciding the amount of information gained from these meetings

412

to share with the customer. Too much negative information will make the customer

have cause for concern – an undesirable event. On the other hand, only fictional

projects contain no problems. An experienced customer or project manager becomes

suspicious if activities proceed without issues developing. Senior management does

not want to know about every hiccup in the development process. Usually a monthly

project overview satisfies upper management’s need to remain aware of project status.

The PM maintains weekly contact with purchasing to understand the status of

significant component, equipment and service purchases or subcontracts.

Project Tracking Example

Perhaps project tracking and reporting can be best understood by an example that

illustrates the data examined by the project manager when monitoring and controlling

the project. The following project example describes a plan to provide a customer with

a custom-built employee security entry system, conceptually shown in Figure 11-1. The

customer operates an industrial facility containing three entrances in the surrounding

fence. The customer has concerns about plant security and wishes to control

personnel access by requiring each employee to carry and use a magnetic identification

card. Before entering the facility, each employee swipes their identification card

through a magnetic card entry reader device and places their thumb on a scanner. The

ID card contains personal and biometric information about the employee. The entry

process verifies that the person swiping the card is the employee seeking entrance by

matching the employee’s fingerprint with data stored on the card. Simultaneously, the

system accesses a central database to confirm that the person works at the facility, has

413

the appropriate security clearance for this site, and has completed all training (e.g.,

Hazmat) required for the job. After performing these checks in five seconds or less, the

control computer sends a signal to the entrance gate to permit or reject the person’s

entry request. The customer requires the contractor to install three identical access

control systems to monitor the entry locations and link each system to a central guard

headquarters.

The contractor receiving the award, decided to use as much commercial off-the-shelf

components and equipment as possible in an effort to reduce costs and development

time. Their schedule, shown in Figure 11-2 a, required sixteen weeks from contract

award to product installation and training. The contractor requires the following

departments in the effort to complete the work on this project: Electrical Engineering,

Mechanical Engineering, Software Engineering, Networking Engineering, Factory

Technicians, Field Service Technicians, Project Management, Publications, Quality

Assurance, Training, Shipping, and Purchasing. These functional departments

contributed to the labor hour estimate for each element of the simplified WBS shown in

Table 11-2. Table 11-3 illustrates the plan for the time distribution of the labor. The

data found on the charts represent a joint planning effort between the PM and all

project contributors.

The labor hour spending plan shown in figure 11-3 does not follow the “traditional”

inverted U characteristic described in chapter 3 because of the project’s small size and

short duration (16 weeks). Limited funding on this project prohibits the staff from

414

spending all of their time on this job. The nature of small short-term jobs requires

people to quickly complete their assigned tasks and move onto another project. Even

the project manager does not charge full-time to this job. Project managers can

manage four to five projects of this size and spread their weekly work hours over the

managed jobs. With a spending plan distribution such as this, the PM carefully

scrutinizes actual costs to ensure that employees do their work and stop charging the

job following completion of their tasks.

The project manager begins to gain control of the project by first reviewing and

understanding the project’s planned budget and schedule. Once the project begins, the

PM has the responsibility to deliver the product or service within budget, on time, and

technically satisfactory. Workers charging the job, enter the hours they work on each

task in the WBS into a database that collects this information. At the end of each week,

a financial administrative assistant prepares a variety of reports for the PM and the

functional managers to examine. These reports enable the comparison of actual labor

and material expenditures with planned expenditures in a variety of ways. At the same

time, the project manager also examines the work accomplished by the functional

departments to verify that they have maintained the planned schedule. Significant

differences between expected and actual spending demands further investigation.

This example focuses on the labor hours expended by the workers at the end of the

project’s fourth week. The example does not include material purchases. Table 11-2

describes the functional department’s budget for each task composing the work

415

breakdown structure. Table 11-3 presents the expected spending for each functional

department over the length of the job. Each week the project’s administrative assistant

prepares data similar to Tables 11-4 through 11-6. The data shown in Tables 11-4

through 11-6 reflect the status of the job at the end of the fourth week. Tables 11-4 a)

and b) identifies the actual project spending by each functional department during the

first four weeks of the project, while Table 11-4 c) summarizes the total labor charged to

each WBS task during this time.

Many PMs begin the weekly status analysis by first comparing the total hours actually

charged to the project by each functional department with the expected spending plan.

The PM or the project financial administrator compares the expected data from Table

11-3 and the actual charged labor hours listed in Table 11-4, and notes a discrepancy

between the anticipated planned rate of spending and the hours actually worked on the

project. During the first two weeks, the team expected to spend 214 (96 and 118)

hours. They actually spent 143 (57 and 86) hours. During weeks 3 and 4, the team

attempted to catch up by working 175 hours each week.

Functional managers may rationalize not placing the required number of people to

work. From their perspective, they have a limited number of people in the department

and they usually feel a responsibility to supply labor for long-term complex jobs.

Functional department managers tend to use short-term projects for “fill-in” work during

a lull in the long-term job. Consequently, functional managers may not assign staff to

the short-term effort until they can fit it into their timetable. Many functional managers

416

incorrectly perceive the short-term project as less important than the longer effort. This

can result in work falling behind schedule.

At the four-week point, we know that several groups did not put the required number of

people on the job. Arbitrarily we establish that time charged to within +/- 10% of the

spend plan is satisfactory. The PM or the project financial administrator creates the

comparison in Table 11-5 from the expected data in Table 11-3 and the actual time

charges listed in Table 11-4 to determine the departments putting the correct number of

people on the project. Examining table 11-5 leads us to conclude that the electrical

engineering, factory technicians, field service technicians, project management,

publications, training, shipping and purchasing departments have spent the planned

labor budget. We have not determined if these departments have completed the

requisite work corresponding to the expenditures. We only know that they spent the

requisite time on the job. The mechanical engineering and quality assurance

departments have overspent the +/- 10% guideline. Initially, we ignore the quality

assurance department’s 20% overrun (2 hours) because it is too small compared with

the overall budget. However, the 20% overrun by the mechanical engineering

department does raise questions. Did they complete the work they set out to

accomplish? Has the department moved ahead of schedule? On the other hand, both

the software and networking engineering departments have under spent their allotted

labor funding. These departments appear not to have placed the required labor onto

this job. Why? Did they overestimate the complexity of the job or do they lack the

people? Did they complete their assigned tasks? Comparing actual time charges with

417

the planned labor expenditures does not provide sufficient information to determine the

project’s status. We must investigate further.

The schedule plan in figure 11- 2 (a) indicates that at the end of the fourth week, WBS

activities 1 and 2.1.1 should be completed. WBS activities 2.1.2, 2.2.3, 2.2 and 2.3

should have approximately 50% of the work done. As they do at the end of every week,

the functional managers provide the PM with the fourth week’s schedule status

information that estimates each department’s progress to date in completing the WBS

activities. In order to gain a meaningful estimate, each task must have a well-defined

output so that both the functional managers and the PM can objectively confirm the

percentage of the task completed. The PM or his/her designee places this data into the

column in table 11-6 entitled Estimate of Work Completed. The project financial

administrator creates the remainder of Table 11-6 by forming the ratio of actual labor

hours charged (Table 11-4c) to the planned labor hour estimate (Table 11-2) shown as

a percentage.

Examine each WBS item in detail in table 11-6. The data for WBS 1.0, states that the

departments’ collectively consider the work on the task completed. The electrical

department charged 68% of the estimated hours for WBS 1.0, whereas project

management charged 120% of its plan. That is, the project management group

overspent its budget by 20% on this task. Earlier we noted that the software

department did not place all the planned labor on the job, but nonetheless completed

the task. So, this issue is satisfactorily resolved. The training department charged the

418

project on WBS 1.0 but did not include this in their original estimate. Quality assurance

under spent. Overall, WBS item 1.0 worked out well. The team completed WBS 1.0 by

spending 78% of its planned expenditures. Work completed on time and under

budget– music to a project manager’s ears.

WBS task 2.1.1 turns out to be quite a different story. The schedule plan indicates that

the task should be done, but the departments report only 75% complete. Every

department has overspent its labor budget. The training and quality assurance have

charged unplanned time to the task. What is happening? The PM must visit each

department as soon as possible. Has a difficult technical issue arisen? Has the

customer requested the engineers to use a different software application or a different

piece of equipment than agreed upon in the proposal? Has a supplier changed the

specifications for a piece of equipment, which has created havoc among the design

engineers? Do the users have incomplete and/or inaccurate data associated with the

use of equipment or software? Did the team simply underestimate the complexity of

the job? The PM must quickly discover and resolve the problem(s). Table 11-7

identifies typical issues that may arise during the project’s early stages. More often

than not, a problem occurring during an early phase is due to a misunderstanding of the

requirements, failure to place people onto the job at the required times, an

underestimate of the job’s complexity, or a subcontractor failing to perform as expected.

With regard to the latter issue, many organization’s prefer to place work with reliable

subcontractors with whom they have developed trusted relationships – even if the task

419

costs a bit more. Deming advocated such an arrangement in the fourth of his fourteen

points:

End the practice of awarding business on the basis of price tag. Instead,

minimize total cost. Move toward a single supplier for any one item, on a

long-term relationship of loyalty and trust.

Receiving reliable hardware or software on time such that it does not delay other work

is crucial to the success of the job.

If the delay associated with WBS task 2.1.1 results from a likelihood of not meeting a

customer requirement then a very significant issue has surfaced. The functional

departments and PM must first develop several alternative plans and then notify senior

management. Finally, after bringing senior management on board, notify the customer.

Very often, a good project manager can trade a difficult implementation requirement for

another feature that the customer may value.

Note that in this example, the PM examined both functional department spending and

WBS activity status. Formal techniques to perform this analysis exist. In particular,

PMs sometimes use earned value analyses to quantify project status. This analysis

method relies on the original project estimates and actual progress to determine status.

Table 11-8 identifies the earned value definitions. Figure 11-5 graphically illustrates the

relationships among several of the variables in Table 11-8. The data are reviewed in

Figure 11-5 during the first week of October. Based on this information, the PM

420

concludes that the project is behind schedule and over budget. The graph denotes the

estimate at project completion based on the formula provided in Table 11-8.

Project managers monitor the schedule and cost performance indices on a weekly

basis to gain a quick understanding of developing problem tasks. Task indices greater

than one signify that all goes well – less than one signifies possible issues. When

confronted with a long column of tasks, the PM can easily scan the list to identify those

tasks with a CPI or SPI less than 1.0. The larger the variation below 1.0, the more the

concern. In this way, the method automatically prioritizes the tasks calling for the PMs

attention. The earned value method continually estimates project cost at completion.

This enables the PM to respond to one of management’s first questions – how much

will the problem cost?

Whatever method of analysis is used, it should be performed in a regular and

consistent manner - preferably each week. The PM examines the project the labor,

financial and schedule data for all WBS tasks in a similar manner as this example.

Meetings then take place with functional department managers to discuss actions

required for problem resolution. Stakeholders find it crucial to keep the

communications channel active and inform one another of changes. The PM always

informs the customer of project changes in writing.

421

Figure 11- 5 Earned Value Relationships

Review Estimate at
Date Completion
ACWP

BCWS
Over
budget Behind
Schedule

BCWP

422

Table 11-8 Earned Value Definitions

TERM ACRONYM FORMULA DERIVED FROM DESCRIPTION
Budgeted Cost Of BCWS Budget Estimate Time phased budget for each task in the entire
Work Scheduled project
Budgeted Cost Of BCWP Budget Estimate The amount of money the PM expected to spend
Work Performed for the work on each task that has been
completed by a specific date.
Budget At Completion BAC Budget Estimate Approved budget to complete all the work on the
project
Estimate To Complete ETC Actual Funds Spent The funding required to complete the remaining
work on the project. Estimate calculated at
designated points during the project performance.
Estimate At EAC = ACWP + ETC Actual Funds Spent An estimate of the total funding that will be spent
Completion on the project. Estimate calculated at designated
points during the project performance.
Actual Cost of Work ACWP Actual Funds Spent The actual costs for each project task.
Performed
Cost Variance CV = BCWP – ACWP Budgeted and actual A positive value signifies that less money than
funds anticipated has been spent on the task. A
negative value signifies that more money has
been spent on the task than anticipated.
Schedule Variance SV = BCWP - BCWS Budgeted and actual A positive value signifies that the task is ahead of
funds schedule. A negative signifies value the task is
behind schedule.
Cost Performance CPI = BCWP/ACWP Budgeted and actual CPI greater than 1 signifies all goes well on the
Index funds task. CPI less than 1 signifies problems
associated with the task and the team has spent
too much.
Schedule Performance SPI = BCWP/BCWS Budgeted and actual SPI greater than 1 indicates that the work is ahead
Index funds of schedule. Less than 1 signifies that the work is
behind schedule.
Cost at completion CAC = TOTAL BUDGET x Budgeted and actual Estimated total project cost based on progress to
(ACWP/BCWP) funds date
Cost to complete = Cost at completion - Budgeted and actual
ACWP funds

423

Figure 11- 1 Proposed Factory Employee Access Project Concept

424

Figure 11- 2 Factory Employee Access Project Design, Fabrication and Installation Schedule

a) Planned Schedule

1st Quarter 2nd Quarter
ID WBS Task Name Duration Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
1 1 System Definition 1 wk
2 2 Design 39 days
3 2.1 Hardware 34 days
4 2.1.1 Define Hardware-Software 4 days
Interfaces

5 2.1.2 Electrical & Electronic 5 wks
Design
6 2.1.3 Mechanical 6 wks
7 2.2 Software 6 wks
8 2.3 Networking 4 wks
9 2.4 Design Review 1 wk
10 3 Purchase Material 3 wks
11 4 Fabricate system 1 wk
12 5 System Integration & Factory Test 1 wk

13 6 Crate and Ship 1 wk
14 7 Site Installation and Test 1 wk
15 8 Documentation 1 wk
16 9 Training 40 days
17 9.1 Training Preparation 3 wks
18 9.2 Conduct Training Class 5 days

425

b) Actual Work Status Four Weeks into the Project

ID WBS Task Name Duration Remaining Duration Month 1 Month 2 Month 3 Month 4
1 1 System Definition 1 wk 0 wks
2 2 Design 39 days 24.72 days
3 2.1 Hardware 34 days 20.03 days
4 2.1.1 Define Hardware-Software 4 days 1 day
Interfaces

5 2.1.2 Electrical & Electronic 5 wks 3.75 wks
Design
6 2.1.3 Mechanical 6 wks 3 wks
7 2.2 Software 6 wks 4.5 wks
8 2.3 Networking 4 wks 2 wks
9 2.4 Design Review 1 wk 1 wk
10 3 Purchase Material 3 wks 3 wks
11 4 Fabricate system 1 wk 1 wk
12 5 System Integration & Factory Test 1 wk 1 wk

13 6 Crate and Ship 1 wk 1 wk
14 7 Site Installation and Test 1 wk 1 wk
15 8 Documentation 1 wk 1 wk
16 9 Training 40 days 40 days
17 9.1 Training Preparation 3 wks 3 wks
18 9.2 Conduct Training Class 5 days 5 days

426

Figure 11-3 Planned Project Labor Hour Distribution for the Factory Employee Access

Project

200
180
160
140
Labor Hours

120
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Weeks

427

Figure 11-4 Planned versus Actual Costs after Four Weeks into the Factory Employee

Access Project

Interim Actual vs. Planned Labor Hours Spending

200
180
160
Planned Labor
140 Hours
Labor Hours

120
100 Actual Labor
Hours to Date
80
60
40
20
0
1

3

5

7

9

11

13

15

Weeks

428

Table 11- 1 Frequency of Project Management Reviews and Interactions

Customer Functional Suppliers Senior Quality Purchasing
Departments Management Assurance
Activity progress Weekly Weekly Weekly Monthly, Monthly Weekly
compared with schedule unless issues
exist
Actual spending Weekly Weekly Weekly Monthly, Monthly Weekly
compared with planned unless issues
spending exist
Component, Equipment, As Required Weekly As As Required Weekly
and Service Purchases Required
Technical Issues ASAP ASAP ASAP As Required As Required ASAP
Financial Issues As Required ASAP ASAP As Required As Required ASAP
Technical Interchange As Required As Required As As Required As Required
meetings (TIM) Required
Preliminary Design Once or Once or twice Once or Once or twice Once or twice
Review(s) (PDR) twice per per project twice per per project per project
project project
Critical Design Reviews Once per Once per Once per Once per Once per Once per
(CDR) project project project project project project
Testing Issues (e.g., As Required Weekly As As Required As Required As Required
factory, site, thermal, Required
reliability, maintainability,
ruggedness, etc.)
Documentation Once per As Required As As Required As Required
document Required
ASAP- As soon as possible after identifying existence of issue

429

Table 11-2 Factory Employee Access Control Project Labor Hours Plan

Engineering
Electrical Mechanical Software Networking Factory Field Service Project Publications Training Quality Shipping Purchasing Total
Technicians Technicians Management Assurance Labor
Project Task

1 System
Definition 40 40 40 20 10 10 160
2 Design
2.1 Hardware
2.1.1 Define
Hardware-
Software
Interfaces 10 10 10 10 4 44
2.1.2 Electrical &
Electronic Design 60 6 66
2.1.3 Mechanical 120 10 130
2.2 Software 160 16 176
2.3 Networking 40 4 44
2.4 Design
Review 15 25 25 10 25
3 Purchase
Material 4 4 4 4 1 40 57
4 Fabricate system 4 4 2 120 20 12 162
5 System
Integration &
Factory Test 50 50 50 30 30 40 20 20 290
6 Crate and Ship 4 4 8 16
7 Site Installation
and Test 8 8 8 8 80 16 10 138
8 Documentation 16 16 16 8 5 40 10 111
9 Training 6 80 86

Total 207 277 313 132 150 144 139 40 80 50 8 40 1580

430

Table11- 3 Factory Employee Access Control Project Labor Hours Spending Plan

a) Distribution of Planned Labor Hours by Week

Week Number

Department 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Total

Electrical Engineering 20 30 40 20 15 8 2 2 2 2 40 10 8 8 207
Mechanical Engineering 20 30 40 40 40 25 8 2 2 2 2 40 10 8 8 277
Software Engineering 20 30 40 88 40 25 8 2 2 40 10 8 313
Networking Engineering 10 20 20 10 10 8 2 2 2 30 10 8 132
Factory Technicians 60 60 20 10 150
Field Service Technicians 20 20 20 4 80 144
Project Management 8 8 8 8 8 20 8 8 8 8 8 8 8 4 10 9 139
Publications 40 40
Quality Assurance 10 20 10 10 50
Training 8 6 6 20 40 80
Shipping 8 8
Purchasing 24 10 3 3 40

Total Labor 96 118 148 166 88 119 50 19 19 74 92 198 104 48 192 49 1580

431

b) Cumulative Planned Labor Hours by Week

Week Number

Department 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Electrical Engineering 20 50 90 110 110 125 133 135 137 139 141 181 191 199 207 207
Mechanical Engineering 20 50 90 130 170 195 203 205 207 209 211 251 261 269 277 277
Software Engineering 20 50 90 178 218 243 251 253 255 255 255 295 305 305 313 313
Networking Engineering 10 30 50 60 60 70 78 80 82 84 84 114 124 124 132 132
Factory Technicians 0 0 0 0 0 0 0 0 0 60 120 140 150 150 150 150
Field Service Technicians 0 0 0 0 0 0 0 0 0 0 20 40 60 64 144 144
Project Management 8 16 24 32 40 60 68 76 84 92 100 108 116 120 130 139
Publications 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40 40
Quality Assurance 10 10 10 10 10 10 10 10 10 10 10 10 30 40 50 50
Training 8 8 8 8 8 8 8 8 8 8 8 8 14 20 40 80
Shipping 0 0 0 0 0 0 0 0 0 0 0 0 0 8 8 8
Purchasing 0 0 0 0 0 24 34 37 40 40 40 40 40 40 40 40

Total Labor 96 214 362 528 616 735 785 804 823 897 989 1187 1291 1339 1531 1580

432

Table 11-4 Actual Factory Employee Access Control Project Labor Hours

a) Actual Labor Hours by Week by Functional Department

Week Number

Department 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Electrical Engineering 5 22 60 30
Mechanical Engineering 20 32 40 65
Software Engineering 4 16 40 58
Networking Engineering 2 8 27 10
Factory Technicians
Field Service Technicians
Project Management 10 8 8 8
Publications
Quality Assurance 8 4
Training 8
Shipping
Purchasing

Total Labor 57 86 175 175

433

b) Cumulative Actual Labor Hours by Week by Functional Department

Week Number

Department 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Electrical Engineering 5 27 87 117
Mechanical Engineering 20 52 92 157
Software Engineering 4 20 60 118
Networking Engineering 2 10 37 47
Factory Technicians 0 0 0 0
Field Service Technicians 0 0 0 0
Project Management 10 18 26 34
Publications 0 0 0 0
Quality Assurance 8 8 8 12
Training 8 8 8 8
Shipping 0 0 0 0
Purchasing 0 0 0 0

Total Labor 57 143 318 493

434

c) Actual Functional Department Labor Hours Charged to Each Project Task

Labor Hours Spent at the End of the Fourth Week
Engineering
Electrical Mechanical Software Networking Factory Field Service Project Publications Training Quality Shipping Purchasing Total
Technicians Technicians Management Assurance Labor
Project Task

1 System
Definition 27 40 20 12 12 6 8 125
2 Design 0
2.1 Hardware 0
2.1.1 Define
Hardware-
Software
Interfaces 22 12 20 10 6 2 4 76
2.1.2 Electrical &
Electronic Design 64 4 68
2.1.3 Mechanical 102 4 106
2.2 Software 78 6 84
2.3 Networking 25 25
2.4 Design
Review 0
3 Purchase
Material 4 3 2 9
4 Fabricate system 0
5 System
Integration &
Factory Test 0
6 Crate and Ship 0
7 Site Installation
and Test 0
8 Documentation 0
9 Training 0

Total 117 157 118 47 0 0 34 0 8 12 0 0 493

435

Table 11-5 Comparison of Cumulative Planned Spending versus Actual Project Labor Charges at the End of the Fourth Week

Week 4 Cumulative Week 4 Cumulative +/- 10% Over or Under
Department Planned Hours Actual Hours Spent

Electrical Engineering 110 117
Mechanical Engineering 130 157 Over
Software Engineering 178 118 Under
Networking Engineering 60 47 Under
Factory Technicians 0 0
Field Service Technicians 0 0
Project Management 32 34
Publications 0 0
Quality Assurance 10 12 Over
Training 8 8
Shipping 0 0
Purchasing 0 0

436

Table 11-6 Ratio of Actual Labor Hours Spent to Planned Labor Hour Estimate at the Fourth Week into the Project

Engineering
Electrical Mechanical Software Networking Factory Field Project Publications Training Quality Shipping Purchasing Total Estimate of
Techs Service Mgmt Assurance Labor Work
Project Task Techs Completed

1 System
Definition 68% 100% 50% 60% 120% --- 80% 78% 100%
2 Design
2.1 Hardware
2.1.1 Define
Hardware-
Software Interface 220% 120% 200% 100% 150% --- --- 173% 75%
2.1.2 Electrical &
Electronic Design
107% 67% 103% 75%
2.1.3 Mechanical 85% 40% 82% 50%
2.2 Software 49% 38% 48% 75%
2.3 Networking 63% 0% 57% 50%
2.4 Design
Review 0% 0% 0% 0% 0%
3 Purchase
Material 100% 75% 0% 0% 200% 0% 16%
4 Fabricate
system 0% 0% 0% 0% 0% 0% 0%
5 System
Integration &
Factory Test 0% 0% 0% 0% 0% 0% 0% 0% 0%
6 Crate and Ship
0% 0% 0% 0%
7 Site Installation
and Test
0% 0% 0% 0% 0% 0% 0% 0%
8 Documentation
0% 0% 0% 0% 0% 0% 0% 0%
9 Training
0% 0% 0%
Total 57% 57% 38% 36% 0% 0% 24% 0% 10% 24% 0% 0% 31%

437

Table 11- 7 Typical Issues Arising during a Project’s Early Stages

Issue PM Action
Stakeholders uncover an • Request affected stakeholder(s) to define the
undefined parameter associated parameter in question using appropriate
with a task or requirement standards and guidelines.
• Inform affected stakeholders (but not the
customer) of the change.
• Following stakeholder agreement to the
change, inform the customer in writing of the
plan.
Unclear requirement in the • Review the unclear requirement(s) with the
specification functional organization(s). Agree on an
interpretation that minimally affects the
project
• Inform stakeholders (but not the customer) of
the change.
• Following stakeholder agreement with the
change, inform the customer in writing of the
contractor’s interpretation of the specification
requirement.
• Seek clarification from the customer only if
absolutely necessary.
Customer has not provided • Request that the customer submit data to the
technical data required to contractor by a specific date.
perform a task • If customer fails to deliver the data, meet with
the customer to discuss the issues.
• As a last resort, inform the customer that the
organization will stop work on the job if
technical personnel do not receive the
required information
Customer has second thoughts • Request that the customer submit data to the
about a requirement in the contractor by a specific date.
original agreement and has not • If customer fails to deliver the data, meet with
provided technical personnel the customer to discuss the issues.
required data • Consider trading requirements to offset the
change cost and schedule impact.
• As a last resort, inform the customer that the
organization will stop work on the job if
technical personnel do receive the required
information

438

Table 11- 7 Typical Issues Arising during a Project’s Early Stages (Continued)

Customer has introduced • PM must immediately stop the practice of the
changes by bypassing the PM customer directly contacting the
and talking directly to the organization’s personnel without permission
engineers on the project. • PM must firmly but gently inform the
customer of the organization’s contract
change process.
• Indicate that contractor will proceed with the
original agreement.
Unavailability of selected • Seek an alternate source for the material
components, equipment or • Select different components, equipment or
software software.
• Inform stakeholders if changes to
components, equipment or software are
made.
Unanticipated technical issue • Resolve issue by obtaining internal or
external (consultant) expertise.
• Understand the cost and schedule impact of
the alternative solutions.
• Agree on a solution to the problem with the
affected internal stakeholders.
• If issue is visible to the customer, meet with
customer to discuss alternatives considered
and solution chosen.
Unavailability of manufacturer’s • Contact manufacturer or manufacturer’s
data representative and arrange for a technical
discussion between organization’s and
manufacturer’s technical personnel.
Labor not placed on job • Meet with functional departments to resolve
issue.

439

Summary of Monitoring and Tracking Activities

The project team can only begin to work the issues if they know that a deviation from

the plan occurred. They then assess the impact of the variance on overall project

delivery. After identification, the team formulates a plan to take corrective actions that

offset the unwelcome news. Project monitoring detects processes or outputs that

deviate from the plan(s) and task costs that deviate from the budget. PMs pay

particular attention to items on the critical path and to the risk areas identified earlier in

the process. Close attention to basic control principles will improve the success of

projects. Achieving this requires a disciplined approach to tracking project status,

anticipating potential problems that may arise, and quick attention to resolve issues.

Subcontracting

From time to time, an organization decides to subcontract one or more tasks in the

project to external organizations. They do this for a variety of reasons that include:

• Organization lack’s expertise

• Insufficient labor available to complete the task

• Contract requirement

• Stringent schedule demands

• Economic reasons (i.e. another organization can complete the task for a lower

price)

The PM has the responsibility of coordinating the activities required to contract out the

work and then monitor the progress. Of course, the buyer expects the vendor to

440

provide a quality product or service on schedule, at the negotiated price, and meeting

the specified requirements.

Sometimes a project manager is in a quandary over permitting the PMs internal

organization to perform a task or subcontracting it to an external organization. Perhaps

the internal organization’s price appears high or the organization has raised significant

technical concerns or the functional group’s have raised labor or schedule issues.

Under these circumstances, the PM may choose to conduct a make-or-buy analysis,

which would compare the advantages and disadvantages of performing the task in-

house or selecting an external vendor to perform the effort. If sufficient schedule time

exists, the PM might prepare a Request for Quotation (RFQ) or a Request for Proposal

(RFP) for distribution to industry. The RFQ/RFP process could take two or more

months.

This exercise sometimes represents a “fishing” expedition. The PM and the functional

departments want information – perhaps a corroboration that they have pursued a good

technical approach. They will carefully evaluate the received bids for their price and

technical content. An ethical question arises if an organization performs this exercise

solely for the purpose of gathering competitive information. Vendors recognize that

every time they respond to a RFP, they give the prospective buyer valuable information

about their organization and its technical abilities. Unfortunately, this is a cost and risk

of doing business. After receiving the bids, the PM analyzes the received information

441

and then decides whether it is in the best interests of the organization to perform the

task themselves or subcontract it.

Selecting Qualified Vendors

The organization demands that the chosen vendor provides a competitively priced

product or service that meets the contract’s needs. Purchases made with funds

stemming from a contract with a federal government agency require vendors to adhere

to certain terms and conditions, for example, equal employment opportunity (EEO) and

civil rights requirements, fair wage standards, anti-kickback regulations, etc.

Organizations evaluate potential suppliers for compliance with these governmental

regulations as well as quality assurance plans and other terms. This process takes a

fair amount of time. Consequently, many organizations develop lists of preferred

vendors to assist and hasten the selection process.

If the organization has never selected a vendor for the required product or service, they

might begin by:

• Consulting colleagues in other departments or organizations who have

purchased a similar product or service,

• Checking the Internet,

• Using library references such as the Thomas Register or Moody's Industrials,

• Consulting the Yellow Pages for local suppliers,

• Consulting trade publications, directories, vendor catalogues, and professional

journals.

442

• Placing advertisements in general circulation publications such as newspapers or

in specialty publications such as professional journals.

After a buyer develops a list of potential vendors, they evaluate each supplier's

capabilities. The purchasing department obtains a Dun & Bradstreet (D&B) financial

report for each proposed vendor. In addition to the vendor’s credit worthiness and

financial stability, some D&Bs also include brief profiles of key management personnel

and historical information on the company. The purchasing department may also check

the supplier’s reliability with local Better Business Bureaus. If the prospective sub-

contract is important to the project’s success, visit the vendor’s facilities to verify that

they have the equipment and labor pool to complete the project. Evaluate their quality

assurance process and determine if they use state-of-the art technology. The

purchasing department usually requests and checks the vendor's references. These

steps should narrow the field to a manageable set of vendors who will be asked to bid

on the needed product or service.

Preparing and Evaluating a Bid

A buyer requires from two to four weeks to prepare a bid request (RFP or RFQ).

Vendors need from four to six weeks to prepare a bid response and the buyer requires

about two weeks to evaluate the documents and make a decision. The process gives an

organization a standard for comparing price, quality, and service thereby allowing the

organization to make an informed and objective choice among potential suppliers.

443

The buying organization prepares a bid package as described in chapter 5. Recall that

the RFP and RFQ includes a clear statement of the item sought, a specification and a

statement of work (SOW) containing a work-breakdown structure (WBS), schedule, and

a blank specification compliance matrix which the vendor completes to signify

compliance with each requirement. This process helps to identify the vendor who can

meet the buyer's requirements for the best price.

If members of functional departments believe that this subcontract represents a

substantial challenge that requires a highly competent technical labor pool, they request

the vendor to include in their response a description of the qualifications of those

individuals who may be involved in implementing the goals and objectives of the RFP.

Sometimes the writers of the RFP seek input from the vendors because they feel

uncertain that the product or service that they have requested will satisfactorily

implement the solution to their problem. If so, they include a statement in the bid

package requesting bidders to describe how they would meet a specific objective, what

unique contributions they would make toward the project, and what alternative

proposals they would offer. The vendors might also be asked to solve specific problems

concerning time constraints, new technology, or on-the-job training for end users. Of

course, realize that these requests involve the vendors providing free consulting

services. They may not respond to these requests for information unless a very

substantial contract is involved.

444

Sometimes the buyer holds a pre-bid conference during which the organization

distributes and clarifies the solicitation for all preferred vendors. The pre-bid

conference ensures that all vendors have a clear and common understanding of the

procurement (technical requirements, contract requirements, etc.). Conducting an open

meeting prevents any vendor from having an unfair advantage of additional

information.

The buyer distributes identical copies of the solicitation and any subsequent changes in

the bid specification to all prospective suppliers. One of the first pages in the

solicitation document should clearly state the deadline for submittal and the person in

the organization to whom the vendors should address their response. The buyer

records the date and time on receipt of the bid response packages from the vendors.

Most proposal documents contain a set of objective evaluation criteria, which the

buyer uses to rate the proposal response. Including these criteria in the solicitation

request not only assists the vendors in the preparation of their work, but also

crystallizes to the buyer which items are most important. The evaluation criteria may

include the following:

A. Technical approach – do the solicitation proposal response documents

demonstrate that the vendor understands and meets the project’s requirements?

B. Low life-cycle cost – the initial purchase price may not be the only cost

factor. Some buyers express interest in a low operating cost as well. If so, the

seller must describe these costs in detail and illustrate a low cost of ownership.

445

C. Technical capability – does the seller present a convincing argument that

they have the technical skills and knowledge needed to complete the

subcontract?

D. Management approach – does the seller have management processes

and procedures in place (including quality assurance) to ensure a successful

project?

E. Financial capacity – does the seller demonstrate that they have the

financial wherewithal to complete the project?

F. Past performance history – has the vendor delivered similar systems or

services in the past?

G. After-sale support and services - Can the seller provide services such as

training, help-desk, and maintenance capabilities?

Very often, the buyer assigns a weighting system that quantifies the evaluative data to

minimize the effect of personal prejudice on source selection. Most such systems

involve 1) assigning a numerical weight to each of the evaluation criteria, 2) rating the

prospective sellers on each criterion, 3) multiplying the weight by the rating and 4)

totaling the resultant products to compute an overall score. Some buyers include a

screening system that establishes minimum requirements for one or more of the

evaluation criteria. That is, failure to meet the minimum requirement automatically

disqualifies the bid. The buyer clearly states these “go-no go” criteria in the solicitation

document.

446

After receiving all bids, the buyer carefully examines them. Frequently three or more

people read all of the responses and meet to discuss them. The proposal reviewers

narrow the field by determining which vendors are "responsive". A "responsive" bid

provides all the information asked for and addresses all the issues in the RFQ or RFP.

The specification compliance matrix provides evaluators a quick summary of seller

responsiveness. Eliminate nonresponsive bidders, unless the seller has a compelling

reason for noncompliance with a requirement.

Technical personnel generally review the technical proposal without knowledge of the

vendor’s price. Members of the purchasing department review the proposed prices.

When they meet, they compare price and technical content and reach a conclusion for

awarding the subcontract. Most purchasing and project managers are wary of a

vendor who substantially underbids the competition. They may have submitted a 'low-

ball" price to win the bid but not have the resources to deliver a quality product or

deliver the product on schedule. A significantly lower price might also indicate that the

vendor has misunderstood or misinterpreted the requirements.

Contract Administration

Following contract award the project manager must ensure that the vendor delivers as

promised. Contract administration is the process of ensuring that the seller performs

as expected. On larger projects with multiple product and service providers,

coordinating the interfaces among the various providers becomes a major task. The

project manager, assuming responsibility for contract administration, applies the tracking

447

and monitoring processes described earlier in the chapter. The PM seeks to

successfully integrate the subcontractor’s outputs into the overall project. The project

management activities include:

• Monitoring and tracking the subcontractors cost, schedule and technical

performance.

• Employing quality assurance techniques to verify the adequacy of the

subcontractor’s product.

• Using change control practices to ensure the proper approval of changes

• Communicating information to all stakeholders

• Observing the factory and site acceptance tests to verify conformance with the

contract’s requirement.

Finally, the project manager approves subcontractor payments that are linked to well

defined progress milestones.

Project Completion

The end of the project approaches. The subcontractors delivered the required product

and services. Factory technicians have integrated the software and hardware. Field

service technicians have installed the products and services at the customer’s site.

Engineers and technicians have completed the acceptance tests. The technologists and

technical writers have completed the required documentation. Training personnel have

prepared the training material and will soon deliver the courses to the customer’s

designated personnel. The process of contract close-out involves confirming that the

organization correctly and satisfactory completed and delivered all work required by the

448

prime contract. The PM requests the appropriate departments to review open invoices

and payment records to settle the project’s financial statements. The PM participates in

the process of updating records to reflect final costs and technical results and then

archiving this information for future use.

Post Project Review – Lessons Learned

Most organizations agree that a post-project evaluation review exercise should be done.

However, hardly anybody ever does it. “Right now we’re too busy, but we'll get to it

later," they say. Well they usually don’t and they go out and make the same mistakes

on the next job. But a lessons learned session--a project postmortem-- helps the

team do a better job on future projects. During this brief activity, the organization

assesses the technical, cost and schedule project outcomes. They examine the

project’s planning, organizing, directing, controlling, execution, and budget phases. Did

the organization achieve the desired results? What went right and what went wrong?

Why? What should and should not be done in the future? Which organizational

method or process was difficult or frustrating to use? Did the selected suppliers deliver

the products and services on schedule, within budget and technically satisfactory? Did

the stakeholders participate effectively and understand their role in the project? If not,

what steps should be taken to improve their participation and understanding of their role

responsibility? The PM communicates the results of this evaluation to other members of

the organization, so that all can benefit from changes and improvements in the

management of future projects.

449

The project financial administrators collect the total project-related expenditures through

the cost tracking system. By analyzing actual expenditures versus budgeted

expenditures, the project team can refine its cost estimating techniques and improve

future project estimates. In the event of a cost overrun, the team should attempt to

explain the variances with the idea of learning from their mistakes – not from a

perspective of assigning blame. This exercise requires tact and diplomacy, for it can

turn into a finger pointing and a bitter complaint session during which no one learns

very much.

Other appropriate topics discussed during a lessons learned session include:

• The project management process

• The product or service development process

• The subcontracting method used

• The training received and/or provided

• The data migration task (used in database projects)

• The technology used

• The software used

• Project team selection

• Suggested changes in organizational policies and procedures

Management can use the results of outcome measures to track the effect that various

decisions, policies, and/or practices have on operations. Perhaps most important of

all, the team should identify, describe and promote successful practices for use in the

next project.

450

Chapter 11 Questions

1. Describe the activities that the project manager engages in after the project

begins.

2. Why does the PM not want technical personnel to engage in discussions with the

customer with a PM present?

3. Describe the project tracking activities in which the PM participates.

4. Project tracking involves which of the following:

a) Monitoring and reviewing the project accomplishments and results against

plan estimates of project scope, resources, schedule, and cost

b) Informing less enthusiastic team members that “They better shape up or

we’ll see to it that they work third shift for the rest of the project.”

c) Accompanying project team members on their activities.

d) Verifying that the organization receives material procurements on time

e) Maintaining contact with subcontractors and receiving the status of their

assigned work.

f) Visiting subcontractors

g) Performing time and motion studies on project team members.

h) Disciplining project team members for not completing work on time.

i) Developing work-around plans to correct technical, schedule, cost, and

subcontracting plans that go awry.

j) Verifying that resources become available when required

k) Informing customers “They better shape up or we’ll cancel the contract.”

451

l) Acting on feedback from the user or external customer.

5. Which of the following statement are true? Project tracking and reporting

compares planned versus actual status for the following:

a) Changes to project sponsorship, management, or organization

b) Project schedule and milestones

c) Project budget

d) Project scope, objectives, or requirements

6. Describe the contents of typical project status briefings.

7. Check or fill-in the frequency of the following status meetings:

Weekly Monthly Other
(Describe)
Functional department activity progress –
plan versus actuals
Subcontractor/supplier activity progress –
plan versus actuals
Functional department spending – plan
versus actuals
Preliminary design review
Critical design review
Site acceptance test
Technical issues identified by Functional
department
Technical interchange meetings between
functional groups and suppliers
Technical interchange meetings between
functional groups and suppliers
Status meetings with purchasing
department

8. Describe the implications associated with the following:

a) A functional department using fewer labor hours than expected.

b) A functional department using more labor hours than expected.

9. Describe the steps to take to verify your suspicions in question 8 (a) and (b).

452

10. Describe the advantages and disadvantages of always informing your customer

of the results of weekly status meetings held with your functional departments.

11. Discuss the following statement: Project managers must regularly use Tables

11-2 through 11-6 to verify project status.

12. The text states that some project managers manage several projects

simultaneously. Discuss the characteristics of a person who engages in this kind

of activity. Do you think it is more difficult to manage several small projects that

one very large project? Explain your answer.

13. Examine WBS elements 2.1.2 and 2.1.3 (figure 11-2) in the project tracking

example described in the text. Analyze the data to determine the status of the

electrical/electronic design and mechanical design groups. Are they on schedule

and within budget? Determine the variance from plan.

14. Describe five problems that may arise during a project’s early stages and identify

possible PM actions to resolve the issues.

15. Why would a prime contractor subcontract a portion of the job?

16. Do you believe it is ethical for a company to submit an RFP to several

companies solely for the purpose of gathering competitive information? Initially,

the prospective “buyer” has no intent of purchasing the product or service.


453

17. A product test laboratory has decided to replace an old analog electronic

environmental control system with a new Digital Environmental Control System.

This unit controls the temperature and humidity in three environmental chambers

to within +/- 1%. The system consists of a digital environmental control

electronics unit (DECEU) and the Environmental Unit (EU) placed in each

chamber, which consists of the temperature and humidity sensors, and the

heater and humidifier/dehumidifier units, shown below.

Digital Environmental Control Electronics Unit (DECEU)

Environmental Unit Environmental Unit Environmental Unit
(EU) (EU) (EU)

Environmental Environmental Environmental
Chamber No. 1 Chamber No. 2 Chamber No. 3

The operator enters the required temperature and humidity for each environmental

camber on a console associated with the DECEU and the DECEU monitors and

controls the temperature and humidity in each environmental chamber.

454

Problem 3-17 (a) Digital Environmental Control System – Schedule Plan

ID WBS Task Name Duration Start Finish Predeces Dec Jan Feb Mar Apr May Jun
1 1 Contract Award 0 days Jan 2 Jan 2 1/2
2 2 Review System Definition 2 days Jan 2 Jan 3 1
3 3 Define Hardware-Software Interfaces 3 days Jan 6 Jan 8 2
4 4 Design 30 days Jan 9 Feb 19
5 4.1 Hardware 20 days Jan 9 Feb 5
6 4.1.1 EU - Electrical and Mechanical 3 wks Jan 9 Jan 29 3
7 4.1.2 DECEU - Electrical and Mecha 4 wks Jan 9 Feb 5 3
8 4.2 Software 6 wks Jan 9 Feb 19 3
9 5 Design Review 2 days Feb 20 Feb 21 5,8
10 6 Prototype System 40 days Feb 24 Apr 18
11 6.1 Purchase Material 4 wks Feb 24 Mar 21 9
12 6.2 Fabricate System 1.5 wks Feb 24 Mar 5 9
13 6.3 Integrate and Test System 3 wks Mar 24 Apr 11 12,11
14 6.4 Update System Drawings 1 wk Apr 14 Apr 18 13
15 7 Final Production Build Review 2 days Apr 14 Apr 15 13
16 8 Three System Production Build 27 days Apr 16 May 22
17 8.1 Purchase material 3 wks Apr 16 May 6 15
18 8.2 Fabricate Systems 1.5 wks Apr 16 Apr 25 15
19 8.3 Systems Integration 2 wks May 7 May 20 17,18
20 8.4 Factory Acceptance Test 2 days May 21 May 22 19
21 9 Crate and Ship 5 days May 23 May 29 20
22 10 Site Installation 1 wk May 30 Jun 5 21
23 11 Site Acceptance Test 2 days Jun 6 Jun 9 22
24 12 Documentation 4 wks May 23 Jun 19 15,20
25 13 Training 7 days Jun 20 Jun 30
26 13.1 Training Preparation 1 wk Jun 20 Jun 26 24
27 13.2 Conduct Training Class 2 days Jun 27 Jun 30 26,23

455

Problem 3-17 (b) Digital Environmental Control System Project Labor Hours Plan
Engineering
Electrical Mechanical Software Factory Field Project Publications Training Quality Shipping Purchasing Total
Technicians Service Management Assurance Labor
Project Task Technicians

1 Contract Award
2 Review System Definition 40 40 40 10 10 140
3 Define HW-SW Interfaces 40 20 80 10 150
4 Design
4.1 Hardware
4.1.1 EU – Elect. & Mech 200 400 60 660
4.1.2 DECEU – Elect. & Mech 320 200 45 565
4.2 Software 450 50 500
5 Design Review 40 40 40 30 25 175
6 Prototype System
6.1 Purchase Material 20 20 15 100 155
6.2 Fabricate System 120 10 130
6.3 Integrate and Test System 100 100 120 50 40 410
6.4 Update System Drawings 20 20 40 10 90
7 Final Prod. Build Review 40 40 40 30 25 10 185
8 Three System Prod. Build
8.1 Purchase material 10 10 10 80 110
8.2 Fabricate Systems 10 10 300 20 340
8.3 Systems Integration 50 50 100 20 40 25 20 305
8.4 Factory Acceptance Test 20 20 20 20 20 20 120
9 Crate and Ship 40 40
10 Site Installation 10 10 10 60 10 10 110
11 Site Acceptance Test 20 20 20 30 20 20 130
12 Documentation 50 50 80 10 50 15 255
13 Training
13.1 Training Preparation 10 40 50
13.2 Conduct Training Class 15 16 31

Total 990 1050 1000 530 150 450 50 56 145 40 190 4651

456

Problem 3-17 (c) Digital Environmental Control System Project Spending Plan -
Monthly Distribution of Planned Labor Hours

Monthly Budgeted Hours

Department 1 2 3 4 5 6 Total

Electrical Engineering 250 250 200 125 100 65 990
Mechanical Engineering 250 300 210 125 100 65 1050
Software Engineering 200 300 220 80 100 100 1000
Factory Technicians 80 200 200 50 530
Field Service Technicians 50 100 150
Project Management 80 80 80 60 70 80 450
Publications 50 50
Quality Assurance 25 10 10 30 30 40 145
Training 56 56
Shipping 40 40
Purchasing 50 50 50 40 190

Total Labor 805 1070 970 670 580 556 4651

Problem 3-17 (d) Digital Environmental Control System Project Spending Actuals

Monthly Distribution of Actual Labor Hours in First Two Months

Department 1 2 3 4 5 6 Total

Electrical Engineering 150 300 450
Mechanical Engineering 225 200 425
Software Engineering 150 400 550
Factory Technicians 20 20
Field Service Technicians 0
Project Management 100 90 190
Publications 0
Quality Assurance 40 40
Training 0
Shipping 0
Purchasing 20 20

Total Labor 665 1030 1695

457

Problem 3-17 (e) Digital Environmental Control System Percent Task Completion at
the end of two Months

WBS Project Task Percent Task
No. Complete

1 Contract Award 100%
2 Review System Definition 90%
3 Define HW-SW Interfaces 75%
4 Design
4.1 Hardware
4.1.1 EU – Elect. & Mech 20%
4.1.2 DECEU – Elect. & Mech 20%
4.2 Software 25%
5 Design Review
6 Prototype System
6.1 Purchase Material 20%
6.2 Fabricate System 10%
6.3 Integrate and Test System
6.4 Update System Drawings
7 Final Production System Build Review
8 Three System Production Build
8.1 Purchase material
8.2 Fabricate Systems
8.3 Systems Integration
8.4 Factory Acceptance Test
9 Crate and Ship
10 Site Installation
11 Site Acceptance Test
12 Documentation
13 Training
13.1 Training Preparation
13.2 Conduct Training Class

a) Plot the project’s planned labor hour estimate versus time. On the same

graph, draw the actual hours worked by the departments. What

conclusion(s) can you draw?

458

b) Explain an issue with the functional department labor hours assigned to

WBS tasks numbers 4.1.1, 4.1.2 and 8.2. What should the project

manager do about it during the planning stage?

c) Prepare a two-month status table comparing the cumulative planned

project spending versus cumulative actual project labor charges for each

department.

i) Have all of the departments placed the required labor onto the

project?

ii) For the first two months, which departments under or over spent

their allotted labor funding budget? By how much?

d) Compare actual time charges with the planned labor expenditures for

each department. To accomplish this, create a chart similar to Table 11-

6 that contains the ratio of actual labor hours charged to the planned labor

hour estimate shown as a percentage.

i) Does this data provide sufficient information to determine the

project’s status? Explain.

ii) Now add a column to the table containing the functional

department’s estimate of the work completed for each WBS task.

Does this data provide sufficient information to determine the

project’s status? Explain.

iii) To which departments does the project manager need to pay

attention? Explain.

18. Why would a buyer hold a pre-bid conference?

459

19. What is the purpose of proposal evaluation criteria?

20. List five items that might serve as the basis for evaluating proposal responses.

21. Explain the difference between the price for a product and the lifecycle price.

Describe the circumstances that would favor the selection of a low price vendor

rather than the vendor that provides a low lifecycle price.

22. What activities are involved in contract or subcontract administration?

23. Following project completion, what is the purpose of a lessons learned

evaluation session?

460

CHAPTER 12

Epilogue

The Blind Men and the Elephant

It was six men of Indostan Is mighty plain," quoth he;
To learning much inclined, "'Tis clear enough the Elephant
Who went to see the Elephant Is very like a tree!"
(Though all of them were blind),
That each by observation The Fifth who chanced to touch the ear,
Might satisfy his mind. Said: "E'en the blindest man
Can tell what this resembles most:
The First approached the Elephant, Deny the fact who can,
And happening to fall This marvel of an Elephant
Against his broad and sturdy side, Is very like a fan!"
At once began to bawl:
"God bless me! but the Elephant The Sixth no sooner had begun
Is very like a wall!" About the beast to grope,
Than, seizing on the swinging tail
The Second, feeling of the tusk, That fell within his scope,
Cried, "Ho! what have we here "I see," quoth he, "the Elephant
So very round and smooth and sharp? Is very like a rope!"
To me 'tis mighty clear
This wonder of an Elephant And so these men of Indostan
Is very like a spear!" Disputed loud and long,
Each in his own opinion
The Third approached the animal, Exceeding stiff and strong,
And happening to take Though each was partly in the right,
The squirming trunk within his hands, And all were in the wrong!
Thus boldly up and spake:
"I see," quoth he, "the Elephant So, oft in theologic wars,
Is very like a snake." The disputants, I ween,
Rail on in utter ignorance
The Fourth reached out his eager hand, Of what each other mean,
And felt about the knee. And prate about an Elephant
"What most this wondrous beast is like Not one of them has seen!

The Blind Men and the Elephant, translated by John Godfrey Saxe (1816-1887), is a
Hindu fable that occurs in the Udana, a Canonical Hindu Scripture.
<>

461

Project Management Perspectives Within the Organization

While organizations view separation into departments or divisions as an efficient way of

structuring, modern corporations often have barriers between divisions, which limit their

ability to interact. The result is much like the fable of the blind men and the elephant.

Each person’s perception is colored by where they stood. And so it is within the

organization. Different departments focus on one specific area of the business while

losing the vision of the big picture (the elephant). Each operational business island may

use different operating procedures, different tools, different software applications, and

different databases and not integrate well with other parts of the organization. The PM

attempts to meld these disparate teams into a cohesive unit using common tools and

procedures.

The project manager focuses on the project and spreads the “big picture” vision to the

entire organizational team. You read about the lack of communication, coordination

and integration associated with major projects in the newspapers every day. The New

York Times reported that the cost of completing projects at the New York City Board of

Education was running at more than 10 times the Board of Education’s estimates and

two years behind schedule (Wyatt, 2001). The project manager at the New York City

Board of Education failed to execute. Stakeholders did not see the big picture. The

project manager’s work certainly does not stop with plans. Job success depends on

implementing, monitoring and control.

The Department of Energy (DOE) acknowledged that their

462

“Projects take much longer and cost about 50% more than comparable

projects by other federal agencies or projects in the private sector.

Moreover, DOE projects commonly overrun their budgets and schedules

[and] have resulted in facilities that do not function as intended, projects

that are abandoned before they are completed, or facilities that have been

so long delayed that, upon completion, they no longer serve any purpose.

In short, the DOE’s record calls into question the credibility of its

procedures for developing designs and cost estimates and managing

projects (Committee to assess the policies and practices of the

Department of Energy to design, manage, and procure environmental

restoration, waste management, and other construction projects, 2000,

p.1).”

The report concluded that the DOE had to “undertake a broad program of reform for

the entire project management process.” The committee’s findings and

recommendations as stated in the report reads like a project management text’s table

of contents. They include the following:

• Establish adequate policies, procedures, documentation and reporting

• Define requirements. Prepare a statement of work.

• Identify and control risks.

• Use performance measures and incentives.

• Control project changes. Implement a system for managing change

• Define project organizational lines of authority and the responsibilities of all

parties.

463

• Implement an ISO 9000 certification process

• Mandate a reporting system that tracks and communicates the cost, schedule,

and scope of a project

• Develop contingency plans and set aside contingency funds

• Train managers in project management skills.

• Formalize procedures to conduct independent project reviews

• Provide fiscal rewards for contractors who meet or exceed schedule, cost, and

scope performance targets

• Arrange the organization to provide focused and consistent management

attention to projects. Establish an office of project management operating at a

high organizational level

Project management failed at the DOE. The DOE’s unique demands make it

imperative that they implement project management concepts into its operation. While

their complex projects frequently rely on technologies that have not been field proven,

the report concluded that the problems at the DOE are more institutional than technical.

The DOE had to change its culture and focus on the problems of cost and schedule

overruns, which involved DOE’s policies and procedures for identifying, planning,

procuring, and managing projects. The report clearly stated that improving the project

management methods would go a long way to reigning in technical, cost and schedule

problems that they experienced.

Project Management Career

464

Today project management is a widely recognized and accepted career track. These

professionals become involved at the birth of the project (proposal state) and remain to

the final site acceptance test. The budgets range from as low as $100,000 for a small

job to many hundreds of million dollars for a job that will extend over several years. The

projects may involve new development, limited production, or maintenance. Most

project managers are assigned to a single job. Some project managers simultaneously

manage multiple projects. All of these projects require a similar set of skills.

PM’s have a wide assortment of tools they use to plan, estimate and track jobs.

Communications and negotiations involve all stakeholders. The PM’s core

competencies involve both social and technical skills. PM’s use social skills to influence

behavior and attitude. They build relationships among all stakeholders using

communication and negotiation methods. Social skills represent the grease for the

skids to influence people to make things happen. Technical skills involve planning,

scheduling, and controlling. The PM uses technical skills to identify the project’s

technical goals and procedures and to ascertain progress.

Project Management Social and Technical Skills

Organizations measure the PM’s output on the their ability to get thing’s done on time,

within budget, meeting the customer’s specifications. This demands a broad range of

skills. Invariably technology students enter a technical program with the goal of learning

as many technical subjects as they can cram into their schedule. On talking with their

employers six months to a year after employment, we hear a common and consistent

465

thread of dissatisfaction. Employers complain, “The new students just out of school

have outstanding technical skills, but they lack social skills. They lack an understanding

organizational and people skills. They lack customer sensitivity.” Social and people

skills employers refer to include communications, leadership, management, adapting to

change, listen, and willingness to go the extra mile – in essence the TACT acronym

discussed in chapter 1. This split in thinking limits the new employees’ professional

growth and advancement within the organization until they develop these skills. Many

technology students choose to ignore this aspect of their personal growth and

development during their college years. They only realize its importance after they

have discovered their limited upward movement within the organization.

Social and People Skills

The new PM should focus on developing social skills and abilities in the following areas:

• Leadership: Set a vision, communicate the vision, align the team to the vision,

and identify the steps required to achieve that vision. Acknowledge that change

will happen. If it will improve the product or service, assist the team in changing

technology, processes, procedures, suppliers and if necessary, personnel.

• Management: Plan, organize, control, delegate, and communicate. Consider

using McGregor’s theory Y approach; coercive power will not work over the long

run. Request senior management clarification if a conflict exists between the

project and business goals.

• Flexibility: More often than not, several viable options to problems present

themselves. Let your team members participate in the solution process. Remain

open to alternate solutions. Learn to juggle resources. Adapt and deal with

466

situations during periods of change. Offer employees support (resources or a

word of encouragement) if the resolution to a problem endangers the schedule.

• Your word: Keep your commitments. Follow the precepts espoused by the Dr.

Seuss children’s story character Horton the elephant – “I meant what I said and I

said what I meant.” (Horton Hatches an Egg, Dr. Seuss, Random House, 1968).

Expect others to keep their commitments.

• Communication: Listen to people and respond to them. Make your

expectations known with clear, precise, unequivocal language. Manage by

“walking around” so that people have access to you. Remain accessible, no

matter how busy you are. Negotiate all the time. Seek win-win situations. A

humiliated stakeholder following an embarrassing negotiation loss may become

unmotivated and not perform to your expectations. Permit stakeholders a

graceful exit. You and your team will benefit.

• Feedback: Provide feedback to team members. As soon as practical,

acknowledge a job well done or offer constructive criticism. Blanchard suggests

that you keep the criticism pointed and short.

• Tolerate Ambiguity: Mathematical and engineering analyses generally result in a

single answer. Some technologists have difficulty working in an environment in

which multiple sets of reasonable explanations exist. Solutions in business and

human relations rarely involve clear-cut answers. More often than not, you will

discover a variety of ways of “skinning the cat.” You may never know which

approach offers the optimum solution. Permit your team members to select the

467

approach with which they feel most comfortable – unless the customer mandates

the solution or the team’s alternative demands excessive funding.

• Conflict Resolution: Issues arise during the course of the project. Sometimes the

stakeholders voice very strong opinions about an issue. The good project

manager learns to resolve conflicts among stakeholders, quell the upset, and

calm things down. Seek win-win solutions.

• Coping Mechanisms for Anxiety and Stress Reduction: Technologists are

usually uncomfortable and unaccustomed to dealing with people. People are

not logical and can voice illogical opinions with passion and strong conviction.

As a project manager, you will have to convince them to redirect themselves.

Senior management, customers, suppliers, and functional designers often have

conflicting views. Projects frequently have aggressive and tight schedules, which

leads to anxiety. Coping with these issues requires a huge amount of energy

and frequently drains people. Conflicting demands leads to stress. Problems

and issues continually arise and, PM’s should learn coping mechanisms to

minimize the impact on health and family life.

Technical skills

Beyond the social and people skills discussed, project managers must have a

command of the processes and tools required to get the job done. Project

Management processes discussed in this volume include planning, estimating,

468

scheduling, tracking, controlling, and measuring. Some of the hard skills found critical

to successful project managers include the following:

• Project definition: Every project demands a plan based on a set of requirements

defined by the customer and deemed realistic by the contractor. Project

Managers must be able to define the project's business objectives and goals,

deliverables, assumptions and constraints, project communication plan (how

status and information will be shared with all stakeholders), and top level

implementation plan.

• Tools: Learn to use spreadsheets and word processor programs well. Gain

familiarity with schedule preparation and tracking tools such as Microsoft

Schedule or Primavera. Learn to develop agendas and conduct meetings.

Prepare and use tools such as a responsibility assignment matrix and a

specification compliance matrix. Use check lists to verify that you have

completed tasks. Employ a labor and material database system that promotes

easy employee labor entry and promotes broad status checking. Organizations

refer to these products as enterprise resource planning (ERP) systems. These

tools enable the project manager to stay on top of expenditures, monitor

purchases, and understand the labor charges on the job.

• Estimating: Compile estimates during the proposal phase. Develop a lessons

learned list to provide a sanity check on functional manager’s estimates. While a

PM should never change functional manager’s estimates without their knowledge

and approval, a PM should anticipate a job’s cost. A major disparity between the

469

functional manager’s estimate and the PM’s rough order of magnitude gives

cause for a discussion.

• Monitor Status and Control Processes: Monitor fundamental data. Compare

labor and material expenditures for every project task versus the plan. Examine

the technical progress. Identify supplier issues as they arise. Talk with the

constituent organizations if things look out-of-whack. Ask questions and get to

the root of the problems. Re-plan as the organization obtains more information.

• Control the customer: Keep the customer informed of the job’s status. Request

the customer to sign and date approvals to indicate their agreement with the

progress to-date. Obtain customer signatures for design reviews and factory and

site acceptance tests. These signatures signify customer awareness,

understanding and approval with the progress. Involving the customer reduces

the likelihood of the customer demanding changes due to a lack of knowledge or

understanding. One of the most difficult project tasks requires the PM has is to

say no to a customer requesting out of scope changes. It must be done! The PM

must balance the need to delight the customer with the organization’s demand

for a profit.

• Consensus building: Develop team-building skills.

• Continuing Education: Improve your technical skills by pursuing a certification

such as the CompTIA Project+ or the Project Management Institute's Project

Management Professional (PMP) Program. Attend conferences and local

seminars. Read project management journals. Keep abreast of new

developments and revisit old methods to keep them fresh in your mind.

470

APPENDIX 1 - TYPICAL EMPLOYEE PERFORMANCE APPRAISAL FORMS

Four lessons of self-knowledge

One: You are your own best teacher.
Two: Accept responsibility. Blame no one.
Three: You can learn anything you want to learn.
Four: True understanding comes from reflecting on your experience.

On becoming a leader – Warren Bennis

472

PERFORMANCE APPRAISAL

EMPLOYEE NAME: EMPLOYEE ID NO.:

POSITION TITLE: LABOR GRADE:

REVIEWER: REVIEW DATE:

PERFORMANCE ASSESSMENT
Objectives for This Period Assessment

PERFORMANCE FACTORS
Circle the factor associated with each performance factor that best describes the individual's job
performance during this review period.

STRENGTH: Employee consistently exceeds expectations or requirements in this area.
MEETS REQUIREMENTS: Employee meets expectations or requirements.
NEEDS IMPROVEMENT: Employee meets some requirements, but needs improvement in this area
UNSATISFACTORY: Employee does not meet requirements

QUALITY: Continuously achieves the highest quality possible. Strives to get the job done right the first time.
Supports the organization’s quality policies. Customer-focused with both external and internal customers.

Unsatisfactory Needs Improvement Meets Requirements Strength Outstanding
Comments:

COMMITMENT & INITIATIVE: Initiates actions that show continuous improvement; creatively solves problems. Can
temporarily assume unaccustomed or additional duties. Dependable and prompt

Unsatisfactory Needs Improvement Meets Requirements Strength Outstanding
Comments:

473

ATTITUDE: Gets along well with others. Team player. Positive and cooperative.

Unsatisfactory Needs Improvement Meets Requirements Exceeds Requirements Outstanding
Comments:

JUDGEMENT/DECISION MAKING: Makes sound judgments and decisions.

Comments:

PLANNING AND ORGANIZATION: Analyzes priorities. Organizes and executes short and long-term effective plans.

Comments:

COMMUNICATION: Effectively communicates with co-workers and customers, both verbally and in writing, in a
timely manner.

Comments:

JOB KNOWLEDGE: Knowledgeable in methods and skills required for the position/field. Current with state-of-the-
art technologies.

Comments:

PRODUCTIVITY: Achieves expected outcomes within budget and schedule without sacrificing quality.

Comments:

MANAGING CHANGE: Effectively initiates and/or adapts to changes in operations.

Comments:

SAFETY: Complies with and supports safety policies and procedures.

Comments:

COACHING: Empowers and involves employees in making decisions and solving problems. Encourages teamwork.
Acts as coach and mentor

Comments:

474

Describe the employee’s major accomplishments during the performance period:

OVERALL RATING: Based upon the expectations for the position, circle the overall
rating of the employee’s performance during the past review period.


OBJECTIVES FOR NEXT REVIEW PERIOD

TASK DUE DATE

475

DEVELOPMENT GUIDANCE
Development guidance for the employee's current position as well as possible future positions.

EMPLOYEE COMMENTS

APPROVAL SIGNATURES
Reviewer: Date:

Approval: Date:

Employee Signature: Date:

476

EMPLOYEE PERFORMANCE APPRAISAL
Employee Name: __________________________________________ Title: ______________________________

Salary Labor Grade: _________________ Employee ID No.: __________________ Dept. No.: _______________

Evaluation Period Dates: ______________________

Check the level that most closely identifies the quality of performance for the following factors:

Performance Factor Outstanding Good Competent Needs Unacceptable
Improvement
A. Technical Effectiveness

B. Defines, Analyzes, And Solves Problems

C. Planning And Organization

D. Personal Time Management - Prioritizes
and Uses Time Effectively
(Meets Deadlines, Punctuality and
Attendance)
E. Self Motivation - Exhibits Initiative

F. Oral Communication – Expresses Ideas To
Ensure Understanding

477

Performance Factor Outstanding Good Competent Needs Unacceptable
Improvement
G. Written Communication -- Expresses Ideas To
Ensure Understanding

H. Teamwork -- Cooperates With Peers,
Supervisors, Customers

I. Leadership – Organizing And Motivates Others

J. Supports Diversity

K. Supervisory Effectiveness – Delegates
Assignments, Recognizes Potential In Others

ESSAY
Comment on the employee's overall performance during the evaluation period. Detail specific accomplishments. Comment on:

• Team performance • Meeting Objectives/goals
• Diversity initiatives • Outstanding contributions/achievements
• Environmental, Health, and Safety contributions • Career development activities

478

PERFORMANCE SUMMARY

Considering the previous performance factors, the essay, and employee’s overall evaluation of productivity against expectations, check the box
that best describes the SUMMARY level of performance.

Outstanding Competent Needs Development Unacceptable

SIGNATURES

Reviewer Date

Approved Date

EMPLOYEE COMMENTS:

Employee Signature Date

479

Employee Evaluation

Employee Name:_______________________ Title: _______________ ID No. __________________

Period covered: _____________

Category Excellent Very Good Good Fair Unsatisfactory
A. Work quality
B. Dependability
C. Initiative
D. Flexibility
E. Skill building
F. Job knowledge
G. Punctuality
H. Supervisory ability

480

General comments on performance:

Objectives for the coming year:

Prepared by: _______________________ Date: _________

Staff signature: _____________________ Date: _________

Employee signature: _____________________ Date Reviewed: _________

481

Employee Evaluation

Name:_____________________________ Employee Number: _____________

Department:_______________________________
Job Title:_________________________________
Department:______________________________
Supervisor:_______________________________

Rate employee’s performance on a scale of 1 (needs improvement) to 4 (excellent) in each area:

Needs Fair Good Excellent
Improvement

1. Work attitude: 1 2 3 4

Comments:____________________________________________________________________

2. Ability to work with others: 1 2 3 4

Comments:____________________________________________________________________

3. Independent decision making: 1 2 3 4

Comments:____________________________________________________________________

4. Quality of work: 1 2 3 4

Comments:____________________________________________________________________

5. Initiative: 1 2 3 4

Comments:____________________________________________________________________

7. Organizational Skills: 1 2 3 4

Comments:____________________________________________________________________

8. Attendance/Punctuality: 1 2 3 4

Comments:____________________________________________________________________

9. Technical ability: 1 2 3 4

Comments:____________________________________________________________________

482

Needs Fair Good Excellent
Improvement

10. Verbal ability: 1 2 3 4

Comments:____________________________________________________________________

11. Writing ability: 1 2 3 4

Comments:____________________________________________________________________

12. Dependability: 1 2 3 4

Comments:____________________________________________________________________

13. Appearance: 1 2 3 4

Comments:____________________________________________________________________

14. Overall performance: 1 2 3 4

Comments:____________________________________________________________________

15. Recommendations for professional growth:
____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

_____________________________________________________________________

This report has been discussed with the employee on ______________
Date
_____________________________________
Employee name (please print)

___________________________________ ___________________
Employee Signature Date

____________________________________ ___________________
Supervisor name (please print) Title

___________________________________ ___________________
Supervisor Signature Date

483

APPENDIX 2 - ETHICAL CODES OF SELECTED PROFESSIONAL ORGANIZATIONS

We are all faced with a series of great opportunities
brilliantly disguised as unsolvable problems.
--John W. Gardner

484

American Chemical Society

The Chemist's Code of Conduct

The American Chemical Society expects its members to adhere to the highest ethical
standards. Indeed, the federal Charter of the Society (1937) explicitly lists among its
objectives "the improvement of the qualifications and usefulness of chemists
through high standards of professional ethics, education and attainments...".
Chemists have professional obligations to the public, to colleagues, and to science.
One expression of these obligations is embodied in "The Chemist's Creed," approved
by the ACS Council in 1965. the principles of conduct enumerated below are intended
to replace "The Chemist's Creed". They were prepared by the Council Committee on
Professional Relations, approved by the Council (March 16, 1994), and adopted by the
Board of Directors (June 3, 1994) for the guidance of society members in various
professional dealings, especially those involving conflicts of interest.

Chemists Acknowledge Responsibilities To:

• The Public
Chemists have a professional responsibly to serve the public interest and welfare
and to further knowledge of science. Chemists should actively be concerned with
the health and welfare of co-workers, consumer and the community. Public
comments on scientific matters should be made with care and precision, without
unsubstantiated, exaggerated, or premature statements.

• The Science of Chemistry
Chemists should seek to advance chemical science, understand the limitations
of their knowledge, and respect the truth. Chemists should ensure that their
scientific contributions, and those of the collaborators, are thorough, accurate,
and a unbiased in design, implementation, and presentation.

• The Profession
Chemists should remain current with developments in their field, share ideas and
information, keep accurate and complete laboratory records, maintain integrity in
all conduct and publications, and give due credit to the contributions of others.
Conflicts of interest and scientific misconduct, such as fabrication, falsification,
and plagiarism, and incompatible with this Code.

• The Employer
Chemists should promote and protect the legitimate interests of their employers,
perform work honestly and competently, fulfill obligations, and safeguard
proprietary information.

• Employees
Chemists, as employers, should treat subordinates with respect for their

485

professionalism and concern for their well-being, and provide them with a safe,
congenial working environment, fair compensation, and proper acknowledgment
of their scientific contributions.

• Students
Chemists should regard the tutelage of students as a trust conferred by society
for the promotion of the student's learning and professional development. Each
student should be treated respectfully and without exploitation.

• Associates
Chemists should treat associates with respect, regardless of the level of their
formal education, encourage them, learn with them, share ideas honestly, and
give credit for their contributions.

• Clients
Chemists should serve clients faithfully and incorruptibly, respect confidentiality,
advise honestly, and charge fairly.

• The Environment
Chemists should understand and anticipate the environmental consequences of
their work. Chemists have responsibility to avoid pollution and to protect the
environment.

Last Updated : January 04, 2000

http://www.acs.org/membership/conduct.html

Copyright © 2000 American Chemical Society. All Rights Reserved.
1155 16th Street NW • Washington DC 20036 • (202) 872-4600 • (800) 227-5558

486

American Society of Mechanical Engineers (ASME)

CODE OF ETHICS OF ENGINEERS

The Fundamental Principles

Engineers uphold and advance the integrity, honor and dignity of the engineering
profession by:

I. Using their knowledge and skill for the enhancement of human welfare;
II. Being honest and impartial, and serving with fidelity the public, their employers
and clients; and
III. Striving to increase the competence and prestige of the engineering
profession.

The Fundamental Canons
1. Engineers shall hold paramount the safety, health and welfare
of the public in the performance of their professional duties.
2. Engineers shall perform services only in the areas of their
competence.
3. Engineers shall continue their professional development
throughout their careers and shall provide opportunities for the professional
and ethical development of those engineers under their supervision.
4. Engineers shall act in professional matters for each employer or
client as faithful agents or trustees, and shall avoid conflicts of interest or the
appearance of conflicts of interest.
5. Engineers shall build their professional reputation on the merit
of their services and shall not compete unfairly with others.
6. Engineers shall associate only with reputable persons or
organizations.
7. Engineers shall issue public statements only in an objective and
truthful manner.
8. Engineers shall consider environmental impact in the
performance of their professional duties.

http://www.asme.org/asme/policies/p15-7.html

487

The Institute of Electrical and Electronics Engineers (IEEE)

CODE OF ETHICS

We, the members of the IEEE, in recognition of the importance of our technologies
affecting the quality of life throughout the world, and in accepting a personal obligation
to our profession, its members and the communities we serve, do hereby commit
ourselves to the highest ethical and professional conduct and agree:

1. to accept responsibility in making engineering decisions consistent with the
safety, health and welfare of the public, and to disclose promptly factors that
might endanger the public or the environment;
2. to avoid real or perceived conflicts of interest whenever possible, and to disclose
them to affected parties when they do exist;
3. to be honest and realistic in stating claims or estimates based on available data;
4. to reject bribery in all its forms;
5. to improve the understanding of technology, its appropriate application, and
potential consequences;
6. to maintain and improve our technical competence and to undertake
technological tasks for others only if qualified by training or experience, or
after full disclosure of pertinent limitations;
7. to seek, accept, and offer honest criticism of technical work, to acknowledge and
correct errors, and to credit properly the contributions of others;
8. to treat fairly all persons regardless of such factors as race, religion, gender,
disability, age, or national origin;
9. to avoid injuring others, their property, reputation, or employment by false or
malicious action;
10. to assist colleagues and co-workers in their professional development and to
support them in following this code of ethics.

Approved by the IEEE Board of Directors, August 1990

http://www.ieeeusa.org/documents/CAREER/CAREER_LIBRARY/ethics.html

488

Project Management Institute (PMI)

Code of Ethics for the Project Management Profession
Preamble: Project Management Professionals, in the pursuit of the profession,
affect the quality of life for all people in our society. Therefore, it is vital that
Project Management Professionals conduct their work in an ethical manner to
earn and maintain the confidence of team members, colleagues, employees,
employers, clients and the public.

Article I: Project Management Professionals shall maintain high standards of
personal and professional conduct and:

A: Accept responsibility for their actions

B: Undertake projects and accept responsibility only if qualified by training
or experience, or after full disclosure to their employers or clients of
pertinent qualifications.

C: Maintain their professional skills at the state of art and recognize the
importance of continued personal development and education.

D: Advance the integrity and prestige of the profession by practicing in a
dignified manner.

E: Support this code and encourage colleagues and co-workers to act in
accordance with this code.

F: Support the professional society by actively participating and
encouraging colleagues and co-workers to participate.

G: Obey the laws of the country in which work is being performed.

Article II: Project Management Professionals shall, in their work:

A: Provide necessary project leadership to promote maximum productivity
while striving to minimize cost.

B: Apply state of the art project management tools and techniques to
ensure quality, cost and time objectives, as set forth in the project
plan, are met.

C: Treat fairly all project team members, colleagues and co-workers,
regardless of race, religion, sex, age or national origin.

D: Protect project team members from physical and mental harm.

E: Provide suitable working conditions and opportunities for project team
members.

489

F: Seek, accept and offer honest criticism of work, and properly credit the
contribution of others.

G: Assist project team members, colleagues and co-workers in their
professional development.

Article III: Project Management Professionals shall, in their relations with their
employers and clients:

A: Act as faithful agents or trustees for their employers and clients in
professional or business matters.

B: Keep information on the business affairs or technical processes of an
employer or client in confidence while employed, and later, until such
information is properly released.

C: Inform their employers, clients, professional societies or public
agencies of which they are members or to which they may make any
presentations, of any circumstance that could lead to a conflict of
interest.

D: Neither give nor accept, directly or indirectly, any gift, payment or
service of more than nominal value to or from those having business
relationships with their employers or clients.

E: Be honest and realistic in reporting project quality, cost and time.

Article IV: Project Management Professionals shall, in fulfilling their
responsibilities to the community:

A: Protect the safety, health and welfare of the public and speak out
against abuses in these areas affecting the public interest.

B: Seek to extend public knowledge and appreciation of the project
management profession and its achievements.

http://www.pmi.org/certification/code.htm

490

APPENDIX 3 - WILDERNESS SURVIVAL ANSWER AND RATIONALE SHEET

Keep away from people who try to belittle your ambitions.
Small people always do that, but the really great make you feel that you, too, can
become great.
– Mark Twain

491

The following pages identify the recommended courses of action for each of the
situations on the Wilderness Survival Work Sheet. These answers come from the
comprehensive course on woodland survival taught by the Interpretive Service, Monroe
County (New York) Parks Department. These responses are considered to be the best
rules of thumb for most situations; specific situations, however, might require other
courses of action.

1. (a) Call "help" loudly but in a low register. Low tones carry farther, especially in
dense woodland. There is a much better chance of being heard if you call loudly but in
a low key. "Help" is a good word to use, because it alerts your companions to your
plight. Yelling or screaming would not only be less effective, but might be passed off as
bird calls by your friends far away.

2. (a) Make a lot of noise with your feet. Snakes do not like people and will usually do
everything they can to get out of your way. Unless you surprise or corner a snake,
there is a good chance that you will not even see one, let alone come into contact with
it. Some snakes do feed at night, and walking softly may bring you right on top of a
snake.

3. (c) Put a bit of the plant on your lower lip for five minutes; if it seems all right, try a
little. The best approach, of course, is to eat only those plants that you recognize as
safe. However, when you are in doubt and very hungry, you may use the lip test. If the
plant is poisonous, you will get a very unpleasant sensation on your lip. Red berries
alone do not tell you much about the plant's edibility (unless, of course, you recognize
the plant by the berries), and birds just do not have the same digestive systems we do.

4. (c) Drink as much as you think you need when you need it. The danger here is
dehydration, and once the process starts, your liter of water will not do much to reverse
it. Saving or rationing will not help, especially if you are lying unconscious somewhere
from sunstroke or dehydration. So, use the water as you need it, and be aware of your
need to find a water source as soon as possible.

5. (c) Dig in the streambed at the outside of a bend. This is the part of the river or
stream that flows the fastest, is less silted, deepest, and the last part to go dry.

6. (c) Midway up the slope. A sudden rainstorm might turn the ravine into a raging
torrent. This has happened to many campers and hikers before they had a chance to
escape. The ridgeline, on the other hand, increases your exposure to rain, wind, and
lightning should a storm break. The best location is on the slope.

7. (b) Put the batteries under your armpits to warm them, and then replace them in the
flashlight. Flashlight batteries lose much of their power, and weak batteries run down
faster in the cold. Warming the batteries, especially if they are already weak, will
restore them for a while. You would normally avoid night travel, of course, unless you
were in open country where you could use the stars for navigation. There are just too

492

many obstacles (logs, branches, uneven ground, and so on) that might injure you -- and
a broken leg, injured eye, or twisted ankle would not help your plight right now. Once
the sun sets, darkness falls quickly in wooded areas; it would usually be best to stay at
your campsite.

8. (a) Yellow. A yellow flame indicates incomplete combustion and a strong possibility
of carbon monoxide build-up. Each year carbon monoxide poisoning kills many
campers as they sleep or doze in tents, cabins, or other enclosed spaces.

9. (a) Leave your boots and pack on. Errors in fording rivers are a major cause of fatal
accidents. Sharp rocks or uneven footing demands that you keep your boots on. If
your pack is well balanced, wearing it will provide you the most stability in the swift
current. A waterproof, zippered backpack will usually float, even when loaded with
normal camping gear; if you step off into a hole or deep spot, the pack could become a
lifesaver.

10. (b) Across the stream. Errors in facing the wrong way in fording a stream are the
cause of many drownings. Facing upstream is the worst alternative; the current could
push you back and your pack would provide the unbalance to pull you over. You have
the best stability facing across the stream, keeping your eye on the exit point on the
opposite bank.

11(c) In stocking feet. Here you can pick your route to some degree, and you can feel
where you are stepping. Normal hiking boots become slippery, and going barefooted
offers your feet no protection at all.

12. (c) Freeze, but be ready to back away slowly. Sudden movement will probably
startle the bear a lot more than your presence. If the bear is seeking some of your
food, do not argue with him; let him forage and be on his way. Otherwise, back very
slowly toward some refuge (trees, rock outcrop, etc.)

493

APPENDIX 4 – ISO 9000 QUALITY MANAGEMENT PRINCIPLES

No one can make you feel inferior without your consent.

- Eleanor Roosevelt

494

The following pages introduce the eight quality management principles defined in ISO

9000:2000, Quality Management Systems Fundamentals And Vocabulary, and in ISO

9004:2000, Quality Management Systems Guidelines For Performance Improvements.

The document may be found on the ISO web site (http://www.iso.ch/iso/en/iso9000-

14000/iso9000/qmp.html). These principles may be used by management as a

framework to guide their organizations towards improved performance.

Principle 1 Customer focus

Organizations depend on their customers and therefore should understand current and
future customer needs, should meet customer requirements and strive to exceed
customer expectations.
Key benefits:
• Increased revenue and market share obtained through flexible and fast

responses to market opportunities.

• Increased effectiveness in the use of the organization's resources to enhance

customer satisfaction.

• Improved customer loyalty leading to repeat business.

Applying the principle of customer focus typically leads to:
• Researching and understanding customer needs and expectations.

• Ensuring that the objectives of the organization are linked to customer needs and

expectations.

• Communicating customer needs and expectations throughout the organization.

• Measuring customer satisfaction and acting on the results.

495

• Systematically managing customer relationships.

• Ensuring a balanced approach between satisfying customers and other

interested parties (such as owners, employees, suppliers, financiers, local

communities and society as a whole).

Principle 2 Leadership
Leaders establish unity of purpose and direction of the organization. They should
create and maintain the internal environment in which people can become fully
involved in achieving the organization's objectives.
Key benefits:
• People will understand and be motivated towards the organization's goals and

objectives.

• Activities are evaluated, aligned and implemented in a unified way.

• Miscommunication between levels of an organization will be minimized.

Applying the principle of leadership typically leads to:
• Considering the needs of all interested parties including customers, owners,

employees, suppliers, financiers, local communities and society as a whole.

• Establishing a clear vision of the organization's future.

• Setting challenging goals and targets.

• Creating and sustaining shared values, fairness and ethical role models at all

levels of the organization.

• Establishing trust and eliminating fear.

496

• Providing people with the required resources, training and freedom to act with

responsibility and accountability.

• Inspiring, encouraging and recognizing people's contributions.

Principle 3 Involvement of people
People at all levels are the essence of an organization and their full involvement
enables their abilities to be used for the organization's benefit.
Key benefits:
• Motivated, committed and involved people within the organization.

• Innovation and creativity in furthering the organization's objectives.

• People being accountable for their own performance.

• People eager to participate in and contribute to continual improvement.

Applying the principle of involvement of people typically leads to:
• People understanding the importance of their contribution and role in the

organization.

• People identifying constraints to their performance.

• People accepting ownership of problems and their responsibility for solving them.

• People evaluating their performance against their personal goals and objectives.

• People actively seeking opportunities to enhance their competence, knowledge

and experience.

• People freely sharing knowledge and experience.

• People openly discussing problems and issues.

497

Principle 4 Process approach
A desired result is achieved more efficiently when activities and related resources are
managed as a process.
Key benefits:
• Lower costs and shorter cycle times through effective use of resources.

• Improved, consistent and predictable results.

• Focused and prioritized improvement opportunities.

Applying the principle of process approach typically leads to:
• Systematically defining the activities necessary to obtain a desired result.

• Establishing clear responsibility and accountability for managing key activities.

• Analyzing and measuring of the capability of key activities.

• Identifying the interfaces of key activities within and between the functions of the

organization.

• Focusing on the factors such as resources, methods, and materials that will

improve key activities of the organization.

• Evaluating risks, consequences and impacts of activities on customers, suppliers

and other interested parties.

Principle 5 System approach to management
Identifying, understanding and managing interrelated processes as a system
contributes to the organization's effectiveness and efficiency in achieving its objectives.
Key benefits:
• Integration and alignment of the processes that will best achieve the desired

results.

498

• Ability to focus effort on the key processes.

• Providing confidence to interested parties as to the consistency, effectiveness

and efficiency of the organization.

Applying the principle of system approach to management typically leads to:
• Structuring a system to achieve the organization's objectives in the most

effective and efficient way.

• Understanding the interdependencies between the processes of the system.

• Structured approaches that harmonize and integrate processes.

• Providing a better understanding of the roles and responsibilities necessary for

achieving common objectives and thereby reducing cross-functional barriers.

• Understanding organizational capabilities and establishing resource constraints

before acting.

• Targeting and defining how specific activities within a system should operate.

• Continually improving the system through measurement and evaluation.

Principle 6 Continual improvement
Continual improvement of the organization's overall performance should be a
permanent objective of the organization.
Key benefits:
• Performance advantage through improved organizational capabilities.

• Alignment of improvement activities at all levels to an organization's strategic

intent.

499

• Flexibility to react quickly to opportunities.

Applying the principle of continual improvement typically leads to:
• Employing a consistent organization-wide approach to continual improvement of

the organization's performance.

• Providing people with training in the methods and tools of continual

improvement.

• Making continual improvement of products, processes and systems an objective

for every individual in the organization.

• Establishing goals to guide, and measures to track, continual improvement.

• Recognizing and acknowledging improvements.

Principle 7 Factual approach to decision making
Effective decisions are based on the analysis of data and information
Key benefits:
• Informed decisions.

• An increased ability to demonstrate the effectiveness of past decisions through

reference to factual records.

• Increased ability to review, challenge and change opinions and decisions.

Applying the principle of factual approach to decision making typically leads to:
• Ensuring that data and information are sufficiently accurate and reliable.

• Making data accessible to those who need it.

• Analyzing data and information using valid methods.

500

• Making decisions and taking action based on factual analysis, balanced with

experience and intuition.

Principle 8 Mutually beneficial supplier relationships
An organization and its suppliers are interdependent and a mutually beneficial
relationship enhances the ability of both to create value
Key benefits:
• Increased ability to create value for both parties.

• Flexibility and speed of joint responses to changing market or customer needs

and expectations.

• Optimization of costs and resources.

Applying the principles of mutually beneficial supplier relationships typically leads to:
• Establishing relationships that balance short-term gains with long-term

considerations.

• Pooling of expertise and resources with partners.

• Identifying and selecting key suppliers.

• Clear and open communication.

• Sharing information and future plans.

• Establishing joint development and improvement activities.

• Inspiring, encouraging and recognizing improvements and achievements by

suppliers.

501

REFERENCES

Adams, J. R. & Kirchof, N. S. (1983). Project Management Professionalism
And Market Survival. Project Management Institute 1983 Seminar/Symposium .
Aguayo, R. (1991). Dr. Deming: The American who taught the Japanese about quality.
New York: Fireside Books.
Apgar IV, M. (May-June 1998). The alternative workplace: Changing where and how
people work. Harvard Business Review. Reprint Number 98301.
Argyris, C. (1965). Organization and Innovation. Irwin Press
Argyris, Chris. (May/June 1998). Empowerment: The Emperor's New Clothes. Harvard
Business Review. pp. 98-105.
Badiru, A.B (1991). Project management tools for engineering and management
professionals. Norcross, GA: Industrial Engineering and Management Press.
Barnard, C. (1938). The Functions of the Executive. Cambridge, MA: Harvard
University Press.
Belgard, W.P. , Fisher, K. K. , & Rayner, S. R. (1988). Vision, Opportunity, and
Tenacity: Three informal processes that influence transformation, in Corporate
Transformation, R. Kilmann & T. Covin, eds. San Francisco: Jossey-Bass p.
135.
Bennis, W. & Nanus, B. (1985). Leaders. New York: Harper & Row.
Blanchard, One Minute Manager
Boehm, B. (1981). Software Engineering Economics.
Collins, J.C. & Porras, J. I. (1997). Built to Last. New York: Harper Business
Covey, S.R. (1992). The Seven Habits of Highly Effective People: Powerful Lessons in
Personal Change. Simon and Schuster, London.
Committee to assess the policies and practices of the Department of Energy to design,
manage, and procure environmental restoration, waste management, and other
construction projects. (2000). Improving project management in the Department
of Energy. http://www.nap.edu/openbook/0309066263/R1.html. Washington,
D.C.: National Academy Press.
Davenport, T.H. & Short, J.E. (1990 Summer). The New Industrial Engineering:
Information Technology and Business Process Redesign. Sloan Management
Review, pp. 11-27.
Davenport, T.H. (1993). Process Innovation. Boston: Harvard Business School Press.
Deal, T.E. and Kennedy, A.A. (1988) Corporate Cultures: The Rites and Rituals
of Corporate Life. London: Penguin
Deming, W. E. (1986 ). Out of the Crisis. Cambridge: MIT Center Advanced
Engineering
Drucker, P. F. (March-April 1999). Managing oneself. Harvard Business Review. Pp.
65-74.
Drucker, P.F. (1986). The frontiers of management: Where tomorrow's decisions are
being shaped today. New York: Truman Talley Books.
Fielder, F.E. (1967) A Theory of Leadership Effectiveness. New York: McGraw-Hill.
Geneen, H. and Moscow, A. (1985). Managing. New York: Avon Books.

502

Goldman, T. (September 19-20, 1997). Success in industry. American Society for
Engineering Education, National Conference on Outcomes Assessment,
Washington, D.C.
Gulick, L., and Urwick. L. (1937). Papers on the Science of Administration. New York:
Columbia University Press.
Hallows, J. (1998). Information systems project management. New York: American
Management Association.
Harris, P.R. and Harris, D.L. (1989). High performance team management. Leadership
and Organization Development Journal, Vol. 10, pp. 28-32.
Harris, P.R. and Harris, K.G. (1996). Managing effectively through teams. Team
Performance Management, Vol. 2 No. 3, pp. 23-26.
Harrold, D. (1999). Designing for Six Sigma Capability. Control Engineering Online.
http://www.controleng.com/archives/1999/ctl0101.99/01a103.htm
Hasek, G. (August 21, 2000). The world’s 100 best. Industry Week.com. pp. 46-68.
Hayes, D.S. (March 2000). Evaluation and application of a project charter template to
improve the project planning process. Project Management Journal. (31) 1, pp.
14-23.
Hesselbein, F. & Cohen, P. M. (1999). Leader to Leader. Jossey-Bass.
Imai, M. (1986). Kaizen: The key to Japan’s competitive success. New York: Random
House.
Jick, T. D. (September 26, 1989). The Vision Thing. Harvard Business Review. Reprint
number 9-490-019.
Katzenbach, J.R. & Smith, D. R. (March-April 1993). The discipline of teams. Harvard
Business Review. pp. 111-120. Reprint Number 93207
Katzenbach, J.R. and Smith, D.R. (1992). Why teams matter. The Mckinsey Quarterly,
Vol. 25, pp. 3-27.
Katzenbach, J.R. and Smith, D.R. (1993). The discipline of teams. Harvard Business
Review March-April, pp. 111-120.
Kerzner, H. (2000). Project Management: A systems approach to planning, scheduling,
and controlling, 7th Edition. Berea, OH: John Wiley & Sons.
Koonce, R. (January, 1995). Becoming your own career coach. Training & Development
49, no. 1. Pp. 18-25.
Kotter, J. P. (1990). A Force for Change: How Leadership Differs From Management.
New York: The Free Press, 1990
Maslow, A. (1954) Motivation and Personality. New York: Harper
Mayo, E. (1933.) The Human Problems of an Industrial Civilization. Division of
Research, Graduate School of Business Administration, Harvard University,
Boston, MASS.
McConkey, D. D. (September-October, 1989). Are you an administrator, a manger or a
leader?. Business Horizons. pp. 15-21
McGregor, D. (1960). The Human Side of Enterprise. New York: McGraw-Hill.
Mintzberg, H. (1973). The Nature of Managerial Work. New York: Harper & Row.
Mintzberg, H. (1994) The Rise and fall of Strategic Planning. Prentice-Hall
International, Hemel Hempstead.
Moss-Kantor, R. (1983) The Change Masters: Innovation and Entrepreneurship in the
American Corporation. New York: Simon and Schuster

503

Mullins, L. (1992). Hospitality Management: A Human Resources Approach. London:
Pitman.
Mullins, L. and Roberts (1996). Assessment strategies: some comparisons between
the UK and the US systems of higher education. International Journal of
Educational Management. (10) 4, p. 44.
Paulk, M.C. (July , 1994). A comparison of ISO 9001 and the Capability Maturity
Model for Software. Technical Report CMU/SEI-94-TR-12, ESC-TR-94-12.
Software Engineering Institute, Carnegie Mellon University, Pittsburgh, PA.
Paulk, M.C. (20-22 June 1995). The rational planning of (Software) projects.
Proceedings of the First World Congress for Software Quality, San Francisco,
CA, section 4.
Peters, T. (1988). Thriving on chaos: handbook for a management revolution. New
York: Perennial Library
Peters, T. and Waterman, R.H. (1982). In Search of Excellence, Harper and Row, New
York.
Pralahad, C.K. and Krishnan, M.H. (September –October, 1999). The new meaning of
quality in the information age. Harvard Business Review. (77) 5, pp. 109-118.
Project Management Institute Standards Committee (1996). A guide to the project
management body of knowledge (PMBOK). Upper Darby, PA: Project
Management Institute
Project Management Institute Standards Committee. (1996). A guide to the project
management body of knowledge. Upper Darby, PA: Project Management
Institute.
Reicheld, F.F. and Sasser, W.E. (September –October, 1990). Zero defections: Quality
comes to Service. Harvard Business Review. (76) 5.
Sandomir, R. (2000, January 23). His airness laces up some new shoes. The New
York Times, Section 4 page2.
Seglin, J.L. (2000, January 16). The Right Thing: Throwing a Beanball in Business.
The New York Times.
Shenhar, A. J. (February, 1998). From theory to practice: Toward a typology of project-
management styles. IEEE Transactions on Engineering Management, 45 (1), p.
33-48.
Smith, J. A. and Angeli, I.I. (1995). The Use of Quality Function Deployment to Help
Adopt a Total Quality Strategy. Total Quality Management. (6) 1, pp. 35-44.
Sotiriou, D. and Wittmer, D. (September, 2001). Influence methods of project
managers: Perceptions of team members and project managers. Project
Management Journal. (32)3. Pp. 12-20.
Stevenson, R.W. (2000, January 8). Growth in jobs at end of year beats estimates. The
New York Times, pp. A1.
Taylor, Frederick W. (1911). The Principles of Scientific Management. New York:
Harper & Row.
Tryon and Associates. (1998). Project charter template. [Online]. Available:
http://www.tryonassoc.com/news/projchartertempl.asp
Tuckman, B.W. (1965) Developmental sequence in small groups. Psychological
Bulletin, (63), pp. 384-399.

504

Twomey, K. and Kleiner, B.H. (1996). Teamwork: the essence of the successful
organization, Team Performance Management, Vol. 2 No. 1, pp. 6-8.
Verespej, M.A. (August 21, 2000). Human Resources: Flexible schedules benefit all.
Industry Week.Com, p. 25.
Waterman, R. H., Jr., Waterman, J. A. & Collard, B. A. (July-August 1994). Toward a
career-resilient workforce. Harvard Business Review. Pp. 87-95.
Whyte, W.F., Greenwood, D.J., and Lazes, P. (1991). Participatory action research in:
Participatory Action Research, edited by Whyte, W.F., Sage, Newbury Park, pp.
19-55.
Wilson, F. (1996). Great teams build themselves, Team Performance Management, (2)
2, pp. 27-31.
Wyatt, E. (2001, July 20). School cost overruns no secret, official says. The New York
Times, pp. D1.

505

Mot spring 2010 text (1)

More Related Content

Viewers also liked (7)

Similar to Mot spring 2010 text (1) (20)

Recently uploaded (20)

Mot spring 2010 text (1)