Management
Professor Alexander Roberts PhD, MBA, FCCA, FCIS, MCIBS. Director, Centre for Strategy Development and ImplementationProfessor Roberts is Professorial Fellow of Edinburgh Business School (EBS), the Gradu-ate School of Business at Heriot-Watt University. Professor Roberts lectures, researches and consults for major organisations on strategy development and implementation. The practical relevance of his work is underpinned by 15 years in senior management, includ-ing 10 years at executive director level within multinational subsidiaries of American and European based businesses. He gained his PhD at London Business School in 1997. He has extensive executive and postgraduate management development experience. Professor Roberts founded and leads the new Centre for Strategy Development and Implementation (CSDI) at Edinburgh Business School. The centre provides executive courses, research and consulting services to assist organisations develop appropriate strategic directions and put them into action effectively. Professor Roberts also founded and heads the Doctorate in Business Administration (DBA) in Strategic Focus programme. Professor Roberts is an executive director of EBS. He is also chairman of the EBS CSDI DBA research committee, steering group and various specific course development steering committees. He is also author of the forthcoming MBA/DBA distance learning text in Making Strategies Work and is joint author of the texts in Project Management, Strategic Risk Management and Mergers and Acquisitions.
Dr William Wallace BSc (Hons), MSc, PhD, MCIOB, MAPM.
Senior Teaching Fellow, Centre for Strategy Development and Implementation.
Dr Wallace is Senior Teaching Fellow of Edinburgh Business School (EBS), the Graduate School of Business at Heriot-Watt University. Dr Wallace chairs the MBA/DBA courses in Project Management and Strategic Risk Management and assists Professor Roberts in the development of the EBS CSDI and EBS CSDI DBA programme.
Dr Wallace has an extensive range of academic and industrial experience. The work for both his first degree and masters degree (Loughborough 1983) established a broad project management academic framework. He subsequently developed and refined this framework through research as a Heriot-Watt scholarship doctoral student. This research led to the award of his PhD in design project management (Heriot-Watt 1987). Dr Wallace subsequently worked as a professional project manager with private and public sector employers before returning to academia in 1995, where he led the Heriot-Watt MSc in Construction Project Management programme from 1995 until 2001. Dr Wallace served as a member of the Heriot-Watt Faculty Board of Engineering from 1997 to 2001 and on the University External Studies Committee 1998 to 2001.
With Professor Roberts and others, Dr Wallace is joint author of the EBS texts in Project Management, Strategic Risk Management, and Mergers and Acquisitions.
Release PR-A1.2.1
Project
Management
Professor Alexander Roberts
Dr William Wallace
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First published in Great Britain in 2002
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Preface 7
List of Abbreviations 9
Module 1 Introduction 1/1
1.1 What Is a Project? 1/2
1.2 What Is Project Management? 1/8
1.3 Characteristics of Project Management 1/16
1.4 Potential Benefits and Challenges of Project Management 1/23
1.5 The History of Project Management 1/25
1.6 Project Management Today 1/27
Module 2 Individual and Team Issues 2/1
2.1 Introduction 2/2
2.2 The Project Manager 2/4
2.3 The Project Team 2/30
2.4 Project Team Staffing Profile and Operation 2/36
2.5 Project Team Evolution 2/46
2.6 Project Team Motivation 2/53
2.7 Project Team Communications 2/58
2.8 Project Team Stress 2/63
2.9 Conflict Identification and Resolution 2/68
Module 3 Project Risk Management 3/1
3.1 Introduction 3/2
3.2 Background to Risk 3/3
3.3 Risk Handling 3/11
3.4 Types of Risk 3/19
3.5 Risk Conditions and Decision making 3/25
3.6 The Concept of Risk Management 3/33
3.7 Risk, Contracts and Procurement 3/55
Module 4 Project Management Organisational Structures and Standards 4/1
4.1 Introduction 4/2
4.2 Organisational Theory and Structures 4/5
4.3 Examples of Organisational Structures 4/50
4.4 Project Management Standards 4/56
Module 5 Project Time Planning and Control 5/1
5.1 The Concept of Project Time Planning and Control 5/2
5.2 The Process of Project Time Planning 5/10
5.3 Project Replanning 5/60
5.4 Trade-off Analysis 5/72
5.5 Resource Scheduling 5/85
Module 6 Project Cost Planning and Control 6/1
6.1 Introduction 6/1
6.2 Project Cost Planning and Control Systems 6/2
6.3 The Project Cost Control System 6/27
Module 7 Project Quality Management 7/1
7.1 Introduction 7/2
7.2 Quality Management as a Concept 7/3
7.3 The Quality Gurus 7/20
7.4 The Quality Management ‘Six Pack’ 7/36
7.5 Total Quality Management 7/61
7.6 Configuration Management 7/70
7.7 Concurrent Engineering and Time-Based Competition 7/80
Module 8 Case Study 8/1
8.1 Aims and Objectives of the Case Study 8/1
8.2 Introduction (Module 1) 8/2
8.3 Individual and Team Issues (Module 2) 8/10
8.4 Risk Management (Module 3) 8/17
8.5 Case Study First Supplement 8/22
8.6 Organisational Structures (Module 4) 8/27
8.7 Case Study Second Supplement 8/30
8.8 Time Planning and Control (Module 5) 8/33
8.9 Cost Planning and Control (Module 6) 8/41
8.10 Quality Management (Module 7) 8/52
Appendix 1 Answers to Review Questions A1/1
Project management has come a long way from its origins in engineering and construction. It is now used for a wide range of applications and is one of the most highly valued management tools. A review of job advertisements in the press reveals that project managers are amongst the most highly paid. By the end of this Preface you will gain some idea of why they should be so highly valued.
In a world of rapid change, organisations that can identify the need for change, design the changes needed, and implement these more effectively and efficiently than others are more likely to survive and prosper. Those that cannot do this are likely to perish. The Centre for Strategy Development and Implementation (CSDI) at Edinburgh Business School, Heriot-Watt University, came into being to address these issues.
The core of the Centre’s work lies in four interrelated areas as shown in The Strategic Focus WheelTM.
Strategic Planning Making Strategies Work Project Management of Change Strategic Risk Management Strategy Focus Wheel
The Strategic Focus WheelTM
T M
A. Roberts and A. MacLennon 2002
The wheel is used to focus the efforts and resources of organisations on deliver-ing their intended strategic objectives and has four core elements.
• Strategic Planningconcerns identifying the options available to an organisa-tion and selecting the most appropriate. If strategic planning is done poorly, then even the best implementation capability is unlikely to compensate for this.
• Making Strategies Workis a process for connecting the high-level strategic plan to the day-to-day activities that are critical to its delivery.
• Project Management of Change ensures completeness and control over physical realisation of the chosen strategy. Project management is the subject of this text.
• Strategic Risk Management (SRM) identifies, monitors and manages the risk profile of the organisation. Major changes in this profile can result in the need to revise or change the elements above and, in particular, to devise new strategic plans. Alternatively, the changes may be due to the implementation of a new strategy. SRM covers three areas: strategic risk, the possibility of ending up in a position that was not intended, or of ending up in the position that was intended but that is no longer a desirable position because the strategy should have been changed; change risk, dealing with the risks associated with projects required to change the organisation in pursuit of a new strategic thrust (where project management is one tool for managing such risks); and, last but not least, operational risk, covering the risks inherent in the day-to-day operation of the organisation.
We chose project management as the key tool for managing change and asso-ciated risks because of its proven usefulness in a vast range of change situations. This is equally true whether designing and erecting a new building (changing materials, labour and other resources into a finished building), designing and implementing new systems (such as human resource management or financial systems), or designing and implementing a new strategy for a whole organisa-tion.
However, project management can do more than just act as a stage in the strategic focus cycle. It can also be used as a tool for managing each of the indi-vidual stages. In practice, the strategic planning process can itself be run as a project. The process can be broken down into a series of elements or work pack-ages that must be completed. For example, internal and external environmental analysis might form two work packages. In total, the packages form what is called a work breakdown structure, i.e. an ordered description of the work that must be done. Responsibilities are then assigned to the people who will carry out the work on each package, and the relevant working relationships between the people are established. This is the function of an organisational breakdown structure. The execution of the elements will need to be sequenced because some elements will depend on others being completed first. This is the func-tion of scheduling, and PERT and Gantt charts become critical. Other elements in the process can also be covered by project management techniques. These techniques can be similarly applied to making strategies work and strategic risk management.
Project management has come a long way from its origins in engineering and construction. It has become indispensable. Project managers now work in all industries and in all functions within organisations. For example, some of the most highly paid project managers now work in IT-related work in financial services, a long way from project management’s building and construction origins.
ABC activity-based costing
ACWP actual cost of the works performed ADR alternative dispute resolution AGAP all goes according to plan
ANSI American National Standards Institute APM Association for Project Management ATWP actual time for work performed
BAC budget at completion
BC budgeted cost
BCWP budgeted cost of the works performed
BCWS budgeted cost of the works specified or scheduled
CAC cost accounting code
CAD computer-assisted design
CAVN cost account variation notice CCRB change control and review board
CCTA Central Computer Telecommunications Agency
CD compact disc
CDES computerised database estimating system
CFM cross-functional management
CMS configuration management system
CPM critical path method
CSAR configuration status accounting and reporting
CSDI Centre for Strategy Development and Implementation
CCS change control section
CV cost variance
CVI cost variance index
DAM daily application management
DBA Doctorate in Business Administration
DMS draft master schedule
EAC estimate at completion
ECTC estimated cost to complete EEC estimated effect at completion
EET earliest event time
EFT earliest finish time
EMV expected monetary value
ERE effective risk exploitation ERP enterprise resource planning
EST earliest start time
ETC estimate to complete
GERT graphical evaluation and review technique HSE Health and Safety Executive
IBS information breakdown structure ILS integrated logistics support
IMCS implementation monitoring and control system IMS interface management system
IPMA International Project Management Association ISO International Organisation for Standardisation IT information technology
JCT Joint Contracts Tribunal JIT just-in-time
LAI local authority inspector LCC life cycle costing
LET latest event time MBR market business risk MFR market financial risk
MRP material requirements planning
NPZ no-problem zone
OBS organisational breakdown structure
PC personal computer
PCCS project cost and control system PCS project central server
PERT program evaluation and review technique PLE project logic evaluation
PMI Project Management Institute PMS project master schedule
POER post-occupancy evaluation and review
PRINCE2 PRoject management IN a Controlled Environment, version 2 PSR programme status report
PVAR project variance analysis reporting PWO project works order
QAP quality assurance plan QAR quality assurance review QBS quality breakdown structure QSR quality status report
RFD resource fluctuation driver
RICS Royal Institute of Chartered Surveyors SLA service-level agreement
SMM standard method of measurement SOW statement of work
SPP strategic project plan SSR safety status report
STWP scheduled time for work performed
SVI schedule variance index
SWOT strengths, weaknesses, opportunities and threats TBC time-based competition
TDS top-down strategy TOC train operating company TQM total quality management TRM task responsibility matrix TSRM total strategic risk management VAC variance at completion
VO variation order
WBS work breakdown structure
WHIF what if
WP works performed
Introduction
Contents
1.1 What Is a Project? 1/2
1.1.1 Introduction 1/2
1.1.2 Projects and Other Production Systems 1/3
1.1.3 Characteristics of Projects 1/5
1.2 What Is Project Management? 1/8
1.2.1 Introduction 1/8
1.2.2 Definition of Project Management 1/8
1.2.3 The Basic Project Management Structures 1/11
1.3 Characteristics of Project Management 1/16
1.3.1 Introduction 1/16
1.3.2 Multiple Objectives 1/16
1.3.3 International Co-operation and Standards 1/19
1.3.4 Multi-Industry/Multidisciplinary Practitioners 1/20
1.3.5 Generic Benchmarks 1/20
1.3.6 Specific Provisions 1/20
1.3.7 Project Life Cycle 1/21
1.4 Potential Benefits and Challenges of Project Management 1/23
1.4.1 Introduction 1/23
1.4.2 Potential Benefits of Project Management 1/24
1.4.3 Potential Challenges to Project Management 1/24
1.5 The History of Project Management 1/25
1.6 Project Management Today 1/27
Learning Summary 1/27
Review Questions 1/31
Learning Objectives
This module introduces the main concepts and philosophies of project man-agement. These areas are then explored in greater depth, and additional ideas introduced, in the remaining modules.
By the time you have finished this module you should be familiar with: • the concept of project management;
• how project management differs from traditional management and the dif-ferent organisation structures employed;
• the potential benefits and challenges of using a project management approach;
• the history and origins of project management.
A project is a one-off process with a single definable end-result or product. Some examples include building a house, introducing new human resources practices, and developing new IT systems. It is difficult to provide an example of a ‘typical’ project because project management techniques are now applied so widely that listing their possible applications would take a volume as large as this text! In addition, new uses are being found regularly. One reason for this growth in popularity is that project management is a very practical tool when used for change management purposes. The ever-increasing rate of change in the environments in which organisations operate requires them to transform themselves regularly if they are to survive and have the possibility of prosperity. Hence the continued growth in interest in project management.
Much of project management is concerned with planning and controlling the three key variables associated with projects. These variables are time, cost, and quality. They are interrelated and a change in any single variable frequently has a significant impact on the others.
Since project management is concerned with managing change, within the constraints of the three key variables of time, cost and quality, organisational structures for managing projects can be expected to differ from traditional organ-isational structures, which were developed to help managers manage in more stable environments. Organisation structures for managing projects are exam-ined and contrasted with more traditional management organisation structures. Projects have a finite life cycle, i.e. definite starting and completion points, and it follows that any project team or organisation structure set up to manage a project will have a finite life cycle.
Project management is a truly unique international and multidisciplinary profession. This characteristic has led to the development of international generic standards and is managed by a new kind of professional who operates in a different way from traditional functional managers. After studying this module, you should be able to define those main differences and understand their advantages and disadvantages compared with traditional approaches.
The module also gives a brief review of how project management evolved from more traditional management structures in response to changing industrial and economic conditions. A major influence has been the tendency for projects to become larger and more complex. As a result, the penalties for failure and the rewards for success have changed significantly.
1.1
What Is a Project?
1.1.1
Introduction
The first stage in developing an understanding of project management is to define what a project is and, by contrasting with other production systems, what a project is not.
At any moment in time organisations will be attempting to achieve a wide range of goals and objectives – for example, the sale of goods and services, improving customer relationships, improving staff motivation, or developing new products. The range of categories for which goals and objectives may be set is infinite. In order to achieve these, some form of production system must be employed. A production system takes resource inputs and passes them through a transformation process that changes them into the desired outputs. For example, consider a simplified manufacturing organisation. The resource inputs consist of materials, labour, equipment, services and so on. The production process then transforms these into outputs of goods and services that the end customer or client buys. This general production system model of inputs, transformation and outputs is true whether the end product/service is packaged food, motor cars, consulting reports, a new building, employee training programmes, or many other things.
1.1.2
Projects and Other Production Systems
Production systems can be classified into three broad categories based on their main method of production, as follows:
• mass production; • batch production;
• project (non-repetitive) production.
Some industries, such as construction and defence, are dominated by the project form. Other industries, such as chemical production and production of consumer goods, use mainly mass or batch production methods. However, even businesses where the norm is mass or batch production will use projects for certain activities. This concept will be covered later in the module.
Mass production systems are based around the production of large numbers of repetitive items. A typical example would be a production line for the manufacture of vehicles. The process runs continually. All the operatives and their tools are arranged within the production system and the whole process is carefully researched and developed to operate at maximum efficiency. The primary characteristics of such a system are that it is capital-intensive and highly mechanistic, and relatively little active management intervention or control is needed once the system is set up and operating satisfactorily. This system is clearly most appropriate for the large scale production of repetitive units, where there is little chance of change to the input requirements and where consumer demand for the end product is likely to be relatively constant.
By way of contrast, batch production is used where there is unlikely to be continual high demand for a given product and where some modifications will be needed at intervals. A typical example is a wallpaper factory, where produc-tion runs of certain types and patterns of wallpaper are produced sufficient to supply all distribution outlets for some months ahead. At that point, the system is shut down, re-tooled and reconfigured, and the process started up again to produce the next batch. The characteristics of a batch system are that it is less
mechanistic than a mass production system and the need for management inter-vention and control is greater. As a result, batch systems tend to be organised around functional groupings. The wallpaper factory might have a colour mixing section, a processing section, a quality-control section, a packaging section, etc. Each section tools up and operates its part of the operation in essentially the same way for each batch run, but the individual manufacturing requirements differ slightly.
Project production is used for one-off, non-repetitive items. As a result of this, there is no previous learning curve on which to rely; and high levels of complex management planning and control may be required.
♦
Time Out
Think about it: combined batch, mass and project production systems.
One example would be a small company that makes paint for a major retailer. At present, it makes the paint on a batch basis. As it receives an order from the retailer, it makes up so many thousands of litres of paint and transports them to the retailer. What if the retailer expands and suddenly wants more paint? The small paint company might see an opportunity and decide to invest in a new mass-production system that will produce paint continuously (although at variable rates) in order to meet the new increased demand from the retailer. This represents a strategic switch from batch to mass production.
In this case, the original production system was based on batch manufacturing. As demand increases, a decision is made to switch to mass production. As far as the company is concerned, the switch from batch to mass requires the installation of new equipment and processes. The design, procurement and installation of this new equipment and the associated processes would be managed as a project. The company will appoint or commission a manager – the project manager – to be responsible for the project.
Questions:
• Can you identify another example of a system that has mass, batch and project phases or characteristics?
• What would be an example of a system that only ever has a project phase?
♦
A project is an instrument for achieving one-off changes. For example, a project to build a house by changing the various resource inputs (bricks, cement, labourers skills, etc.) into a house. When the house is complete, the project is complete. Another example is a training project to enhance people’s skills. In both cases, the changes are intended to be permanent. This one-off nature is the most prominent feature of a project.
Typical projects that can be found in mass or batch-production-dominated organisations are usually targeted at improving the organisation’s competitive position by improving its effectiveness or efficiency. For example, the end result of a project to develop a new product should increase the effectiveness of sales and marketing efforts. Projects such as changing the layout of manufacturing or other facilities, or improving the skills of people, should lead to permanent increases in the productivity or efficiency of these resources.
1.1.2.1
Projects Versus Programmes
Before considering what a project is in more detail, it is useful to contrast a ‘project’ with a ‘programme’. Frequently, the terms ‘programme management’ and ‘project management’ are used interchangeably. Technically, a programme is a set of identifiable projects aimed at achieving some goal or objective. Typically, a programme will be of longer duration than any individual project within it. Some programmes might not have any specified end date and will run until a decision is taken to stop or replace them – for example, a government programme to reduce pollution in the environment. Over several years, various projects will be undertaken, completed and evaluated; the government will learn from these and new projects will be initiated. This practice will continue until – if ever – the government’s goals and objectives are achieved. Each of the specific projects will be undertaken under the overall umbrella of the pollution reduction programme. Another example is a customer service improvement programme, which would also contain several projects within it.
1.1.3
Characteristics of Projects
A project can generally be defined by its characteristics where the following apply.
• It involves a single, definable purpose, product or result. An example is a project to repair impact damage to an aircraft. Once the impact damage is repaired, the project is complete.
• It usually has defined constraints or targets in terms of cost, schedule (time), and performance requirements. An example is a time limit. The aircraft with the impact damage might have to be repaired within a specific time frame or lose several hours in its flying schedule. If at all possible, the repair should be completed within this time frame.
• It uses skills and talents from multiple professions and organisations. Projects often involve advanced technology and rely on task interdependen-cies that may introduce new and unique problems. Task and skill require-ments vary from project to project. Repairing aircraft damage might involve mechanical engineers, aeronautical engineers, safety inspectors, and repre-sentatives from the aircraft manufacturer. These people may work together on the repair as a multidisciplinary team.
• It is unique. A project is generally a one-off activity that is never repeated exactly. Generally, one piece of impact damage will be unique. The extent of the damage will depend on what hit, where it hit, how it hit, how fast it was going, and so on.
• It is somewhat unfamiliar. It may encompass new technology and hence possess significant elements of uncertainty and risk. Failure of the project might jeopardise the organisation or its goals.
• It is a temporary activity. It is undertaken to accomplish a goal within a given period of time; once the goal is achieved, the project ceases to exist. This applies to the organisational structure created to deliver it, as well as to the project itself. Once the aircraft repair is complete, the repair team goes
back to the terminal buildings and either remains on duty or goes home. Next time the team is needed, it could consist of different people working on a different aircraft under different conditions.
• It is part of the process involved in working to achieve a goal. During the process, a project passes through several distinct phases; as a result, tasks, people, organisational structure; and resources change as the project moves from one phase to the next. Projects usually have clear start and finish points. In the case of the aircraft repair, there will be an inspection, an appraisal, a solution, implementation, finalisation and testing.
• It is part of an interlinked process. Projects are very rarely carried out in isolation. There is usually some interlinking between different projects that are being run by any particular organisation.
• It is generally of secondary importance to the organisation. Projects are generally not the primary objective of the organisation. There are exceptions such as pure research and development organisations and companies that are established purely to plan and execute a single project. Generally the organisation is concerned with defined functional objectives and the project is subsidiary to these.
• It is relatively complex. Projects involve multidisciplinary teams and have defined aims and objectives. In organisational terms they therefore tend to be relatively complex as compared to the standard functional processes that operate within the organisation.
♦
Time Out
Think about it: project characteristics when installing a new server.
The installation of a new server for the IT requirements in an office is one example of a project. It involves a single, definable purpose, which is to set up a new server-based network for the office. It uses the skills of a number of different people, from individual company users to external specialist IT consultants. Different people will write the software, configure the hardware, install the system, and test and commission it. As with many projects, the team itself is multidisciplinary. Installing the server and commissioning it is a unique process for the IT consultants, in that every office is different and the demands of any particular client will be specific to that client. The project will always be somewhat unfamiliar because new hardware and software are coming on to the market all the time, and hence the resulting system requirements will be constantly changing.
The installation team is also temporary. It works together on the server installation. As soon as the installation is complete and the system is commissioned, the team ceases to exist and each individual either moves on to new installation projects or moves back into his or her standard functional role. The installation may be interlinked in that it may take place in conjunction with hardware or software upgrades. Most IT managers would take advantage of a server upgrade to carry out other network improvement works such as replacing PCs or upgrading software.
Questions:
• How could project objectives (installation of the new server) be accurately co-ordinated with organisational objectives (general software and hardware upgrade)?
♦
From the project characteristics highlighted above, it is clear that projects require a unique form of management. Hence the concept of project management evolved in order to plan, co-ordinate and control the many complex and often diverse activities involved in projects.
Until recently, projects and project management were considered to be limited to the construction and engineering industries. Today project management is being applied across all industry sectors. Organisations in the banking sector are as likely to be running a programme of interlinked projects as an organisation building power stations, and the recruitment adverts for project management posts are more likely to be looking for IT specialists than engineers. The growing popularity of project management tools and techniques is, in part, attributable to the development of easy-to-use computer-based project management tools.
Project management is, in essence, the general management of an organisation. Good project management therefore requires the effective application of a wide range of general management skills in order to achieve the desired goals. Skills that senior corporate executives use daily in directing whole organisations are equally relevant to project management, and include:
• financial awareness; • marketing appreciation; • technical knowledge; • planning skills; • strategic awareness; • quality management.
Project management covers the whole range of functional management areas. Skills are often required in all of these areas to secure project success.
Almost universally, the traditional organisation has been structured as a pyra-midal hierarchy with vertical manager–subordinate relationships and depart-ments along functional, geographic or product lines. Authority and formal com-munication flow down from the top. Departments tend to be highly specialised and operate independently. Traditional organisations become very efficient in what they do and are well suited to a stable environment. They are fairly rigid and therefore less suitable to the unstable and dynamic environments that characterise project situations.
Project teams are set up to undertake projects of every type. They may deal with single projects where all resources are dedicated to achieving the objective of that project, or they may be responsible for multiple projects where resources have to be managed across projects.
Projects can be of many sizes, ranging from large multinational projects such as building the Channel Tunnel connecting the UK to France and requiring
millions of person hours to complete, down to more simple projects such as organising a social event or company newspaper.
Projects may be external, where they are carried out for a client outside the organisation. These are normally defined by a binding contract and are usually a main revenue source for the organisation. Projects may also be internal, where they are generally set up to improve the operations of the organisation and the client would be an internal project sponsor.
Finally, projects are either undertaken to deliver hardware or software. Hard-ware projects are those where there is a tangible physical result, such as a new building. Software projects are those where the end result is a system or process, rather than a physical item. An example is a new operational or administrative system for an office.
1.2
What Is Project Management?
1.2.1
Introduction
This section considers project management as a discipline, and it develops an appreciation of how project management can exist in basic internal and external forms.
1.2.2
Definition of Project Management
The characteristics of a project have been considered above. It is now possible to develop a definition for project management. Given the relative youth of project management as a discipline, it is not surprising to find that project management has numerous definitions.
Typical examples are:
The process of planning and executing a piece of work from inception to completion to achieve safe achievement of objectives on time, within cost limits and to the specified standards of quality.
And:
The organising, planning, directing, co-ordinating and controlling of all project resources from inception to completion to achieve project objectives on time, within cost, and to required quality standards.
Most authors agree that project management is about achieving time, cost and quality targets, within the context of overall strategic and tactical client requirements, by using project resources. There is also general agreement that project management is concerned with the life cycle of the project: planning and controlling the project from inception to completion. Project resources are resources that are wholly or partly allocated to the project and under the control of the project manager. They are allocated for a specific time, usually from within the standard functional structures that make up the organisation.
Traditional planning and control techniques consider time, cost, and quality planning and control. However, traditional approaches often consider them as
separate entities that are planned and monitored using different systems. For example, traditional cost planning and reporting systems do not necessarily link directly into the relevant resource scheduling systems. In addition, reports have traditionally been prepared by different consultants, who are responsible for different aspects of project delivery. Project Management seeks to address these problems by integrating the individual areas under the overall control of the project manager. Monitoring and reporting activities are spread out among different specialists with different and often conflicting viewpoints that give rise to confusion among those responsible for delivering the project.
Another facet of project management involves choosing the optimum position in relation to the success criteria. This concept is shown diagrammatically in Figure 1.1. Quality increase Quality Cost increase Time Time increase Cost A B B1
Figure 1.1 The typical project-management time–cost–quality continuum
Generally the facets of time, cost and quality can be represented as a three-way continuum. For example, position A Figure 1.1 might represent a low-quality, low-time, low-cost option. This option could be the preferred project success criterion of the client at the start of the project. As the project develops, the client might want to increase quality – perhaps because of the number of delays that are being caused by defective works or abortive design. There may be several ways by which this can be achieved. More time can be spent on design and this will increase cost; or more resources can be employed, with a resulting increase in costs but maintenance of the time schedule. There will always be some kind of link between quality and cost, and quality and time, so a change in the position of the project on the quality axis will also reposition it along the cost and time axes. The point that represents the project success criterion will
therefore move along all three axes relative to each other, not simply along one axis. In Figure 1.1, the required increase in quality is leading to increases in the time required and in the overall cost. This is represented by the move from A to B.
If a project has cost as its priority – for example, building to a fixed price – cost objectives would take precedence over quality and time objectives. It is important at the start of the project to prioritise between cost, time and quality and to specify where each sits in relation to the others. By doing this, it will be easier and quicker to make the difficult decisions that may be required during the pressure of the project execution phase.
The need for integrated planning and control procedures, together with a recent corresponding success of project management, is caused by the changing nature of industrial projects over the past fifty years. Generally, as industry has evolved, it has become more complex. Technological processes have become more complex and this has been coupled with more and more complicated organisational and administrative procedures. Technology and organisational processes, like plants and animals, tend to evolve over time into ever more complex and sophisticated structures.
This effect is further enhanced by the increasing rate of technological evolution. Technology is determined by human invention, and it can therefore evolve as rapidly as the human thought process. It is not limited to physiological evolution or to the metaphysical interactions and developments that necessitate a finite rate of development. The result has been an explosion in technological innovation and an increasing use of more and more complex and sophisticated technology. Increasing technological complexity demands increasingly complex support, administration, organisational and control techniques.
Moreover, as societies become ever more sophisticated and complex, the links and interdependencies between different sections of industry and commerce become more pronounced. Expansion and evolution in one area produces a demand for corresponding expansion and development in other sectors. For example, an expansion in the commercial sector generates a demand for expan-sion in the communications sector, as commerce depends on communications.
This increase in complexity and multiple objectives has been a driving force behind the development of project management. The project manager is con-cerned with time, cost and quality variables, but he or she also has to be able to view these within the context of the whole operating system. Today, projects come in all shapes and sizes, from high-capital-expenditure large construction projects to lower-cost cultural change management projects within companies. They come in many different degrees of complexity, from launching a space mission to designing and printing a company newsletter, and across all projects they require the commitment of a wide range of resources and the application of a wide and varied range of skills by the project manager.
Project management is therefore about deciding the various success and failure criteria of a project and then organising and running the project as a single entity so that all the success criteria are met. This process involves setting up and managing a project team that may consist of a number of different individuals with different specialisations. The project manager must weld this group of
individuals into a team and then drive the team to perform successfully. The team itself, like the project, will only last a certain time. Once the project is completed the project team will probably be disbanded or be moved on to the next project.
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Time Out
Think about it: the development of system complexity and resulting need for effective project management telephone systems.
Only forty years ago, telephone systems comprised a national network of exchanges linked by metal connecting wires. This system was based on the telephone networks that were first developed in the late nineteenth and early twentieth centuries. The telephone exchanges were manned by operators who directed calls manually. As society developed and commercial and industrial demands on the system escalated, the telephone system was forced into a process of evolution.
This evolution was assisted to some extent by a corresponding development in new technology in radio and other communication media. Commercial radio telephones appeared in the 1960s, followed by mass networks involving electronically controlled exchanges. The first mobile handsets appeared in the 1980s, although these still required large batteries.
Today, there is a multiplicity of different telecommunication options. Users can still use cable-linked systems, but these tend to use high-capacity optical fibre rather than metallic conductors. Increasingly, telephone calls are transmitted by radio. International calls can be made by satellite. Most people in the developed world now have mobile phones that are operated through a series of competing cellular networks. There are large-scale commercial battles and take-overs involving large telephone companies, and the major players have become corporate giants. The whole telephone system is infinitely more complex than the 1960s system. It is also far more powerful and flexible.
These remarkable changes have all been market-driven. Companies have invested in them because the potential benefits have been clearly demonstrable. Market-driven forces for change require multiple time, cost and quality objectives to change. Users want better handsets at reasonable prices, delivered more quickly than the oppo-sition. This in turn generates a need for advanced project-management practice in the rapidly expanding telephone and communications markets. Today, the largest single membership of the Association for Project Management is Information Tech-nology, and the telephone network and equipment companies use some of the most advanced project-management techniques in the world.
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1.2.3
The Basic Project Management Structures
Although numerous different organisational structures are possible, usually occurring because of particular project characteristics such as size and com-plexity, a useful distinction can be made between internal and external project-management structures.
1.2.3.1
Internal Project Management
The most common form of project management is the formation of a project team operating within an existing organisational structure. This format is com-monly known as internal, or non-executive, project management. The various organisational forms for project management are considered in more detail in Module 5. This section introduces the idea of project teams operating within functional units in advance of the main discussion in that module.
Most firms are organised around functional groups that specialise in partic-ular areas. A typical structure would have separate sections such as sales and marketing, finance and accounting, and operations. Each section or group makes a specialised contribution to the whole. A typical functional structure is shown in Figure 1.2. This kind of structure can be found in large functionally driven organisations, such as universities, government departments, local authorities, large companies and the military.
Board of directors Managing Director IT Director Marketing Director Operations Director Financial Director HR Director Advertising Sales Packaging Promotions Payments Salaries Invoicing Cost control Updates Support
Figure 1.2 Typical functional arrangement Note: some sections omitted for clarity.
The disadvantage of this structure is that people tend to become compartmen-talised and work rigidly on functional tasks. In order to make more efficient use of resources, project teams can be set up to operate across these functional boundaries. A typical project team operating across functional boundaries is shown in Figure 1.3.
In this structure, the project manager takes (or is allocated) individuals from their normal functional units and reallocates them to one or more projects. Each person therefore, now has functional and project responsibilities. One example is an IT specialist working on a project to ensure common standards
Board of directors Managing Director Program Manager Marketing Director Operations Director Financial Director IT Director Project manager Project manager Marketing input Marketing input Operations input Operations input Financial input Financial input IT input IT input
Figure 1.3 Typical project team operating across functional boundaries Note: some sections omitted for clarity.
are applied throughout all of the organisation’s IT systems. The specialist might work normally for the IT section but, for part of the time, also be responsible for working with the standards manager to make sure that all systems are covered within the time available.
Projects operating across functional structures offer good flexibility in the use of people. Staff are primarily employed to perform a functional task but are temporarily assigned to projects that require their particular expertise. In addition, individual experts can be effectively used across a number of projects. If there is a broad base of expertise within a functional department, it can be employed on different projects with relative ease. The internal system also has the advantage that specialist knowledge can easily be built up and shared within the function. Continuity of expertise, procedures and administration is maintained within the function despite any personnel changes that may occur.
The main characteristics of the system are as follows:
• A single designated person, namely the project manager, is responsible for managing the project organisation.
• The project manager acts (to some extent) independently and outside the normal functional authority structure.
• The project manager has equal authority to the functional managers over shared (project and functional) resources.
• The project manager acts as a single leader and brings together the efforts of the various functional and project resources in order to achieve the project objectives.
• Projects generally require a number of different functional specialists to work together. The work is therefore often carried out by a range of dif-ferent functional specialists working as a multidisciplinary group under the leadership of the project manager.
• The project manager is responsible for integrating this multidisciplinary group into a multidisciplinary project team.
• The project manager has to negotiate with individual functional managers for the use of shared project-functional resources. Functional resources often remain under the direct control of the functional manager.
• The project focuses on delivering the project objectives in relation to time, cost and quality. The functional managers have to concentrate on maintain-ing an ongomaintain-ing pool of functional resources to support the primary goals of the organisation. As a result there is the potential for conflict between func-tional and project managers over shared resources. This arises particularly in terms of the quality of people that functional managers will release onto projects and the time for which they are required by the project.
• A project may be subject to two lines of authority. A project individual may report directly to both the project manager and the relevant functional manager.
• Decision making, accountability, rewards and potential benefits are shared among the members of the project team and the functional units.
• The project structure is temporary and lasts only until the project is com-pleted. The functional units are generally permanent. Project team members generally return to their respective functional units once the project is com-plete.
• Projects can originate from any level within the organisation. The market-ing department might initiate a product development project while the IT department might initiate a systems upgrade project.
• Project structures generally require the assistance of the standard support functions such as human resources, finance and IT. They do not generally operate as entirely self contained sections.
Since projects involve the efforts of different units from within and outside the organisation, reliance on the functional chain of command for authority and communication is inefficient and causes disruption and delay of work. To get the job done efficiently, managers and workers in different units and at different levels need to associate directly with each other. Even in traditional organisations, the formal lines of authority are frequently bypassed by informal lines, which cut through the formal rules and procedures to expedite work more effectively.
In project organisations, the virtue of these informal lines is recognised and formalised through the creation of a horizontal hierarchy to augment the vertical hierarchy. This hybrid organisation enables people in different functional areas to be formed into highly integrated project teams.
Given their temporary nature, an organisation working on projects must be flexible, so that it can alter structure and resources to meet the shifting requirements of different projects.
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Time Out
Think about it: using existing university functional specialisations to develop a new course in Marine Resource Project Management.
A university might have courses already running both in Marine Resource Manage-ment and in Project ManageManage-ment. University market researchers might find that there is significant demand for a new course that combines the two existing courses into Marine Resource Project Management. The existing departments of Project Management and Offshore Engineering could combine to develop the new course. The existing heads of department are functional managers, and the project team members will be specialist lecturers from these departments. The Project Manager is the new course leader for the course, reporting directly to senior university management, probably at faculty board level.
The staff costs would be charged to the project cost centre. Any time working for the functional departments would be charged to the functional cost centre. Once in operation, the system would effectively operate as a batch production system.
Questions:
• What would be the obvious advantages and disadvantages of such an arrange-ment?
• What would be the potential dangers to the functional departments under such an arrangement?
• How could these dangers be mitigated from an organisational viewpoint?
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In the role of project manager, a single person is given project responsibility and is held accountable for project success. This emphasis on project goals versus functional goals is a major feature distinguishing project and functional management roles. Project managers often depend on people who report directly to other managers on an ongoing basis but are assigned to them as required. Thus the task of project management is more complicated and diverse than in other management areas.
1.2.3.2
External Project Management
External project management is where an external project manager is appointed on a consultancy basis and acts as an external agent on behalf of the client. The external project manager appoints other external consultants to form an external project team. The team then works under the control of the external project manager to deliver the project within the success criteria as defined by the client. This arrangement is shown in Figure 1.4.
The main characteristics of an external project management structure are the following:
• The external project manager acts as an agent on behalf of the client. The consultancy contract is a form of agency agreement.
• The external system is more flexible than the internal system. External consultants can be hired as required as a function of workload demand.
• Instructions and communications between the external consultants and the client have to cross the organisational boundary. This boundary acts as an interface and represents a barrier to effective communication.
• Team allegiance tends to be lower in external structures. The objectives of the external consultants do not correspond to the objectives of the client, and the external consultants owe no allegiance to the client organisation. • The external project manager has direct control over the project team. For
this reason, external arrangements are sometimes referred to as external project management.
• In an external structure, the functional structure of the organisation has no direct relevance to or impact on the project.
• Because of the greater proportion of external organisations, there is a greater requirement for risk transfer and contractual control in an external project management structure.
• There is no in-built knowledge of the firm. This can sometimes be a disad-vantage.
Internal and external systems are considered in more detail in Module 4.
1.3
Characteristics of Project Management
1.3.1
Introduction
Modern project management has a number of characteristics that differentiate it from traditional management approaches. It is international in that there are standards that are set by an international agency. Project management has relevance and applicability across most industries. Project management is unique in that it uses both international and industry-specific benchmarks. It is also unique in that project management professionals provide advice in relation to the full life cycle of a project, from inception to completion.
Some important elements are examined under the headings of: • multiple objectives;
• international co-operation and standards; • multi-industry/multi-disciplinary practitioners; • generic benchmarks;
• specific provisions; • project life cycles.
1.3.2
Multiple Objectives
Project management is concerned with several objectives at once. The objectives typically fall under the headings of time, cost and quality. Project management decisions that affect any one of these variables will usually impact on the others. Project success and failure criteria are usually set by the client or executives of
External project manager
External consultants
External suppliers External contractors External subcontractors Resource Resource
Resource Resource Interface manager
Functional team Functional team Senior management
Functional manager
Functional manager
Figure 1.4 Typical external project management arrangement
the parent organisation at the outset. Some projects may have to be built as quickly as possible; some may have to be completed as cheaply as possible, or others to a particular minimum quality standard. In altering any one of these, the project manager will affect the other two. Project management decisions are therefore generally made under conditions of direct functionality.
The relative importance of each of the project success and failure criteria will determine the required levels of performance for each variable over the course of the project. This consideration can apply in both a tactical and in a strategic sense. For example the various cost and quality options can be generated for a company that manufactures TV sets. These options can be represented as a cost quality function. This function is usually known as a cost–quality curve because of the distinctive shape of diagrams that map quality–cost relationships. An example is shown in Figure 1.5.
There may be several different options for cost and quality, such as manu-facturing a TV set for £250 with a maximum of 3 per cent defects, at £400 with a
Manufacturing cost per unit 99% 98% 97% £500 £400 £250 Defect-free rate
Figure 1.5 Typical cost–quality curve
maximum of 2 per cent defects, or £500 with a maximum of 1 per cent defects. The point on the curve where the manufacturer wishes to be, will depend on a number of factors, including:
• market price of TVs;
• guarantees and warranties in place; • cost of replacements;
• true cost of defective workmanship.
The company might choose to manufacture TV sets with a maximum of 3 per cent defects. This accepted level of defects may allow them to sell at a very competitive unit price. However, the sets might have a higher level of defects, and this characteristic can have a number of consequences. It may be possible to indemnify the purchaser by issuing a guarantee or warranty with each set. However, this procedure may have a high eventual cost because a large number of guarantees will be exercised. Additionally, there may be a high true cost in that the reputation of the company may suffer and future sales may be lost. Thus, the true cost may be far higher than the additional cost of reducing the level of defects during production.
Project management is concerned with ensuring that the chosen project-success criteria are met within the changing constraints of the three way time–cost– quality continuum. Project management recognises that there is more than one success criterion. There is no point in completing on time and on cost if the quality of the finished product is lower than specified by the client; for example, there is little point in building a house to cost and on time if it is so poorly built that it will fall down shortly afterwards. For each of the variables of time, cost and quality, there should be a minimum acceptable condition. Project Management is concerned with meeting these minimum criteria.
In most projects, there will be changes as the project progresses. This will impact on one or more of the variables, and trade-offs might need to be made
between them. For example, if the quality criterion is increased, either the time required and/or the cost will change.
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Time Out
Think about it: varying cost and quality for a new football grandstand.
A football club might decide to employ a contractor to build a new grandstand. The club might initially state that the stand must cost no more than £3 million, and commission designers and employ contractors on that basis. At this point, cost might be the most important success criterion.
Other events might then occur that change the relative importance of cost in relation to other project success criteria. There may be very bad weather conditions that delay the construction of the stand itself by three months. At some point the club might realise that the bad weather has caused such delays that it will no longer be able to open the stand by the start of the next football season.
This delayed opening could have significant effects, well beyond the immediate cost viability of the new stand. For example, a delay might result in the loss of ticket sales over the first five home games of the next season. This could amount to £1 million. Under these circumstances, it might be worth spending an extra £0.3 million to speed up the construction process in order to avoid losing the £1 million. In this case, capital cost was the initial success criterion. However, a change in a time-based variable subsequently promoted time to being the primary success criterion because of the linked effects of a time extension on other (environmental) variables. These environmental variables relate to the financial performance of the club as a whole. They are outside the project environment but nevertheless affect it directly.
Questions:
• In what type of projects might weather be a determining factor on whether or not the project is completed on time?
• What other examples are there of wholly external factors that can determine whether or not the project is completed on time, yet are wholly outside the control of the project manager?
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1.3.3
International Co-operation and Standards
Project Management is international. As a profession, it is unique in that its codes of practice and body of knowledge are based on international rather than national practice. This approach is in contrast to most other types of professional service. The legal systems in any two countries are likely to be very different and it is unlikely that a lawyer who is qualified to practise in one country would be able to practise successfully in another country, even if the various legal governing bodies were to permit this. Similar restrictions apply in other professions, including banking and most forms of engineering.
Project management is different in that a global approach has been established and is governed by an international standards association. This international professional body is the International Project Management Association (IPMA).
This body administers an international approach to project management and co-ordinates the activities of specific international professional associations, such as the Association for Project Management (APM) in the UK and the Project Management Institute (PMI) in the USA. The IPMA ensures that the codes of practice and bodies of knowledge of the various national project management associations adhere to one standard as closely as possible, allowing only for essential cultural and economic differences.
Specific country standards are therefore controlled, to some extent, by inter-national standards that are set and regulated by the global body.
1.3.4
Multi-Industry/Multidisciplinary Practitioners
The concepts and practices of project management are not specific to any one industry. The time, cost and quality planning-and-control techniques used in project management are as applicable to agriculture as to process engineering.
In addition, a wide range of disciplines uses project management. The three largest membership groups within the APM are information technology (IT) followed by process engineering and then construction. It is very unusual for any professional body to be made up of individual members from such a wide range of professional backgrounds.
1.3.5
Generic Benchmarks
Traditionally, there was no standardisation of practice for professional project management consultants. There have been the professional bodies and their codes of conduct, but there was never any real attempt to standardise how projects are set up and managed, what cost control systems should be used, and so on. This changed significantly during the last ten years of the 20th century. For example, British Standard BS6079 is the current UK standard for project management practice. It is generic and is applicable across all industries. ISO10006 is the European code of practice for project management of the design process. It is again generic and is applicable across all industries.
There are a number of industry-specific standards for project management practice. For example, PRINCE2 is an attempt at producing standardised project management practice within controlled environment industries and UK govern-ment. Sometimes large companies have combined to develop industry specific responses to the various generic standards. On other occasions, very large com-panies have developed company-specific responses. Examples would be the British Telecom and Construction Industry Council codes of practice. While these specific codes are less general than the generic codes, they are consistent with them.
1.3.6
Specific Provisions
Many organisations use fully trained project management professionals to run projects, rather than designers or others acting as managers. Project Management specialists provide combined time, cost and quality control, using national and international standards of professional practice.
Traditionally, project managers were selected from functional specialists within an organisation. The project manager could have been a specialist designer (as in the case of engineers or architects) or a specialist cost consultant (as in the case of accountants or surveyors). In many cases, the people leading and managing projects were designers or other types of specialist who assumed the role of manager for the duration of the project.
The modern concept of project management includes the professional project manager. Increasingly, this type of professional person is a specialist manager who is educated and trained in project management and who has relevant indus-trial experience in project management rather than in design or in some other specialisation. This transition has been matched by a worldwide proliferation of project management courses offered by universities, and in specialist short courses offered by specialist management-training and consultancy firms.
1.3.7
Project Life Cycle
Traditionally, consultants advised on, and managed, only one or two sections of an overall project life cycle. As a result, there was a lack of co-ordination between the different life cycle phases. This is important because decisions in earlier stages of the project life cycle impact on the choices available at later stages. For example, decisions taken in the design phases have a direct effect on decisions that can be made in the operational phase. Similarly, decisions on material choice affect choices on disposal in the decommissioning or recycling phases.
Another example is the choice of materials for items such as car bodies. Aluminium might be a lot more expensive than steel in terms of capital cost, but in terms of maintenance costs it could be far more cost-effective because it does not rust. Depending on the design and assembly of the other car components, the use of aluminium for the body might significantly extend the life span of the car.
In general, there are a number of recognised life cycle phases for projects. The project manager is responsible for giving clients advice that covers the complete life cycle. For example, the project manager should give professional advice on both capital costs and ongoing costs relating to any decision on choices of material. Traditional approaches have used consultants to give advice on design and/or manufacture only, with no significant consideration of longer-term cost implications. Project management as a discipline attempts to correct this by giving professional advice based on the whole picture.
Typical life cycle phases include the following:
• Inception. In the inception phase, the client decides to develop a project. The inception phase could have been developed years earlier as part of the overall corporate strategic plan of the particular company concerned; alter-natively, it could be a new requirement based on changes such as consumer demand or technology. In the inception phase, the client assembles a basic proposal for the work that is required.
• Feasibility. In the feasibility stage, the project team seeks to establish the validity of the proposal from all relevant perspectives. These perspectives
