Pr o je c t Ma n a g eme n t

THE MANAGERIAL PROCESS Clifford F. Gray

Eric W. Larson

Chapter 1

Modern Project Management

 What is a Project?
• Project Defined
– A complex, non-routine, one-time effort limited by
time, budget, resources, and performance
specifications designed to meet customer needs.
• Major Characteristics of a Project
– Has an established objective.
– Has a defined life span with a beginning and an end.
– Requires across-the-organizational participation.
– Involves doing something never been done before.
– Has specific time, cost, and performance
requirements.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–2
 Programs versus Projects
• Program Defined
– A series of coordinated, related, multiple projects that
continue over an extended time and are intended to
achieve a goal.
– A higher level group of projects targeted at a common
goal.
– Example:
• Project: completion of a required course in project
management.
• Program: completion of all courses required for a business
major.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–3
 Comparison of Routine Work with Projects
Routine, Repetitive Work Projects
Taking class notes Writing a term paper
Daily entering sales receipts into Setting up a sales kiosk for a
the accounting ledger professional accounting meeting
Responding to a supply-chain Developing a supply-chain
request information system
Practicing scales on the piano Writing a new piano piece
Routine manufacture of an Apple Designing an iPod that is
iPod approximately 2 X 4 inches,
interfaces with PC, and stores
10,000 songs
Attaching tags on a manufactured Wire-tag projects for GE and
product Wal-Mart

TABLE 1.1

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–4
 Project Life Cycle

FIGURE 1.1

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–5
 The Challenge of Project Management
• The Project Manager
– Manages temporary, non-repetitive activities and
frequently acts independently of the formal
organization.
• Marshals resources for the project.
• Is linked directly to the customer interface.
• Provides direction, coordination, and integration to the
project team.
• Is responsible for performance and success of the project.
– Must induce the right people at the right time to
address the right issues and make the right decisions.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–6
 The Importance of Project Management
• Factors leading to the increased
use of project management:
– Compression of the product life cycle
– Global competition
– Knowledge explosion
– Corporate downsizing
– Increased customer focus
– Rapid development of Third World and
closed economies
– Small projects that represent big
problems

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–7
 Integrated Project Management Systems
• Problems resulting from the use of piecemeal
project management systems:
– Do not tie together the overall strategies of the firm.
– Fail to prioritize selection of projects by their
importance of their contribution to the firm.
– Are not integrated throughout the project life cycle.
– Do not match project planning and controls with
organizational culture to make appropriate
adjustments in support of project endeavors.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–8
 Integrated
Management of
Projects

FIGURE 1.2

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–9
 The Technical and
Sociocultural
Dimensions
of the Project
Management
Process

FIGURE 1.3

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–10
 An Overview of Project Management 3e.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–11
 Pr o je c t Ma n a g eme n t
THE MANAGERIAL PROCESS Clifford F. Gray
Eric W. Larson

Chapter 2
Organization Strategy
and Project Selection
Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–13
 Why Project Managers Need to Understand
the Strategic Management Process

• Changes in the organization’s mission and

strategy
– Project managers must respond to changes with
appropriate decisions about future projects and
adjustments to current projects.
– Project managers who understand their organization’s
strategy can become effective advocates of projects
aligned with the firm’s mission.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–14
 Strategic
Management
Process

FIGURE 2.1

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–15
 Characteristics of Objectives

S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress

A Assignable Make the objective assignable to one person for

completion

R Realistic State what can realistically be done with available

resources

T Time related

EXHIBIT 2.1

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–16
 Project Portfolio Management Problems
• The Implementation Gap
– The lack of understanding and consensus on strategy
among top management and middle-level (functional)
managers who independently implement the strategy.
• Organization Politics
– Project selection is based on the persuasiveness and
power of people advocating the projects.
• Resource Conflicts and Multitasking
– The multiproject environment creates interdependency
relationships of shared resources which results in the
starting, stopping, and restarting projects.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–17
 Benefits of Project Portfolio Management

• Builds discipline into project selection process.

• Links project selection to strategic metrics.
• Prioritizes project proposals across a common set of
criteria, rather than on politics or emotion.
• Allocates resources to projects that align with strategic
direction.
• Balances risk across all projects.
• Justifies killing projects that do not support organization
strategy.
• Improves communication and supports agreement on
project goals.

EXHIBIT 2.2

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–18
 Portfolio of Projects by Type

FIGURE 2.2

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–19
 A Portfolio Management System
• Selection Criteria
– Financial: payback, net present value (NPV), internal
rate of return (IRR)
– Non-financial: projects of strategic importance to the
firm.
• Multi-Weighted Scoring Models
– Use several weighted selection criteria to evaluate
project proposals.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–20
 Project Screening Matrix

FIGURE 2.3

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–21
 Applying a Selection Model
• Project Classification
– Deciding how well a strategic or operations project fits
the organization’s strategy.
• Selecting a Model
– Applying a weighted scoring model to bring projects to
closer with the organization’s strategic goals.
• Reduces the number of wasteful projects
• Helps identify proper goals for projects
• Helps everyone involved understand how and why a project is
selected

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–22
 Project Proposals
• Sources and Solicitation of Project Proposals
– Within the organization
– Request for proposal (RFP) from external sources
(contractors and vendors)
• Ranking Proposals and Selection of Projects
– Prioritizing requires discipline, accountability,
responsibility, constraints, reduced flexibility, and loss
of power.
• Managing the Portfolio
– Senior management input
– The priority team (project office) responsibilities

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–23
 Major Project
Proposal

FIGURE 2.4A

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–24
 Risk
Analysis

FIGURE 2.4B

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–25
 Managing the Portfolio
• Senior Management Input
– Provide guidance in selecting criteria that are aligned
with the organization’s goals
– Decide how to balance available resources among
current projects
• The Priority Team Responsibilities
– Publish the priority of every project
– Ensure that the project selection process is open and
free of power politics.
– Reassess the organization’s goals and priorities
– Evaluate the progress of current projects

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–26
 Project Screening
Process

FIGURE 2.5

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–27
 Project Portfolio Matrix

FIGURE 2.7

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–28
 Project Portfolio Matrix Dimensions
• Bread-and-butter projects
– Involve evolutionary improvements to current products and
services.
• Pearls
– Represent revolutionary commercial advances using proven
technical advances.
• Oysters
– Involve technological breakthroughs with high commercial
payoffs.
• White elephants
– Projects that at one time showed promise but are no longer
viable.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 1–29