Core concepts project management practice 3rd edition

This is accomplished by simulating project outcomes. There are two types of project selection methods: numeric and nonnumeric. Both have their advantages. Of the numeric methods, there are two subtypes— methods that assess the profits associated with a project and more general methods that measure nonmonetary advantages in addition to the monetary pluses. Of the financial methods, the discounted cash flow is best. In our judgment, however, the weighted scoring method is the most useful.

The time required to complete a project, the availability and costs of key resources, the timing of solutions to technological problems, a wide variety of macroeconomic variables, the whims of a client, the actions taken by competitors, even the likelihood that the output of a project will perform as expected, all these exemplify the uncertainties encountered when managing projects.

While there are actions that may be taken to reduce the uncertainty, no actions of a PM can ever eliminate it. One approach that is particularly useful in helping us understand the implications of uncertain information is risk analysis. The essence of risk analysis is to make estimates or assumptions about the probability distributions associated with key parameters and variables and to use analytic decision models or Monte Carlo simulation models based on these distributions to evaluate the desirability of certain managerial decisions.

Realworld problems are usually large enough that the use of analytic models is very difficult and time consuming. With modern computer software, simulation is not difficult. The model is run or replicated repeatedly, starting from a different point each time based on random choices of values from the probability distributions of the input variables. Outputs of the model are used to construct statistical distributions of items of interest to decision makers, such as costs, profits, completion dates, or return on investment.

These distributions are the risk profiles of the outcomes associated with a decision. Risk profiles can be considered by the manager when considering a decision, along with many other factors such as strategic concerns, behavioral issues, fit with the organization, and so on. Considering Uncertainty in Project Selection Decisions Reconsider the PsychoCeramic Sciences example we solved in the section devoted to finding the discounted cash flows associated with a project.

We found that the project cleared the barrier of a 13 percent hurdle rate for acceptance. The rate of inflation is shown in a separate column because it is another uncertain variable that should be included in the risk analysis. Assume that the expenditures in this example are fixed by contract with an outside vendor so that there is no uncertainty about the outflows; there is, of course, uncertainty about the inflows.

Suppose that the estimated inflows are as shown in Table and include a minimum pessimistic estimate, a most likely estimate, and a maximum optimistic estimate. Shortly, we will deal with the importance of ensuring the honesty of such estimates.

Both the beta and the triangular statistical distributions c Therefore, we will assume that the triangular distribution will give us a reasonably good fit for the inflow variables. The hurdle rate of return is typically fixed by the firm, so the only remaining variable is the rate of inflation that is included in finding the discount factor. We have assumed a 2 percent rate of inflation with a normal distribution, plus or minus 1 percent i.

It is important to point out that approaches in which only the most likely estimate of each variable is used are equivalent to assuming that the input data are known with certainty.

The major benefit of simulation is that it allows all possible values for each variable to be considered. The cells that contain variables or parameters that we make assumptions about are defined as assumption cells.

For the PsychoCeramic Sciences case, these are the cells in Table , columns B and G, the inflows and the rate of inflation, respectively. As noted above, we assume that the rate of inflation is normally distributed with a mean of 2 percent and a standard deviation of. Likewise, we assume that yearly inflows can be modeled with a triangular distribution. The cells that contain the outcomes or results we are interested in forecasting are called forecast cells. Hence, cell F17 in Table is defined as a forecast cell.

Each forecast cell typically contains a formula that is dependent on one or more of the assumption cells. Simulations may have many assumption and forecast cells, but they must have at least one of each.

To illustrate the process of defining an assumption cell, consider cell B7, the cash inflow estimate for We can see from Table that the minimum expected cash c Also remember that we decided to model all these flows with a triangular distribution. Click on cell B7 to identify it as the relevant assumption cell. Select the menu option Cell at the top of the screen. From the dropdown menu that appears, select Define Assumption. Note: it is important that the cell being defined as an assumption cell contain a numeric value.

If the cell is empty or contains a label, an error message will be displayed during this step. CB allows you to choose from a wide variety of probability distributions. Doubleclick on the Triangular box to select it. In the Assumption Name: textbox at the top of the dialog box enter a descriptive label, for example, Cash Inflow Click on the OK button.

Now repeat steps 1—6 for the remaining cash inflow assumption cells cells B8:B Remember that the proper information to be entered is found in Table Next, click on the CB checkbox and select OK.

When finished with the cash inflow cells, assumption cells for the inflation values in column G need to be defined.

For these cells select the Normal distribution. We decided earlier to use a 2 percent inflation rate, plus or minus 1 percent. Recall that the normal distribution is bell-shaped and that the mean of the distribution is its center point.

The mean will be 0. The standard deviation will be. Note that Figure displays only the first two decimal places of the standard deviation. The actual standard deviation of. As you enter this data you will note that the distribution will show a mean of 2 percent and a range from 1 percent to 3 percent. Notice that there are two cash inflows for the year , but one of those occurs at the beginning of the year and the other at the end of the year.

The entry at the beginning of the year is not discounted so there is no need for an entry in G4. Some versions of CB insist on an entry, however, so go ahead and enter 2 percent with zero standard deviation. Then enter. While the rate of inflation could be entered in a similar fashion for the following years, a more efficient approach is to copy the assumption cell G5 to G6:G The following steps are required: 1.

Place the cursor on cell G5. Enter the command Cell, then click on Copy Data. Highlight the range G6:G Enter the command Cell, then Paste Data. Note that the year has two cash inflows, both occurring at the end of the year. In this example we wish to find the net present value of the cash flows we have estimated. The process of defining a forecast cell involves five steps.

Click on the cell F17 to identify it as containing an outcome that interests us. From the dropdown menu that appears, select Define Forecast. Then enter a descriptive label such as Dollars in the Units: textbox.

Click OK. There is only one Forecast cell in this example, but in other situations there may be several. Use the same five steps to define each of them. When you have completed all entries, what was Table is now changed and appears as Table We are ready to simulate. CB randomly selects a value for each assumption cell based on the probability distributions which we specified and then calculates the net present value of the cell values selected. By repeating this process many times, we can get a sense of the distribution of possible outcomes.

To simulate the model you have constructed times, select the Run menu item from the toolbar at the top of the page. The reason is simple. To perform the simulation, select the Run menu item again and then Run from the dropdown menu. CB summarizes the results of the simulation in the form of a frequency chart that changes as the simulations are executed.

See the results of one such run in Figure The frequency chart in Figure is sometimes referred to as a risk profile. As you can c And as we have stated before, as the level of uncertainty increases, so does the risk. CB provides considerable information about the forecast cell in addition to the frequency chart including percentile information, summary statistics, a cumulative chart, and a reverse cumulative chart.

For example, to see the summary statistics for a forecast cell, select View from the Forecast dialogue box toolbar and then select Statistics from the dropdown menu that appears. The Statistics view for the frequency chart Figure is illustrated in Figure Figure contains some interesting information.

Both the mean and median NPV resulting from the simulation are nicely positive and thus indicate a return above the hurdle rate of 13 percent 15 percent including inflation. There are, however, several negative outcomes, those showing a return below the hurdle rate. What is the likelihood that this project will achieve a positive NPV, and therefore produce a rate of return at or above the hurdle rate?

With CB, the answer is easy. Using the display shown in Figure , erase —Infinity from the box in the lower left corner. Type 0 or 1 in that box and press Enter. Figure now changes as shown in Figure The boxes at the bottom of Figure show that given our estimates and assumptions of the cash flows and the rate of inflation, there is a.

Even in this simple example the power of including uncertainty in project selection should be obvious. Because a manager is always uncertain about the amount of uncertainty, it is also possible to examine various levels of uncertainty quite easily using CB. We could, for instance, alter the degree to which the inflow estimates are uncertain by expanding or contracting the degree to which optimistic and pessimistic estimates vary around the most likely estimate. We could increase or decrease the level of inflation.

Simulation runs made with these changes provide us with the ability to examine just how sensitive the outcomes forecasts are to possible errors in the input data.

This allows us to focus on the important risks and to ignore those that have little effect on our decisions. The expected cost of a risk is the estimated cost of the risk if it does occur times the probability that it will occur see Section 4.

How should we consider an event that may have an extraordinarily high cost if it occurs, but has a very low probability of c The probability of such events occurring is so low that their expected value may be much less than some comparatively minor misfortunes with a far higher probability of happening.

The supplier reports that his or her plant has never had a major fire, and has the latest in fire prevention equipment. Does that mean that a major plant fire is impossible? Might some other disaster close the plant—a strike, an al Qaida bomb. Insurance comes immediately to mind, but getting a monetary payback is of little use when you are concerned with the loss of your customer base or the death of your firm. In an excellent book, The Resilient Enterprise, Yossi Sheffi Sheffi, deals with the risk management of many different types of disasters.

It details the methods that creative businesses have used to cope with disasters that struck their facilities, supply chains, customers, and threatened the future of their firms. On occasion this will mean shutting down projects prior to their completion because their risks have become excessive, their costs have escalated beyond their expected benefits, another or a new project does a better job of supporting the goals, or any of a variety of similar reasons.

The steps in this process generally follow those described in Longman, Sandahl, and Speir and Englund and Graham Step 1: Establish a Project Council The main purpose of the project council is to establish and articulate a strategic direction for projects. In addition to senior management, other appropriate members of the project council include: project managers of major projects; the head of the Project Management Office if one exists ; particularly relevant general managers, that is, those who can identify key opportunities and risks facing the organization; and finally, those who can derail the progress of the PPP later in the process.

In addition, within each category criteria are established to c Minor process changes G3 Derivative projects discriminate between very good and even better projects. The criteria are also weighted to reflect their relative importance. The first task in this step is to list the goals of each existing and proposed project— that is, the mission, or purpose, of each project. Wheelwright and Clark have developed a matrix called the aggregate project plan illustrating these changes, as shown in Figure Based on the extent of product change and process change, they identified four separate categories of projects: 1.

Derivative projects These are projects with objectives or deliverables that are only incrementally different in both product and process from existing offerings. They are often meant to replace current offerings or add an extension to current offerings lower priced version, upscale version.

They form the basis for follow-on derivative projects that attempt to extend the platform in various dimensions. Breakthrough projects Breakthrough projects typically involve a newer technology than platform projects. Examples here include the use of fiber-optic cables for data transmission, cashbalance pension plans, and hybrid gasoline-electric automobiles.

They may also be for acquiring new knowledge, or developing new technologies themselves. The numbers indicate the order, or time frame, in which the projects are to be or were implemented, separated by category, if desired. Include the timing, both date and duration, for expected benefits and resource needs. Use the project plan, a schedule of project activities, past experience, expert opinion, whatever is available to get a good estimate of these data.

If the project is new, you may want to fund only enough work on the project to verify the assumptions. Next, use the criteria score limits, or constraints as described in our discussions of scoring models, to screen out the weaker projects. Also, screen in any projects that do not require deliberation, such as projects mandated by regulations or laws, projects that are competitive or operating necessities described above , projects required for environmental or personnel reasons, and so on.

The fewer projects that need to be compared and analyzed, the easier the work of the council. Step 4: Assess Resource Availability Next, assess the availability of both internal and external resources, by type, department, and timing. Note that labor availability should be estimated conservatively. Timing is particularly important, since project resource needs by type typically vary up to percent over the life cycle of projects.

Needing a normally plentiful resource at the same moment it is fully utilized elsewhere may doom an otherwise promising project. Eventually, the council will be trying to balance aggregate project resource needs over future periods with resource availabilities so timing is as important as the amount of maximum demand and availability.

Many managers insist on trying to schedule resource usage as closely as possible to system capacity. This is almost certain to produce catastrophe see Chapter 6, Section 6. Step 6: Prioritize the Projects within Categories Apply the scores and criterion weights to rank the projects within each category. It is acceptable to hold some hard-to-measure criteria out for subjective evaluation, such as riskiness, or development of new knowledge.

Subjective evaluations can be translated from verbal to numeric terms easily by the Delphi Dalkey, , pairwise comparisons, or other methods. This, however, should be done by category, not for each project individually since different projects are offering different packages of benefits that are not comparable. Step 7: Select the Projects to be Funded and Held in Reserve The first task in this step is to determine the mix of projects across the various categories and aspects, if used and time periods.

Then allocate the categorized projects in rank order to the categories according to the mix desired. It is usually good practice to include some speculative projects in each category to allow future options, knowledge improvement, additional experience in new areas, and so on.

The focus should be on committing to fewer projects but with sufficient funding to allow project completion. Document why late projects were delayed and why any were defunded.

Step 8: Implement the Process The first task in this final step is to make the results of the PPP widely known, including the documented reasons for project cancellations, deferrals, and nonselection as was mentioned earlier. Top management must now make their commitment to this project portfolio process totally clear by supporting the process and its results.

This may require a c As project proposers come to understand and appreciate the workings and importance of the PPP, their proposals will more closely fit the profile of the kinds of projects the organization wishes to fund. As this happens, it is important to note that the council will have to concern itself with the reliability and accuracy of proposals competing for limited funds.

Senior management must fully fund the selected projects. It is unethical and inappropriate for senior management to undermine PPP and the council as well as strategically important projects by playing a game of arbitrarily cutting X percent from project budgets. It is equally unethical and inappropriate to pad potential project budgets on the expectation that they will be arbitrarily cut. Finally, the process must be repeated on a regular basis. For some industries, quarterly analysis may be best, while in slow-moving industries yearly may be fine.

Projects are often subdivisions of major programs. A proper mix of project categories can help ensure its long-run competitive position. Following this introductory chapter, our attention goes to the various roles the PM must play and the ways projects are organized. Chapter 2 focuses on the behavioral and structural aspects of projects and their management. Then attention turns to the ways in which projects can be organized within the parent establishment.

Matrix organization is discussed at length as are the conflicts and managerial problems that matrix organizations tend to foster.

Finally, the chapter moves to the project team: its purposes and the widespread use of transdisciplinary teams. Using transdisciplinary teams to plan and carry out the project is a source of both creativity and conflict. The process of building effective teams is briefly covered. The remainder of the book is designed to conform to the life cycle of any project, whatever the shape of the life cycle curve.

Chapter 3 covers the process of planning and launching the project, construction of the work breakdown structure WBS , and responsibility charts. These activities require the project team to estimate resource and time requirements for accomplishing what the project plan has described. Because any estimate is a forecast, the allied subject of risk management is introduced.

Schedules will be calculated under conditions of uncertainty in two ways: 1 using standard probability theory, and 2 using simulation. In Chapter 6, resource allocation is discussed. To begin, we consider the problem of crashing a project, i. Then we deal with two fundamental problems of resource management.

First, a schedule of resource usage must c Second, we adjust the resource loads to avoid gluts and shortages of valuable resources, a. The problems of resource usage when there are multiple projects competing for a limited resource pool are then covered, as are ways of dealing with these problems. The subjects of Chapter 7 are monitoring and controlling projects. The nature of project data collection is explained and various types of project reports, including earned value reports, are illustrated and discussed.

Following this, we cover the general purposes and mechanisms for project control. The chapter ends with a section devoted to the control of change on a project. Chapter 8 deals with evaluating, auditing, and terminating projects. The project team often fears evaluation and auditing. Team members usually equate these activities with fault finding, but when correctly used they are valuable aids for the PM and team.

Project termination is usually ignored or treated as a trivial problem in practice—and in most works on project management. We feel it is an important and complex process that may cause serious problems if not handled properly. Throughout this book there are illustrations of the tools and reports used by project managers. There are a large number of spreadsheets and literally hundreds of project management software packages on the market. Most of them perform with reasonable competence in the tasks for which they were designed.

Of the packages intended for overall project management, MSP is by far the favorite with roughly half the total market. There are also a large number of specialized software packages, for example, report generators, and special risk management packages. In the past decade or two, spreadsheet software has become highly sophisticated. When one reads the literature of project management, one sees much about risk management.

Too often, it may seem to the reader that risk management is a highly specific task. Risk management is a reference to a class of ideas, methods, and techniques that aids the management of projects being carried out in an uncertain world. Outside factors can affect projects in a wide variety of ways and so our discussions of risk management cannot be restricted to a chapter on the subject.

They appear throughout the book. Tools and techniques are introduced as they are needed to deal with specific problems. The reader should note that these tools have wide application beyond project management and most are valuable for the general manager as well as the PM. With this introduction, let us begin our study of project management.

Use the characteristics of a project to differentiate it from a nonproject. Contrast win-lose negotiation with win-win negotiation and explain why the latter is so important in project management.

Identify the three goals of a project and describe how the project manager achieves them. Contrast the two types of project life cycles and discuss why it is important to know which type the current project is following. How does the weighted scoring approach avoid the drawbacks of the NPV approach? Can the two approaches be combined? What weights would be appropriate if they were combined? What advantages are lost if the sum of the weights in a weighted scoring approach does not add to 1.

Why is it suggested that factors with less than 2 percent or 3 percent impact not be considered in this approach? Draw a distinction between a project and a program. Why is the distinction important? Contrast the three types of nonnumeric project selection methods.

Could any specific case combine two of them, such as the sacred cow and the operating necessity, or the comparative benefits and the competitive necessity? You are the project manager of a team of software specialists working on a project to produce a piece of application software in the field of project management. Give some examples of things that might go wrong on such a project and the sorts of trade-offs you might have to make.

In Figure , what distribution of large and small circles and squares across the four boxes would A weak business? Give several examples of projects found in your city, region, or country—avoiding those used as examples in the chapter. For each of the projects identified in the answer to Question 14, is the life cycle for the project S-shaped or J-shaped? Construct a list of factors, conditions, and circumstances you think might be important for a manufacturing firm to evaluate during the project selection process.

Do the same for a computer repair shop. How might you use project management for doing a major school work assignment? If the required rate of return is 0. A score of 1 represents unfavorable, 2 satisfactory, and 3 favorable. In the project described in Problem 18, assume that the net cash inflows are probabilistic variables. Given a required rate of return of 0. What is the probability that the actual NPV will be positive? What would happen to the NPV of the above project if the inflation rate was expected to be 4 percent in each of the next four years?

Use a weighted scoring model to choose between three locations A, B, C for setting up a factory. Using a spreadsheet for Problem 21, find the following: a What would be your recommendation if the weight for the transportation cost went down to 10 and the weight for union relations went up to 25?

Would your recommendation change under these circumstances? How does this affect your recommendation? Nina is trying to decide in which of four shopping centers to locate her new boutique. Some cater to a higher class of clientele than others, some are in an indoor mall, some have a much greater volume than others, and, of course, rent varies considerably. Because of the nature of her store, she has decided that the class of clientele is the most important consideration.

Following this, however, she must pay attention to her expenses, and rent is a major item—probably 90 percent as important as clientele. An indoor, temperature-controlled mall is a big help for stores such as hers where 70 percent of sales are from passersby slowly strolling and window shopping.

Thus, she rates this as about 95 percent as important as rent. Last, a higher volume of shoppers means more potential sales; she thus rates this factor as 80 percent as important as rent. As an aid in visualizing her location alternatives, she has constructed the following table. Core Project Management. Filters Clear Filters Guaranteed to Run. Start Time Range. End Time Range. Filters Showing of 11 Courses.

Project Management Essentials for Non-Project Managers - Project management is not just for designated project managers. Every project—no matter the size—requires you to use sound project management principles, including interacting with stakeholders,… Project management is not just for designated project managers. Read More. Delivery Method: Classroom Remote Virtual. Project Management Principles - Managing a project from initiation to closeout requires many tools, techniques, and working practices.

Through informative content, hands-on activities, class discussions, and a threaded case study,… Managing a project from initiation to closeout requires many tools, techniques, and working practices. Read More Guaranteed to Run. Leadership and Communication Skills for Project Leaders - Successful project leaders do more than manage scope, schedule, cost, risk, and resources; they exhibit the leadership and communication skills that propel a project forward and inspire confidence in… Successful project leaders do more than manage scope, schedule, cost, risk, and resources; they exhibit the leadership and communication skills that propel a project forward and inspire confidence in those they lead.

Project Risk Management - In project and program management, something can and will go wrong. Solid risk management best practices are critical to delivering… In project and program management, something can and will go wrong. Project Management Simulation - You learned project management techniques and best practices and developed the skills to effectively manage a project at your organization.

Through a case-study-based simulation, you will… You learned project management techniques and best practices and developed the skills to effectively manage a project at your organization. Delivery Method: Virtual. Project Cost Estimating - Projects cannot be successful without accurate and timely project cost estimating. Estimating is a practice that occurs throughout the project management lifecycle, and so it must be done effectively… Projects cannot be successful without accurate and timely project cost estimating.

Delivery Method: Classroom Virtual. Managing Scope, Schedule, and Cost - All projects require monitoring and controlling to meet their objectives, whether delivering a research program or a nuclear submarine.

Delivering a project within the promised timeframe schedule ,… All projects require monitoring and controlling to meet their objectives, whether delivering a research program or a nuclear submarine. This course is specifically designed to provide you with the proven,… Project managers who have proven skills and experience can find exciting, high-visibility opportunities in a wide range of fields. Showing of 11 Courses. Financial Management. Human Capital and Human Resources. Professional Skills.

Add to Basket. Book Description Condition: New. Seller Inventory M More information about this seller Contact this seller. Seller Inventory Q Items related to Project Management in Practice. Project Management in Practice. Publisher: Wiley , Explore a range of methods and techniques for project management effectiveness.

Playable 1. Playable 2. Ethics and Project Management This course illustrates how the project management community and the Project Management Institute have established ethics standards to help members navigate ethical issues and establish project management as a profession.

Strategically Focused Project Management Managing projects means having a project strategy. Strategic projects remain in line with company goals and deliver on expected value. This course covers best practices for strategic project management.

You'll learn about strategy and the creation of a project charter through to closing the project.