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BA 339 – Operations Management. Chapter 3, Project Management (PM) Modern PM Aligning Projects with Organization Strategy Organization: Structure & Culture Defining the Project Estimating Project Times & Costs Developing the Project Plan Managing Risk Scheduling Resources.

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ba 339 operations management
BA 339 – Operations Management
  • Chapter 3, Project Management (PM)
    • Modern PM
    • Aligning Projects with Organization Strategy
    • Organization: Structure & Culture
    • Defining the Project
    • Estimating Project Times & Costs
    • Developing the Project Plan
    • Managing Risk
    • Scheduling Resources
chapter 3 project management
Chapter 3 – Project Management
  • Modern Project Management
    • Projects in ancient times – Pyramids, Great Wall of China, Medieval Cathedrals
    • Current – most common in construction, IT, DOD contracts, Hollywood films, and large consulting firms
    • Characteristics of a project:
      • Established objective
      • Defined lifespan with a beginning & end
      • Usually involves several departments & professionals
      • Typically involves do something that’s never been done before
      • Specific time, cost and performance requirements
chapter 3 project management3
Chapter 3 – Project Management
  • Modern Project Management
    • Project lifecycle
      • Definition/Identification – goals, specifications, tasks, responsibilities
      • Planning – Schedules, budgets, resources, risks, staffing
      • Execution – Status reports, changes, quality, forecasts
      • Delivery – transfer documents/ownership, train customer, release resources, reassign staff, lessons learned
    • PM & OM
      • PM usually involves one or more areas of OM and affects one or more areas
chapter 3 project management4
Chapter 3 – Project Management
  • Modern Project Management
    • Importance of project management
      • Compression of product lifecycle (hi-tech = 1.5-3 yrs. Vs. 10-15 yrs. 30 years ago)
      • Global competition – quality management involves project management; more work is being “projectized” (especially product development)
      • Knowledge explosion – increase complexity
      • Corporate downsizing – PM replacing middle management
      • Increased customer focus – customized products and maintaining lucrative customer relationships
      • Rapid development of 3rd world and closed economies
      • Small project represent big problems – cumulative impact of many small project problems
chapter 3 project management5
Chapter 3 – Project Management
  • Modern Project Management
    • PM & maturity levels
      • Level 1 – absence of a process for developing a project plan that includes cost, schedule & performance
      • Level 2 – Repeatable processes used primarily on large mission-critical projects
      • Level 3 Well-defined processes that are integrated with organizational processes
      • Level 4 – Seamless, integrated, holistic project systems and processes that include strategic decisions that take into account selection, plans, performance & lessons learned
      • Level 5 – Continuous improvement by archiving and using lessons learned to improve PM learning
chapter 3 project management6
Chapter 3 – Project Management
  • Modern Project Management
    • Technical & socio-cultural dimensions
      • Technical – scope, WBS, schedules, resource management, budgets, status reports
      • Socio-cultural – leadership, problem solving, teamwork, negotiations, politics, customer expectations
chapter 3 project management7
Chapter 3 – Project Management
  • Aligning Project with Organization Strategy
    • Strategic management process
      • Review & define the organizational mission
      • Set long-range goals & objectives
      • Analyze and formulate strategies to reach objectives (“SMART” characteristics)
      • Implement strategies through OM and projects
    • Projects should reflect a balanced approach for achieving goals & objectives; requires a consistent method for this
    • Alignment between strategic goals and projects often affected by:
      • Implementation gap
      • Organizational politics
      • Resource conflicts and multi-tasking
chapter 3 project management8
Chapter 3 – Project Management
  • Organization: Structure & Culture
    • PM structures
      • Functional organization – traditional “stovepipe”
        • Advantages:
          • Project completed within existing organization structure,; no alteration of operations
          • Maximum flexibility in use of staff
          • If scope narrow, in-depth expertise can of functional unit can be applied
          • Normal career paths are within functional divisions are maintained
        • Disadvantages
          • Project often lack focus and commitment
          • Poor integration across functional units
          • Generally takes longer to complete
          • Motivation of team members often limited
chapter 3 project management9
Chapter 3 – Project Management
  • Organization: Structure & Culture
    • PM structures
      • Dedicated project teams – operate separately from rest of the parent organizations
        • Advantages:
          • Relatively simple way to complete projects; does not disrupt ongoing operations
          • Get done more quickly
          • High level of motivation and dedication
          • High level of cross-functional integration (if staffed properly)
        • Disadvantages:
          • Expensive; loss of economies of scale
          • Projectitis – we-they divisiveness
          • Inhibits maximization of technological expertise
          • What to do with personnel when project is complete
chapter 3 project management10
Chapter 3 – Project Management
  • Organization: Structure & Culture
    • PM structures
      • Matrix management – hybrid that overlays PM structure on functional hierarchy (can have functional, balanced, or project matrix)
        • Advantages:
          • Share resources (more cost efficient)
          • Stronger project focus by having assigned PM
          • Access to larger reservoir of talent (homeport return helps with economies of scale & technological expertise)
          • More flexible utilization of resources
        • Disadvantages:
          • Tensions between PMs and functional organizations can breed conflicts (need to be managed)
          • Resource sharing can lead to conflict/competition
          • Violates unity of command (two bosses)
          • Decision making can get bogged down
chapter 3 project management11
Chapter 3 – Project Management
  • Organization: Structure & Culture
    • Factors in PM Structure Selection
      • Size of project
      • Strategic importance
      • Novelty & the need for innovation
      • Need for integration (number of departments)
      • Environmental complexity (external interfaces)
      • Budget & time constraints
      • Stability of resource requirements
      • *** Higher the levels of these seven factors, the more autonomy & authority the PM & team require >> matrix or dedicated teams are preferred
chapter 3 project management12
Chapter 3 – Project Management
  • Organization: Structure & Culture
    • Characteristics of organizational culture and their relationship to PM
      • Member identity – job vs. organization
      • Team emphasis – individual vs. group
      • Management focus – task vs. people
      • Unit integration – independent vs. interdependent
      • Control – loose vs. tight
      • Risk tolerance – low vs. high
      • Reward criteria – performance vs. other
      • Conflict tolerance – low vs. high
      • Means-end orientation – means vs. ends
      • Open-system focus – internal vs. external
chapter 3 project management13
Chapter 3 – Project Management
  • Defining the Project
    • Step 1 – Defining the Project Scope
      • Project objectives
      • Deliverables
      • Milestones – significant events
      • Technical requirements
      • Limits & exclusions
      • Reviews with customers/stakeholders
chapter 3 project management14
Chapter 3 – Project Management
  • Defining the Project
    • Step 2 – Establishing Project Priorities
      • Meeting customer/stakeholder expectations in terms of (triple constraints):
        • Cost
        • Schedule
        • Performance (scope, technical, quality)
      • Tradeoffs can be done by using a priority matrix >> for each of the triple constraints, determine whether to:
        • Enhance
        • Constrain
        • Accept
chapter 3 project management15
Chapter 3 – Project Management
  • Defining the Project
    • Step 3 – Creating the Work Breakdown Structure
      • Once scope & deliverables have been determined >> project is successively subdivided into smaller & smaller work elements
      • Hierarchical – Project > Task > Subtask > Deliverable > Work Package
      • Provides basis for scheduling, resourcing, and budgeting
      • Each work package:
        • Defines work (what)
        • Identifies time to complete (how long)
        • Identifies a time-phased budget to complete (cost)
        • Identifies resources needed to complete (how much)
        • Identifies single person responsible for work (who)
        • Identifies monitoring points for measuring progress
chapter 3 project management16
Chapter 3 – Project Management
  • Defining the Project
    • Step 4 – Integrating the WBS with the Organization (creating the OBS)
      • Creates a matrix between the WBS and the organizational resources required to perform the work
    • Step 5 – Code the WBS for the Info. System
      • Provides the “structure” for tracking and controlling work, information, costs, etc.
        • 1.0 - Project
          • 1.1 – Task
          • 1.1.1 - Subtask
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Chapter 3 – Project Management
  • Defining the Project
    • Process Breakdown Structure (PBS)
      • Used for process-oriented projects (such as business process improvement or organizational re-engineering efforts
    • Responsibility Matrices
      • Involves taking the OBS to a lower level and identifying specific individuals who will perform work identified in work packages
chapter 3 project management18
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Estimating – process of forecasting or approximating the time and cost of completing project deliverables
    • Unique to the organizations – there is no off the shelf process
    • 2 types:
      • Macro: top-down – derived by analogy or mathematical relationships (parametric)
        • Most useful for strategic decision making, high uncertainty, small, internal projects, unstable scope
      • Micro: bottoms-up – based on estimates of elements found in the WBS
        • Most useful when cost/time are important, fixed price contracts and when customers want details
    • Accuracy increase with time spent – e.g., they cost $$$
    • Cost, time, & budget estimates are the lifeline to controlling projects
chapter 3 project management19
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Factors influencing quality of estimates
      • Planning horizon
      • Project duration
      • People
      • Project structure & organization
      • Padding estimates
      • Organizational culture
      • Non-project factors – equipment downtime, holidays, legal limits, etc.
chapter 3 project management20
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Macro (parametric) approaches
      • Ratio method – used in the concept (“need”) phase. Ex. - $110/SF. x 2,700 SF = $297,000
      • Apportion method – extension of ratio method; based on past projects/costs; require good historical accuracy to ensure accuracy. Ex. – Construction loan payouts – 3% for foundation, 25% for framing, 15% for plumbing/heating, etc. Can apportion costs to WBS deliverables based on history.
      • Function Point Methods for SW and IT projects – function points are weighted macro variables or major parameters such as no. of inputs/outputs, number of inquiries, data files and interfaces. Usually adjusted for complexity and added. Provide basis for estimating labor.
      • Learning Curves – used for repetitious projects of similar scope. Recognize that learning occurs with repetition. “Each time the output quantity doubles, the unit labor hours are reduced at a constant rate.” 60% = significant improvement; 100% = no improvement.
chapter 3 project management21
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Micro approaches
      • Template methods – uses past, similar projects as a starting point and then adjusted for differences. Permits development of schedule, cost and budget estimates in a short period of time.
      • Parametric methods applied to specific tasks – similar to parametric techniques, but applied to WBS tasks. Ex. – Wallpaper estimate ($5/SY paper x $2SY installation = $7SY)
      • Detailed estimates for WBS work packages – based on experience of personnel doing the work. If significant uncertainty exist, often use low, avg. & high estimates
      • Phase estimating (hybrid) – begins with macro estimate and refines it for phases of the project. Breakdowns may include concept definition, design production, deliverables, work package definition, etc.
chapter 3 project management22
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Budget estimates
      • Not the same as cost estimates.
      • Cost estimate becomes a budget when it is time-phased.
      • WBS work packages require time=phased budgets
      • Includes duration and start/end dates
      • Types of costs include: direct labor, materials, equipment, overhead, G&A
chapter 3 project management23
Chapter 3 – Project Management
  • Estimating Project Costs & Times
    • Estimating guidelines
      • Responsibility –at work package level, should be done by person most familiar with work
      • Use several people to estimate – all should have relevant experience
      • Normal conditions – should be based on normal conditions, efficient methods and normal level of resources (Ex. – 8 hours for shift work)
      • Time units – all time estimates need consistent time units
      • Independence – should assume independence of tasks
      • Contingencies – should not include allowances for contingencies (should be estimated separately at a higher level)
      • Add risk assessments to estimates to avoid surprises – new technology vs. proven process. Use optimistic, most likely and pessimistic estimates.
chapter 3 project management24
Chapter 3 – Project Management
  • Developing the Project Plan
    • Project Network Terminology
      • Activity – element that requires time (may or may not include resources). Usually represent one or more tasks from a work package
      • Merge activity – activity that has more than one activity immediately preceding it (e.g., more than one dependency arrow)
      • Parallel activity – activities that take place at the same time
      • Path – sequence of connected dependent activities
      • Critical path – longest path through the network; if an activity on the critical path is delayed, the project will be delayed by the same amount
      • Event – point in time where an activity is started or completed
      • Burst activity – activity with more than one activity immediately following it
chapter 3 project management25
Chapter 3 – Project Management
  • Developing the Project Plan
    • Rules for Developing Project Networks
      • Networks typically flow right to left
      • An activity cannot begin until all preceding connected activities have been completed
      • Arrows on networks indicate precedence and flow; they can cross over each other
      • Each activity should have a unique identification number
      • An activity identification number must be larger that than of any activities that precede it
      • Looping is not allowed
chapter 3 project management26
Chapter 3 – Project Management
  • Developing the Project Plan
    • Approaches to Developing Networks
      • Activity-on-Node - AON (precedence diagram method)
        • Activity represented by box; dependencies depicted by arrows
        • 3 basic relationships for activities
          • Predecessor activities – which activities must be completed before the activity
          • Successor activities – which activities must immediately follow the activity
          • Current/parallel activities – which activities can occur while the activity is taking place
      • Activity-on-Arrow – AOA: same as AON except that activities are represented by the arrow
chapter 3 project management27
Chapter 3 – Project Management
  • Developing the Project Plan
    • Networks Computations
      • Forward pass (earliest times – start/complete):
        • Starts with the first project activities and traces each path through the network to the last project activities.
        • Activity times are added as you trace through the path.
        • Longest path denotes project completion time for the plan & is called the critical path (CP)
      • Backward pass (latest times – start/complete)
        • Starts with the last project activities and traces backward on each path to the first project activities.
        • Activity times are subtracted as you trace through the path.
        • Before computed, the last project activity must be selected.
      • Slack (float) – used to determine which activities can be delayed. Is simply the difference between LS and ES or LF and EF.
chapter 3 project management28
Chapter 3 – Project Management
  • Managing Risk
    • Project risk is highest at the beginning and decreases as the project progresses
    • Cost to fix the risk event is lowest at the beginning and increases as the project progresses.
    • For new products, the cost to fix increase geometrically as you move through the product lifecycle (concept definition, design, production, delivery, installation)
    • “A god solution to a well-posed decision problem is almost always a smarter choice than an excellent solution to a poorly posed one.”
chapter 3 project management29
Chapter 3 – Project Management
  • Managing Risk
    • The Risk Management Process
      • Multiple risk management models – FAA, GAO, DOE, COSO, AS/NZ 4360
      • All models typically include the following process steps:
        • Risk identification – involves generating a list of all possible risks that could affect a project
        • Risk assessment – involves assessing risk based on impact severity, probability/likelihood of occurring, and controllability (includes scenario analysis and probability/impact matrices)
        • Risk response – involves developing a response strategy and contingency plans (usually includes mitigation, transfer, avoidance, sharing, and acceptance)
        • Risk response control – involves implementing the risk strategy, monitoring and adjusting, and change management
chapter 3 project management30
Chapter 3 – Project Management
  • Managing Risk
    • Classification
      • Many classification systems; project risk can be classified based on the following impacts (often referred to as the triple constraints):
        • Cost
        • Schedule
        • Technical/quality
chapter 3 project management31
Chapter 3 – Project Management
  • Scheduling Resources
    • “Project network times are not a schedule until resources have been assigned”
    • Key ??
      • Will assigned labor/equipment be adequate and available for the project?
      • Will outside contractors have be used?
      • Do unforeseen resource dependencies exist? Is there a new critical path?
      • How much flexibility do we have in using resources?
      • Is the original deadline realistic?
      • If another project or additional work is added, will it cause delays in the project?
chapter 3 project management32
Chapter 3 – Project Management
  • Scheduling Resources
    • Constraints
      • Technical or logic constraints – usually address sequence in which activities must occur.
        • Example: Design > code > test
        • Example: Pour foundation > frame > roof
      • Resource constraints – absence or shortage of resources (can alter technical constraints)
        • People
        • Materials
        • Equipment
        • Capital
      • Physical constraints
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